Georges Marciano v. Steven Chapnick
708 F.3d 1123
| 9th Cir. | 2013Background
- Marciano was sued by former employees in California state court for defamation and emotional distress, with sanctions leading to three disputed money judgments ($55M, $35M, $15.3M).
- While judgments were on appeal, other creditors pursued collection and the petitioning creditors filed an involuntary bankruptcy petition under § 303(b)(1).
- Bankruptcy court and BAP held that unstayed state judgments are not subject to bona fide dispute under § 303(b)(1); Marciano challenged defective service of process and the petition’s basis.
- Marciano argued the state judgments’ pending appeals meant there was a bona fide dispute; the majority rejected this and maintained the per se rule.
- The court ultimately affirmed the bankruptcy court’s decision, holding unstayed non-default state judgments are not subject to bona fide dispute under § 303(b)(1).
- Dissent argues for case-by-case Vortex/Byrd analysis, preserving a bona fide dispute inquiry for judgments on appeal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether unstayed state judgments can be per se not in bona fide dispute | Marciano argues per Byrd/Vortex that judgments may be in dispute | Petitioning Creditors argue per Drexler rule no dispute | Yes, per majority: unstayed judgments are not subject to a bona fide dispute |
| Proper interpretation of 'claim' under § 303(b)(1) | Marciano contends judgments are not 'claims' or not in bona fide dispute | Petitioning Creditors rely on § 101(5)(A) and judgments as claims | Claim is right to payment; judgment is not itself the 'claim' for § 303(b)(1) purposes; dispute assessment governs |
| Applicability of Vortex Byrd objective test | Marciano urges case-specific objective inquiry | Creditors argue per se rule suffices | No per se rule; test should assess objective dispute validity |
| Federalism and Full Faith and Credit considerations | Marciano argues Byrd/Vortex align with 28 U.S.C. § 1738 | Creditors contend limitations in federalism do not defeat state-judgment enforcement | Held that § 1738 does not require relitigation of liability; recognition of judgments remains |
| Discovery on bad faith in filing petition | Marciano seeks discovery to show bad faith | Creditors oppose discovery as unlikely to affect merits | Bankruptcy court did not abuse discretion; protective order upheld |
Key Cases Cited
- In re Vortex Fishing Sys., Inc., 277 F.3d 1057 (9th Cir. 2001) (establishes objective basis for bona fide dispute test)
- In re Byrd, 357 F.3d 433 (4th Cir. 2004) (rejects per se rule; requires case-by-case scrutiny)
- In re Cantrell, 329 F.3d 1119 (9th Cir. 2003) (applies Full Faith and Credit considerations to collateral issues)