In re: Mbe Digital, Inc.
CC-16-1121-FMcTa
| 9th Cir. BAP | Nov 9, 2016Background
- MBE Digital, Inc. (the debtor) was placed in a state-court receivership (appointed receiver: David Pasternak) after shareholder disputes; the superior court directed MBE to pay receiver fees but later sought to hold individual shareholders jointly and severally liable.
- By late 2011 the receiver’s unpaid fees exceeded $417,000; the superior court’s final Fee Order (Nov. 2012) assessed $626,244.11 against five individuals (including appellant Adesorn Hemaratanatorn) and exonerated the receiver’s bond.
- MBE filed a chapter 11 petition in July 2012 (converted to chapter 7 in Feb. 2013). The receiver’s Fee Order was affirmed by the California Court of Appeal in May 2014.
- In Feb. 2016 Hemaratanatorn moved in bankruptcy court to vacate the Fee Order, arguing it violated the automatic stay and that Bankruptcy Code §§ 503/543 vested exclusive jurisdiction in the bankruptcy court; the bankruptcy court denied relief.
- The BAP affirmed, holding the Fee Order (a judgment against non-debtors) did not violate § 362, state courts retained jurisdiction to award fees against non-debtors, and federal courts could not relitigate the state-court judgment under Rooker–Feldman / full faith and credit principles.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the superior-court Fee Order violated the automatic stay (§ 362) | Hemaratanatorn: bankruptcy filing stayed state-court consideration of receiver’s fees because fees relate to estate property/choses in action | Pasternak: Fee Order imposed liability on individuals, not the debtor or estate; stay protects only debtor/estate absent an extension | No stay violation; stay protects debtor/estate only and did not reach a judgment against non-debtors |
| Whether §§ 503 / 543 divested state court of jurisdiction to award receiver fees after bankruptcy filing | Hemaratanatorn: §§ 503/543 give bankruptcy court exclusive authority to determine receiver’s unpaid fees and administration once bankruptcy filed | Pasternak: §§ 503/543 permit bankruptcy court to address administrative claims but do not confer exclusive jurisdiction or strip state court power over non-debtors | State court retained jurisdiction; §§ 503/543 are not jurisdictional bars to state-court fee awards against non-debtors |
| Whether bankruptcy court could review/vacate Fee Order (preclusion / Rooker–Feldman) | Hemaratanatorn: Fee Order is void because it violated stay/exclusive bankruptcy jurisdiction and thus may be relitigated in bankruptcy court | Pasternak: Full Faith and Credit and Rooker–Feldman bar federal relitigation of state-court judgment between same parties on issues adjudicated | Bankruptcy court lacked authority to relitigate the Fee Order; Rooker–Feldman and res judicata/preclusion principles preclude review |
Key Cases Cited
- Boucher v. Shaw, 572 F.3d 1087 (9th Cir.) (automatic stay does not bar actions against non-debtors)
- Solidus Networks, Inc. v. Excel Innovations, Inc. (In re Excel Innovations, Inc.), 502 F.3d 1086 (9th Cir.) (consistent rule that stay does not apply to suits against non-debtors)
- Arbaugh v. Y & H Corp., 546 U.S. 500 (2006) (statutory limitations that do not speak in jurisdictional terms are not treated as jurisdictional)
- Migra v. Warren City School District Board of Education, 465 U.S. 75 (1984) (federal courts must give state-court judgments full faith and credit)
- Noel v. Hall, 341 F.3d 1148 (9th Cir.) (application of Rooker–Feldman to preclude federal relitigation of state-court judgments)