488 B.R. 178
Bankr. D. Nev.2013Background
- Sas was injured in 2004 and pursued a personal injury claim, hiring Arin & Associates to represent him; the claim was submitted to binding arbitration in 2010 with a $200,000 cap.
- Debtors Sas and Orna Cohen filed Chapter 7 in September 2010; the Lawsuit was not listed on Schedule B but was disclosed in the SOFA and questioned by the Trustee at the 341 meeting.
- The Trustee initially reported no distribution and later amended Schedules B and C to reflect a $16,150 exemption for the personal injury claim; the case moved from Asset to No Asset and the Trustee announced abandonment of the Lawsuit.
- Arbitration in 2011 awarded Sas $531,846.95, limited to $200,000 by the cap; in 2012 the case was reopened, and Arin sought turnover of the Arbitration Funds (less his fees) which the Trustee opposed.
- The Trustee filed Turnover Motion on September 14, 2012 arguing abandonment should be reversed or turnover ordered; competing security interests by Shaked and Plaintiff Funding were noted; the court later denied turnover and held abandonment could not be revoked under the circumstances.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Revocation of abandonment under 554(c) for false information | Trustee asserts misrepresentation or incomplete disclosure justified revocation | Debtors/Arin contend abandonment was proper and not revocable | Not warranted; information in schedules allowed inquiry and did not prove false disclosure |
| FRCP 60(b)(1) grounds for mistake or inadvertence | Trustee relies on trustee’s mistake/inadvertence to justify revocation | Delay and lack of diligence undermine grounds for relief | Second and third Pioneer factors weigh against relief; no sufficient mistake/inadvertence shown |
| Turnover of Arbitration Funds under 542(a) | Trustee seeks turnover of funds held from the arbitration proceeds | Funds are not property of the estate after abandonment; no turnover allowed | Turnover denied; Arbitration Funds not property of the estate under 542(a) |
Key Cases Cited
- Cusano v. Klein, 264 F.3d 936 (9th Cir. 2001) (improper valuation alone does not prove false disclosure for abandonment revocation)
- In re DeVore, 223 B.R. 193 (9th Cir. BAP 1998) (abandonment revocation proper under specific circumstances)
- Vasquez v. Adair (In re Adair), 253 B.R. 85 (9th Cir. BAP 2000) (trustee discovery rules and abandonment strategy; updates not mandatory to reopen case)
- In re Gonzalez, 302 B.R. 687 (Bankr. C.D. Cal. 2003) (FRCP 60(b)(1) equitable considerations in relief from final orders)
- Murray v. Nagy (In re Nagy), 432 B.R. 564 (Bankr. M.D. La. 2010) (abandonment rights and trustee lack of interest post-abandonment)