Linda Mastro v. James Rigby, Jr.
764 F.3d 1090
| 9th Cir. | 2014Background
- Trustee filed an adversary proceeding in bankruptcy court alleging Linda Mastro fraudulently transferred Michael Mastro’s estate assets in violation of federal and Washington law; Linda did not assert counterclaims.
- Linda consented to trial before the bankruptcy court; the court found fraudulent transfers and entered final judgment ordering turnover and monetary relief.
- Linda appealed to the district court but fled to France, where she and Michael resisted extradition; Linda was indicted on related criminal bankruptcy charges but remained in France.
- The district court dismissed Linda’s civil appeal under the fugitive disentitlement doctrine, concluding her fugitive status and refusal to submit to U.S. courts made her ineligible to pursue the appeal.
- The Ninth Circuit considered (1) whether the bankruptcy court had authority to enter final judgment on the fraudulent-transfer (Stern) claims and (2) whether the district court abused its discretion by invoking fugitive disentitlement to dismiss the appeal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the bankruptcy court had constitutional authority to enter final judgment on Stern fraudulent-conveyance claims | Linda contended the bankruptcy court lacked authority and she was entitled to Article III adjudication | Trustee argued parties consented, so bankruptcy court could enter final judgment | Held: Consent by parties authorized bankruptcy court to enter final judgment under Ninth Circuit precedent (In re Bellingham); Arkison does not abrogate that rule |
| Whether the district court properly dismissed Linda’s civil appeal under the fugitive disentitlement doctrine | Linda argued dismissal was an abuse of discretion because Degen limits disentitlement and no necessity justified the sanction | Trustee justified dismissal based on Linda’s flight and refusal to submit to authority | Held: District court abused its discretion; Degen requires narrow application and necessity, which the district court did not show |
| Whether dismissal should be affirmed by this court on the merits despite district court error | Trustee invited the court to affirm the bankruptcy judgment on appeal | Linda opposed first-instance appellate consideration by this court | Held: Ninth Circuit declined to decide merits and remanded to the district court for consideration of the appeal |
| Whether unenforceability justified disentitlement in this case | Linda argued her absence did not make enforcement impossible | Trustee suggested fugitive status supported dismissal (district court) | Held: Court found no record finding that enforcement would be impeded and district court did not rely on unenforceability; thus disentitlement was unjustified |
Key Cases Cited
- Stern v. Marshall, 131 S. Ct. 2594 (U.S. 2011) (limits on bankruptcy courts adjudicating certain "Stern" claims)
- Exec. Benefits Ins. Agency v. Arkison, 134 S. Ct. 2165 (U.S. 2014) (discusses proper procedures for Stern claims and effect of district court de novo review)
- In re Bellingham Ins. Agency, Inc., 702 F.3d 553 (9th Cir. 2012) (consent permits bankruptcy court to enter final judgment on Stern claims in Ninth Circuit)
- Degen v. United States, 517 U.S. 820 (U.S. 1996) (narrows application of fugitive disentitlement; disentitlement requires necessity and is a harsh sanction)
- Molinaro v. New Jersey, 396 U.S. 365 (U.S. 1970) (early recognition of disentitlement for fugitives)
- Bhasin v. Gonzales, 423 F.3d 977 (9th Cir. 2005) (review standard: abuse of discretion for fugitive disentitlement decisions)
- Koon v. United States, 518 U.S. 81 (U.S. 1996) (district court abuses discretion when it makes an error of law)