Double Diamond Distribution, Ltd. v. Garman Turner Gordon, LLP

• Court: Court of Appeals for the Ninth Circuit
• Decided: April 16, 2025
• Docket: 24-1959
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS APR 16 2025 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

DOUBLE DIAMOND DISTRIBUTION, No. 24-1959 LTD., D.C. No. 22-1212 Appellant,

v. MEMORANDUM*

GARMAN TURNER GORDON, LLP,

Appellee.

Appeal from the Ninth Circuit Bankruptcy Appellate Panel William J. Lafferty, III, Julia W. Brand, and Frederick Philip Corbit, Bankruptcy Judges, Presiding

Submitted March 31, 2025** Phoenix, Arizona

Before: HAWKINS, FISHER***, and R. NELSON, Circuit Judges.

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The panel unanimously concludes this case is suitable for decision without oral argument. See Fed. R. App. P. 34(a)(2). *** The Honorable D. Michael Fisher, United States Circuit Judge for the Court of Appeals, 3rd Circuit, sitting by designation. Plaintiff Double Diamond Distribution, Ltd. (“Double Diamond”), an affiliate

of debtor U.S.A. Dawgs, Inc. (“Debtor”), agreed to pay Debtor’s bankruptcy

counsel, appellee Garman Turner Gordon, LLP (“GTG”) a monthly retainer and

guaranteed the payment of GTG’s fees and expenses incurred in connection with the

Debtor’s bankruptcy case (the “Engagement Agreement”). After Debtor’s assets

were sold in bankruptcy, GTG applied for fees and the bankruptcy court approved

the application. The bankruptcy court’s fee order (“Fee Order”) specified that

Debtor and Double Diamond would be jointly and severally liable for payment of

the fees and expenses.

Double Diamond refused to pay and after avoiding collection efforts in

Canada for several years, filed a motion to under Rule 60(b) of the Federal Rules of

Civil Procedure. The bankruptcy court denied the motion to reopen, and Double

Diamond appealed to the Bankruptcy Appellate Panel (“BAP”), which affirmed the

bankruptcy court in a published opinion. See Double Diamond Distribution, Ltd. v.

Garman Turner Gordon LLP (In re U.S.A. Dawgs, Inc.), 657 B.R. 98 (9th Cir. BAP

2024).

We review questions of subject matter jurisdiction de novo, Montana v.

Golding (In re Pegasus Gold Corp.), 394 F.3d 1189, 1193 (9th Cir. 2005), and the

denial of a motion under Rule 60(b) for an abuse of discretion, Cmty. Dental Servs.

v. Tani, 282 F.3d 1164, 1167 n.7 (9th Cir. 2002), and we affirm.

2 24-1959 I. Subject Matter Jurisdiction

We agree with the BAP and the bankruptcy court had jurisdiction in this

matter. “Federal courts considering Rule 60(b)(4) motions that assert a judgment is

void because of a jurisdictional defect generally have reserved relief only for the

exceptional case in which the court that rendered judgment lacked even an ‘arguable

basis’ for jurisdiction.” United Student Aid Funds, Inc. v. Espinosa, 559 U.S. 260,

271 (2010) (internal quotation and citation omitted). As set forth in 28 U.S.C. §

1334, bankruptcy courts exercise jurisdiction over matters that (i) “arise under” the

Bankruptcy Code; (ii) “arise in” a bankruptcy case and (iii) are “related to” a

bankruptcy case. See Wilshire Courtyard v. Cal. Franchise Tax Bd. (In re Wilshire

Courtyard), 729 F.3d 1279, 1285–87 (9th Cir. 2013).

A proceeding “arises in” a case under the Bankruptcy Code “if it is an

administrative matter unique to the bankruptcy process that has no independent

existence outside of bankruptcy and could not be brought in another forum, but

whose cause of action is not expressly rooted in the Bankruptcy Code.” Battle

Ground Plaza, LLC v. Ray (In re Ray), 624 F.3d 1124, 1131 (9th Cir. 2010). As the

BAP explained, “while guaranty agreements can and do exist outside of bankruptcy,

the Engagement Agreement, including the guaranty and funding provisions therein,

could not.” 657 B.R. at 111. The Engagement Agreement, which was executed by

both Debtor and Double Diamond, pertained solely to the retention of Chapter 11

3 24-1959 counsel in accordance with §§ 327–331, and required the bankruptcy court’s

approval pursuant to these provisions. Because Debtor lacked the ability to pay

bankruptcy counsel, the bankruptcy case would not have existed without Double

Diamond’s agreement to fund GTG. As the BAP explained, “[b]ecause this

employment and compensation scheme cannot exist outside of bankruptcy, the

current dispute over the Fee Order ‘arose in’ Debtor’s bankruptcy case.” Id.; accord

Battle Ground Plaza, LLC v. Ray (In re Ray), 624 F.3d 1124, 1131 (9th Cir. 2010).1

As the bankruptcy court had jurisdiction to enter the Fee Order, the judgment

was not void and there was no basis to reopen under Rule 60(b)(4).

II. Rule 60(b)(6)

Double Diamond also sought relief pursuant to Fed. R. Civ. P. 60(b)(6).

Relief under this provision is to be “used sparingly as an equitable remedy to prevent

manifest injustice” and “is to be utilized only where extraordinary circumstances

prevented a party from taking timely action to prevent or correct an erroneous

judgment.” Latshaw v. Trainer Wortham & Co., Inc., 452 F.3d 1097, 1103 (9th Cir.

2006) (internal quotation and citation omitted).

1 The BAP also opined that the bankruptcy court had “arising under” and “related to” jurisdiction. 657 B.R. at 112–15. We need not address these additional bases for bankruptcy jurisdiction, as any avenue for subject matter jurisdiction is independently sufficient to affirm the denial of the Rule 60(b) motion.

4 24-1959 Motions for relief from judgment must be made within a “reasonable

time.” Fed. R. Civ. P. 60(c)(1); see also Ashford v. Stewart, 657 F.2d 1053, 1055

(9th Cir. 1981).

Here, Double Diamond offers little explanation of why it took over three and

a half years from the entry of the Fee Order for it to seek Rule 60(b) relief. The

bankruptcy court noted that Double Diamond and its principal Steven Mann were

properly served with the fee application and proposed order, that Double Diamond

chose to litigate its liability in Canada instead of appealing the Fee Order, and that

Double Diamond engaged Canadian counsel to oppose GTG’s efforts to enforce the

Fee Order in 2018, at which point it must have been aware of the contents of the Fee

Order. Accordingly, the bankruptcy court did not abuse its discretion when it

concluded that there was no evidence or argument establishing extraordinary

circumstances beyond Double Diamond’s control that prevented it from taking

timely action.

AFFIRMED.

5 24-1959