East Coast Foods, Inc. v. Sharp

• Court: Court of Appeals for the Ninth Circuit
• Decided: May 16, 2025
• Docket: 24-4970
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS MAY 16 2025 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

In re: EAST COAST FOODS, INC. No. 24-4969 D.C. No. Debtor 23-1168 _____________________________

MEMORANDUM* EAST COAST FOODS, INC.,

Appellant.

v.

DEVELOPMENT SPECIALISTS, INC.; BRADLEY D. SHARP,

Appellees.

In re: EAST COAST FOODS, INC. No. 24-4970 Debtor D.C. No. _____________________________ 23-1169

EAST COAST FOODS, INC.,

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. BRADLEY D. SHARP, Chapter 11 Trustee; DEVELOPMENT SPECIALISTS, INC.,

Appeal from the Ninth Circuit Bankruptcy Appellate Panel Gary A. Spraker, Frederick Philip Corbit, and William J. Lafferty, III, Bankruptcy Judges, Presiding

Submitted May 12, 2025** Pasadena, California

Before: IKUTA, R. NELSON, and LEE, Circuit Judges.

East Coast Foods, Inc. (ECF) sued Bradley D. Sharp and his firm,

Development Specialists, Inc., for actions he took as ECF’s former Chapter 11

trustee. ECF appeals from the Bankruptcy Appellate Panel’s (BAP) decision

affirming the bankruptcy court’s dismissal of ECF’s complaint for lack of standing.

“We review the bankruptcy court’s conclusions of law de novo and its factual

findings for clear error.” In re Su, 290 F.3d 1140, 1142 (9th Cir. 2002). Exercising

jurisdiction under 28 U.S.C. § 158(d)(1), we affirm.

1. ECF lacks standing to sue Sharp and his firm under its Chapter 11

reorganization plan (the Plan), which became effective September 2018. The Plan

created a Plan Trust managed by a Plan Trustee. On the effective date, the Plan

** The panel unanimously concludes this case is suitable for decision without oral argument. See Fed. R. App. P. 34(a)(2).

2 24-4969 vested in the Plan Trust so-called “Estate Claims,” which it broadly defined as “any

and all claims and causes of action that constitute property of the Estate including,

but not limited to . . . any causes of action or claims for recovery of any amounts

owing to the Debtor or the Estate.” Whether and how to pursue these claims was

left to the “absolute discretion” of the Plan Trustee.

ECF’s claims against Sharp and his firm are “property of the Estate,” meaning

they can be brought by the Plan Trustee alone. Property of the bankruptcy Estate

includes “[a]ny interest in property that the estate acquires after the commencement

of the [bankruptcy] case.” 11 U.S.C. § 541(a)(7); see Cusano v. Klein, 264 F.3d

936, 945 (9th Cir. 2001) (“An ‘estate’ is created when a bankruptcy petition is filed.”

(citing 11 U.S.C. § 541(a))). That includes post-petition interests “acquired in the

estate’s normal course of business.” In re Neidorf, 534 B.R. 369, 371–72 (B.A.P.

9th Cir. 2015). The claims asserted in ECF’s complaint arose in the bankruptcy

Estate’s “normal course of business” because they are based on Sharp’s post-petition

management of the Estate as the Chapter 11 trustee. See id. The claims are thus

“property of the Estate,” which, under the Plan, can be brought only by the Plan

Trustee. ECF’s argument that the Estate suffered no actual injury under Matter of

East Coast Foods, Inc., is not persuasive as that analysis addresses a creditor rather

than an estate. 80 F.4th 901, 910 (9th Cir. 2023). ECF therefore lacks standing. See

Cusano, 264 F.3d at 945 (“For [the debtor] to have standing, he, rather than the

3 24-4969 bankruptcy estate, must own the claim upon which he is suing.”).

2. We decline ECF’s request to remand to the bankruptcy court with

instructions to permit the introduction of extrinsic evidence about the meaning of

“Estate Claims.” Under California contract law, extrinsic evidence is admissible to

prove a meaning to which the contract is “reasonably susceptible.” Pac. Gas & Elec.

Co. v. G.W. Thomas Drayage & Rigging Co., 442 P.2d 641, 644 (Cal. 1968) (in

bank). The Plan is not “reasonably susceptible” to ECF’s interpretation that the Plan

does not vest exclusive control over Estate Claims in the Plan Trustee.

3. The bankruptcy court did not err or abuse its discretion in denying ECF

an opportunity to amend its complaint. By failing to serve the complaint, ECF never

triggered the 21-day window for amendment as of right under Federal Rule of Civil

Procedure 15(a)(1). And because ECF has identified no set of facts under which its

claims against Sharp and his firm could proceed, the bankruptcy court acted within

its discretion in denying discretionary leave to amend. See Fed. R. Civ. P. 15(a)(2);

see also In re Cloudera, Inc., 121 F.4th 1180, 1189–90 (9th Cir. 2024) (denial of

leave to amend is permissible when amendment would be futile).

4. ECF’s opening brief makes no substantive argument for why the

bankruptcy court abused its discretion in denying its motion for reconsideration.

Thus, any distinct argument targeting the reconsideration order is forfeited. See

Brown v. Rawson-Neal Psychiatric Hosp., 840 F.3d 1146, 1148 (9th Cir. 2016).

4 24-4969 5. Because the bankruptcy court properly dismissed ECF’s complaint for

lack of standing, it did not abuse its discretion in declining to extend the time for

ECF to serve the summons and complaint. See Efaw v. Williams, 473 F.3d 1038,

1040 (9th Cir. 2007).

AFFIRMED.

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