FILED APR 22 2022 NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT
UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT
In re: BAP No. NV-21-1198-TLG ANDREW B. PLATT and RUTH ANN PLATT, Bk. No. 2:19-bk-17282-BTB Debtors. Adv. No. 2:19-bk-01125-BTB ANDREW B. PLATT, Appellant, v. MEMORANDUM∗ WOODS & ERICKSON LLP, Appellee.
Appeal from the United States Bankruptcy Court for the District of Nevada Bruce T. Beesley, Bankruptcy Judge, Presiding
Before: TAYLOR, LAFFERTY, and GAN, Bankruptcy Judges.
INTRODUCTION
Appellant Andrew B. Platt appeals the bankruptcy court’s judgment
against him finding a debt of $166,735 to his former law firm to be non-
∗ This disposition is not appropriate for publication. Although it may be cited for whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential value, see 9th Cir. BAP Rule 8024-1. dischargeable under 11 U. S. C. § 523(a)(4).1 We VACATE and REMAND
for additional action as required by this memorandum.
DISCUSSION
Prepetition, Platt was an associate and, as of January 1, 2016, an
alleged partner at the law firm of Woods & Erickson, LLP, a Nevada
Limited Liability Partnership (the “Firm”). During his tenure, he took
payments for legal services where the Firm claims the payments were its
assets. He also allegedly usurped Firm business opportunities and took
other tangible and intangible assets and opportunities from the Firm. These
activities occurred both before and after January 1, 2016.
Once the Firm discovered the activities, it ousted Platt and sued him
in state court, seeking recovery of actual and punitive damages. Platt
eventually filed a chapter 7 bankruptcy case; the Firm then removed the
state court action to the bankruptcy court, creating adversary proceeding
number 19-01122 (the “State Court Action”). It also initiated a separate
nondischargeability action seeking a judgment under, as relevant for this
appeal, § 523(a)(4). The complaint, as relevant to this appeal, requests
recovery based on alleged breach of fiduciary duty.
As the matter proceeded towards trial, the bankruptcy court made
two related rulings. First, it refused to consolidate the two adversary
1 Unless specified otherwise, all chapter and section references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, all “Rule” references are to the Federal Rules of Bankruptcy Procedure, and all “Civil Rule” references are to the Federal Rules of Civil Procedure. 2 proceedings. Second, mere days before trial, it refused to allow amendment
of the complaint to include a § 523(a)(6) conversion claim or to allow a
§ 523(a)(4) claim based on larceny to be a basis for recovery. There is little
to nothing in the record to explain either the bankruptcy court’s analysis in
making these rulings or how they impacted the trial.
After a six-day trial, the bankruptcy court entered a short judgment
containing cursory findings. It determined that Platt was a partner of the
Firm for part of his tenure, that he acted with the state of mind required for
larceny, and that $166,735 was nondischargeable. This number equates to
amounts allegedly taken when an associate ($31, 815) and as an alleged
partner ($134,920).
On appeal, this procedural record and the dearth of findings renders
us incapable of answering critical issues, including whether the order on
appeal is final.
As to finality, both parties to the appeal argue that the State Court
Action was not mooted by the judgment and that the exact amount of the
nondischargeable judgment remains to be resolved. To the extent that the
bankruptcy court liquidated any portion of the nondischargeable
judgment, Platt argues error, saying that the bankruptcy court’s intention
in refusing to consolidate was to reserve the liquidation of the amount of
the nondischargeable claim entirely to the state court. The Firm asserts that
the bankruptcy court appropriately liquidated a portion of the claim
through its trial but intended, notwithstanding the language of the
3 judgment, to allow augmentation of the judgment through a final
determination in the State Court Action (which has since been remanded).
Under either view, questions arise as to the finality of the judgment and
our jurisdiction on appeal.
“Finality for purposes of jurisdiction over ‘as of right’ appeals under
28 U.S.C. § 158(a)(1) in adversary proceedings does not differ from finality
in ordinary federal civil actions under 28 U.S.C. § 1291.” Belli v. Temkin (In
re Belli), 268 B.R. 851, 855 (9th Cir. BAP 2001) (citations omitted). Thus, we
typically lack jurisdiction in an appeal from a merely interlocutory order.
Remand is appropriate to allow the bankruptcy court to clarify the
situation. Is this judgment the final word as to the existence and amount of
the nondischargeable judgment? If so, how can this position be reconciled
with the decisions to deny consolidation of the two adversary proceedings
and to remand the State Court Action?
We also note that if finality were the only cause for question, we
would suggest that the bankruptcy court consider certification of the
matter as appropriate for interlocutory review under Civil Rule 54(b)
(applicable via Rule 7054). But other areas of concern arise given the
confusing procedural history and lack of clear findings.
First, we cannot tell whether the bankruptcy court found
nondischargeability based on breach of fiduciary duty or larceny or both. If
it found larceny, then we cannot square this with its apparent
determination before trial that larceny would not be a basis for
4 nondischargeability. And if breach of fiduciary duty, we cannot discern
how this supports the entire amount of the nondischargeable claim that, at
least facially, appears to include moneys taken when Platt was not a
partner. The bankruptcy court should clarify the basis of its
nondischargeability decision. And if based on larceny, it should explain
how this determination squares with its pre-trial determination that
larceny could not be a basis for a nondischargeability determination, or it
should reconsider its decision regarding litigation of claims based on
larceny if a legally appropriate basis for doing so exists.
Further, as to breach of fiduciary duty, we lack findings that
adequately reflect the court’s reasoning. The record supports a
determination that Platt was a partner at some point in time. But a debt is
nondischargeable as a defalcation in a fiduciary capacity only if a
partnership under Nevada law is tantamount to an express or statutory
trust. True, Nevada statutory law provides that the duties of partners rise
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FILED APR 22 2022 NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT
UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT
In re: BAP No. NV-21-1198-TLG ANDREW B. PLATT and RUTH ANN PLATT, Bk. No. 2:19-bk-17282-BTB Debtors. Adv. No. 2:19-bk-01125-BTB ANDREW B. PLATT, Appellant, v. MEMORANDUM∗ WOODS & ERICKSON LLP, Appellee.
Appeal from the United States Bankruptcy Court for the District of Nevada Bruce T. Beesley, Bankruptcy Judge, Presiding
Before: TAYLOR, LAFFERTY, and GAN, Bankruptcy Judges.
INTRODUCTION
Appellant Andrew B. Platt appeals the bankruptcy court’s judgment
against him finding a debt of $166,735 to his former law firm to be non-
∗ This disposition is not appropriate for publication. Although it may be cited for whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential value, see 9th Cir. BAP Rule 8024-1. dischargeable under 11 U. S. C. § 523(a)(4).1 We VACATE and REMAND
for additional action as required by this memorandum.
DISCUSSION
Prepetition, Platt was an associate and, as of January 1, 2016, an
alleged partner at the law firm of Woods & Erickson, LLP, a Nevada
Limited Liability Partnership (the “Firm”). During his tenure, he took
payments for legal services where the Firm claims the payments were its
assets. He also allegedly usurped Firm business opportunities and took
other tangible and intangible assets and opportunities from the Firm. These
activities occurred both before and after January 1, 2016.
Once the Firm discovered the activities, it ousted Platt and sued him
in state court, seeking recovery of actual and punitive damages. Platt
eventually filed a chapter 7 bankruptcy case; the Firm then removed the
state court action to the bankruptcy court, creating adversary proceeding
number 19-01122 (the “State Court Action”). It also initiated a separate
nondischargeability action seeking a judgment under, as relevant for this
appeal, § 523(a)(4). The complaint, as relevant to this appeal, requests
recovery based on alleged breach of fiduciary duty.
As the matter proceeded towards trial, the bankruptcy court made
two related rulings. First, it refused to consolidate the two adversary
1 Unless specified otherwise, all chapter and section references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, all “Rule” references are to the Federal Rules of Bankruptcy Procedure, and all “Civil Rule” references are to the Federal Rules of Civil Procedure. 2 proceedings. Second, mere days before trial, it refused to allow amendment
of the complaint to include a § 523(a)(6) conversion claim or to allow a
§ 523(a)(4) claim based on larceny to be a basis for recovery. There is little
to nothing in the record to explain either the bankruptcy court’s analysis in
making these rulings or how they impacted the trial.
After a six-day trial, the bankruptcy court entered a short judgment
containing cursory findings. It determined that Platt was a partner of the
Firm for part of his tenure, that he acted with the state of mind required for
larceny, and that $166,735 was nondischargeable. This number equates to
amounts allegedly taken when an associate ($31, 815) and as an alleged
partner ($134,920).
On appeal, this procedural record and the dearth of findings renders
us incapable of answering critical issues, including whether the order on
appeal is final.
As to finality, both parties to the appeal argue that the State Court
Action was not mooted by the judgment and that the exact amount of the
nondischargeable judgment remains to be resolved. To the extent that the
bankruptcy court liquidated any portion of the nondischargeable
judgment, Platt argues error, saying that the bankruptcy court’s intention
in refusing to consolidate was to reserve the liquidation of the amount of
the nondischargeable claim entirely to the state court. The Firm asserts that
the bankruptcy court appropriately liquidated a portion of the claim
through its trial but intended, notwithstanding the language of the
3 judgment, to allow augmentation of the judgment through a final
determination in the State Court Action (which has since been remanded).
Under either view, questions arise as to the finality of the judgment and
our jurisdiction on appeal.
“Finality for purposes of jurisdiction over ‘as of right’ appeals under
28 U.S.C. § 158(a)(1) in adversary proceedings does not differ from finality
in ordinary federal civil actions under 28 U.S.C. § 1291.” Belli v. Temkin (In
re Belli), 268 B.R. 851, 855 (9th Cir. BAP 2001) (citations omitted). Thus, we
typically lack jurisdiction in an appeal from a merely interlocutory order.
Remand is appropriate to allow the bankruptcy court to clarify the
situation. Is this judgment the final word as to the existence and amount of
the nondischargeable judgment? If so, how can this position be reconciled
with the decisions to deny consolidation of the two adversary proceedings
and to remand the State Court Action?
We also note that if finality were the only cause for question, we
would suggest that the bankruptcy court consider certification of the
matter as appropriate for interlocutory review under Civil Rule 54(b)
(applicable via Rule 7054). But other areas of concern arise given the
confusing procedural history and lack of clear findings.
First, we cannot tell whether the bankruptcy court found
nondischargeability based on breach of fiduciary duty or larceny or both. If
it found larceny, then we cannot square this with its apparent
determination before trial that larceny would not be a basis for
4 nondischargeability. And if breach of fiduciary duty, we cannot discern
how this supports the entire amount of the nondischargeable claim that, at
least facially, appears to include moneys taken when Platt was not a
partner. The bankruptcy court should clarify the basis of its
nondischargeability decision. And if based on larceny, it should explain
how this determination squares with its pre-trial determination that
larceny could not be a basis for a nondischargeability determination, or it
should reconsider its decision regarding litigation of claims based on
larceny if a legally appropriate basis for doing so exists.
Further, as to breach of fiduciary duty, we lack findings that
adequately reflect the court’s reasoning. The record supports a
determination that Platt was a partner at some point in time. But a debt is
nondischargeable as a defalcation in a fiduciary capacity only if a
partnership under Nevada law is tantamount to an express or statutory
trust. True, Nevada statutory law provides that the duties of partners rise
to the level of an express or statutory trust, at least as of July 1, 2006 (See
Nev. Rev. Stat. (“NRS”) § 87.4314). NRS § 87.4336 provides in relevant part:
2. A partner’s duty of loyalty to the partnership and the other partners is limited to the following:
(a) To account to the partnership and hold as trustee for it any property, profit or benefit derived by the partner in the conduct and winding up of the partnership business or derived from a use by the partner of partnership
5 property, including the appropriation of a partnership opportunity[.]
But because the section applies only to partnerships formed on or
after July 1, 2006, it is critical that the bankruptcy court clarify whether the
partnership with Platt is the original Firm partnership formed in 1995 or a
new partnership formed as of January 1, 2016. And if it is the former, then
it is important for the bankruptcy court to explain how an express or
statutory trust arises notwithstanding the inapplicability of NRS § 87.4336.
The bankruptcy court also failed to explain how the state of mind
required by Bullock v. BankChampaign, N.A., 569 U.S. 267, 269 (2013), was
evidenced. For a debt to be nondischargeable under § 523(a)(4) as a
defalcation, the debtor must possess “a culpable state of mind,” which the
Supreme Court described as “one involving knowledge of, or gross
recklessness in respect to, the improper nature of the relevant fiduciary
behavior.” Id. The reference to larceny may be intended to fill this state of
mind lacuna in the record, but we cannot be certain. The bankruptcy court
should fill the gap on remand.
In addition, there are questions as to the calculation of the amount of
the nondischargeable debt. Facially, we can discern that it reflects simple
addition of two numbers that were in evidence. But there were other
numbers in evidence, and, depending on the partnership finding, there
may have been appropriate deductions or other offsets. Clarification on
remand is necessary.
6 We acknowledge that we can affirm for any reason supported by the
record, but here the lack of findings and the discord between the
procedural record and the judgment give us too little to go on. Clarity must
be provided by the trial court.
Finally, we acknowledge that the judge handling the matter through
trial is now retired. We remand to a fresh set of eyes. This is unfortunate,
but we see no alternative. But to be clear, on remand the new judge has all
latitude consistent with due process and applicable law to bring the
required clarity to the case.
CONCLUSION
Based on the foregoing, we VACATE and REMAND for further
action consistent with this memorandum.