In re: Anita Holcomb

Opinion

FILED APR 25 2018

1 NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK

2 U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT

3 UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT

4 5 In re: ) BAP No. CC-17-1268-KuTaS )

6 ANITA HOLCOMB, ) Bk. No. 2:11-bk-56326-BB )

7 Debtor. ) Adv. No. 2:17-ap-01283-BB ______________________________)

8 )

ANITA HOLCOMB, )

9 )

Appellant, )

10 v. ) M E M O R A N D U M* )

11 ROBERT ALTAGEN, )

)

12 Appellee. )

______________________________)

13 Argued and Submitted on March 22, 2018 14 at Pasadena, California 15 Filed - April 25, 2018 16 Appeal from the United States Bankruptcy Court for the Central District of California 17 Honorable Sheri Bluebond, Bankruptcy Judge, Presiding 18 _____________________________________ 19 Appearances: Blake Joseph Lindemann of Lindemann Law Group PLC argued for appellant Anita Holcomb; James D.

20 Hepworth of Nemecek & Cole argued for appellee Robert Altagen.

21 ______________________________________ 22 Before: KURTZ, TAYLOR, and SPRAKER, Bankruptcy Judges.

23 24 25 26 * This disposition is not appropriate for publication.

27 Although it may be cited for whatever persuasive value it may have (see Fed. R. App. P. 32.1), it has no precedential value. 28 See 9th Cir. BAP Rule 8013-1.

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1 I. INTRODUCTION 2 After her surplus bankruptcy estate was fully administered 3 and closed Anita Holcomb (Debtor) filed a state court complaint 4 against her former chapter 71 bankruptcy attorney, Robert 5 Altagen (Altagen), alleging claims for malpractice. The state 6 court dismissed the action for lack of subject matter 7 jurisdiction because Debtor had failed to seek leave from the 8 bankruptcy court before suing Altagen. Debtor later sought 9 leave from the bankruptcy court which the court denied on the 10 basis that it had jurisdiction over the matter. The bankruptcy 11 court reopened Debtor’s bankruptcy case; and Debtor filed an 12 adversary proceeding against Altagen. Altagen moved to dismiss 13 the complaint under Civil Rule 12(b)(6). Taking judicial notice 14 of its prior rulings in the bankruptcy case, the court granted 15 Altagen’s motion and dismissed Debtor’s complaint with 16 prejudice. Debtor appeals from this ruling. 17 For the reasons discussed below, we vacate the bankruptcy 18 court’s order dismissing Debtor’s adversary complaint with 19 prejudice and remand with instructions to dismiss the adversary 20 proceeding without prejudice for lack of subject matter 21 jurisdiction. 22 II. FACTS 23 Debtor filed a chapter 11 petition in 2011 with the 24 assistance of Altagen for the purpose of preventing the 25 1 26 Unless otherwise indicated, all chapter and section references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, 27 Rule references are to the Federal Rules of Bankruptcy Procedure, and Civil Rule references are to the Federal Rules of Civil 28 Procedure.

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1 foreclosure of her home (Property). The bankruptcy court 2 approved Altagen’s employment as Debtor’s chapter 11 counsel. 3 Debtor had no income and the substantial equity in the 4 Property represented her “retirement.” Her plan of 5 reorganization was to remodel the home, employ a broker to 6 market and sell the Property, pay off her creditors, and then 7 reap the benefits of a surplus due to increasing values in the 8 real estate market. About a year after the filing, Debtor’s 9 plan had still not been confirmed. 10 The bankruptcy court converted Debtor’s case to one under 11 chapter 7, and Edward M. Wolkowitz was appointed the chapter 7 12 trustee (Trustee). Debtor executed a retainer agreement with 13 Altagen to represent her in the converted chapter 7. Debtor 14 then adopted a “scorched-earth” strategy aimed at saving the 15 Property from liquidation by Trustee. 16 A. The Sale Of The Property 17 With bankruptcy court approval, Trustee employed a real 18 estate broker to market the Property for sale. Debtor refused 19 to allow Trustee or his professionals access to the Property. 20 Trustee filed a motion requiring Debtor to, among other things, 21 turn over the Property and remove her exempt property from the 22 premises. In June 2013, the bankruptcy court entered an order 23 granting Trustee’s motion, in part, which allowed Debtor to 24 remain in the Property until Trustee opened a sale escrow for 25 the Property (June Order). The June Order provided that Debtor 26 was to vacate the Property no later than 5:00 p.m. on the second 27 business day after Trustee informed Debtor’s counsel in writing, 28 including e-mail, that Trustee had opened a sale escrow for the

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1 Property. The bankruptcy court also ordered Debtor to cooperate 2 with Trustee. 3 Cooperate she did not. Debtor filed an amended Schedule A, 4 showing that from the time her chapter 11 petition was filed 5 until the time her case was converted, the Property increased in 6 value from $1.3 million to approximately $3 million. On 7 numerous occasions she sought to enjoin the sale and remove 8 Trustee and his professionals due to their alleged misconduct 9 and gross undervaluation of the Property. She also refused to 10 vacate the Property after escrow was opened. After Trustee 11 obtained a writ of possession, Debtor sought to enjoin him from 12 executing on it. 13 Debtor also filed several motions to dismiss her bankruptcy 14 case. In August 2013, Debtor filed a pro se motion to 15 voluntarily dismiss her bankruptcy case. There, Debtor 16 disclosed that she had obtained refinancing for the Property for 17 an amount sufficient to cover the secured debt and 18 administrative costs of her bankruptcy proceeding. Attached to 19 her motion as Exhibit “A” was an email purporting to evidence 20 refinancing of the Property was forthcoming. But such evidence 21 it was not; it was not an approval, but a communication stating 22 information that must be provided by Debtor for an application 23 process to begin. 24 In November 2013, Trustee filed a motion to sell the 25 Property by auction (Motion to Sell). Debtor objected to the 26 motion, and this time Altagen, on behalf of Debtor, filed an 27 emergency motion to dismiss her case. Again, Debtor represented 28 that she had obtained pre-approval for a refinancing loan in the

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1 amount of $1.2 million. She also asserted that all existing 2 liens on the Property would be paid in full and monies would be 3 held in escrow to pay any and all fees or amounts that the 4 bankruptcy court ordered to be paid upon dismissal of her case. 5 Finally, Debtor contended that dismissal was in the best 6 interests of her creditors. Debtor also submitted a pre- 7 approval certificate dated November 25, 2013, from 1st Point 8 Lending, Inc., which was signed by Alex Nelson, a broker/loan 9 officer. 10 Altagen re-filed the emergency motion to dismiss on 11 December 2, 2013 (December 2013 MTD) because an incorrect event 12 code was used for docketing the motion. On the same date, 13 Altagen filed the declaration of Mr. Nelson. Mr. Nelson 14 declared that he was the owner of 1st Point Lending, Inc. and 15 that he had a lender who agreed to fund a $1.2 million loan to 16 Debtor which was pending at Greater LA Escrow Inc., bearing 17 Escrow No. 4128-MB. Mr. Nelson also stated that he spoke to 18 Greater LA Escrow Inc., which indicated that the money was 19 available to fund the loan subject to bankruptcy court approval. 20 Attached to his declaration was proof of funding in the form of 21 a statement from Charles Schwab in the name of an individual 22 lender. 23 On December 4, 2013, the bankruptcy court held a hearing on 24 the Motion to Sell and Debtor’s December 2013 MTD. Altagen 25 appeared and stated that he was apprised of the refinancing for 26 Debtor’s Property and spoke to Mr. Nelson about the loan. He 27 told the court that the escrow was about to close and that there 28 was a one year interest reserve built into the loan. Still, the

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1 court had concerns: 2 THE COURT: Un-huh. And then what happens? 3 MR. ALTAGEN: If the loan is not paid off within one year, they would have all the rights that they would 4 have, I assume as any other lender would. 5 THE COURT: How is she going to pay interest payments in a year? From what I understand, she’s not --

6 MR. ALTAGEN: The money is built into the loan.

7 THE COURT: No. I get that. But that’s for a year.

8 Then what happens? I mean, I’m saying, isn’t she going to be back in bankruptcy then or is she going to 9 be losing the property again at that point? How is she going to service the debt?

10 MR. ALTAGEN: your Honor, I’m not a fortune teller. I 11 don’t know what’s going to happen in a year. But her intention would be to market the property in a proper 12 way as the owner of a piece of real estate that’s been approved and allowed to be sold in the normal course 13 of selling real estate. That’s her objective. That’s her goal. That’s what she’s been trying to do, as the 14 Court so ably, aptly pointed out, since November of 2011. Okay.

15 THE COURT: . . . I mean, she’s pretty much said 16 repeatedly that she didn’t have any source of income.

I don’t have any reason to think that’s going to 17 change. I mean, maybe it will. I hope it will. But she’s been telling us that this is the money she’s 18 going to live on. You know. Whatever she gets out of this property is what she’s going to live on for the 19 rest of, you know, her natural life. 20 So I wouldn’t be able to do this, to confirm this if this were -- if this were in Chapter 11 if this were a 21 plan because I don’t think it’s feasible. So it’s at best a band-aid that kicks this can down the road 22 . . . . So I’m going to deny the motion to dismiss. 23 Over Debtor’s objection, the bankruptcy court allowed 24 Trustee to proceed with the sale of the Property by auction at 25 the hearing. The Property sold for $1.85 million to the highest 26 bidder, and the bankruptcy court entered an order approving the 27 sale (Sale Order).

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1 B. Debtor’s Appeal Of The Sale Order And Request For A Stay Pending Appeal

2 3 Acting pro se, Debtor filed a notice of appeal of the Sale 4 Order in the United States District Court for the Central 5 District of California. 6 Debtor also filed in the bankruptcy court a pro se motion 7 to stay the Sale Order pending appeal (Motion For Stay). Debtor 8 again reiterated that her primary goal was to retain the 9 Property. Attached as Exhibit “A” was a commitment letter from 10 Mr. Nelson. Debtor stated that the lender would be taking a 11 first trust deed on the Property, all existing liens on the 12 Property would be paid in full, and monies would be held to pay 13 the fees for Debtor’s attorney and other amounts that the court 14 approved. Also attached was proof of funding in the form of a 15 statement from Charles Schwab bearing the name of the individual 16 lender. 17 The bankruptcy court denied her motion for a stay pending 18 appeal finding that she would not prevail on the merits (Stay 19 Order). The order provides in relevant part: 20 Debtor’s only basis for the Motion is her contention that she will be able to borrow $1.2 [million] to 21 refinance her property; however, the debtor has never presented any admissible evidence showing that a 22 lender has agreed to lend this amount or any other amount.

23 As the Court explained on the record at the time of 24 hearing on the debtor’s last motion to dismiss the above bankruptcy case, even if the debtor were able to 25 borrow $1.2 million, the debtor has repeatedly represented on the record in open court that she has 26 no income and no ability to make debt service payments on the loan (which is why the alleged loan included a 27 year’s reserve for interest payments). Therefore, the debtor’s need for liquidation or reorganization would 28 not be resolved by the proffered financing. It would

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1 merely (further) delay the inevitable. 2 Debtor later requested and obtained dismissal of her appeal 3 of the Sale Order because the sale closed on December 12, 2013. 4 C. The Bankruptcy Case Is Closed 5 After paying administrative costs and secured and unsecured 6 creditors, Trustee paid surplus funds to Debtor in the amount of 7 $594,779, which included her $175,000 homestead exemption. 8 Debtor obtained her § 727 discharge, and her bankruptcy case was 9 closed. 10 D. The State Court Malpractice Action Against Altagen 11 A year after the closing of her bankruptcy case, Debtor 12 filed a state court lawsuit against Altagen for malpractice, 13 alleging that he failed to (1) timely secure the needed 14 paperwork to stop the bankruptcy court’s ordered sale of the 15 Property; (2) properly advise the bankruptcy court that Debtor 16 had obtained appropriate financing to forestall the sale of her 17 home; and (3) advise the bankruptcy court as to the value of her 18 home. Debtor alleged that as a result of Altagen’s negligence, 19 her home was sold at a price far below market value resulting in 20 damages between $1.5 to $2.5 million. 21 Altagen filed a motion for judgment on the pleadings 22 seeking to dismiss the state court action for lack of 23 jurisdiction. Altagen alleged that Debtor had not sought leave 24 from the bankruptcy court to file the state court action as 25 required under the Barton Doctrine.2 The state court granted 26

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27 In Blixseth v. Brown, 470 B.R. 562, 565 (D. Mont. 2012), the court explained the Barton Doctrine as follows: 28 (continued...)

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1 Altagen’s motion for judgment on the pleadings on the ground 2 that the bankruptcy court had exclusive jurisdiction over 3 Debtor’s legal malpractice claim against Altagen. Debtor sought 4 to reopen her bankruptcy case and filed a motion seeking leave 5 to pursue the state court action. Meanwhile, the state court 6 dismissed the matter. Debtor did not appeal the state court’s 7 ruling. 8 The bankruptcy court later denied Debtor’s motion for leave 9 to sue Altagen in the state court. During the hearing, Debtor’s 10 counsel argued that the Barton Doctrine did not apply to Altagen 11 because he was Debtor’s attorney in her chapter 7 case and thus 12 not appointed by the court. Counsel further argued that the 13 creditors had been satisfied, the chapter 7 trustee’s duties 14 were over, and Debtor was the sole beneficiary of the 15 malpractice action. Therefore, he asserted, the matter should 16 proceed in state court. 17 In its ruling, the bankruptcy court agreed that the 18 malpractice action did not affect the bankruptcy estate but 19 found that it did affect the administration of the bankruptcy 20 system. The court noted that Altagen had been appointed as 21

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(...continued)

22 The Barton Doctrine is derived from the United States 23 Supreme Court’s decision in Barton v. Barbour, 104 U.S.

126 (1881). It requires a party to ‘first obtain leave 24 of the bankruptcy court before it initiates an action in another forum against a bankruptcy trustee or other 25 officer appointed by the bankruptcy court for acts done 26 in the officer’s official capacity.’ Jeffrey v. Fort James Corp., 421 F.3d 963, 970 (9th Cir. 2005)

27 (discussing Barton). If the Bankruptcy Court has not granted leave, then other courts do not have subject 28 matter jurisdiction. Id. at 971.

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1 chapter 11 debtor-in-possession counsel and continued as 2 Debtor’s attorney when the case was converted. The court found 3 that whether or not the Barton Doctrine applied, it was 4 appropriate for the court to police how attorneys behaved in 5 front of it. The court denied Debtor’s motion for leave and 6 found that Debtor’s claims for malpractice were properly brought 7 in the bankruptcy court. 8 The court granted Debtor’s motion to reopen her bankruptcy 9 case. 10 E. The Adversary Complaint 11 On May 26, 2017, Debtor filed an adversary complaint 12 against Altagen alleging California state law claims for 13 fraudulent concealment, fraudulent misrepresentation, and 14 constructive fraud in connection with Altagen’s representation 15 of Debtor in her converted chapter 7 bankruptcy case. Debtor 16 alleged the state law fraud claims because the statute of 17 limitations had run on her malpractice claims. 18 Debtor alleged that Altagen had concealed from the 19 bankruptcy court the fact that Debtor had secured refinancing of 20 her residence. She further asserted Altagen concealed from her 21 that Trustee’s counsel had agreed to continue the auction of the 22 Property so that counsel could review the documentation relating 23 to the refinance loan. Finally, Debtor complained that Altagen 24 had not filed the declaration of Mr. Nelson who verified the 25 financing, although Altagen had filed it. Debtor contended that 26 her residence would not have been sold at the court-ordered 27 auction if all the information regarding her refinancing loan 28 had been given to the bankruptcy court. Debtor requested

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1 compensatory damages in a sum of not less than $2.5 million and 2 punitive damages in an amount to be determined. 3 In August 2017, Altagen moved to dismiss the complaint 4 under Civil Rule 12(b)(6), contending that the allegations of 5 fraud and concealment were contradicted by facts of which the 6 bankruptcy court could take judicial notice. The bankruptcy 7 court stated in the Stay Order that the refinancing loan would 8 not have changed the court’s decision to approve the sale 9 because Debtor had no ability to service the debt. As a result, 10 Altagen alleged that nothing he was accused of doing caused 11 Debtor any damage. 12 At the hearing on Altagen’s motion to dismiss the 13 complaint, the bankruptcy court took judicial notice of its 14 ruling in the Stay Order and then read from its tentative 15 ruling: 16 The text of the order made clear that the result would not have been different if Defendant had told the 17 Court any of the things that Plaintiff claims he should have told the Court or provided any of the 18 documents that Plaintiff alleges should have been provided to the Court. The Debtor had no ability to 19 service any debt on the property and could not afford to retain the property. The only way to resolve 20 Debtor’s financial problems was to have the property sold. Any proposed financing would have merely kicked 21 the can down the road, and Debtor would have lost her property once the interest reserve had been exhausted.

22 The Trustee’s willingness to agree to a postponement [of the auction] would not have changed this result.

23 24 According to the bankruptcy court, the liquidation of the 25 Property was inevitable. The bankruptcy court granted Altagen’s 26 motion and dismissed Debtor’s adversary complaint with 27 prejudice. Debtor filed a timely notice of appeal.

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1 III. JURISDICTION 2 We have jurisdiction under 28 U.S.C. § 158. We discuss the 3 bankruptcy court’s jurisdiction below. 4 IV. ISSUE 5 Whether the bankruptcy court had subject matter 6 jurisdiction over this adversary proceeding. 7 V. STANDARD OF REVIEW 8 We review the bankruptcy court’s jurisdiction over Debtor’s 9 adversary complaint de novo. Harris v. Wittman (In re Harris), 10 590 F.3d 730, 736 (9th Cir. 2009). 11 VI. DISCUSSION 12 A. Bankruptcy Court Jurisdiction 13 We may raise the question of subject matter jurisdiction 14 sua sponte at any time during the pendency of the action, even 15 on appeal and when not raised by the parties. See Snell v. 16 Cleveland, Inc., 316 F.3d 822, 826 (9th Cir. 2002). 17 A bankruptcy court’s subject matter jurisdiction is 18 established by statute. Under 28 U.S.C. § 1334(b), a bankruptcy 19 court has jurisdiction over “all civil proceedings arising under 20 title 11, or arising in or related to cases under title 11.” 21 “Arising under title 11” describes those proceedings that 22 involve a cause of action created or determined by a statutory 23 provision in the bankruptcy code. In re Harris, 590 F.3d at 24 737. “Proceedings ‘arising in’ a bankruptcy are generally 25 referred to as ‘core’ proceedings, and essentially are 26 proceedings that would not exist outside of bankruptcy. . . .” 27 Montana v. Goldin (In re Pegasus Gold Corp.), 394 F.3d 1189, 28 1193 (9th Cir. 2005); see also Battleground Plaza, LLC v. Ray

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1 (In re Ray), 624 F.3d 1124, 1131 (9th Cir. 2010). A 2 nonexhaustive list of core proceedings is set out in 28 U.S.C. 3 § 157, which includes “matters concerning the administration of 4 the estate.” 28 U.S.C. § 157(b)(2)(A). 5 The bankruptcy court also has jurisdiction over “those 6 proceedings that are ‘related to’ a bankruptcy case.” In re 7 Pegasus Gold Corp., 394 F.3d at 1193. 8 [T]he test is whether . . . the outcome of the proceeding could conceivably have any effect on the 9 estate being administered in bankruptcy. Thus, the proceeding need not necessarily be against the debtor 10 or against the debtor’s property. An action is related to bankruptcy if the outcome could alter the 11 debtor’s rights, liabilities, options, or freedom of action (either positively or negatively) and which in 12 any way impacts upon the handling and administration of the bankrupt estate.

13 14 Id. (quoting Fietz v. Great W. Savings (In re Fietz), 852 F.2d 15 455, 457 (9th Cir. 1988) (adopting the “Pacor test” derived from 16 Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3d Cir. 1984)). The 17 United States Supreme Court endorsed Pacor’s conceivability 18 standard with the caveats that “related to” jurisdiction “cannot 19 be limitless,” and that the critical component of the Pacor test 20 is that “bankruptcy courts have no jurisdiction over proceedings 21 that have no effect on the estate of the debtor.” Celotex Corp. 22 v. Edwards, 514 U.S. 300, 308 & n. 6 (1995). 23 We consider whether the bankruptcy court properly exercised 24 its jurisdiction over this proceeding under one of these three 25 categories. 26 B. Analysis 27 It is indisputable that this adversary proceeding, which 28 contains postpetition claims for state law fraud/malpractice

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1 against Altagen acting in his capacity as Debtor’s chapter 7 2 attorney, does not arise under Title 11. The claims alleged do 3 not depend upon a substantive provision of bankruptcy law. In 4 re Ray, 624 F.3d at 1130. 5 Nor do the allegations constitute any of the core 6 jurisdiction matters listed in 28 U.S.C. § 157(b) which “arise 7 in” a case under Title 11 and essentially are proceedings that 8 would not exist outside of bankruptcy. In re Pegasus Gold 9 Corp., 394 F.3d at 1193; In re Ray, 624 F.3d at 1131. The Ninth 10 Circuit has held that some claims for professional malpractice 11 based on services rendered in a bankruptcy case may be 12 considered core proceedings because they arose during the 13 administration of a bankruptcy case. Schultze v. Chandler, 765 14 F.3d 945 (9th Cir. 2014). In Schultze, members of an unsecured 15 creditors’ committee sued their court-appointed attorney for 16 committing legal malpractice while representing them in a debtor 17 business’s bankruptcy proceeding. Id. at 947. The Ninth 18 Circuit stated that “[w]here a post-petition claim was brought 19 against a court-appointed professional, we have held the suit to 20 be a core proceeding,” because 21 ‘[a] sine qua non in restructuring the debtor-creditor relationship is the court’s ability to police the 22 fiduciaries, whether trustees or debtors-in-possession and other court-appointed professionals, who are 23 responsible for managing the debtor’s estate in the best interest of creditors. The bankruptcy court must 24 be able to assure itself and the creditors who rely on the process that court-approved managers of the 25 debtor’s estate are performing their work, conscientiously and cost-effectively. Bankruptcy Code 26 provisions describe the basis for compensation, appointment and removal of court-appointed 27 professionals, their conflict-of-interest standards, and the duties they must perform. See generally §§ 28 321, 322, 324, 326-331.’

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1 Id. at 949 (quoting Southmark Corp. v. Coopers & Lybrand (In re 2 Southmark Corp.), 163 F.3d 925, 931-32 (5th Cir. 1999)). 3 The court noted that (1) the attorney’s employment was 4 approved by the bankruptcy court under § 1103, (2) his 5 compensation was approved by the bankruptcy court under § 328, 6 330, and 331, (3) his duties pertained solely to the 7 administration of the bankruptcy estate, and (4) the claim 8 asserted by the plaintiffs was based solely on acts that 9 occurred in the administration of the estate. In the end, the 10 court found that “this particular legal malpractice claim is 11 inseparable from the bankruptcy case” and thus “falls easily 12 within the definition of a core proceeding.” Id. 13 Debtor’s claims against Altagen do not fall within the 14 scope of Schultze. Although Debtor’s claims would not exist 15 without the bankruptcy case insofar as her claims against 16 Altagen concern his handling of her bankruptcy case, it is not 17 an “administrative” matter peculiar to the bankruptcy context 18 involving, for instance, a court-appointed attorney such as in 19 Schultze. Debtor’s allegations against Altagen pertain solely 20 to his representation as her chapter 7 private attorney. As 21 such, Altagen’s duties and representation of Debtor did not 22 involve the administration of the bankruptcy estate as that was 23 the chapter 7 trustee’s role. Accordingly, Debtor’s claims 24 against Altagen do not impact the handling and administration of 25 her estate and thus are easily separable from the bankruptcy 26 case. 27 In short, Debtor’s relationship with Altagen is governed by 28 the same state-law rules of professional conduct regardless of

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1 whether Altagen represented Debtor in a bankruptcy case or some 2 state real estate matter. Therefore, her claims exist outside 3 of bankruptcy and could be (and were) brought in the state 4 court. The claims alleged against Altagen do not fall within 5 “arising in” jurisdiction. 6 The claims also do not fall within the “related to” 7 category for noncore proceedings. Debtor’s fraud/malpractice 8 claims against Altagen could not have any conceivable effect on 9 her estate. The claims belong to Debtor personally and are not 10 property of her estate, creditors have been paid in full, debtor 11 received her discharge, and the chapter 7 estate has been fully 12 administered and closed. Regardless of whether Debtor is 13 successful or not with her claims against Altagen, her estate 14 would receive no assets. No administration would occur and no 15 distributions would be made. In the end, the critical component 16 of the Pacor test is not met here: “bankruptcy courts have no 17 jurisdiction over proceedings that have no effect on the estate 18 of the debtor.” Celotex Corp., 514 U.S. at 300, 308 & n. 6. 19 Accordingly, the bankruptcy court lacked subject matter 20 jurisdiction over the underlying adversary proceeding. 21 VII. CONCLUSION 22 For the reasons stated, we vacate the bankruptcy court’s 23 order dismissing Debtor’s adversary complaint with prejudice 24 and remand with instructions to dismiss this adversary 25 proceeding without prejudice based on lack of subject matter 26 jurisdiction.