In re: C&M Russell, LLC

United States Bankruptcy Appellate Panel for the Ninth Circuit·Decided July 30, 2019·No. CC-18-1312-KuTaS·Unpublished

Opinion

FILED

JUL 30 2019

NOT FOR PUBLICATION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. CC-18-1312-KuTaS C&M RUSSELL, LLC, Bk. No. 2:11-bk-53845-RK Debtor. Adv. No. 2:16-ap-01577-RK MATTIE BELINDA EVANS,

Appellant,

v. MEMORANDUM*

ALAN G. TIPPIE; SULMEYERKUPETZ, a professional corporation,

Appellees.

Submitted Without Argument** on July 18, 2019 at Pasadena, California

Filed – July 30, 2019

Appeal from the United States Bankruptcy Court

*

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.

**

By order entered on June 3, 2019, a motions panel determined these appeals suitable for submission on the briefs and record without oral argument.

for the Central District of California Honorable Robert N. Kwan, Bankruptcy Judge, Presiding

Appearances: Appellant Mattie Belinda Evans pro se on brief; David J.

Richardson of SulmeyerKupetz on brief for appellees, Alan G. Tippie and SulmeyerKupetz

Before: KURTZ, TAYLOR, and SPRAKER, Bankruptcy Judges.

INTRODUCTION

Chapter 111 debtor, C&M Russell, LLC (C&M), sold its assets, paid its undisputed creditors in full, and filed a motion to dismiss its case. The bankruptcy court granted C&M's motion and the case closed in late 2012. Per the dismissal order, the remaining sale proceeds were held in trust pending the outcome of state court litigation with a disputed creditor. The litigation resolved in favor of C&M, and the proceeds were turned over to it in November 2016.

Shortly after, Mattie Belinda Evans, individually and as Chief Executive Manager as Real Party in Interest for C&M, filed a malpractice action in the state court against Alan G. Tippie, and his law firm SulmeyerKupetz, APC (SulmeyerKupetz) (collectively, Defendants) in

1 Unless specified otherwise, all chapter and section references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and “Rule” references are to the Federal Rules of Bankruptcy Procedure.

connection with legal services performed for C&M during its bankruptcy case (State Court Action). Defendants removed the action to the bankruptcy court, arguing that it had jurisdiction over the claims alleged under 28 U.S.C. § 1334. Ms. Evans filed a motion to remand, which the bankruptcy court denied. Defendants then filed a motion for summary judgment (MSJ), asserting that claim and issue preclusion applied to the claims. Ms. Evans filed a motion for judgment on the pleadings. The bankruptcy court granted Defendants' MSJ, denied Ms. Evans' motion for judgment on the pleadings, entered judgment in favor of Defendants, and dismissed all claims with prejudice. Ms. Evans appeals from these rulings. We AFFIRM.

FACTS

A. The Bankruptcy Proceeding C&M filed its chapter 11 petition in October 2011. At the time, C&M owned and managed five multi-residential properties. Ms. Evans was the managing member of C&M.

In February 2012, the bankruptcy court approved C&M's application to employ SulmeyerKupetz as general bankruptcy counsel. Mr. Tippie was lead counsel.

In May 2012, SulmeyerKupetz filed its first application for compensation. Ms. Evans filed a declaration in support of the request stating that she had no objections and asking that all professional fees and

costs be approved in full.

During the bankruptcy case, resolution was reached with the secured creditors and C&M's properties were sold. The sale proceeds were used to pay all of C&M's creditors in full, except for one disputed creditor whose claim was the subject of ongoing litigation in state court.

In August 2012, C&M moved to dismiss its case. In October 2012, the bankruptcy court granted the motion and SulmeyerKupetz's employment terminated. In the order dismissing the case (Dismissal Order), certain distributions were authorized and the balance of the sale proceeds were placed in SulmeyerKupetz's client trust account pending the outcome of the litigation with the disputed creditor. The bankruptcy court retained jurisdiction to hear and determine applications for compensation for services rendered by professionals employed by order of the bankruptcy court, including SulmeyerKupetz.

Thereafter, SulmeyerKupetz sought approval of its amended second and final fee application. Ms. Evans again filed a declaration in support of the application. The bankruptcy court approved the application in its entirety.

On December 17, 2013, the bankruptcy case was closed.

In February 2016, the litigation in state court with the disputed creditor was finalized in favor of C&M. The sale proceeds held in trust were turned over to C&M in November 2016.

B. The Malpractice Lawsuit On November 30, 2016, Ms. Evans filed a complaint in the Superior Court for the County of Los Angeles against Defendants seeking over $10,000,000 in damages, and alleging claims for legal malpractice, intentional and negligent misrepresentation, breach of the implied covenant of good faith and fair dealing, breach of fiduciary duty, civil conspiracy, racism, fraud and fraudulent inducement, and intentional and negligent infliction of emotional distress. Ms. Evans asserted these claims in her individual capacity and as the chief executive manager of C&M and Trustee of the Mattie B. Evans Family Trust. The caption page of the complaint listed C&M's bankruptcy case as a related case, and made a demand for a jury trial.

All of the allegations in Ms. Evans' complaint related to Defendants'

legal services provided during C&M's chapter 11 case one way or another. Her claim for racism was based on the bankruptcy judge's alleged bias. Ms. Evans complained that C&M's properties were sold instead of reorganized, and alleged that she was not informed about the dismissal of C&M's case. She further alleged Defendants wrongfully withheld funds in their client trust account and did not release the funds until February 2016. According to Ms. Evans, she was in a vulnerable financial position and unable to timely make monthly payments on her home mortgage, resulting in a Notice of Default and Intent of Sale being filed by her lender. She was

forced to borrow $87,000 from a hard money lender to save her home.

In December 2016, Defendants filed a notice of removal, arguing that the bankruptcy court had jurisdiction over the State Court Action under 28 U.S.C. §§ 1334 and 157(b)(2)(A), (B), and (C) because the allegations in the complaint concerned the administration of the estate and claims against C&M's bankruptcy counsel for work performed during the bankruptcy case.

Ms. Evans filed a motion to remand the action to the state court. She argued that remand was appropriate because there was no basis for the bankruptcy court to exercise jurisdiction over the claims alleged in her complaint as they were based on state law. She maintained that Defendants were California attorneys subject to discipline by independent judges dedicated to ruling on disciplinary matters. Ms. Evans further argued that there was no federal subject-matter jurisdiction over a legal malpractice dispute citing Gunn v. Minton, 133 S.Ct. 105 (2013). According to Ms. Evans, Defendants were also barred by the doctrine of waiver from removing the case to federal court based on their actions in directly invoking the state court's jurisdiction.2 She requested fees and costs under 28 U.S.C. § 1447(c)3

2 It is not exactly clear what actions Ms. Evans was referring to. It appears that she had filed a series of complaints against Defendants in the state court. The first complaint, which Defendants maintain was identical to the removed complaint, was filed on August 23, 2016 (First Action). Defendants filed a demurrer to that complaint on essentially the same grounds that they asserted in the bankruptcy court seeking (continued...)

as a result of Defendants' removal.

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