In re: Jack Klein

• Court: United States Bankruptcy Appellate Panel for the Ninth Circuit
• Decided: October 3, 2013
• Docket: NC-12-1263-JuPaD
• Status: Unpublished

Opinion

FILED OCT 3 2013 1 SUSAN M. SPRAUL, CLERK 2 U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT

3 UNITED STATES BANKRUPTCY APPELLATE PANEL 4 OF THE NINTH CIRCUIT 5 In re: ) BAP No. NC-12-1263-JuPaD ) 6 JACK KLEIN, ) Bk. No. NC-11-31873-TEC ) 7 Debtor. ) Adv. No. NC-11-3171-TEC ______________________________) 8 DOUGLAS CARAWAY, ) ) 9 Appellant, ) ) 10 v. ) M E M O R A N D U M* ) 11 JACK KLEIN, ) ) 12 Appellee. ) ______________________________) 13 Argued and Submitted on September 20, 2013 14 at San Francisco, California 15 Filed - October 3, 2013 16 Appeal from the United States Bankruptcy Court for the Northern District of California 17 Honorable Thomas E. Carlson, Bankruptcy Judge, Presiding 18 _______________________ 19 Appearances: Joseph Bochner, Esq. argued for appellant Douglas Caraway; Howard L. Hibbard, Esq., argued for 20 appellee Jack Klein _________________________ 21 22 Before: JURY, PAPPAS, and DUNN, 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.

-1- 1 Appellant, Douglas Caraway, appeals from the bankruptcy 2 court’s judgment in an adversary proceeding in favor of 3 chapter 71 debtor, Jack Klein. 4 In granting judgment on the pleadings for debtor, the 5 bankruptcy court found that Caraway’s state court judgment debt 6 against debtor was dischargeable on the grounds that (1) Caraway 7 had assigned his judgment debt to Sandra Williams dba Capital 8 Judgment Recovery (Williams) prepetition and thus Williams was 9 the real party in interest under Civil Rule 17(a); and 10 (2) Caraway’s complaint failed to state a claim against debtor 11 as a matter of law due to Williams’ postpetition filing of an 12 acknowledgment of satisfaction of judgment (SOJ) in the state 13 court. The court also found that Williams did not violate the 14 automatic stay by filing the SOJ postpetition and dismissed 15 Caraway’s claims against Williams without prejudice for lack of 16 subject matter jurisdiction. We AFFIRM. 17 I. FACTS 18 A. The State Court Judgment 19 In March 1993, Caraway, dba as Caraway Audio, entered into 20 an agreement with George Silva, Prompt Rewire and debtor to 21 supply and install a public address system in and around the San 22 Mateo County Exposition Center. Caraway was not paid and in 23 September 1993, Caraway filed a complaint in the Superior Court 24 of California, San Mateo County, against Silva, Prompt Rewire, 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 28 Civil Procedure.

-2- 1 debtor and the County of San Mateo alleging causes of action for 2 breach of contract and fraud. 3 Debtor answered the complaint, asserting as an affirmative 4 defense, among others, that he was not a party to the contract. 5 Debtor also filed a cross-complaint against Silva, Prompt Rewire 6 and the County of San Mateo seeking indemnification and 7 apportionment of fault. 8 At some point, Caraway settled with Silva, Prompt Rewire 9 and the County of San Mateo. 10 On December 1, 1997, the state court held a bench trial. 11 Debtor did not appear. After hearing testimony, the state court 12 found for Caraway, awarding him $23,259 in damages, which 13 included principal of $18,125 and interest, $5,000 in punitive 14 damages and $9,960 in attorneys’ fees. 15 On April 14, 1998, the state court entered a default 16 judgment against debtor. The judgment was renewed.2 17 B. The Assignment of the State Court Judgment 18 On January 11, 2010, Caraway entered into an Assignment and 19 Acceptance Agreement with Williams. The assignment shows, among 20 other things, that it was an “absolute assignment” of the full 21 amount of the judgment which at that time was $75,308.33, and 22 that Williams was to pay fifty percent of the net revenue 23 collected to Caraway after paying costs for collection. In 24 addition, Caraway as the assignor acknowledged that as of the 25 date the assignment was executed, “[a]ssignee has the exclusive 26 2 27 Under California law, the judgment is enforceable for a period of 10 years, and longer if renewed. See Cal. Code Civ. 28 Proc. §§ 683.020, 683.120(b).

-3- 1 right to satisfy, settle, compromise and collect the judgment at 2 [a]ssignee’s sole discretion.” 3 C. The Bankruptcy Proceedings 4 On May 13, 2011, debtor filed a chapter 13 petition.3 5 On August 22, 2011, Caraway filed the instant adversary 6 proceeding against debtor seeking to have the state court 7 judgment debt declared nondischargeable under § 523(a)(2). 8 On October 22, 2011, debtor filed a motion for summary 9 judgment (MSJ) on the ground that Caraway had assigned all 10 right, title and interest in the underlying judgment to Williams 11 and, as a result, Caraway lacked standing to assert the action. 12 On December 8, 2011, Caraway filed an opposition to 13 debtor’s motion, asserting that he retained a beneficial 14 interest in the judgment because Williams was required to pay 15 him fifty percent of the net recovery if, and only if, she 16 collected on the judgment. Caraway further maintained that the 17 sole purpose of the assignment was to permit a third-party, 18 non-lawyer — Williams — to collect the judgment for Caraway’s 19 benefit in return for a contingency fee, which arrangement was 20 illegal. 21 On the same date, Caraway filed a declaration attaching the 22 pleadings from the state court lawsuit and an unsigned copy of 23 the assignment. Caraway declared Williams never gave him any 24 25 3 On February 13, 2012, on the motion of the chapter 13 26 trustee, the bankruptcy court converted debtor’s case to one under chapter 7 because his unsecured debt, which included the 27 state court judgment debt at issue in this appeal, exceeded the statutory limit under § 109(e). Therefore, he did not qualify 28 for relief under chapter 13.

-4- 1 monies in return for the assignment. 2 On December 22, 2011, the bankruptcy court entered a 3 Tentative Ruling on the MSJ. The court ruled that at most 4 debtor’s motion would determine that Caraway was not the 5 plaintiff real party in interest. Relying on Civil 6 Rule 17(a)(3),4 incorporated by Rule 7017, the bankruptcy court 7 gave Caraway time to obtain Williams’ ratification, joinder, or 8 substitution. 9 On January 6, 2012, the bankruptcy court entered an order 10 denying debtor’s MSJ and giving Caraway forty-five days to 11 obtain Williams’ ratification, joinder or substitution. The 12 court’s order further stated that, if Caraway failed to comply 13 fully and timely with the court’s order, the court may dismiss 14 the proceeding without further notice or hearing. The record 15 shows that Caraway never obtained Williams’ ratification, 16 joinder or substitution in the adversary proceeding. 17 On January 14, 2012, debtor filed a Notice of Filing of 18 Satisfaction of Judgment. Attached as Exhibit “A” was a 19 certified copy of the SOJ signed by Williams and filed in the 20 San Mateo County Superior Court on January 13, 2012. 21 22 4 Civil Rule 17(a)(3) entitled Joinder of the Real Party in 23 Interest provides:

24 The court may not dismiss an action for failure to prosecute in the name of the real party in interest 25 until, after an objection, a reasonable time has been 26 allowed for the real party in interest to ratify, join, or be substituted into the action. After ratification, 27 joinder, or substitution, the action proceeds as if it had been originally commenced by the real party in 28 interest.

-5- 1 On February 15, 2012, Caraway filed his first amended 2 complaint joining Williams not as a plaintiff, but as a 3 defendant. Caraway alleged generally that Williams took a 4 contingency fee in return for her collection efforts under the 5 assignment, but that she was not a member of the California 6 State Bar. Caraway then alleged claims for relief against 7 Williams for fraud and deceit, constructive fraud, and unfair 8 business practices. He also sought injunctive relief against 9 her under the Consumer Legal Remedies Act based on consumer 10 fraud. Finally, in his prayer for relief, Caraway requested the 11 imposition of a constructive trust upon Williams and an order 12 commanding Williams to relinquish her purported interest in his 13 judgment. 14 On February 22, 2012, debtor filed an answer to Caraway’s 15 FAC. Debtor asserted Caraway filed the FAC without leave from 16 the bankruptcy court and also sought to join Williams, a third 17 party, which was unnecessary when the judgment debt had been 18 satisfied. 19 On March 5, 2012, the bankruptcy court held a hearing, the 20 transcript of which is not included in the record. At that 21 hearing, Caraway evidently acknowledged that he had executed an 22 assignment of the state court judgment to Williams. 23 On March 9, 2012, the bankruptcy court entered an Order to 24 Show Cause re Judgment on the Pleadings for Defendant (OSC). 25 Based on Caraway’s admission regarding the assignment and the 26 SOJ signed by Williams and filed in the state court, the court 27 required Caraway to file a brief by April 2, 2012, showing cause 28 why the court should not enter judgment on the pleadings for

-6- 1 debtor. The court stated that if Caraway did not timely comply, 2 it may, without further notice or hearing, enter judgment for 3 debtor. 4 On April 2, 2012, Caraway’s counsel filed a request for a 5 seventy-two-hour extension to respond. 6 On April 13, 2012, Caraway filed his response to the OSC 7 seeking to have the bankruptcy court issue an order commanding 8 Williams to appear. Caraway argued that he retained an 9 equitable interest in the judgment because the assignment was 10 merely one for collection, that the filing of the purported SOJ 11 in the underlying action violated the automatic stay, and that 12 Williams had engaged in the unauthorized practice of law. 13 On April 16, 2012, the bankruptcy court entered its 14 Memorandum Decision and Order. The court denied Caraway’s 15 request for an extension of time to respond to the OSC. The 16 court found that upon its review of the assignment, Caraway had 17 assigned all rights, title, and interest in the state court 18 judgment to Williams and that Williams had full authority to 19 recover, compromise, settle, and enforce the state court 20 judgment. The bankruptcy court further found that although 21 Caraway was given the opportunity to present evidence 22 controverting the absolute assignment or SOJ, he did not do so. 23 Finally, the court decided that the filing of the SOJ by 24 Williams was not an action taken against debtor in violation of 25 § 362. 26 On April 18, 2012, the bankruptcy court entered judgment 27 for debtor and dismissed all claims against Williams without 28 prejudice for lack of subject matter jurisdiction or in the

-7- 1 alternative, permissive abstention under 28 U.S.C. § 1334(c)(1). 2 On April 27, 2012, Caraway filed a timely notice of appeal. 3 II. JURISDICTION 4 The bankruptcy court had jurisdiction over this proceeding 5 under 28 U.S.C. §§ 1334 and 157(b)(2)(I). We have jurisdiction 6 under 28 U.S.C. § 158. 7 III. ISSUES 8 A. Whether the bankruptcy court erred in granting 9 judgment on the pleadings in favor of debtor based on the 10 assignment and SOJ; 11 B. Whether the bankruptcy court erred in finding that 12 Williams’ filing of the SOJ in the state court did not violate 13 the automatic stay under § 362; and 14 C. Whether the bankruptcy court erred in dismissing 15 Caraway’s claims against Williams for lack of subject matter 16 jurisdiction. 17 IV. STANDARDS OF REVIEW 18 We review de novo (1) judgments on the pleadings granted 19 under Civil Rule 12(c); (2) the bankruptcy court’s decision on 20 the applicability of the automatic stay under § 362; and (3) the 21 bankruptcy court’s subject matter jurisdiction. Lyon v. Chase 22 Bank USA, N.A., 656 F.3d 877 (9th Cir. 2011) (judgments on the 23 pleadings); McCarthy, Johnson & Miller v. N. Bay Plumbing, Inc. 24 (In re Pettit), 217 F.3d 1072, 1077 (9th Cir. 2000) (scope or 25 applicability of the automatic stay under § 362 is a question of 26 law); Battle Ground Plaza, LLC v. Ray (In re Ray), 624 F.3d 27 1124, 1130 (9th Cir. 2010) (subject matter jurisdiction). 28 De novo review is independent, with no deference given to

-8- 1 the trial court’s conclusion. See First Ave. W. Bldg., LLC v. 2 James (In re Onecast Media, Inc.), 439 F.3d 558, 561 (9th Cir. 3 2006). 4 V. DISCUSSION 5 A. The Bankruptcy Court Did Not Err in Granting Judgment on the Pleadings for Debtor 6 7 A bankruptcy court may sua sponte dismiss claims by 8 granting judgment on the pleadings. See Jackson v. E. Bay 9 Hosp., 980 F.Supp. 1341, 1358 (N.D. Cal. 1997). The court must 10 give notice of its sua sponte intention to dismiss the claims 11 and afford plaintiffs “an opportunity to at least submit a 12 written memorandum in opposition to such motion.” Wong v. Bell, 13 642 F.2d 359, 361-62 (9th Cir. 1981). Here, the bankruptcy 14 court complied with this procedure. Caraway had notice and was 15 given the opportunity to file a brief in response to the 16 bankruptcy court’s OSC re judgment on the pleadings. Indeed, 17 Caraway submitted a brief in response to the OSC, albeit an 18 untimely one.5 19 “Judgment on the pleadings is proper when, taking all 20 allegations in the pleadings as true and construed in the light 21 most favorable to the nonmoving party, the moving party is 22 entitled to judgment as a matter of law.” Living Designs, Inc. 23 v. E.I. Dupont de Nemours & Co., 431 F.3d 353, 360 (9th Cir. 24 2005). In other words, a motion for judgment on the pleadings 25 is evaluated under the same standards as a motion to dismiss for 26 27 5 Although Caraway’s brief was late, the record shows that 28 the bankruptcy court did not dismiss his claims on this ground.

-9- 1 failure to state a claim under Civil Rule 12(b)(6), and 2 dismissal pursuant to Civil Rule 12(c) is inappropriate if the 3 facts as pled would entitle the plaintiff to a remedy. Merchs. 4 Home Delivery Serv., Inc. v. Hall & Co., 50 F.3d 1486, 1488 (9th 5 Cir. 1995). 6 In ruling on a motion for a judgment on the pleadings, the 7 bankruptcy court need not accept as true unreasonable inferences 8 or conclusory legal allegations cast in the form of factual 9 allegations. See W. Mining Council v. Watt, 643 F.2d 618, 624 10 (9th Cir. 1981). In addition, the court does not have to accept 11 as true conclusory allegations that contradict facts that may be 12 judicially noticed or that are contradicted by documents 13 referred to in the complaint. See, e.g., Steckman v. Hart 14 Brewing Inc., 143 F.3d 1293, 1295–96 (9th Cir. 1998). 15 The bankruptcy court may dispose of a case under Civil 16 Rule 12 by reference to documents “whose contents are alleged in 17 a complaint and whose authenticity no party questions” without 18 treating the motion as one for summary judgment. Parrino v. 19 FHP, Inc., 146 F.3d 699, 705-06 (9th Cir. 1998). Caraway 20 referenced the assignment in his FAC and no party has questioned 21 its authenticity. Accordingly, the bankruptcy court properly 22 considered the content of the assignment when ruling. 23 Finally, when considering a motion for judgment on the 24 pleadings, the bankruptcy court “may consider facts that ‘are 25 contained in materials of which the court may take judicial 26 notice.’” Heliotrope Gen., Inc. v. Ford Motor Co., 189 F.3d 27 971, 981 n.18 (9th Cir. 1999); see also MGIC Indem. Corp. v. 28 Weisman, 803 F.2d 500, 504 (9th Cir. 1986) (court may take

-10- 1 judicial notice of “matters of public record” without converting 2 a motion to dismiss into a motion for summary judgment). 3 Accordingly, the bankruptcy court could take judicial notice of 4 the SOJ because it was a matter of public record. Mack v. 5 S. Bay Beer Distrib., 798 F.2d 1279, 1282 (9th Cir. 1986). 6 We apply these legal standards to the facts of this case. 7 Analysis 8 Civil Rule 17(a)(1) provides, in relevant part, that “[a]n 9 action must be prosecuted in the name of the real party in 10 interest.” “‘This rule requires that the party who brings an 11 action actually possess, under the substantive law, the right 12 sought to be enforced. Such a requirement is in place ‘to 13 protect the defendant against a subsequent action by the party 14 actually entitled to recover, and to insure generally that the 15 judgment will have its proper effect as res judicata.’” Sung Ho 16 Cha v. Rappaport (In re Sung Ho Cha), 483 B.R. 547, 551 (9th 17 Cir. BAP 2012). 18 In Carter v. Brooms (In re Brooms), 447 B.R. 258 (9th Cir. 19 BAP 2011), the Panel considered the application of the real 20 party in interest rule to assignments. Unlike here, in Brooms, 21 the assignee of the judgment sought to have the prepetition 22 judgment debt declared nondischargeable. Concerned that the 23 assignee was not the real party in interest, the bankruptcy 24 court required the assignee to produce evidence regarding the 25 assignment. After assignee failed to produce the evidence, the 26 bankruptcy court entered judgment in favor of debtor. 27 “‘In an action involving an assignment, a court must ensure 28 that the plaintiff-[assignor] is the real party in interest with

-11- 1 regard to the particular claim involved by determining: (1) what 2 has been assigned; and (2) whether a valid assignment has been 3 made.’” Id. at 265 (quoting 6A Charles Alan Wright, Arthur R. 4 Miller, Mary Kay Kane & Richard L. Marcus, Fed. Practice and 5 Proc. § 1545 (3d ed. 2010)). The Panel noted: 6 Under California law,6 a judgment creditor may assign a judgment to a third person. Cal. Civ. Code § 954. 7 ‘In doing so, the judgment creditor assigns the debt upon which the judgment is based. . . . Through such 8 an assignment, the assignee ordinarily acquires all the rights and remedies possessed by the assignor for 9 the enforcement of the debt, subject, however, to the defenses that the judgment debtor had against the 10 assignor.’ Great W. Bank v. Kong, 90 Cal.App.4th 28, 108 Cal.Rptr.2d 266, 268 (2001) (internal citations 11 omitted). An assignment carries the legal title to the judgment; ‘the transfer of the title does not 12 depend upon the fact of there being a valuable consideration.’ Curtin v. Kowalsky, 145 Cal. 431, 13 78 P. 962, 963 (1904). 14 Furthermore, under federal law, assignees of claims generally have standing to prosecute objections to the 15 dischargeability of particular debts. Boyajian v. New Falls Corp. (In re Boyajian), 564 F.3d 1088, 1091 (9th 16 Cir.2009). And for collection purposes, the assignee who holds legal title to the debt according to 17 substantive law is the real party in interest, even though the assignee must account to the assignor for 18 whatever is recovered in the action. Sprint Commc’ns Co., L.P. v. APCC Servs., Inc., 554 U.S. 269, 284–85 19 (2008). 20 In re Brooms, 447 B.R. at 265. 21 Furthermore, under California law, “[i]n determining what 22 rights or interests pass under an assignment, the intention of 23 the parties as manifested in the instrument is controlling.” 24 Nat’l Reserve Co. of Am. v. Metro. Trust Co. of Cal., 17 Cal.2d 25 827, 832 (Cal. 1941); Cambridge Co. v. City of Elsinore, 26 27 6 The assignment states that it is governed and construed in 28 accordance with California law.

-12- 1 57 Cal.App. 245, 249 (Cal. 1922) (“As with contracts generally, 2 the nature of an assignment is determined by ascertaining the 3 intent of the parties.”). 4 On appeal, Caraway asserts that the bankruptcy court erred 5 in entering judgment for debtor because the assignment was 6 partial, not absolute. According to Caraway, the assignment was 7 only for collection, and since he was entitled to fifty percent 8 of any recovery, he retained an equitable interest in the 9 judgment and thus qualified as a real party in interest. There 10 is authority for the proposition that where there has been only 11 a partial assignment, as in an assignment for collection, both 12 the assignor and the assignee have an interest in the claim and 13 both are real parties in interest. In re Hooker Inves., Inc., 14 116 B.R. 375, 382 (Bankr. S.D.N.Y. 1990) (“[I]n the case of a 15 partial assignment, the assignee owns the part assigned to him, 16 the assignor the balance; each is a real party in interest as to 17 his part of the claim.”) (citing 3 Williston on Contracts § 443 18 n.14 (3d ed. 1960)); see also 6A Charles Alan Wright, Arthur R. 19 Miller, Mary Kay Kane & Richard L. Marcus, Fed. Practice and 20 Proc. § 1545 (3d ed. 2013) (“[W]hen there has been only a 21 partial assignment the assignor and the assignee each retain an 22 interest in the claim and are both real parties in interest. . . 23 in an action involving an assignment for collection, . . . the 24 assignor retains a sufficient interest in the property to be a 25 real party in interest, and under Rule 17(a) either party may 26 sue to protect those rights.”). 27 However, the plain terms of the assignment show that 28 Caraway gave up his right to enforce the judgment when he

-13- 1 acknowledged that Williams held the exclusive right to satisfy, 2 settle, compromise and collect the judgment at her sole 3 discretion. Such an assignment of rights is valid under 4 California law. Cal. Civ. Code § 954. Additionally, 5 In re Brooms holds that under California and federal law, 6 Williams became a real party in interest whether or not Caraway 7 retained an interest in any potential recovery. 447 B.R. at 8 265. That Williams agreed to split with Caraway any recovery 9 she obtained does not undermine the assignment’s effect to 10 vesting legal title of the judgment in Williams. See Nat’l 11 Reserve Co., 17 Cal.2d at 831. For these reasons, Williams was 12 the real party in interest under Civil Rule 17(a). 13 Unable to obtain Williams’ joinder or ratification under 14 Civil Rule 17(a)(3), Caraway sought her involuntary joinder in 15 the FAC and requested the bankruptcy court to compel her 16 appearance. While Civil Rule 17(a) governs only the right of 17 Caraway to bring the suit, Civil Rule 19 tells us whether the 18 appropriate parties are before the court. U-Haul Int’l v. 19 Jartran, Inc., 793 F.2d 1034, 1038 (9th Cir. 1986). Civil 20 Rule 19 provides in relevant part: 21 (a) Persons Required to Be Joined if Feasible. 22 (1) Required Party. A person who is subject to service of process and whose joinder will not deprive 23 the court of subject-matter jurisdiction must be joined as a party if: 24 (A) in that person’s absence, the court 25 cannot accord complete relief among existing parties; or 26 (B) that person claims an interest relating 27 to the subject of the action and is so situated that disposing of the action in the 28 person’s absence may:

-14- 1 (i) as a practical matter impair or impede the person’s ability to 2 protect the interest; or 3 (ii) leave an existing party subject to a substantial risk of 4 incurring double, multiple, or otherwise inconsistent obligations 5 because of the interest. 6 (2) Joinder by Court Order. If a person has not been joined as required, the court must order that the 7 person be made a party. A person who refuses to join as a plaintiff may be made either a defendant or, in a 8 proper case, an involuntary plaintiff. 9 By its terms, Civil Rule 19 limits the power of plaintiffs 10 to determine who shall be parties in lawsuits they institute. 11 U-Haul, 793 F.2d at 1039. It does so in order to serve three 12 sets of interests: “‘(1) the interests of the present 13 defendant; (2) the interests of the potential but absent 14 plaintiffs and defendants; and (3) the social interest in the 15 orderly, expeditious administration of judgment.’ In keeping 16 with these ends, both [Civil] Rules 17(a) and 19 have been 17 construed so as to further the fair and prompt disposition of 18 litigation.” Id. 19 In this case, the assignment shows that Williams possessed 20 the sole right to enforce the judgment against debtor and she 21 exercised that right postpetition by filing the SOJ in the state 22 court. By doing so, Williams no longer claimed an interest in 23 the action. As a result, any concern that debtor would face the 24 risk of incurring double or otherwise inconsistent obligations 25 was alleviated. Accordingly, as debtor argued in the bankruptcy 26 court, it was unnecessary to join Williams in the adversary 27 proceeding after she filed the SOJ. 28 In sum, taken together, the assignment and the filing of

-15- 1 the SOJ effectively determined that under the facts alleged in 2 his FAC, Caraway failed to state a claim against debtor for 3 which relief could be granted. Caraway had the opportunity to 4 present controverting evidence regarding the assignment and SOJ 5 but did not do so. As a result, the bankruptcy court properly 6 granted judgment on the pleadings for debtor. 7 B. The Bankruptcy Court Properly Found That Williams’ Filing of the SOJ Did Not Violate the Automatic Stay 8 9 Caraway contends that the bankruptcy court erred when it 10 found that Williams’ filing of the SOJ did not violate 11 § 362(a)(1). Generally, actions taken in violation of the 12 automatic stay are void. Schwartz v. United States 13 (In re Schwartz), 954 F.2d 569, 571–72 (9th Cir. 1992). 14 In support of his argument that a stay violation occurred, 15 Caraway relies heavily on Dean v. Trans World Airlines, 72 F.3d 16 754 (9th Cir. 1995). Dean addressed the issue of whether the 17 postpetition dismissal of a lawsuit filed prepetition by an 18 airline pilot (Dean) against the debtor/defendant (TWA) violated 19 the automatic stay. 72 F.3d at 755. The court held that 20 “post-filing dismissal in favor of the bankrupt of an action 21 that falls within the purview of the automatic stay violates the 22 stay where the decision to dismiss first requires the court to 23 consider other issues presented by or related to the underlying 24 case.” Id. at 756. Because the dismissal of Dean’s action 25 against TWA required the court to decide whether the 26 law-of-the-case precluded finding TWA liable to Dean, the court 27 found that the dismissal violated the automatic stay. 28 Dean does not provide support for Caraway’s assertion that

-16- 1 Williams’ conduct violated the automatic stay in this case. 2 While the scope of the automatic stay is broad, Williams’ filing 3 of the SOJ did not require the court to consider issues 4 presented by or related to the underlying bankruptcy case. 5 Rather, the issues Caraway raised regarding the validity of the 6 assignment and SOJ were between Williams and Caraway — two 7 nondebtor parties. 8 Moreover, the plain terms of § 362(a)(1) do not apply to 9 these facts. Under § 362(a)(1), the filing of debtor’s petition 10 operated as a stay of the “continuation . . . of a judicial 11 . . . or other action or proceeding against the debtor . . . .” 12 The filing of the SOJ did not constitute a “continuation” of a 13 judicial or other action or proceeding against the debtor. It 14 officially recognized the conclusion of the state court 15 proceeding based on satisfaction of the judgment against the 16 debtor. See In re Pettit, 217 F.3d at 1080. 17 Further, the filing of the SOJ conceivably falls under the 18 Ministerial Act exception to the automatic bankruptcy stay which 19 has been recognized by the Ninth Circuit. Id. at 1076 20 (adopting the Ministerial Act exception to the automatic stay). 21 “Ministerial acts or automatic occurrences that entail no 22 deliberation, discretion, or judicial involvement do not 23 constitute continuations of such a proceeding.” Id. Williams’ 24 filing of the SOJ is similar to the entry of judgment by a court 25 clerk. See Rexnord Holdings, Inc. v. Bidermann, 21 F.3d 522, 26 527 (2nd Cir. 1994) (finding an act of entry of judgment by 27 court clerk was ministerial act that did not violate the stay). 28 Neither act entails deliberation, discretion, or judicial

-17- 1 involvement. Therefore, the bankruptcy court properly found 2 that Williams’ filing of the SOJ was not a violation of the 3 automatic stay. 4 C. The Bankruptcy Court Did Not Err By Dismissing Caraway’s Claims Against Williams 5 6 Finally, Caraway makes vague assertions regarding the 7 prejudice he will suffer if Williams is not joined in the 8 adversary proceeding and he is not allowed to proceed in the 9 bankruptcy court. Caraway attacks the validity of the 10 assignment itself, alleging that it was illegal. In this 11 regard, Caraway contends that Williams’ business is collecting 12 judgments in return for a contingency fee which is a sham or 13 which constitutes the unauthorized practice of law. Caraway 14 fills an entire page of his opening brief with citations to 15 cases from across the country to support his position that he 16 has been the victim of a species of fraud that is widespread. 17 However, these arguments have little relevance to Civil 18 Rules 17(a) and 19 which apply to the joinder of parties. Here, 19 the bankruptcy court dismissed Caraway’s claims against Williams 20 for lack of subject matter jurisdiction, or in the alternative 21 permissive abstention, but nowhere does Caraway argue on appeal 22 why the bankruptcy court’s dismissal of Caraway’s claims against 23 Williams was in error for either of these reasons. Accordingly, 24 Caraway has waived those arguments on appeal. Wake v. Sedona 25 Inst. (In re Sedona Inst.), 220 B.R. 74, 76 (9th Cir. BAP 1998). 26 Even if we were to consider the bankruptcy court’s decision 27 to dismiss Caraway’s claims against Williams for lack of subject 28 matter jurisdiction, we summarily conclude that such dismissal

-18- 1 was proper. Caraway’s claims for breach of fiduciary duty, 2 fraud and the unauthorized practice of law against Williams all 3 arose under California state law, independent of and prior to 4 debtor’s bankruptcy filing.7 These state law claims between two 5 nondebtor parties could have existed entirely apart from 6 debtor’s bankruptcy proceeding and did not depend upon 7 resolution of a substantial question of bankruptcy law.8 See 8 generally In re Ray, 624 F.3d at 1124. Therefore, the 9 bankruptcy court properly dismissed these claims and was 10 compelled to do so under Ray for lack of jurisdiction.9 As the 11 dismissal was without prejudice, Caraway may proceed against 12 13 7 Although bankruptcy courts “enjoy broad discretion to determine who shall practice before them and to monitor the 14 conduct of those who do,” In re Brooms, 447 B.R. at 267, Williams 15 never appeared in the bankruptcy court. 8 16 Contrary to Caraway’s assertion at oral argument, the bankruptcy court was not called upon to decide which creditor had 17 the right to assert a competing claim against a bankruptcy estate. No bankruptcy estate issues, such as allowance of 18 claims, were presented in the nondischargeability action against 19 debtor. 9 20 In the alternative, the bankruptcy court relied upon the doctrine of permissive abstention under 28 U.S.C. § 1334(c)(1) to 21 dismiss the claims. Abstention can exist only where there is a parallel proceeding in state court. Christensen v. Tucson 22 Estates, Inc. (In re Tucson Estates), 912 F.2d 1162, 1167 (9th 23 Cir. 1990) (recognizing as a factor for permissive abstention the presence of a related proceeding commenced in state court or 24 other nonbankruptcy court). The abstention provision is inapplicable to this case because there was no parallel state 25 court proceeding. However, since this was an alternative ground 26 for dismissal, the court’s reliance on permissive abstention was harmless error. See Rule 9005 (“Harmless Error”) (Civil Rule 61 27 provides: “At every stage of the proceeding, the court must disregard all errors and defects that do not affect any party's 28 substantial rights.”).

-19- 1 Williams in the state court. 2 VI. CONCLUSION 3 For the reasons stated, we AFFIRM. 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

-20-