FILED 1 FEB 06 2012 2 NOT FOR PUBLICATION SUSAN M SPRAUL, CLERK U.S. BKCY. APP. PANEL O F TH E N IN TH C IR C U IT 3 4 UNITED STATES BANKRUPTCY APPELLATE PANEL 5 OF THE NINTH CIRCUIT 6 7 In re: ) BAP No. NC-11-1174-HSaD ) 8 SAMAN HASNAIN, ) Bk. No. 10-58064 ) 9 Debtor. ) Adv. No. 10-05380 ______________________________) 10 ) SAMAN HASNAIN, ) 11 ) Appellant, ) 12 ) v. ) M E M O R A N D U M1 13 ) MICHAEL CHADD, AUDREY HARRIS, ) 14 Chapter 7 Trustee, ) ) 15 Appellees. ) ______________________________) 16 17 Submitted on January 19, 2012 at San Francisco, California 18 Filed - February 6, 2012 19 Appeal from the United States Bankruptcy Court 20 for the Northern District of California 21 Hon. Stephen L. Johnson, Bankruptcy Judge, Presiding. 22 Appearances: Both parties argued pro se. The Trustee did 23 not appear. 24 25 26 27 1 This disposition is not appropriate for publication. 28 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 8013-1. 1 Before: HOLLOWELL, SALTZMAN2 and DUNN, Bankruptcy Judges. 2 3 Creditor Michael Chadd (Chadd) sought relief under 4 § 362(d)3 seeking to have a previously rendered final arbitration 5 award against the debtor confirmed and entered as a judgment in 6 state court. Although the chapter 7 debtor had already received 7 a discharge, Chadd had a timely nondischargeability complaint 8 pending when he filed for § 362(d) relief. Nevertheless, the 9 debtor argued that the discharge injunction of § 524 barred Chadd 10 from seeking confirmation of the arbitration award. The 11 bankruptcy court disagreed and granted relief from the stay or 12 the discharge injunction, to the extent either applied, to have 13 the award confirmed. For the reasons set forth below, we DISMISS 14 this appeal as moot. 15 I. FACTUAL BACKGROUND 16 Sometime in 2008, Chadd bought securities from Jawad Hasnain 17 (Hasnain), which were sold as membership interests in Hasnain’s 18 company. However, the securities were not authorized by the 19 California Department of Corporations. Chadd filed a complaint 20 against Hasnain, his company, and his wife, Saman Hasnain (the 21 Debtor), in California state court, alleging they violated 22 California and Federal securities laws by selling the securities. 23 24 2 The Hon. Deborah J. Saltzman, Bankruptcy Judge for the 25 Central District of California, sitting by designation. 26 3 Unless otherwise indicated, all chapter and section 27 references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532. All Rule references are to the Federal Rules of Bankruptcy 28 Procedure, Rules 1001-9037.
-2- 1 Chadd sought damages for fraud and breach of fiduciary duty. 2 The matter was heard by an arbitrator. The arbitration took 3 place over two days in early 2010. On July 6, 2010, after 4 considering the evidence offered by the parties, the arbitrator 5 found that Hasnain and the Debtor had violated California 6 securities laws, sold the securities by means of 7 misrepresentation, and breached their fiduciary duties by using 8 investor funds for their personal use. The arbitrator determined 9 that Chadd was entitled to a damage award of $683,000 10 (Arbitration Award). 11 On August 4, 2010, before the Arbitration Award was 12 confirmed4 against the Debtor, she filed a voluntary chapter 7 13 bankruptcy petition. On November 5, 2010, Chadd filed an 14 adversary proceeding contending that the Arbitration Award was a 15 nondischargeable debt pursuant to § 523(a)(2), (a)(4), (a)(6) and 16 (a)(19) (Nondischargeability Proceeding). 17 On January 27, 2011, while the Nondischargeability 18 Proceeding was still pending, the Debtor received a bankruptcy 19 discharge. The discharge order specified that not all types of 20 debts were discharged. It provided specific examples of debts 21 not subject to the discharge, including: “Debts that the 22 bankruptcy court specifically has decided or will decide in [a 23 debtor’s] bankruptcy case are not discharged.” 24 4 25 Under California law, a party to an arbitration, in which an award has been made, may petition the court to confirm, 26 correct, or vacate the award. Cal. Civ. Proc. Code §§ 1285- 27 1287.6. If an arbitration award is confirmed, a conforming judgment is entered. The judgment then has the same force and 28 effect as any other civil judgment. Id. at § 1287.4.
-3- 1 On March 8, 2011, Chadd filed a motion for relief from stay 2 (MRS) under § 362(d)(1). He sought stay relief in order to 3 proceed in state court to confirm the Arbitration Award and have 4 it entered as a judgment. Chadd contended that doing so would 5 promote judicial economy because it would allow him to use the 6 state court judgment preclusively in the Nondischargeability 7 Proceeding. The Debtor filed a response to the MRS asserting 8 that the discharge injunction of § 524 barred Chadd from having 9 the Arbitration Award confirmed. The Debtor alleged that Chadd 10 was attempting to improperly perfect an award for a discharged 11 prepetition debt. 12 On March 29, 2011, the bankruptcy court held a hearing on 13 the MRS. The bankruptcy court and the Debtor agreed that the 14 automatic stay was not in effect since the Debtor’s discharge had 15 been entered. However, the bankruptcy court disagreed with the 16 Debtor’s argument that the discharge injunction prevented Chadd 17 from returning to the state court to confirm the Arbitration 18 Award. The bankruptcy court subsequently entered an order on 19 April 5, 2011, granting Chadd relief from stay under § 362, to 20 the extent the stay applied, and § 524(a)(2)5 to proceed in state 21 court to obtain confirmation of the Arbitration Award (Stay 22 Relief Order). The Stay Relief Order emphasized that Chadd could 23 not undertake collection actions as a result of the issuance of 24 25 5 Section 524(a)(2) provides that a discharge “operates as 26 an injunction against the commencement or continuation of an 27 action, the employment of process, or an act, to collect, recover or offset any such debt as a personal liability of the debtor, 28 whether or not discharge of such debt is waived.”
-4- 1 any state court judgment he obtained. The Debtor timely 2 appealed. 3 The Debtor immediately sought a stay pending appeal from the 4 bankruptcy court; however, the bankruptcy court denied the 5 Debtor’s motion. Thereafter, the Debtor sought a stay pending 6 appeal from the Bankruptcy Appellate Panel (BAP). The BAP denied 7 the Debtor’s motion for stay pending appeal on May 3, 2011. 8 The state court scheduled a hearing on the confirmation of 9 the Arbitration Award for May 10, 2011. On May 9, 2011, the 10 state court issued a tentative ruling to confirm the Arbitration 11 Award. That afternoon, the Debtor filed a chapter 11 bankruptcy 12 petition (the Second Bankruptcy Case) and sent a letter to Chadd 13 stating that the automatic stay prevented Chadd from following 14 through with the hearing to have the confirmation entered as a 15 judgment. 16 Chadd then filed a motion for stay relief in the Second 17 Bankruptcy Case.6 It was granted on July 7, 2011. That order 18 was not appealed. On August 25, 2011, the state court confirmed 19 the Arbitration Award and entered a judgment against the Debtor, 20 Hasnain, and his company, jointly and severally, in the amount of 21 $751,250.11. Chadd then filed a motion for summary judgment in 22 the Nondischargeability Proceeding asserting that the state court 23 judgment was preclusive as to the § 523(a) issues. On October 24 27, 2011, the bankruptcy court granted Chadd’s motion for summary 25 26 6 27 The Hon. Arthur S. Weissbrodt presided over the Second Bankruptcy Case.
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FILED 1 FEB 06 2012 2 NOT FOR PUBLICATION SUSAN M SPRAUL, CLERK U.S. BKCY. APP. PANEL O F TH E N IN TH C IR C U IT 3 4 UNITED STATES BANKRUPTCY APPELLATE PANEL 5 OF THE NINTH CIRCUIT 6 7 In re: ) BAP No. NC-11-1174-HSaD ) 8 SAMAN HASNAIN, ) Bk. No. 10-58064 ) 9 Debtor. ) Adv. No. 10-05380 ______________________________) 10 ) SAMAN HASNAIN, ) 11 ) Appellant, ) 12 ) v. ) M E M O R A N D U M1 13 ) MICHAEL CHADD, AUDREY HARRIS, ) 14 Chapter 7 Trustee, ) ) 15 Appellees. ) ______________________________) 16 17 Submitted on January 19, 2012 at San Francisco, California 18 Filed - February 6, 2012 19 Appeal from the United States Bankruptcy Court 20 for the Northern District of California 21 Hon. Stephen L. Johnson, Bankruptcy Judge, Presiding. 22 Appearances: Both parties argued pro se. The Trustee did 23 not appear. 24 25 26 27 1 This disposition is not appropriate for publication. 28 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 8013-1. 1 Before: HOLLOWELL, SALTZMAN2 and DUNN, Bankruptcy Judges. 2 3 Creditor Michael Chadd (Chadd) sought relief under 4 § 362(d)3 seeking to have a previously rendered final arbitration 5 award against the debtor confirmed and entered as a judgment in 6 state court. Although the chapter 7 debtor had already received 7 a discharge, Chadd had a timely nondischargeability complaint 8 pending when he filed for § 362(d) relief. Nevertheless, the 9 debtor argued that the discharge injunction of § 524 barred Chadd 10 from seeking confirmation of the arbitration award. The 11 bankruptcy court disagreed and granted relief from the stay or 12 the discharge injunction, to the extent either applied, to have 13 the award confirmed. For the reasons set forth below, we DISMISS 14 this appeal as moot. 15 I. FACTUAL BACKGROUND 16 Sometime in 2008, Chadd bought securities from Jawad Hasnain 17 (Hasnain), which were sold as membership interests in Hasnain’s 18 company. However, the securities were not authorized by the 19 California Department of Corporations. Chadd filed a complaint 20 against Hasnain, his company, and his wife, Saman Hasnain (the 21 Debtor), in California state court, alleging they violated 22 California and Federal securities laws by selling the securities. 23 24 2 The Hon. Deborah J. Saltzman, Bankruptcy Judge for the 25 Central District of California, sitting by designation. 26 3 Unless otherwise indicated, all chapter and section 27 references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532. All Rule references are to the Federal Rules of Bankruptcy 28 Procedure, Rules 1001-9037.
-2- 1 Chadd sought damages for fraud and breach of fiduciary duty. 2 The matter was heard by an arbitrator. The arbitration took 3 place over two days in early 2010. On July 6, 2010, after 4 considering the evidence offered by the parties, the arbitrator 5 found that Hasnain and the Debtor had violated California 6 securities laws, sold the securities by means of 7 misrepresentation, and breached their fiduciary duties by using 8 investor funds for their personal use. The arbitrator determined 9 that Chadd was entitled to a damage award of $683,000 10 (Arbitration Award). 11 On August 4, 2010, before the Arbitration Award was 12 confirmed4 against the Debtor, she filed a voluntary chapter 7 13 bankruptcy petition. On November 5, 2010, Chadd filed an 14 adversary proceeding contending that the Arbitration Award was a 15 nondischargeable debt pursuant to § 523(a)(2), (a)(4), (a)(6) and 16 (a)(19) (Nondischargeability Proceeding). 17 On January 27, 2011, while the Nondischargeability 18 Proceeding was still pending, the Debtor received a bankruptcy 19 discharge. The discharge order specified that not all types of 20 debts were discharged. It provided specific examples of debts 21 not subject to the discharge, including: “Debts that the 22 bankruptcy court specifically has decided or will decide in [a 23 debtor’s] bankruptcy case are not discharged.” 24 4 25 Under California law, a party to an arbitration, in which an award has been made, may petition the court to confirm, 26 correct, or vacate the award. Cal. Civ. Proc. Code §§ 1285- 27 1287.6. If an arbitration award is confirmed, a conforming judgment is entered. The judgment then has the same force and 28 effect as any other civil judgment. Id. at § 1287.4.
-3- 1 On March 8, 2011, Chadd filed a motion for relief from stay 2 (MRS) under § 362(d)(1). He sought stay relief in order to 3 proceed in state court to confirm the Arbitration Award and have 4 it entered as a judgment. Chadd contended that doing so would 5 promote judicial economy because it would allow him to use the 6 state court judgment preclusively in the Nondischargeability 7 Proceeding. The Debtor filed a response to the MRS asserting 8 that the discharge injunction of § 524 barred Chadd from having 9 the Arbitration Award confirmed. The Debtor alleged that Chadd 10 was attempting to improperly perfect an award for a discharged 11 prepetition debt. 12 On March 29, 2011, the bankruptcy court held a hearing on 13 the MRS. The bankruptcy court and the Debtor agreed that the 14 automatic stay was not in effect since the Debtor’s discharge had 15 been entered. However, the bankruptcy court disagreed with the 16 Debtor’s argument that the discharge injunction prevented Chadd 17 from returning to the state court to confirm the Arbitration 18 Award. The bankruptcy court subsequently entered an order on 19 April 5, 2011, granting Chadd relief from stay under § 362, to 20 the extent the stay applied, and § 524(a)(2)5 to proceed in state 21 court to obtain confirmation of the Arbitration Award (Stay 22 Relief Order). The Stay Relief Order emphasized that Chadd could 23 not undertake collection actions as a result of the issuance of 24 25 5 Section 524(a)(2) provides that a discharge “operates as 26 an injunction against the commencement or continuation of an 27 action, the employment of process, or an act, to collect, recover or offset any such debt as a personal liability of the debtor, 28 whether or not discharge of such debt is waived.”
-4- 1 any state court judgment he obtained. The Debtor timely 2 appealed. 3 The Debtor immediately sought a stay pending appeal from the 4 bankruptcy court; however, the bankruptcy court denied the 5 Debtor’s motion. Thereafter, the Debtor sought a stay pending 6 appeal from the Bankruptcy Appellate Panel (BAP). The BAP denied 7 the Debtor’s motion for stay pending appeal on May 3, 2011. 8 The state court scheduled a hearing on the confirmation of 9 the Arbitration Award for May 10, 2011. On May 9, 2011, the 10 state court issued a tentative ruling to confirm the Arbitration 11 Award. That afternoon, the Debtor filed a chapter 11 bankruptcy 12 petition (the Second Bankruptcy Case) and sent a letter to Chadd 13 stating that the automatic stay prevented Chadd from following 14 through with the hearing to have the confirmation entered as a 15 judgment. 16 Chadd then filed a motion for stay relief in the Second 17 Bankruptcy Case.6 It was granted on July 7, 2011. That order 18 was not appealed. On August 25, 2011, the state court confirmed 19 the Arbitration Award and entered a judgment against the Debtor, 20 Hasnain, and his company, jointly and severally, in the amount of 21 $751,250.11. Chadd then filed a motion for summary judgment in 22 the Nondischargeability Proceeding asserting that the state court 23 judgment was preclusive as to the § 523(a) issues. On October 24 27, 2011, the bankruptcy court granted Chadd’s motion for summary 25 26 6 27 The Hon. Arthur S. Weissbrodt presided over the Second Bankruptcy Case. The Debtor’s Second Bankruptcy Case was 28 dismissed on September 13, 2011, and closed December 13, 2011.
-5- 1 judgment and declared Chadd’s claim nondischargeable. The Debtor 2 has separately appealed that ruling (BAP No. NC-11-1631). 3 On December 12, 2011, Chadd filed with the BAP a Notice of 4 Mootness contending that because the judgment had been entered, 5 the appeal was now moot.7 The Debtor filed a response on 6 December 29, 2011. 7 II. JURISDICTION 8 The bankruptcy court had jurisdiction under 28 U.S.C. § 1334 9 and 28 U.S.C. § 157(b)(2)(A) and (G). We address our 10 jurisdiction under 28 U.S.C. § 158 below. 11 III. ISSUES 12 Is the appeal moot? 13 If the appeal is not moot, did the bankruptcy court err in 14 entering the Stay Relief Order allowing Chadd to confirm the 15 Arbitration Award in state court? 16 IV. STANDARDS OF REVIEW 17 Mootness is a jurisdictional issue that we review de novo. 18 Paulman v. Gateway Venture Partners III, L.P. (In re Filtercorp, 19 Inc.), 163 F.3d 570, 577 (9th Cir. 1998). We lack jurisdiction 20 to hear moot appeals. I.R.S. v. Pattullo (In re Pattullo), 271 21 F.3d 898, 901 (9th Cir. 2001). If an appeal becomes moot while 22 it is pending before us, we must dismiss it. Id. 23 V. DISCUSSION 24 Constitutional mootness is derived from Article III of the 25 U.S. Constitution, which provides that the exercise of judicial 26 7 27 Chadd had previously sought to have the appeal dismissed as interlocutory. However, the BAP denied that motion on May 12, 28 2011.
-6- 1 power depends on the existence of a case or controversy. DeFunis 2 v. Odegaard, 416 U.S. 312, 316 (1974); Clear Channel Outdoor, 3 Inc. v. Knupfer (In re PW, LLC), 391 B.R. 25, 33 (9th Cir. BAP 4 2008). The mootness doctrine applies when events occur during 5 the pendency of the appeal that make it impossible for the 6 appellate court to grant effective relief. Id. The determining 7 issue is “whether there exists a ‘present controversy as to which 8 effective relief can be granted.’” People of Village of Gambell 9 v. Babbitt, 999 F.2d 403, 406 (9th Cir. 1993) (quoting NW Envtl. 10 v. Gordon, 849 F.2d 1241, 1244 (9th Cir. 1988)). If no effective 11 relief is possible, we must dismiss for lack of jurisdiction. 12 United States v. Arkison (In re Cascade Rds., Inc.), 34 F.3d 756, 13 759 (9th Cir. 1994). 14 Our review of the record leads us to conclude that this 15 appeal is moot. If the bankruptcy court had erred and the state 16 court judgment was consequently entered in violation of the 17 automatic stay or the discharge injunction, it would be void. 18 Lone Star Sec. & Video, Inc. v. Gurrola (In re Gurrola), 328 B.R. 19 158, 171 (9th Cir. BAP 2005). As a result, Chadd could not have 20 relied on its preclusive effect in the Nondischargeability 21 Proceeding, and consequently, the appeal would not be moot. 22 However, here, the bankruptcy court in the Second Bankruptcy 23 Case authorized stay relief to allow Chadd to confirm the 24 Arbitration Award. That decision has not been appealed and is 25 final. Therefore, a reversal of this appeal would not change the 26 outcome. Without a stay pending appeal, subsequent events 27 allowed Chadd to confirm the Arbitration Award and obtain a state 28 court judgment against the Debtor that is not subject to being
7 1 declared void. As a result, a reversal of the Stay Relief Order 2 could not provide relief to the Debtor, and therefore, the appeal 3 is moot. 4 VI. CONCLUSION 5 Because Chadd was granted stay relief in the Second 6 Bankruptcy Case, a reversal here would not provide effect relief 7 to the Debtor. Therefore, the appeal is moot and we do not reach 8 its merits. Accordingly, the appeal is DISMISSED. 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28