In re: U.S.A. Dawgs, Inc.

• Court: United States Bankruptcy Appellate Panel for the Ninth Circuit
• Decided: February 28, 2024
• Docket: 22-1212
• Status: Published

Opinion

FILED FEB 28 2024 ORDERED PUBLISHED 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-22-1212-LBC U.S.A. DAWGS, INC., Debtor. Bk. No. 2:18-bk-10453-GS DOUBLE DIAMOND DISTRIBUTION, LTD., Appellant, v. OPINION GARMAN TURNER GORDON LLP, Appellee.

Appeal from the United States Bankruptcy Court for the District of Nevada Gary A. Spraker, Bankruptcy Judge, Presiding

APPEARANCES David A. Riggi of Riggi Law Firm, on brief, for appellant Double Diamond Distribution, Ltd.; Talitha Gray Kozlowski and Teresa M. Pilatowicz of Garman Turner Gordon LLP, on brief, for appellee Garman Turner Gordon LLP.

Before: LAFFERTY, BRAND, and CORBIT, Bankruptcy Judges.

LAFFERTY, Bankruptcy Judge:

INTRODUCTION

In early 2018, U.S.A Dawgs, Inc., the debtor in this case (“Debtor”),

found itself in a difficult situation: it needed legal assistance to help it

1 dispose of assets, preferably through a chapter 111 bankruptcy case. But

Debtor was cash-strapped, and lacked any unencumbered assets from

which to pay a retainer or legal fees to competent bankruptcy counsel.

Double Diamond Distribution, Ltd. (“Double Diamond”), an affiliate of

Debtor 2 and appellant in this matter, rode, seemingly, to the rescue, and

agreed to provide Garman Turner Gordon LLP, (“GTG”), appellee and

Debtor’s choice for chapter 11 counsel, with an ongoing monthly retainer,

and to guaranty the payment of GTG’s fees and expenses incurred in

connection with Debtor’s bankruptcy case.

The arrangement among Debtor, Double Diamond, and GTG was

properly documented in an engagement letter, and properly disclosed and

approved by the bankruptcy court via an order approving employment of

counsel. After Debtor’s assets were sold in the bankruptcy case, GTG

applied for allowance and payment of its fees and expenses incurred via a

properly noticed and served application. The bankruptcy court entered an

order approving the application for compensation (the “Fee Order”), which

also provided that, consistent with the terms set forth in GTG’s

employment application and the court’s order approving the same, Debtor

1 Unless specified otherwise, all chapter and section references are to the Bankruptcy Code, 11 U.S.C. §§ 101–1532, “Rule” references are to the Federal Rules of Bankruptcy Procedure, “Civil Rule” references are to the Federal Rules of Civil Procedure, and “Local Bankruptcy Rule” references are to the Local Bankruptcy Rules for the District of Nevada. 2 Double Diamond is a Canadian company that develops and sells DAWGS

Brand footwear. Debtor was the United States distributor for DAWGS Brand footwear. 2 and Double Diamond would be jointly and severally liable for payment of

the fees and expenses allowed.

At this point, our story takes an unhappy turn, as Double Diamond

declined to pay GTG’s allowed fees and expenses as previously agreed.

Indeed, for much of the ensuing six years, GTG pursued enforcement of its

allowed claim against Double Diamond in various collection actions in

Canada (where Double Diamond apparently has assets). When Double

Diamond had exhausted its ability to dodge GTG’s collection efforts in

Canada, it deployed a different strategy: it moved to reopen Debtor’s

bankruptcy and to seek relief from the Fee Order under Civil Rule 60(b), on

the theory that the bankruptcy court lacked subject matter jurisdiction to

enter an order determining liability of Double Diamond, and on the theory

that the bankruptcy court’s entry of the Fee Order infringed on Double

Diamond’s due process rights to the extent that it purported to hold

Double Diamond liable for GTG’s unpaid fees and expenses.

Double Diamond appeals the bankruptcy court’s order denying its

motion for relief from the Fee Order (the “Civil Rule 60(b) Motion”).

Double Diamond reasserts before this Panel the arguments it urged in its

Civil Rule 60(b) Motion, that the bankruptcy court lacked subject matter

jurisdiction to enforce provisions in the employment agreement against

Double Diamond. Double Diamond also raises notice and due process

concerns related to counsel’s application for approval of fees.

3 The bankruptcy court held that it had “arising in” jurisdiction over

the dispute between Double Diamond and Debtor’s counsel and that the

procedural issues raised by Double Diamond did not amount to a

constitutional due process violation. As a result, the bankruptcy court

denied Double Diamond’s request for relief under Civil Rule 60(b)(4).

We find no error in the bankruptcy court’s analysis and, accordingly,

we AFFIRM. We publish to address the multifaceted reach of a bankruptcy

court’s subject matter jurisdiction over a bankruptcy case, and with respect

to the statutes governing estate counsel’s employment and compensation

under §§ 327-331.

FACTS

A. Prepetition Events

Prior to the commencement of this case, Debtor, mired in over a

decade of litigation with a competitor, sought to retain counsel to discuss,

among other things, the possibility of filing for bankruptcy protection. 3 In

furtherance of this goal, Steven Mann, as CEO of Debtor, and David

Kaplan, as general counsel of Debtor, signed an initial engagement letter

(the “Initial Letter”) retaining GTG. The Initial Letter warned that, “[i]n the

event that a bankruptcy filing becomes necessary, [GTG] may require that

an additional retainer be paid.”

3 We have taken judicial notice of the bankruptcy court docket and various documents filed through the electronic docketing system. See O’Rourke v. Seaboard Sur. Co. (In re E.R. Fegert, Inc.), 887 F.2d 955, 957-58 (9th Cir. 1988); Atwood v. Chase Manhattan Mortg. Co. (In re Atwood), 293 B.R. 227, 233 n.9 (9th Cir. BAP 2003). 4 Shortly thereafter, Debtor decided to file a chapter 11 petition. Here,

Debtor encountered a hitch: as forewarned in the Initial Letter, GTG

required a prefiling retainer. However, a secured lender was asserting a

lien against substantially all of Debtor’s assets. Debtor requested that GTG

waive the prefiling retainer, but, because of Debtor’s lack of unencumbered

assets, GTG was concerned about Debtor’s ability to fund its services to the

estate. To resolve this issue and allow Debtor to proceed with its

bankruptcy filing, Double Diamond, an affiliate of Debtor for which Mr.

Mann also served as President and CEO, agreed that it would: (i) pay

$10,000 per month into GTG’s client trust account during the life of

Debtor’s bankruptcy case; and (ii) guaranty payment of all of GTG’s fees

and costs incurred in connection with Debtor’s bankruptcy case.

To memorialize this agreement, GTG sent another engagement letter

to Mr. Mann and Mr. Kaplan (the “Engagement Agreement”),

incorporating Double Diamond’s obligations identified above. The

Engagement Agreement also noted that GTG’s fees and costs would be

subject to approval by the bankruptcy court. Mr. Mann twice signed the

Engagement Agreement: first, in his capacity as President and CEO of

Debtor and, second, in his capacity as President and CEO of Double

Diamond.

B. Debtor’s Bankruptcy Filing and Employment of GTG

On January 31, 2018, Debtor filed a chapter 11 petition signed by Mr.

Mann as President and CEO of Debtor. The following day, Debtor filed an

5 application to employ GTG as general bankruptcy counsel for Debtor (the

“Application to Employ”). Through the Application to Employ, Debtor

requested that the court approve, pursuant to §§ 327, 328(a), 330, and 331,

“the retention and compensation of GTG as its attorneys. . . .” The

Application to Employ also set forth the proposed scope of GTG’s services

for the estate, all of which involved matters particular to a chapter 11

bankruptcy case.

In a section entitled “Compensation,” Debtor outlined the agreement

between GTG, Debtor, and Double Diamond as follows:

As set forth in the [Engagement Agreement], Double Diamond . . ., an affiliate of Debtor, has guaranteed payment of all GTG’s fees and expenses incurred in connection with the Chapter 11 Case, and agreed to pay, commencing February 10, 2018 and on the first day of every month thereafter, $10,000 to GTG to be held in retainer and applied to fees and expenses approved by this Court after application pursuant to Sections 330 and 331.

Mr. Mann signed a declaration in support of the Application to Employ. In

addition, the Application to Employ was served on Mr. Kaplan on behalf of

Double Diamond. Double Diamond did not oppose the Application to

Employ.

The bankruptcy court entered an order approving the Application to

Employ (the “Order Employing GTG”). In the Order Employing GTG, the

bankruptcy court reiterated that GTG was retained “subject to the terms of

the Engagement Agreement” and would be compensated “in accordance

with the procedures set forth in Sections 330 and 331, and any other

6 applicable procedures and orders of the Court.” Double Diamond did not

appeal the Order Employing GTG or otherwise move for relief from the

Order Employing GTG.

C. The Sale of Debtor’s Assets and GTG’s Fee Application

Later, Debtor filed a motion for, among other things, the sale of

virtually all of its assets by auction (the “Sale Motion”). The Sale Motion

was served on Double Diamond, Mr. Mann, and Mr. Kaplan. Double

Diamond was actively involved in the sale of Debtor’s assets. Eventually,

the bankruptcy court entered an order granting the Sale Motion.

Thereafter, GTG filed its first and final application for allowance of

fees and reimbursement of costs (the “Fee Application”). In the Fee

Application, GTG reiterated its agreement with Double Diamond, again

quoting the language from the Engagement Agreement regarding Double

Diamond’s obligations to pay $10,000 per month to GTG and guaranty

GTG’s fees and costs. In its concluding prayer for relief, GTG requested

that the bankruptcy court “enter an order in the form attached hereto as

Exhibit ‘4,’ thereby granting” the Fee Application. Exhibit 4, in turn,

proposed incorporation of the following findings into the court’s order

allowing fees and costs:

This Court has jurisdiction to consider the Application under 28 U.S.C. §§ 157 and 1334. This is a core proceeding under 28 U.S.C. § 157(b). Venue of this case and the Application in this District is proper under 28 U.S.C. §§ 1408 and 1409.

7 A reasonable opportunity to object and to be heard with respect to the Application and the relief requested therein has been given to Debtor, Double Diamond, the Office of the United States Trustee, and all other interested persons and entities. ... Through its execution of the Engagement Letter, Double Diamond unconditionally guaranteed the payment of all fees and expenses incurred by GTG in its representation of Debtor in the Chapter 11 Case.

Pursuant to the terms of the Engagement Letter, Debtor and Double Diamond are jointly and severally liable for payment of the Allowed Fees and Costs to GTG.

The proposed order also included the following decretal language:

The Allowed Fees and Costs are immediately due and payable to GTG.

Debtor and Double Diamond are jointly and severally liable for the payment of the Allowed Fees and Costs to GTG.

GTG served the Fee Application, and all attached exhibits, on Double

Diamond, Mr. Mann, and Mr. Kaplan.

Concurrently with the Fee Application, GTG filed a three-page notice

of the Fee Application (the “Notice of Fee Application”). The Notice of Fee

Application also was served on Double Diamond, Mr. Mann, and Mr.

Kaplan. On the first page of the Notice of Fee Application, GTG stated that

it sought entry of an order that provided, in relevant part, that “the

Allowed Fees and Costs are immediately due and payable to GTG” and

“Debtor and Double Diamond Distribution Ltd. are jointly and severally

liable for the payment of the Allowed Fees and Costs to GTG.” The Notice

8 of Fee Application also informed any parties that wished to oppose such

relief to file an opposition no later than 14 days before the hearing date of

the Fee Application.

Double Diamond did not oppose the Fee Application. Instead,

Debtor’s secured lender filed an opposition arguing that GTG could not

collect its fees and costs from its collateral (i.e., the thoroughly encumbered

assets of Debtor’s estate) and that GTG should collect directly from Double

Diamond. Double Diamond did not file a response to this opposition.

On August 22, 2018, after a hearing on the matter, the bankruptcy

court entered the Fee Order, approving GTG’s request for payment of fees

and reimbursement of expenses. The bankruptcy court incorporated the

proposed findings and decretal language quoted above into the Fee Order.

Double Diamond did not appeal the Fee Order.

Around this time, Debtor, via new counsel, also filed a motion to

disburse proceeds from the sale of Debtor’s assets. The motion to disburse

was supported by a declaration by Mr. Mann, in which Mr. Mann stated

that “[a]ll or substantially all of the Debtor’s assets were sold and

transferred per the Sale Order” and that “Debtor has little, if anything, in

property of the estate that is of value. . . .”

D. Double Diamond’s Civil Rule 60(b) Motion

GTG spent several years attempting to collect fees and costs from

Double Diamond, mainly by prosecuting several Canadian proceedings in

pursuit of Double Diamond’s assets in that country. After the Canadian

9 proceedings concluded in favor of GTG, Double Diamond returned to the

bankruptcy court.

On March 4, 2022, approximately three and a half years after entry of

the Fee Order, Double Diamond filed the Civil Rule 60(b) Motion. In the

Civil Rule 60(b) Motion, Double Diamond contended that: (i) the Fee Order

is void because the bankruptcy court lacked subject matter jurisdiction to

determine Double Diamond jointly and severally liable for immediate

payment of GTG’s fees and costs; (ii) Double Diamond was a guarantor,

not a surety, such that the bankruptcy court could not order Double

Diamond to “immediately” pay GTG’s fees and costs or hold Double

Diamond jointly and severally liable with Debtor; and (iii) the proposed

order improperly requested relief beyond what was requested in the Fee

Application.

On October 7, 2022, the bankruptcy court issued its memorandum of

decision regarding the Civil Rule 60(b) Motion. In the memorandum of

decision, the bankruptcy court held that: (i) the Fee Order is not void for

lack of subject matter jurisdiction because the bankruptcy court had

“arising in” and “related to” jurisdiction over the dispute; and (ii) Double

Diamond failed to raise the remainder of its arguments under Civil Rule

60(b) within a reasonable time, as required by Civil Rule 60(c).

Consequently, the bankruptcy court entered an order denying the Civil

Rule 60(b) Motion. Double Diamond timely appealed.

10 JURISDICTION

As discussed below, the bankruptcy court had jurisdiction under

28 U.S.C. §§ 1334 and 157(b)(2)(A) and (O). We have jurisdiction under 28

U.S.C. § 158.

ISSUES

1. Did the bankruptcy court err in denying Double Diamond’s Civil

Rule 60(b) Motion under Civil Rule 60(b)(4)?

2. Did the bankruptcy court err in denying Double Diamond’s Civil

Rule 60(b) Motion under Civil Rule 60(b)(6)?

STANDARDS OF REVIEW

We review the denial of a motion under Civil Rule 60(b)(4) de novo.

Hasso v. Mozsgai (In re La Sierra Fin. Servs., Inc.), 290 B.R. 718, 726 (9th Cir.

BAP 2002). This includes subject matter jurisdictional challenges, Montana

v. Goldin (In re Pegasus Gold Corp.), 394 F.3d 1189, 1193 (9th Cir. 2005); Davis

v. Courington (In re Davis), 177 B.R. 907, 910 (9th Cir. BAP 1995), and due

process arguments raised under Civil Rule 60(b)(4). In re La Sierra Fin.

Servs., Inc., 290 B.R. at 726 (citing Wilborn v. Gallagher (In re Wilborn), 205

B.R. 202, 206 (9th Cir. BAP 1996))(“Whether a person’s due process rights

have been violated is a mixed question of law and fact, which is reviewed

de novo.”). De novo review means that we review the matter anew, as if

the bankruptcy court had not previously decided it. Francis v. Wallace (In re

Francis), 505 B.R. 914, 917 (9th Cir. BAP 2014).

11 The Panel otherwise reviews a trial court’s decision to deny a Civil

Rule 60(b) motion, including arguments raised under Civil Rule 60(b)(6),

for abuse of discretion. Cmty. Dental Servs. v. Tani, 282 F.3d 1164, 1167 n.7

(9th Cir. 2002), as amended on denial of reh'g and reh'g en banc. A bankruptcy

court abuses its discretion if it applies the wrong legal standard, misapplies

the correct legal standard, or makes factual findings that are illogical,

implausible, or without support in inferences that may be drawn from the

facts in the record. United States v. Hinkson, 585 F.3d 1247, 1262 (9th Cir.

2009) (en banc).

DISCUSSION

On appeal, Double Diamond relies primarily on its argument that,

pursuant to Civil Rule 60(b)(4), the provisions in the Fee Order imposing

liability on Double Diamond are void because the bankruptcy court lacked

subject matter jurisdiction. “Subject matter jurisdiction defines the court’s

authority to hear a given type of case; it represents the extent to which a

court can rule on the conduct of persons or the status of things.” Carlsbad

Tech., Inc. v. HIF Bio, Inc., 556 U.S. 635, 639 (2009) (cleaned up). “Federal

courts are courts of limited jurisdiction. They possess only that power

authorized by Constitution and statute. . . .” Kokkonen v. Guardian Life Ins.

Co. of Am., 511 U.S. 375, 377 (1994) (citations omitted).

“Like all federal courts, the jurisdiction of the bankruptcy courts is

created and limited by statute.” Wilshire Courtyard v. Cal. Franchise Tax Bd.

(In re Wilshire Courtyard), 729 F.3d 1279, 1284-85 (9th Cir. 2013) (citing

12 Celotex Corp. v. Edwards, 514 U.S. 300, 307 (1995)). For the purposes of

bankruptcy jurisdiction, that statute is 28 U.S.C. § 1334, through which

Congress granted bankruptcy courts, by referral from district courts,

“original and exclusive jurisdiction of all cases under title 11,” 28 U.S.C. §

1334(a), and “original but not exclusive jurisdiction of all civil proceedings

arising under title 11, or arising in or related to cases under title 11.” 28

U.S.C. § 1334(b).

As is evident from the language of this statute, bankruptcy subject

matter jurisdiction differs from other types of federal subject matter

jurisdiction, and specifically, jurisdiction in Article III courts to dispose of

litigation matters. Specifically, bankruptcy courts have subject matter

jurisdiction over both “cases” and “proceedings.”

In order fully to comprehend the nature and scope of bankruptcy

subject matter jurisdiction, one must understand and appreciate this

express distinction between jurisdiction over bankruptcy cases, which is

original and exclusive (i.e., absolute), and bankruptcy proceedings, which

is original but not exclusive, and which is a function of the relationship

between proceedings in bankruptcy (i.e., via “contested matters”, or

motion practice, or adversary proceedings, or lawsuits) and the overall

goal and purpose of a bankruptcy case.

The term bankruptcy “case” refers to the bankruptcy petition itself, In

re Combustion Eng’g, Inc., 391 F.3d 190, 225 n.38 (3d Cir. 2004), as amended,

and is “the basis for taking control of all pertinent interests in property,

13 dealing with that property, determining entitlements to distributions, the

procedures for administering the mechanism, and discharging the debtor.”

Menk v. LaPaglia (In re Menk), 241 B.R. 896, 908 (9th Cir. BAP 1999). In

contrast, “[e]ssentially all litigation within a bankruptcy case is a ‘civil

proceeding.’” Id.

More fundamentally, the fact that the statute expressly recognizes the

separate concept of a bankruptcy case, within which the parties’ rights, and

the ultimate success or failure of the process, are determined by the

outcomes of those civil proceedings, highlights the fact that in crafting a

system of bankruptcy, and in enacting a Bankruptcy Code, Congress

created a system that would facilitate societal goals that would extend

beyond the outcome of any particular piece of litigation therein—

facilitating a process, overseen by the bankruptcy courts, that would lead,

where possible, to a fair liquidation or a feasible reorganization.

To be sure, in the course of a bankruptcy case, bankruptcy courts

resolve disputes of fact and law via civil proceedings in a manner entirely

consistent with typical judicial functions. But that overall objective of

achieving a fair liquidation or a feasible reorganization gives the

bankruptcy system, and the bankruptcy courts that preside over that

process, an additional purpose that is unique in the federal judiciary.

In this context, it is apparent that the basis and scope for the

jurisdictional grant over proceedings in bankruptcy cases depends on the

relationship between those proceedings and the overall objective of

14 achieving a readjustment of the debtor-creditor relationship. As articulated

in 28 U.S.C § 1334, the bankruptcy courts exercise jurisdiction over matters

that (i) “arise under” the Code (i.e., where the Code creates or determines

the cause of action); (ii) “arise in” a bankruptcy case (i.e., the proceeding

would not exist outside of the bankruptcy case); or (iii) are “related to” a

bankruptcy case (i.e., the outcome of the proceeding could conceivably

have an effect on administration of the estate). In re Wilshire Courtyard, 729

F.3d at 1285-87.

As we explain more fully below, we agree with the bankruptcy

court’s determination that this matter “arose in” and was “related to” a

bankruptcy case, and could affirm the bankruptcy court’s decision on those

bases alone. But we further conclude, based on the bankruptcy court’s

jurisdiction over matters emanating from the overall reorganization

process, that there is ample basis to determine that the bankruptcy court

had “arising under” jurisdiction over this matter as well.

With this context, we believe that the bankruptcy court’s duty, under

§§ 327-331, to scrutinize employment and compensation of counsel, takes

on particular practical importance, and jurisdictional significance. Because

corporate debtors, like Debtor, are required to have counsel,4 the filing of a

corporate chapter 11 petition immediately triggers the bankruptcy court’s

obligations under these statutes.

4 “Any corporation, partnership, limited liability company, trust, or other non- individual debtor must be represented by[] an attorney.” Local Bankruptcy Rule 9010. 15 The bankruptcy court’s authority over employment and

compensation of estate counsel safeguards the continuing integrity of the

bankruptcy case. The court’s obligations include the duty to assess whether

counsel is “disinterested,” a concept that is specific to bankruptcy and

distinct from nonbankruptcy conflict of interest laws. § 327(a).5 This

analysis requires bankruptcy courts to analyze and, if appropriate, to

approve both Debtor’s selection of counsel and the terms of payment to

counsel in accordance with the particular mandates of the Code.

As it relates to this matter, a bankruptcy court’s assessment,

oversight, and enforcement of funding arrangements between estate

counsel and nondebtor third parties is a central and necessary part of the

court’s duties under §§ 327-331. Given this framework, the bankruptcy

court did not err in holding that it had “arising in” and “related to”

jurisdiction over the dispute between GTG and Double Diamond, as

further discussed in sections A.1 and A.3. In fact, the instant proceeding is

so fundamental to the bankruptcy court’s authority over counsel that the

court also had “arising under” jurisdiction, as discussed in A.2. Nor did the

bankruptcy court err in denying Double Diamond’s additional requests for

relief under Civil Rule 60(b)(4) and (b)(6), as discussed in sections B and C.6

5 Section 101(14) defines a “disinterested person” for purposes of the Code. 6 Before the bankruptcy court, Double Diamond argued that it was entitled to

relief under all subsections of Civil Rule 60(b). However, Double Diamond currently presents arguments under Civil Rules 60(b)(4) and (b)(6). As such, the Panel will only address those subsections. 16 A. The bankruptcy court did not err in holding that it had subject matter jurisdiction over this matter. A “court may relieve a party or its legal representative from a final

judgment, order, or proceeding” if “the judgment is void.” Civil Rule

60(b)(4).7 The U.S. Supreme Court has held that only two infirmities

warrant relief under Civil Rule 60(b)(4): where a judgment is premised

either on (i) a certain type of jurisdictional error, or (ii) a violation of due

process that deprives a party of notice or the opportunity to be heard.

United Student Aid Funds, Inc. v. Espinosa, 559 U.S. 260, 271 (2010) (citing

Boch Oldsmobile, Inc., 909 F.2d at 661). “Federal courts considering [Civil]

Rule 60(b)(4) motions that assert a judgment is void because of a

jurisdictional defect generally have reserved relief only for the exceptional

case in which the court that rendered judgment lacked even an ‘arguable

basis’ for jurisdiction.” Id. (quoting Nemaizer v. Baker, 793 F.2d 58, 65 (2d

Cir. 1986)).

1. The bankruptcy court had “arising in” jurisdiction over this dispute. Double Diamond does not dispute that issues related to GTG’s

employment and compensation under §§ 327-331 are core proceedings over

which the bankruptcy court had subject matter jurisdiction. That

conclusion is uncontroversial. Matters concerning the administration of the

estate are considered “core” because they “arise under” the Code or “arise

7 “[R]elief from a void judgment has no time limitations.” United States v. Boch Oldsmobile, Inc., 909 F.2d 657, 661 (1st Cir. 1990). 17 in” a bankruptcy case. Maitland v. Mitchell (In re Harris Pine Mills), 44 F.3d

1431, 1435 (9th Cir. 1995). “Congress has left no doubt as to what matters

concern case administration for it subtitled Chapter 3 of title 11 ‘Case

Administration.’” In re GHR Energy Corp., 60 B.R. 52, 61 (Bankr. S.D. Tex.

1985). Sections 327-331, which govern the employment and compensation

of counsel representing the estate, are included in that chapter.

Nevertheless, Double Diamond contends that, despite being a

signatory to the very same Engagement Agreement over which the

bankruptcy court undoubtedly had subject matter jurisdiction, Double

Diamond’s obligations under the Engagement Agreement constituted a

separate guaranty agreement over which the bankruptcy court lacked even

“related to” subject matter jurisdiction.

This Panel disagrees. A proceeding “arises in” a case under the Code

“if it is an administrative matter unique to the bankruptcy process that has

no independent existence outside of bankruptcy and could not be brought

in another forum, but whose cause of action is not expressly rooted in the

Bankruptcy Code.” Battle Ground Plaza, LLC v. Ray (In re Ray), 624 F.3d

1124, 1131 (9th Cir. 2010) (citation omitted).

The bankruptcy court did not err in holding that the current dispute

“arose in” Debtor’s bankruptcy case. The Engagement Agreement at issue

is for retention of chapter 11 counsel in accordance with the strict mandates

set forth in §§ 327-331. This fact, standing alone, demonstrates “arising in”

18 jurisdiction; such an agreement could not exist anywhere outside of a

chapter 11 case.

Additionally, Debtor’s bankruptcy case would not exist without

Double Diamond’s agreement to fund GTG. The record reflects that GTG

required the monthly deposits and the guaranty before agreeing to

represent Debtor, and that Debtor did not otherwise have the means to

fully fund bankruptcy counsel. As such, the specific provisions binding

Double Diamond enabled Debtor to pursue bankruptcy protection in the

first place.8

Double Diamond mainly argues that, because guaranty/suretyship

agreements in general exist outside of bankruptcy, this matter could not

“arise in” bankruptcy. This interpretation misconstrues binding Ninth

Circuit law. See Harris v. Whitman (In re Harris), 590 F.3d 730 (9th Cir. 2009).

In Harris, after the debtor filed a chapter 7 case, the chapter 7 trustee

entered into an agreement assigning the right to prosecute a fraudulent

conveyance claim against the debtor and his wife to an unsecured creditor.

590 F.3d at 734-35. Later, the debtor, his wife, the trustee, and the

unsecured creditor entered into a settlement agreement resolving the

disputes between the parties. Id. Through the agreement, the trustee agreed

to sell certain assets for the benefit of the estate and to refrain from selling

8 Moreover, GTG explicitly set forth the scope of its proposed employment in its Application to Employ. GTG’s detailed outline of the scope of its employment exclusively covered matters involving the administration of Debtor’s bankruptcy case, i.e., work that could not happen anywhere outside of bankruptcy. 19 other assets. Id. The bankruptcy court approved the settlement agreement.

Id.

Almost three years later, the debtor sued the trustee, the unsecured

creditor, and the unsecured creditor’s attorneys in California state court,

asserting several California causes of action related to the settlement

agreement. Id. at 735-36. The trustee removed the case to bankruptcy court,

which dismissed the debtor’s complaint in its entirety. Id.

On appeal, the Ninth Circuit Court of Appeals held that the

bankruptcy court had “arising in” jurisdiction over the lawsuit:

Because the plaintiff sued the bankruptcy trustee for the trustee’s conduct in administering the bankruptcy estate, the state law claims arose in the bankruptcy case and were subject to federal jurisdiction.

Here, although this is a state law cause of action, Harris’s claim arose in his bankruptcy case because it could not exist independently of his bankruptcy case. Harris alleged that. . . the bankruptcy trustee[] breached the Settlement Agreement by selling bankruptcy estate assets that she had agreed not to sell, in exchange for [the unsecured creditor’s] release of his claims against the estate and his assumption of other estate liabilities that Harris alleges were already released by the Settlement Agreement. . . . Therefore, Harris’s state law contract claim arose in his bankruptcy case, and it could be referred to the bankruptcy court.

Id. at 737-38.

Of course, settlement agreements generally can and do exist outside

of bankruptcy. Nevertheless, despite the fact that the debtor was suing

20 nondebtor entities for, among other things, breach of a contract under state

law, the Ninth Circuit held that the particular type of contract at issue – i.e.,

a settlement agreement regarding administration of the estate that was

approved by the bankruptcy court – could not exist outside of bankruptcy.

Similarly, while guaranty agreements can and do exist outside of

bankruptcy, the Engagement Agreement, including the guaranty and

funding provisions therein, could not. Like in Harris, the Engagement

Agreement involved administration of the estate, namely, the employment

and compensation of counsel under §§ 327-331. Because this employment

and compensation scheme cannot exist outside of bankruptcy, the current

dispute over the Fee Order “arose in” Debtor’s bankruptcy case.

Consequently, the bankruptcy court did not err in holding that it had

“arising in” jurisdiction.

2. The bankruptcy court had “arising under” jurisdiction over this dispute. Although both the parties and the bankruptcy court focus on “arising

in” jurisdiction, we believe the current dispute also “arises under” the

Code. “A matter ‘arises under’ the Bankruptcy Code if its existence

depends on a substantive provision of bankruptcy law, that is, if it involves

a cause of action created or determined by a statutory provision of the

Bankruptcy Code.” In re Ray, 624 F.3d at 1131 (citations omitted).

As noted above, the employment and compensation system set forth

in §§ 327-331 is specific to bankruptcy – the comprehensive requirements

21 governing estate counsel set forth in those statutes do not exist anywhere

else. It was these statutes that supplied the requirements for approval of

the Engagement Agreement, both as concerned approval of GTG as

counsel and approval of the fee arrangement involving Double Diamond.

It was also these statutes that provided the standard for approval or denial

of counsel’s fees, including whether GTG was entitled to receive funds

from Double Diamond.

Although Double Diamond attempts to extricate itself from the

bankruptcy court’s authority over GTG as estate counsel, the provisions

obligating Double Diamond equally implicated the court’s statutory

authority under §§ 327-331. Pursuant to these statutes, the bankruptcy

court had the authority to deny approval of the Engagement Agreement

based on Double Diamond’s inclusion in that agreement. For example, the

court could have found that GTG was not “disinterested” for purposes of

the Code based on the funding it was receiving from Double Diamond.

Notwithstanding the parties’ agreement to the contrary, the bankruptcy

court also retained the authority to deny all or part of counsel’s fees and

prevent Double Diamond from paying GTG.

Binding Ninth Circuit authority, Congress’s explicit grant of

jurisdiction to bankruptcy courts, and policy also serve to bolster this

holding. The Ninth Circuit Court of Appeals’ decision in Neben & Starrett,

Inc. v. Chartwell Financial Corp. (In re Park-Helena Corp.), 63 F.3d 877, 881 (9th

Cir. 1995), is particularly informative. In Park-Helena, the debtor’s general

22 bankruptcy counsel received a retainer from the debtor’s president, i.e., a

nondebtor third party, in contemplation of the debtor’s chapter 11

bankruptcy filing. 63 F.3d at 879. However, in its application for

employment, counsel stated that it received the retainer from the debtor. Id.

After the true source of the retainer came to light, the bankruptcy court

held that counsel’s failure to make complete disclosures warranted denial

of all of counsel’s fees. Id. at 880.

The Ninth Circuit affirmed. Id. at 879. In support, the circuit first

discussed the bankruptcy court’s “policing responsibilities” under the

Code:

The bankruptcy court must ensure that attorneys who represent the debtor do so in the best interests of the bankruptcy estate. The court must ensure, for example, that the attorneys do not have interests adverse to those of the estate, 11 U.S.C. § 327, that the attorneys only charge for services that benefit the estate, and that they charge only “reasonable” fees, 11 U.S.C. § 329(b). To facilitate the court’s policing responsibilities, the Bankruptcy Code and Federal Rules of Bankruptcy Procedure impose several disclosure requirements on attorneys who seek to represent a debtor and who seek to recover fees. See 11 U.S.C. § 329; Fed. R. Bankr. P. 2014 & 2016.

Id. at 880 (internal citations omitted). Because counsel failed to disclose the

source of its retainer in accordance with § 329, the circuit held that the

bankruptcy court had the authority to deny all of counsel’s fees, even if

such a result was “harsh.” Id. at 881. The circuit further held that § 327 also

empowered the bankruptcy court to deny counsel’s fees, because that

23 statute “assists the court in ensuring that the attorney has no conflicts of

interest and is disinterested.” Id.

As such, the circuit implicitly held that the bankruptcy court had

jurisdiction over counsel’s recovery of fees and costs despite the fact that a

nondebtor third party funded counsel’s retainer. This holding is in line

with Congress’s grant of jurisdiction to bankruptcy courts under 28 U.S.C.

§ 1334; Congress evidently believed the bankruptcy court’s role under §

327 to be so important that it explicitly conferred on bankruptcy courts

“exclusive jurisdiction . . . over all claims or causes of action that involve

construction of section 327 of title 11, United States Code, or rules relating

to disclosure requirements under section 327.” 28 U.S.C. § 1334(e)(2)

(emphasis added); see also In re Sundance Self Storage-El Dorado LP, 482 B.R.

613, 624 (Bankr. E.D. Cal. 2012) (the bankruptcy court “has original and

exclusive jurisdiction over the employment of counsel, their compensation,

and their disclosure obligations, pursuant to 28 U.S.C. § 1334(e)(2). . . .”).

Significantly, the breadth of the holding in Park-Helena demonstrates

the centrality of §§ 327-331 to the integrity of the bankruptcy system. See

also Land W., Inc. v. Coldwell Banker Com. Grp., Inc. (In re Haley), 950 F.2d 588,

590 (9th Cir. 1991) (“Control by the bankruptcy court is necessary to enable

the court to contain the estate’s expenses and avoid intervention by

unnecessary participants.”). The bankruptcy court’s broad and exclusive

jurisdiction over issues that implicate estate counsel’s employment and

compensation has been recognized in other contexts as well. For instance,

24 after assessing the history of Congress’s grant of exclusive jurisdiction to

bankruptcy courts, one court held that it could not delegate any disputes

under §§ 327-331 to arbitration for resolution:

[D]isputes over fees in bankruptcy cases fall within the extremely narrow category of disputes which Congress probably never envisioned being delegated to nonjudicial entities for resolution. Under the Bankruptcy Act of 1898, the Supreme Court held that the jurisdiction of the bankruptcy court over fees is “paramount and exclusive,” Congress having asked for “the informed judgment of the bankruptcy court, not another court or agency.” Brown v. Gerdes, 321 U.S. 178, 183– 184, 64 S.Ct. 487, 88 L.Ed. 659 (1944). Nothing in the 1978 Code or amendments thereto indicates that Congress was unaware of this principle or that it intended to change it. As was stated in Dewsnup v. Timm, 502 U.S. 410, 112 S.Ct. 773, 779, 116 L.Ed.2d 903 (1992), the 1978 Code should not be interpreted “to effect a major change in pre-Code practice that is not the subject of at least some discussion in the legislative history.” No such legislative history supports the delegation of the court’s fee- setting responsibilities. . . .

Home Express, Inc. v. Alamo Grp., LLC (In re Home Express, Inc.), 226 B.R. 657,

659 (Bankr. N.D. Cal. 1998). Considering this history, the Home Express

court distinguished between “ordinary contract dispute[s] between the

debtor and another party (whether it be core or noncore)” and “disputes

involving § 327 through 330,” holding that “bankruptcy policy must hold

sway over the policies of the Federal Arbitration Act” in proceedings

regarding the latter. Id.

25 More recently, a bankruptcy court dismissed an adversary

proceeding filed by special counsel employed by the estate on the basis that

counsel’s complaint was preempted by the Code’s compensation statutes.

RFK Glob., PLLC v. Nuti Hart LLP (In re Sunergy Cal., LLC), 651 B.R. 781

(Bankr. E.D. Cal. 2023). There, after the chapter 11 trustee objected to

special counsel’s fee application, special counsel sued the trustee on several

common law theories, demanding damages measured by any fees the court

disallowed plus punitive damages. Id. at 784. After noting that “[t]he fee

application process established by Congress serves as the exclusive remedy

for professionals employed by an estate,” the bankruptcy court held that

special counsel’s suit was preempted by the Code:

The above-described comprehensive Congressional scheme for employing and compensating professionals in bankruptcy cases is intended to provide mandatory standards for compensation awards.

To permit the common-law causes of action that [special counsel] alleges in its adversary proceeding complaint would be to “erect an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.”

Id. at 784, 789 (quoting Stengel v. Medtronic Inc., 704 F.3d 1224, 1231 (9th Cir.

2013) (en banc)); see also McCutchen, Doyle, Brown & Enersen v. Off. Comm. of

Unsecured Creditors (In re Weibel, Inc.), 176 B.R. 209, 212 (9th Cir. BAP 1994)

(holding that the Code precludes fee awards for services performed on

26 behalf of a bankruptcy estate based on state law theories not provided for

by the Code).

In light of the above, the dispute between GTG and Double Diamond

falls squarely within the bankruptcy court’s jurisdiction over §§ 327-331. It

is the bankruptcy court, and no other court, that has the ability and

obligation to parse whether any part of counsel’s employment and

compensation is adverse to the bankruptcy estate and renders counsel

“disinterested” under the Code. This obligation to assess the Engagement

Agreement for compliance with the Code necessarily includes assessment

of any other parties to the agreement, and especially parties that fund

estate counsel and guaranty estate liabilities.

A holding that the bankruptcy court lacks subject matter jurisdiction

over the portions of the Engagement Agreement involving Double

Diamond would seriously undermine the bankruptcy court’s authority

under §§ 327-331. For example, a nondebtor entity in Double Diamond’s

shoes could unfairly influence debtor’s counsel by either increasing or

withholding monthly payments to counsel. In such a scenario, Double

Diamond’s proposed limits on the bankruptcy court’s jurisdiction would

leave the Code’s otherwise broad and powerful disclosure and

compensation statutes utterly toothless. To wit, the bankruptcy court

would have no jurisdiction to enforce its own order approving

employment under §§ 327-329, or the flow of funds (or lack thereof) to

debtor’s counsel under §§ 330-331. Given that the mandates of §§ 327-331

27 occur exclusively in the context of bankruptcy, it stands to reason that a

dispute involving these statutes, whether or not such a dispute involves a

nondebtor guarantor, also “arises under” §§ 327-331.

Double Diamond voluntarily entered into an agreement governing

bankruptcy estate counsel’s employment and compensation under §§ 327-

331. In so doing, Double Diamond brought the current dispute over the

Engagement Agreement within the bankruptcy court’s “core” jurisdiction.

3. The bankruptcy court had “related to” jurisdiction over this dispute. An action is “related to” a bankruptcy case if the outcome of the

proceeding could conceivably alter the debtor’s rights, liabilities, options or

freedom of action (either positively or negatively) in such a way as to

impact the administration of the bankruptcy estate. Fietz v. Great W. Sav. (In

re Fietz), 852 F.2d 455, 457 (9th Cir. 1988) (adopting Pacor, Inc. v. Higgins,

743 F.2d 984, 994 (3d Cir. 1984)).

Although the Panel holds that the bankruptcy court had “arising

under” and “arising in” jurisdiction, the Panel will briefly address Double

Diamond’s contention that the bankruptcy court lacked even noncore,

“related to” jurisdiction. “Congress intended to grant comprehensive

jurisdiction to the bankruptcy courts so that they might deal efficiently and

expeditiously with all matters connected with the bankruptcy estate.”

Celotex Corp., 514 U.S. at 308. Thus, “the ‘related to’ language of § 1334(b)

must be read to give district courts (and bankruptcy courts under § 157(a))

28 jurisdiction over more than simple proceedings involving the property of

the debtor or the estate.” Id.

Double Diamond contends that, because the estate was insolvent

when GTG filed the Fee Application, Double Diamond’s failure to pay

GTG would have no impact on the estate; in other words, either way, the

estate would not be the entity satisfying GTG’s administrative expenses.

But this is too narrow a view of a bankruptcy court’s “related to”

jurisdiction. At any point during the bankruptcy case, Double Diamond’s

breach of the Engagement Agreement could have increased the

administrative expenses of the estate. In addition, unlike the cases

referenced by Double Diamond where the obligation to fund counsel was

exclusively placed on a third party, here, the estate also remained liable for

payment of GTG’s fees and expenses under the Engagement Agreement.

As such, Double Diamond’s obligations stemming from the Engagement

Agreement could have “alter[ed] the debtor’s rights, liabilities, options or

freedom of action” in such a way as to impact administration of the

bankruptcy estate. In re Fietz, 852 F.2d at 457 (citing Pacor, 743 F.3d at 994). 9

9 Moreover, without the Engagement Agreement and Double Diamond’s involvement, Debtor would not have bankruptcy counsel at all. As noted above, corporate debtors are required to have counsel or risk dismissal of their case. See Local Bankruptcy Rule 9010. That the existence of Debtor’s bankruptcy case hinged on the Engagement Agreement also signals that this issue is “related to” Debtor’s bankruptcy case. 29 Ultimately, Double Diamond mainly stresses the fact that it was not a

creditor in Debtor’s case. However, this assertion conflates subject matter

jurisdiction with personal jurisdiction, as more fully discussed below, and

contradicts the established test for subject matter jurisdiction, which

requires only that the matter impact administration of the estate. As

discussed at length above, employment and compensation of Debtor’s

counsel concerns administration of the estate. Thus, whether or not it was a

creditor, Double Diamond’s involvement in this case impacted a core,

administrative function of the bankruptcy courts.

Given how intertwined Double Diamond’s obligations under the

Engagement Agreement were to both employment and compensation of

GTG, it follows that these provisions could and did have a “conceivable

effect on administration of Debtor’s bankruptcy case.” As such, the

bankruptcy court also had “related to” jurisdiction over this matter.

4. Double Diamond’s arguments are not relevant to the issue of subject matter jurisdiction. Double Diamond frames many of the issues it raises on appeal as

indicative of the bankruptcy court’s lack of subject matter jurisdiction.

However, the arguments set forth by Double Diamond do not actually

implicate the bankruptcy court’s subject matter jurisdiction at all.

First, Double Diamond asserts that the bankruptcy court lacked the

“power” to order payment of administrative fees and expenses from any

30 source other than the bankruptcy estate. 10 Although couched in

jurisdictional terms, this argument is not jurisdictional. “Subject matter

jurisdiction and power are separate prerequisites to the court’s capacity to

act. Subject matter jurisdiction is the court’s authority to entertain an action

between the parties before it. Power. . . is the scope and forms of relief the

court may order in an action in which it has jurisdiction.” Am. Hardwoods,

Inc. v. Deutsche Credit Corp. (In re Am. Hardwoods, Inc.), 885 F.2d 621, 624

(9th Cir. 1989).

On this point, the Supreme Court’s decision in Stern v. Marshall, 564

U.S. 462 (2011), is instructive. In Stern, the Court had to decide, among

10 Because the Panel holds that the bankruptcy court had “arising under” and “arising in” jurisdiction, as discussed above, this matter was “core.” See Stern v. Marshall, 600 F.3d 1037, 1053 (9th Cir. 2009) (core proceedings consist of all actions “arising under” title 11 and also those “arising in” a case under title 11). Thus, the bankruptcy court properly entered a final order against Double Diamond. However, even if the bankruptcy court only had noncore, “related to” jurisdiction, Double Diamond provided implied consent to entry of the Fee Order by the bankruptcy court. See Wellness Int'l Network, Ltd. v. Sharif, 575 U.S. 665, 684–85 (2015). For all the reasons explained in this Opinion, Double Diamond had notice of all relevant proceedings before the bankruptcy court, voluntarily participated in the bankruptcy case, and elected to become a signatory to the Engagement Agreement approved by the bankruptcy court in accordance with the Code. Until the filing of the Civil Rule 60(b) Motion, Double Diamond did not object to entry of final orders by the bankruptcy court. Because Civil Rule 60(b)(4) does not cover defects based on a court’s lack of “power,” the bankruptcy court was well within its discretion to hold that Double Diamond’s request for reconsideration based on any such lack of “power” was untimely, as more fully discussed below. See Civil Rule 60(c) (“A motion under Rule 60(b) must be made within a reasonable time – and for reasons (1),(2), and (3) no more than a year after entry of the judgment or order or the date of the proceeding.”). 31 other things, whether the bankruptcy court had statutory and

constitutional authority to enter a final order on a debtor’s counterclaim

against an individual that filed a proof of claim against debtor’s estate. Id.

at 471-72. Although the Court held that the bankruptcy court lacked

constitutional authority to enter a final order disposing of the counterclaim,

the Court rejected the claimant’s argument that the bankruptcy court

lacked subject matter jurisdiction over the suit. Id. at 478-80.

[W]e agree with [the debtor] that § 157(b)(5) is not jurisdictional, and that [the claimant] consented to the Bankruptcy Court’s resolution of his defamation claim. Because “[b]randing a rule as going to a court’s subject-matter jurisdiction alters the normal operation of our adversarial system,” Henderson v. Shinseki, 562 U.S. 428, 434, 131 S.Ct. 1197, 1201–03, 179 L.Ed.2d 159 (2011), we are not inclined to interpret statutes as creating a jurisdictional bar when they are not framed as such. See generally Arbaugh v. Y & H Corp., 546 U.S. 500, 516, 126 S.Ct. 1235, 163 L.Ed.2d 1097 (2006) (“when Congress does not rank a statutory limitation on coverage as jurisdictional, courts should treat the restriction as nonjurisdictional in character”). ... The statutory context also belies [the claimant’s] jurisdictional claim. Section 157 allocates the authority to enter final judgment between the bankruptcy court and the district court. See §§ 157(b)(1), (c)(1). That allocation does not implicate questions of subject matter jurisdiction. See § 157(c)(2) (parties may consent to entry of final judgment by bankruptcy judge in noncore case).

Id. at 479-80.

32 As in Stern, Double Diamond’s various arguments regarding the

bankruptcy court’s “power” are distinct from the question of whether the

bankruptcy court had subject matter jurisdiction. The cases referenced by

Double Diamond, all of which discuss a court’s power, are similarly

inapposite. For instance, in ThreeStrands by Grace, LLC, No. 12-00756-JKC-

11, 2012 WL 1986434, at *6 (Bankr. S.D. Ind. June 1, 2012), the bankruptcy

court assessed whether an attorney who received a prepetition flat fee

retainer from the debtor had to apply for approval of fees under § 330.

Although the court held that the application process applies only when

professionals seek compensation from the estate, the court also stated that

it maintained the “ability to review professional services for

reasonableness” and to adjust the amount of fees under §§ 328(a) and

329(b). Id. As such, the court never held that it lacked subject matter

jurisdiction over the issues in that case.

Similarly, in McDonald Bros. Construction, Inc., 114 B.R. 989 (Bankr.

N.D. Ill. 1990), although the bankruptcy court ultimately held that the fee

application procedures under § 330 only apply when a professional seeks

compensation from the estate, the court also noted that:

Most of the professionals retained by a debtor in bankruptcy may receive compensation without court scrutiny as long as they are paid entirely from sources other than the estate. Legal counsel for the debtor, however, must submit all of their compensation, regardless of source, to court scrutiny, pursuant to Section 329 of the Code.

33 Id. at 994-95 (emphasis added). Once again, this case did not discuss subject

matter jurisdiction. Yet, the court acknowledged the importance of a

bankruptcy court’s ability to scrutinize payments to debtor’s counsel,

regardless of the source of such payments.

In David & Hagner, P.C. v. DHP, Inc., 171 B.R. 429 (D.D.C. 1994), aff’d,

70 F.3d 637 (D.C. Cir. 1995), although the court noted that § 329 “pertains to

payments allowed – or disallowed – from the estate, not the non-debtor

entity,” the court also held that “[t]he bankruptcy court was not divested of

its authority to review compensation paid from [the guarantor], it simply

chose not to exercise that authority.” Id. at 434 (emphasis in original). Thus,

this case also did not hold that the bankruptcy court lacked subject matter

jurisdiction over such issues. 11

Double Diamond’s remaining arguments also do not relate to subject

matter jurisdiction. Double Diamond’s contention that the bankruptcy

court exercised power over its property raises a question of in rem

jurisdiction, not subject matter jurisdiction. “Federal courts most often hear

actions in personam,” which are “brought against a person rather than

property” and “determine the rights and interests of the parties themselves

11 Double Diamond also references Aegean Marine Petroleum Network, Inc., 599 B.R. 717, 723 (Bankr. S.D.N.Y. 2019), in which the court addressed whether it could approve a provision in a debtor’s proposed chapter 11 plan that granted broad, nonconsensual third-party releases. Aegean Marine Petroleum did not involve employment or compensation under §§ 327-331 and, as a result, does not have any bearing on this case. 34 in the subject matter of the action.” Taul ex rel. United States v. Nagel Enters.,

Inc., No. 2:14-CV-0061-VEH, 2016 WL 304581, at *2-3 (N.D. Ala. Jan. 25,

2016) (internal citations omitted). In contrast, in rem actions are “against a

thing” and do not “bind anyone with respect to personal liability.” Id.

The bankruptcy court did not enter a judgment against Double

Diamond’s assets. Rather, the bankruptcy court simply entered an order for

monetary liability against Double Diamond, i.e., an in personam judgment.

As such, Double Diamond’s arguments regarding in rem jurisdiction are

irrelevant to this appeal.

In addition, Double Diamond’s argument that the bankruptcy court

improperly entered an order against a nondebtor party also is unavailing.

This point raises a personal jurisdiction issue, not a subject matter

jurisdiction issue. Having actively participated in Debtor’s bankruptcy

case, Double Diamond cannot seriously contend that the bankruptcy court

lacked personal jurisdiction over Double Diamond. See Benny v. Pipes, 799

F.2d 489, 492 (9th Cir. 1986) (holding that a “general appearance or

responsive pleading by a defendant that fails to dispute personal

jurisdiction will waive any defect in service or personal jurisdiction.”),

amended, 807 F.2d 1514 (9th Cir. 1987). The identity of the party against

whom the court entered judgment is otherwise, at most, tangentially

related to the issue of subject matter jurisdiction.

Finally, Double Diamond asserts that the bankruptcy court impliedly,

and mistakenly, held that it was a surety instead of a guarantor. To this

35 end, Double Diamond raises several factual issues regarding why, under

Nevada law, it should have been characterized as a guarantor instead of a

surety. Once again, these arguments are not jurisdictional. First, as

discussed above, the fact that an issue may implicate state law does not

take away a court’s subject matter jurisdiction. See In re Harris, 590 F.3d at

738. Second, these arguments raise factual issues, all of which are long

foreclosed by Double Diamond’s failure to timely appeal. Thus, Double

Diamond has not identified a basis to question the bankruptcy court’s

subject matter jurisdiction.

As noted in Espinosa, for purposes of Civil Rule 60(b)(4), a court must

lack even an “arguable basis” for jurisdiction to render a judgment void.

559 U.S. at 271. For all the reasons set forth above, the bankruptcy court

had an “arguable basis” to assert subject matter jurisdiction and did not err

in denying Double Diamond’s request for relief under Civil Rule 60(b)(4).

B. The bankruptcy court did not violate Double Diamond’s due process rights by depriving Double Diamond of notice or the opportunity to be heard. Due process requires notice “reasonably calculated, under all the

circumstances, to apprise interested parties of the pendency of the action

and afford them an opportunity to present their objections.” Mullane v.

Cent. Hanover Bank & Tr. Co., 339 U.S. 306, 314 (1950); see also Jones v.

Flowers, 547 U.S. 220, 225 (2006) (“[D]ue process does not require actual

36 notice. . . .”). In Espinosa, the Supreme Court discussed what constitutes a

due process violation for purposes of Civil Rule 60(b)(4):

Espinosa’s failure to serve United with a summons and complaint deprived United of a right granted by a procedural rule. See Fed. Rule Bkrtcy. Proc. 7004(b)(3). United could have timely objected to this deprivation and appealed from an adverse ruling on its objection. But this deprivation did not amount to a violation of United’s constitutional right to due process. ... Here, United received actual notice of the filing and contents of Espinosa’s plan. This more than satisfied United’s due process rights. Accordingly, on these facts, Espinosa’s failure to serve a summons and complaint does not entitle United to relief under Rule 60(b)(4).

559 U.S. at 272 (emphasis in original).

Double Diamond asserts that GTG’s request to hold Double Diamond

jointly and severally liable, and for “immediate” payment of its fees, was

buried in an attachment to the Fee Application instead of in the body of the

application itself. Thus, Double Diamond argues that it did not have

proper notice or an opportunity to object.

Whether or not the Fee Application was procedurally proper, Double

Diamond was not deprived of its constitutional due process rights. The

concluding paragraph of the Fee Application, which constituted GTG’s

prayer for relief from the bankruptcy court, explicitly incorporated the

proposed order into the body of the Fee Application. In addition, the first

page of the three-page Notice of Fee Application explicitly stated that GTG

37 sought to hold Double Diamond jointly and severally liable, and that GTG

was requesting “immediate” payment under the Engagement Agreement.

The Notice of Fee Application also informed parties of the deadline to

object to the relief requested in the Fee Application.

GTG served the Fee Application and the Notice of Fee Application on

Double Diamond, Mr. Mann, and Mr. Kaplan. Notably, Double Diamond

does not argue, and did not argue before the bankruptcy court, that it did

not receive the Fee Application and the Notice of Fee Application. On these

facts, even if the failure to prominently state the relief requested in the

body of the Fee Application was procedural error, the error did not rise to

the level of a constitutional due process violation.

Double Diamond also argues that its due process rights were violated

when GTG failed to notify Double Diamond of Debtor’s insolvency.

According to Double Diamond, it agreed to be a guarantor, not a surety. As

a result, Double Diamond asserts that, under Nevada law, GTG was

required to first attempt collection from Debtor and then notify GTG of

Debtor’s inability to pay.

The Panel need not assess whether the bankruptcy court erred in

treating Double Diamond as a surety instead of a guarantor. “In the

interests of finality, the concept of void judgments is narrowly construed. A

judgment is not void merely because it is or may be erroneous. . . .” Boch

Oldsmobile, 909 F.2d at 661 (cleaned up).

38 Even if the Panel were to assume that the bankruptcy court erred in

holding Double Diamond jointly and severally liable for “immediate”

payment of GTG’s fees, such an error does not rise to the level of a

constitutional due process violation. For the same reasons noted above,

Double Diamond was provided adequate notice and an opportunity to

object. It did not. 12 As a result, Double Diamond cannot now seek relief via

Civil Rule 60(b)(4).

C. The bankruptcy court did not err in denying Double Diamond’s request for relief under Civil Rule 60(b)(6). Double Diamond argues that the bankruptcy court’s failure to

distinguish between a surety and a guarantor, as well as the purported

noticing defects discussed above, provide grounds for relief from the

bankruptcy court’s Fee Order under Civil Rule 60(b)(6).

Pursuant to Civil Rule 60(c)(1), “[a] motion under Rule 60(b) must be

made within a reasonable time--and for reasons (1), (2), and (3) no more

than a year after the entry of the judgment or order or the date of the

proceeding.” 13 “What constitutes ‘reasonable time’ depends upon the facts

12 Although the Panel does not need to address whether Double Diamond received adequate notice of Debtor’s insolvency under Nevada law, the Panel notes that, at all times during the pendency of the bankruptcy case, Mr. Mann was served as both President and CEO of Double Diamond. As such, Mr. Mann, according to his own declarations, had personal knowledge of Debtor’s books and records and, necessarily, of Debtor’s financial condition. 13 Although Double Diamond states in its appellate brief that its Civil Rule 60(b)

Motion was timely under any subsection of Civil Rule 60(b), it only develops arguments under Civil Rules 60(b)(4) and (b)(6). As such, the Panel only will address the timeliness of Double Diamond’s request under Civil Rule 60(b)(6). 39 of each case, taking into consideration the interest in finality, the reason for

delay, the practical ability of the litigant to learn earlier of the grounds

relied upon, and prejudice to other parties.” Ashford v. Steuart, 657 F.2d

1053, 1055 (9th Cir. 1981) (citing Lairsey v. Advance Abrasives Co., 542 F.2d

928, 930-31 (5th Cir. 1976); Sec. Mut. Cas. Co. v. Century Cas. Co., 621 F.2d

1062, 1067-68 (10th Cir. 1980)).

The bankruptcy court did not abuse its discretion in holding that

Double Diamond’s request for relief under Civil Rule 60(b)(6) was not

made within a reasonable time. The bankruptcy court’s findings on this

point are thorough. Among other things, the bankruptcy court found that:

(i) Double Diamond and Mr. Mann were served with the Fee Application

and attached proposed order; (ii) Double Diamond chose to litigate its

liability in Canada instead of timely appealing the Fee Order or moving for

relief under Civil Rule 60(b); (iii) in October 2018, Double Diamond

retained counsel in Canada to oppose GTG’s efforts to have the Fee Order

recognized, at which point it must have been aware of the contents of the

Fee Order; (iv) the Canadian litigation lasted years; and (v) it took over

three years for Double Diamond to move for relief under Civil Rule 60(b).

Double Diamond does not contend that these factual findings are

erroneous, nor does the record show any clear factual error. On these facts,

the bankruptcy court did not abuse its discretion in holding that the

pertinent factors set forth in Ashford rendered Double Diamond’s request

for relief under Civil Rule 60(b)(6) untimely.

40 CONCLUSION

The bankruptcy court did not err in denying Double Diamond’s

request for relief from the Fee Order under Civil Rules 60(b)(4) and (b)(6).

We therefore AFFIRM.