NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS APR 5 2024 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT
JEFFREY B. GUINN, No. 23-16220
Appellant, D.C. No. 2:19-cv-00649-CDS v.
CDR INVESTMENTS, LLC; CHARLES L. MEMORANDUM* RUTHE IRA; FRANK E. GRANIERI, Revocable Trust; CHARLES L. RUTHE TRUST,
Appellees.
Appeal from the United States District Court for the District of Nevada Cristina D. Silva, District Judge, Presiding
Submitted April 2, 2024** Pasadena, California
Before: R. NELSON, VANDYKE, and SANCHEZ, Circuit Judges.
Appellant Jeffrey Guinn formerly owned and operated Aspen Financial
Services, LLC, which brokered and serviced “hard money” loans between individual
* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The panel unanimously concludes this case is suitable for decision without oral argument. See Fed. R. App. P. 34(a)(2). investors from his personal network and commercial real estate developers.
Beginning in 2000, the Ruthes, their associated trusts and entities, and several family
members invested millions through Aspen, often making their investment decisions
based on only a few details shared by Aspen employees on solicitation calls. The
Ruthes stopped investing with Aspen after their relationship with Guinn fell apart in
2007. At that time, they still had money invested in many Aspen-brokered loans,
twenty-six of which were never fully repaid because of the Great Recession. Aspen
eventually closed its doors in 2013, and Guinn filed for bankruptcy soon thereafter.
The Ruthes intervened in Guinn’s bankruptcy proceedings, alleging he owed
them a nondischargeable debt under 11 U.S.C. § 523(a) because he fraudulently
induced their investment in all twenty-six unpaid loans. After a two-week bench
trial, the bankruptcy court rejected most of the Ruthes’ claims and held Guinn liable
for fraudulently concealing facts about just four of the unpaid loans. As to three of
the four loans, the bankruptcy court concluded that Guinn fraudulently concealed
the real estate collateral’s proper valuation by relying on unrealistically high
appraisal values, and regarding the final loan, the bankruptcy court concluded that
Guinn omitted key details about the project suggesting its immediate financial future
was uncertain.
Guinn appealed to the district court, which affirmed. Before this court, the
parties dispute (1) whether the bankruptcy court applied the correct legal standards
2 to the Ruthes’ fraud claims, which arise under Nevada law, and (2) whether
sufficient evidence supported the causation and reliance prongs of the court’s
conclusions regarding Guinn’s fraudulent concealments. We have jurisdiction under
28 U.S.C. § 158(d)(1). We review the bankruptcy court’s findings of fact for clear
error and its conclusions of law de novo, see In re Gebhart, 621 F.3d 1206, 1209
(9th Cir. 2010), and we may affirm the bankruptcy court’s decision on any ground
fairly supported by the record, see In re Warren, 568 F.3d 1113, 1116 (9th Cir.
2009). We affirm for the reasons below.
1. To survive a chapter 7 bankruptcy proceeding, a creditor must demonstrate
the existence of a nondischargeable debt. “[T]here are two distinct issues to consider
in the dischargeability analysis: first, the establishment of the debt itself, … and,
second, a determination as to the nature of that debt.” Banks v. Gill Distrib. Ctrs.,
Inc., 263 F.3d 862, 868 (9th Cir. 2001). Though the existence of a debt is a question
of state law and its dischargeability is a question of federal law, the bankruptcy court
correctly noted that the required showings “largely mirror” one another. As relevant
here, both require evidence of reliance and a causal connection between the alleged
fraud and the damages incurred.1
1 Compare Dow Chem. Co. v. Mahlum, 970 P.2d 98, 110 (Nev. 1998), overruled on other grounds by GES, Inc. v. Corbitt, 21 P.3d 11 (Nev. 2001) (requiring plaintiffs alleging fraudulent concealment to demonstrate they were “unaware of the fact and would have acted differently if [they] had known of the concealed or suppressed
3 Federal law, however, differs from Nevada law in its more relaxed approach
to demonstrating reliance. Under Nevada law, a plaintiff must demonstrate they
actually relied on the misrepresentation. Nev. Power Co. v. Monsanto Co., 891 F.
Supp. 1406, 1417 (D. Nev. 1995) (“Actual reliance on an alleged misrepresentation,
or a sufficient showing that the fraud victim would have acted differently if there
had not been fraudulent concealment, is also a required element.”) (citing Blanchard
v. Blanchard, 839 P.2d 1320, 1322 (Nev. 1992); see also Rivera v. Philip Morris,
Inc., 395 F.3d 1142, 1154–55 (9th Cir. 2005). This court, by contrast, when applying
federal law has adopted “a presumption of reliance … available to plaintiffs alleging
… omissions of material fact,” Binder v. Gillespie, 184 F.3d 1059, 1063 (9th Cir.
1999), meaning that “[r]eliance may be inferred from [the defendant’s] failure to
disclose the requisite material information,” In re Tallant, 218 B.R. 58, 69 (B.A.P.
9th Cir. 1998). Thus, while the standard under Nevada law is subjective and
plaintiff-dependent, the federal law inquiry instead depends largely on the totality of
the circumstances and the objective materiality of the omission.
Guinn contends that the bankruptcy court applied the wrong legal standards
to the Ruthes’ Nevada fraud claims by (1) employing the federal presumption of
reliance and (2) conducting its inquiry objectively, from the perspective of a
fact”), with In re Slyman, 234 F.3d 1081, 1085 (9th Cir. 2000) (requiring, for a creditor “to prevail on any claim arising under § 523(a)(2)(A),” evidence of “justifiable reliance by the creditor on the debtor’s statement or conduct”).
4 reasonable investor, rather than subjectively, from the Ruthes’ perspective. But
there is no indication the court made either of the errors pressed by Guinn.
First, the decision correctly recites the actual reliance standard required by
Nevada law, see Nev. Power Co., 891 F. Supp at 1415, and though it later notes that
“positive proof of reliance is not a prerequisite to recovery,” it is sufficiently clear
in context that that statement was intended to describe the federal standard, not the
standard under Nevada law. Second, the court nowhere presumed the Ruthes’
reliance.
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NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS APR 5 2024 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT
JEFFREY B. GUINN, No. 23-16220
Appellant, D.C. No. 2:19-cv-00649-CDS v.
CDR INVESTMENTS, LLC; CHARLES L. MEMORANDUM* RUTHE IRA; FRANK E. GRANIERI, Revocable Trust; CHARLES L. RUTHE TRUST,
Appellees.
Appeal from the United States District Court for the District of Nevada Cristina D. Silva, District Judge, Presiding
Submitted April 2, 2024** Pasadena, California
Before: R. NELSON, VANDYKE, and SANCHEZ, Circuit Judges.
Appellant Jeffrey Guinn formerly owned and operated Aspen Financial
Services, LLC, which brokered and serviced “hard money” loans between individual
* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The panel unanimously concludes this case is suitable for decision without oral argument. See Fed. R. App. P. 34(a)(2). investors from his personal network and commercial real estate developers.
Beginning in 2000, the Ruthes, their associated trusts and entities, and several family
members invested millions through Aspen, often making their investment decisions
based on only a few details shared by Aspen employees on solicitation calls. The
Ruthes stopped investing with Aspen after their relationship with Guinn fell apart in
2007. At that time, they still had money invested in many Aspen-brokered loans,
twenty-six of which were never fully repaid because of the Great Recession. Aspen
eventually closed its doors in 2013, and Guinn filed for bankruptcy soon thereafter.
The Ruthes intervened in Guinn’s bankruptcy proceedings, alleging he owed
them a nondischargeable debt under 11 U.S.C. § 523(a) because he fraudulently
induced their investment in all twenty-six unpaid loans. After a two-week bench
trial, the bankruptcy court rejected most of the Ruthes’ claims and held Guinn liable
for fraudulently concealing facts about just four of the unpaid loans. As to three of
the four loans, the bankruptcy court concluded that Guinn fraudulently concealed
the real estate collateral’s proper valuation by relying on unrealistically high
appraisal values, and regarding the final loan, the bankruptcy court concluded that
Guinn omitted key details about the project suggesting its immediate financial future
was uncertain.
Guinn appealed to the district court, which affirmed. Before this court, the
parties dispute (1) whether the bankruptcy court applied the correct legal standards
2 to the Ruthes’ fraud claims, which arise under Nevada law, and (2) whether
sufficient evidence supported the causation and reliance prongs of the court’s
conclusions regarding Guinn’s fraudulent concealments. We have jurisdiction under
28 U.S.C. § 158(d)(1). We review the bankruptcy court’s findings of fact for clear
error and its conclusions of law de novo, see In re Gebhart, 621 F.3d 1206, 1209
(9th Cir. 2010), and we may affirm the bankruptcy court’s decision on any ground
fairly supported by the record, see In re Warren, 568 F.3d 1113, 1116 (9th Cir.
2009). We affirm for the reasons below.
1. To survive a chapter 7 bankruptcy proceeding, a creditor must demonstrate
the existence of a nondischargeable debt. “[T]here are two distinct issues to consider
in the dischargeability analysis: first, the establishment of the debt itself, … and,
second, a determination as to the nature of that debt.” Banks v. Gill Distrib. Ctrs.,
Inc., 263 F.3d 862, 868 (9th Cir. 2001). Though the existence of a debt is a question
of state law and its dischargeability is a question of federal law, the bankruptcy court
correctly noted that the required showings “largely mirror” one another. As relevant
here, both require evidence of reliance and a causal connection between the alleged
fraud and the damages incurred.1
1 Compare Dow Chem. Co. v. Mahlum, 970 P.2d 98, 110 (Nev. 1998), overruled on other grounds by GES, Inc. v. Corbitt, 21 P.3d 11 (Nev. 2001) (requiring plaintiffs alleging fraudulent concealment to demonstrate they were “unaware of the fact and would have acted differently if [they] had known of the concealed or suppressed
3 Federal law, however, differs from Nevada law in its more relaxed approach
to demonstrating reliance. Under Nevada law, a plaintiff must demonstrate they
actually relied on the misrepresentation. Nev. Power Co. v. Monsanto Co., 891 F.
Supp. 1406, 1417 (D. Nev. 1995) (“Actual reliance on an alleged misrepresentation,
or a sufficient showing that the fraud victim would have acted differently if there
had not been fraudulent concealment, is also a required element.”) (citing Blanchard
v. Blanchard, 839 P.2d 1320, 1322 (Nev. 1992); see also Rivera v. Philip Morris,
Inc., 395 F.3d 1142, 1154–55 (9th Cir. 2005). This court, by contrast, when applying
federal law has adopted “a presumption of reliance … available to plaintiffs alleging
… omissions of material fact,” Binder v. Gillespie, 184 F.3d 1059, 1063 (9th Cir.
1999), meaning that “[r]eliance may be inferred from [the defendant’s] failure to
disclose the requisite material information,” In re Tallant, 218 B.R. 58, 69 (B.A.P.
9th Cir. 1998). Thus, while the standard under Nevada law is subjective and
plaintiff-dependent, the federal law inquiry instead depends largely on the totality of
the circumstances and the objective materiality of the omission.
Guinn contends that the bankruptcy court applied the wrong legal standards
to the Ruthes’ Nevada fraud claims by (1) employing the federal presumption of
reliance and (2) conducting its inquiry objectively, from the perspective of a
fact”), with In re Slyman, 234 F.3d 1081, 1085 (9th Cir. 2000) (requiring, for a creditor “to prevail on any claim arising under § 523(a)(2)(A),” evidence of “justifiable reliance by the creditor on the debtor’s statement or conduct”).
4 reasonable investor, rather than subjectively, from the Ruthes’ perspective. But
there is no indication the court made either of the errors pressed by Guinn.
First, the decision correctly recites the actual reliance standard required by
Nevada law, see Nev. Power Co., 891 F. Supp at 1415, and though it later notes that
“positive proof of reliance is not a prerequisite to recovery,” it is sufficiently clear
in context that that statement was intended to describe the federal standard, not the
standard under Nevada law. Second, the court nowhere presumed the Ruthes’
reliance. Instead, the court found actual reliance based on its own assessment of
what the Ruthes would have done, not just a presumption. And finally, in making
such predictions, the court weighed the objective materiality of the omissions against
unique aspects of the Ruthes’ investment strategy, including their tendency to make
very risky investments based on only a few pieces of basic information. Thus, its
analysis was plaintiff-specific as required by Nevada law and did not mix the Nevada
and federal law standards for proving reliance.
2. Next, Guinn contends that there was insufficient evidence to support the
bankruptcy court’s reliance and causation findings because the Ruthes did not
introduce evidence “that any of the allegedly concealed information would have
changed their investment decisions.” It is true that, as Guinn repeatedly notes, the
record demonstrates that the Ruthes grew complacent, demonstrated an extremely
high risk tolerance, and generally neglected to perform any of their own due
5 diligence into the documents Aspen provided, instead choosing to rely solely on the
few details Aspen provided in solicitation calls. But other evidence in the record
nevertheless supports the bankruptcy court’s conclusion that the Ruthes would have
been unwilling to invest in the four unpaid loans had Aspen not concealed material
facts about those loans.
First and foremost, Mrs. Ruthe testified that neither she nor Mr. Ruthe would
have continued to invest had they known Aspen was inflating valuations or loaning
money to troubled borrowers to enable them to continue to make interest payments
on preexisting loans. This testimony is probative even though it does not mention
the challenged loans by name because it informs how the Ruthes would have reacted
had they known Guinn was committing the exact kind of fraudulent concealments
involved with the four unpaid loans.
Guinn suggests Mrs. Ruthe’s testimony is not credible because even if the
information had been disclosed, the Ruthes would likely not have reviewed it. But
the Ruthes’ general failure to conduct due diligence is not a barrier to their justifiable
reliance on the details provided in the solicitation call, some of which were affected
by Guinn’s omissions. In re Eashai, 87 F.3d 1082, 1090 (9th Cir. 1996) (“[A] person
is justified in relying on a representation of fact although he might have ascertained
the falsity of the representation had he made an investigation.” (citations and internal
quotation marks omitted)).
6 More importantly, Mrs. Ruthe’s testimony is corroborated by other evidence
suggesting that the Ruthes were not entirely unwilling to decline to invest with
Aspen upon learning concerning information about investment opportunities. For
example, in the summer of 2007, the Ruthes expressed concern about three aspects
of Aspen’s business practices: (1) its decision to broker “cash out” loans to
borrowers to provide unrestricted funds, (2) its use of unrealistically high appraisals
to inflate the value of the collateral securing the loans, and (3) its decision to broker
refinance loans to beleaguered buyers who could not keep up with their preexisting
loans. These aspects of Aspen’s business, which are closely related to the omissions
Guinn made to induce Ruthes’ participation in the four unpaid loans, were so
concerning to the Ruthes that they eventually ended their relationship with Guinn as
a result. Thus, the Ruthes’ response is sufficient evidence that they would have
chosen not to invest in the four unpaid loans had Guinn divulged the concealed
information. For these reasons, Guinn’s evidentiary sufficiency challenge fails.
AFFIRMED.