Liu v. Zhang

• Court: Court of Appeals for the Ninth Circuit
• Decided: June 5, 2025
• Docket: 24-3522
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS JUN 5 2025 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

In re: YING LIU; ZHIWEN YANG No. 24-3522 D.C. No. Debtors. 23-1158 ______________________________

MEMORANDUM* YING LIU; ZHIWEN YANG,

Appellants,

v.

YUN ZHANG,

Appellee.

Appeal from the Ninth Circuit Bankruptcy Appellate Panel William J. Lafferty, III, Julia W. Brand, and Gary A. Spraker, Bankruptcy Judges, Presiding

Submitted June 3, 2025** Seattle, Washington

Before: RAWLINSON, BRESS, and BUMATAY, Circuit Judges.

* 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). Debtors Ying Liu and Zhiwen Yang appeal the Bankruptcy Appellate Panel’s

(“BAP”) decision affirming the bankruptcy court’s denial of their motion for relief

from that court’s order approving a settlement agreement between them and Yun

Zhang. We affirm.

We review the BAP’s decision de novo and the underlying bankruptcy court

order under the same standard of review the BAP applied. Hutchinson v. United

States (In re Hutchinson), 15 F.4th 1229, 1232 (9th Cir. 2021). Because the

underlying order ruled on a motion brought under Federal Rule of Civil Procedure

60, the applicable standard for the bankruptcy court’s ruling is abuse of discretion.

See Marroquin v. City of Los Angeles, 112 F.4th 1204, 1211 (9th Cir. 2024).

1. Debtors first argue that the bankruptcy court abused its discretion when it

rejected their claim for relief under Federal Rule 60(b)(3), and that the BAP erred

by affirming the decision. We disagree. Rule 60(b)(3) allows a court to “relieve a

party . . . from a final judgment, order, or proceeding” based on the “fraud . . . ,

misrepresentation, or misconduct by an opposing party.” To prevail, Debtors needed

to prove by “clear and convincing evidence” that the order approving the settlement

was “obtained through fraud, misrepresentation, or other misconduct” and that it

“prevented [them] from fully and fairly presenting the defense.” Trendsettah USA,

Inc. v. Swisher Int’l, Inc., 31 F.4th 1124, 1136 (9th Cir. 2022) (simplified). They

must also show that the fraud was “not . . . discoverable by due diligence before or

2 24-3522 during the proceedings.” Casey v. Albertson’s Inc., 362 F.3d 1254, 1260 (9th Cir.

2004) (simplified).

Debtors failed to carry their burden. Debtors consistently argued before the

bankruptcy court that the Zhang judgment was invalid and obtained through

inappropriate or fraudulent means. They also argued that the settlement agreement

was “fair and equitable” because it afforded them significant benefits and spared

them the risk of litigation associated with challenging the validity of the Zhang

judgment. Debtors were likewise aware that a third party was challenging the Zhang

judgment in China. Because Debtors were aware of the relevant facts and made an

informed decision to settle, the bankruptcy court did not abuse its discretion in

finding Rule 60(b)(3) relief inappropriate under these circumstances.

2. Debtors next argue that the bankruptcy court abused its discretion when it

denied their motion for relief under Rule 60(b)(5). Rule 60(b)(5) allows a court to

relieve a party from a final judgment if it “has been satisfied, released, or discharged;

it is based on an earlier judgment that has been reversed or vacated; or applying it

prospectively is no longer equitable.” Debtors argue that applying the settlement

agreement prospectively is no longer equitable.

Relief under Rule 60(b)(5) requires “a significant change either in factual

conditions or in law.” Horne v. Flores, 557 U.S. 433, 447 (2009) (simplified). But

Debtors show neither. Instead, the record makes clear that Debtors contemplated

3 24-3522 the possibility that the Zhang judgment could be thrown out and elected to settle

because they deemed it to be in their best interests given the benefits offered to them

in the agreement. Debtors may regret agreeing to the settlement, but that does not

form the basis for Rule 60(b)(5) relief—especially when a party fully understands

the implications of their decision. See id.; United States v. Asarco Inc., 430 F.3d

972, 979 (9th Cir. 2005) (“A court should not ordinarily modify a decree, however,

‘where a party relies upon events that actually were anticipated at the time it entered

into a decree.’” (simplified)). And enforcement of a private settlement agreement

voluntarily entered into by parties with knowledge of the relevant facts and

circumstances is not detrimental to the public interest. See Horne, 557 U.S. at 447.

3. Lastly, Debtors challenge the bankruptcy court’s denial of relief under Rule

60(b)(6). Rule 60(b)(6) is a catch-all provision that allows a court to grant relief for

“any other reason that justifies relief.” Rule 60(b)(6) applies only in cases of

“extraordinary circumstances” and “only when the reason for granting relief is not

covered by any other reasons set forth in Rule 60.” Delay v. Gordon, 475 F.3d 1039,

1044 (9th Cir. 2007) (simplified). Here, Debtors based their Rule 60(b)(6) motion

on the same reasons that they sought relief under Rule 60(b)(3) and (5)—fraud and

changed circumstances. Because those rationales are covered by different parts of

Rule 60, it was not an abuse of discretion to deny relief under Rule 60(b)(6).

AFFIRMED.

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