In re John Christian Lukes

Case Type:
Case Status:
Ninth Circuit Bankruptcy Appellate Panel Case No. CC-20-1236-LFT (9th Circuit, May 26,2021) Not Published
Where a decision whether to allow or disallow a claim could have preclusive effect in future litigation, an appeal of that decision is not moot despite the administrative bankruptcy case having been dismissed. Therefore, the appeal of the bankruptcy court's ruling was not moot. The BAP determined that the bankruptcy court did not err in its interpretation of the Settlement Agreement and affirmed the disallowance of the second amended claim.
Procedural context:
A law firm that represented the Debtor's former spouse appealed the bankruptcy court's ruling disallowing the law firm's second amended claim filed in the Debtor's Chapter 11 bankruptcy. Prior to the Bankruptcy Appellate Panel entering its ruling, the Debtor's Chapter 11 case was dismissed.
Prior to the bankruptcy, the Debtor's former spouse successfully obtained an award of her attorneys' fees in the amount of $150,000. The attorneys' representing the former spouse recorded an abstract of judgment related to the fee order. Debtor filed Chapter 11. Debtor's former spouse filed a secured proof of claim representing the back owing amount of child support and spousal support owed as of the petition date. The law firm filed a separate priority secured claim representing the fees stated in the pre-bankruptcy fee order due to the law firm in the amount of $152,621.77. The law firm, shortly thereafter, filed its first amended claim asserting a balance due of $326,129.14 ($152,621.77 from the fee order and the balance as an unsecured claim). The Debtor, Debtor's former spouse, and the law firm entered into a Settlement Agreement. The Debtor remitted the amount due to his former spouse; and, paid the law firm the amount stated in the fee order ($152,621.77). The Settlement Agreement provided that the law firm would withdraw its claim. However, the law firm filed a second amended claim asserting it was still owed the "unsecured" portion. The bankruptcy court determined that the terms of the Settlement Agreement provided a release of all liabilities associated with the domestic support obligations. In addition, the Settlement Agreement provided for the withdraw of law firm's claim not an amendment. Therefore, the second amended claim was deemed disallowed.
Honorable Lafferty, Faris, and Taylor, Bankruptcy Judges

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