Now Updating
Church Joint Venture, L.P. v. Earl Blasingame

Summarizing by Amir Shachmurove

The Village at Lakeridge, LLC v. U.S. Bank National Association (In re The Village at Lakeridge, LLC)

Citation:
BAP Nos. NV-12-1456-PaKiTa and NV-12-1474-PaKiTa (Cross-appeals)
Tag(s):
Ruling:
In an unpublished opinion, the Ninth Circuit BAP held (1) the Bankruptcy Court’s determination that Rabkin is not a non-statutory insider is AFFIRMED. The Panel based its ruling by weighing the closeness of the relationship between Rabkin and Bartlett and the degree of control Rabkin had over the Debtor. The Panel REVERSED the Bankruptcy Court’s determination that Rabkin was a statutory “insider”. Upon review of the case law the Bankruptcy Court relied on, the Panel distinguished this case from those cited by the Bankruptcy Court in that the purchaser of the claims in the cited cases were “insiders” purchasing other claims; therefore, the buyer was already a statutory “insider”. The Panel stated that assignment of an “insider” claim does not in and of itself transfer to the purchaser without further facts supporting that the purchaser is an “insider”. Since the Panel reversed the classification of Rabkin’s Claim as an “insider”; the Panel further REVERSED the Bankruptcy Court’s decision that Rabkin’s vote would not be considered as part of the Debtor’s Chapter 11 Plan. The Panel also AFFIRMED the Bankruptcy Court’s denial of USB’s request to find that Rabkin’s acceptance of the Chapter 11 Plan was not in good faith. The Panel reasoned that even where a creditor appears to act against self-interest, that may be an indication of bad faith; however, the Bankruptcy Court considered testimony and evidence on this question thus it did not clearly err in its determination. The Bankruptcy Court did not abuse its discretion in denying USB its request for a second deposition of Bartlett; therefore, the denial of the second deposition was AFFIRMED. Lastly, the Panel VACATED the Bankruptcy Court’s ruling that the conversation that occurred prior to Rabkin’s deposition was protected by the “common interest” privilege. The Panel based its determination on the need for additional information evidencing that the Debtor and Rabkin share an common interest in the outcome of litigation such as an express or implied agreement between the Debtor and Rabkin to pursue a joint strategy in litigation.
Procedural context:
USB requested that the Bankruptcy Court intervene in a discovery dispute between the Parties to determine (1) whether “common interest” privilege applied and (2) compel Bartlett to sit for a second deposition in her “individual” capacity. The Bankruptcy Court held (1) based on United States v. Gonzalez, 669 F.3d. 974 (9th Cir. 2012) USB’s request to compel Rabkin’s communication with Debtor’s counsel was denied and (2) Bartlett would not be required to sit for a second deposition. USB Cross-Appealed the Bankruptcy Court’s denial of its discovery request. USB further filed a Motion for Designation and request that the Bankruptcy Court enter an Order finding that (1) Rabkin was a statutory “insider” by virtue of receiving the assignment of MBP’s insider Claim (2) Rabkin is a non-statutory insider based on his relationship to Bartlett and (3) the assignment of the MBP Claim to Rabkin was in bad faith. After an evidentiary hearing, the Bankruptcy Court held that Rabkin is not a non-statutory insider because (a) Bartlett does not exercise control over the Debtor (b) he does not cohabit with Bartlett and (c) Rabkin never purchased expensive gifts for Bartlett. The Bankruptcy Court further held that Rabkin, as assignee of MBP’s “insider” claim acquired the same status; therefore, because Rabkin acquired MBP’s status as an “insider” Rabkin vote would not be considered for Chapter 11 Plan voting purposes. However, the Bankruptcy Court did rule that Rabkin’s purchase of MBP’s claim was not assigned in bad faith. The Debtor and Rabkin appealed the Bankruptcy Court’s decisions regarding Rabkin acquiring MBP’s status as an “insider” and Court’s determination that Rabkin’s vote would not be considered for voting purposes. USB cross-appealed.
Facts:
The Village at Lakeridge, LLC (“Debtor”) filed for relief under Chapter 11. The only member of Debtor is MBP Equity Partners 1, LLC (“MBP”). Kathie Bartlett (“Bartlett”), as a board member of MBP, executed all the documents filed with the Court to file the Chapter 11. In 2004 the Debtor purchased commercial real property in Reno, Nevada. The Debtor financed the purchase through Greenwich Financial Products, Inc. (“Greenwich”) in the amount of $10 million dollars. Greenwich secured its promissory note with a deed of trust on the commercial real property. Sometime prior to the Debtor seeking relief under Chapter 11, U.S. Bank, N.A. (USB) acquired the note and deed of trust. USB is the only secured creditor listed by the Debtor in its Schedules. Moreover, upon further review the only unsecured creditor is its sole member, MBP, in the amount of approximately $2.7 million. The Debtor files its Disclosure Statement and Chapter 11 Plan on September 14, 2011. Approximately one month later, October 27, 2011, a Dr. Robert Rabkin (“Rabkin”) purchased the unsecured claim in the amount of $5,000.00. Bartlett was deposed by USB in her capacity as representative of the Debtor. Additionally, USB conducted a deposition of Rabkin. Approximately one hour prior to the deposition, Rabkin conveys that he attended a meeting with his counsel and the Debtor’s counsel. USB’s counsel inquires about the discussions between Rabkin and Debtor’s counsel. Both Debtor’s Counsel and Rabkin’s counsel object invoking the “common interest” privilege. Rabkin later testified during the deposition as follows: “(1) that he had both a business and close personal relationship with Bartlett; (2) that he saw Bartlett regularly, including on the day of the deposition; and (3) that he purchased the MBP Claim for $5,000 as a business investment and expected to be paid a pro rata dividend of $30,000 under the [Debtor’s] plan.” At the conclusion of Rabkin’s deposition, USB, through counsel, offered to purchase Rabkin’s Claim for up to $60,000.00, which Rabkin declined to accept.
Judge(s):
Hon. Jim D. Pappas; Hon. Ralph B. Kirscher; and Hon. Laura S. Taylor

ABI Membership is required to access the full summary. Please Sign In using your ABI Member credentials. Not a Member yet? Join ABI now - it is absolutely worth it!

About us in numbers

3201 in the system

3081 Summarized

1 Being Processed