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Mastro v. Rigby

United States Court of Appeals, Ninth Circuit

August 22, 2014

LINDA A. MASTRO, Appellant,
v.
JAMES F. RIGBY, JR., Trustee, solely in his capacity as Chapter 7 trustee of the bankruptcy estate of Michael R. Mastro, Appellee

Argued and Submitted, Seattle, Washington: July 8, 2014.

Page 1091

Appeal from the United States District Court for the Western District of Washington. DC No. 2:11 cv-2077 BJR. Barbara Jacobs Rothstein, Senior District Judge, Presiding.

SUMMARY[*]

Bankruptcy

The panel reversed the district court's dismissal, pursuant to the fugitive disentitlement doctrine, of an appeal by a nonclaimant to the bankruptcy estate from the bankruptcy court's judgment in a fraudulent conveyance case.

The trustee for the bankruptcy estate of the nonclaimant's husband brought an adversary proceeding against her, alleging that she fraudulently transferred estate assets in violation of 11 U.S.C. § § 544 and 548 and Wash. Rev. Code, ch. 19.40. After trial, the bankruptcy court held the nonclaimant liable for fraudulent transfers and ordered her to turn over certain specified items of personal property. Instead, she fled to France.

The panel held that the bankruptcy court had authority to enter judgment based on the parties' consent. The panel concluded that after Exec. Benefits Ins. Agency v. Arkison, 134 S.Ct. 2165, 189 L.Ed.2d 83 (2014) (holding that bankruptcy court generally cannot enter final judgment on Stern claims, or proceedings that are defined as " core" under 28 U.S.C. § 157(b) but that may not, as a constitutional matter, be adjudicated as such), this court's holding in Exec. Benefits Ins. Agency v. Arkison (In re Bellingham Ins. Agency, Inc.), 702 F.3d 553, 557 (9th Cir. 2012) (ruling that parties' consent gives bankruptcy court jurisdiction over Stern claims), remained good law.

The panel held that district court abused its discretion in dismissing the appeal under the fugitive disentitlement doctrine because no necessity justified invoking the rule of disentitlement. Declining to hear the merits of the appeal in the first instance, the panel remanded the case to the district court.

Michael E. Gossler (argued), Montgomery Purdue Blankinship & Austin PLLC, Seattle, Washington, for Appellant.

Spencer Hall (argued) and Janet D. McEachern, Hall Zanzig Claflin McEachern PLLC, Seattle, Washington, for Appellee.

Before: Arthur L. Alarcón, A. Wallace Tashima, and Mary H. Murguia, Circuit Judges. Opinion by Judge Tashima.

OPINION

Page 1092

TASHIMA, Circuit Judge:

Linda Mastro (" Linda" ), a nonclaimant to the bankruptcy estate, appeals the district court's dismissal of her appeal of the bankruptcy court's judgment in this fraudulent conveyance case. We hold that the bankruptcy court had authority to enter judgment based on the parties' consent. We conclude, however, that the district court abused its discretion in dismissing Linda's appeal under the fugitive disentitlement doctrine, because no necessity justified invoking the rule of disentitlement in this case.

I.

James Rigby (the " Trustee" ), in his capacity as Trustee for the Chapter 7 bankruptcy estate of Linda's husband, Michael Mastro (" Michael" ), filed an adversary proceeding against Linda. The Trustee alleged, inter alia, that Linda fraudulently transferred estate assets in violation of 11 U.S.C. § § 544 and 548, and Wash. Rev. Code, ch. ...


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