[00:00:00] Speaker 03: I need to call the first matter. [00:00:06] Speaker 00: In Ray Harrington, Karen Pine appearing for appellant, Jamie Dreher appearing for appellee. [00:00:17] Speaker 03: Okay, Ms. [00:00:19] Speaker 03: Pine, am I correct that you're not able to join us by video today, that there was a connection problem, so your phone audio only? [00:00:28] Speaker 02: Yes, you're correct, Your Honor. [00:00:29] Speaker 03: Okay. [00:00:29] Speaker 03: All right. [00:00:29] Speaker 03: Do you want to reserve some time for rebuttal? [00:00:33] Speaker 02: Uh, no, your honor. [00:00:35] Speaker 03: Okay. [00:00:36] Speaker 03: You may proceed. [00:00:39] Speaker 02: Um, in light of the panel, having read the pleadings and the matter and the brief, um, I'm, I could start by answering any questions or concerns they have, or I could give a brief summary. [00:00:51] Speaker 02: I'm fine either way. [00:00:52] Speaker 03: It's up to you. [00:00:54] Speaker 02: Okay. [00:00:55] Speaker 02: I would go ahead and take their questions. [00:00:58] Speaker 03: All right. [00:01:00] Speaker 01: All right. [00:01:01] Speaker 01: So your focus, this is Judge Brand. [00:01:04] Speaker 01: Your focus in your brief seems to be on the exclusion of the evidence based on the granting of the motion and eliminate by Judge Klein. [00:01:17] Speaker 01: Can you tell me why you think that that was important and why that should require us to reverse in this case? [00:01:29] Speaker 01: Okay. [00:01:30] Speaker 01: Thank you, Your Honor. [00:01:31] Speaker 02: What brought about the whole situation with the lawsuit to start with with the conduct of the county, the merits of the underlying case were never heard or considered because of this bifurcation issue in regards to the serving of the claim form prior to proceeding. [00:01:55] Speaker 02: Our client was understanding it was [00:01:58] Speaker 02: properly served based on testimony under oath of her process server. [00:02:03] Speaker 02: So the total merits of the case were never considered and they were not considered by the bankruptcy court in regards to her defensive unclean hands that the conduct of the county brought the whole situation to head, including having to serve the claim form and the whole attorney fee award that now has been determined undischargeable [00:02:28] Speaker 02: And if she'd been able to present her evidence of the county's conduct, that it should have been considered before making that determination. [00:02:37] Speaker 01: But it sounds like you're looking for a second bite at the apple for the underlying state court dispute in the bankruptcy court. [00:02:47] Speaker 01: And so aren't we bound by the state court's decision on that? [00:02:52] Speaker 01: And wouldn't you have to seek any remedy there? [00:02:54] Speaker 01: I mean, I know you said that you thought that [00:02:57] Speaker 01: you know, testimony had been recanted and, you know, isn't that a remedy to seek in state court? [00:03:05] Speaker 02: Well, the debtor believed that the court should consider it. [00:03:11] Speaker 02: The county has never made a determination of the underlying merits, only that the tort claim portion had never been properly served, but not of the underlying conduct. [00:03:22] Speaker 01: You're still pursuing the inverse condemnation claim separately in state court, right? [00:03:28] Speaker 02: Yes, we are. [00:03:29] Speaker 01: That is correct. [00:03:33] Speaker 01: Judge Corbett, did you have a question? [00:03:35] Speaker 01: I think I interrupted you. [00:03:36] Speaker 05: Well, no, I was interrupting you. [00:03:37] Speaker 05: I'm sorry, Judge Brand, but I was going to ask the same question. [00:03:41] Speaker 05: Really, it appears here, Ms. [00:03:43] Speaker 05: Pine, that what you're asking us to do is review what the state court did. [00:03:52] Speaker 05: And our job here is to review what the bankruptcy court did. [00:03:58] Speaker 02: We're asking, Your Honor, we're asking that the court consider the evidence that's never been presented in the counties in the civil case to determine whether it should be dischargeable based on the county's conduct. [00:04:11] Speaker 03: Well, let me jump in for a second. [00:04:13] Speaker 03: I mean, this is an appellate court. [00:04:15] Speaker 03: We don't consider factual. [00:04:18] Speaker 03: You know, we're not going to make findings here. [00:04:20] Speaker 03: I mean, I'm not sure what it is you think we're going to do. [00:04:23] Speaker 03: I mean, and the second part of my question is, I think Judge Klein went fairly exhaustively through the factors for 523A7. [00:04:30] Speaker 03: And certainly, if you have any comments on a mistake you think he made there, now's the time to tell us, because that's what he thought he was doing, and that's what we think we're reviewing. [00:04:40] Speaker 03: So, all ears, if you've got any problem with any of his conclusions about 523A7, now's the time to tell us. [00:04:47] Speaker 02: We have not argued that nor are we going to. [00:04:51] Speaker 02: Okay. [00:04:53] Speaker 02: In regards to the county's conduct that we would like the court to consider. [00:04:56] Speaker 02: Okay. [00:05:00] Speaker 02: I don't have any more questions. [00:05:02] Speaker 01: Did you want to make some statements? [00:05:05] Speaker 02: I think everything's in our pleadings. [00:05:06] Speaker 02: I rest on our papers. [00:05:08] Speaker 02: Thank you for your time and consideration. [00:05:11] Speaker 03: Well, I have no further questions, Judge Corbett. [00:05:13] Speaker 03: How about you? [00:05:14] Speaker 05: No further questions. [00:05:15] Speaker 03: Okay. [00:05:15] Speaker 03: Thank you, Ms. [00:05:16] Speaker 03: Pine. [00:05:17] Speaker 03: Thank you. [00:05:18] Speaker 03: Okay, Mr. Jerry, you want to. [00:05:21] Speaker 03: Thank you, your honor. [00:05:22] Speaker 04: Yes. [00:05:23] Speaker 04: Yes, briefly. [00:05:24] Speaker 04: I just would like to make a few kind of statements and hit a few high points and then answer any questions the panel may have. [00:05:31] Speaker 04: Jamie, representing the county of El Dorado. [00:05:33] Speaker 04: 1st, I think I understand from the panel's questions that. [00:05:38] Speaker 04: The your honors fully understand the procedural posture, which is. [00:05:42] Speaker 04: These defenses and issues that appellant attempted to raise in the bankruptcy court or more probably raised in the state court, there's ongoing proceedings there. [00:05:52] Speaker 04: She has whatever further or additional remedy she has in the state court. [00:05:56] Speaker 04: I guess the highlights or the things I'd like to focus on are one, to remind the panel that sanctions awards, which I consider this to be, even though the statute itself doesn't use the word sanctions, [00:06:08] Speaker 04: do have preclusive effect in subsequent non-dischargeability litigation. [00:06:12] Speaker 04: We cited the NRAE Zellis, Z-E-L-I-S case in our brief. [00:06:17] Speaker 04: That is in respect to, or should I say, it was a 523A6 case that Zellis was, but I think the principle remains. [00:06:27] Speaker 04: Secondly, there are multiple BAP and night circuit cases discussing prevention of the relitigation of previously concluded matters, including NRAE Florida, [00:06:37] Speaker 04: Uh, which I felt was an important case and I'd like to highlight and, um, Florida is the person's name, not the state I thought was interesting. [00:06:44] Speaker 04: So it's in Ray, Florida at one 64 BR, um, six 36. [00:06:49] Speaker 04: And that is a, um, uh, a ninth circuit bat case out of 1994. [00:06:54] Speaker 04: Um, again, it, um, was a five 23 a six case, but, um, [00:07:00] Speaker 04: the point the court made there, or I'm gonna read a brief quote, which says, a bankruptcy court is precluded from determining the issue of willful malicious conduct once the issue is settled in prior litigation, citing the Grogan v. Garner case I think we're all familiar with. [00:07:16] Speaker 03: Well, assuming that it's the same standard, right? [00:07:18] Speaker 03: Agreed. [00:07:19] Speaker 03: Remembering pliam, right? [00:07:20] Speaker 03: Which says sometimes it isn't. [00:07:22] Speaker 03: I agree. [00:07:23] Speaker 03: I agree, Your Honor, yes. [00:07:24] Speaker 04: And the point of this quote actually is the next part to me, which is new defenses are borrowed by the judgment. [00:07:31] Speaker 04: The bankruptcy court is not a last chance form permitting a judgment debtor to relitigate de novo issues decided in prior litigation. [00:07:39] Speaker 03: I don't want you to have to muse unnecessarily, but Judge Klein did allow a pleading Ray unclean hands. [00:07:47] Speaker 03: What's the implication of that given that given that he also granted the motion and limp? [00:07:52] Speaker 04: I don't know what the implication is, your honor, except that I can tell you what happened during the case and during the litigation of that issue with respect to the, um, um, the debtor filed a motion for leave to amend to add the unclean hands defense. [00:08:07] Speaker 04: We opposed it on the basis that eventually became, you know, part of, I reflected actually in judge Klein's ultimate ruling. [00:08:15] Speaker 04: Um, but I will tell you that the conversation with the judge during the hearing on the motion for leave to amend was, [00:08:19] Speaker 04: Leave to amend should be freely given. [00:08:22] Speaker 04: And at this stage, there's no reason not to deny them positing the additional defense will address the merits later. [00:08:28] Speaker 03: And that's exactly the point. [00:08:30] Speaker 03: You can say, from a pleading standpoint, you can plead it, but I reserve the right to determine that it's not relevant or whatever you want to put it, right? [00:08:38] Speaker 03: That's, that's what he did. [00:08:39] Speaker 03: All right. [00:08:40] Speaker 03: Got it. [00:08:41] Speaker 04: Yeah. [00:08:41] Speaker 04: The other case that I felt was important to highlight, which actually did discuss, um, what I would call additional, um, subsequent post-final judgment, um, um, attacks and defenses actually is the in Ray Liu case, L Y U that's a night circuit bath, 2020 case, which you may all be familiar with. [00:09:01] Speaker 04: It's 611 BR 864, one of the holdings of which is that while the court, the BAP in that case, precluded attacking prior final orders by the attempt to raise new defenses, like in that case, it was unclean hands, breach of fiduciary, and estoppel. [00:09:17] Speaker 04: With respect to the specific elements of 523A7, I believe that this case and this state statute is really on all fours with the Inrei Searcy BAP case, which determined or looked at the effect of an Idaho statute in that case, which was designed to and did award sanctions for frivolous litigation by prisoners against governmental entities. [00:09:46] Speaker 04: This California statute, it's not prisoners, but it is designed to, and in our briefing we point out, there's, I don't have a legislative history, but there's cases discussing it. [00:09:56] Speaker 04: It's designed to deter frivolous litigation against governmental entities in California because governmental entities are constitutionally limited in filing malicious prosecution cases against litigants. [00:10:08] Speaker 04: I think the constitutional matter relates to litigants, the right to petition the court for redress. [00:10:17] Speaker 04: So this statute is designed to, and what it's used for, is to, because of that kind of limitation of malicious prosecution rights, sanction litigants for, I call it frivolous conduct, but the specific terms of the statute are actually what matter, and it's pursuing unjustified litigation, which [00:10:38] Speaker 04: I mean, there's no question that's actually what happened here. [00:10:41] Speaker 04: And Judge Brand asked the question about a second bite at an apple. [00:10:45] Speaker 04: I mean, we call this the fifth bite at the apple. [00:10:48] Speaker 04: I mean, there's the motion proceedings, multiple levels of appeal, again, the request of the bankruptcy court, and I guess now we're here on the same issue. [00:10:59] Speaker 04: Just some final, just additional notes to point out for consideration. [00:11:03] Speaker 04: One is to remind the panel that Judge Klein also held the debt non-dischargeable under 523A6, finding it akin to a sanction. [00:11:14] Speaker 01: I found that a little surprising since the trial was limited to 523A7 and the debtor had no opportunity to be heard on that issue. [00:11:25] Speaker 01: He just ruled. [00:11:27] Speaker 01: So I'm wondering if that's error right there. [00:11:32] Speaker 04: Thank you, Your Honor. [00:11:33] Speaker 04: I wasn't expecting that ruling when the opinion came out. [00:11:37] Speaker 04: This case does have a tortured five-year kind of procedural history with various stays and multiple judges, requests for summary judgment that limited the issues. [00:11:48] Speaker 04: And when we did eventually finally get to trial in front of Judge Klein, [00:11:52] Speaker 04: You're correct that we believe that the 52837 issue was the central. [00:11:57] Speaker 04: And the way my client and me were thinking about it was we believe that it's apparent that it is non-dischargeable under 52837, which really is kind of for the [00:12:10] Speaker 04: The most part of legal issue, so we believe it will provide like a streamline proceeding a streamline trial and it did and we were able to with counsel do stipulated facts and stipulated documents. [00:12:20] Speaker 04: So that was the thinking behind that kind of bifurcation with respect to the appellate issue of whether that's reversible error or not. [00:12:28] Speaker 04: I think to me, I don't want to say it doesn't matter, it's out there, but it doesn't because I think the panel can affirm on the 523A7 issue and leave it at that. [00:12:38] Speaker 04: And just affirming for that reason on the record, whether or not the 523A6 finding stands or not, [00:12:45] Speaker 04: If the panel affirms the 523A7 judgment, then I believe it's not reversible, i.e. [00:12:52] Speaker 04: it doesn't matter. [00:12:53] Speaker 05: Yeah. [00:12:53] Speaker 05: Council, in other words, it doesn't matter if we find that A7 is sufficient grounds for the ruling. [00:13:02] Speaker 05: It doesn't matter whether A6 decision was wrong or right. [00:13:06] Speaker 04: Yes, thank you. [00:13:08] Speaker 04: That's a summary of my response, yes. [00:13:12] Speaker 03: Any other questions? [00:13:16] Speaker 03: No, okay. [00:13:17] Speaker 03: Thank you. [00:13:18] Speaker 03: The matter submitted will get you a written decision as soon as we can. [00:13:20] Speaker 03: Thank you very much for your good arguments. [00:13:22] Speaker 03: Thank you very much. [00:13:23] Speaker 03: Thank you. [00:13:24] Speaker 03: Okay, let's call the next matter.