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Inray White, Stella Havkin, counsel for appellant Devon Jermell White.

[00:00:15] Speaker 00:
Good morning.

[00:00:15] Speaker 01:
Well, you're last.

[00:00:17] Speaker 00:
I know.

[00:00:17] Speaker 01:
But look on the bright side.

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You don't have to reserve any time.

[00:00:20] Speaker 00:
Yes, that's true.

[00:00:22] Speaker 00:
That's true.

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I actually notified Judge Saltzman that I might be late.

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They're per-pers here.

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I have a 1 o'clock with Judge Saltzman, but I'll be fine.

[00:00:29] Speaker 01:
All right, go ahead and make your appearance.

[00:00:31] Speaker 00:
Stella Hapkin on behalf of Appellant.

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I've never been by myself.

[00:00:37] Speaker 00:
That's kind of different.

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So this is an interesting issue.

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I've never had to address it before.

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And I appear in front of Judge Basin every Tuesday.

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So this is pretty much of an unusual set of circumstances.

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As you've read, there are two grounds for the appeal.

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One is what we assert is a lack of due process because the order was issued under the wrong code section.

[00:01:07] Speaker 01:
Can I give you a little feedback and maybe speed things up a bit?

[00:01:10] Speaker 01:
Sure.

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I think you're going to profitably spend your time on the second issue.

[00:01:17] Speaker 01:
Yes.

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Which is what was the source of the authority to basically dismiss a seventh?

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Correct.

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And go ahead and give us your best thoughts about that, if you would.

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I think that's going to be very helpful.

[00:01:29] Speaker 00:
Absolutely.

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The code provides very few sections under which, provisions under what you can dismiss for it.

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They're technical.

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There's three of them.

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I mean, one of them is basically, you know, you don't show up, you don't provide documents, and whatever.

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We don't have any of that.

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We have 17 days in the Chapter 7.

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I provided documents to the trustee, nothing's happened.

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So it cannot be anything that happened in the chapter 7 and the code provides us under this chapter, 707 says under this chapter.

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It doesn't say anything about chapter 11, chapter 13 or anything of the sort.

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It's under this chapter.

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So what happened in this chapter?

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Nothing.

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Nothing happened in this chapter.

[00:02:20] Speaker 01:
The case was converted.

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Can I sort of rephrase it and play it back and see if we're on the same page?

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Yeah.

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That there was an 11th.

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Judge Basin expressed his concerns about what he believed to be deficiencies.

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He, in dismissing the 7, he seemed to focus, I think you're right, really on what he had seen as the prior conduct that in his view was less than candid.

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What I think you're telling me in the last point is that the reasons to dismiss a 7 are all forward-looking, right?

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The obligations for a Chapter 7 debtor are forward-looking.

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Correct.

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Right?

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I mean, you do these things so people know what your financial condition is and what your assets and liabilities are so the trustee can manage them, right?

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And there's certainly a law in the Ninth Circuit, and not every circuit goes this way, that it's very hard to dismiss a 7 for bad faith based on alleged pre-7 conduct.

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So that's, I mean, that's where I'm beginning the thought process.

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So go ahead and... I agree with you 100%.

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There is no requirement of good faith in a Chapter 7.

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Yeah.

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There is, if you act badly in a Chapter 7, there are remedies.

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Yeah.

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You can file a 727, 8245, whatever, then you can file, a creditor can file a 523,

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And most of the time we see debtors trying to get out of a Chapter 7 that, you know, that they erroneously filed.

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Or the USD can file a 707B, but a 707A is so limited.

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And Judge Basin relied on saying that it's a delay to creditors.

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We were there three months.

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Three months.

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Motions to avoid liens were filed.

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There was equity created for the estate.

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There was a car that could have been sold.

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There was reasons to convert to Chapter 7.

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This debtor, while I disagree with Judge Basin and I think he got the wrong end on this debtor, he wasn't hiding it.

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Yes, he was unemployed at the time we filed.

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He got a job within a month, a good paying job.

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He couldn't provide all the disclosures that he could, but we had a buyer, buyer backed out.

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No buyer, you know, can't provide the judge with what disclosures he wants for a Chapter 11.

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He said, you know what, call it a day.

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Go to Chapter 7, let's get the trust, we'll buy back equity from the trustee in the car.

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and see what we can do.

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Then we get a dismissal on the grounds that you weren't fully forthcoming with your commissions or whatever.

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I don't know what else we could have done because Guy was on the job for two weeks.

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What can we do?

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And so he said, okay, and every death,

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A debtor in this kind of debtor is entitled to discharge $4 million worth of business debt.

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There is no evidence in the record that the debtor didn't hit cash, hit jewelry.

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There's nothing anything like that.

[00:05:24] Speaker 01:
Yeah, let me suggest that there is no record along those lines.

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So I don't want to argue about that, neither do you, I don't think.

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I think what we're really interested in is just keeping it out.

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What would the source of authority have been, if any, to dismiss the seven?

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And it's not, I mean, where I think we're going with this is the Ninth Circuit tells us good faith's not really an issue, rape filing is seven, there are other remedies.

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I mean, and they also include make a referral if things are really bad, right?

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I mean, there are bankruptcy crimes that can be pursued.

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And to the extent there's what Judge Basin might have had in mind with something Marama-like, my suspicion is that wouldn't play as well when you're going from the wholly unrestricted

[00:06:03] Speaker 00:
eleven venue to a fairly restricted seven i don't know that it fits if you want to address any of that feel free it's i think in fact it is a the chapter seven is a much better ground if you suspect a debtor doing something funny you've got a chapter seven trustee who is supervised by the usd you've got everybody looking at it go provide me with everything under the sun and the trustee can then determine if they've been pro

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you know, fraudulent transfers, preferences, whatever.

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There's nothing of the sort.

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In fact, we're going to a restricted and the reality is no creditor appeared and said, you know, oh, this debtor is delaying things.

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There was no relief from stay, nothing.

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We weren't there for three months.

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That's it.

[00:06:48] Speaker 02:
It is possible that he could have dismissed for unreasonable delay after the case was converted if there was evidence to suggest that the debtor was purposely somehow not cooperating with the trustee.

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That's not what this was based on though.

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It was based on all of the activities that occurred in the 11 that he didn't believe were fair or reasonable on behalf of the debtor, and that's what he brought as the basis for the dismissal of the Chapter 7.

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And what Judge Lafferty said is the Ninth Circuit says you can't look back.

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You have to do something looking forward.

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In the 7.

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That happens after the conversion.

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and there are remedies in seven for those kinds of things.

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Correct.

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So you just think it was premature and should be reinstated.

[00:07:42] Speaker 01:
In the meantime both his prohibition order

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It's lapsed, right?

[00:07:48] Speaker 01:
It ran March 12th.

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But I think we issued a stay here, right?

[00:07:53] Speaker 00:
He issued a stay as well, which I'm pretty shocked about.

[00:07:56] Speaker 01:
But he issued it to let us get to here first, correct?

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Right.

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So there's a stay.

[00:08:01] Speaker 01:
There's been a stay.

[00:08:01] Speaker 00:
There is a stay in place.

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There's a stay in place, yeah.

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And the debtor's house is not being foreclosed upon and child support is being paid.

[00:08:08] Speaker 00:
So, so far so good.

[00:08:11] Speaker 01:
Okay.

[00:08:13] Speaker 00:
I don't have anything else to add.

[00:08:15] Speaker 01:
So you want us to reverse the decision?

[00:08:16] Speaker 00:
Yes, I do.

[00:08:18] Speaker 00:
Because I don't need another attempt to do this again.

[00:08:21] Speaker 00:
Anything else?

[00:08:24] Speaker 01:
No.

[00:08:25] Speaker 00:
Good luck with that.

[00:08:25] Speaker 01:
Thank you very much.

[00:08:26] Speaker 00:
Thank you.

[00:08:28] Speaker 00:
I'll make it.

[00:08:29] Speaker 00:
Yeah, I've got plenty of time.

[00:08:31] Speaker 01:
Don't blame us.

[00:08:32] Speaker 01:
I'm sure Judge Salzberg would.

[00:08:34] Speaker 00:
I blame the propose about the form of the discharge order.

[00:08:39] Speaker 01:
OK.

[00:08:40] Speaker 01:
Thank you.

[00:08:42] Speaker 02:
All rise, the session is now adjourned.