[00:00:00] Speaker 01: All right, we'll take the final case on the argument. [00:00:05] Speaker 01: Allender, Nance, the Warfield. [00:00:34] Speaker 01: Whenever you're ready, counsel. [00:00:36] Speaker 00: Good morning, Your Honors, and may it please the court, April Maxwell on behalf of the debtor, Johnny Lee Nance. [00:00:41] Speaker 00: In bankruptcy, exemptions are what are used to protect a person's property from the trustee and from creditors. [00:00:47] Speaker 00: Without a proper exemption, the debtor can lose their home, they can lose their car, they can lose household goods and furnishings, everything that they own. [00:00:59] Speaker 00: So they need exemptions to cover those and to protect them. [00:01:02] Speaker 00: There are over 50 different exemption schemes across the US. [00:01:06] Speaker 00: But when filing a bankruptcy, a debtor can only choose one exemption scheme at a time. [00:01:11] Speaker 01: So somebody can't say, I have a homestead exemption under Arizona law, and I also have a homestead exemption under Washington state law. [00:01:21] Speaker 00: They cannot concurrently claim those rights. [00:01:23] Speaker 01: So they have to pick. [00:01:25] Speaker 00: You have to pick, and you have to pick an entire scheme. [00:01:28] Speaker 00: You have to say either Arizona state law, Washington state law, federal law. [00:01:33] Speaker 00: You have to pick one and stay within that exemption scheme. [00:01:35] Speaker 00: And that is because of both what the statute says and how the form is set up. [00:01:40] Speaker 00: Right. [00:01:40] Speaker 00: So it's the statute 522B1 says that they must choose either paragraph two or paragraph three in the alternate. [00:01:52] Speaker 00: And then the state and the [00:01:54] Speaker 00: Official form, again, also says that you have to check only one if you're claiming state and federal non-bankruptcy exemptions or the federal exemptions. [00:02:04] Speaker 00: And then under Bankruptcy Rule 9009, it says that you're required that the official form shall be used without alliteration or without change. [00:02:15] Speaker 00: So under the statutes, under the bankruptcy rules, and under the official forms, and as well as under the cases that have looked at this, for example, Henry Ladd says they simply do not allow pleading in the alternative. [00:02:29] Speaker 00: You have to pick one exemption scheme at a time. [00:02:32] Speaker 03: Also, the federal exemption is only available, the one that he ultimately relied on, if the [00:02:40] Speaker 03: state ones are not, is that right? [00:02:42] Speaker 00: Sometimes. [00:02:43] Speaker 00: Since Arizona is an opt-out state, that is the case. [00:02:47] Speaker 00: There are other states, for example, Texas, you get to choose which one you want. [00:02:50] Speaker 00: But in Arizona, you're required to use the state exemptions unless there's a reason that you can't. [00:02:57] Speaker 03: But I thought that the federal exemption, in any event, I was a little confused about this, but it appeared that the federal exemption [00:03:06] Speaker 03: was available, even with regard to Washington, the backup one, the one that he ultimately relied on, only if there was nothing else. [00:03:24] Speaker 00: Right, a lot of times, and again, in the circumstances of this case, yes, it's only available if there is nothing else available, and that's due to the hanging paragraph under [00:03:37] Speaker 03: hanging paragraph or whatever. [00:03:38] Speaker 00: Yeah, the 522B3. [00:03:40] Speaker 00: It's underneath 522B3. [00:03:42] Speaker 00: So in the circumstances of this case, yes, that is the case. [00:03:46] Speaker 00: Federal exemptions are only available if another exemption scheme is not available. [00:03:52] Speaker 02: So we agree that if Mr. Nance had amended to claim the federal exemption as he was [00:04:07] Speaker 02: after the trustee objected that he could have done so before the court ruled? [00:04:19] Speaker 00: Can you rephrase that? [00:04:22] Speaker 00: I'm sorry. [00:04:23] Speaker 02: OK. [00:04:24] Speaker 02: So the trustee objects to the Washington claim of exemptions. [00:04:30] Speaker 00: Right, the homestead exemptions. [00:04:32] Speaker 02: And there's a notice to Mr. Nasset [00:04:37] Speaker 02: there's this objection and at the bottom of the notice it says you're warned that if you don't respond to this, the judge, the court's going to rule and going to accept the objection. [00:04:48] Speaker 02: So before, between the time that he got the notice and the time the court accepted the objection, he could have amended. [00:04:58] Speaker 00: He could have amended, however, for the purposes of claim preclusion, he's not required to have amended because claim preclusion is only available when something could have been argued but was not. [00:05:14] Speaker 00: And that's the point. [00:05:15] Speaker 00: He could not have argued for the federal exemptions at the same time that he was arguing for the Washington State exemptions, which is what a major difference is between the district court and the trial level court and the bankruptcy court. [00:05:28] Speaker 00: under in the bankruptcy court, even if there are multiple exemptions schemes that you can use, you must only pick one. [00:05:37] Speaker 00: And then and really that's done to minimize litigation and streamline the process. [00:05:42] Speaker 00: And like I said, it's a it's one of the main differences between bankruptcy court and the district court. [00:05:47] Speaker 01: So partly your argument, I take it, is that if the scheme were he always could have argued in the alternative, then maybe there's a claim preclusion problem. [00:05:58] Speaker 01: But if he asked to pick one, it can't be claimed perclusion. [00:06:00] Speaker 00: Exactly right. [00:06:02] Speaker 00: If it was if it was like a complaint in the district court where you get to throw every single argument that you have Adam at one time, then we might be looking at more of what the district court here had held and decided. [00:06:18] Speaker 00: we might be in more of a claim preclusion issue. [00:06:21] Speaker 00: But under the statutes, under the rules, under the forms, and under the cases, he could not do that. [00:06:27] Speaker 00: He was only able to produce one exemption scheme at a time. [00:06:31] Speaker 00: Therefore, claim preclusion cannot apply. [00:06:33] Speaker 03: What about, could he, I think there is some case law that suggests that he could have, in responding to the objection, have said, well, if this one doesn't work, then that one does. [00:06:47] Speaker 00: I'm sorry, respond to the objection that I didn't hear the last part. [00:06:50] Speaker 03: If he had, then he could have said, well, if the Washington exemption doesn't work, then the federal one does. [00:06:57] Speaker 00: What he could have done is he could have amended before the order was entered. [00:07:01] Speaker 03: I know, I'm asking you a different question. [00:07:03] Speaker 03: I'm asking you whether as part of the litigation over the Washington exemption, there are some cases that suggest that he could have raised as a defense that [00:07:16] Speaker 03: the alternatively the federal exemption is available. [00:07:20] Speaker 00: I don't know of a single Ninth Circuit case that has said that, or that says anything along those lines. [00:07:27] Speaker 03: That makes sense, because he would still have to do it, right? [00:07:30] Speaker 03: He could defend it on that ground, but there would still have to be an exemption actually claimed. [00:07:39] Speaker 00: There would still have to be an exemption actually claimed [00:07:43] Speaker 03: In other words, to say it, the only defense could be, well, I have an alternative exemption, but that wouldn't constitute a claim of an alternative exemption, probably. [00:07:53] Speaker 03: Possibly. [00:07:54] Speaker 03: I mean, it seems like a strange, there are some cases that say that, but it seems like a strange way to deal with the situation. [00:08:00] Speaker 00: I agree. [00:08:01] Speaker 00: I think it's a very strange way. [00:08:02] Speaker 00: I think it's not precluded. [00:08:06] Speaker 00: to respond and say, well, I could just change this, or you could just go ahead and change the exemptions before the ruling comes out and therefore the ruling is moot. [00:08:18] Speaker 00: The fundamental, the top tier of what you have to prove to be able to use claim preclusion is that this could have been, either was or could have been raised on a prior case. [00:08:30] Speaker 00: And that's not what, we don't have that here. [00:08:33] Speaker 00: The trustee's arguing and the district court ruled that Mr. Nance cannot exercise his explicit right to freely amend because of claim preclusion, but that's wrong. [00:08:44] Speaker 00: Like I said, claim preclusion only implies in cases [00:08:48] Speaker 00: where it could have been raised and he was not allowed to raise that. [00:08:53] Speaker 03: This is probably a foreclosed question by our case law, but is it clear to you that the fact that a determination on an exemption is final for appeal purposes means that it's final for preclusion purposes? [00:09:12] Speaker 00: I would say, yes, it's final for preclusion purposes. [00:09:14] Speaker 00: Therefore, if, for example, if I claimed a homestead under Arizona law, and the trustee objected, and the trustee won, I cannot go back then and say, I'm going to claim this homestead exemption under Arizona law again. [00:09:29] Speaker 00: That 100%, that would be more of an excuse for preclusion. [00:09:31] Speaker 03: Well, it hardly matters whether you call it preclusion or what you call it, because the bankruptcy judge is going to say, I already ruled on that, and I'm not going to rule on it again. [00:09:40] Speaker 03: But in terms of a broader claim preclusion kind, that is what you could have raised otherwise. [00:09:52] Speaker 03: It seems to me that bankruptcy finality for appeal purposes is purposely rather loose. [00:10:10] Speaker 03: not, because the case is still ongoing. [00:10:15] Speaker 03: There's still a case going on. [00:10:18] Speaker 03: And there hasn't been a discharge or anything. [00:10:22] Speaker 03: If somebody doesn't appeal, does that mean the district court couldn't go forward and change their mind about an exemption? [00:10:31] Speaker 00: So if a debtor files an exemption, [00:10:37] Speaker 00: The trustee objects and wins. [00:10:42] Speaker 00: Can a debtor then file a new exemption? [00:10:45] Speaker 00: Yes, they can under federal bankruptcy rule 1009A. [00:10:55] Speaker 00: Petition list schedule statements may be amended by the debtor as a matter of course at any time before the case is closed. [00:11:02] Speaker 00: Now, Inray Albert does say, if it's a legally identical issue, preclusion may come in. [00:11:08] Speaker 00: We're not going to make the judges hear the same thing over and over again. [00:11:10] Speaker 03: But he doesn't assert that the preclusion has to at least be substantially narrower under these circumstances, in general. [00:11:17] Speaker 03: Because what you really have in these appeals is tantamount to an interlocutory [00:11:23] Speaker 03: Well, to account versus beneficial finance kind of appeal in state court and federal court. [00:11:29] Speaker 03: And my understanding of those kinds of appeals is that you can take them, but if you don't take them, you don't have preclusion until there's a final judgment. [00:11:40] Speaker 03: And then there's like, for example, for qualified immunity, if you're denied qualified immunity, you can take a [00:11:52] Speaker 03: an appeal because of various reasons we have said, but if you don't take the appeal and the case plays out and there's a trial, I don't think you have – you certainly don't have claim preclusion at that point. [00:12:07] Speaker 03: So I'm just wondering whether that dynamic doesn't play into how we ought to look at preclusion under these circumstances. [00:12:14] Speaker 00: Well, and I would like to reserve a couple of minutes for rebuttal. [00:12:17] Speaker 00: But first of all, to say that it is bankruptcy court, the issue of preclusion is going to be much more narrow than what it is in the district court. [00:12:26] Speaker 00: Claim preclusion. [00:12:27] Speaker 00: Like you said, if somebody had gotten an e-call judgment. [00:12:30] Speaker 00: Claim preclusion. [00:12:30] Speaker 00: I'm sorry? [00:12:31] Speaker 03: Claim preclusion. [00:12:33] Speaker 00: Thank you. [00:12:34] Speaker 00: If someone had gotten a default judgment and part of that judgment is this property is worth $10,000, they can't really go back in and start arguing about the value of the property because that is precluded. [00:12:46] Speaker 00: But they can go back and argue a different exemption. [00:12:49] Speaker 01: Council, before you reserve, I have a question on this issue of the party presentation rule where the district court [00:13:02] Speaker 01: ruled that the party presentation rule barred what the bankruptcy court did with the, if I'm using the term correctly, the federal wild card. [00:13:09] Speaker 01: So this is my question. [00:13:12] Speaker 01: What is the appropriate standard of review for the district court looking at whether the bankruptcy court violated the party presentation rule [00:13:26] Speaker 01: And what is our standard of review of what the district court did on whether the bankruptcy court violated the party presentation rule? [00:13:35] Speaker 00: Okay. [00:13:36] Speaker 00: I would say that the, that the standard of review in when the district court looks at the bankruptcy court, they're going to have an abusive discretion review. [00:13:44] Speaker 00: Um, and however, when with you looking with the ninth circuit, looking at the district court, you are looking at whether or not they followed the correct law. [00:13:54] Speaker 00: And that in itself would be a de novo review. [00:13:57] Speaker 01: All right. [00:13:57] Speaker 01: So if that's correct, then in essence, we would be deciding whether the bankruptcy court abused its discretion in deciding whether the bankruptcy court violated the party presentation rule. [00:14:12] Speaker 01: We would be looking at whether the bankruptcy court abused its discretion. [00:14:16] Speaker 02: Yes. [00:14:17] Speaker 01: All right. [00:14:18] Speaker 01: I'll give you some extra time on rebuttal. [00:14:20] Speaker 01: Thank you. [00:14:25] Speaker 04: If it pleases the court, my name is Terry Data, I represent the Bankruptcy Trustee Lawrence Warfield. [00:14:30] Speaker 04: I think that the court has received some incorrect information this morning. [00:14:36] Speaker 04: It's my understanding that Washington, unlike Arizona, is not an opt-out state. [00:14:43] Speaker 04: Arizona is an opt-out state. [00:14:45] Speaker 03: It's not, but so what? [00:14:47] Speaker 03: I'm sorry? [00:14:47] Speaker 03: It's not, but so what? [00:14:49] Speaker 03: I mean, first of all, is it not correct that both the bankruptcy form and [00:14:55] Speaker 03: the statute and perhaps the applicable rules do require that you choose what? [00:15:05] Speaker 04: With respect to most assets, that's true. [00:15:08] Speaker 04: There are times when that's not true. [00:15:11] Speaker 04: For example, the pension exemption that's available under, I'm always horrible with the sites, 522 B3C. [00:15:25] Speaker 04: Arizona has a state exemption for that. [00:15:26] Speaker 03: All right, but what about in this instance? [00:15:29] Speaker 04: With respect to the homestead, yes, you're going to have to choose. [00:15:31] Speaker 03: All right, so why doesn't that simply preclude? [00:15:37] Speaker 03: Since the whole notion of claim preclusion is as to what you did argue and what you could have argued, certainly I understand the briefs focused a lot on whether the different exemptions were sufficiently distinct that the [00:15:54] Speaker 03: even if claim preclusion potentially applied, it didn't apply or it did apply. [00:16:01] Speaker 03: But the fundamental notion of claim preclusion is that as to different clauses of action, they have to be things you could have litigated with overlapping factual, with the same nucleus of facts. [00:16:17] Speaker 03: And even if we assume there is the same nucleus of facts, you couldn't have litigated it. [00:16:21] Speaker 03: So why isn't that the answer? [00:16:24] Speaker 04: That's not accurate in this case. [00:16:27] Speaker 04: First of all, let's look at the sequence of events in this case. [00:16:30] Speaker 04: First of all, the debtor tried to claim the Arizona exemptions when it was apparent from his own papers, his petition and schedules, he was not entitled to them. [00:16:40] Speaker 03: But the Arizona exemption we know is exclusive. [00:16:42] Speaker 03: I mean, he couldn't have raised the federal exemption at that point, besides which he was through it before. [00:16:49] Speaker 03: the bankruptcy judge even ruled on it. [00:16:53] Speaker 04: That's correct, and that's the point I was getting to. [00:16:55] Speaker 04: He had the opportunity to correct it before a final order was entered, and he did. [00:17:00] Speaker 04: And what he did is he went to Washington, which is where he should have gone in the first place. [00:17:05] Speaker 04: Now, when you went to Washington, he had a choice. [00:17:07] Speaker 04: He could have elected the federal exemptions, or he could have elected the state exemptions, because Washington is not an opt-out state. [00:17:14] Speaker 04: He elected Washington. [00:17:16] Speaker 03: He made a mistake, but the question is whether there's [00:17:19] Speaker 03: a claim preclusion as a result. [00:17:21] Speaker 03: Well, sure. [00:17:22] Speaker 04: Because just like the first time, when the objection was filed to his Washington homestead exemption, it was a pure legal issue. [00:17:31] Speaker 04: The Washington state court had said, you can't claim out-of-state property exempt in Washington. [00:17:37] Speaker 04: At that moment, just like the very first objection, he could have amended and claimed the federal exemptions. [00:17:44] Speaker 04: But he didn't. [00:17:45] Speaker 04: OK. [00:17:46] Speaker 04: But I still don't know why that leads to claim preclusion. [00:17:49] Speaker 04: It's claim preclusion because he had the opportunity, based on the facts, to claim the other exemptions and elected not to. [00:17:57] Speaker 01: He could have chosen A or B. That's correct, Your Honor. [00:18:02] Speaker 04: He could have. [00:18:03] Speaker 04: And just like the first time, he didn't. [00:18:05] Speaker 01: I'm still confused about why that would equal claim preclusion, but for the reasons I think Judge Berzahn is. [00:18:12] Speaker 01: But let me ask you, I apologize that this is a somewhat [00:18:16] Speaker 01: Irrelevant question at the time the trustee took the appeal to the district court. [00:18:23] Speaker 01: How much money was it issue totally in this in the appeal? [00:18:30] Speaker 04: I can't really answer that question as I stand here because there were that there could have at the end of the day. [00:18:38] Speaker 04: If the asset is not exempt and the trustee has to sell it, it's going to be a matter of the market value of the asset. [00:18:44] Speaker 01: But how much would he have got? [00:18:46] Speaker 04: How much would the bankruptcy estate have gotten? [00:18:48] Speaker 01: No, how much would the debtor have gotten? [00:18:51] Speaker 04: If the exemption was denied? [00:18:53] Speaker 01: No, if it was granted. [00:18:54] Speaker 01: If it were granted, how much are we talking about here? [00:18:57] Speaker 01: How much extra? [00:18:58] Speaker 04: If it was granted, the debtor would have retained both the RV and the real estate. [00:19:03] Speaker 01: In total? [00:19:03] Speaker 01: Yes. [00:19:04] Speaker 01: Okay. [00:19:05] Speaker 04: So the other issue, and this gets back to the hanging paragraph. [00:19:11] Speaker 03: I thought the federal exemption was limited to a fairly small amount of money. [00:19:17] Speaker 04: roughly $30,000 for the property. [00:19:21] Speaker 03: So it's not the value of the property, it's $27,000 of the value of the property. [00:19:27] Speaker 04: It's the equity in the property. [00:19:29] Speaker 03: Right. [00:19:29] Speaker 04: Right. [00:19:30] Speaker 03: So what you told Judge Benning is wrong. [00:19:34] Speaker 04: Well, again, he gets to exempt [00:19:38] Speaker 04: the equity in the property under federal exemptions up to the amount of the value. [00:19:42] Speaker 04: Up to $27,000. [00:19:43] Speaker 04: Yeah. [00:19:43] Speaker 04: And again, the value had not been determined. [00:19:45] Speaker 04: We've never got into that issue because we've never attempted to liquidate the property. [00:19:50] Speaker 03: I'm missing something. [00:19:52] Speaker 03: Is the exemption for more than $27,000? [00:19:56] Speaker 03: Currently? [00:19:57] Speaker 03: Well, whatever the amount was at that time. [00:20:00] Speaker 04: The total amount of the exemption that he would have been allowed in the real estate would have been the maximum federal homestead exemption. [00:20:06] Speaker 03: Which is? [00:20:07] Speaker 04: Which was roughly $27,500. [00:20:08] Speaker 03: So it's not true that he would get to keep the house. [00:20:12] Speaker 03: He would get to keep $27,000 of the equity in the house. [00:20:16] Speaker 04: Well, if the equity in the house did not exceed that, he would have effectively kept the whole thing. [00:20:22] Speaker 04: Right, which is almost impossible. [00:20:23] Speaker 04: So, okay. [00:20:24] Speaker 04: Well, I believe there was a lien on the property as well, so we would have had to liquidate it, paid the lien, and then we would have had to satisfy the exemption. [00:20:32] Speaker 01: Council, do you agree with your friend that as to the party presentation rule, essentially what we would be deciding is did, if we thought the party presentation rule were applicable here, that we would be deciding whether the bankruptcy court abused its discretion? [00:20:51] Speaker 04: If it were applicable, yes, but I don't think it's applicable in this case because this was a situation where as a matter of law, what the bankruptcy judge did was completely improper. [00:21:03] Speaker 04: That the bankruptcy judge is not in the position to select and allow exemptions without first of all, without honoring any of the due process obligations. [00:21:13] Speaker 04: It's the debtor's obligation to choose the exemption, not the bankruptcy court. [00:21:17] Speaker 04: It's the debtor's obligation to give notice of that proposed exemption to all creditors and parties in interest and allow them an opportunity to object. [00:21:24] Speaker 03: He did ask in general to exempt the value or some amount of the value of the RV. [00:21:34] Speaker 04: As part of his homestead exemption, yes ma'am. [00:21:36] Speaker 03: But more generally to exempt it. [00:21:39] Speaker 03: Yes ma'am. [00:21:41] Speaker 03: So the question is whether the selection of which exemption applies [00:21:47] Speaker 03: is of the character that you're suggesting, rather than simply a rule of law that the district judge can decide applies to the case. [00:21:59] Speaker 04: Well, I'm not sure how to answer your question, Your Honor. [00:22:04] Speaker 03: Well, why don't you answer it? [00:22:06] Speaker 03: I mean, in other words, that's the question, right? [00:22:08] Speaker 03: I mean, that's what we're at. [00:22:09] Speaker 03: The alternative view of this is he said that this is exempt unto the bankruptcy laws. [00:22:17] Speaker 03: the district judge, so it isn't just if the district judge was coming out of the air and saying, you know, I think here's some property I think should be exempt because he'd already argued that it should be exempt. [00:22:28] Speaker 03: He was saying, well, it is exempt under this provision of law. [00:22:37] Speaker 04: But again, the problem is it's not up to the bankruptcy judge to select exemptions for a debtor. [00:22:42] Speaker 03: That's the answer. [00:22:43] Speaker 03: That's the [00:22:45] Speaker 03: question, not the answer. [00:22:47] Speaker 03: I mean, if a debtor comes in and says, I regard this property as exempt or I'm arguing that this should be exempt from discharge under the bankruptcy laws, and it doesn't say, but it's under this exemption rather than that exemption, is that [00:23:13] Speaker 03: beyond the powers of the bankruptcy court. [00:23:15] Speaker 03: That's the question. [00:23:16] Speaker 01: It is. [00:23:17] Speaker 01: The bankruptcy court, a court of equity? [00:23:20] Speaker 04: To an extent. [00:23:23] Speaker 01: Are the rules the same in courts of law and courts of equity in this regard? [00:23:33] Speaker 04: If you're talking about this specific issue, [00:23:36] Speaker 04: No, because it's up to the debtor to select the exemption. [00:23:39] Speaker 04: There's a reason why the debtor selects it. [00:23:42] Speaker 04: The judge's use of the debtor's wild card may affect other assets that the debtor is trying to exempt. [00:23:50] Speaker 04: How can a judge possibly decide on behalf of the debtor which part of the debtor's wild card the debtor should use? [00:23:59] Speaker 04: It's [00:24:00] Speaker 04: It boggles my mind. [00:24:02] Speaker 04: If I'm representing a debtor, I don't want somebody else telling my client which part of his wildcard he has to use. [00:24:08] Speaker 04: The debtor didn't object. [00:24:10] Speaker 04: Well, of course, the debtor didn't object because he was getting what he wanted at that moment. [00:24:14] Speaker 04: But again, the debtor, nobody had an opportunity to address it because the judge just said, here's an exemption. [00:24:20] Speaker 04: I'm going to allow it. [00:24:22] Speaker 04: No one had the opportunity to address it. [00:24:25] Speaker 04: No one had the opportunity to think about it. [00:24:27] Speaker 04: This at the end of the day may affect Mr. Nance and Mr. Nance loses his homestead exemption. [00:24:33] Speaker 04: He may have other issues. [00:24:35] Speaker 02: I'm sorry. [00:24:38] Speaker 02: I was going to change the subject. [00:24:40] Speaker 02: So would you respond to your opponent's argument about how she couldn't relitigate Washington exemptions? [00:24:52] Speaker 02: accepting that she's bound by race judicata for that, but could then raise a different exemption and not be barred. [00:25:03] Speaker 04: That's exactly the problem, Your Honor. [00:25:05] Speaker 04: That's why we're here. [00:25:06] Speaker 04: What we have is a case where the facts were determined [00:25:11] Speaker 04: at the time the bankruptcy petition was filed. [00:25:14] Speaker 04: The facts have never changed since the date that this case was filed. [00:25:18] Speaker 04: The only thing that has changed is the selection of the legal theory. [00:25:22] Speaker 04: And the case law, other than LAD, seems to be pretty consistent that if you are only changing the legal theory, that's not enough. [00:25:32] Speaker 04: What the debtor's trying to argue is, well, under this exemption, these facts applied, or this exemption, these facts applied, or this exemption, these facts applied. [00:25:40] Speaker 04: As counsel mentioned, if you go through the 50 states, every state, at least the states that have opted out of the federal exemptions, have a variety of exemptions. [00:25:51] Speaker 02: It's true, though, that they could not have. [00:25:55] Speaker 02: The rule is that you have to raise every, [00:25:59] Speaker 02: issue or claim that could have been raised and she couldn't have raised or Mr. Nance couldn't have raised. [00:26:08] Speaker 04: Mr. Nance could have, could have selected the federal exemptions when his Washington state homestead exemption was objected to. [00:26:17] Speaker 04: He didn't have to wait. [00:26:19] Speaker 01: He could have amended just like he did. [00:26:21] Speaker 01: He didn't have to wait, but he couldn't plead in the alternative and say, [00:26:29] Speaker 01: I want Washington and if Washington doesn't work, I want Arizona or if Arizona doesn't work, I want the federal. [00:26:37] Speaker 01: He has to pick. [00:26:38] Speaker 04: Well, in his pleading, he could have said, but again, keep in mind that he never responded to the objection to his Washington homestead exemption. [00:26:46] Speaker 04: That's one of the problems with this case. [00:26:48] Speaker 04: This is about bad choices and frankly, bad lawyering. [00:26:52] Speaker 04: He could have responded and said, [00:26:56] Speaker 04: I have some defense, which would have been extremely difficult given the fact that the Washington Supreme Court said this isn't going to work. [00:27:04] Speaker 04: Or said, or in the alternative, your honor, if you find that this exemption is not allowable, allow me an opportunity to amend. [00:27:12] Speaker 01: But if the district court, I mean, if the bankruptcy court said, no, Washington, no good. [00:27:20] Speaker 01: I'm going to exercise my discretion in not allowing you to amend. [00:27:24] Speaker 01: You'd still be arguing claim preclusion, right? [00:27:26] Speaker 04: Absolutely. [00:27:27] Speaker 04: Absolutely. [00:27:28] Speaker 01: Because basically the choice was pick the right one. [00:27:31] Speaker 04: Exactly. [00:27:32] Speaker 01: And if you pick the wrong one, you can never argue it's a different exemption. [00:27:38] Speaker 04: The issue is, is did you have the opportunity to protect yourself? [00:27:41] Speaker 01: Did you have the opportunity to get it right? [00:27:43] Speaker 03: I mean, that may be a reasonable question, but it's not a claim preclusion question. [00:27:51] Speaker 03: Because a claim preclusion question [00:27:54] Speaker 03: is having let something go to a final judgment. [00:27:58] Speaker 03: And as I suggested before, I'm a little leery about this whole final judgment notion. [00:28:03] Speaker 03: It's at least a peculiar kind of final judgment. [00:28:06] Speaker 03: But assuming it for now, having let it go to final judgment, what is it that this final judgment decided or could have decided? [00:28:19] Speaker 03: And it couldn't have decided this. [00:28:22] Speaker 03: So even if you could have come in earlier, still the judgment does not apply to the federal claim, the federal exemption, because you couldn't have raised it at the same time. [00:28:37] Speaker 03: You would have had to dismiss that one and start over again. [00:28:40] Speaker 03: That's your argument is you just dismissed it and started over again. [00:28:44] Speaker 03: So the judgment in the Washington, as to the Washington exemption, I [00:28:50] Speaker 03: can't see how it's preclusive, even if better lawyering would have done it the other way. [00:28:55] Speaker 04: Well, the problem, Your Honor, is if we don't apply claim preclusion to this, what we have is what we see in this case, a serial claim of exemptions. [00:29:07] Speaker 04: I have another appeal appending before the Ninth Circuit currently, where exactly that same sort of thing has happened. [00:29:13] Speaker 03: But it's a product of the way, the unusual way in which the statute is set up. [00:29:18] Speaker 03: which is to preclude alternative pleading. [00:29:23] Speaker 03: Ordinary claim preclusion assumes the availability of alternative claims. [00:29:28] Speaker 03: So it's anything that you could have litigated with regard to the same core facts. [00:29:32] Speaker 03: But if you can't litigate them simultaneously, [00:29:35] Speaker 03: then how could it be preclusive? [00:29:37] Speaker 04: Well, and again, Your Honor, I don't know that to be true, and I don't think the law establishes that to be true. [00:29:43] Speaker 04: Again, had counsel pled and asserted, well, if this exemption is going to be denied, I can claim a different exemption, I think we'd be in a different situation. [00:29:53] Speaker 04: I think counsel would have preserved the opportunity to avoid the claim preclusion issue. [00:29:57] Speaker 01: I thought you answered my question a few minutes ago that [00:30:01] Speaker 01: I thought I asked that exact question if the district, if the bankruptcy court had said, no, Washington doesn't apply and I'm not gonna let you amend. [00:30:11] Speaker 01: So we're done. [00:30:11] Speaker 01: I thought I asked you and would that be claim preclusion? [00:30:15] Speaker 04: I thought you said yes. [00:30:18] Speaker 04: I did, but I think counsel should have made that argument. [00:30:22] Speaker 04: And then the issue would be to take that up on appeal and find out whether or not that's an abuse of discretion, which it probably would be. [00:30:28] Speaker 01: All right, thank you, counsel. [00:30:34] Speaker 01: How much time is left? [00:30:38] Speaker 01: All right. [00:30:38] Speaker 01: We'll give you three minutes. [00:30:39] Speaker 00: Thank you, Your Honor. [00:30:43] Speaker 00: In response to the trustee's argument, I just want to point out accepting his way of doing claim preclusion would essentially stop all litigation regarding exemptions in the bankruptcy world. [00:30:59] Speaker 00: Because the reason that we know a lot of these questions about whether Washington allows the homestead exemption to be done outside of to apply to host homes outside of the state or whether. [00:31:13] Speaker 00: non-residents are able to claim an exemption is because of these unresolved questions that began in the bankruptcy court and a lot of times got certified over, and obviously not all of them are, but a lot of the questions about these open questions began in the bankruptcy court. [00:31:33] Speaker 00: Under his theory, [00:31:36] Speaker 00: If you lose, you can't litigate it out. [00:31:39] Speaker 00: Because if you lose, you can't ever go anywhere else. [00:31:42] Speaker 00: And yes, I understand. [00:31:44] Speaker 01: You can appeal. [00:31:44] Speaker 00: Right. [00:31:46] Speaker 00: You can appeal, but if it turns out, for example, Arizona had said when it got certified to the Arizona Supreme Court, they said that an RV does not [00:31:56] Speaker 00: account for a homestead exemption even though it always had before. [00:32:01] Speaker 00: So now we have a new answer from Arizona and now that if under this version of claim preclusion that debtor has no ability to go to any other. [00:32:12] Speaker 01: Well I mean my guess would be that and I have no idea whether the [00:32:17] Speaker 01: The relevant court would follow the restatement of judgments, but my guess would be if that were actually what happened, there would be an acclaimed preclusion exception in the restatement of judgments, but that's a different issue. [00:32:28] Speaker 00: But the point is that it would chill any and all answers to the questions of whether or not any open question about whether or not this exemption scheme applies could not be litigated out because they would not have the ability to pivot if they were wrong. [00:32:42] Speaker 00: And then the other concern is that it's basically get a one shot [00:32:46] Speaker 00: chance to protect your property. [00:32:47] Speaker 00: And remember, Arizona runs about 15% pro se in Chapter 7. [00:32:54] Speaker 00: So suddenly all of those, he said it's bad lawyering. [00:32:58] Speaker 00: I'm not saying it's bad lawyering, but I am saying people without a lawyer are really, really going to be disadvantaged if this new way of claim preclusion is applied. [00:33:18] Speaker 00: The other thing that I want to say is just that, uh, we just asked that this court, um, overrule the district court. [00:33:28] Speaker 00: It used the improper, improperly applied claim conclusion where it did not apply. [00:33:34] Speaker 01: All right. [00:33:34] Speaker 01: We thank counsel for their arguments. [00:33:36] Speaker 01: The case just argued is submitted. [00:33:38] Speaker 01: And with that, we are adjourned for the day and the week.