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In 1955, the Rev. Robert Schuller established Garden Grove Community Church in an old drive-in theater in Orange County, California. Over the next 50 years, the "community" church became a megachurch called Crystal Cathedral, from which Schuller broadcast a show called "Hour of Power." At its height, "Hour of Power" was seen by 1.3 million people in 156 countries, according to The Huffington Post.

That all changed in 2010 when Crystal Cathedral filed for bankruptcy in the face of a $36 million mortgage and $7.5 million it owed to different vendors. In 2011, Crystal Cathedral got some help from the sale of its 40-acre property to the Catholic Church diocese in Orange County.

It all began with the late Anna Nicole Smith, the Playboy Playmate and wife of billionaire oil tycoon J. Howard Marshall II. After J. Howard passed away in 1995, one year after marrying Smith, a dispute erupted over his estate, which was bequeathed nearly entirely to one son, the late E. Pierce Marshall.

Smith, whose legal name was Vickie Lynn Marshall, challenged the will, as did J. Howard III, a second son of the late billionaire. Both of the will’s challengers also declared bankruptcy, the proceedings of which led to the Ninth Circuit’s ruling late last week.

Like many law grads, Michael Headlund hasn't had the easiest time, economically. Though he graduated back in 1997, he's had the same experience as recent grads, with over $100,000 in student loan debt and no hope whatsoever of paying it off.

Ten years ago, he filed for bankruptcy after The Educational Resources Institute (TERI) and Pennsylvania Higher Education Assistance Agency (PHEAA) demanded payments far beyond his means. TERI ended up settling for a payment plan, but PHEAA fought to prevent partial or full discharge of his remaining $85,000 or so in debt.

The bankruptcy court ruled in his favor, but the Bankruptcy Appellate Panel reversed. The Ninth Circuit vacated the BAP's holding and remanded the case for consideration the three-part Brunner test. The bankruptcy court judge passed away in the meantime, leading to more delay and a case reassignment.

In re: Schwarzkopf, No. 08-56974

Fraudulent Transfer Action in Bankruptcy

In In re: Schwarzkopf, No. 08-56974, an adversary proceeding seeking to recover for bankrupt estates' benefit approximately $4 million in assets, the court affirmed and reversed in part partial judgment for defendants where 1) the district court did not err in finding that a trust to which defendants transferred certain assets was fraudulent; and 2) the California courts had not extended the prohibition on "reverse-piercing" the corporate veil to the trust context.

 

Ahcom, Ltd. v. Smeding, No. 09-16020

Alter Ego Action Against Bankrupt Company's Shareholders

In Ahcom, Ltd. v. Smeding, No. 09-16020, an action against the shareholders of a bankrupt corporation, the court reversed the dismissal of the complaint where a creditor of a corporation in bankruptcy has standing to assert a claim against the corporation's sole shareholders on an alter ego theory.

 

Interpretation of Bankruptcy Homestead Exemption, and Criminal Matter

In Dunn v. Castro, No. 08-15957, a challenge to a restriction that was temporarily imposed on plaintiff's right to receive visits from his three minor children while he was in prison, the court reversed the denial of defendants' motion to dismiss the complaint where a reasonable prison official could have believed that terminating plaintiff's right to receive visits from his children was lawful, in light of clearly established law and the information he possessed.

Northstar Fin. Advisors, Inc. v. Schwab Invs., No. 09-16347, involved an action by investors claiming that a large American investment trust operating a series of mutual funds unlawfully deviated from the investment policies set forth in its registration statement, to the detriment of the fund's shareholders and in violation of section 13(a) of the Investment Company Act.  The court reversed the denial of defendant's motion to dismiss the complaint on the grounds that nothing in section 13(a) as originally enacted or as subsequently amended either created a private cause of action or recognized one existed with the clarity and specificity required under Supreme Court precedent.

In US v. Pineda-Doval, No. 08-10240, the court affirmed defendant's conviction for transportation of illegal aliens resulting in death, holding that 1) a defendant may be found guilty of transportation of illegal aliens resulting in death only if the government proves beyond a reasonable doubt that the defendant's conduct was the proximate cause of the charged deaths, and the government made this showing; and 2) because there was no "reasonable likelihood that the jury" thought the greater and lesser offenses were equivalent, there was no error, let alone plain error, in the verdict form.  However, the court vacated defendant's sentence where, because the court required strict compliance with Fed. R. Crim. P. 32, it could not give the district court the benefit of the doubt and assume it meant "malice aforethought" when it said "recklessness."

Comite de Jornaleros de Redondo Beach v. City of Redondo Beach, No. 06-55750, concerned a First Amendment challenge to Redondo Beach Municipal Code section 3-7.1601, which prohibits the act of standing on a street or highway and soliciting employment, business, or contributions from the occupants of an automobile.  The court of appeals reversed the district court's preliminary injunction in favor of plaintiffs, holding that the ordinance was a valid time, place, or manner restriction.

Benay v. Warner Bros. Entm't, Inc., No. 08-55719, involved an action alleging copyright infringement under federal law and breach of contract under California law based on defendants' alleged misappropriation of plaintiffs' screenplay.  The court of appeals affirmed summary judgment for defendants in part, holding that, even if defendants had access to the screenplay, plaintiffs did not show sufficient similarity between the screenplay and the film (The Last Samurai) to maintain an infringement claim under federal copyright law.  However, the court reversed in part, on the ground that novelty was not required for an implied-in-fact contract claim arising out of unauthorized use.

In re: Southern Cal. Sunbelt Developers, No. 08-56570, concerned actions seeking punitive damages and attorney's fees arising out of the filing of allegedly meritless involuntary bankruptcy petitions against two alleged debtors.  The court of appeals affirmed judgment against appellants in part, holding that 1) the bankruptcy court properly concluded that 11 U.S.C. section 303(i) permitted an award of attorney's fees for a section 303 action as a whole, including fees incurred to litigate claims for fees and damages under section 303(i)(1) and (2); 2) section 303(i) permitted an award of punitive damages under section 303(i)(2)(B) in the absence of an award of actual damages under section 303(i)(2)(A); and 3) the bankruptcy court properly held two individual appellants jointly and severally liable for the costs and attorney's fees the debtors incurred in obtaining dismissal of the involuntary petitions.  However, the court reversed in part, on the ground that the bankruptcy court erred by holding the individual appellants liable for the debtors' costs and fees incurred on the section 303(i) motions themselves.

Prison Legal News v. Schwarzenegger, No. 09-15006, involved an action claiming that the California Department of Corrections violated a prison newspaper's First Amendment rights.  The court of appeals affirmed the district court's award of attorney's fees, on the grounds that 1) plaintiffs could recover attorneys' fees under 42 U.S.C. section 1988 for monitoring the state officials' compliance with the parties' settlement agreement; and 2) the district court's determination of the fee amount was not an abuse of discretion, because it was reasonable for the district court to conclude that the 31.5 hours spent corresponding with inmates was part of plaintiff's efforts to monitor state officials' compliance with the agreement.

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Arizona's Wine Regulations, Bankruptcy Case

Black Star Farms LLC v. Oliver, No. 08-15738, concerned an action by a Michigan winery claiming that certain provisions of Arizona's statutory scheme regulating the direct shipment of wine from wineries -- whether located in-state or out-of-state -- to Arizona consumers violated the dormant Commerce Clause.  The Ninth Circuit affirmed summary judgment for defendant, on the ground that Arizona's statutory exceptions to its three-tier distribution system, which treated similarly situated in-state and out-of-state wineries the same and imposed no new impermissible burdens on out-of-state wineries, did not have the practical effect of favoring in-state economic interests over out-of-state interests.

In re: Sabban, No. 08-60017, involved a Chapter 7 bankruptcy adversary proceeding.  The court of appeals affirmed the bankruptcy court's order holding that a monetary award under California's unlicensed contractor statute, Cal. Bus. & Prof. Code section 7031(b), was dischargeable, on the ground that the award was exempted from discharge pursuant to 11 U.S.C. section 523(a)(2)(A) because it was not premised on either fraud or actual harm.

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