Cobb v. City of Stockton, No. 14-17269 (9th Cir. 2018)
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The Ninth Circuit dismissed objector's appeal of the bankruptcy court's order denying his objection to confirmation of a Chapter 9 petition, by the City of Stockton, as equitably moot. In this case, objector filed an inverse condemnation claim against the City in state court and the plan classified the claim as a general unsecured claim.
The panel held that objector did not seek a stay of confirmation at any stage; the plan has been substantially consummated; the relief of undoing plan confirmation would bear unduly on innocent third parties; and the bankruptcy court could not fashion relief without undoing the confirmed plan. On the merits, the panel held that the Takings Clause exempted objector's unsecured claim from reorganization. In reality, objector's purported property interest was a claim for monetary relief.
Court Description: Bankruptcy. The panel dismissed as equitably moot an appeal from the bankruptcy court’s order denying an objection to confirmation of the Chapter 9 plan of adjustment of the City of Stockton. The objector had filed an inverse condemnation claim against the City in state court. The plan classified the claim as a general unsecured claim. Agreeing with the Sixth Circuit, the panel dismissed the appeal as equitably moot because the objector did not seek a stay of confirmation; the plan had been substantially consummated; the relief of undoing plan confirmation would bear unduly on innocent third parties; and the bankruptcy * This case was originally submitted to a panel that included Judge Kozinski. After Judge Kozinski’s retirement, Judge Gould was drawn by lot to replace him. Ninth Circuit General Order 3.2.h. Judge Gould has read the briefs, reviewed the record, and listened to oral argument. IN RE CITY OF STOCKTON 3 court could not fashion relief without undoing the confirmed plan. The panel also affirmed the bankruptcy court’s conclusion that the objector’s claim—that the Takings Clause exempted his unsecured claim from reorganization—failed on the merits. The panel concluded that the objector’s purported property interest was, in reality, a claim for monetary relief. Dissenting, Judge Friedland wrote that the objector sought only to have his claim for just compensation under the Takings Clause excepted from discharge, and a claim that falls outside of bankruptcy cannot be subject to the bankruptcy doctrine of equitable mootness. On the merits, Judge Friedland wrote that because the objector maintained a constitutional claim for just compensation, and because that claim should have been excepted from discharge, the state- court inverse condemnation action should have been allowed to proceed.
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