Mandelbrot v. J.T. Thorpe Settlement Trust, No. 15-56430 (9th Cir. 2017)
Annotate this CaseThe Ninth Circuit vacated the district court's affirmance of the bankruptcy court's order enforcing a stipulated agreement in adversary proceedings seeking to debar an attorney from submitting claims to asbestos trusts. The trusts were created through the Chapter 11 bankruptcy proceedings of entities exposed to significant asbestos liability. In Golden v. California Emergency Physicians Medical Group, 782 F.3d 1083 (9th Cir. 2015), the panel held that assessing the validity of a settlement agreement is a question of state contract law. In this case, the district court never addressed whether federal law governed this case, and it was unclear whether the district court was even aware that the trusts contended that federal law controlled its decision. Furthermore, the district court also did not apply Golden to the settlement at issue. Accordingly, the court remanded so that the district court can decide whether federal or state law governs (including whether the federal law argument has been waived), and what impact, if any, Golden has on this case.
Court Description: Bankruptcy The panel vacated the district court’s affirmance of the bankruptcy court’s order enforcing a stipulated agreement in adversary proceedings seeking to debar an attorney from submitting claims to asbestos trusts, which are created through the Chapter 11 bankruptcy proceedings of entities exposed to significant asbestos liability. The attorney had repudiated the settlement, arguing that California Business and Professions Code section 16600 and California Rule of Professional Conduct 1-500 rendered the settlement illegal because it restrained him from the practice of law. The panel concluded that further proceedings in the district court were warranted. It remanded for the district court to decide whether federal or state law governed, including whether the asbestos trusts waived the argument IN RE J.T. THORPE, INC. 3 that federal law governed, and to decide the impact, if any, of Golden v. Cal. Emergency Physicians Med. Grp., 782 F.3d 1073 (9th Cir. 2015), which held that California law requires a broad reading of section 16600. Dissenting, District Judge Korman wrote that he would resolve the case on the merits and would affirm because the debarment provision was enforceable. Judge Korman wrote that the United States had a strong interest in enforcing the debarment provision, and, since it was reasonable, California had no interest in invalidating it.
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