In re Delta Entertainment Corporation, No. 2:2009cv06082 - Document 22 (C.D. Cal. 2011)

Court Description: ORDER REVERSING DECISION OF BANKRUPTCY COURT AND DISMISSING ADVERSARY PROCEEDING: The bankruptcy courts grant of reconsideration and leave to amend are REVERSED. Because the court lacks subject matter jurisdiction over Paciorettis claim, the adversary proceeding is DISMISSED by Judge Dean D. Pregerson, (Made JS-6. Case Terminated.) (lc)

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1 2 O 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 11 12 13 IN RE: DELTA ENTERTAINMENT CORPORATION THOMAS S. PACCIORETTI as liquidating trustee for DELTA ENTERTAINMENT CORPORATION, 14 Plaintiff, 15 v. 16 17 STARCREST OF CALIFORNIA, INC., 18 19 20 Defendants. ___________________________ ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) Case No. CV 09-06082 DDP [USBC Number LA07-16302-EC] ORDER REVERSING DECISION OF BANKRUPTCY COURT AND DISMISSING ADVERSARY PROCEEDING This matter is before the court on an appeal from a decision 21 by the United States Bankruptcy Court. After reviewing and 22 considering the materials submitted by the parties, the court 23 reverses the bankruptcy court decision and dismisses the adversary 24 proceeding. 25 26 27 28 cc: US Bankruptcy Court and the US Trustee s Office 1 I. Background 2 In 2008, after filing a Chapter 11 bankruptcy petition, Delta 3 Entertainment Corporation confirmed a liquidation plan and created 4 a liquidating trust. ER 338. Broadway Advisors, LLC ( Broadway ) 5 6 7 was named Liquidating Trustee ( Trustee ). (Id.) Thomas S. Paccioretti ( Paccioretti ) is Broadway s principal 8 and sole shareholder. 9 as liquidating trustee for Delta Entertainment Corporation brought 10 an adversary proceeding against Defendant Starcrest of California, 11 Inc. ( Starcrest ). 12 Paccioretti named Trustee. 13 (ER 338). (ER 84). Plaintiff, Thomas S. Paccioretti At no point, however, was In February 2009, Starcrest moved for judgment on the 14 pleadings, contesting Paccioretti s standing. 15 bankruptcy court observed that the correct Trustee is obviously 16 free to file a new action, and dismissed the adversary proceeding 17 for lack of jurisdiction.1 18 (ER 118). The (ER 37, 368). Broadway, the correct Trustee, did not file a new action, but 19 did file a motion for reconsideration of the bankruptcy court s 20 order dismissing the adversary proceeding. 21 bankruptcy court granted Broadway s motion (ER 57-62, 396), and 22 granted Paccioretti s subsequent motion to amend to substitute 23 Broadway as Plaintiff. 24 reconsideration, (ER 400), which was denied. 25 timely filed two Notices of Appeal regarding the denial of its (ER 563). (ER 331). The Starcrest filed a motion for (ER 517). Starcrest 26 27 1 28 The bankruptcy court also denied Pacciorettie s motion to amend to substitute in Broadway as Plaintiff. (ER 361-362.) 2 1 motion for reconsideration and the bankruptcy court s order 2 granting Paccioretti leave to substitute in Broadway. 3 II. 4 Jurisdiction This court has the discretion to grant leave to appeal 5 interlocutory orders. 6 a notice of appeal as a motion for leave to appeal. 7 8003(c). 8 looks to 28 U.S.C. 1292(b). 9 Cir. BAP 1994). 28 U.S.C. ยง 158(a). This court may consider Fed.R.Bankr.P. In considering whether leave should be granted, the court In re Sperna, 173 B.R. 654, 658 (9th Because there is a substantial ground for 10 difference of opinion regarding Paccioretti s standing, and because 11 resolution of the jurisdictional question will materially advance 12 the termination of this litigation, this court construes 13 Starcrest s Notices of Appeal as motions for leave to appeal, 14 grants the motions, and proceeds to the merits. 15 III. Standard of Review 16 The bankruptcy court s conclusions of law are reviewed de 17 novo, while its findings of fact are reviewed for clear error. 18 Blausey v. United States Trustee, 552 F.3d 1124, 1132 (9th Cir. 19 2009)(citing In re Salazar, 430 F.3d 992, 994 (9th Cir. 2005)). 20 This court may affirm on any ground supported by the record. 21 Thrifty Oil Co. v. Bank of America, Nat l Trust and Sav. Ass n, 322 22 F.3d 1039, 1046 (9th Cir. 2003). 23 IV. Discussion The parties do not dispute that Paccioretti was not, and is 24 25 not, the Trustee. The issue before the court is whether the 26 bankruptcy court had subject matter jurisdiction over the adversary 27 proceeding filed by Paccioretti. 28 /// 3 1 Lack of Article III standing is a jurisdictional defect. 2 Renne v. Duncan, 623 F.3d 787, 796 (9th Cir. 2010). 3 requires that three essential elements be met, the first of which 4 is that the plaintiff must have suffered an injury in fact. 5 Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992). 6 Nevertheless, Paccioretti argues that constitutional standing does 7 not require the injury in fact have actually occurred to the party 8 bringing the suit. 9 Standing (Appellee s Brief at 10). The court disagrees. At a constitutional minimum, the 10 plaintiff himself [must have] suffered some threatened or actual 11 injury . . . . 12 then, however, a plaintiff must also assert his own rights, not 13 those of third parties. 14 requirement operates in addition, not as an alternative, to the 15 constitutional standing requirement. 16 F.3d 1107, 1112 (9th Cir. 2004). 17 standing may be curable, id., Article III standing is a threshold 18 jurisdictional prerequisite central to subject matter jurisdiction. 19 Bates v. United Parcel Service, Inc., 511 F.3d 974, 985 (9th Cir. 20 2007) (en banc); Gerlinger v. Amazon.com Inc., 526 F.3d 1253, 1255. 21 Warth v. Seldin, 422 U.S. 490, 499 (1975). Id. Even This prudential standing Dunmore v. United States, 358 While defects in jurisdictional The facts in this case are somewhat similar to those in 22 Dunmore. In Dunmore, a pro se plaintiff sued for a refund of his 23 alleged tax overpayments following a personal bankruptcy. 24 358 F.3d at 1109. 25 bankruptcy estate, not to Dunmore individually. 26 therefore moved to dismiss Dunmore s complaint for lack of 27 prudential standing. 28 /// Dunmore, The overpayments, however, belonged to the Id. at 1110. 4 Id. The defendant 1 The Ninth Circuit found that Dunmore did have constitutional 2 standing, for he himself had suffered an injury in fact traceable 3 to the defendant and redressable by the court. 4 The court agreed, however, that Dunmore lacked prudential standing, 5 and that the bankruptcy estate, not Dunmore himself, was the real 6 party in interest. 7 determination whether the defect in prudential standing was 8 curable. 9 Id. at 1112. The court therefore remanded for a Id. at 1112-1113. A plaintiff who is not the real party in interest may, 10 therefore, lack prudential standing while possessing constitutional 11 standing. 12 Paccioretti suffered any injury in fact, nor has he alleged that he 13 himself suffered any injury. 14 Dunmore does not stand for the proposition that a plaintiff has 15 constitutional standing to assert claims based on injuries suffered 16 by third parties. 17 whether prudential standing exists, Art[icle] III s requirement 18 remains: the plaintiff still must allege a distinct and palpable 19 injury to himself . . . . ); Elk Grove Unified School Dist. v. 20 Newdow, 542 U.S. 1, 12 (2004) ( The Article III limitations are 21 familiar: The plaintiff must show that conduct of which he 22 complains has caused him to suffer an injury in fact that a 23 favorable judgment will redress. ). 24 Here, however, there is no evidence in the record that Contrary to Paccioretti s argument, See also Warth, 422 U.S. at 501 (Regardless Having concluded that Paccioretti lacks constitutional 25 standing, the court need not address his contention that the 26 bankruptcy court properly allowed him to cure prudential and real 27 party in interest defects. 28 19). (Appellee s Opening Brief at 9, 11, 14, See, e.g. Fed.R.Civ.P. 82 ( These rules do not extend . . . 5 1 the jurisdiction of the district courts . . . .); Miguel v. Country 2 Funding Corp., 309 F.3d 1161, 1165 (9th Cir. 2002) (Rule 15 may not 3 be used to extend jurisdiction); Davis v. Yageo Corp., 481 F.3d 4 661, 678 ( [W]hether or not [plaintiff] was the real-party-in- 5 interest, it does not have standing, and it cannot cure its 6 standing problem through an invocation of Fed.R.Civ.P. 17(a). ). 7 IV. 8 9 Conclusion For the reasons stated above, the bankruptcy courts grant of reconsideration and leave to amend are REVERSED. Because the court 10 lacks subject matter jurisdiction over Pacioretti s claim, the 11 adversary proceeding is DISMISSED. 12 13 14 IT IS SO ORDERED. 15 16 17 Dated: December 20, 2011 18 DEAN D. PREGERSON 19 United States District Judge 20 21 22 23 24 25 26 27 28 6

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