Opinion
No. 05-56107. D.C. Nos. CV-05-00377-AHM, AD 03-02712-BB.
Submitted April 10, 2007 Pasadena, California.
This panel unanimously finds this case suitable for decision without oral argument. See Fed.R.App.P. 34(a)(2).
April 13, 2007.
Appeal from the United States District Court for the Central District of California A. Howard Matz, District Judge, Presiding.
MEMORANDUM
This disposition is not appropriate for publication and is not precedent except as provided by 9th Cir. R. 36-3.
Appellant, American Staffing Association ("ASA"), appeals the district court's order affirming the bankruptcy court's denial of ASA's motion for sanctions under Fed.R.Bankr.P. 9011 against Brinkman Portillo, PC and David Wardle, Esq. (collectively, "BP"). We have jurisdiction under 28 U.S.C. § 1291, and we affirm.
We review de novo the district court's decision, Preblich v. Battley, 181 F.3d 1048, 1051 (9th Cir. 1999), and we review for abuse of discretion the bankruptcy court's denial of sanctions under Rule 9011. In re Marino, 37 F.3d 1354, 1358 (9th Cir. 1994).
Contrary to ASA's contentions, BP are not subject to sanctions simply because they were unable to cite cases in support of their theories of recovery. Even if not supported by existing law, legal contentions are well-founded if they are warranted by "a non-frivolous argument for the extension, modification, or reversal of existing law or the establishment of new law." Fed.R.Bankr.P. 9011(b)(2).
Nor is ASA correct that BP's allegations were contrary to controlling authority. Although, as ASA correctly notes, a voluntary payment cannot constitute the payment of an antecedent debt (and, hence, a preferential transfer), BP did not contend that the debtor's payment of dues was voluntary. BP's argument was that the dues payment was involuntary in view of the debtor's prior business relationship with ASA, the existence of an "Invoice" from ASA requesting payment of $30,000, and the debtor's enjoyment of pre-payment membership benefits. This argument failed but it was not foreclosed by controlling authority.
Equally misplaced is ASA's contention that BP's fraudulent transfer theory was contrary to existing law because an open market purchase at arms' length is always for fair market value. The phrase "fair market value" does not appear in 18 U.S.C. § 548, and no support exists for the proposition that a purchase at fair market value necessarily results in the debtor's receipt of "reasonably equivalent value." See BFP v. Resolution Trust Corp., 511 U.S. 531, 537 (1994) ("fair market value" is not always the benchmark for "reasonably equivalent value"). In the proceedings below, BP argued that the debtor did not receive reasonably equivalent value for its $30,000 dues payment because it received no membership benefits after the transfer. Although the bankruptcy court found otherwise, BP's argument clearly was not foreclosed by controlling authority.
ASA incorrectly argues that the bankruptcy court committed legal error by refusing to accord preclusive effect to its earlier summary judgment order. Clearly, a summary judgment ruling on the merits of a claim does not establish by collateral estoppel the appropriateness of sanctions against the losing party.
Under the circumstances, the bankruptcy court properly concluded that the positions advanced by BP were "non-frivolous argument[s] for the extension, modification, or reversal of existing law or the establishment of new law." Fed.R.Bankr.P. 9011(b)(2). Accordingly, the refusal to impose sanctions was not an abuse of discretion.
We need not reach ASA's argument that BP's pre-filing investigation was inadequate, because attorneys who file a well-founded complaint may not be sanctioned solely for failing to conduct a reasonable inquiry. See In re Keegan Mgmt Co., Sec. Litig., 78 F.3d 431, 434 (9th Cir. 1996).
AFFIRMED.