The Four Sequential In re Arciniega Appeals.

Bruce prevailed in four separate sequential appeals in the same case covering a nine-year period. He obtained three reversals and a final partial reversal. His client was initially found liable for debt of over $500,000 that was deemed non-dischargeable. Bruce's appellate advocacy reduced the award piece-by-piece, until the appellate courts found she was liable for no damages at all and awarded Bruce's client an $11,000 cost award in her favor. These are the four cases.

In re Arciniega (CC-15-1123) (2016) (Arciniega 1)

United States Bankruptcy Appellate Panel

Ninth Circuit

Bruce represented the debtor in an appeal from a nondischargeability judgment arising out of a post-divorce settlement agreement. In the settlement agreement the wife had promised to remove her former husband's name from a $75,000 V.A. mortgage loan within one year. The agreement contained a $1,000 per day liquidated damages provision. The wife tried to refinance or remove her ex-husband from the loan, but was unable to do so. The husband suffered no harm from her failure; he simply remained on the loan and she was current on the payments. Nonetheless, the bankruptcy judge Scott Yoon found that wife had fraudulently induced the husband to entered into the settlement agreement. It awarded the husband $540,806.42 in non-dischargeable damages, including $50,000 for a payment the husband had made for the wife to convey title to other property, $281,000 in liquidated damages, calculated at $1,000 per day for each day after the one year period expired, and over $200,000 in attorney’s fees under Cal. Civil Code § 1717. On appeal, the Bankruptcy Appellate Panel affirmed the liability findings under a substantial evidence review. However, it reversed the $50,000 in actual damages, noting that the husband’s payment was for a separate and completed obligation. And it reversed the liquidated damages, noting that they must bear a reasonable relationship to anticipated harm and questioned whether $1,000 per day was reasonable. It also reversed an award of attorney’s fees since there was no prevailing party yet. The BAP remanded for the bankruptcy court to evaluate whether the liquidated damages provision bore a reasonable relationship to anticipated actual damages.

In re Arciniega (CC-17-1154) (2017) (Arciniega 2)

United States Bankruptcy Appellate Panel

Ninth Circuit

After remand in the first appeal, the bankruptcy court reinstated the $281,000 in liquidated damages and awarded $244,586.50 in attorney’s fees. The court found the $1,000 per day damage clause enforceable. Bruce appealed again. The BAP reversed the liquidated damages award again, holding that as a matter of law, the liquidated damages clause was unenforceable under California law as an unreasonable penalty. The liquidated damages provision bore no reasonable relationship to the parties' expected actual damages. The BAP vacated the attorney's fee award as premature and remanded for a determination of the husband's actual damages, if any, and prevailing party status.

In re Arciniega (5-19-CV-01383-JLS) (2019) (Arciniega 3)

U.S. District Court

Central District of California

After remand in the second appeal, the bankruptcy court was charged with determining the husband's actual damages, if any. The husband had by now obtained a non-VA loan that he claimed involved a lower teaser rate but a higher subsequent rate than the VA loan. (He used the loan proceeds to pay his lawyers for the previous litigating, illustrating how unnecessary this whole litigation was.) He now sought only $1,511.27 in actual damages, $1 in nominal damages, and $244,586.50 in attorney’s fees. The bankruptcy court awarded him these damages. On appeal (this time to the federal district court), the district court reversed. It held that the husband failed to prove that his ex-wife's supposed misrepresentation caused his supposed financial harm, noting that he had not shown his VA loan denial was due to the debtor’s breach. The court also rejected the nominal damages award, finding such nominal damages were improper in a nondischargeability context. Because the husband failed to establish any recoverable damages, he failed to establish a necessary element of a fraud claim under 11 U.S.C. §§ 523(a)(2)(A) and 523(a)(6).

In re Arciniega (23-CV-00301-JLS) (2023) (Arciniega 4)

U.S. District Court

Central District of California

This is the fourth and final appeal in this case. After three prior appeals, the BAP and district court eliminated all possible damages and determined that the husband failed to provide fraud under 11 U.S.C. §§ 523(a)(2)(A) and 523(a)(6). On remand, the wife argued she was now the prevailing party after having defeated the husband’s claims and was therefore entitled to attorney’s fees and costs. Judge Yoon in the bankruptcy court, after having been reversed three times, concluded that neither party was a prevailing party and denied both attorney’s fees and costs. On appeal, the district court affirmed the denial of attorney’s fees, holding that the bankruptcy court properly exercised its discretion under California Civil Code § 1717 and found the litigation result was mixed and did not warrant a fee award. However, the district court reversed the denial of costs. Under California Code of Civil Procedure § 1032(a)(4), the debtor was a prevailing party as a matter of law because the creditor recovered no relief. The court awarded her $11,032.02 in costs.

Case Note

This case and set of appeals is an example of the attorney's fee tail wagging the dog. Even though the husband had no actual damages, he tried to obtain a large damage award against his ex-wife. As his claims got knocked out one by one, he needed to pursue smaller and smaller damage theories to hold onto his attorney's fee award. Thanks to Bruce's appellate work, he failed on all counts and received nothing from his ex-wife and faced a cost award against him.

In re Dwyer (03-1242) 303 B.R. 437 (2003)

United States Bankruptcy Appellate Panel

Ninth Circuit

Bruce's client, the ex-husband in a prior marital dissolution actions, had an adversarial complaint due in the bankruptcy court the Friday after Thanksgiving. It was filed the following Monday. The bankruptcy court found that it was untimely and dismissed the complaint. The Bankruptcy Appellate Panel reversed, holding that the Friday after Thanksgiving is a “legal holiday” under Federal Rule of Bankruptcy Procedure 9006(a), which extends filing deadlines. California law designates the day after Thanksgiving as a judicial holiday, and the federal rules are designed to harmonize with state holidays to avoid procedural traps.

Case Note

Another triple appellate victory. Bruce's client had an adverse judgment in the family court, and Bruce obtained a reversal. See here. His ex-wife then filed for bankruptcy to try to discharge this debt. The bankruptcy court dismissed his appeal as untimely, and Bruce obtained a reversal. After losing in the BAP, the ex-wife appealed to the Ninth Circuit, where Bruce won again. See below.

In re Dwyer 04-55044) 426 F.3d 1041 (2005)

U.S. Court of Appeals

Ninth Circuit

The Ninth Circuit affirmed, holding that the Friday after Thanksgiving is a “legal holiday” under Bankruptcy Rule 9006(a) because California law designates it as a judicial holiday. The court emphasized procedural uniformity and the importance of harmonizing federal and state calendars.