In re: Chunchai Yu ( 2016 )

FILED
AUG 11 2016
1 NOT FOR PUBLICATION
SUSAN M. SPRAUL, CLERK
U.S. BKCY. APP. PANEL
2 OF THE NINTH CIRCUIT
3 UNITED STATES BANKRUPTCY APPELLATE PANEL
4 OF THE NINTH CIRCUIT
5 In re: ) BAP No. CC-16-1045-KuFD
)
6 CHUNCHAI YU ) Bk. No. 6:15-bk-12567-SC
)
7 Debtor. ) Adv. No. 6:15-ap-01153-SC
______________________________)
8 )
CHUNCHAI YU, )
9 )
Appellant, )
10 )
v. ) MEMORANDUM*
11 )
NAUTILUS, INC., )
12 )
Appellee. )
13 ______________________________)
14 Argued and Submitted on July 28, 2016
at Pasadena, California
15
Filed – August 11, 2016
16
Appeal from the United States Bankruptcy Court
17 for the Central District of California
18 Honorable Scott C. Clarkson, Bankruptcy Judge, Presiding
19 Appearances: Appellant Chunchai Yu argued pro se; Samuel R.
Watkins of Thompson Coburn, LLP argued for
20 appellee Nautilus, Inc.
21
22 Before: KURTZ, FARIS and DUNN, Bankruptcy Judges.
23
24
25
26 *
This disposition is not appropriate for publication.
27 Although it may be cited for whatever persuasive value it may
have (see Fed. R. App. P. 32.1), it has no precedential value.
28 See 9th Cir. BAP Rule 8024-1.
1 INTRODUCTION
2 The bankruptcy court excepted from discharge, as a debt
3 arising from a willful and malicious injury, a $4 million state
4 court default judgment entered against chapter 71 debtor Chunchai
5 Yu and in favor of appellee Nautilus, Inc. The bankruptcy court
6 gave issue preclusive effect to the facts the state court relied
7 upon in entering the default judgment. Based on the issue
8 preclusive effect of these facts, the bankruptcy court ruled that
9 all of the elements were met for a nondischargeable debt under
10 § 523(a)(6).
11 On appeal, Yu has not directly challenged the bankruptcy
12 court’s application of issue preclusion. Instead, Yu contends
13 for the first time on appeal that she never received notice of
14 the district court’s default judgment proceedings, even though
15 she does not dispute that she actively participated in the
16 district court litigation for roughly a year prior to the
17 commencement of the default judgment proceedings. Yu further
18 contends that the default judgment should not have been entered
19 while she was incarcerated for trafficking in counterfeit
20 exercise equipment and that she did not have effective assistance
21 of counsel in the nondischargeability adversary proceeding.
22 We will not consider Yu’s allegations of insufficient
23 service for the first time on appeal. Yu’s other arguments on
24 appeal lack merit. Accordingly, we AFFIRM.
25
1
26 Unless specified otherwise, all chapter and section
references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and
27 all “Rule” references are to the Federal Rules of Bankruptcy
Procedure, Rules 1001-9037. All “Civil Rule” references are to
28 the Federal Rules of Civil Procedure.
2
1 FACTS
2 In July 2010, Yu was convicted in federal court of
3 trafficking in counterfeit exercise equipment in violation of
4 18 U.S.C. § 2320(a). Prior to the conviction, the jury was
5 instructed to find a violation of the statute only if Yu had
6 intentionally trafficked in goods she knew were counterfeit. The
7 exercise equipment was considered counterfeit because it bore
8 false marks which were substantially indistinguishable from the
9 trademarks Nautilus owned and used and because Nautilus did not
10 manufacture the equipment, did not authorize its manufacture and
11 did not authorize the use of its trademarks.
12 Several months before Yu was indicted, in January 2010,
13 Nautilus commenced a civil lawsuit in federal district court
14 against Yu for (among other things) trademark infringement, trade
15 dress infringement and patent infringement. The civil lawsuit in
16 large part was based on the same allegedly unlawful conduct as
17 the criminal proceedings against Yu. After roughly one year of
18 civil litigation in which Yu actively participated, the district
19 court issued an order to show cause why her answer should not be
20 stricken and default entered against her based on Yu’s failure to
21 appear at a scheduling conference.
22 Yu did not respond to either the order to show cause or
23 Nautilus’ subsequent motion for entry of a default judgment.
24 Ultimately, the district court entered an order granting
25 Nautilus’ default judgment motion. In the order, the district
26 court ruled that Nautilus was entitled to enhanced statutory
27 damages of up to $2 million for each trademark infringed because
28 Yu had committed “willful” trademark infringement. In so ruling,
3
1 the district court found that Yu had admitted that she knew that
2 the exercise equipment that she and her husband had been
3 importing from China and selling for many years was counterfeit.
4 In addition, the district court accepted as true Nautilus’
5 allegation that Yu and her husband had imported at least
6 thirty-eight ocean shipping containers filled with the
7 counterfeit exercise equipment. The district court also accepted
8 as true Nautilus’ allegation that Yu and her husband continued to
9 import the counterfeit exercise equipment even after some of
10 their shipments had been seized as counterfeit goods by U.S.
11 customs officials.
12 Based on the alleged volume of imported counterfeit goods,
13 the alleged continued importation of counterfeit goods after some
14 had been seized, Yu’s admissions, Yu’s criminal conviction, and
15 Yu’s failure to comply with the court’s orders in the civil
16 litigation, the district court concluded that Yu had committed
17 willful trademark infringement and awarded $4 million in
18 statutory damages against Yu. The district court entered a civil
19 judgment against Yu in December 2011.
20 Several years later, in March 2015, Yu commenced her
21 chapter 7 bankruptcy case. Within a few months, Nautilus filed
22 its adversary complaint seeking to except from discharge the
23 $4 million civil judgment debt as a debt arising from a willful
24 and malicious injury under § 523(a)(6).
25 Ultimately, the bankruptcy court disposed of the adversary
26 proceeding by granting summary judgment in favor of Nautilus.
27 According to the bankruptcy court, Yu was barred by the doctrine
28 of issue preclusion from challenging any of the elements for a
4
1 willful and malicious injury under § 523(a)(6). The bankruptcy
2 court held that Yu was given a full and fair opportunity to
3 litigate in the proceedings leading up to the district court’s
4 entry of the default judgment. In so holding, the bankruptcy
5 court noted that Yu had not argued inadequate notice or an
6 absence of due process.
7 The bankruptcy court also held that the willful and
8 malicious injury elements were actually litigated in the district
9 court. In spite of the disposition of the district court
10 litigation by default judgment, the bankruptcy court reasoned
11 that Yu’s active participation in the litigation for roughly a
12 year was sufficient to constitute actual litigation of the
13 willful and malicious injury elements.
14 Finally, the bankruptcy court determined that the district
15 court litigation resolved the same issues that needed to be
16 resolved in order to find a willful and malicious injury under
17 § 523(a)(6). As the bankruptcy court put it, willfulness for
18 purposes of § 523(a)(6) could be ascertained from Yu’s knowledge
19 that the she was importing and selling counterfeit exercise
20 equipment for half price: “Because the Defendant knew she was
21 selling counterfeit Bowflex exercise equipment at half-price, she
22 necessarily must have also known that the Plaintiff’s injury was
23 substantially certain to occur as a result of her conduct.”
24 Order and Memorandum Decision Granting Plaintiff’s Motion For
25 Summary Judgment (Feb. 18, 2016) at 15:26-16:1.
26 With respect to the bankruptcy court’s determination of
27 maliciousness, the bankruptcy court pointed out that three of the
28 four requirements for finding a malicious injury for purposes of
5
1 § 523(a)(6) were inherent in the nature of Yu’s trademark
2 infringement (wrongful acts, done intentionally, that necessarily
3 caused injury). As for the fourth maliciousness requirement –
4 the absence of just cause or excuse – the bankruptcy court
5 observed that Yu only had pointed to her alleged innocent state
6 of mind as excusing her conduct, but the court held that the
7 preclusive effect of the district court’s ruling regarding Yu’s
8 knowledge and intent barred her from arguing in the adversary
9 proceeding her allegedly innocent state of mind.
10 The bankruptcy court entered an amended judgment excepting
11 the $4 million judgment debt from discharge, and Yu timely
12 appealed.
13 JURISDICTION
14 The bankruptcy court had jurisdiction pursuant to 28 U.S.C.
15 §§ 1334 and 157(b)(2)(I). We have jurisdiction under 28 U.S.C.
16 § 158.
17 ISSUE
18 Did the bankruptcy court err when it granted summary
19 judgment on Nautilus’ § 523(a)(6) claim for relief?
20 STANDARDS OF REVIEW
21 We review the bankruptcy court’s grant of summary judgment
22 de novo. Barboza v. New Form, Inc. (In re Barboza), 545 F.3d
23 702, 707 (9th Cir. 2008). We also review de novo the bankruptcy
24 court’s determination that a particular debt is nondischargeable.
25 Carillo v. Su (In re Su), 290 F.3d 1140, 1142 (9th Cir. 2002).
26 (“Whether a claim is nondischargeable presents mixed issues of
27 law and fact and is reviewed de novo.”).
28 We similarly review de novo the bankruptcy court’s
6
1 application of issue preclusion. Beauchamp v. Anaheim Union High
2 Sch. Dist., 816 F.3d 1216, 1225 (9th Cir. 2016).
3 DISCUSSION
4 Section 523(a)(6) excepts from discharge debts arising from
5 willful and malicious injuries to an entity or its property.
6 Ormsby v. First Am. Title Co. of Nev. (In re Ormsby), 591 F.3d
7 1199, 1206 (9th Cir. 2010); In re Barboza, 545 F.3d at 706. We
8 must separately consider the willfulness and malice elements.
9 Id.; In re Su, 290 F.3d at 1146–47. For purposes of § 523(a)(6),
10 a debt arises from a willful injury if the debtor subjectively
11 intended to cause injury to the creditor or the debtor
12 subjectively believed that injury was substantially certain to
13 occur to the creditor as a result of her actions. In re Ormsby,
14 591 F.3d at 1206; In re Su, 290 F.3d at 1144-46. And a debt
15 arises from a malicious injury when it is based on: “(1) a
16 wrongful act, (2) done intentionally, (3) which necessarily
17 causes injury, and (4) is done without just cause or excuse.”
18 In re Ormsby, 591 F.3d at 1207 (quoting Petralia v. Jercich
19 (In re Jercich), 238 F.3d 1202, 1209 (9th Cir. 2001)).
20 While Yu’s opening appeal brief did not directly challenge
21 the bankruptcy court’s application of issue preclusion against
22 her, we nonetheless have considered the issue, and we have found
23 no reversible error. In determining whether issue preclusion
24 applies to a federal court judgment, the Ninth Circuit Court of
25 Appeals employs the following standard: “(1) the issue must be
26 identical to one alleged in prior litigation; (2) the issue must
27 have been ‘actually litigated’ in the prior litigation; and
28 (3) the determination of the issue in the prior litigation must
7
1 have been ‘critical and necessary’ to the judgment.” Beauchamp,
2 816 F.3d at 1225.2
3 In giving issue preclusive effect to the district court
4 judgment, the bankruptcy court held that the facts that the
5 district court relied upon in establishing that Yu had engaged in
6 willful infringement for purposes of awarding enhanced statutory
7 damages under 15 U.S.C. § 1117(c)(2) also established that Yu’s
8 conduct was willful for purposes of § 523(a)(6). We agree.
9 We are mindful of the fact that the willfulness standard the
10 district court applied is not the same as the § 523(a)(6)
11 willfulness standard. According to the district court,
12 “Willfulness under [15 U.S.C. § 1117(c)] has been interpreted to
13 mean a deliberate and unnecessary duplicating of a plaintiff’s
14 mark in a way that [is] calculated to appropriate or otherwise
15 benefit from the good will the plaintiff ha[s] nurtured or an
16 aura of indifference to plaintiff’s rights.” Order Granting
17 Motion for Default Judgment (Dec. 19, 2011) at 30:10-13 (emphasis
18 added). The fact that the willful infringement standard can be
19
2
20 The bankruptcy court utilized a different Ninth Circuit
formulation of the legal standard for issue preclusion, which can
21 be found in United States Internal Revenue Service v. Palmer
(In re Palmer), 207 F.3d 566, 568 (9th Cir. 2000):
22
23 (1) there was a full and fair opportunity to litigate
the issue in the previous action; (2) the issue was
24 actually litigated in that action; (3) the issue was
lost as a result of a final judgment in that action;
25 and (4) the person against whom collateral estoppel is
26 asserted in the present action was a party or in
privity with a party in the previous action.
27
Id. Even if we were to use this alternate standard, the result
28 here would be the same.
8
1 satisfied by an aura of indifference means that great care must
2 be taken by bankruptcy courts not to simply graft a finding of
3 willful infringement onto a finding of willful injury for
4 purposes of § 523(a)(6). Indifference – reckless or otherwise –
5 is insufficient to satisfy the § 523(a)(6) willfulness
6 requirement. See In re Barboza, 545 F.3d at 707-08.
7 Nonetheless, it is clear from the district court’s factual
8 recitation and from its comments regarding Yu’s willfulness that
9 the district court was focusing on the knowing, deliberate and
10 calculated nature of Yu’s infringement rather than on any aura of
11 indifference. Among other things, the district court pointed out
12 that Yu had admitted she knew the exercise equipment she was
13 importing and selling was counterfeit. According to the district
14 court, Yu’s knowledge that the equipment was counterfeit was
15 further established by her continued importation of the equipment
16 even after some of her shipments had been seized as counterfeit.
17 In addition, the district court relied upon the sheer volume of
18 Yu’s business – involving the importation of thirty-eight ocean
19 shipping containers filled with counterfeit exercise equipment –
20 as establishing the deliberate nature of her infringement.
21 Concededly, the district court did not state the specific
22 words now associated with the § 523(a)(6) willfulness standard.
23 The district court did not state either that Yu subjectively
24 intended to harm Nautilus or that Yu subjectively knew that
25 injury to Nautilus was substantially certain to occur. Even so,
26 by deliberately and intentionally trading on Nautilus’ goodwill,
27 Yu must have known that harm to Nautilus was substantially
28 certain to occur.
9
1 Our conclusion is consistent with both In re Jercich and
2 In re Ormsby. In In re Jercich, the Ninth Circuit Court of
3 Appeals relied on a state court’s findings after a bench trial to
4 hold that the resulting state court judgment debt arose from a
5 willful and malicious injury. In re Jercich, 238 F.3d at
6 1208-09. The In re Jercich court explained that Jercich had
7 acted willfully within the meaning of § 523(a)(6) based on the
8 following reasoning:
9 As the state court found, Jercich knew he owed the
wages to Petralia and that injury to Petralia was
10 substantially certain to occur if the wages were not
paid; and Jercich had the clear ability to pay Petralia
11 his wages, yet chose not to pay and instead used the
money for his own personal benefit. He therefore
12 inflicted willful injury on Petralia.
13 Id. However, in the facts as recited by the Ninth Circuit, the
14 state court never explicitly stated what Jercich actually knew or
15 believed regarding whether harm was substantially certain to
16 occur as a result of his conduct. Id. at 1204. Instead,
17 according to the Ninth Circuit, the state court found that
18 Jercich had willfully and deliberately withheld payment of
19 commissions and vacation pay from the creditor in a manner that
20 was oppressive within the meaning of California Civil Code
21 § 3294. Nothing in that statutory definition of oppression or in
22 the state court’s findings directly spoke to Jercich’s subjective
23 knowledge or belief of harm to the creditor. Thus, the Ninth
24 Circuit apparently read Jercich’s subjective knowledge of harm
25 into the state court’s findings as a necessary corollary to what
26 the state court did specifically find.
27 More recently, in In re Ormsby, the Ninth Circuit employed
28 similar reasoning to hold that Ormsby had willfully injured a
10
1 competing title company by misappropriating that title company’s
2 proprietary information. The In re Ormsby court ruled that the
3 preclusive effect of a state court’s findings supported the
4 bankruptcy court’s grant of summary judgment in favor of the
5 creditor title company on its § 523(a)(6) claim for relief. In
6 so ruling, the Court of Appeals rejected Ormsby’s argument on
7 appeal that the state court’s findings should not have had a
8 preclusive effect on the § 523(a)(6) willfulness issue, as
9 follows:
10 Ormsby contends section 523(a)(6) does not apply
because the state court did not adopt a finding that
11 Ormsby had the subjective intent to injure FATCO or
that he believed that FATCO's injury was substantially
12 certain to occur as a result of his conduct. Ormsby
must have known that FATCO's injury was substantially
13 certain to occur as a result of his conduct. Because
Ormsby paid for access to the title plants for 2000
14 until present, he was necessarily aware that his use of
FATCO's title plants and other materials without paying
15 for them had an economic value.
16 In re Ormsby, 591 F.3d at 1207.
17 Reading In re Ormsby and In re Jercich together, they stand
18 for the proposition that, for purposes of § 523(a)(6)
19 willfulness, “[t]he Debtor is charged with the knowledge of the
20 natural consequences of his actions.” In re Ormsby, 591 F.3d at
21 1206. Applying that same principle here to the district court’s
22 findings, Yu necessarily must have known that her importation and
23 sale of goods she knew to be counterfeit and her deliberate and
24 calculated attempts to obtain personal gain by trading on
25 Nautilus’ goodwill were substantially certain to cause injury to
26 Nautilus. Therefore, the bankruptcy court correctly determined
27 that the facts the district court relied upon were sufficient to
28 establish, for issue preclusion purposes, § 523(a)(6)
11
1 willfulness.
2 As for the maliciousness requirement, we agree with the
3 bankruptcy court that the district court’s determination that Yu
4 knowingly imported and sold counterfeit goods and that she
5 deliberately sought to trade on Nautilus’ goodwill readily
6 establishes three of the four maliciousness elements: legally
7 wrongful acts, done intentionally, which necessarily caused
8 injury.
9 This only leaves the fourth and final maliciousness element
10 – the absence of just cause or excuse. The bankruptcy court
11 noted that the summary judgment record did not contain any
12 suggestion of just cause or excuse, except perhaps for Yu’s
13 contention that she subjectively believed that her actions
14 constituted lawful trade in “grey market” goods. The bankruptcy
15 court held that this contention was barred by the preclusive
16 effect of the district court’s findings regarding Yu’s knowledge
17 and intent. Moreover, the Ninth Circuit has held that the
18 debtor’s subjective intent cannot justify or excuse conduct that
19 otherwise is legally wrongful. Murray v. Bammer (In re Bammer),
20 131 F.3d 788, 793 (9th Cir. 1997). Likewise, Yu’s pleas that she
21 was simply trying to provide for her family also do not
22 constitute just cause or excuse. In re Bammer held that such a
23 “standardless, unmeasurable, emotional, and nonlegal concept such
24 as compassion” for family members could not, as a matter of law,
25 serve as just cause or excuse for committing a legally wrongful
26 act. Id.
27 In sum, we perceive no error in the bankruptcy court’s
28 holding that the district court’s factual determinations
12
1 established, for issue preclusion purposes, § 523(a)(6)
2 maliciousness.
3 Yu’s arguments on appeal focus on her perception of
4 unfairness regarding the district court’s entry of the default
5 judgment. She indicates that she was unable to defend herself in
6 the district court because of the criminal proceedings then
7 pending against her. Apparently, she contends that her supposed
8 invocation of her Fifth Amendment right against self-
9 incrimination should not have been used against her in the civil
10 proceedings. But this contention ignores the fact that her
11 answer was stricken and the default judgment was entered against
12 her for litigation conduct that took place after her criminal
13 conviction. The striking of Yu’s answer in the civil litigation
14 and the subsequent default judgment proceedings were a direct
15 result of Yu’s failure to attend a scheduling conference and her
16 failure to respond to the district court’s order to show cause in
17 January 2011. At the time of these events, Yu’s criminal
18 conviction already had occurred in July 2010. Yu has never
19 offered any specific explanation why she could not have appeared
20 for the January 2011 scheduling conference or why she could not
21 have responded to the January 2011 order to show cause.
22 As for the default judgment itself, Yu claims that she
23 already was incarcerated at the time Nautilus filed its default
24 judgment motion and at the time the district court entered the
25 default judgment, so the district court should not have entered
26 the default judgment against her. However, the fact that Yu was
27 incarcerated does not, by itself, explain why Yu could not and
28 did not participate in the default judgment proceedings, and Yu
13
1 did not offer any other or further explanation in the bankruptcy
2 court. Federal courts – indeed all courts – are accustomed to
3 presiding over litigation in which one or more of the parties
4 have been incarcerated. Federal courts can and do offer
5 reasonable accommodations to incarcerated litigants, but the
6 incarcerated litigants must ask for such accommodations. On this
7 record, there is no indication that Yu ever requested any
8 accommodation on account of her incarceration. She simply
9 stopped participating in the district court civil lawsuit.
10 On appeal, Yu alleges for the first time that she did not
11 receive notice of either the default judgment motion or the entry
12 of the default judgment. We will not consider for the first time
13 on appeal Yu’s allegations of insufficient service in the
14 district court litigation when she could have made these
15 allegations in the bankruptcy court but did not do so. See
16 Castro v. Terhune, 712 F.3d 1304, 1316 n.5 (9th Cir. 2013);
17 Kirshner v. Uniden Corp. of Am., 842 F.2d 1074, 1077 (9th Cir.
18 1988).
19 Indeed, Yu’s belated insufficiency of service argument
20 reminds us of Consorzio Del Prosciutto di Parma v. Domain Name
21 Clearing Co., LLC, 346 F.3d 1193 (9th Cir. 2003). There, the
22 Ninth Circuit dismissed an appeal from a default judgment because
23 the pro se appellant did not first avail himself of the
24 procedures for setting aside the entry of default or for setting
25 aside the default judgment under Civil Rule 55(c) and Civil
26 Rule 60(b), respectively. As the Ninth Circuit put it: “‘Federal
27 courts are not run like a casino game in which players may enter
28 and exit on pure whim. A defaulted party may not [ ] enter
14
1 litigation, particularly on appeal, on sheer caprice. It must
2 follow proper procedure to set aside the default.’” Id. (quoting
3 Investors Thrift v. Lam (In re Lam), 192 F.3d 1309, 1311 (9th
4 Cir. 1999)).
5 Here, Yu did not seek any relief in the district court from
6 the default judgment and did not appeal the default judgment.
7 Instead, she waited until her appeal from the bankruptcy court’s
8 nondischargeability judgment (which relied on the preclusive
9 effect of the default judgment) to raise her allegations
10 challenging the sufficiency of service in the district court’s
11 default judgment proceedings. Consistent with Consorzio Del
12 Prosciutto di Parma, we will not consider here Yu’s insufficiency
13 of service allegations.
14 Interpreting Yu’s appeal brief liberally, as we must,3 it
15 might be possible to construe her arguments collaterally
16 attacking the district court judgment as actually challenging the
17 preclusive effect the bankruptcy court gave to the district
18 court’s factual determinations. In essence, Yu might be arguing
19 that the facts the district court relied upon were not “actually
20 litigated” within the meaning of the issue preclusion doctrine
21 because the litigation was disposed of by default judgment.
22 The bankruptcy court correctly addressed this issue. The
23 bankruptcy court analyzed the procedural facts and holdings of
24 three Ninth Circuit cases: (1) Internal Revenue Service v. Palmer
25 (In re Palmer), 207 F.3d 566 (9th Cir. 2000); (2) Federal Deposit
26
3
27 We must liberally construe pro se appeal briefs. Keys v.
701 Mariposa Project, LLC (In re Keys), 514 B.R. 10, 15 n.3 (9th
28 Cir. BAP 2014).
15
1 Insurance Corp. v. Daily (In re Daily), 47 F.3d 365 (9th Cir.
2 1995); and (3) United States v. Gottheiner (In re Gottheiner),
3 703 F.2d 1136 (9th Cir. 1983). As noted by the bankruptcy court,
4 federal court default judgments (and dispositions akin to default
5 judgments) ordinarily are not given issue preclusive effect
6 unless the defendant actively participated in the litigation or
7 the defendant engaged in obstruction to impede the progress of
8 the litigation. In re Palmer, 207 F.3d at 568. After
9 considering the varying procedural histories of the above-
10 referenced Ninth Circuit decisions, the bankruptcy court decided
11 that Yu’s litigation activity was most analogous to the activity
12 in In re Gottheiner. Therefore, the bankruptcy court reasoned,
13 it would follow In re Gottheiner, which held that the bankruptcy
14 court had properly applied issue preclusion to a prior district
15 court judgment because the defendant had actively participated in
16 the litigation for sixteen months before the plaintiff prevailed
17 on an unopposed summary judgment motion.
18 In addition to the three decisions analyzed by the
19 bankruptcy court, we consider this case analogous to the Panel’s
20 prior decision in Genel Co. v. Bowen (In re Bowen), 198 B.R. 551
21 (9th Cir. BAP 1996). In In re Bowen, the defendant entered into
22 a stipulated judgment after months of discovery and litigation.
23 Therefore, following In re Gottheiner, we concluded in
24 In re Bowen that the debtor’s active participation in the prior
25 district court litigation satisfied the “actually litigated”
26
27
28
16
1 element for the application of issue preclusion.4
2 In short, the bankruptcy court, here, did not err when it
3 concluded that the “actually litigated” requirement for the
4 application of issue preclusion had been met. Yu’s active
5 participation in the district court litigation for roughly a year
6 was sufficient to satisfy this requirement.
7 Yu also complains regarding the amount of the default
8 judgment, but if there were some error in the calculation of that
9 amount, Yu needed to raise that issue before the district court.
10 For purposes of the nondischargeability proceedings, the entire
11 amount of the $4 million district court judgment flowed from Yu’s
12 nondischargeable conduct and thus constitutes nondischargeable
13 debt. See Gomeshi v. Sabban (In re Sabban), 384 B.R. 1, 6-7 &
14
4
15 This case is distinguishable from Silva v. Smith's Pacific
Shrimp, Inc (In re Silva), 190 B.R. 889, 893-94 (9th Cir. BAP
16 1995). There, a different BAP panel held that a debtor’s
participation in a prior district court lawsuit was not
17 sufficiently active to satisfy the actually litigated
requirement. Id. The In re Silva panel’s holding appears to
18 have hinged on the fact that Silva was a very minor player in the
19 prior district court lawsuit and in the misconduct that led to
the filing of that lawsuit:
20
The record indicates that whatever role Silva had in
21 Supreme Food's fraudulent scheme, it was minor compared
to the other co-defendants who were all subsequently
22
indicted on fifty counts of wire fraud in violation of
23 18 U.S.C. § 1343, as well as other criminal charges. In
fact, there is little in the record [regarding Silva]
24 except that he was an employee of Supreme Foods.
25 Id. at 894 (emphasis added). Here, in contrast, Yu was a central
26 character in the prior trademark infringement lawsuit brought by
Nautilus, and the district court specifically determined that Yu
27 had admitted she knowingly imported and sold counterfeit goods.
These facts effectively distinguish the case before us from
28 In re Silva.
17
1 n.6 (9th Cir. BAP 2008), aff’d, 600 F.3d 1219 (citing Cohen v. de
2 la Cruz, 523 U.S. 213, 218-19 (1998)); Bane v. Sorayama
3 (In re Bane), 2010 WL 6451886, at *8 (Mem. Dec.) (9th Cir. BAP
4 Jan. 15, 2010).
5 There is only one other issue we need to address. Yu
6 contends on appeal that she had ineffective assistance of counsel
7 in the nondischargeability adversary proceeding. She asserts
8 that her counsel did not raise the points Yu asked him to raise
9 regarding her incarceration at the time of the default judgment
10 proceedings or regarding her being the sole provider for her
11 family. She also claims that her counsel failed to ask Nautilus
12 for a settlement. Even if we were to assume that Yu’s counsel in
13 the nondischargeability litigation was less than effective, this
14 fact would not support reversal. There is no guaranteed right to
15 counsel in civil or bankruptcy proceedings – effective or
16 otherwise. Hedges v. Resolution Trust Corp., 32 F.3d 1360, 1363
17 (9th Cir. 1994); Davis v. Cent. Bank (In re Davis), 23 B.R. 773,
18 776 (9th Cir. BAP 1982); see also Shepard v. Conklin
19 (In re Shepard), 2009 WL 7809003, *8 (Mem. Dec.) (9th Cir. BAP
20 Nov. 24, 2009) (“A ‘full and fair opportunity to litigate’ simply
21 means that the debtor had a reasonable chance to appear in court
22 and contest the factual and legal issues raised in the state
23 court action, not that the debtor should have equal footing from
24 a tactical standpoint.”).
25 CONCLUSION
26 For the reasons set forth above, we AFFIRM the bankruptcy
27 court’s nondischargeability judgment against Yu.
28
18