In re: Lavesta M. Locklin

FILED DEC 07 2015 1 NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK U.S. BKCY.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-14-1446-KuFKi ) 6 LAVESTA M. LOCKLIN, ) Bk. No. 13-24951 ) 7 Debtor. ) _______________________________) 8 ) RELIANCE STEEL & ALUMINUM CO., ) 9 ) Appellant, ) 10 ) v. ) MEMORANDUM* 11 ) LAVESTA M. LOCKLIN, ) 12 ) Appellee. ) 13 _______________________________) 14 Argued and Submitted on October 22, 2015 at Los Angeles, California 15 Filed – December 7, 2015 16 Appeal from the United States Bankruptcy Court 17 for the Central District of California 18 Honorable Mark D. Houle, Bankruptcy Judge, Presiding 19 Appearances: Robert P. Goe of Goe & Forsythe, LLP argued for 20 appellee LaVesta M. Locklin.** 21 Before: KURTZ, FARIS and KIRSCHER, Bankruptcy Judges. 22 23 24 * This disposition is not appropriate for publication. Although it may be cited for whatever persuasive value it may 25 have (see Fed. R. App. P. 32.1), it has no precedential value. 26 See 9th Cir. BAP Rule 8024-1. ** 27 Counsel for appellant Reliance Steel & Aluminum Co. did not appear for oral argument, so appellant’s position was deemed 28 submitted on its appeal briefs and on the appellate record.

1 INTRODUCTION 2 Reliance Steel & Aluminum Co. appeals from an order 3 disallowing the claim it filed in LaVesta Locklin’s chapter 111 4 bankruptcy case. In disallowing the claim, the bankruptcy court 5 held that no evidentiary hearing was required under Rule 9014(d) 6 because Reliance’s papers responding to Locklin’s claim objection 7 did not include any evidence demonstrating that there was a 8 disputed material factual issue requiring resolution at an 9 evidentiary hearing. 10 We disagree with the bankruptcy court. Reliance’s properly 11 filed proof of claim constituted prima facie evidence of the 12 validity of Reliance’s claim, including the allegations contained 13 therein contending that Locklin was the alter ego of her wholly 14 owned corporation Nightscaping, Inc. When these allegations are 15 considered in conjunction with the opposing evidence Locklin 16 presented with her claim objection, they establish that there was 17 a disputed issue of material fact regarding the alter ego issue. 18 Therefore, the bankruptcy court abused its discretion when it 19 denied Reliance’s request for an evidentiary hearing. 20 Therefore, we must VACATE the bankruptcy court’s claim 21 disallowance order and REMAND for further proceedings. 22 FACTS 23 In February 2014, Reliance filed a proof of claim for 24 $17,205.58 in Locklin’s bankruptcy case. Reliance did not 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. All “Civil Rule” references are to the Federal Rules 28 of Civil Procedure.

1 include with its proof of claim any documentation and did not 2 explain the basis for its claim, other than to state that the 3 claim was for “goods and services.” Locklin filed an objection 4 to that claim, which the bankruptcy court sustained with leave to 5 amend.2 6 On June 10, 2014, Reliance filed its amended proof of claim. 7 This time, Reliance included enough documentation and explanation 8 with its proof of claim that the basis for its claim was 9 apparent. Reliance’s claim against Locklin allegedly arose from 10 a credit arrangement between Reliance on the one hand and 11 Locklin’s wholly-owned corporations Nightscaping, Inc. and Loran, 12 Inc. on the other hand.3 Pursuant to this credit arrangement, 13 Reliance supplied to Nightscaping, on credit, stainless steel 14 sheeting. Reliance effectively acknowledged in its amended proof 15 of claim that Locklin was not directly liable for Nightscaping’s 16 trade debt. Instead, Reliance alleged that Locklin was 17 Nightscaping’s alter ego. 18 In support of its alter ego allegation, Reliance included in 19 its proof of claim numerous conclusory, boilerplate statements 20 21 2 Reliance did not include in its excerpts of record a copy 22 of its February 2014 proof of claim, nor did it include copies of Locklin’s March 2014 claim objection, or the bankruptcy court’s 23 June 2014 order sustaining that objection with leave to amend. We have obtained copies of these documents by accessing the 24 bankruptcy court’s electronic docket. We can and do take judicial notice of the docket and the imaged documents attached 25 thereto. Goldstein v. Stahl (In re Goldstein), 526 B.R. 13, 17 26 (9th Cir. BAP 2015). 3 27 For purposes of this appeal, there is no material difference between Nightscaping and Loran. For ease of 28 reference, both are jointly referred to herein as Nightscaping.

1 that, if proven, might have supported alter ego liability against 2 Locklin under California law. See CADC/RAD Venture 2011-1 LLC v. 3 Bradley, 235 Cal. App. 4th 775, 788-89 (2015), review denied, 4 (July 8, 2015) (generally describing circumstances that might 5 lead to a finding of alter ego liability). As set forth in the 6 proof of claim, Reliance alleged as follows: 7 On information and belief, some or all of the following facts and factors for alter ego liability exist to 8 impose individual liability on Lavesta Locklin for that [sic] acts and omissions of Nightscaping and Loran: 9 a. The business is inadequately capitalized, 10 b. The business is operated by Locklin as if it 11 is herself, 12 c. The business fails to observe corporate formalities, 13 d. There is a commingling of funds and other 14 assets, 15 e. There is the holding out by one entity that it is liable for the debts of the other, 16 f. The corporation is a mere shell or conduit 17 for the affairs of the individual, 18 g. There is identical ownership, management, and control, where the corporation is completely 19 owned, managed, and controlled by the individual, 20 h. The use of the corporation as a mere shell, 21 instrumentality or conduit for a single venture or the business of the individual, 22 i. The individual using the corporation's income 23 and assets and resources to pay herself large amounts of compensation, while failing to pay 24 the legitimate creditors of the corporation, 25 j. The use of the corporate entity to procure labor, services or merchandise for the 26 individual, 27 k. The diversion of assets from the corporation by or to a stockholder or other person or 28 entity, to the detriment of creditors, or the

1 manipulation of assets and liabilities between entities and individuals so as to 2 concentrate the assets in one and the liabilities in another, 3 1. The contracting with another with intent to 4 avoid performance by use of a corporate entity as a shield against personal 5 liability, or the use of a corporation as a subterfuge of illegal transactions, 6 m. The use of a corporation to avoid personal 7 liability, while the individual takes the income and value from the corporation to have 8 a luxurious personal lifestyle, while failing to pay creditors, who should be entitled to 9 pursue the assets and value into the individual rather than being limited to 10 pursuing the corporation, 11 n. Incurring debts far beyond the ability to pay, purportedly only as corporate 12 liabilities, and then declaring bankruptcy to discharge those debts to creditors, while 13 maintaining a luxurious individual lifestyle. 14 Amended Proof of Claim (June 10, 2014) at pp. 5-6. 15 On July 8, 2014, Locklin filed her objection to Reliance’s 16 amended proof of claim (“Second Claim Objection”). The Second 17 Claim Objection focused on and attacked Reliance’s alter ego 18 allegations. Locklin supported her Second Claim Objection with 19 declarations and exhibits. Her declaration told a much different 20 story than that suggested by Reliance’s alter ego allegations. 21 Locklin explained that her husband founded Nightscaping in 1963 22 and successfully designed, manufactured and sold landscape 23 lighting products through Nightscaping for decades. When her 24 husband passed away in 2007, she became the sole owner of 25 Nightscaping. Thereafter, Nightscaping’s business quickly and 26 significantly deteriorated, with revenues falling by 70% in 2008 27 and by 80% in 2009. As Locklin puts it, between 2009 and 2011, 28 she invested over $1.7 million of her own personal funds in

1 Nightscaping in an attempt to turn around operations, but all of 2 this investment capital was consumed as a result of poor business 3 planning and management. 4 As a result, in June 2011, she hired a professional senior 5 management team in an attempt, once again, to turn around 6 Nightscaping. According to Locklin, once she hired the 7 management team, she was not involved in Nightscaping’s day-to- 8 day operations. She further asserted that she invested in 9 Nightscaping another $1.2 million in 2011 and 2012. Again in 10 2013, Locklin claims that she invested further funds in an 11 attempt to keep Nightscaping’s doors open while the management 12 team negotiated a sale of the business as a going concern to a 13 third party for $3 million, but that sale fell through as a 14 result of the third party’s inability to obtain financing. 15 Because she had borrowed funds to make many of her capital 16 investments in Nightscaping, Locklin explained that she ended up 17 heavily indebted and ultimately was forced to file her personal 18 chapter 11 bankruptcy petition. 19 The Second Claim Objection also included the declaration of 20 Nightscaping’s chief executive officer Richard Henninger – one of 21 the members of Nightscaping’s turnaround management team. 22 Henninger explained that, as chief executive officer, he was in 23 possession of Nightscaping’s books and records, and that, in 24 2014, he searched those records for all transactions between 25 Nightscaping and Reliance. According to Henninger, those records 26 reflected that, between 2006 and 2012, Nightscaping received 27 95 invoices for credit purchases from Reliance and that 28 Nightscaping fully paid 94 of those 95 invoices. Furthermore,

1 Henninger corroborated Locklin’s testimony that she had no 2 involvement in Nightscaping’s day-to-day operations in 2012 and 3 that, at the time Nightscaping made the 2012 purchase from which 4 Reliance’s claim arose, Locklin had no responsibility for making 5 purchasing decisions on behalf of Nightscaping and had no reason 6 to even know about individual purchasing decisions. 7 Henninger further opined that Nightscaping’s 2012 credit 8 purchase from Reliance was made in good faith and in the ordinary 9 course of Nightscaping’s business and that Nightscaping, at the 10 time, was in the process of implementing its turnaround business 11 plan, which was aimed at selling the business as a going concern. 12 Finally, Henninger maintained that, during his entire tenure as 13 chief executive officer, Nightscaping complied with all corporate 14 formalities. 15 Reliance filed a response to the Second Claim Objection, but 16 the response was quite brief and did not include any evidence. 17 The entire response consisted of four short paragraphs, in which 18 Reliance merely asserted that, at the upcoming hearing on the 19 Second Claim Objection, the bankruptcy court should set a 20 schedule for discovery, briefing and an evidentiary hearing in 21 light of the fact that the Second Claim Objection involved a 22 disputed material issue of fact, namely whether Locklin was 23 Nightscaping’s alter ego. 24 At the hearing on the Second Claim Objection, the bankruptcy 25 court disagreed with Reliance. The court held that, because 26 Locklin had presented evidence tending to refute Reliance’s alter 27 ego allegations and because Reliance had not submitted any 28 evidence in support of its alter ego allegations, there was no

1 material factual issue, so no evidentiary hearing was necessary. 2 Rather, according to the court, Reliance had been obligated under 3 the court’s local rules to provide evidence in support of its 4 claim contemporaneously with its opposition to the Second Claim 5 Objection, and because of Reliance’s failure to include any such 6 evidence on the alter ego issue, Locklin’s Second Claim Objection 7 would be sustained and Reliance’s claim would be disallowed. 8 The bankruptcy court entered an order disallowing Reliance’s 9 amended claim on August 29, 2014, and Reliance timely appealed 10 the claim disallowance order. 11 Locklin had included in her Second Claim Objection a request 12 for attorney’s fees, which the bankruptcy court denied without 13 prejudice. After Reliance filed its notice of appeal, Locklin 14 filed a motion for attorney’s fees as the prevailing party on its 15 Second Claim Objection. After briefing and a hearing, the 16 bankruptcy court entered an order on December 5, 2014, granting 17 Locklin’s attorney’s fees motion. Reliance did not timely file a 18 notice of appeal from the fees order. Eventually, on January 7, 19 2015, Reliance filed a “Supplemental” notice of appeal, in which 20 it requested appellate review of the fees order as part of its 21 appeal from the claim disallowance order. 22 JURISDICTION 23 The bankruptcy court had jurisdiction pursuant to 28 U.S.C. 24 §§ 1334 and 157(b)(2)(B). Except as otherwise noted below, we 25 have jurisdiction under 28 U.S.C. § 158. 26 ISSUES 27 1. Was the appeal from the order awarding attorney’s fees 28 timely filed?

1 2. Is the appeal from the order disallowing Reliance's amended 2 proof of claim moot? 3 3. Did the bankruptcy court commit reversible error when it 4 disallowed Reliance’s amended proof of claim? 5 STANDARDS OF REVIEW 6 We have an independent duty to examine our jurisdiction, and 7 we review jurisdictional issues de novo. Couch v. Telescope, 8 Inc., 611 F.3d 629, 632 (9th Cir. 2010); Wolkowitz v. Beverly 9 (In re Beverly), 374 B.R. 221, 230 (9th Cir. BAP 2007), aff'd in 10 part, dismissed in part, 551 F.3d 1092 (9th Cir. 2008). 11 Orders resolving claims objections can raise both legal 12 issues and factual issues. We review the legal issues de novo 13 and the factual issues under the clearly erroneous standard. See 14 Veal v. Am. Home Mortg. Servicing, Inc. (In re Veal), 450 B.R. 15 897, 918 (9th Cir. BAP 2011). 16 The bankruptcy court’s decision not to conduct an 17 evidentiary hearing is reviewed for an abuse of discretion. 18 Tyner v. Nicholson (In re Nicholson), 435 B.R. 622, 636 (9th Cir. 19 BAP 2010), partially abrogated on other grounds by, Law v. 20 Siegel, 134 S. Ct. 1188, 1196-98 (2014). The bankruptcy court 21 abused its discretion if it incorrectly construed or applied the 22 law or its factual findings were clearly erroneous. United 23 States v. Hinkson, 585 F.3d 1247, 1262 (9th Cir. 2009) (en banc). 24 DISCUSSION 25 A. Timeliness Issue re Appeal From Attorney’s Fees Order 26 A timely-filed notice of appeal is mandatory and 27 jurisdictional. Browder v. Dir., Dep't of Corr. of Ill., 28 434 U.S. 257, 264 (1978); Hunt v. City of Los Angeles, 638 F.3d

1 703, 719 (9th Cir. 2011). When the appellant fails to timely 2 file a notice of appeal from a post-judgment order awarding 3 attorney’s fees, the appellate court lacks jurisdiction to review 4 the fees order. Id.; Farley v. Henderson, 883 F.2d 709, 712 (9th 5 Cir. 1989) (citing Culinary & Serv. Employees Union, Local 555 v. 6 Haw. Employee Benefit Admin., 688 F.2d 1228, 1232 (9th Cir. 7 1982)). 8 Here, Reliance’s January 7, 2015 supplemental notice of 9 appeal was untimely. The bankruptcy court entered its fee order 10 on December 5, 2014, and pursuant to Rule 8002(a)(1), the last 11 day to timely file a notice of appeal therefrom was December 19, 12 2014. Reliance argues that its belated supplemental notice of 13 appeal referencing the fees order should relate back to the date 14 of the filing of its appeal from the claim disallowance order. 15 We disagree. The above-cited Ninth Circuit decisions stand for 16 the proposition that a timely supplemental notice of appeal must 17 be filed from a post-judgment fees order. 18 Because Reliance’s appeal of the fees order was untimely, we 19 lack jurisdiction to review the bankruptcy court’s fees order. 20 B. Mootness Issue re Claim Disallowance Order 21 An appeal is constitutionally moot if it has become 22 impossible for the appellate court to fashion meaningful relief. 23 Ederel Sport, Inc. v. Gotcha Int'l L.P. (In re Gotcha Int'l 24 L.P.), 311 B.R. 250, 254 (9th Cir. BAP 2004) (citing Church of 25 Scientology of Cal. v. United States, 506 U.S. 9, 12 (1992)). 26 Here, after Reliance appealed the claim disallowance order, 27 the bankruptcy court entered an order granting Locklin’s request 28 to dismiss her bankruptcy case. The case dismissal order has not

1 been appealed, and its entry raises the question of whether this 2 appeal has been rendered moot. See Omoto v. Ruggera 3 (In re Omoto), 85 B.R. 98, 100 (9th Cir. BAP 1988) (“The general 4 rule, when an underlying bankruptcy case is dismissed, is that it 5 ‘may indicate that no case or controversy remains with respect to 6 issues directly involving the reorganization of the estate.’”). 7 While the dismissal of the underlying bankruptcy case 8 sometimes renders moot a pending appeal arising from that case, 9 that is not what happened here. The bankruptcy court’s dismissal 10 order explicitly stated that both its claim disallowance order 11 and its fees order would remain effective notwithstanding the 12 dismissal of Locklin’s bankruptcy case. The case dismissal order 13 also provided for the bankruptcy court’s post-dismissal retention 14 of jurisdiction in the event that any of the matters taken up on 15 appeal were remanded for further proceedings. Most importantly, 16 the case dismissal order contemplated the payment in full of all 17 allowed general unsecured claims, which in light of our ruling in 18 this appeal conceivably could eventually include Reliance’s 19 claim. Under these circumstances, the appeal from the claim 20 disallowance order is not moot. 21 C. Substantive Review of Claim Disallowance Order 22 “The filing of an objection to a proof of claim ‘creates a 23 dispute which is a contested matter’ within the meaning of 24 Bankruptcy Rule 9014 and must be resolved after notice and 25 opportunity for hearing upon a motion for relief.” Lundell v. 26 Anchor Const. Specialists, Inc., 223 F.3d 1035, 1039 (9th Cir. 27 2000) (quoting Adv. Comm. Notes accompanying Rule 9014). As 28 amended in 2002, Rule 9014 generally requires bankruptcy courts

1 to resolve contested matters only after holding an evidentiary 2 hearing at which the testimony of witnesses is taken in the same 3 manner as it is in adversary proceedings. See Rule 9014(d) and 4 accompanying Adv. Comm. Note. There are two exceptions to this 5 rule: (1) the court may, if the parties so stipulate, decide the 6 contested matter based on the parties’s affidavits and exhibits; 7 and (2) the court may dispense with the evidentiary hearing 8 requirement when there are no “disputed material factual issues” 9 presented. Id.; see also Caviata Attached Homes, LLC v. U.S. 10 Bank, N.A. (In re Caviata Attached Homes, LLC), 481 B.R. 34, 44 11 (9th Cir. BAP 2012). Put another way, “Where the . . . core 12 facts are not disputed, the bankruptcy court is authorized to 13 determine contested matters . . . on the pleadings and arguments 14 of the parties, drawing necessary inferences from the record.” 15 In re Caviata Attached Homes, LLC, 481 B.R. at 45-46 (quoting 16 In re Nicholson, 435 B.R. at 636). 17 Here, the bankruptcy court noted the alter ego allegations 18 set forth in the amended proof of claim and acknowledged 19 Reliance’s request for the court to set an evidentiary hearing. 20 But the court declined to do so. No evidentiary hearing was 21 necessary, the court reasoned, because Reliance had not included 22 with its written claim objection response any declarations or 23 exhibits tending to demonstrate that Locklin was Nightscaping’s 24 alter ego. Consequently, the court ruled, the alter ego issue 25 was not a disputed material factual issue for purposes of 26 Rule 9014(d) because the only evidence before the court – 27 Locklin’s evidence – tended to demonstrate that Locklin was not 28 Nightscaping’s alter ego.

1 We cannot uphold this ruling of the bankruptcy court. The 2 alter ego allegations in the amended proof of claim constituted 3 “some evidence” in support of Reliance’s alter ego theory. 4 Wright v. Holm (In re Holm), 931 F.2d 620, 623 (9th Cir. 1991) 5 (citing 3 L. King, Collier on Bankruptcy § 502.02, at 502-22 6 (15th ed. 1991)). Indeed, the bankruptcy court acknowledged the 7 prima facie validity of Reliance’s amended proof of claim based 8 on its alter ego theory. This acknowledgment is consistent with 9 the Federal Rules of Bankruptcy Procedure and Ninth Circuit 10 authority. Rule 3001(f) provides that “A proof of claim executed 11 and filed in accordance with these rules shall constitute prima 12 facie evidence of the validity and amount of the claim.” And our 13 Court of Appeals has held that the allegations set forth in a 14 properly-filed proof of claim constitute prima facie evidence for 15 purposes of ruling on a claim objection. Lundell, 223 F.3d at 16 1040 (“Claimants alleged in their proofs of claim that Lundell 17 was a West Coast general partner, which is prima facie valid.”). 18 In Lundell, the bankruptcy court weighed the evidence at an 19 evidentiary hearing at which both sides presented evidence in 20 support of their respective positions. Id. at 1037. Here, in 21 contrast, the bankruptcy court refused to hold an evidentiary 22 hearing. While the bankruptcy court here concluded that there 23 was no factual dispute – no conflicting evidence – for which it 24 needed to hold an evidentiary hearing, this conclusion was 25 incorrect. The bankruptcy court here weighed the evidence 26 presented by both sides and determined that Reliance’s alter ego 27 evidence was de minimis and Locklin’s contrary evidence was 28 credible. These two determinations constituted the resolution of

1 a material factual dispute, which the bankruptcy court only 2 should have resolved after holding an evidentiary hearing, per 3 Rule 9014(d). 4 According to the bankruptcy court, its local rules – namely 5 C.D. Cal. L. Bankr. R. 9013-1(f) and (i) – required Reliance to 6 include with its written response to the Second Claim Objection 7 the evidence it wished to submit on the alter ego issue. Having 8 not done so, the court ruled, Reliance failed to meet its burden 9 to demonstrate the existence of a disputed material factual issue 10 requiring an evidentiary hearing. As the bankruptcy court 11 explained to Reliance at oral argument: 12 I think your burden in your response was to present evidence, and I’ll turn back to other local bankruptcy 13 rules. 9013-1(f) and (i) both require as part of an opposition that you include evidence as well as the 14 legal argument on which you base your opposition for, among other things, due process concerns. 15 Ultimately, that wasn’t done in any respect. And so I 16 think in terms of the shifting of the burdens with respect to a claim objection, you, sir, you failed to 17 satisfy your burden, the Claimant's ultimate burden of persuasion, by presenting evidence as part of your 18 response to raise an issue of fact in part, because there is no evidence presented with your initial 19 claim. So there’s no evidence at all supporting your assertions that Ms. Locklin is the alter ego of 20 Nightscaping. 21 Hr’g Tr. (Aug. 19, 2014) at 5:21-6:9. 22 The manner in which the bankruptcy court applied its local 23 rules shifted the timing and manner of presenting evidence from 24 an evidentiary hearing to the briefing portion of the claim 25 objection proceedings. In this sense, the bankruptcy court’s 26 application of its local rules impermissibly contravened the 27 Federal Rules of Bankruptcy Procedure by altering the procedural 28 scheme for resolving claim objections set forth in Rule 9014(d).

1 See Rule 9029(a)(1) (authorizing courts to promulgate local rules 2 only to the extent they are consistent with the Federal Rules of 3 Bankruptcy Procedure); see also Garner v. Shier (In re Garner), 4 246 B.R. 617, 624 (9th Cir. BAP 2000) (citing Rule 9029(a)(1) and 5 noting that local rules must be consistent with the Federal Rules 6 of Bankruptcy Procedure).4 7 In addition, by weighing the evidence presented by both 8 sides and finding for Locklin on the alter ego issue, the 9 bankruptcy court conflated its initial duty to ascertain whether 10 there existed a disputed material factual issue with its ultimate 11 duty to resolve factual disputes by weighing the evidence. 12 Consequently, the bankruptcy court committed reversible error 13 when it disallowed Reliance’s claim without holding an 14 evidentiary hearing. 15 It also is worth noting that the bankruptcy court was 16 insistent that its ruling did not amount to a grant of summary 17 judgment. Summary judgment procedures are available in 18 bankruptcy court contested matters, see Rule 9014(c) 19 20 4 In In re Garner, this panel upheld the validity of a local 21 rule requiring those objecting to proofs of claim to submit with their claims objections evidence sufficient to overcome the prima 22 facie validity of a properly-filed proof of claim. In relevant 23 part, In re Garner held that this local rule was consistent with Rules 3007 and 9014. We need not further address In re Garner 24 because it dealt with the requirements for claims objections and not, as implicated here, the requirements for responses to claims 25 objections. However, we do note that In re Garner was decided 26 before Rule 9014 was amended in 2002 to require evidentiary hearings in contested matters and that some of In re Garner’s 27 reasoning depended on the bankruptcy court’s discretion, before the 2002 amendments, to decide disputed material factual issues 28 on affidavits. See In re Garner, 246 B.R. at 623-24.

1 (incorporating Civil Rule 56), and the bankruptcy court here 2 could have sua sponte invoked the summary judgment process if it 3 believed, based on the parties’ papers, that the claim objection 4 presented no genuinely disputed issues of material fact. See 5 Norse v. City of Santa Cruz, 629 F.3d 966, 971-72 (9th Cir. 6 2010). 7 However, before sua sponte granting summary judgment, courts 8 first must give the adverse party adequate opportunity to avail 9 itself of summary judgment procedures, which are designed to 10 flesh out whether a genuinely disputed issue of material fact 11 exists. Id. Here, the evidentiary record presented at the 12 initial hearing on Locklin’s Second Claim Objection arguably 13 suggested that there was no “genuine” issue of material fact 14 within the meaning of seminal summary judgment decisions like 15 Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248–49 (1986). 16 Regardless, Reliance was not given adequate notice and 17 opportunity to avail itself of summary judgment procedures 18 designed to test this notion. 19 Nothing in our decision should be construed to suggest that 20 the bankruptcy court is obliged on remand to give Reliance more 21 time to conduct discovery. Reliance’s opening appeal brief 22 mentions discovery only once, and then only in passing. As a 23 result, Reliance has forfeited the issue of whether the 24 bankruptcy court erred by not giving it more time to conduct 25 discovery. See Christian Legal Soc'y v. Wu, 626 F.3d 483, 487–88 26 (9th Cir. 2010); Brownfield v. City of Yakima, 612 F.3d 1140, 27 1149 n.4 (9th Cir. 2010). 28 Moreover, even if Reliance had properly preserved for appeal

1 the discovery issue, the record reflects that Reliance had ample 2 time to conduct discovery. As early as September 2013, when 3 Reliance filed a state court complaint against both Locklin and 4 Nightscaping, Reliance already had stated that the basis of its 5 claim against Locklin arose from alter ego principles. See 6 Complaint (Sept. 11, 2013) – attached as Exhibit 3 to Reliance’s 7 June 10, 2014 amended proof of claim (“LaVesta Locklin is liable 8 for the debt pursuant to the doctrine of alter ego.”). Thus, at 9 the time it filed its initial proof of claim in February 2014, 10 Reliance already knew that its claim against Locklin ultimately 11 depended on it being able to prove that Locklin was 12 Nightscaping’s alter ego. This need to prove its alter ego 13 allegations was further driven home when Locklin filed her first 14 claim objection in March 2014 and when the court sustained the 15 first claim objection in June 2014 (with leave to amend). Yet 16 there is nothing in the record indicating that Reliance made any 17 effort to conduct discovery at any time during the claim 18 proceedings – from the February 2014 filing of its original proof 19 of claim to the August 2014 entry of the order disallowing its 20 amended proof of claim. Nor is there anything in the record 21 indicating any legitimate reason why Reliance was unable to 22 conduct the requisite discovery while its bankruptcy claim 23 against Locklin was pending. 24 Finally, at the end of its opening brief, Reliance requested 25 that this panel order that the dispute between the parties, on 26 remand, be reassigned to another bankruptcy judge. We deny that 27 request. Reliance did not attempt to explain why it believes 28 reassignment is necessary. Furthermore, if Reliance believes

1 that reassignment is justified based on some particular conduct 2 of the bankruptcy court, Reliance in the first instance should 3 have filed a motion for recusal in the bankruptcy court and 4 should have followed all applicable procedural rules for 5 requesting such relief. See generally United States v. Studley, 6 783 F.2d 934, 939-40 (9th Cir. 1986).5 7 CONCLUSION 8 For the reasons set forth above, we VACATE the bankruptcy 9 court’s claim disallowance order, and we REMAND for further 10 proceedings consistent with this decision. 11 12 13 14 15 16 17 18 19 20 21 22 23 5 On appeal, after we set this matter for oral argument, 24 Reliance filed a motion to continue oral argument, which we denied. Reliance then filed additional requests for relief 25 regarding oral argument and attempted to support these requests 26 with a request for judicial notice. We addressed all of these requests in our decision disposing of Reliance’s and Opperwall’s 27 companion appeal (BAP No. CC-15-1008-KuFKI), and we deny those requests for purposes of this appeal for the same reasons as 28 stated therein.