SAN DIEGO, CA--(Marketwired - Jul 8, 2014) - Cooley LLP announced today that it successfully represented Kismet Acquisition, LLC, in obtaining affirmance in several related appeals before the Ninth Circuit Court of Appeals in a case that has spanned more than ten years. The appeals concerned a judgment in Kismet's favor issued by the United States Bankruptcy Court for the Southern District of California, avoiding and recovering the debtors' post-petition transfer of an interest in coastal real estate located in Jalisco, Mexico, as well as the related contempt sanctions awarded against the defendants as a result of their failure to comply with the judgment.
The Ninth Circuit's affirmance of the judgment avoiding and recovering the post-petition transfer as fraudulent establishes the broad extraterritorial reach of a bankruptcy court over an estate and upholds a bankruptcy court's exclusive jurisdiction over core proceedings. In addition, the Ninth Circuit's finding that the defendants had waived any objection they might have had under Stern v. Marshall to the bankruptcy court's judgment under Article III of the Constitution is one of the first circuit court applications of the U.S. Supreme Court's ruling in Exec. Benefits Ins. Agency v. Arkison concerning the breadth of the bankruptcy court's power to hear and decide avoidance actions.
The Ninth Circuit also affirmed the District Court's order affirming in part the Bankruptcy Court's award of contempt sanctions against defendants for having created impediments in Mexico to try to evade the bankruptcy court's judgment to transfer the Mexican property to Kismet. This decision establishes the broad power of a bankruptcy court to award significant monetary sanctions where it is necessary to obtain compliance with a judgment. It also upholds the bankruptcy court's power to require that specific acts be taken even if that act must on foreign soil. The Ninth Circuit also upheld the abrogation of the defendants' attorney-client privilege under the crime-fraud exception, establishing very broad and important limitations on the availability of the attorney-client privilege to a contemnor in any contempt proceeding.
The Cooley team representing Kismet was led by partner Ali M.M. Mojdehi and included associate Janet Dean Gertz.
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