United States v. 2005-07-11 | 02-16466 | PILATE VBURRELL | precedential | opinion |

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
 In re: STANLEY KIRK BURRELL, dba/
Bustin’ Publishing, aka/M.C.
Hammer; In re: STEPHANIE
DARLENE BURRELL, aka/Bustin’
Publishing,
Debtors,
No. 02-16466
FELTON PILATE, dba/Felstar Music; D.C. Nos.
FELSTER PUBLISHING, CV-01-02657-SI Appellants, 99-4173AN
v. OPINION
STANLEY KIRK BURRELL, aka/M.C.
Hammer, Hammer, dba/Bustin’
Publishing; STEPHANIE DARLENE
BURRELL, individually and as
business associates of unknown
character,
Appellees. 
Appeal from the United States District Court
for the Northern District of California
Susan Yvonne Illston, District Judge, Presiding
Argued and Submitted
December 8, 2004—San Francisco, California
Filed July 11, 2005
Before: Dorothy W. Nelson, Andrew J. Kleinfeld, and
Ronald M. Gould, Circuit Judges.
Opinion by Judge D. W. Nelson
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COUNSEL
Sheila Gropper Nelson, San Francisco, California, for the
appellant.
Stanley K. Burrell, in pro per, Tracy, California, for the appel-
lee.
OPINION
D. W. NELSON, Circuit Judge:
In 1986, a then little known rapper, Stanley Burrell (at the
time known as “Holy Ghost Boy” and later to be known as
“M.C. Hammer,” and subsequently simply “Hammer”),
approached Felton Pilate, a well-established producer, to col-
laborate on the production of an album. Their first LP, “Let’s
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Get It Started,” went multi-platinum in 1988 and they contin-
ued to collaborate until 1990 without any written agreement.
In January 1990, they signed two contracts (the Songwriter’s
and Producer’s agreements), the interpretation of which is the
sole issue appealed from the judgments below.
This case presents the question of whether the preclusive
effect of those judgments requires vacatur in the bankruptcy
context when the underlying claims have been mooted on
appeal.
I.
Burrell filed for bankruptcy protection under Chapter 11 of
the Bankruptcy Code, 11 U.S.C. § 1101 et seq., on April 1,
1996. In September 1998, his bankruptcy petition was con-
verted to a petition under Chapter 7 of the Bankruptcy Code,
11 U.S.C. § 701 et seq. On April 5, 1999, Pilate filed an
adversary complaint in the bankruptcy proceeding, objecting
to the discharge of Burrell’s debt to him and requesting, inter
alia, an order of denial of discharge of debts. Among Pilate’s
asserted grounds for denial of discharge were breach of fidu-
ciary duty under 11 U.S.C. § 523(a)(4), and conversion of
property under 11 U.S.C. § 523(a)(6).
Burrell moved to dismiss Pilate’s complaint for failure to
state a claim upon which relief can be granted under Fed. R.
Bankr. P. 7012(b), which applies Fed. R. Civ. P. 12(b)(6) to
adversary proceedings in bankruptcy. The bankruptcy court
dismissed all causes of action pertaining to Stephanie Burrell,
Burrell’s wife, finding nothing in the complaint alleging that
Mrs. Burrell had been involved in any of the transactions
between Pilate and Burrell, or had a role in the alleged fraudu-
lent conduct. The court also dismissed the causes of action
that were based on the existence of an express trust.
Burrell then filed motions for summary judgment on the
remaining causes of action. The bankruptcy court granted
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Burrell’s summary judgment motion on the 11 U.S.C. § 523
causes of action on July 19, 2000, and Pilate appealed to the
district court. Pilate argued that the bankruptcy court erred
when it held that co-ownership of a copyright does not create
a fiduciary relationship, when it found that the Producer’s and
Songwriter’s agreements did not reach the pre-1990 composi-
tions, and when it dismissed all claims against Stephanie Bur-
rell.
On May 21, 2002, the district court affirmed the bank-
ruptcy court on all claims, but only after the bankruptcy court
had already denied discharge of Burrell’s debts on April 24,
2002, for failure to fulfill certain conditions of a settlement
agreement with the Chapter 7 trustee. Pilate timely filed this
appeal.
We hold that Pilate’s claims for denial of discharge of debt
were rendered moot when the bankruptcy court denied dis-
charge on other grounds while Pilate’s appeal was pending
before the district court. We therefore dismiss this appeal as
moot. We vacate the district court’s decision and remand to
the district court with directions to dismiss. On remand, the
district court is ordered to vacate the judgment from which
Pilate originally appealed, remanding to the bankruptcy court
with instructions to dismiss.
II.
The disputed agreements were entered into concurrently,
with the Producer’s agreement effective January 1, 1990 and
the Songwriter’s agreement effective January 31, 1990. In
both agreements, Pilate assigned his copyright interests to
Burrell in exchange for a $125,000 yearly salary and future
royalties. Pilate claims the agreements only operate prospec-
tively while Burrell maintains that the agreements also reach
pre-1990 compositions. Both the bankruptcy court and the
district court on appeal accepted Burrell’s interpretation of the
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agreements.1 We decline to reach this issue because of the
mootness of Pilate’s underlying claim.
Neither party argues that the case is moot. However, this
court has an independent obligation to consider mootness sua
sponte. North Carolina v. Rice, 404 U.S. 244, 246 (1971);
Dittman v. California, 191 F.3d 1020, 1025 (9th Cir. 1999).
At the outset, then, the court must determine its own jurisdic-
tion over this appeal. Pizza of Haw., Inc. v. Shakey’s, Inc. (In
re Pizza of Haw., Inc.), 761 F.2d 1374, 1377 (9th Cir. 1985).
[1] The district court asserted jurisdiction pursuant to 28
U.S.C. § 158(a). This court, in turn, has jurisdiction pursuant
to 28 U.S.C. § 158(d), but “only if the order appealed from is
within the scope of section 158(a), a bankruptcy court order
appealed to a district court.” Benny v. England (In re Benny),
791 F.2d 712, 718 (9th Cir. 1986). If the appeal from the dis-
trict court to this court “did not reach the district court
through section 158(a), section 158(d) has no application.” Id.
[2] The district court did not properly have jurisdiction to
hear this case because the case became moot while it was
pending before the district court. On April 24, 2002, less than
a month before the district court entered its order of judgment,
the bankruptcy court entered an order denying the discharge
of the debtors on other grounds. If the district court lacked
jurisdiction, it could not issue a bona fide “final decision” in
1The issue of whether Pilate assigned his ownership interest in the pre-
1990 copyrights is ancillary to, though implicated by, Pilate’s claims seek-
ing denial of discharge of the debt owed him by Burrell. Specifically, the
district court found without merit Pilate’s claim that his debt should be
excepted from discharge because it is “for willful and malicious injury to
another entity or to the property of another entity.” 11 U.S.C. § 523(a)(6).
Pilate’s willful and malicious conversion claim turned on whether he had
retained any ownership interest in the copyrights to the pre-1990 composi-
tions. Because, as the bankruptcy and district courts found, Pilate no lon-
ger had any interests in the pre-1990 works, he had no property to be
converted.
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this case, a prerequisite to this court’s ability to review bank-
ruptcy cases on appeal. See 28 U.S.C. § 158(d); In re Benny,
791 F.2d at 718. Accordingly, the appeal would not have
properly reached this court through § 158(a), and “jurisdiction
therefore cannot lie in this court under section 158(d).” In re
Benny, 791 F.2d at 718; see also Ex parte McCardle, 74 U.S.
(7 Wall.) 506, 514 (1868) (“Without jurisdiction the court
cannot proceed at all in any cause. Jurisdiction is power to
declare the law, and when it ceases to exist, the only function
remaining to the court is that of announcing the fact and dis-
missing the cause.”).
[3] If the controversy is moot, both the trial and appellate
courts lack subject matter jurisdiction, see Rice, 404 U.S. at
246, and the concomitant “power to declare the law” by
deciding the claims on the merits. If the district court lacked
jurisdiction to reach the merits because of mootness, so does
this court. See Bender v. Williamsport Area Sch. Dist., 475
U.S. 534, 541 (2003) (“[E]very federal appellate court has a
special obligation to satisfy itself not only of its own jurisdic-
tion, but also that of the lower courts in a cause under review
. . . [When the lower federal court] lack[s] jurisdiction, we
have jurisdiction on appeal, not of the merits but merely for
the purpose of correcting the error of the lower court in enter-
taining the suit.”) (internal citations and quotation marks
omitted). The threshold question, then, is whether this case
was in fact moot at the time the district court rendered its
judgment. We find that it was.
III.
[4] A case is moot if the issues presented are no longer live
and there fails to be a “case or controversy” under Article III
of the Constitution. See GTE Cal., Inc. v. FCC, 39 F.3d 940,
945 (9th Cir. 1994). “The test for mootness of an appeal is
whether the appellate court can give the appellant any effec-
tive relief in the event that it decides the matter on the merits
in his favor. If it can grant such relief, the matter is not moot.”
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Garcia v. Lawn, 805 F.2d 1400, 1402 (9th Cir. 1986); see also
Pub. Util. Comm’n of the State of Cal. v. FERC, 100 F.3d
1451, 1458 (9th Cir. 1996) (“The court must be able to grant
effective relief, or it lacks jurisdiction and must dismiss the
appeal.”). In Pilate’s case, no such relief could have been
granted given that Pilate had already gotten the relief he
sought because of Burrell’s failure to meet the terms of Bur-
rell’s settlement agreement with the bankruptcy trustee.
[5] In his appeal to this court, Pilate in effect seeks a
declaratory judgment that the Songwriter’s and Producer’s
agreements only worked prospectively to transfer ownership
interests in Pilate’s post-1990 copyrights to Burrell. Even if
the panel were to construe Pilate’s earlier request for relief
from the district court somehow as including a request for a
declaratory judgment on the interpretation of the contracts,
the district court could not have granted that relief. See Pub.
Util. Comm’n of the State of Cal., 100 F.3d at 1459 (“A fed-
eral court cannot issue a declaratory judgment if a claim has
become moot.”). There are, however, four major exceptions
to the mootness doctrine, for (1) collateral legal conse-
quences; (2) wrongs capable of repetition yet evading review;
(3) voluntary cessation; and (4) class actions where the named
party ceases to represent the class. See id. at 1459-61;
Gator.Com Corp. v. L.L. Bean, Inc., 398 F.3d 1125, 1141 (9th
Cir. 2005).
[6] The one plausible candidate exception in Pilate’s case
is for collateral legal consequences that survive after the
plaintiff’s primary injury has been resolved. See Pub. Util.
Comm’n of the State of Cal., 100 F.3d at 1460 (holding that
for mootness purposes, a party satisfies the Article III case or
controversy requirement by continuing to suffer collateral
legal consequences of the action being appealed). On appeal
to this court, Pilate suggests that the “continuing legal impli-
cations” of judgments that “taint” his ownership interest in the
pre-1990 compositions affect “cognizable legal rights” and
are therefore not mooted on appeal. While Pilate gives short
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shrift to this argument in his brief, the implication is that the
“taint” of the earlier judgments comes in the form of their pre-
clusive effect on future claims involving the issue of exactly
what copyrighted material the contested contracts reach.
[7] Pilate may not invoke as an exception to the mootness
doctrine the specter of continuing legal harm from res judicata
or collateral estoppel arising from his mooted claims when
such harm is merely hypothetical and speculative. See Kop-
pers Indus., Inc. v. U.S. E.P.A., 902 F.2d 756, 758 (9th Cir.
1990). Pilate “cite[s] no collateral continuing legal disputes to
which the [mooted claim] has given rise,” id., other than
vaguely referring to the enduring “taint” of the lower court
judgments. Moreover, “[t]he speculative contingency that
such issues might arise afford[s] no basis for our passing on
the substantive issues.” Id. (internal citations and quotation
marks omitted). Because Pilate has not shown that “there is
a substantial controversy, between parties having adverse
legal interests, of sufficient immediacy and reality to warrant
the issuance of a declaratory judgment,” his request for relief
does not qualify for the collateral consequences exception to
the mootness doctrine. Super Tire Eng’g Co. v. McCorkle,
416 U.S. 115, 122 (1974) (emphasis added).
IV.
[8] It is well established, however, that collateral estoppel
engenders legal consequences from which a party may con-
tinue to suffer harm after a claim has been rendered moot. The
Supreme Court has recognized that because of the unfairness
of the enduring preclusive effect of an unreviewable decision
in the case of a civil action that has become moot on appeal,
“[t]he established practice of the Court . . . is to reverse or
vacate the judgment below and remand with a direction to dis-
miss.” United States v. Munsingwear, Inc. 340 U.S. 36, 39
(1950). While Munsingwear’s directive was only dictum, the
Supreme Court has since affirmed this practice as it relates to
mootness that arises by “happenstance.” U.S. Bancorp Mort-
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gage Co. v. Bonner Mall P’ship, 513 U.S. 18, 25 n.3 (1994)
(“We thus stand by Munsingwear’s dictum that mootness by
happenstance provides sufficient reason to vacate.”). This
practice is, nonetheless, limited.
[9] As this court observed, “U.S. Bancorp makes clear that
the touchstone of vacatur is equity.” Dilley v. Gunn, 64 F.3d
1365, 1370 (9th Cir. 1995). And equity counsels against vaca-
tur, “when the appellant has by his own act caused the dis-
missal of the appeal.” Ringsby Truck Lines, Inc. v. W.
Conference of Teamsters, 686 F.2d 720, 722 (9th Cir. 1982).
The Supreme Court in U.S. Bancorp held that when parties
settle during the pendency of their appeal, thereby mooting
the appeal, Munsingwear is “inapplicable.” U.S. Bancorp, 513
U.S. at 26. The Court reasoned that, in settling, the appellant
had “voluntarily forfeited his legal remedy by the ordinary
processes of appeal or certiorari, thereby surrendering his
claim to the equitable remedy of vacatur.” Id. at 25. The pri-
mary inquiry, then, “is whether the party seeking relief from
the judgment below caused the mootness by voluntary
action.” Id. at 24.
[10] In this case, Pilate, the party seeking relief from the
judgment below, did not render his appeal moot by voluntary
action or by any act of his own. Cf. Blair v. Shanahan, 38
F.3d 1514, 1521 (9th Cir. 1994) (automatic vacatur not
granted even when a litigant whose action causes mootness
does not intend to moot his appeal). The bankruptcy court’s
judgment interpreting the Songwriter’s and Producer’s agree-
ments and the district court’s judgment affirming the same
would be unreviewable were we to dismiss the appeal without
vacating the judgments below. Burrell, not Pilate, rendered
this appeal moot when the bankruptcy court denied discharge
of Burrell’s debt because of Burrell’s failure to comply with
conditions of settlement with the bankruptcy trustee. Pilate
has therefore not surrendered his claim to the equitable rem-
edy of vacatur and should not be penalized by an unfair appli-
cation of collateral estoppel, when his case has been mooted
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through no act of his own. Dilley, 64 F.3d at 1370 (“ ‘A party
who seeks review of the merits of an adverse ruling, but is
frustrated by the vagaries of circumstance, ought not in fair-
ness be forced to acquiesce in the judgment.’ ”) (quoting U.S.
Bancorp, 513 U.S. at 25).
V.
[11] While Munsingwear dealt only with vacatur of a single
lower court judgment, this case involves two potentially pre-
clusive lower court judgments, and thus raises the issue of
whether Munsingwear and U.S. Bancorp may require multiple
vacaturs in the bankruptcy context. See Dunlavey v. Ariz. Title
Ins. & Trust Co. (In re Charlton), 708 F.2d 1449, 1454 (9th
Cir. 1983) (“Bankruptcy proceedings do not fit squarely
within the Munsingwear rule because of the fact that three,
not two, court systems are involved.”).2 We hold that in such
a situation, if the appeal has become moot through no act of
the party seeking relief, Munsingwear requires vacatur of both
the judgments of the district court or the BAP and the bank-
ruptcy court. See W. Farm Credit Bank v. Davenport (In re
Davenport), 40 F.3d 298, 299 (9th Cir. 1994) (vacating under
Munsingwear both the decision of the bankruptcy court con-
firming the debtors’ plan of reorganization and the decision of
the BAP affirming the bankruptcy court order, after the bank-
ruptcy action was dismissed at the request of the debtors);
contrast In re Charlton, 708 F.2d at 1455 (vacating district
court order affirming order of bankruptcy court but refusing
to require bankruptcy court to vacate its order approving sale
when sale proceeded because of appellant’s failure to comply
with Rule 805, which caused the mootness of his appeal).
2A party may appeal a bankruptcy court judgment to the District Court
or to the Bankruptcy Appellate Panel (“BAP”), from either of which a sec-
ond appeal can be taken to the United States Court of Appeals.
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VI.
CONCLUSION
[12] Because Pilate did not cause the mootness of his
appeal and because the preclusive effect of the lower court
judgments, if unreviewed, may unfairly prejudice Pilate, the
judgments below must be vacated. We therefore vacate the
judgment of the district court and direct the district court on
remand to dismiss. The district court shall also vacate the
bankruptcy court judgment, remanding to the bankruptcy
court with instructions to dismiss. The appeal to this court is
hereby dismissed as moot.
VACATED and REMANDED
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