IN THE MATTER OF: J. HOWARD MARSHALL, III and ILENE O. MARSHALL v. J. HOWARD MARSHALL, III and ILENE O. MARSHALL

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
IN THE MATTER OF: J. HOWARD
MARSHALL, III and ILENE O.
MARSHALL,
Debtors,
ELAINE T. MARSHALL, as Successor
Trustee of the BETTYE B. MARSHALL
Living Trust, Trustee of the J.
HOWARD MARSHALL, II Marital
Trust Number Two, and Trustee of
the E. PIERCE MARSHALL Family
Trust Created Under BETTYE B.
MARSHALL Living Trust Indenture
Dated October 30, 1990,
Appellant,
v.
J. HOWARD MARSHALL, III and
ILENE O. MARSHALL,
Appellees.
No. 09-55573
D.C. No.
8:03-cv-01354-
DOC
OPINION
Appeal from the United States District Court
for the Central District of California
David O. Carter, District Judge, Presiding
Argued and Submitted
October 11, 2012—Pasadena, California

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IN THE MATTER OF: MARSHALL 2
The Honorable David M. Ebel, Senior Circuit Judge for the U.S. Court *
of Appeals for the Tenth Circuit, sitting by designation.
This summary constitutes no part of the opinion of the court. It has * *
been prepared by court staff for the convenience of the reader.
Filed June 28, 2013
Before: David M. Ebel, Kim McLane Wardlaw, and*
Jacqueline H. Nguyen, Circuit Judges.
Opinion by Judge Nguyen
SUMMARY**
Bankruptcy
The panel affirmed the district court’s affirmance of
bankruptcy court decisions arising from the dispute over the
estate of J. Howard Marshall, II, who left nearly all of his
assets to his son, E. Pierce Marshall, but excluded his wife,
Vickie Lynn Marshall, also known as Anna Nicole Smith,
and his other son, J. Howard Marshall, III, from receiving any
part of his fortune.
The panel held that non-random assignment of the
Chapter 11 case of Howard III and his wife Ilene (Debtors) to
Bankruptcy Judge Bufford, who presided over Vickie’s
Chapter 11 case, was within the court’s discretion and in the
interests of efficiency. The panel held that Judge Bufford did
not abuse his discretion in denying the motion of Pierce’s
widow, Elaine T. Marshall, for recusal.

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IN THE MATTER OF: MARSHALL 3
For the reasons outlined in the second amended opinion
of the bankruptcy court filed on October 9, 2003, the panel
concluded that the district court correctly affirmed the
bankruptcy court’s confirmation of the Debtors’ Chapter 11
Plan and denial of Elaine’s motion to dismiss with respect to
the constitutional issues raised in the motion.
The panel held that the “Best Interests of Creditors” test
in 11 U.S.C. § 1129(a)(7)(A) did not apply to Pierce or his
Texas fraud judgment against Howard III, where Pierce never
filed a proof of claim in the Debtors’ Chapter 11 proceedings,
and the deadline for doing so had passed by the time the
bankruptcy court confirmed the Plan.
The panel held that the bankruptcy court’s finding that the
Debtors’ Plan was proposed in good faith was not clearly
erroneous, and that the confirmation of the Plan was not an
abuse of discretion. The panel likewise held that the
bankruptcy court’s finding that the Debtors’ Chapter 11
petition was filed in good faith was not clearly erroneous, and
that the bankruptcy court did not abuse its discretion in
denying Elaine’s motion to dismiss.
COUNSEL
G. Eric Brunstad, Jr. (argued), Matthew Joseph Delude, and
Collin O’Connor Udell, Dechert LLP, Hartford, Connecticut;
Jeffrey W. Chambers, Ware, Snow, Fogel & Jackson, LLP,
Houston, Texas, for Appellant.

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IN THE MATTER OF: MARSHALL 4
David L. Neale (argued) and Michelle Sharoni Grimberg,
Levene, Neale, Bender, Yoo & Brill LLP, Los Angeles,
California; Anne Wells, Futter-Wells, PC, Santa Monica,
California, for Appellees.
OPINION
NGUYEN, Circuit Judge:
This case marks the third time we have been asked to
intervene in the infamous feud over the estate of the late
Texas oil magnate and billionaire J. Howard Marshall, II (“J.
Howard”). J. Howard died in 1995, leaving nearly all his
assets to his son, E. Pierce Marshall (“Pierce”), but excluding
his young wife, Vickie Lynn Marshall, also known as Anna
Nicole Smith (“Vickie”), and his other son, J. Howard
Marshall, III (“Howard”), from receiving any part of his
fortune. The ensuing controversy, pitting wife against son
and brothers against each other, has defied resolution for
nearly two decades, and has survived almost all of its original
players.
After J. Howard died, Vickie and Howard each
unsuccessfully challenged his will in Texas probate court. In
addition to losing the will contest, Howard suffered a multi-
million dollar judgment after Pierce successfully
counterclaimed against him on the basis of fraud. Following
this loss, Howard and his wife, Ilene, filed for Chapter 11
bankruptcy in the Central District of California. Their case
was assigned to United States Bankruptcy Judge Samuel

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IN THE MATTER OF: MARSHALL 5
Vickie filed for bankruptcy protection in the Central District of 1
California while her probate claims were still pending in the Texas court.
Pierce filed a proof of claim, and Vickie successfully counterclaimed
against him for tortious interference with an expectancy. Vickie’s case
was extensively litigated, including twice before the Supreme Court, and
is not now before us. W e nevertheless discuss certain aspects of her
bankruptcy case to the extent they are relevant to this appeal.
Pierce died in 2006. Elaine appears in her capacity as Successor 2
Trustee of the Bettye B. M arshall Living Trust, Trustee of the J. Howard
Marshall, II Marital Trust Number Two, and Successor Trustee of the E.
Pierce Marshall Family Trust Created Under the B ettye B. Marshall
Living Trust Indenture Dated October 30, 1990 (collectively “the Trusts”).
Bufford, who had previously presided over Vickie’s Chapter
11 bankruptcy case.1
Pierce moved for random reassignment or recusal of
Judge Bufford, objected to Howard and Ilene’s proposed
Chapter 11 Plan, and moved to dismiss the bankruptcy action.
Judge Bufford published three separate opinions: (1) denying
Pierce’s motion for reassignment or recusal; (2) confirming
the Plan and denying Pierce’s motion to dismiss with respect
to his constitutional arguments; and (3) confirming the Plan
and denying Pierce’s motion to dismiss with respect to his
statutory arguments. Pierce appealed to the district court,
which affirmed the bankruptcy court’s decisions in all
respects on March 18, 2009.
Appellant Elaine T. Marshall (“Elaine”), Pierce’s widow,2
now appeals the district court’s decision, contending that the
district court erred in affirming the bankruptcy court’s orders
because: (1) there was no basis for non-random assignment
of the case to Judge Bufford, and alternatively, Judge Bufford
should have recused himself on account of apparent bias; (2)
Howard and Ilene’s Chapter 11 petition and proposed Plan

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IN THE MATTER OF: MARSHALL 6
Specifically, Judge Bufford found that Pierce (a) destroyed documents; 3
(b) failed to respond to discovery requests; (c) failed to produce a privilege
log and documents in camera; and (d) failed to produce documents held
by J. Howard’s attorneys.
were unconstitutional; and (3) Howard and Ilene’s Chapter 11
petition and proposed Plan were filed in bad faith. We have
jurisdiction pursuant to 28 U.S.C. § 158(d), and we affirm.
BACKGROUND
I.
THE VICKIE LYNN MARSHALL CASE
In the Texas probate court, Vickie claimed that she was
entitled to a portion of J. Howard’s estate, and that Pierce had
tortiously interfered with her expectancy of a gift from her
husband. While the probate case was pending, she filed for
bankruptcy in California, and the matter was assigned to
Judge Bufford. Pierce filed a proof of claim, arguing that he
held a defamation claim against Vickie that was not subject
to her bankruptcy discharge. Vickie counterclaimed,
contending, as she had in probate court, that Pierce tortiously
interfered with her expectancy of a gift from J. Howard.
Judge Bufford dismissed Pierce’s proof of claim against
Vickie, and proceeded to consider Vickie’s counterclaim
against Pierce. Over the course of the bankruptcy
proceedings, Judge Bufford determined that Pierce had
engaged in various discovery abuses and issued both
monetary and non-monetary sanctions against him.3
In September 1998, Pierce moved to withdraw the case
from bankruptcy court. District Judge William D. Keller

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IN THE MATTER OF: MARSHALL 7
Judge Keller’s October 21, 1998 minute order granted Pierce’s motion 4
to withdraw with respect to Pierce’s defamation claim and Vickie’s
counterclaim. Vickie’s Chapter 11 petition, Pierce’s proof of claim, and
aspects of Pierce’s defamation claim that pertained to dischargeability of
debt, as well as all pending discovery matters were to remain before the
bankruptcy court. The minute order also indicated that “[a]ll discovery
matters which the bankruptcy judge determines are necessary to the ‘core’
bankruptcy proceedings . . . shall proceed before the bankruptcy court.”
The contents of the memorandum remain undisclosed. 5
withdrew the bankruptcy reference in part in October 1998,4
after which Judge Bufford stated his intent to submit a
memorandum to “assist [Judge Keller] in his review of the
matter.” On February 1, 1999, Judge Keller stayed Judge
Bufford’s prior sanctions orders. The next day, Judge
Bufford declared the stay invalid and issued terminating
sanctions against Pierce on Vickie’s tortious interference
counterclaim as a result of Pierce’s purported discovery
abuses. On March 9, 1999, Judge Keller vacated and
remanded Judge Bufford’s initial sanctions order, citing a
lack of evidence. Then, after acknowledging receipt of Judge
Bufford’s memorandum, Judge Keller vacated his order
withdrawing the bankruptcy reference. On May 20, 1999,5
Judge Bufford entered a final sanctions order, once again
deeming many of Vickie’s allegations established as a
sanction against Pierce.
Judge Bufford then held a five-day hearing on Vickie’s
counterclaim. On the first day, Judge Bufford conducted an
unusual press conference of sorts on the record, where he
responded to reporters’ questions, noted that the case was
related to the Texas probate litigation, and explained the
procedures by which reporters could obtain public records or
court filings. Approximately eleven months later, Judge

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IN THE MATTER OF: MARSHALL 8
The Supreme Court ultimately held that the bankruptcy court lacked 6
constitutional authority to enter a final judgment on Vickie’s common law
tort counterclaim. Stern v. Marshall, 131 S. Ct. 2594, 2601 (2011).
Judge Bufford sua sponte withdrew the final sanctions order on 7
January 18, 2000. However, his October 6, 2000, decision on Vickie’s
tortious interference counterclaim identified a number of factual findings
the court deemed established as discovery sanctions against Pierce.
Bufford entered judgment in Vickie’s favor and against
Pierce in the amount of $449,000,000, with an additional
punitive damages award of $25,000,000. See Marshall v.
Marshall (In re Marshall), 257 B.R. 35, 39, 40 (Bankr. C.D.
Cal. 2000). Judge Bufford acknowledged that the damages6
were “mainly based” on facts that were presumed to be true
by virtue of his final sanctions order.7
Several months later, the Texas probate court rendered
judgment in favor of Pierce in the probate case, ordering
Vickie to pay Pierce’s attorneys’ fees in the amount of
$541,000. The Probate Court later modified its order to
specify that the fee award arose solely out of conduct that
occurred after Vickie’s bankruptcy discharge. However,
Judge Bufford overturned the probate court’s fee award,
finding that it violated Vickie’s bankruptcy discharge and was
barred by judicial estoppel. The district court affirmed Judge
Bufford’s decision, but we reversed and remanded, finding
that the attorneys’ fees award did not violate Vickie’s
bankruptcy discharge, as it was based solely on conduct that
occurred after the discharge. Marshall v. Marshall (In re
Marshall), 119 F. App’x 136 (9th Cir. 2004).

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IN THE MATTER OF: MARSHALL 9
Howard claimed that J. Howard had orally promised to divide his 8
estate equally between his two sons after Howard agreed to sell back to J.
Howard voting shares of Koch Industries. In his fraud counterclaim,
Pierce argued that J. Howard had disinherited Howard in 1980, that no
such oral promise was ever made, and that Howard purposely sold his
shares back to J. Howard in order to later concoct the claim that the sale
was consideration for his father’s oral promise to divide his estate equally
between his sons.
The probate court’s modified Fraud Judgment reflects a substantial 9
reduction from the jury’s original $34 million judgment against Howard.
II.
THE J. HOWARD MARSHALL III CASE
Howard also challenged J. Howard’s estate plan, arguing
that, inter alia, Pierce had exerted undue influence over their
father for years, the estate plan had been formulated under
duress, and the will was invalid and unenforceable. In his
capacity as trustee of the Trusts, Pierce filed a fraud
counterclaim against Howard. After a lengthy trial, the jury8
found in favor of Pierce, and the probate court entered a
Second Modified Final Judgment against Howard (“the Fraud
Judgment”) on December 7, 2001. At the time Howard and
Ilene filed their bankruptcy petition, the Fraud Judgment
exceeded twelve million dollars.9
Howard filed an appeal in the Texas courts, and on
January 31, 2002, moved to stay execution of the Fraud
Judgment, or in the alternative, to lower the amount of
security for a supersedeas bond. As part of that motion,
Howard submitted a sworn affidavit attesting to a total net
worth of $22,413,220. Elaine contends that the parties
engaged in numerous efforts to negotiate a potential

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IN THE MATTER OF: MARSHALL 10
settlement, which eventually resulted in an agreement to stay
enforcement in return for a $10.4 million bond, but that
Howard ultimately reneged on the agreement when he was
unable to finance the bond. Pierce moved to enforce the
Fraud Judgment, and at a July 18, 2002, hearing, the probate
court suggested that Howard voluntarily move assets to Texas
to satisfy the judgment. The probate court scheduled another
hearing for July 25, 2002 to consider whether it would order
Howard to transfer assets to Texas.
On July 23, 2002, Howard and Ilene (collectively, “the
Debtors”) filed a Chapter 11 bankruptcy petition in the
Central District of California. In connection with the petition,
they filed a Statement of Related Cases and an addendum
noting that Vickie’s bankruptcy case involved a similar
factual background and many of the same principal parties as
their case. The Clerk assigned Howard and Ilene’s case to
Judge Bufford.
III.
E. PIERCE MARSHALL’S MOTION FOR RECUSAL AND
REASSIGNMENT
Several months later, Pierce moved for random
reassignment of the case, or alternatively, recusal of Judge
Bufford, pursuant to 28 U.S.C. § 455(a) and the Due Process
Clause. Judge Bufford denied Pierce’s motion at an October
29, 2002 hearing. He subsequently issued an Order to Show
Cause (“OSC”) why the motion should not be denied on the
basis of standing because Pierce had not filed a proof of claim
in Howard and Ilene’s case. After a hearing on the OSC,
Judge Bufford issued a March 27, 2003 amended written
opinion in which he assumed that Pierce had standing

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IN THE MATTER OF: MARSHALL 11
Elaine admits that Pierce deliberately refrained from filing a proof of 1 0
claim in the Debtors’ case to avoid potential counterclaims such as those
brought against him in Vickie’s case.
(because the time for filing a proof of claim had not elapsed)
and again denied the recusal motion. Pierce never filed a
proof of claim in the Debtors’ bankruptcy case.10
IV.
PIERCE’S OBJECTION TO THE CHAPTER 11 PLAN AND
MOTION TO DISMISS
The Debtors’ initial plan of reorganization listed total
assets of $8,391,904, personal property valued at $6,084,922,
and identified the Texas Fraud Judgment as a disputed
unsecured debt. Howard and Ilene filed an amended plan of
reorganization on April 16, 2003 (“the Plan”). This time, the
Plan provided for full payment of all debts except the Fraud
Judgment, which the Plan proposed should nevertheless be
discharged.
Pierce objected to the Debtors’ proposed Plan on the
grounds that it was unconstitutional and proposed in bad
faith. Pierce argued that Howard and Ilene had initiated
bankruptcy proceedings for the sole purpose of avoiding
enforcement of the Fraud Judgment, that the Debtors
misrepresented the value of assets and liabilities in their
amended plan, and that Howard and Ilene were solvent and
could easily satisfy their financial obligations without resort
to bankruptcy. Citing similar concerns, Pierce also moved to
dismiss the Debtors’ Chapter 11 petition on the grounds of
unconstitutionality and bad faith.

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IN THE MATTER OF: MARSHALL 12
Judge Carter denied Pierce’s request for a stay without bond pending 1 1
appeal of the bankruptcy opinions. However, we granted a stay pending
decision of the district court and also pending resolution of Vickie’s case
in the Supreme Court (Stern v. Marshall, 131 S. Ct. 2594 (2011)).
Although both decisions have now been rendered, consummation of the
Plan remains stayed pursuant to the district court’s July 27, 2012 Order.
See Order Granting Appellant’s Motion for Stay at 4, In re Marshall, 8:03-
cv-01354-DOC, Docket no. 127 (C.D. Cal. July 27, 2012), ECF No. 127.
Howard and Ilene argued that they had filed their suit and
proposed their Plan in good faith, based not only on their
inability to pay the Fraud Judgment, but also on the threat of
future litigation with Pierce and others which they claimed
could cost them upwards of $100 million.
On August 26, 2003, Judge Bufford issued a written
opinion confirming the Debtors’ Plan and denying Pierce’s
motion to dismiss on bad faith grounds. Then, on October 9,
2003, he issued a second amended opinion rejecting Pierce’s
constitutional challenge. Pierce appealed all three of Judge
Bufford’s decisions to the district court, Judge David O.
Carter, presiding, which affirmed on March 18, 2009. This11
appeal followed.
DISCUSSION
We review de novo a district court’s decision on appeal
from a bankruptcy court. Greene v. Savage (In re Greene),
583 F.3d 614, 618 (9th Cir. 2009). As to the decision of the
bankruptcy court, we apply the same standard of review
applied by the district court. Id. However, we review the
bankruptcy court decision independently and without
deference to the district court’s decision. Strand v. Neary (In
re Strand), 375 F.3d 854, 857 (9th Cir. 2004).

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IN THE MATTER OF: MARSHALL 13
I.
MOTION FOR REASSIGNMENT OR RECUSAL
We first address Elaine’s contention that the district court
erred in affirming the bankruptcy court’s denial of her Motion
for Reassignment or Recusal. We review the denial of a
§ 455(a) motion for recusal for abuse of discretion. United
States v. Wilkerson, 208 F.3d 794, 797 (9th Cir. 2000). “A
bankruptcy court abuses its discretion if it applies the law
incorrectly or if it rests its decision on a clearly erroneous
finding of material fact.” Brotby v. Brotby (In re Brotby),
303 B.R. 177, 184 (B.A.P. 9th Cir. 2003). “We examine the
bankruptcy court’s conclusions of law de novo and its factual
findings for clear error.” BCE W., L.P. v. Smith (In re BCE
W., L.P.), 319 F.3d 1166, 1170 (9th Cir. 2003).
“Clear error exists only when the reviewing court is left
with a definite and firm conviction that a mistake has been
committed.” In re Brotby, 303 B.R. at 184. “If two views of
the evidence are possible, the trial judge’s choice between
them cannot be clearly erroneous.” Lehtinen v. Lehtinen (In
re Lehtinen), 332 B.R. 404, 411 (B.A.P. 9th Cir. 2005). De
novo review applies to Elaine’s claim that Judge Bufford’s
partiality violated due process. See In re Victoria Station
Inc., 875 F.2d 1380, 1382 (9th Cir. 1989).
A.
REASSIGNMENT
Pursuant to 28 U.S.C. § 137, cases are to be assigned
among judges in the manner prescribed by local rules and
general orders of the court. In the Central District of

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IN THE MATTER OF: MARSHALL 14
At the time the Debtors filed their bankruptcy petition, the operative 1 2
provision was General Order 224 § 1.2 (1993). The terms of that
provision have been consolidated and superseded several times, but now
exist in substantially the same form within General Order 08-05 § 1.2
(2008).
In bankruptcy cases, the parties must file a 1015-2 statement of related 1 3
cases. Under Local Bankruptcy Rule 1015-2(a) (formerly, Rule 1015-2(1))
cases are deemed “related” if the earlier case was filed or pending before
the new petition was filed and the debtors:
(1) Are the same;
(2) Are spouses, former spouses, domestic partners, or
former domestic partners;
(3) Are “affiliates,” as defined in 11 U.S.C. § 101(2),
except that 11 U.S.C. § 101(2)(B) shall not apply;
(4) Are general partners in the same partnership;
(5) Are a partnership and one or more of its general
partners;
(6) Are partnerships that share one or more common
general partners; or
(7) Have, or within 180 days of the commencement of
either of the related cases had, an interest in property
California, General Order 08-05 § 1.2 (2008), which applies
equally to bankruptcy courts, directs the Clerk to assign cases
to judges in the district randomly. Gen. Order 08-05 § 1.212
(“The assignment of civil cases shall be completely at random
through the Automated Case Assignment System (ACAS).”).
However, where cases are related, the Clerk is directed to
assign the new case to the same judge who presided over the
prior case. Gen. Order 08-05 § 5.2 (2008); Bankr. C.D. Cal.13

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IN THE MATTER OF: MARSHALL 15
that was or is included in the property of another estate
under 11 U.S.C. § 541(a), § 1115, § 1207, a n d / o r
§ 1306.
In fact, the Debtors explained that the cases were not technically 1 4
related in the very Statement of Related Cases at issue here.
Gen. Order 11-01 (2011) (formerly, Gen. Order 99-02
(1999)).
Elaine contends that assignment of the Debtors’
bankruptcy case to Judge Bufford was improper because the
two cases were not related, notwithstanding the Debtors’
listing of the Vickie case in their 1015-2 Statement of Related
Cases. The Debtors concede, and we agree, that the Debtors’
bankruptcy case is not technically related to Vickie’s case
under Local Bankruptcy Rule 1015-2(a). However, the14
court has “broad discretion” to interpret the requirements of
its General Orders. United States v. DeLuca, 692 F.2d 1277,
1281 (9th Cir. 1982) (“Because general orders and local rules
not only implement due process and other statutory rights but
also promote efficiency, we permit the district court broad
discretion in determining their requirements.”); United States
v. Torbert, 496 F.2d 154, 157 (9th Cir. 1974) (noting that a
general order requiring random reassignment when a case is
returned to the clerk after a judge is disqualified “is a
housekeeping rule for the internal operation of the district
court which has a large measure of discretion in interpreting
and applying it” (internal quotation marks omitted)). While
not technically “related,” the Debtors’ and Vickie’s
bankruptcy cases involved convoluted facts and issues, many
of which had also been heavily litigated in the Texas probate
court. Assignment of the case to Judge Bufford was within
the court’s discretion and was in the interests of efficiency.

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IN THE MATTER OF: MARSHALL 16
Moreover, judges are vested with “inherent” authority to
transfer cases among themselves “for the expeditious
administration of justice.” United States v. Stone, 411 F.2d
597, 598 (5th Cir. 1969) (per curiam); see also Badea v. Cox,
931 F.2d 573, 575 (9th Cir. 1991) (“District court judges have
broad discretion regarding the assignment or reassignment of
cases.” (internal quotation marks omitted)). Had the
Debtors’case been randomly assigned, it is likely that the
assigned judge would have transferred the case to Judge
Bufford, given his superior knowledge of the complex factual
and procedural history of the parties’ dispute in the Texas
probate court.
Finally, a party has no due process right to random case
assignment or to ensure the selection or avoidance of any
particular judge absent a showing of bias or partiality in the
proceedings. See Cruz v. Abbate, 812 F.2d 571, 574 (9th Cir.
1987) (explaining that “a [party] has no right to any particular
procedure for the selection of the judge[,]” so long as the
decision is made “in a manner free from bias or the desire to
influence the outcome of the proceedings”); Torbert,
496 F.2d at 157 (holding that non-random assignment of a
case did not violate due process, particularly because there
was no showing of actual prejudice resulting from the
procedural irregularity). As discussed infra Section I.B.,
Elaine has not established actual or apparent bias on the part
of Judge Bufford, and was therefore not prejudiced by the
non-random assignment.

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IN THE MATTER OF: MARSHALL 17
B.
RECUSAL
Elaine contends that Judge Bufford should have recused
himself from the Debtors’ bankruptcy case pursuant to
28 U.S.C. § 455. Section 455(a) requires recusal when “a
reasonable person with knowledge of all the facts would
conclude that the judge’s impartiality might reasonably be
questioned.” F.J. Hanshaw Enters., Inc., v. Emerald River
Dev., Inc., 244 F.3d 1128, 1144 (9th Cir. 2001).
First, Elaine argues that Judge Bufford failed to apply the
correct legal standard in denying recusal. During a hearing
on the recusal motion, Judge Bufford stated that the
“[a]ppearance of impropriety is not a basis for recusal.” This
was undeniably a misstatement of the law. See Liljeberg v.
Health Servs. Acquisition Corp., 486 U.S. 847, 860 (1988)
(“The goal of section 455(a) is to avoid even the appearance
of partiality.” (quoting Health Servs. Acquisition Corp. v.
Liljeberg, 796 F.3d 796, 802 (5th Cir. 1986))). Proof of
actual bias is not required under § 455(a). Instead, bias
should “be evaluated on an objective basis, so that what
matters is not the reality of bias or prejudice but its
appearance.” Liteky v. United States, 510 U.S. 540, 548
(1994). “It is well established that the recusal inquiry must
be made from the perspective of a reasonable observer who
is informed of all surrounding facts and circumstances.”
Cheney v. U.S. Dist. Ct., 541 U.S. 913, 924 (2004) (emphasis
and internal quotation marks omitted).
Nevertheless, Judge Bufford articulated the correct
standard in his subsequent written opinion and specified that
his denial of recusal was based “on the grounds stated in the

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IN THE MATTER OF: MARSHALL 18
court’s decision of this date.” Thus, we find that Judge
Bufford ultimately applied the correct legal standard. The
salient inquiry, then, is whether Judge Bufford abused his
discretion in concluding that his conduct in the Vickie case
did not give rise to an appearance of bias against Pierce that
warranted his recusal from the Debtors’ proceedings.
Elaine contends that Judge Bufford’s impartiality may be
reasonably questioned in light of his handling of Vickie’s
case. Specifically, she claims that Judge Bufford’s rulings
demonstrated partiality towards Vickie, that his issuance of
severe discovery sanctions and “critical” statements against
Pierce and Pierce’s attorney throughout the proceedings
indicated prejudice against Pierce, and that his
communications with the press and the district court evinced
an uncommon interest in the case.
As a preliminary matter, we note that Elaine’s examples
of bias emanate exclusively from Judge Bufford’s rulings and
conduct during Vickie’s case. Insofar as Elaine points to
Judge Bufford’s judicial rulings as evidence of bias, such
“rulings alone almost never constitute a valid basis for a bias
or partiality motion.” Liteky, 510 U.S. at 555. “Almost
invariably, they are proper grounds for appeal, not for
recusal.” Id. Moreover, “the judge’s conduct during the
proceedings should not, except in the ‘rarest of
circumstances’ form the sole basis for recusal under
§ 455(a).” United States v. Holland, 519 F.3d 909, 913–14
(9th Cir. 2008) (quoting Liteky, 510 U.S. at 555).
“[O]pinions formed by the judge on the basis of facts
introduced or events occurring in the course of the current
proceedings, or of prior proceedings, do not constitute a basis
for a bias or partiality motion unless they display a deep-
seated favoritism or antagonism that would make fair

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IN THE MATTER OF: MARSHALL 19
As a practical matter, Judge Bufford’s purported bias against Pierce 1 5
would not spill over into Howard and Ilene’s bankruptcy case unless and
until Pierce injected himself into the case by filing a proof of claim, which
he had not done by the time Judge Bufford ruled on the recusal motion.
This is true notwithstanding the fact that the time in which to file a proof
of claim had not yet elapsed. Section 455(a) cannot reasonably be read to
require recusal based on speculation that a particular party might
subsequently enter in the case.
judgment impossible.” Liteky, 510 U.S. at 555. We find that
Judge Bufford’s conduct in Vickie’s case does not satisfy this
standard.
For example, Elaine contends that Judge Bufford
advocated for Vickie by ruling in her favor on arguments
neither raised nor briefed by the parties. While Judge
Bufford may have erred in basing certain rulings on
arguments not raised by the parties and without giving the
parties an opportunity to respond, doing so several times in
the course of lengthy and complicated litigation does not
reasonably give rise to an inference that he is advocating for
one side or another. Further, Elaine’s argument suffers from
the fact that neither Vickie nor Pierce were parties to Howard
and Ilene’s bankruptcy case. Thus, Judge Bufford’s15
purported partiality toward Vickie (or antagonism towards
Pierce), even if true, does not reasonably give rise to an
appearance of bias in Howard and Ilene’s case.
Elaine also argues that, after initially denying Pierce’s
recusal motion, Judge Bufford instigated an improper sua
sponte investigation to find additional grounds for denying
the motion. Judge Bufford issued an OSC why the motion
should not be denied for lack of standing, in light of Pierce’s
failure to file a proof of claim. We find nothing unusual or
improper in the bankruptcy court’s effort to determine

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IN THE MATTER OF: MARSHALL 20
whether a party has standing to litigate; in fact, such
determination is required. See B.C. v. Plumas Unified Sch.
Dist., 192 F.3d 1260, 1264 (9th Cir. 1999) (“[F]ederal courts
are required sua sponte to examine jurisdictional issues such
as standing.”).
As further evidence of bias, Elaine points to Judge
Bufford’s decisions declaring the district court’s stay of his
initial discovery sanctions ineffective and reimposing
virtually the same sanctions in his Final Sanctions Order.
Presumably, Elaine is insinuating that Judge Bufford openly
defied the district court in order to ensure that Pierce would
remain subject to his virtually insurmountable terminating
sanctions. However, not only are judicial rulings rarely a
basis for recusal, Liteky, 510 U.S. at 555, these particular
rulings cannot reasonably be seen as contravening the district
court’s direction. The district court subsequently adopted
Judge Bufford’s Final Sanctions Order, notwithstanding its
similarity to the initial vacated order, and even increased the
damages award against Pierce. In re Marshall, 275 B.R. 5,
58 (C.D. Cal. 2002), rev’d on other grounds, 392 F.3d 1118
(9th Cir. 2004), rev’d and remanded, sub nom. Marshall v.
Marshall, 126 S. Ct. 1735 (2006), rev’d on remand, 600 F.3d
1037 (9th Cir. 2010), aff’d, sub nom. Stern v. Marshall,
131 S. Ct. 2594 (2011).
With respect to the sanctions themselves, the district
court’s decision to increase Judge Bufford’s sanctions
significantly weakens Elaine’s contention that the heavy
sanctions create an appearance of bias on Judge Bufford’s
part. See Offutt v. United States, 348 U.S. 11, 15–16 (1954)
(holding that heavy sanctions, which were later reduced by a
higher court, constituted “compelling proof” of bias).
Moreover, a reasonable person could find, as the district court

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IN THE MATTER OF: MARSHALL 21
Although the Supreme Court ultimately determined that the 1 6
bankruptcy court did not have jurisdiction over Vickie’s counterclaims,
the propriety of the Final Sanctions Order was not ultimately decided in
either venue. See In re Marshall, 600 F.3d 1037, 1046 n.17 (9th Cir.
2010) (noting that the Court’s “discussion of these matters” would be
“limited” as “the parties agreed that there [were] no sanctions issues . . .
on appeal” and because “Pierce . . . [was] entitled to judgment in his favor
for other reasons . . .”).
did, that Judge Bufford’s decision to sanction Pierce was
based on his perception of Pierce’s bad faith. See United
States v. Yagman, 796 F.2d 1165, 1181–82 (9th Cir. 1986)
(“When [a judge imposes sanctions], the judge will obviously
be dissatisfied with some aspect of the offending attorney’s
conduct[,]” but “[w]ithout more, this natural responsive
attitude does not provide reasonable grounds to question the
judge’s impartiality[.]”). Judge Bufford found that Pierce
committed numerous discovery abuses throughout the Vickie
case. His determination was affirmed by the district court,
and Pierce apparently elected not to raise the issue again on
appeal of that decision to this court. See In re Marshall,16
392 F.3d 1118 (9th Cir. 2004). The record does not indicate
that Judge Bufford’s findings of sanctionable discovery abuse
were erroneous. Thus, neither the existence nor the scope of
the sanctions suggest that Judge Bufford harbored deep-
seated antagonism against Pierce.
Similarly, Judge Bufford’s comments towards Pierce and
his attorney during Vickie’s case might also be reasonably
seen as the product of Judge Bufford’s frustration
with Pierce’s behavior throughout the litigation. See F.J.
Hanshaw Enters., Inc., 244 F.3d at 1144–45
(“[P]redispositions developed during the course of a trial will
[rarely] suffice.” (citing Liteky, 510 U.S. at 544–45)); United
States v. Conforte, 624 F.2d 869, 881 (9th Cir. 1980)

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IN THE MATTER OF: MARSHALL 22
(explaining that recusal under § 455(a) requires a finding of
“an animus more active and deep-rooted than an attitude of
disapproval toward certain persons because of their known
conduct”). For example, Judge Bufford referred to Pierce as
“a Defendant with extremely dirty hands,” told Pierce’s
counsel to bring certain documents to court or “bring [his]
toothbrush,” to bring his “checkbook” to a hearing, and that
he had “substantial experience with the way [Pierce’s] side
has handled cases.” These statements, while potentially
indicative of personal bias, are not serious enough to
overcome the high standard set forth in Liteky:
[J]udicial remarks during the course of a trial
that are critical or disapproving of, or even
hostile to, counsel, the parties, or their cases,
ordinarily do not support a bias or partiality
challenge. They may do so if they reveal an
opinion that derives from an extrajudicial
source; and they will do so if they reveal such
a high degree of favoritism or antagonism as
to make fair judgment impossible.
510 U.S. at 555 (emphasis added).
Elaine also contends that Judge Bufford’s
communications with the press gave rise to an appearance of
partiality. Judge Bufford primarily took questions from
reporters about the procedures for obtaining court documents
and records. These procedural comments, themselves, do not
indicate partiality and are not ethically proscribed. See Code
of Judicial Conduct Canon 3(A)(6) (“This proscription [on
judicial speech] does not extend to public statements made in
the course of the judge’s official duties, to the explanation of
court procedures, or to a scholarly presentation made for

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IN THE MATTER OF: MARSHALL 23
purposes of legal education.”); see also United States v.
Microsoft Corp., 253 F.3d 34, 112 (D.C. Cir. 2001)
(distinguishing between “purely procedural matters,” which
the district judge may properly discuss in public, and the
judge’s “views on factual and legal matters at the heart of the
case,” upon which the judge may not publicly comment).
However, the fact that Judge Bufford initiated the “press
conference” at all is highly unusual and of some concern. See
In re Boston’s Children First, 244 F.3d 164, 170 (1st Cir.
2001) (noting that, in highly publicized cases, “even
ambiguous comments may create the appearance of
impropriety” and “[i]n fact, the very rarity of such public
statements, and the ease with which they may be avoided,
make it more likely that a reasonable person will interpret
such statements as evidence of bias”); see also United States
v. Cooley, 1 F.3d 985, 995 (10th Cir. 1993) (holding that a
judge’s deliberate choice to express “strong views” on a
pending case in a media forum “conveyed an uncommon
interest . . . in the subject matter” and “created the appearance
that the judge had become an active participant in [the
litigation]”).
Furthermore, in speaking with the press, Judge Bufford
mentioned the interplay between the Texas probate case and
Vickie’s bankruptcy case, explaining that there were some
overlapping issues that might be resolved in either venue.
Given that the bankruptcy court’s jurisdiction over Vickie’s
counterclaim was in dispute, such statements might be
viewed as commentary on the merits of the case. See In re
Boston’s Children First, 244 F.3d at 170 (concluding that a
judge’s comment that one case was more “complex” than
another could be seen as “a preview of a ruling on the merits
of petitioner’s motion for class certification” and called the

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IN THE MATTER OF: MARSHALL 24
judge’s impartiality into question). While there is nothing
wrong with a court providing procedural information to the
press in a highly publicized case, an appearance of
impropriety may be created where a judge voluntarily takes
on that role, especially in open court during the course of the
proceedings.
Still, notwithstanding our concerns, Judge Bufford’s
statements to the press are in and of themselves insufficient
to warrant recusal. The lion’s share of his comments dealt
with courtroom procedures and policies, which is
understandable given the strong media interest in Vickie’s
case. That several of his comments might be construed as a
vague reflection on a disputed jurisdictional issue does not,
alone, compel a finding of apparent bias.
In addition, Elaine makes much of a private
communication Judge Bufford shared with Judge Keller
regarding Pierce’s motion to withdraw the bankruptcy
reference. She argues that, by sending Judge Keller a “secret
memorandum,” Judge Bufford injected himself into the case
under the guise of “assisting” Judge Keller’s decision on
whether to withdraw the reference, evincing an “uncommon
interest and degree of personal involvement” in Vickie’s case.
Cooley, 1 F.3d at 995. However, context matters, and the
record here does not support that conclusion.
In October 1998, Judge Keller issued a minute order
withdrawing the bankruptcy reference in part. The minute
order indicated that the bankruptcy judge would determine
which discovery matters were necessary to “core” bankruptcy
proceedings and should therefore remain before the
bankruptcy court. At a January 1999 hearing, Howard and
Ilene’s counsel reminded Judge Bufford that the bankruptcy

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IN THE MATTER OF: MARSHALL 25
court “was going to be coming out with an order with respect
to th[e] Court’s belief as to the jurisdictional responsibilities
. . . which Judge Keller[’s] . . . minute order indicated he was
awaiting.” Judge Bufford clarified that his response to Judge
Keller would “not take the form of an order[,]” but would be
“a memorandum to Judge Keller to assist in his review of the
matter.” Judge Bufford then noted that the memo would be
“an internal document not available to the parties.” After
receiving the memo, Judge Keller noted that “as far as the
memorandum that [Judge Bufford] shared with me, he does
have authority to try everything but the MPI case, as far as I
can tell.” Judge Keller acknowledged that he was “not as
deeply into it from a bankruptcy standpoint as [Judge Bufford
was],” and that Judge Bufford was the one who “kn[ew]
what[ was] going on.”
Although we are not privy to the contents of Judge
Bufford’s communication, this context strongly suggests that
Judge Bufford’s memo dealt with legitimate jurisdictional
issues, and that Judge Bufford was merely responding to a
request made by Judge Keller. At any rate, the record does
not suggest that Judge Bufford was actively trying to retain
jurisdiction over Vickie’s case because of antagonism or
favoritism towards the parties, as opposed to, for example, his
understandable reticence to foist a complex case on the
district court unless it was necessary to do so.
Elaine’s examples of bias are almost exclusively based on
Judge Bufford’s conduct during Vickie’s bankruptcy
proceedings. Taken together, Judge Bufford’s actions are not
indicative of a “deep-seated favoritism or antagonism that
would make fair judgment impossible.” Liteky, 510 U.S. at
555. As such, this case is not one of the “rarest of
circumstances” where judicial conduct in prior proceedings

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IN THE MATTER OF: MARSHALL 26
Furthermore, the record does not suggest that “the probability of 1 7
actual bias” on Judge Bufford’s part was “too high to be constitutionally
tolerable[,]” so as to mandate his recusal on due process grounds.
Withrow v. Larkin, 421 U.S. 35, 47 (1975).
should form the sole basis for recusal under § 455(a).
Holland, 519 F.3d at 914. Judge Bufford’s determination—
that under all of the circumstances a reasonable person would
not question his impartiality—does not reflect an incorrect
application of the law and is not based on clearly erroneous
factual findings. Therefore, we cannot say that Judge Bufford
abused his discretion in denying Elaine’s motion to recuse.17
II.
CONSTITUTIONAL ISSUES
For the reasons outlined in the second amended opinion
of the bankruptcy court filed on October 9, 2003, in the
Central District of California, we conclude that the district
court correctly affirmed the bankruptcy court’s confirmation
of Howard and Ilene’s Chapter 11 plan and denial of Elaine’s
motion to dismiss with respect to the constitutional issues
raised in the motion. See In re Marshall, 300 B.R. 507
(Bankr. C.D. Cal. 2003). Therefore, we adopt the bankruptcy
court’s opinion on Elaine’s constitutional claims, and affirm
the district court’s decision as to the issues addressed therein.
See Appendix A.

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IN THE MATTER OF: MARSHALL 27
III.
NON-CONSTITUTIONAL ISSUES
Elaine contends that the bankruptcy court erred in
confirming the Debtors’ Chapter 11 Plan because the Plan
does not satisfy the “Best Interests of Creditors” test and was
proposed in bad faith. Elaine also argues that the bankruptcy
case should have been dismissed because it was filed in bad
faith.
We review the bankruptcy court’s decision to confirm the
Debtors’ Chapter 11 Plan for abuse of discretion. In re
Brotby, 303 B.R. at 184. The bankruptcy court’s ruling on a
motion to dismiss for bad faith is also subject to review for
abuse of discretion. Stolrow’s Inc. v. Stolrow’s Inc. (In re
Stolrow’s, Inc.), 84 B.R. 167, 170 (B.A.P. 9th Cir. 1988). In
both cases, “[t]he question of good faith is factual” and we
review for clear error. Id.; Marsch v. Marsch (In re Marsch),
36 F.3d 825, 828 (9th Cir. 1994) (per curiam).
A.
PLAN CONFIRMATION—BEST INTERESTS OF CREDITORS
TEST
The so-called “Best Interest of Creditors” test requires
that:
[w]ith respect to each impaired class of claims
or interests—
(A) each holder of a claim or interest of such
class—

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IN THE MATTER OF: MARSHALL 28
(i) has accepted the plan; or
(ii) will receive or retain under the plan on
account of such claim or interest property of
a value, as of the effective date of the plan,
that is not less than the amount that such
holder would so receive or retain if the debtor
were liquidated under chapter 7 of this title on
such date.
11 U.S.C. § 1129(a)(7)(A).
Because the Plan purported to discharge the Texas Fraud
Judgment without any payment, Elaine contends that the Plan
failed to ensure that Pierce would receive at least as much as
he would have under Chapter 7 liquidation. However, Pierce
never filed a proof of claim in the Debtors’ Chapter 11
proceedings, and the deadline for doing so had passed by the
time the bankruptcy court confirmed the Debtors’ Chapter 11
Plan. Thus, § 1129(a)(7)(A) did not apply to Pierce or to the
Fraud Judgment.
That Pierce would not have been foreclosed from filing a
proof of claim under Chapter 7 is of no moment. See
11 U.S.C. § 726(a)(2) (permitting late-filed claims in Chapter
7 cases). We will not extend the “Best Interests of Creditors”
test to individuals who are only hypothetically creditors,
simply because the statute invokes a hypothetical Chapter 7
liquidation as a point of reference. Were we to go that far, a
Chapter 11 Plan would not be confirmable unless it provided
for all individuals who could potentially be entitled to
distribution. Such a result would be untenable in practice and
would eviscerate the proof of claim filing deadline in Chapter
11.

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IN THE MATTER OF: MARSHALL 29
B.
PLAN CONFIRMATION—BAD FAITH
Under 11 U.S.C. § 1129(a)(3), a bankruptcy plan must be
“proposed in good faith and not by any means forbidden by
law.” “A plan is proposed in good faith where it achieves a
result consistent with the objectives and purposes of the
Code.” Sylmar Plaza, L.P. v. Sylmar Plaza L.P. (In re Sylmar
Plaza, L.P.), 314 F.3d 1070, 1074 (9th Cir. 2002).
Elaine argues that the Plan was not proposed in good faith
because the Debtors (1) were actually solvent; (2)
misrepresented the true value of their assets; and (3) filed the
petition with the primary purpose of avoiding payment of the
Texas Fraud Judgment.
We agree that the Debtors’ claim of potentially costly
future litigation— including a $5 million Louisiana lawsuit in
which Howard was a named defendant and Pierce’s separate
threat of a $100 million lawsuit—was perhaps too speculative
to support a finding that they were “insolvent.” However,
“insolvency is not a prerequisite to a finding of good faith
under § 1129(a).” Id. at 1074–75. The bankruptcy court
reasonably concluded that the Debtors’ technical solvency did
not bespeak bad faith given that they faced the threat of future
litigation, not to mention their very concrete obligation to
satisfy the Texas Fraud Judgment, amounting to nearly $12
million.
With regard to the Debtors’ purported misstatements on
their asset schedule, the chief example cited by Elaine was
the listing of the value of the Eleanor Stevens Gift Trust
Debenture as “contingent,” despite its prior valuation at

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IN THE MATTER OF: MARSHALL 30
In addition, while the asset schedule stated the value of the Debtors’ 1 8
stock holdings as “unknown,” Elaine points to Howard’s Probate Affidavit
which valued his stock holdings in the millions of dollars and a monthly
statement from his investment advisor indicating that Howard’s stock
holdings were worth $5,891,141.65. Elaine also claims that the amended
schedules improperly listed the “book value” of certain assets, rather than
market value and “inexplicably” valued various partnership interests at
just one hundred dollars each. According to Elaine, Howard and Ilene’s
assets actually exceeded their stated liabilities by at least $4,000,000.
upwards of $6 million. However, the Debtors’18
identification and description of the debenture and other stock
holdings were more than sufficient to put creditors on notice
of the assets so they could investigate further. See, e.g.,
Cusano v. Klein, 264 F.3d 936, 946–47 (9th Cir. 2001)
(holding that, while a debtors must “be as particular as is
reasonable under the circumstances[,]” there are “no bright-
line rules for how much itemization and specificity is
required,” and where the value of assets are unknown, “a
simple statement to that effect will suffice” (citations and
internal quotation marks omitted)); In re Weingarten, No. 05-
01091, 2013 WL 309076, at *12 (Bankr. C. D. Cal. Jan. 25,
2013) (“By listing the asset, even one with an unknown value,
[the debtor] has put parties on notice of these assets and they
can investigate further.”). Further, with regard to the
Debtors’ failure to list certain assets, the bankruptcy court did
not clearly err in finding that the omitted assets—200 shares
of stock, worth roughly $175–180 per share, and Citibank
accounts containing $186,458—were de minimis and
unproven, respectively.
Finally, Elaine argues that the Plan was proposed in bad
faith because the Debtors’ primary purpose was to avoid
paying the Texas Fraud Judgment. However, the only reason
consummation of the Debtors’ Plan would frustrate Elaine’s

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IN THE MATTER OF: MARSHALL 31
attempt to collect on the Texas Fraud Judgment was because
Pierce never filed a proof of claim. Significantly, the Debtors
initially included the Fraud Judgment in their Plan, and
amended to provide for discharge of the judgment only after
Pierce failed to file a proof of claim. We find no reason to
conclude that the Debtors knew Pierce would not file a proof
of claim and we see nothing that prevented him from doing
so.
In sum, the bankruptcy court’s finding that the Debtors’
Plan was proposed in good faith was not clearly erroneous
under all the circumstances. Therefore, confirmation of the
Debtors’ Plan was not an abuse of discretion.
C.
MOTION TO DISMISS—BAD FAITH
Under 11 U.S.C. § 1112(b), a Chapter 11 bankruptcy case
may be dismissed “for cause.” “Although section 1112(b)
does not explicitly require that cases be filed in ‘good faith,’
courts have overwhelmingly held that a lack of good faith in
filing a Chapter 11 petition establishes cause for dismissal.”
In re Marsch, 36 F.3d at 828. The good faith requirement
does not depend on a debtor’s subjective intent, but rather
“encompasses several, distinct equitable limitations that
courts have placed on Chapter 11 filings.” Id. Generally, a
plan is not filed in good faith if it represents an attempt “to
unreasonably deter and harass creditors” and to “achieve
objectives outside the legitimate scope of the bankruptcy
laws.” Id.
The question of a debtor’s good faith “depends on an
amalgam of factors and not upon a specific fact.” Id.

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IN THE MATTER OF: MARSHALL 32
(quoting Idaho Dep’t of Lands v. Arnold (In re Arnold),
806 F.2d 937, 939 (9th Cir. 1986)). “[T]he courts may
consider any factors which evidence ‘an intent to abuse the
judicial process and the purposes of the reorganization
provisions.’” Phoenix Piccadilly, Ltd. v. Life Ins. Co. of Va.
(In re Phoenix Piccadilly, Ltd.), 849 F.2d 1393, 1394 (11th
Cir. 1988) (quoting Albany Partners, Ltd. v. Westbrook (In re
Albany Partners, Ltd.), 749 F.2d 670, 674 (11th Cir. 1984)).
A “[d]ebtor bears the burden of proving that the petition was
filed in good faith.” Leavitt v. Soto (In re Leavitt), 209 B.R.
935, 940 (B.A.P. 9th Cir. 1997) (citing In re Powers, 135
B.R. 980, 997 (Bankr. C.D. Cal. 1991)).
Elaine argues that the petition was filed in bad faith and
should have been dismissed. First, Elaine contends that the
timing of the filing, within days of the Texas court’s
suggestion that Howard transfer assets to satisfy the Fraud
Judgment, indicated bad faith. We agree that the timing of
Howard and Ilene’s filing may be an indication that the
Debtors initiated bankruptcy proceedings for the purpose of
avoiding or delaying payment of the judgment. See In re
Leavitt, 171 F.3d at 1225 (finding that the timing of debtor’s
bankruptcy petition, filed within two weeks of judgment,
demonstrated that the debtor’s primary motive was avoidance
of the judgment). However, because the Debtors specifically
included the Texas Fraud Judgment in their initial Plan, it
appears just as likely that they filed their petition in order to
“effect a speedy, efficient reorganization,” and not “to
unreasonably deter and harass creditors.” In re Marsch,
36 F.3d at 828.
In addition, Elaine argues that the Debtors’ sole purpose
in filing the petition was to avoid filing a supersedeas bond
pending appeal of the Texas Fraud Judgment. In Marsch, we

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IN THE MATTER OF: MARSHALL 33
held that a petition was correctly dismissed for bad faith
where it “was filed solely to delay collection of the judgment
and avoid posting an appeal bond, even though debtor had the
ability to satisfy the judgment with nonbusiness assets.” Id.
at 831; see also In re Boynton, 184 B.R. 580, 581 (Bankr.
S.D. Cal. 1995) (finding bad faith where petition was filed in
order to evade a tax judgment despite the fact that debtors had
“significant assets” and “may have been able” to post a
bond).
Here, unlike in Marsch and Boynton, the record suggests
that Howard and Ilene’s liquid assets were probably
insufficient to satisfy the judgment or cover the cost of a
supersedeas bond. The bankruptcy court found that the Fraud
Judgment amounted to over $12 million plus interest, that the
“custom” in Texas was to set appeal bonds at 150% of the
judgment, and that Howard did not have sufficient liquid
assets to post a bond of that size. Although the record does
not invariably indicate that the Debtors could not finance a
supersedeas bond, we cannot say that the bankruptcy court’s
determination was clearly erroneous. Moreover,
notwithstanding their ability to finance a bond, Howard and
Ilene’s inclusion of the Fraud Judgment in their initial Plan
suggests that they filed their bankruptcy petition for the
proper purpose of reorganization, not as a mere ploy to avoid
posting the bond.
Finally, Elaine contends that the absence of other
unsecured creditors in the Plan shows that the Debtors filed
their petition in order to avoid having to obtain a supersedeas
bond or pay the Texas Fraud Judgment. See, e.g., Chinichian
v. Campalongo (In re Chinichian), 784 F.2d 1440, 1445 (9th
Cir. 1986); Little Creek Dev. Co. v. Common Wealth Mortg.
Corp. (In the Matter of Little Creek), 779 F.2d 1068, 1073

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IN THE MATTER OF: MARSHALL 34
In support of her motion to dismiss based on bad faith filing, Elaine 1 9
also relies on the arguments that the Debtors were solvent and
misrepresented the value of their assets. W e reject these arguments for the
same reasons discussed supra section III.B.
(5th Cir. 1986); In re Silberkraus, 253 B.R. 890, 904 (Bankr.
C.D. Cal. 2000). Indeed, Howard and Ilene paid off at least
$89,000 in unsecured debts the day before filing, and the
Texas Fraud Judgment made up roughly 82% of the Debtors’
total scheduled liabilities.
However, notwithstanding their minimal unsecured debt,
the Debtors’ decision to file for bankruptcy does not indicate
bad faith in light of the size of the Texas Fraud Judgment and
the potential cost of obtaining a bond. As the bankruptcy
court noted, all debtors file for bankruptcy in order to delay
creditor action. Thus, although the Debtors’ main motivation
may have been to ameliorate the burden of the judgment,
given that the Plan proposed payment of the judgment, we
cannot say that they filed a Chapter 11 petition in order to
avoid paying it altogether, or to unduly deter or harass
creditors.19
Moreover, we agree with the bankruptcy court that
“[p]erhaps the most compelling grounds for denying a motion
to dismiss grounded on bad faith is the determination that a
reorganization plan qualifies for confirmation.” This is
because “[a] debtor’s showing that a plan of reorganization is
ready for confirmation essentially refutes a contention that
the case is filed or prosecuted in bad faith.” Id. The
bankruptcy court properly considered the viability of the
Debtors’ proposed Plan as weighing heavily against
dismissal.

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IN THE MATTER OF: MARSHALL 35
Viewing the amalgam of factors together, it is not
“obvious that [the Debtors are] attempting unreasonably to
deter and harass creditors[.]” In re Thirtieth Place, Inc., 30
B.R 503, 505 (9th Cir. B.A.P. 1983) (quoting Matter of
Levinsky, 23 B.R. 210, 218 (N.Y. Bankr. 1982)).
Accordingly, the bankruptcy court’s finding of good faith was
not clearly erroneous, and it did not abuse its discretion in
denying the motion to dismiss.
For the foregoing reasons, the district court’s decision is
AFFIRMED.

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APPENDIX A

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507 IN RE MARSHALL
Cite as 300 B.R. 507 (Bkrtcy.C.D.Cal. 2003)
In re J. Howard MARSHALL
et ux., Debtors.
No. LA 02–30769–SB.
United States Bankruptcy Court,
C.D. California.
Oct. 9, 2003.
Trustee of family trust filed his oppo-
sition to proposed Chapter 11 plan filed by
his brother and his brother’s wife and
moved to dismiss their bankruptcy case on
ground that they were not insolvent, and
that Congress could not constitutionally
provide for reorganization by solvent debt-
ors. Amending and superceding prior opin-
ion, the Bankruptcy Court, Samuel L. Buf-
ford, J., held that: (1) bankruptcy law does
not require that debtor be insolvent, either
in ‘‘balance sheet’’ or in ‘‘liquidity’’ sense,
in order to file Chapter 11 petition or to
proceed to confirmation; (2) Congress has
power under the Bankruptcy Clause to
determine that debtor may invoke rights
under the Bankruptcy Code to adjust his
obligations before debtor becomes insol-
vent; and (3) allowing debtors who alleged-
ly were not insolvent, in ‘‘balance sheet’’
sense, to file for Chapter 11 relief and to
obtain confirmation of plan providing for
discharge of their debts would not violate
Fifth Amendment economic substantive
due process rights of judgment creditor.
Plan confirmed; dismissal motion de-
nied.
1. Bankruptcy O2223, 3548.1
Bankruptcy law does not require that
debtor be insolvent, either in ‘‘balance
sheet’’ sense of having liabilities that ex-
ceed his assets or in ‘‘liquidity’’ sense of
being unable to pay his debts as they
become due, in order to file a Chapter 11
petition or to proceed to confirmation of
plan of reorganization.
2. Bankruptcy O2222.1
While Congress is not free to define
contours of bankruptcy without any limita-
tion, insolvency, whether in ‘‘balance
sheet’’ or in ‘‘liquidity’’ sense, is not pre-
requisite for the constitutional invocation
of federal bankruptcy jurisdiction.
U.S.C.A. Const. Art. 1, § 8, cl. 4.
3. Bankruptcy O2022
United States bankruptcy law is de-
signed to provide relief from creditor pres-
sures for debtors with cash flow difficul-
ties, even when they are clearly solvent
under ‘‘balance sheet’’ test.
4. Bankruptcy O2222.1
Congress has power under the Bank-
ruptcy Clause to determine that debtor
may invoke rights under the Bankruptcy
Code to adjust his obligations with credi-
tors before debtor becomes insolvent un-
der ‘‘balance sheet’’ test. U.S.C.A. Const.
Art. 1, § 8, cl. 4; Bankr.Code, 11 U.S.C.A.
§ 101 et seq.
5. Constitutional Law O277(1)
Eminent Domain O81.1
Property rights enjoy at least a mea-
sure of protection in bankruptcy under the
Due Process and Just Compensation
Clauses of the Fifth Amendment.
U.S.C.A. Const.Amend. 5.
6. Bankruptcy O2015
While property rights enjoy at least a
measure of protection in bankruptcy, Con-
gress is not barred from passing laws that
impair obligation of contracts.
7. Bankruptcy O2015
Very essence of bankruptcy laws is
modification or impairment of contractual
obligations.

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508 300 BANKRUPTCY REPORTER
8. Bankruptcy O2013.1
Constitutional Law O306(4)
Protection of property rights in bank-
ruptcy is measured, and Congress, acting
in its bankruptcy power, may authorize
bankruptcy courts to affect such property
rights, as long as limitations of due process
are observed. U.S.C.A. Const. Art. 1, § 8,
cl. 4; U.S.C.A. Const.Amend. 5.
9. Bankruptcy O2223, 3549
Constitutional Law O306(4)
Allowing Chapter 11 debtors who al-
legedly were not insolvent, in sense that
their liabilities did not exceed their assets,
to file for Chapter 11 relief and to obtain
confirmation of plan providing for dis-
charge of their debts would not violate the
Fifth Amendment economic substantive
due process rights of judgment creditor
who had neither property nor contract
rights to assert against debtors, and who,
as result of his refusal to file proof of
claim, did not even have claim against
estate, but only a Texas state court judg-
ment which was on appeal. U.S.C.A.
Const.Amend. 5.
10. Bankruptcy O2019
Congress validly exercised its bank-
ruptcy powers under the Constitution to
authorize debtors who are solvent, wheth-
er in ‘‘balance sheet’’ or in ‘‘liquidity’’
sense, to file Chapter 11 cases and obtain
confirmation of reorganization plans.
U.S.C.A. Const. Art. 1, § 8, cl. 4.
West Codenotes
Recognized as Unconstitutional
Pub.L. No. 101-650, 101st Cong., 2d
Sess. § 317(a) (1990).
Validity Called into Doubt
Bankr.Code, 11 U.S.C.A. § 106(a).
Limitation Recognized
Bankr.Code, 11 U.S.C.A. § 522(f).
J. Howard Marshall, III, Ilene Marshall,
Pasadena.
Bingham McCutchen, LLP, Julia Frost–
Davies, Rheba Rutkowski, Andrew J. Gal-
lo, Boston, MA.
Bingham McCutchen, LLP, G. Eric
Brunstad, Jr., Hartford, CT.
Bingham McClutchen, LLP, Matthew A.
Lesnick, Los Angeles.
David L. Neale/Anne E. Wells, Levene
Neale Bender Rankin et al., Los Angeles.
SECOND AMENDED OPINION ON
PLAN CONFIRMATION AND MO-
TION TO DISMISS (CONSTITU-
TIONAL ISSUES)
SAMUEL L. BUFFORD, Bankruptcy
Judge.
I. Introduction
In this case Pierce Marshall, as trustee
for three family trusts (collectively re-
ferred to as ‘‘Pierce’’) opposes confirmation
of the chapter 11 1 plan proposed by the
debtors, who are his brother J. Howard
Marshall, III (‘‘Howard’’) and Howard’s
wife Ilene O. Marshall. Pierce also moves
to dismiss the case. Pierce supports both
of these positions with the argument that
this case falls outside the bankruptcy juris-
diction of the federal courts under the
Bankruptcy Clause of the United States
1. Unless otherwise indicated, all chapter, sec-
tion and rule references are to the Bankrupt-
cy Code, 11 U.S.C. §§ 101–1330 (West 2003)
and to the Federal Rules of Bankruptcy Pro-
cedure, Rules 1001–9036.

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509 IN RE MARSHALL
Cite as 300 B.R. 507 (Bkrtcy.C.D.Cal. 2003)
Constitution, because the debtors are sol-
vent under a balance sheet test. Notably,
Pierce has declined to file a claim on be-
half of the trusts (or on his own behalf) in
this case.
The court finds that the balance sheet
test for insolvency was unknown in United
States bankruptcy law until 1898, when
balance sheet insolvency first entered
United States bankruptcy law. Prior
thereto, insolvency in the bankruptcy con-
text always meant liquidity (or equity) in-
solvency.
The court further holds that the Bank-
ruptcy Clause of the United States Consti-
tution does not require that a debtor in
bankruptcy be insolvent under any test,
and that the debtors in this case may
constitutionally invoke remedies provided
under chapter 11.
II. Relevant Facts
The relevant facts in this case are set
forth in the court’s recently issued opinion
on the non-constitutional issues involved in
the pending plan confirmation and motion
to dismiss. See In re Marshall, 298 B.R.
670 (Bankr.C.D.Cal.2003). The filing of
this bankruptcy case was precipitated in
part by a judgment in favor of Pierce and
against Howard in the Texas probate case
of their father J. Howard Marshall II (‘‘J.
Howard’’). The judgment, which was then
on appeal, was for $11 million plus costs
and interest at ten percent. By the filing
date of the bankruptcy petition, this debt
totaled more than $12 million.
As amended, the debtors’ schedules
show assets worth $13,138,311.38 and liqui-
dated debts of $13,914,112.39. In addition
to the valued assets, the schedules disclose
interests in a revocable family trust, claims
made in the probate estate of Howard’s
father, J. Howard, and an interest in the
Eleanor P. Stevens Irrevocable Gift Trust
(which is described in detail in a full-page
exhibit). In addition to the quantified
debts, the schedules list nonpriority debts
in unknown amounts owing to Wells Fargo
Bank Texas, the City of Pasadena, a Dallas
law firm and the Marshall Museum &
Trust.
In addition to the $12 million judgment,
Howard had been named as a defendant in
a $5 million lawsuit in Louisiana. Fur-
thermore, Pierce’s lawyer also sent a letter
to Howard’s lawyer on May 20, 2002 pro-
viding substantial detail for another claim
against Howard exceeding $100 million.
The court set a claims bar date of No-
vember 15, 2002. Pierce declined to file a
proof of claim in this case. Pierce has
moved to dismiss this case and has object-
ed to the confirmation of the debtors’
chapter 11 plan as amended.
Pierce makes both statutory and consti-
tutional objections to the confirmation of
the chapter 11 plan proposed by debtors
Howard and Ilene Marshall. The court
has previously found that the statutory
requirements for confirmation are satis-
fied, and that the case should not be dis-
missed on good faith grounds. See Mar-
shall, 298 B.R. at 675-684.
III. Constitutionality of a Chapter
11 Case for a Solvent Debtor
Pierce contends that the debtors’ assets
exceed their liabilities as of the date of
filing, and that in consequence they were
solvent under a balance sheet test. The
court finds that determining the accuracy
of this contention would be very difficult
and very time consuming in this case.
While for some purposes in bankruptcy it
is necessary to make such a determina-
tion,2 in this case no such determination is
2. See § 546(c) (reclamation); § 547(b)(3) (preferential transfer); § 548(a)(1)(B)(ii)(I)

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510 300 BANKRUPTCY REPORTER
necessary. For the purposes of the consti-
tutional analysis, the court assumes with-
out deciding that the debtors were solvent,
in the balance sheet sense, when they filed
this case.
[1] As a statutory matter, it is clear
that the bankruptcy law does not require
that a bankruptcy debtor be insolvent, ei-
ther in the balance sheet sense (more lia-
bilities than assets) or in the liquidity
sense (unable to pay the debtor’s debts as
they come due), to file a chapter 11 case or
proceed to the confirmation of a plan of
reorganization. The Ninth Circuit firmly
rejected such a view in Sylmar Plaza
where it held, ‘‘insolvency is not a prereq-
uisite to a finding of good faith under
§ 1129(a).’’ Platinum Capital, Inc. v. Syl-
mar Plaza, L.P. (In re Sylmar Plaza,
L.P.), 314 F.3d 1070, 1074–75 (9th Cir.
2002); accord, In re James Wilson Associ-
ates, 965 F.2d 160, 170 (7th Cir.1992) (re-
jecting bad faith challenge to confirma-
tion).
Pierce concedes that insolvency is not a
statutory requirement for filing a volun-
tary bankruptcy case under chapter 11.
Instead, he argues that the Bankruptcy
Clause of the United States Constitution
can only be invoked by a bankruptcy debt-
or who is insolvent under a balance sheet
test. Pierce argues that the constitutional
grant of authority to Congress to enact
‘‘uniform Laws on the subject of Bankrupt-
cies throughout the United States’’ 3 is lim-
ited to regulating the affairs of debtors
who are insolvent in this sense.
Pierce argues that there must be some
content to the Bankruptcy Clause in the
Constitution. In general terms, this court
agrees. On this point Pierce is on solid
ground. Congress is not free to define the
contours of bankruptcy without any limita-
tions: the bankruptcy terrain clearly must
have some boundaries. See, e.g., Conti-
nental Illinois Nat’l Bank & Trust v. Chi-
cago, Rock Island & Pac. Ry. Co., 294 U.S.
648, 669–70, 55 S.Ct. 595, 79 L.Ed. 1110
(1935).
The test, according to Pierce, is that the
Constitution must require that a debtor in
a bankruptcy case be insolvent under a
balance sheet test. Insofar as the Bank-
ruptcy Code permits a bankruptcy filing
by a debtor who is balance sheet solvent,
according to Pierce, the law falls outside
the powers granted by the Constitution to
the federal government. In such a circum-
stance, the Constitution, and not the law,
must govern the case. See Marbury v.
Madison, 5 U.S. (1 Cranch) 137, 178, 2
L.Ed. 60 (1803) (‘‘If then TTT the constitu-
tion is superior to any ordinary act of the
legislature; the constitution, and not such
ordinary act, must govern the case to
which they both apply.’’)
[2] The court finds that neither bal-
ance sheet insolvency nor liquidity insol-
vency is required for the constitutional
invocation of federal bankruptcy jurisdic-
tion. The limits on the application of the
Bankruptcy Clause lie elsewhere, not in
balance sheet insolvency.
As a preliminary matter, it is necessary
to distinguish the exercise of powers under
the Bankruptcy Clause from the exercise
of congressional powers under the Com-
merce Clause. These two powers are
closely related. See Railway Labor Exec-
utives’ Ass’n v. Gibbons, 455 U.S. 457,
465–66, 102 S.Ct. 1169, 71 L.Ed.2d 335
(1982). However, the conditions for invok-
ing the Commerce Clause are different
from those for invoking the Bankruptcy
Clause, and each has its own limitations.
(certain fraudulent transfers); § 553(a) (set-
off).
3. U.S. C ONST. , art. 1, § 8, cl. 4.

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511 IN RE MARSHALL
Cite as 300 B.R. 507 (Bkrtcy.C.D.Cal. 2003)
As the Supreme Court has explained,
‘‘[u]nlike the Commerce Clause, the Bank-
ruptcy Clause itself contains an affirmative
limitation or restriction upon Congress’
power,’’ and ‘‘if we were to hold that Con-
gress had the power to enact nonuniform
bankruptcy laws pursuant to the Com-
merce Clause, we would eradicate from the
Constitution a limitation on the power of
Congress to enact bankruptcy laws.’’ Id.
at 468–69, 102 S.Ct. 1169.
Setting aside the Commerce Clause, the
powers granted to Congress under the
Bankruptcy Clause are expanded by art. 1,
§ 8, cl. 18, which grants Congress the
power ‘‘To make all Laws which shall be
necessary and proper for carrying into
Execution the foregoing Powers TTTT’’
See Wright v. Union Central Life Ins. Co.,
304 U.S. 502, 513, 58 S.Ct. 1025, 82 L.Ed.
1490 (1938). Theoretically, this provision
might be invoked to support the use of the
Bankruptcy Clause in doubtful cases.
However, the Supreme Court has never in
fact utilized this approach to determine the
constitutionality of bankruptcy provisions.
The court assumes without deciding that
Congress was not exercising its Commerce
Clause or its Necessary and Proper Clause
powers in determining the qualifications
for filing a bankruptcy case. Thus the
court’s constitutional analysis in this case
is confined to the Bankruptcy Clause.
To analyze Pierce’s argument, we exam-
ine the understanding of the framers of
the Constitution at the time of its adoption,
the history of bankruptcy law in the Unit-
ed States and its predecessor English stat-
utes, and applicable Supreme Court case
law. We also examine Pierce’s argument
that, insofar as the Bankruptcy Code per-
mits a solvent chapter 11 debtor to file a
case and proceed to plan confirmation,
Congress has exceeded its Bankruptcy
Powers and has deprived him of property
without due process of law.
A. Definition of Insolvency
Before undertaking this analysis, we
must first address what Pierce means by
‘‘insolvency,’’ because this term has two
commonly used definitions in the bank-
ruptcy context.
For the purposes of this argument,
Pierce urges the court to adopt the balance
sheet definition of solvency in
§ 101(32)(A), which states in relevant part:
‘‘insolvent’’ means TTT with reference to
an entity other than a partnership and a
municipality, financial condition such
that the sum of such entity’s debts is
greater than all of such entity’s proper-
ty, at a fair valuation, exclusive of—
(i) property transferred, concealed, or
removed with intent to hinder, delay, or
defraud such entity’s creditors; and
(ii) property that may be exempted
from property of the estate TTTT
Section 101(32)(A) states the Bankruptcy
Code version of the balance sheet test for
Insolvency.4 Under the non-bankruptcy
version, a debtor is insolvent where its
liabilities exceed its assets as shown on its
balance sheet. See B LACK ’ S LAW DICTIO-
NARY 799 (7th ed.1999).
Section 101(32)(A) makes two modifica-
tions to the usual balance sheet insolvency
test. First, the test requires the revision
of balance sheet values to their ‘‘fair valua-
tion.’’ In contrast, a balance sheet pre-
pared according to generally accepted ac-
counting principles provides asset values
at historical cost less any applicable depre-
ciation or amortization. The ‘‘fair valua-
tion’’ standard requires an adjustment in
4. The 1898 Act has a similar definition of
insolvency. See 1898 Act, § 1(19). Unlike
§ 101(32)(A) of the Bankruptcy Code, § 1(19)
of the 1898 Act included exempt property in
the calculation of insolvency.

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512 300 BANKRUPTCY REPORTER
balance sheet values from historical cost to
present market values. Second, the
§ 101(32)(A) definition excludes property
that would otherwise appear on a balance
sheet, but that is exempt under § 522 (pro-
viding exemptions for individual debtors).
The insolvency definition in § 101(32)(A)
is designed to govern the handful of tech-
nical uses of this term in the Bankruptcy
Code. In fact, ‘‘insolvent’’ is used only ten
times in the entire statute, and in nine of
those it is used to define narrowly drawn
rights under particular statutory provi-
sions. See § 365 (trustee may assume an
executory contract notwithstanding a de-
fault relating to the debtor’s insolvency);
§ 525 (protecting a debtor against dis-
criminatory treatment during prepetition
insolvency); § 541 (forfeiture based on in-
solvency does not prevent prepetition
property from becoming property of the
estate); § 543 (court may consider inter-
ests of equity holders of solvent debtor in
determining whether to require a custodi-
an to turn over property); § 545 (protect-
ing a debtor from statutory liens predicat-
ed upon insolvency); § 546 (authorizing
certain reclamation rights to creditors who
have delivered certain goods to a debtor
while insolvent before the bankruptcy pe-
tition was filed); § 547 (element of cause
of action for preferential transfer); § 548
(element of certain causes of action for
fraudulent transfers); § 553 (condition for
prohibiting a creditor setoff). None of
these uses sheds any light on the constitu-
tional limits of the Bankruptcy Clause.
The final use of ‘‘insolvency’’ in the
Bankruptcy Code occurs in § 109(c)(3),
which requires a municipality to be insol-
vent as a condition of filing a bankruptcy
case. The meaning of ‘‘insolvency’’ in this
provision is entirely different from the bal-
ance sheet test,5 and is governed by
§ 101(32)(C), which states that ‘‘insolvent’’
means:
with reference to a municipality, finan-
cial condition such that the municipality
is—
(i) generally not paying its debts as they
become due unless such debts are the
subject of a bona fide dispute; or
(ii) unable to pay its debts as they be-
come due TTTT
This is known as the liquidity test for
insolvency (also known as the ‘‘equity’’ or
the ‘‘cash flow’’ test),6 and it is the most
commonly used definition in the bankrupt-
cy context.7 This liquidity definition of
insolvency is the only one that has ever
played a role in qualifying a person as a
debtor under United States bankruptcy
law.
[3] It is not uncommon for debtors to
be solvent under the balance sheet test,
and yet to have severe financial problems.
This court frequently receives cases, filed
under both chapter 7 and chapter 11 and
especially under chapter 13 (a reorganiza-
tion chapter for consumers), where the
debtor is clearly solvent under a balance
5. Section 101(32)(B) also has a different defi-
nition of insolvency for a partnership, which
is a modified version of the balance sheet test
that takes into account the partners’ separate
assets.
6. This definition is also used in § 303(h)(1),
which authorizes a court to order relief
against an involuntary debtor if, ‘‘the debtor
is generally not paying such debtor’s debts as
such debts become due unless such debts are
the subject of a bona fide disputeTTTT’’
7. There are other, more sophisticated mea-
sures of insolvency that are increasingly used
in complex business transactions. See e.g.,
Michael J. Epstein, Director/Manager Liability
and How to Avoid Furthering Insolvency,
NABT ALK , Summer 2003, at 23, 24. These
measures of insolvency have not found their
way into United States bankruptcy statutes.

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513 IN RE MARSHALL
Cite as 300 B.R. 507 (Bkrtcy.C.D.Cal. 2003)
sheet test, but has substantial cash flow
problems.8 The United States bankruptcy
law is designed to provide relief from cred-
itor pressures for debtors with cash flow
difficulties, even where they are clearly
solvent under a balance sheet test.
As to reorganizations under chapter 11,
there is substantial reason for Congress to
decide that a debtor should be eligible
before the debtor becomes insolvent under
a balance sheet test. The prospects for
reorganizing a debtor in financial difficulty
are much better when the debtor is still
solvent than after it becomes insolvent.
See generally 1 COLLIER ON B ANKRUPTCY
¶ 1.19[1] (James William Moore ed., 14th
ed.1988) [hereinafter C OLLIER ] (comment-
ing on the reorganization provisions of the
1898 Act, as amended by the Chandler
Act). If a debtor must wait until it be-
comes insolvent to invoke the reorganiza-
tion provisions under the bankruptcy law,
substantial economic values will often be
irretrievably lost. Congress certainly
could legitimately decide that it is best for
the economy of the United States to per-
mit solvent debtors to reorganize under
the bankruptcy law to preserve economic
values.
An additional vice of a balance sheet test
as a criterion for admission to the bank-
ruptcy system is that substantial time is
consumed in determining whether a debtor
is in fact insolvent. This case is illustra-
tive—litigation over the debtors’ solvency
has consumed a large amount of time and
effort, and a determination of the debtors’
insolvency has not yet been made more
than a year after the filing.
If a reorganization is held up pending a
determination of balance sheet insolvency,
businesses will rarely be reorganized, and
at least some of the reorganization value
(the value of a business as reorganized as
opposed to its liquidation value) will inevi-
tably be lost. Indeed, this is the experi-
ence in countries that require insolvency,
according to a balance sheet test, as a
condition for admission to the bankruptcy
system—businesses are generally not re-
organizable, and substantial economic val-
ues are lost.9
Accordingly, the court finds that the bal-
ance sheet test is not the appropriate test
for insolvency in evaluating Pierce’s consti-
tutional challenge in this case. However,
assuming that Pierce has implicitly
claimed that the liquidity test should also
be applied by the court, the court proceeds
to consider Pierce’s constitutional chal-
lenge.
B. United States and English
Bankruptcy Laws
The United States Congress has enacted
five bankruptcy laws.10 The first was en-
8. Some bankruptcy courts also frequently see
chapter 12 cases where the debtor is quite
solvent under a balance sheet test. However,
chapter 12 cases are rare in the Central Dis-
trict of California.
9. The World Bank recommends against the
use of a balance sheet insolvency test as a
qualification for bankruptcy. See W ORLD
B ANK, P RINCIPLES AND G UIDELINES FOR E FFECTIVE
I NSOLVENCY AND CREDITOR R IGHTS S YSTEMS ¶ 90
(2001). Instead, if an insolvency test is to be
adopted in a country, the World Bank recom-
mends the liquidity test—the debtor’s ability
to pay debts as they come due. See id.
10. At the time of the framing of the Constitu-
tion, the terms ‘‘bankruptcy’’ and ‘‘insolven-
cy’’ were applied differently and had operated
in different systems. Bankruptcy meant the
action against malingering debtors, while in-
solvency meant relief for the honest but unfor-
tunate debtor. See Sturges v. Crowninshield, 4
Wheat. 122, 17 U.S. 122, 194–195, 4 L.Ed.
529 (1819) (‘‘[T]he subject [of bankruptcies] is
divisible in its nature into bankrupt and insol-
vent laws TTT [A]lthough the two systems have
existed apart from each other, there is such a
connection between them, as to render it diffi-
cult to say how far they may be blended
together’’); see also C HARLES W ARREN, BANK -

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514 300 BANKRUPTCY REPORTER
acted in 1800 (‘‘the 1800 Act’’),11 and was
intended to last only five years. See gen-
erally Charles Jordan Tabb, The Histori-
cal Evolution of the Bankruptcy Dis-
charge, 65 Am. Bankr.L.J. 325, 344–45
(1991); B RUCE H. M ANN, REPUBLIC OF DEBT-
ORS (2002) [hereinafter MANN ]. This act
was repealed in 1803. There was no fur-
ther federal bankruptcy law until 1841
(‘‘the 1841 Act’’).12 See generally Tabb, at
349–51. The 1841 Act lasted for an even
shorter time than the 1800 Act, and was
repealed in 1843. The next bankruptcy
law was enacted in 1867 (‘‘the 1867 Act’’) 13
to deal with economic dislocations result-
ing from the Civil War. See generally
Tabb, at 353–55. This law lasted consider-
ably longer than its predecessors, and was
repealed in 1878.
Congress enacted permanent federal
bankruptcy legislation in 1898 (‘‘the 1898
Act’’).14 This law was substantially revised
and expanded by the Chandler Act of
1938.15 It was replaced with the Bank-
ruptcy Code in 1978 (effective October 1,
1979).16
English law has included bankruptcy
law continuously since 1542, when Parlia-
ment enacted the first bankruptcy law.17
The next major English bankruptcy law
was enacted in 1705.18 In 1732 Parliament
enacted a comprehensive codification and
revision of English bankruptcy law,19
which remained in force (with amend-
ments) at the time that the United States
Constitution was written.
C. The Constitutional Convention
Before examining the English and Unit-
ed States statutes, we turn to the constitu-
tional convention in 1789, to see whether
there is anything in the records of the
convention that might shed light on the
role of insolvency in the meaning of ‘‘bank-
ruptcies’’ in the Bankruptcy Clause.
The Bankruptcy Clause received little
discussion in the constitutional convention.
The bankruptcy issue arose in a discussion
of the Full Faith and Credit clause, and
drove the constitutional extension of the
Full Faith and Credit clause to acts of the
legislature as well as judicial decisions.
See M ANN , at 183; see generally id. at 182–
87. Because credit, like commerce, was
not limited by state boundaries, the dele-
gates recognized that a national system of
bankruptcy law was needed to support a
national credit system upon which com-
merce depended. See id. at 185–87.
The only vote against the Bankruptcy
Clause was cast by Roger Sherman of
Connecticut. He opposed this provision on
the grounds that bankruptcies were pun-
ishable by death in some cases in England,
RUPTCY IN U NITED STATES HISTORY 7 (1935) (at the
time of the adoption of the Constitution, only
a few states had laws on either the subject of
bankruptcies or insolvency, Pennsylvania be-
ing the only state that had both—bankruptcy
was releasing traders from debts, insolvency a
discharge of all persons from prison upon
surrendering their property to their credi-
tors).
11. Bankruptcy Act of 1800, ch. 19, 2 Stat. 19
(1800) (repealed 1803).
12. Bankruptcy Act of 1841, ch. 9, 5 Stat. 440
(1841) (repealed 1843).
13. Bankruptcy Act of 1867, ch. 176, 14 Stat.
517 (1867) (repealed 1878).
14. Bankruptcy Act of 1898, ch. 541, 30 Stat.
544 (1898) (repealed 1978).
15. Chandler Act, ch. 575, 52 Stat. 840 (1938)
(repealed 1978).
16. Pub.L. No. 95–598, 92 Stat. 2549 (1978).
17. An act against such persons as do make
bankrupts, 34 & 35 Hen. 8, c. 4 (1542).
18. 4 Anne, c. 17 (1705).
19. 5 Geo. 2, c. 30 (1732).

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515 IN RE MARSHALL
Cite as 300 B.R. 507 (Bkrtcy.C.D.Cal. 2003)
and he opposed granting Congress this
power in the United States. See Railway
Labor Executives’ Ass’n v. Gibbons, 455
U.S. 457, 472 n. 13, 102 S.Ct. 1169, 71
L.Ed.2d 335 (1982) (citing 2 M. F ARRAND,
RECORDS OF THE CONVENTION OF 1787, at 489
(1911)).
The Federalist Papers, which discuss in
detail virtually every aspect of the Consti-
tution, make only a single reference to the
Bankruptcy Clause. In Federalist No. 42,
James Madison wrote:
The power of establishing uniform laws
of bankruptcy is so intimately connected
with the regulation of commerce, and
will prevent so many frauds where the
parties or their property may lie or be
removed into different States, that the
expediency of it seems not likely to be
drawn into question.
T HE FEDERALIST No. 42, at 239 (James
Madison) (Clinton Rossiter ed., 1961).
A few decades later Justice Story (then
a professor at Harvard Law School), in his
famous Commentaries, stated:
Perhaps, as satisfactory a description of
a bankrupt law as can be framed is, that
it is a law for the benefit and relief of
creditors and their debtors, in cases in
which the latter are unable or unwilling
to pay their debts. And a law on the
subject of bankruptcies, in the sense of
the constitution, is a law making provi-
sions for cases of persons failing to pay
their debts.
3 JOSEPH STORY, COMMENTARIES ON THE C ON-
STITUTION OF THE UNITED STATES § 1108
n.25. (1833) [hereinafter S TORY ]. In Jus-
tice Story’s view, it is the failure to pay
debts, not insolvency, that distinguishes a
debtor who is an eligible subject for bank-
ruptcy relief.20
Thus the constitutional history gives no
support to the argument that the founders
intended that bankruptcy relief be limited
to insolvent debtors, or that this meaning
was included in the Bankruptcy Clause.
D. History of Insolvency Provisions
In Bankruptcy Law
Having found the evidence from the con-
stitutional convention unhelpful, we now
take a broader look to see what meaning
‘‘bankruptcy’’ was given in relevant legisla-
tion on the subject, both before and after
the writing of the Constitution. As the
Supreme Court has told us, ‘‘Probably the
most satisfactory approach to the problem
of interpretation here involved [the power
of Congress under the Bankruptcy Clause]
is to examine it in the light of the acts, and
the history of the acts, of Congress which
have from time to time been passed on the
subjectTTTT’’ Continental Illinois Nat’l
Bank & Trust. v. Chicago, Rock Island &
Pac. Ry. Co., 294 U.S. 648, 670, 55 S.Ct.
595, 79 L.Ed. 1110 (1935).
Historically, bankruptcy laws have not
been conceived in the United States or
England for the protection of debtors,
whether honest or dishonest. Bankruptcy
laws were enacted principally for the bene-
fit of trade and for the protection of credi-
tors, to give them more powers acting in
concert to collect debts than they pos-
sessed individually. See, e.g., 2 W ILLIAM
B LACKSTONE, C OMMENTARIES *472 [hereinaf-
ter BLACKSTONE ]. Indeed, some of the
worst abuses were committed by debtors
20. See also STORY , supra, § 1101 (‘‘it may be
stated, that the general object of all bankrupt
and insolvent laws is, on the one hand, to
secure to creditors an appropriation of the
property of their debtors pro tanto to the
discharge of their debts, whenever the latter
are unable to discharge the whole amount;
and, on the other hand, to relieve unfortunate
and honest debtors from perpetual bondage to
their creditors, either in the shape of unlimit-
ed imprisonment to coerce payment of their
debts, or of an absolute right to appropriate
and monopolize all their future earnings.’’)

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516 300 BANKRUPTCY REPORTER
who refused to pay their debts even
though they were solvent and eminently
capable of paying. The principal benefit
to debtors was the avoidance of debtors’
prison or the discharge therefrom. See id.
An analysis of the history of bankruptcy
laws in the United States, and of their
predecessors in England, shows that the
Bankruptcy Clause has never been tied to
balance sheet insolvency, or insolvency of
any other type. No United States bank-
ruptcy act, and none of its English prede-
cessors, has ever required balance sheet
insolvency as a condition of either volun-
tary or involuntary bankruptcy. Of the
five United States bankruptcy laws and its
three principal English predecessors, only
the 1841 and the 1867 Acts required a
voluntary debtor to plead that the debtor
was insolvent in a liquidity sense, i.e. that
the debtor was unable to pay his or her
debts as they became due, and such a
pleading was unchallengeable.
For involuntary bankruptcy cases, insol-
vency began to creep into United States
bankruptcy law in the 1867 Act as an
element in one or more ‘‘acts of bankrupt-
cy,’’ any one of which would support an
involuntary bankruptcy petition. Howev-
er, insolvency did not become the chief
basis for an involuntary petition until the
adoption of the Bankruptcy Code in 1978.
Even now, under the Bankruptcy Code,
the insolvency test for an involuntary peti-
tion is the liquidity test, and not the bal-
ance sheet test for insolvency.21
1. Voluntary Cases
The 1841 Act was the first United States
law to authorize a debtor to file a volun-
tary bankruptcy petition.22 Neither the
1800 Act nor the English predecessors
permitted a voluntary bankruptcy filing.
The 1841 Act required that a bankruptcy
petition be verified under oath and plead
that the debtor is ‘‘unable to meet [his or
her] debts and engagements TTTT’’
This was only a pleading requirement.
Neither the parties nor the court had the
authority to inquire into whether a debtor
was in fact insolvent. See, e.g., Ex parte
Hull, 12 F.Cas. 853, 856 (S.D.N.Y.1842).
Indeed, the court was required to declare
a voluntary petitioner bankrupt on the
debtor’s sworn representation of inability
to pay his or her debts, irrespective of the
debtor’s actual wealth and financial condi-
tion. See id.
A debtor filing a voluntary bankruptcy
petition under the 1867 Act was similarly
required to ‘‘set forth TTT his inability to
pay all his debts in full TTTT’’ See id. § 11.
Immediately upon filing a petition stating
the debtor’s inability to pay his or her
debts in full and the debtor’s willingness to
surrender his or her estate and effects for
the benefit of creditors and a desire to
obtain the benefits of the bankruptcy law,
the debtor was entitled to be adjudicated a
bankrupt. See, e.g., In re Patterson, 18
F.Cas. 1315, 1317 (S.D.N.Y.1867). No fur-
ther inquiry as to the debtor’s ability to
pay was permitted. See id. at 1318.
21. But see Thomas E. Plank, Bankruptcy and
Federalism, 71 FORD. L. REV. 1063 (2002),
where he argues that ‘‘bankruptcy’’ inherently
meant insolvency in the eighteenth century.
He bases this conclusion principally on the
examination of several eighteenth century dic-
tionaries, and ignores the legal history of
bankruptcy law. See id. at 1076–77. The
court finds this approach unpersuasive, in
light of the contrary history of bankruptcy law
at that time. Furthermore, even Professor
Plank does not contend that bankruptcy
meant balance sheet insolvency in 1789.
22. However, it appears that debtors frequent-
ly arranged with friendly creditors to file es-
sentially voluntary bankruptcy cases under
the 1800 bankruptcy law. See MANN , supra, at
228–39.

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517 IN RE MARSHALL
Cite as 300 B.R. 507 (Bkrtcy.C.D.Cal. 2003)
The 1898 Act provided that a voluntary
debtor could file a bankruptcy case with no
requirement of insolvency. See id. § 4(a).
Unlike the 1841 and 1867 Acts, the 1898
Act did not require a debtor to plead ina-
bility to pay his or her debts as they came
due. Collier explains § 4(a) as follows:
A voluntary petitioner may be solvent or
insolvent, and his motive is generally
immaterial except that the petition may
not be filed for purposes of perpetrating
a fraud. There is nothing in the Act
which requires the person to be insol-
vent, and there seems to be no reason
why, if a solvent person cares to have
his property distributed among his cred-
itors through bankruptcy proceedings,
he should not be allowed to do so TTTT It
will not be necessary to allege insolven-
cy in the petition, nor prove it, to pro-
cure an adjudication [of bankruptcy].
1 C OLLIER ¶ 4.03 (interpreting bankruptcy
law as it existed before the Bankruptcy
Code took effect in 1979); see Caplin v.
Marine Midland Grace Trust Co., 406
U.S. 416, 423, 92 S.Ct. 1678, 32 L.Ed.2d
195 (1972) (‘‘Chapter X proceedings [under
the 1898 Act as amended in 1938] are not
limited to insolvent corporations but are
open to those corporations that are solvent
in the bankruptcy (asset-liability) sense
but are unable to meet their obligations as
they mature’’) (citing United States v. Key,
397 U.S. 322, 329, 90 S.Ct. 1049, 25
L.Ed.2d 340 (1970)).
After arising in the 1841 Act as a plead-
ing requirement, insolvency of any kind
disappeared entirely in 1878 (the date of
repeal of the 1867 Act) as a condition of
filing a voluntary bankruptcy petition in
the United States.
Thus the statutory history shows that no
United States bankruptcy law has ever
required a voluntary debtor to show that
he or she was in fact insolvent, under a
balance sheet test or otherwise, as a pre-
requisite of taking advantage of bankrupt-
cy. While two of the nineteenth century
acts required a debtor to plead inability to
pay his or her debts as they came due, no
creditor was permitted to contest this con-
tention.
2. Involuntary Cases
Similarly, insolvency has never been re-
quired for a debtor to become an involun-
tary bankrupt, either under United States
bankruptcy law or under its English pre-
decessors.
The English bankruptcy laws prior to
the United States revolution uniformly
provided only for involuntary bankruptcy.
Uniformly, also, these laws made no provi-
sion for insolvency as a condition of the
filing of a petition in bankruptcy against a
debtor. Instead, these statutes based the
right to file an involuntary bankruptcy pe-
tition on what became known as a debtor’s
‘‘acts of bankruptcy.’’ Any single act of
bankruptcy, under each of these laws, was
sufficient to support an involuntary bank-
ruptcy petition. The qualifying acts in-
cluded such conduct as refusing to pay
creditors, departing the country, staying in
one’s house (to avoid service of process),
taking sanctuary, and permitting himself
or herself to be arrested (presumably for
not paying debts). In addition, the credi-
tor was required to show that the debtor
took such an action with the intent to
hinder or delay his or her creditors.
Blackstone’s C OMMENTARIES ON THE LAWS
OF E NGLAND , published in 1765 to 1769, are
in accord with the English laws. Black-
stone wrote extensively in his COMMENTAR-
IES about bankruptcy law. However, like
the English bankruptcy law of his time,
Blackstone makes no reference to insol-
vency as a qualification for bankruptcy.
See 2 BLACKSTONE , supra, at *471–88.
Blackstone’s COMMENTARIES were well
known to the writers of the Constitution

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518 300 BANKRUPTCY REPORTER
and to early United States judges and
lawyers. See Hanover Nat. Bank v.
Moyses, 186 U.S. 181, 187, 22 S.Ct. 857, 46
L.Ed. 1113 (1902); Nelson v. Carland, 42
U.S. (1 How.) 265, 270–73, 11 L.Ed. 126
(1843) (dissenting opinion of Justice Ca-
tron).
In the United States, the first two bank-
ruptcy acts, the 1800 Act and 1841 Act
permitted a creditor to file an involuntary
bankruptcy petition against a debtor only
if the debtor had committed an act of
bankruptcy. The 1800 Act specified ten
qualifying acts of bankruptcy, which large-
ly mirrored those in the English statutes.
See 1800 Act, § 1. The 1841 Act reduced to
five the qualifying acts of bankruptcy. See
1841 Act, § 1. Like their predecessor En-
glish laws, none of the qualifying acts of
bankruptcy in either the 1800 or the 1841
Acts included insolvency as an element or
factor to be considered in making an adju-
dication of bankruptcy.
The 1867 Act was the first to introduce
insolvency as an element in any of the acts
of bankruptcy. Of the nine statutory acts
of bankruptcy 23 that could support an in-
voluntary petition under the 1867 Act, one
was the granting of a preferential transfer,
‘‘being bankrupt or insolvent, or in con-
templation of bankruptcy or insolvency
TTTTT’’ See 1867 Act, § 39. None of the
other acts of bankruptcy in the 1867 Act
involved the insolvency of the debtor.
In the 1898 Act insolvency began to take
a prominent role in the acts of bankruptcy
that could support an involuntary petition.
The original version of the 1898 Act de-
creased to five the number of bankruptcy
acts, three of which involved insolvency.
See 1898 Act, § 3(a). One act of bankrupt-
cy under this law was the preferential
transfer, brought forward from the 1867
Act, which continued to require that the
debtor be insolvent. See id. § 3(a)(2).
Another act of bankruptcy supporting an
involuntary petition occurred when the
debtor, while insolvent, suffered or permit-
ted a creditor to obtain a preference
through legal proceedings, and who fur-
ther failed to discharge the preference at
least five days before a sale or final dispo-
sition of any property affected by the pref-
erence. See id. § 3(a)(3). In addition, it
was an act of bankruptcy to admit in writ-
ing the inability to pay debts and being
willing to be adjudged a bankrupt. See id.
§ 3(a)(5). Furthermore, with respect to a
fraudulent transfer, the debtor was given
an affirmative defense of solvency. See id.
§ 3(c); see generally 1 C OLLIER ¶ 1.19[1].
Congress amended the fourth act of
bankruptcy (making an assignment for the
benefit of creditors) in 1903 to include
having a receiver or trustee take charge of
the debtor’s property while the debtor was
insolvent. See Act of February 5, 1903, 32
Stat. 797; see also In re Valentine Bohl
Co., 224 F. 685 (2d Cir.1915) (dismissing
involuntary petition on three grounds: the
debtor was balance sheet solvent when the
state court receiver was appointed, it was
impossible to determine whether the dis-
trict court receivership was ordered ‘‘be-
cause of [balance sheet] insolvency’’ (as the
clause required for an involuntary receiv-
ership), and there was no evidence of a
fraudulent transfer). In 1926, Congress
added yet a fifth act of bankruptcy involv-
ing the debtor’s insolvency to the 1898 Act:
suffering, while insolvent, a lien that was
not vacated or discharged within thirty
23. Case law under the 1867 Act treated a
general assignment for the benefit of creditors
as a tenth act of bankruptcy. See Boese v.
King, 108 U.S. 379, 385, 2 S.Ct. 765, 27 L.Ed.
760 (1883). This act of bankruptcy also did
not require the debtor’s insolvency.

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519 IN RE MARSHALL
Cite as 300 B.R. 507 (Bkrtcy.C.D.Cal. 2003)
days thereafter. See Act of May 27, 1926,
44 Stat. 662.
In the 1898 Act (but not previously),
‘‘insolvency’’ was defined. This definition
adopted the modified balance sheet test
that now appears in § 101(32)(A). See
1898 Act § 1(19); see also American Nat’l
Bank & Trust Co. v. Bone, 333 F.2d 984,
986–87 (8th Cir.1964) (utilizing a balance
sheet to show insolvency); Syracuse Engi-
neering Co. v. Haight, 110 F.2d 468, 471
(2d Cir.1940). This definition was a
change from the previous understanding of
solvency for the purposes of bankruptcy
law. While the previous statutes con-
tained no definition of solvency, it was
generally understood that the liquidity test
applied in the bankruptcy context. See gen-
erally 1 C OLLIER ¶ 1.19[1].
The Chandler Act in 1938, which sub-
stantially amended the 1898 Act, expanded
the scope of the 1903 addition by applying
it both when the debtor was insolvent (on a
modified balance sheet basis) and when the
debtor was unable to pay his or her debts
as they matured (the liquidity definition).
The Chandler Act also revised the various
reorganization provisions added to the
1898 Act beginning in 1933. For these
provisions (the predecessors of chapter
11), the liquidity definition of insolvency
was ordinarily invoked.
Throughout the career of the 1898 Act
(which was repealed effective September
30, 1979), making a general assignment for
the benefit of creditors was an act of bank-
ruptcy that did not require the insolvency
of the debtor. See id. § 3(a)(4).
The Bankruptcy Code, while reducing to
two the acts of bankruptcy that can sup-
port an involuntary petition, continues to
permit an involuntary bankruptcy notwith-
standing a debtor’s solvency. The Code
permits a court to order relief against the
debtor if, within 120 days of the filing of
the petition, a custodian, receiver or agent
is appointed or takes possession of less
than substantially all of the debtor’s prop-
erty to enforce a lien. See § 303(h)(2).
However, virtually every involuntary pe-
tition filed under the Bankruptcy Code
relies on § 303(h)(1),24 which authorizes an
involuntary case where the debtor ‘‘is gen-
erally not paying such debtor’s debts as
such debts become due unless such debts
are the subject of a bona fide dispute
TTTT’’ Thus insolvency is now a major fac-
tor in an involuntary bankruptcy case.
But it is the liquidity definition of insolven-
cy that controls, and not the balance sheet
definition on which Pierce relies.
The court concludes from the foregoing
history that, at the time that the Constitu-
tion was written, insolvency of any kind
was utterly unknown as a requirement for
filing a bankruptcy case. Thus it is not
credible that the framers of the Constitu-
tion thought that a requirement of insol-
vency was included in the concept of
bankruptcy that found its way into the
Bankruptcy Clause. Furthermore, insol-
vency has never been a statutory require-
ment for either voluntary or involuntary
bankruptcy under United States bank-
ruptcy law. Finally, balance sheet insol-
vency was altogether unknown for bank-
ruptcy purposes in the United States until
1898.
E. Watershed Developments
in Bankruptcy Concepts
The development of bankruptcy law did
not end with the writing of the Bankruptcy
Clause in the United States Constitution in
24. As a bankruptcy judge for nearly twenty
years, I have handled nearly a hundred thou-
sand bankruptcy cases. Perhaps two hun-
dred of these cases have commenced with
involuntary bankruptcy petitions. I can re-
call only one that probably was based on
§ 303(h)(2).

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520 300 BANKRUPTCY REPORTER
1787. There are three watershed develop-
ments in United States bankruptcy law
since that date.
The first major development, which was
introduced in the 1841 Act, was the author-
ization for a debtor to file a voluntary
bankruptcy case without waiting for a
creditor to file an involuntary petition
against the debtor. Justice Catron, sitting
on circuit in the district of Missouri, found
this provision constitutional in In re Klein,
42 U.S. 277, 1 How. 277, 11 L.Ed. 275, 14
F.Cas. 716, 718 (1843), reported in a note
to Nelson v. Carland, 42 U.S. (1 How.)
265, 277, 11 L.Ed. 126 (1843). The Su-
preme Court cited Klein with approval on
this issue in Hanover Nat’l Bank v. Moys-
es, 186 U.S. 181, 186, 22 S.Ct. 857, 46
L.Ed. 1113 (1902).
The second landmark major develop-
ment, also adopted in the 1841 Act, was
the extension of the bankruptcy law to
individuals who are not traders. The Su-
preme Court approved this development
also in Moyses, 186 U.S. at 186, 22 S.Ct.
857, again relying on Klein.
The third major landmark development
was the addition of reorganization as a
mode of bankruptcy authorized under the
Bankruptcy Clause. This first reorganiza-
tion provision appeared in United States
law in the Act of March 3, 1933, which was
signed by President Hoover on his last day
in office.25 The Supreme Court validated
the constitutionality of reorganization un-
der the Bankruptcy Clause in Continental
Illinois Nat. Bank & Trust Co. v. Chicago,
R.I. & P. Ry., 294 U.S. 648, 668, 55 S.Ct.
595, 79 L.Ed. 1110 (1935) (railroad reorga-
nization under § 77 of the 1898 Act as
amended in 1933); accord, United States
v. Bekins (In re Lindsay–Strathmore Irri-
gation Dist.), 304 U.S. 27, 47, 58 S.Ct. 811,
82 L.Ed. 1137 (1938).
Each of these provisions constituted a
landmark change in bankruptcy law from
that known in 1787 when the Bankruptcy
Clause was written into the Constitution.
In the words of the Supreme Court itself,
these extensions of bankruptcy law were of
a ‘‘fundamental and radically progressive
nature.’’ Louisville Joint Stock Land
Bank v. Radford, 295 U.S. 555, 588, 55
S.Ct. 854, 79 L.Ed. 1593 (1935) (quoting
Continental Illinois, 294 U.S. at 671, 55
S.Ct. 595). Nonetheless, the Supreme
Court found that each of these develop-
ments comes within the ambit of the Bank-
ruptcy Power, and thus is constitutional.
Radford, 295 U.S. at 587–88, 55 S.Ct. 854;
Continental Illinois, 294 U.S. at 671, 55
S.Ct. 595.
More generally, the Supreme Court has
very recently stated that the Constitution
should not be restricted to a particular
generation’s interpretation of the Constitu-
tion: ‘‘As the Constitution endures, per-
sons in every generation can invoke its
principles in their own search for greater
freedom.’’ Lawrence v. Texas, ––– U.S.
––––, 123 S.Ct. 2472, 2484, 156 L.Ed.2d 508
(2003) (finding due process violation in
Texas statute prohibiting same-sex sod-
omy).
In contrast to these landmark bankrupt-
cy law changes, the filing of a bankruptcy
case by or with respect to a solvent debtor
has always been permitted under bank-
ruptcy law, both under every bankruptcy
law enacted in the United States and un-
der every prior law enacted in England.
F. Supreme Court Case Law
Supreme Court case law likewise gives
no support to the thesis that, as a constitu-
tional matter, congressional power to pro-
vide bankruptcy protection must be limited
25. The various reorganization provisions en-
acted over several years beginning in 1933
were substantially revised in the Chandler Act
of 1938.

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521 IN RE MARSHALL
Cite as 300 B.R. 507 (Bkrtcy.C.D.Cal. 2003)
to those who are insolvent, whether under
a balance sheet test or otherwise.26 Even
if the English bankruptcy law in effect in
1787 had limited bankruptcy to debtors
who satisfied an insolvency test, this would
not be determinative in this case more
than two centuries later.
1. Expansive Supreme
Court Statements
The United States Supreme Court has
consistently taken an expansive view of the
Bankruptcy Powers, to permit their appli-
cation in the context of the enormous ex-
pansion of the economy since 1787 and the
correspondingly great elaboration of the
legal structures supporting it:
[T]he notion that the framers of the
Constitution, by the bankruptcy clause,
intended to limit the power of Congress
to the then existing English law and
practice upon the subject long since has
been dispelledTTTT Whether a clause in
the Constitution is to be restricted by
the rules of the English law as they
existed when the Constitution was
adopted depends upon the terms or the
nature of the particular clause in ques-
tion.
Continental Illinois, at 668, 55 S.Ct. 595.
The Supreme Court has repeatedly and
consistently held that the Bankruptcy
Powers are not limited to the meaning of
the term ‘‘bankruptcy’’ at the time of the
formulation of the Constitution. See, e.g.,
Wright v. Union Central Life Ins. Co., 304
U.S. 502, 58 S.Ct. 1025, 82 L.Ed. 1490
(1938); Adair v. Bank of America NTSA,
303 U.S. 350, 354, 58 S.Ct. 594, 82 L.Ed.
889 (1938); Hanover National Bank, at
187, 22 S.Ct. 857 (‘‘The framers of the
Constitution were familiar with Black-
stone’s Commentaries, and with the bank-
rupt laws of England, yet they granted
plenary power to Congress over the whole
subject of ‘bankruptcies,’ and did not limit
it by the language [that they] used.’’)
The core of the federal bankruptcy pow-
er, according to the Supreme Court, is
‘‘the restructuring of debtor-creditor rela-
tions TTTT’’ Northern Pipeline Construc-
tion Co. v. Marathon Pipe Line Co., 458
U.S. 50, 71, 102 S.Ct. 2858, 73 L.Ed.2d 598
(1982) (plurality opinion). Beyond this
core, as a general rule, the Supreme Court
has said, ‘‘the subject of bankruptcies is
incapable of final definition.’’ Gibbons, 455
U.S. at 466, 102 S.Ct. 1169; accord Wright
v. Union Central, 304 U.S. at 513, 58 S.Ct.
1025; Continental Illinois, 294 U.S. at
669–70, 55 S.Ct. 595 (‘‘[t]hose limitations
have never been explicitly defined, and any
attempt to do so now would result in little
more than a paraphrase of the language of
the Constitution without advancing far to-
ward its full meaning.’’). In Gibbons the
Supreme Court stated:
[W]e have previously defined ‘‘bankrupt-
cy’’ as the subject of the relations be-
tween an insolvent or nonpaying or
fraudulent debtor and his creditors, ex-
tending to his and their relief. Con-
gress’ power under the Bankruptcy
Clause contemplates an adjustment of a
failing debtor’s obligations. This power
extends to all cases where the law
causes to be distributed, the property of
the debtor among his creditors. It in-
cludes the power to discharge the debtor
from his contracts and legal liabilities, as
well as to distribute his property. The
grant to Congress involves the power to
impair the obligation of contracts, and
this the States were forbidden to do.
Gibbons, 455 U.S. at 466, 102 S.Ct. 1169
(emphasis added, quotations and citations
omitted).
26. The court has found no relevant case law
from the Ninth Circuit or the Ninth Circuit
Bankruptcy Appellate Panel.

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522 300 BANKRUPTCY REPORTER
In Moyses, the Court added that the
debtor ‘‘may be, in fact, fraudulent, and
able and unwilling to pay his debts; but
the law takes him at his word, and makes
effectual provision, not only by civil, but
even by criminal, process, to effectuate his
alleged intent of giving up all his proper-
ty.’’ Id. at 861. Thus the ‘‘subject of
bankruptcies’’ includes the power to dis-
charge a debtor from contracts and legal
liabilities, and to distribute the debtor’s
property to creditors. Id. at 188, 22 S.Ct.
857 (upholding the constitutionality of the
Bankruptcy Act of 1898 insofar as it au-
thorized the discharge of a judgment on a
promissory note). The Court in Moyses
also stated: ‘‘all intermediate legislation,
affecting substance and form, but tending
to further the great end of the subject,—
distribution and discharge,—are in the
competency and discretion of Congress.’’
Id. at 186, 22 S.Ct. 857 (quoting In re
Klein, 14 F.Cas. No. 716 (D.Mo.1843), re-
printed in a note to Nelson v. Carland, 42
U.S. (1 How.) 265, 277, 11 L.Ed. 126, 130
(1843)).
The Court further stated in Continental
Illinois that bankruptcy ‘‘may be con-
strued to include a debtor who, although
unable to pay promptly, may be able to
pay if time to do so be sufficiently extend-
ed,’’ i.e., a solvent debtor. Id. at 668, 55
S.Ct. 595. There is no reason to believe
that the bankruptcy laws of the nineteenth
century exhausted congressional power un-
der the Bankruptcy Clause. See id.
The Supreme Court has also spoken on
the essential purposes of chapter 11, under
which the debtors filed this case. In
NLRB v. Bildisco & Bildisco, 465 U.S.
513, 527, 104 S.Ct. 1188, 79 L.Ed.2d 482
(1984), the Court stated that the policy of
chapter 11 is to permit the successful reha-
bilitation of debtors. The Court elaborat-
ed this policy in Toibb v. Radloff, 501 U.S.
157, 111 S.Ct. 2197, 115 L.Ed.2d 145
(1991), to state that one Congressional
purpose of chapter 11 is ‘‘permitting busi-
ness debtors to reorganize and restructure
their debts in order to revive the debtors’
businesses and thereby preserve jobs and
protect investors.’’ Id. at 163, 111 S.Ct.
2197. In addition, the Court said in that
case:
Chapter 11 also embodies the general
Code policy of maximizing the value of
the bankruptcy estate. Under certain
circumstances a consumer debtor’s es-
tate will be worth more if reorganized
under Chapter 11 than if liquidated un-
der Chapter 7. Allowing such a debtor to
proceed under Chapter 11 serves the
congressional purpose of deriving as
much value as possible from the debtor’s
estate.
Id. The Court used this rationale in Toibb
to hold that individual consumers, like the
debtors in this case, are entitled to take
advantage of chapter 11 to reorganize
their financial affairs, even though they
may have no business to reorganize. See
id. at 160–66, 111 S.Ct. 2197.
Similarly, in Bank of America NTSA v.
203 N. LaSalle St. P’ship, 526 U.S. 434,
119 S.Ct. 1411, 143 L.Ed.2d 607 (1999), the
Court stated that, ‘‘the two recognized pol-
icies underlying Chapter 11[are] preserv-
ing going concerns and maximizing proper-
ty available to satisfy creditors TTTT’’ Id. at
453, 119 S.Ct. 1411.
The debtors in this case at least qualify
as ‘‘nonpaying’’ debtors, in the terminology
of Gibbons, and they certainly appeared to
be failing when they filed their case. If
they enjoy a bonanza from their chapter 11
plan, it will result from Pierce’s refusal to
file a claim on his $12 million Texas judg-
ment.
Furthermore, the court finds that the
chapter 11 plan in this case maximizes the
property available to satisfy creditors. At
the time of filing, it was not at all clear

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523 IN RE MARSHALL
Cite as 300 B.R. 507 (Bkrtcy.C.D.Cal. 2003)
that the debtors could pay their creditors
in full. The plan settles this issue.
2. Cases Finding Bankruptcy
Provisions Unconstitutional
There are very few Supreme Court
cases holding that Congress has exceeded
its constitutional powers in legislating on
the subject of bankruptcy. In light of the
foregoing expansive descriptions of Con-
gress’ powers under the Bankruptcy
Clause, these cases shed little light on any
relevant limitations on Congress’ Bank-
ruptcy Powers.
Perhaps the best known case holding
unconstitutional a provision of bankruptcy
law is Louisville Joint Stock Land Bank v.
Radford, 295 U.S. 555, 55 S.Ct. 854, 79
L.Ed. 1593 (1935), which invalidated the
Frazier–Lemke addition to the 1898 Act
that permitted a farmer to pay rent in-
stead of mortgage payments for five years
and then retire the mortgage by paying
only the (likely reduced) fair market value
of the property. The principal vice of this
provision, the Supreme Court found, was
that Congress applied it only to mortgages
existing on the date of enactment, and thus
it constituted a taking of existing property
rights of mortgage holders in violation of
the Just Compensation clause of the Fifth
Amendment.27 See id. at 589–602, 55 S.Ct.
854.
In Railway Labor Executives’ Ass’n v.
Gibbons, 455 U.S. 457, 469–73, 102 S.Ct.
1169, 71 L.Ed.2d 335 (1982), the Supreme
Court held that bankruptcy legislation ex-
plicitly applying to a single (albeit large)
debtor, and no other similarly situated
debtors, unconstitutionally violated the
uniformity requirement of the Bankruptcy
Clause. A bankruptcy law, the Supreme
Court held, must at least apply uniformly
to a defined class of debtors. See id. at
473, 102 S.Ct. 1169. But see Regional
Rail Reorganization Cases, 419 U.S. 102,
158–60, 95 S.Ct. 335, 42 L.Ed.2d 320 (1974)
(holding that bankruptcy statute governing
railroad reorganization in one region did
not violate Uniformity Clause when no
railroad reorganization was pending out-
side that region). Similarly, the Ninth
Circuit has held that § 317(a) of the Judi-
cial Improvements Act of 1990, which au-
thorizes bankruptcy administrators (em-
ployed by the judicial branch) to substitute
for United States Trustees (employed in
the Department of Justice) in two states
alone (North Carolina and Alabama) vio-
lates the Uniformity Clause. See St. An-
gelo v. Victoria Farms, Inc., 38 F.3d 1525,
1531–32 (9th Cir.1994).
In Granfinanciera, S.A. v. Nordberg,
492 U.S. 33, 109 S.Ct. 2782, 106 L.Ed.2d 26
(1989), the Supreme Court held that the
bankruptcy power did not permit Congress
to eliminate a party’s Seventh Amendment
jury trial right by relabeling the cause of
action and assigning it to a specialized
court in equity. Id. at 61, 109 S.Ct. 2782.
Also well known is Northern Pipeline Con-
struction Co. v. Marathon Pipe Line Co.,
458 U.S. 50, 102 S.Ct. 2858 (1982), where
the Supreme Court found in 1982 that the
27. See also United States v. Security Industrial
Bank, 459 U.S. 70, 103 S.Ct. 407, 74 L.Ed.2d
235 (1982), where the Supreme Court con-
strued narrowly the provision in § 522(f) that
permits a debtor to avoid the fixing of a lien
on an interest of the debtor in property, to the
extent that the lien impairs an exemption.
The Court held that, to avoid a likely violation
of the Just Compensation Clause of the Fifth
Amendment, this provision must not permit
the avoidance of liens existing before its en-
actment. See id. at 82, 103 S.Ct. 407. But
see Webber v. Credithrift (In re Webber), 674
F.2d 796 (9th Cir.1982), in which the Ninth
Circuit held that a debtor may take advantage
of § 522(f) to avoid the fixing of a lien on an
interest in property that impaired an exemp-
tion, where the lien had been fixed before the
effective date of the Bankruptcy Code (and
§ 522(f)) but after the enactment of the Code.
See id. at 803–04.

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524 300 BANKRUPTCY REPORTER
Bankruptcy Clause did not authorize Con-
gress to grant bankruptcy jurisdiction to
judges lacking Article III tenure.
There are also very few lower court
decisions finding a bankruptcy law provi-
sion unconstitutional. There is one con-
temporary example. A battle rages
among lower courts today on whether
rights clearly legislated under the Bank-
ruptcy Clause can be enforced under
§ 106(a) in federal court against state gov-
ernments in light of the Eleventh Amend-
ment (constitutionalizing state sovereign
immunity) and case law thereunder. In
Hood v. Tennessee Student Assistance
Corp. (In re Hood), 319 F.3d 755, 761–68
(6th Cir.), cert. granted, ––– U.S. ––––, 124
S.Ct. 45, 156 L.Ed.2d 703 (2003), the Sixth
Circuit held that the Bankruptcy Clause
authorized Congress, notwithstanding the
Eleventh Amendment, to abrogate state
sovereign immunity in bankruptcy mat-
ters. In contrast, the following circuit
court decisions have held that the Elev-
enth Amendment prevents Congress from
abrogating state sovereign immunity in
bankruptcy matters: Nelson v. La Crosse
County Dist. Attorney (In re Nelson), 301
F.3d 820, 832 (7th Cir.2002); Mitchell v.
Franchise Tax Bd. (In re Mitchell), 209
F.3d 1111, 1121 (9th Cir.2000); Sacred
Heart Hosp. v. Pennsylvania (In re Sa-
cred Heart Hosp.), 133 F.3d 237, 243 (3d
Cir.1998); Department of Transportation
and Development v. PNL Asset Mgmt. Co.
LLC (In re Fernandez), 123 F.3d 241, 243
(5th Cir.), amended by 130 F.3d 1138, 1139
(5th Cir.1997); Schlossberg v. Maryland
(In re Creative Goldsmiths), 119 F.3d
1140, 1145–46 (4th Cir.1997).
This case today does not require the
court to determine the limits of the Bank-
ruptcy Powers granted to the federal gov-
ernment in the Constitution. Accordingly,
the court leaves this issue to another day.
G. Substantive Due Process
Pierce contends that Howard’s bank-
ruptcy case deprives him of his substantive
due process rights, thereby invoking ‘‘dor-
mant’’ substantive economic due process
rights that have disappeared from Su-
preme Court jurisprudence since the
1930’s. The Fifth Amendment provides, in
relevant part, ‘‘nor shall any person TTT be
deprived of life, liberty or property, with-
out due process of law TTTT’’ Under this
theory, the Fifth Amendment is a limita-
tion on the scope of ‘‘the subject of bank-
ruptcies.’’
Recent Supreme Court decisions make it
clear that substantive due process is alive
and well in its jurisprudence, insofar as it
concerns individual rights and liberties.
See, e.g., Lawrence v. Texas, ––– U.S.
––––, 123 S.Ct. 2472, 2484, 156 L.Ed.2d 508
(2003) (finding due process violation in
Texas statute prohibiting same-sex sod-
omy). In contrast, substantive economic
due process remains sound asleep in Su-
preme Court jurisprudence. Thus, entire-
ly apart from the particular controversy
before this court, Pierce faces a steep up-
hill climb to invoke substantive economic
due process.
Apparently the only Supreme Court
case addressing substantive due process
rights in the bankruptcy context is Canada
Southern Ry. v. Gebhard, 109 U.S. 527, 3
S.Ct. 363, 27 L.Ed. 1020 (1883), where
New York bondholders challenged a Cana-
dian railroad ‘‘scheme of arrangement’’
specially authorized by Canadian statute.
The bondholders had not participated in
the Canadian proceeding. The Court
found that the scheme was ‘‘no more than
is done in bankruptcy’’ in the United
States, and thus that the scheme should be
enforced in a United States court against
all creditors. See id. at 537–40, 3 S.Ct.
363. The Supreme Court rejected the

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525 IN RE MARSHALL
Cite as 300 B.R. 507 (Bkrtcy.C.D.Cal. 2003)
substantive due process challenge to the
arrangement. See id. at 537, 3 S.Ct. 363.
Procedural due process rights under the
Fifth Amendment clearly apply in the
bankruptcy context. In Hanover Nat.
Bank v. Moyses, 186 U.S. 181, 187, 22
S.Ct. 857, 46 L.Ed. 1113 (1902), for exam-
ple, the Supreme Court found that the
notice requirements of the Fifth Amend-
ment Due Process Clause applied and
were satisfied. The Court rejected the
contention that personal notice of the filing
was required. The Court found that bank-
ruptcy proceedings are, generally speak-
ing, in the nature of proceedings In rem,
for which notice by publication and mail
satisfy due process requirements. Pierce
does not complain of procedural due pro-
cess violations in this case.
[4] The court finds it unnecessary to
explore in detail the constitutional conse-
quences of bankruptcy legislation that falls
outside the Bankruptcy Powers of the
Constitution. If this case were to fall out-
side the scope of the Bankruptcy Clause,
the court assumes without deciding that
the law would violate some constitutional
provision. However, the court does not
reach this issue because the court finds
that Congress has the power under the
Bankruptcy Clause to determine that a
debtor may invoke rights under the Bank-
ruptcy Code to adjust obligations with
creditors before the debtor becomes insol-
vent under a balance sheet test.
The larger constitutional issue concerns
the power to extinguish debts and cancel
contractual obligations. Under the Arti-
cles of Confederation, the states possessed
and used this power, to the consternation
of many. See Alexander Hamilton, THE
FEDERALIST NO. 85, praising the new
constitution’s ‘‘precautions against the rep-
etition of those practices on the part of the
State governments which have undermined
the foundations of property and credit,
have planted mutual distrust in the breasts
of all classes of citizens, and have occa-
sioned an almost universal prostration of
morals.’’ The states, because they were
sovereign, possessed broad power to dis-
charge debts and contractual obligations.
What has happened to this power? The
grand bargain of 1787 was that states sur-
rendered it to the new federal government
in exchange for the checks and balances of
a federal system that would restrain the
new national legislature from unwise debt
forgiveness. Moyses, 186 U.S. at 187, 22
S.Ct. 857. Thus, the grant of power to
Congress over the ‘‘subject of bankrupt-
cies’’ in Article I, Section 8 is balanced
with the prohibition in Article I, Section
10, forbidding states from impairing the
obligation of contracts. The power to dis-
charge debts and contractual obligations
was not extinguished: it was surrendered
to the federal government. See id.
[5–7] There is a significant difference,
with respect to the Bankruptcy Power,
between property interests and contract
rights. See Webber v. Credithrift (In re
Webber), 674 F.2d 796, 802 (9th Cir.1982).
In the bankruptcy context, property rights
enjoy at least a measure of protection un-
der the Due Process and Just Compensa-
tion Clauses of the Fifth Amendment.
See, e.g., Louisville Joint Stock Land
Bank v. Radford, 295 U.S. 555, 55 S.Ct.
854, 79 L.Ed. 1593 (1935) (just compensa-
tion); United States v. Security Industrial
Bank, 459 U.S. 70, 103 S.Ct. 407, 74
L.Ed.2d 235 (1982) (same). On the other
hand, Congress is not prohibited from
passing laws that impair the obligation of
contracts. See, e.g., Continental Bank v.
Rock Island Ry., 294 U.S. 648, 680, 55
S.Ct. 595, 79 L.Ed. 1110 (1935); Webber,
674 F.2d at 802. ‘‘In fact, the very essence
of bankruptcy laws is the modification or
impairment of contractual obligations.’’
Webber, 674 F.2d at 802.

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526 300 BANKRUPTCY REPORTER
[8] The protection of property rights in
the bankruptcy context, however, is mea-
sured. The Supreme Court made this
clear in Wright v. Union Central Life Ins.
Co., 304 U.S. 502, 58 S.Ct. 1025, 82 L.Ed.
1490 (1938):
Property rights do not gain any absolute
inviolability in the bankruptcy court be-
cause created and protected by state
law. Most property rights are so creat-
ed and protected. But if Congress is
acting within its bankruptcy power, it
may authorize the bankruptcy court to
affect these property rights, provided
the limitations of the due process clause
are observed.
Id. at 518, 58 S.Ct. 1025.
[9] In this case, Pierce has neither
property rights nor contract rights to as-
sert against the debtors. He does not
even have a claim against the debtors in
this case, because he refused to file his
claim. He has only a Texas state court
judgment that is on appeal. This claim is
in danger of discharge if the debtors’ chap-
ter 11 plan is confirmed. The court finds
that this is an insufficient basis to find a
violation of Pierce’s Fifth Amendment eco-
nomic substantive due process rights in
this case.
IV. Conclusion
The court concludes that Pierce’s consti-
tutional challenge to the debtors’ bank-
ruptcy case and their plan of reorganiza-
tion under chapter 11 cannot be sustained.
The court finds that the balance sheet test
for insolvency was unknown in United
States bankruptcy law until 1898, when
balance sheet insolvency first entered
United States bankruptcy law. Prior
thereto, insolvency in the bankruptcy con-
text always meant liquidity (or equity) in-
solvency.
[10] The court finds that Congress val-
idly exercised the Bankruptcy Powers un-
der the Constitution to authorize a debtor
who is solvent, whether in the balance
sheet sense or in the liquidity sense, to file
a chapter 11 case and to confirm a plan of
reorganization.
The court has previously found against
Pierce on his statutory objections to the
chapter 11 plan and on his motion to dis-
miss based on bad faith. Accordingly, the
court finds that the chapter 11 plan should
be confirmed and the motion to dismiss
should be denied.
NOTICE OF FILING SECOND
AMENDED OPINION
Pursuant to Dressler v. Seeley Co. (In re
Silberkraus), 336 F.3d 864, 869 (9th Cir.
2003), the court HEREBY GIVES NO-
TICE of the filing of its Second Amended
Opinion on Plan Confirmation And Motion
To Dismiss (Constitutional Issues) in the
above case, a copy of which is attached.
,
In re Viola Carolyn LUCAS,
also known as Carolyn
Lucas, Debtor.
Orvey R. Cousatte, Administrator of
the Estate of Imogene Collier,
Plaintiff–Appellant,
v.
Viola Carolyn Lucas, Defendant–
Appellee.
BAP No. KS–02–088.
Bankruptcy No. 01–12092–7.
Adversary No. 01–5116.
United States Bankruptcy Appellate Panel
for the Tenth Circuit.
Oct. 20, 2003.
Judgment creditor brought adversary
proceeding against Chapter 7 debtor, seek-

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