Federal Circuits, 9th Cir. (September 06, 2001)
Docket number: 99-56131
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U.S. Court of Appeals for the 6th Cir. - In re. Bonner v. (6th Cir. 2005)
U.S. Court of Appeals for the 6th Cir. - Lewis v. Weyerhaeuser Co (6th Cir. 2005)
Counsel Richard H. Batson, II, Nashville, Tennessee, for the plaintiff-appellant.
Brian G. Wolf, Lavely & Singer, Los Angeles, California, for the defendants-appellees.Appeal from the United States District Court for the Central District of California A. Howard Matz, District Judge, Presiding D.C. No. CV-97-04914-AHM-AJ; D.C. No. CV-97-04914-AHMBefore: Harry Pregerson, William C. Canby, Jr., and David R. Thompson, Circuit Judges.Canby, Circuit JudgeVincent Cusano, individually and under certain professional and business names, brought this diversity action against persons and companies associated with the famous rock'n'roll band KISS, alleging various claims for unpaid royalties, defamation, and infringement of his right of publicity. Cusano appeals the district court's grant of summary judgment in favor of Defendants. In his companion appeal, No. 00-55536, which we consolidate for purposes of decision, Cusano challenges the district court's award of attorney's fees and costs. We have jurisdiction pursuant to 28 U.S.C. 1291 and 2106, and we affirm in part, reverse in part, and remand.FACTS AND PROCEDURAL BACKGROUNDPlaintiff Vincent Cusano, professionally known as Vinnie Vincent, is a professional musician, songwriter and publisher, and former lead guitarist of the rock'n'roll band KISS. Cusano, individually and under his business names Streetbeat Music and Vinnie Vincent Music, brought this diversity action in July 1997 against persons and companies associated with KISS. Cusano alleged fourteen causes of action, including claims for unpaid royalties from songs Cusano co-authored and performed for the band, and claims for defamation and infringement of his right of publicity arising from the release of two videos and a book about KISS.1 Two of the central questions raised by the appeal concern the effect of Cusano's Chapter 11 bankruptcy on his royalty-related claims, and the effect of the statutes of limitations on his defamation and right-of-publicity claims.The "KISS Defendants" include: The KISS Company, successor in interest to KISS; Paul Stanley and Gene Klein a/k/a Gene Simmons, individual members of the band; KISStory, Ltd., a corporation that merchandises a book about KISS; and Gene Simmons Worldwide, Inc. and SimstanMusic, Ltd., companies that administer copyright interests of band members. Other Defendants include: Polygram Records, Inc., publisher of certain songs co-authored by Cusano; and Horipro Entertainment Group, purported assignee of certain royalty rights to certain KISS compositions.Cusano was the lead guitarist for KISS from 1982 until 1984, during which time Cusano co-authored and performed three songs for the 1982 KISS album "Creatures of the Night" and eight songs for the 1983 KISS album "Lick It Up." KISS and Cusano's publishing company, Streetbeat Music, executed co-publishing agreements in 1982 and 1984 covering these compositions, agreeing to share royalties evenly. Polygram allegedly administered the collection and distribution of royalties for KISS. Cusano alleges that KISS failed to honor certain provisions of the co-publishing agreements, and improperly exercised an option to purchase certain of Cusano's songrights, causing KISS wrongfully to receive and later assign to Horipro a portion of Cusano's rightful share of the royalties.Cusano declared Chapter 11 bankruptcy in 1989. On the schedule for personal property, he listed "songrights in . . . Songs written while in the band known as `KISS,' " which he assigned a value of "unknown." Defendants Simmons and Stanley were listed as creditors possessing contingent and disputed claims in an unknown amount. Cusano's reorganization plan provided for a cash payment to the plan of $40,000, generally, and another cash payment of $1,521.60 to retain his songrights. The plan was confirmed in 1990 and Cusano was released from bankruptcy in 1993.In 1992, although no longer a member of the band, Cusano co-authored three songs for the KISS album "Revenge." Cusano alleges that he never received royalties for the "Revenge" compositions because Defendants Klein and Stanley fraudulently attached a photocopy of his signature to an agreement purporting to assign his interest in the compositions to Gene Simmons Worldwide, Inc. and SimstanMusic, Ltd. Also in 1992, Cusano assigned part of his royalty rights in the "Creatures of the Night" compositions to Horipro, after which Horipro allegedly directed Polygram to pay Horipro more than its rightful share.In 1994, the coffee-table book entitled "KISStory " was published, allegedly pursuant to a merchandising agreement between KISS and other non-parties for the production and distribution of an "authorized" and "limited edition" picture book about the rock band. Cusano alleges that his right of publicity was infringed because the book contains numerous photographs of Cusano that were utilized without his permission. Cusano further alleges that the book contains a defamatory reference to Cusano. His defamation claim also includes alleged defamatory statements that were published in two KISS videos released in 1987 and 1992.Cusano filed the present action in July 1997 against KISS, individual band members, Polygram, and Horipro, in which he alleged claims for breach of fiduciary duty, fraud and deceit, constructive fraud, negligent misrepresentation, conversion, imposition of constructive trust, breach of contract, infringement on the right of publicity, defamation, and open book account for royalties.2In December 1997, in response to Defendants' Rule 12(b)(6) and other motions, the district court transferred or dismissed several claims, in whole or in part. First, the district court severed all claims against Horipro and transferred them to the Southern District of New York, thereby removing from the case all of claim 7 for fraud and parts of claims 9 and 10 for conversion and imposition of constructive trust. Second, the district court applied California statutes of limitations to dismiss claims 2 through 5 for breach of fiduciary duty, fraud, and misrepresentation, to the extent that they arose before July 1994; claims 9 and 10 for conversion and imposition of constructive trust, to the extent that they arose before July 1997; claim 11 for breach of contract, to the extent that it arose before July 1993; and claim 14 for defamation, to the extent that it arose before July 1996.Third, the district court dismissed entirely claims 6 and 8 for fraud, because Cusano failed to allege the reliance element and cited no authority allowing him to bring a claim for fraud upon a fiduciary. Fourth, as a consequence of dismissing claim 8 for fraud, brought against Klein, Stanley, Gene Simmons Worldwide, Inc., and SimstanMusic, Ltd., the district court dismissed claims 9 and 10 for conversion and imposition of constructive trust with respect to those same Defendants. Fifth, the district court dismissed in part claim 14 for defamation, holding that two of the four alleged defamatory statements are non-defamatory as a matter of law.Finally, having previously taken notice of Cusano's Chapter 11 bankruptcy, the district court dismissed without prejudice all claims for royalties on the "Creatures of the Night" and "Lick It Up" compositions ("pre-petition compositions") which should have been paid prior to March 21, 1989 or for other damages which were incurred prior to March 21, 1989, the date Cusano filed his petition. The court found that Cusano had failed to schedule his claims for royalties and that the "songrights" asset he did schedule was vastly undervalued. Finding that these unscheduled claims "would appear to belong to the estate," the court informed Cusano that he could not proceed with these claims without first obtaining permission from the bankruptcy court. This ruling on Defendants' December 1997 motions resulted in at least partial dismissal of each of Cusano's fourteen claims.In September 1998, with a new judge presiding over the case, the district court granted Defendants' motion for summary judgment on claim 11 for breach of contract, dismissing it in its entirety. The district court found that Cusano could not maintain this claim, in which he sought payment of artist's royalties for his performances with KISS, because he was not a member of the American Federation of Musicians ("AFM") during the time in which he was a member of the band, and thus had no standing to sue for breach of the AFM Labor Agreement.In November 1998, with Cusano having yet to petition the bankruptcy court to release his claims, KISS Defendants and Polygram moved for summary judgment on all claims arising from pre-petition compositions. The district court granted the motion in February 1999, possibly unaware that Cusano had since moved the bankruptcy court in December 1998 to reopen his bankruptcy case. The district court held that Cusano lacked standing to assert claims based on facts and transactions predating his bankruptcy, including all claims for unpaid royalties, accruing either pre-or post-petition, from his pre-petition compositions. In accordance with this holding and summary judgment, the district court partially dismissed Cusano's claims for open book account (1st claim), breach of fiduciary duty (2nd claim), fraud and deceit (3rd claim), constructive fraud (4th claim), negligent misrepresentation (5th claim), conversion (9th claim), and imposition of constructive trust (10th claim).Also in February 1999, the district court on its own motion dismissed Cusano's claim for infringement of his right of publicity (13th claim), and granted Defendants' motion for summary judgment on the defamation claim (14th claim). The court found that Cusano had admitted in his opposition to Defendants' motion for summary judgment that the right of publicity claim was based on pre-petition facts. The remaining portion of his defamation claim was dismissed as barred by the statute of limitations. These rulings resulted in the dismissal of these two claims in their entirety.At this point in the proceedings, most of Cusano's remaining claims involved his post-petition "Revenge " compositions. KISS Defendants and Polygram moved for summary judgment in January 1999 on the ground that Cusano had been paid all sums due and owing. Cusano countered by alleging that his signature on agreements in which he purportedly assigned his interest in the "Revenge" compositions had been forged. The district court appointed a forensic examiner in March 1999 to determine the authenticity of the "Revenge" agreements. The court ordered Cusano either to submit a handwriting analysis report from the neutral examiner or to withdraw his dispute of the agreements and submit his opposition to the motion for summary judgment, limiting his arguments to the use of the "Revenge" compositions on the KISS album "Alive III" and two KISS videos. When Cusano failed to comply with the order by filing nothing, the court held that the "Revenge" agreements were valid and binding on Cusano and granted summary judgment for KISS Defendants and Polygram. This ruling resulted in the dismissal of all remaining portions of Cusano's claims 1 through 5 for open book account, breach of fiduciary duty, fraud, and misrepresentation; and claims 9 and 10 for conversion and imposition of constructive trust.Meanwhile, Cusano's bid to reopen his bankruptcy case was unsuccessful. In April 1999, after a hearing at which KISS Defendants and Polygram also appeared, the bankruptcy court denied Cusano's December 1998 motion to reopen. The court stated that it would not reconsider the district court's findings that "any claims for unpaid royalties on prepetition musical compositions did not revert to debtor and that such claims were never formally abandoned to debtor." The court also stated that, "[a]ll claims based on facts predating Debtor's bankruptcy, including claims for unpaid royalties on prepetition musical compositions remain assets of the estate, and the Estate is Closed." Finally, because the reorganization plan was "fully consummated in 1993," the bankruptcy court found that it had no authority to allow Cusano to amend the plan. Cusano missed his deadline to appeal the decision to the Bankruptcy Appellate Panel.In May 1999, the district court rendered final judgments on all of its prior dismissal orders and summary judgment rulings. The final judgment also disposed of the only claim not entirely disposed of by its prior orders--claim 12 for open book account--noting that it was effectively dismissed when the court dismissed claim 11 for breach of contract in September 1998. Noting that the bankruptcy court had refused to reopen Cusano's bankruptcy, the court went on to dismiss all fourteen claims for relief in their entirety with prejudice. From this ruling, and the award of attorney's fees and costs, Cusano appeals.DISCUSSIONI. Pre-Petition CompositionsCusano contends that the district court erred in granting summary judgmentdismissing for lack of standing all of his claims concerning his interests in pre-petition compositions.3 We agree, in part. For Cusano to have standing, he, rather than the bankruptcy estate, must own the claim upon which he is suing. The question of ownership turns on the validity and effect of Cusano's listing of his "songrights " as an asset in his bankruptcy schedules. We conclude that Cusano's scheduled "songrights" asset reverted to him upon the confirmation of his reorganization plan--by technical abandonment and by express provision of the plan--and vested in him all post-petition royalty rights to his pre-petition compositions, despite his probable undervaluation of the songrights. He thus reacquired ownership of all claims to royalties derived from these compositions post-petition, but not claims for unpaid pre-petition royalties, which were required to be scheduled separately as either receivables or legal claims. Thus, we reverse the district court in part, and reinstate some of Cusano's royalty claims.An "estate" is created when a bankruptcy petition is filed. See 11 U.S.C. 541(a); In re Fitzsimmons, 725 F.2d 1208, 1210 (9th Cir. 1984). Property of a bankruptcy estate includes "all legal or equitable interests of the debtor in property as of the commencement of the case." § 541(a)(1). This broad category includes "[p]roceeds, product, offspring, rents, or profits of or from property of the estate, except such as are earnings from services performed by an individual debtor after the commencement of the case." § 541(a)(6). Thus, postpetition revenues belong to the estate to the extent they are based on pre-petition services or agreements. See, e.g., In re Jess, 215 B.R. 618, 621 (B.A.P. 9th Cir. 1997); In re Wu, 173 B.R. 411, 414-15 (B.A.P. 9th Cir. 1994); Ryerson v. Rau, 739 F.2d 1423, 1425 (9th Cir. 1984). Accordingly, Cusano's future royalties from his pre-petition "Creatures of the Night" and "Lick It Up" compositions became assets of his bankruptcy estate. See In re Dillon, 219 B.R. 781, 784 (Bankr. M.D. Tenn. 1998); Waldschmidt v. CBS, Inc., 14 B.R. 309, 311-12 (M.D. Tenn. 1981). In addition, assets of the estate properly included any of Cusano's causes of action. See Sierra Switchboard Co. v. Westinghouse Elec. Corp. , 789 F.2d 705, 708 (9th Cir. 1986). The question presented here is what happened to these assets of the estate during and after their administration in bankruptcy.Two separate sections of the bankruptcy code govern reversion of assets of the bankruptcy estate to the debtor. The first provision, which applies to all forms of bankruptcy, including Chapter 11, is the technical abandonment provision: "Unless the court orders otherwise, any property scheduled under section 521(1) of this title not otherwise administered at the time of the closing of a case is abandoned to the debtor and administered for purposes of section 350 of this title." 11 U.S.C. 554(c). The second provision is unique to Chapter 11 bankruptcies, and sets forth the effect of confirmation: "Except as otherwise provided in the plan or the order confirming the plan, the confirmation of a plan vests all of the property of the estate in the debtor." Id. § 1141(b).The bankruptcy code placed an affirmative duty on Cusano to schedule his assets and liabilities. Id. § 521(1). If he failed properly to schedule an asset, including a cause of action, that asset continues to belong to the bankruptcy estate and did not revert to Cusano. See Stein v. United Artists Corp., 691 F.2d 885, 893 (9th Cir. 1982) (holding that only property "administered or listed in the bankruptcy proceedings" reverts to the bankrupt); accord Hutchins v. IRS, 67 F.3d 40, 43 (3d Cir. 1995); Vreugdenhill v. Navistar Int'l Transp. Corp., 950 F.2d 524, 526 (8th Cir. 1991) (holding that property is not abandoned by operation of law unless the debtor "formally schedule[s] the property before the close of the case")."[T]he debtor has a duty to prepare schedules carefully, completely, and accurately." In re Mohring , 142 B.R. 389, 394 (Bankr. E.D. Cal. 1992); accord In re Jones , 134 B.R. 274, 279 (N.D. Ill. 1991); In re Baumgartner, 57 B.R. 513, 516 (Bankr. N.D. Ohio 1986); In re Mazzola, 4 B.R. 179, 182 (Bankr. D. Mass. 1980). Although there are "no bright-line rules for how much itemization and specificity is required," Cusano was required to be as particular as is reasonable under the circumstances. In re Mohring, 142 B.R. at 395. If possible, Cusano was to list the "approximate dollar amount" of each asset. See In re Wenande, 107 B.R. 770, 772 (Bankr. D. Wyo. 1989). If faced with a range of values, he was to "choose a value in the middle of the range." In re Seruntine, 46 B.R. 286, 288 (Bankr. C.D. Cal. 1984). There are assets, however, the value of which is unknown; when that is the case, "a simple statement to that effect" will suffice. In re Wenande, 107 B.R. at 772.Generally, "mistakes in valuation will not enable a trustee to recover an abandoned asset," Hutchins, 67 F.3d at 44, not even upon "subsequent discovery that the property has a greater value than previously believed." In re McGowan, 95 B.R. 104, 106 (Bankr. N.D. Iowa 1988); accord In re DeVore, 223 B.R. 193, 197 (B.A.P. 9th Cir. 1998) (recognizing the "general rule that abandonment is irrevocable"). Revocation of abandonment is appropriate, however, where "the trustee is given incomplete or false information of the asset by the debtor, thereby foregoing a proper investigation of the asset." In re Ozer, 208 B.R. 630, 633 (Bankr. E.D.N.Y. 1997); accord In re Adair, 253 B.R. 85, 89 (B.A.P. 9th Cir. 2000); In re DeVore, 223 B.R. at 198. The cases that contemplate such action, however, indicate that the revocation may be effected only by express order after the reopening of the bankruptcy case. See, e.g., In re Ozer, 208 B.R. at 631; In re Adair, 253 B.R. at 88-89; In re DeVore, 223 B.R. at 198.Cusano's listing was not so defective that it would forestall a proper investigation of the asset. Cusano scheduled "songrights in . . . Songs written while in the band known as `KISS.' " He listed their value as "unknown." His reorganization plan called for him to retain ownership of his "songrights." In a memo to the bankruptcy court, Cusano listed "songrights" as an asset being retained under the plan and listed its value as $1,521.60. He then noted that, in addition to $40,000 he had "already set aside . . . to pay creditors," he would "contribute cash representing the value of these songrights in the amount of $1,521.60." He concluded by noting that these amounts constitute "a fresh contribution which greatly exceeds the value of the property interest he is retaining."The "songrights" asset as described by Cusano can reasonably be interpreted to mean copyrights and rights to royalty payments for songs written for the band KISS prepetition. The debtor in In re Dillon described a similar asset on her bankruptcy schedules as "songwriter's share of songs." 219 B.R. at 783. Although it would have been more helpful for Cusano to break down the description further so that it named songs, albums, and dates of and parties to royalty and copyright agreements, the additional detail would not have revealed anything that was otherwise concealed by the description as it was, which provided inquiry notice to affected parties to seek further detail if they required it. Any undervaluation of the "songrights" asset does not impair Cusano's interest in it, because only an express order of revocation after reopening of the bankruptcy case would do so, and that did not occur.4 See In re Adair, 253 B.R. at 88-89; In re Ozer, 208 B.R. at 631.We conclude, therefore, that his listing of the "songrights" asset was a sufficient scheduling of Cusano's interest in his pre-petition compositions, which reverted to him upon confirmation of his plan. The reversion vested in Cusano the rights to post-petition royalties on his pre-petition compositions and other damages accruing post-petition with respect to these pre-petition compositions. The district court erred when it applied to Cusano's case the general rule that post-petition revenues based on pre-petition services or agreements belong to the bankruptcy estate. In re Dillon, 219 B.R. at 784. The rule is simply not applicable here, because the actual pre-petition service or agreement at issue in this case, "songrights," reverted to Cusano's ownership.Unpaid pre-petition royalties and other damages which accrued pre-petition, on the other hand, did not revert to Cusano with the "songrights" asset, because these were subject to a separate scheduling requirement as accrued causes of action. Causes of action are separate assets which must be formally listed. Vreugdenhill, 950 F.2d at 526. Simply listing the underlying asset out of which the cause of action arises is not sufficient. See id. at 525 (stating that debtor who scheduled parts as an asset failed properly to list a cause of action for failure to accept those parts).Cusano contends that his royalty claims for pre-petition compositions involved an open book account, see Cal. Code Civ. Proc. § 337a, and thus no legal claim accrued until the entry of the last item, see § 337, well after his bankruptcy. We reject this contention. It is true that, generally, a debtor has no duty to schedule a cause of action that did not accrue prior to bankruptcy. Brassfield v. Jack McLendon Furniture, Inc., 953 F. Supp. 1424, 1433 (M.D. Ala. 1996); Erickson v. Baxter Healthcare, 94 F. Supp. 2d 907, 912-13 (N.D. Ill. 2000). To determine when a cause of action accrues, we look to state law. In re Folks, 211 B.R. 378, 384 (B.A.P. 9th Cir. 1997). It is important, however, to distinguish principles of accrual from principles of discovery and tolling, which may cause the statute of limitations to begin to run after accrual has occurred for purposes of ownership in a bankruptcy proceeding. In re Swift,Try vLex for FREE for 3 days
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