January 30, 2011
In November 2010, Shulman Hodges & Bastian attorneys Gary A. Pemberton and Franklin J. Contreras, Jr., representing Robert L. Goodrich, the Chapter 7 Trustee, obtained a complete victory in an appeal before the Ninth Circuit Court of Appeals in Goodrich v. Briones (In re Schwarzkopf), 626 F.3d 1032 (9th Cir. 2010). At issue was whether two irrevocable trusts, both of which the debtor controlled and used to pay his personal debts and one of which he created to avoid his creditors, were assets of the debtor's bankruptcy estate which the Trustee could use to pay the bankruptcy estate's administrative expenses and the debtor's creditors. After a lengthy trial and two appeals, the Ninth Circuit affirmed the district court's ruling in favor of the Trustee that the trust the debtor had created to avoid his creditors was invalid and its assets property of the bankruptcy estate because it was created to defraud the debtors' creditors. The Ninth Circuit also reversed the district court's ruling against the Trustee by holding that the other trust was the debtor's alter ego, agreeing with Messrs. Pemberton and Contreras that equitable ownership is a sufficient basis for finding that a trust is the alter ego of a debtor. As a result of Shulman Hodges & Bastian's work on the case, it is anticipated that over $2 million will be available to the Trustee to pay his administrative expenses and make distributions to the debtor's creditors.