Petition for Writ of Certiorari — Cuker Interactive, LLC, Petitioner v. Pillsbury Winthrop Shaw Pittman, LLP

Supreme Court briefJun 30, 2022

Ask Donna

What actually matters in this document.

Text

No. ______

In the Supreme Court of the United States

CUKER INTERACTIVE, LLC, PETITIONER,

PILLSBURY WINTHROP SHAW PITTMAN, LLP.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

PETITION FOR A WRIT OF CERTIORARI

LEAH S. STRICKLAND

TROUTMAN PEPPER

HAMILTON SANDERS LLP

222 Central Park Ave.,

Ste. 2000

Virginia Beach, VA

23462

(757) 687-7511

leah.strickland@

troutman.com

MISHA TSEYTLIN

Counsel of Record

KEVIN M. LEROY

TROUTMAN PEPPER

HAMILTON SANDERS LLP

227 W. Monroe St.,

Ste. 3900

Chicago, IL 60606

(608) 999-1240

misha.tseytlin@

troutman.com

Attorneys for Petitioner

QUESTION PRESENTED

Whether a federal court deciding a state-law issue

in a bankruptcy case must apply the forum State’s

choice-of-law rules or federal choice-of-law rules to

determine what substantive law governs.

PARTIES TO THE PROCEEDINGS

Cuker Interactive, LLC, is the Petitioner here and

was the Defendant-Appellant below.

Pillsbury Winthrop Shaw Pittman, LLP, is the

Respondent here and was the Plaintiff-Appellee

below.

iii

CORPORATE DISCLOSURE STATEMENT

Pursuant to this Court’s Rule 29.6, Petitioner

identifies the following parent corporations or

publicly held corporations that own 10% or more of its

stock/membership interests: Cuker Design, Inc., a

California corporation, is the sole member of

Petitioner.

STATEMENT OF RELATED PROCEEDINGS

This case arises from the following proceedings:

•

Pillsbury Winthrop Shaw Pittman, LLP, v.

Cuker Interactive, LLC, No.21-55298 (9th

Cir.) (opinion issued and judgment entered

on March 2, 2022);

•

Pillsbury Winthrop Shaw Pittman, LLP, v.

Cuker Interactive, LLC, No.20-CV-01882CAB-BLM (S.D. Cal.) (order reversing

bankruptcy court’s grant of Petitioner’s

summary-judgment motion entered March

25, 2021);

•

Cuker Interactive, LLC v. Pillsbury

Winthrop Shaw Pittman, LLP, Adversary

No.20-90075-LA11 (Bankr. S.D. Cal.)

(order granting Petitioner’s summaryjudgment motion entered September 17,

2020; letter opinion on Petitioner’s

summary-judgment

motion

entered

August 21, 2020; tentative ruling granting

Petitioner’s summary-judgment motion

entered July 9, 2020);

•

In re Cuker Interactive, LLC, Bankruptcy

No.18-07363-LA11 (Bankr. S.D. Cal.).

There are no other proceedings in state or federal

trial or appellate courts, or in this Court, directly

related to this case within the meaning of this Court’s

Rule 14.1(b)(iii).

TABLE OF CONTENTS

Page

QUESTION PRESENTED ......................................... i

PARTIES TO THE PROCEEDINGS ........................ ii

CORPORATE DISCLOSURE STATEMENT .......... iii

STATEMENT OF RELATED PROCEEDINGS ...... iv

PETITION FOR WRIT OF CERTIORARI .................1

DECISIONS BELOW..................................................3

JURISDICTION ..........................................................4

CONSTITUTIONAL PROVISIONS

INVOLVED .............................................................4

STATEMENT ..............................................................4

REASONS FOR GRANTING THE PETITION .......10

There Is A Well-Entrenched, Widely

Acknowledged Circuit Split As To Whether

Forum State Or Federal Choice-Of-Law

Rules Apply In Bankruptcy Proceedings .......10

II. The Ninth Circuit’s Entrenched Position

That Federal Choice-Of-Law Rules Always

Apply In Bankruptcy Proceedings Violates

This Court’s Case Law ...................................13

III. This Case Is An Ideal Vehicle For Resolving

The Important Question Presented ...............19

CONCLUSION ..........................................................27

vii

TABLE OF APPENDICES

Page

APPENDIX A — OPINION OF THE UNITED

STATES COURT OF APPEALS FOR THE

NINTH CIRCUIT, FILED MARCH 2, 2022 ........... 1a

APPENDIX B — ORDER OF THE UNITED

STATES DISTRICT COURT FOR THE

SOUTHERN DISTRICT OF CALIFORNIA,

FILED MARCH 25, 2021 ......................................... 6a

APPENDIX C — OPINION OF THE UNITED

STATES BANKRUPTCY COURT FOR THE

SOUTHERN DISTRICT OF CALIFORNIA,

ENTERED SEPTEMBER 17, 2020 ....................... 17a

APPENDIX D — OPINION OF THE UNITED

STATES BANKRUPTCY COURT FOR THE

SOUTHERN DISTRICT OF CALIFORNIA,

FILED AUGUST 21, 2020 ..................................... 20a

APPENDIX E — OPINION OF THE UNITED

STATES BANKRUPTCY COURT FOR THE

SOUTHERN DISTRICT OF CALIFORNIA,

DATED JULY 9, 2020............................................ 27a

viii

TABLE OF AUTHORITIES

Cases

Amtech Lighting Servs. Co. v. Payless Cashways,

Inc. (In re Payless Cashways),

203 F.3d 1081 (8th Cir. 2000)..................... 1, 8, 13

Atherton v. FDIC,

519 U.S. 213 (1997) ................................. 14, 16, 19

Butner v. United States,

440 U.S. 48 (1979) ........................................ passim

Cassirer v. Thyssen-Bornemisza Collection

Found.,

142 S. Ct. 1502 (2022)................................... 15, 16

Deutsche Bank Tr. Co. Ams. v. U.S. Energy Dev.

Corp. (In re First River Energy, LLC),

986 F.3d 914 (5th Cir. 2021)......................... 10, 13

Erie R. Co. v. Tompkins,

304 U.S. 64 (1938) ................................2, 14, 15, 16

Felder v. Casey,

487 U.S. 131 (1988) ................................. 14, 16, 18

Hansen v. Jacobsen,

230 Cal. Rptr. 580 (Cal. Ct. App. 1986) ............... 9

In re Gaston & Snow,

243 F.3d 599 (2d Cir. 2001) ......................... passim

In re Holiday Airlines Corp.,

620 F.2d 731 (9th Cir. 1980)............................... 16

In re Jafari,

569 F.3d 644 (7th Cir. 2009)............................... 13

In re Merritt Dredging Co.,

839 F.2d 203 (4th Cir. 1988)........................ passim

In re Sterba,

852 F.3d 1175 (9th Cir. 2017)..............1, 10, 11, 23

In re Vortex Fishing Sys., Inc.,

277 F.3d 1057 (9th Cir. 2002)............................. 11

Kearney v. Salomon Smith Barney, Inc.,

137 P.3d 914 (Cal. 2006) ................................. 7, 21

Klaxon Co. v. Stentor Elec. Mfg. Co.,

313 U.S. 487 (1941) ...................................... passim

Lindsay v. Beneficial Reinsurance Co.

(In re Lindsay),

59 F.3d 942 (9th Cir. 1995).......................... passim

Matter of Iowa R. Co.,

840 F.2d 535 (7th Cir. 1988)....................... 1, 8, 13

O’Melveny & Myers v. FDIC,

512 U.S. 79 (1994) ........................................ passim

Robeson Indus. Corp. v. Hartford Accident &

Indem. Co. (In re Robeson Indus. Corp.),

178 F.3d 160 (3d. Cir. 1999) ....................... 1, 8, 13

Siegel v. Fitzgerald,

142 S. Ct. 1770, 2022 WL 1914098

(2022) ................................................................... 20

Sterba v. PNC Bank,

No.17-423,

cert. denied 138 S. Ct. 2672 (2018) ................ 2, 22

Sturges v. Crowninshield,

17 U.S. (4 Wheat.) 122 (1819) ............................ 20

Vanston Bondholders Protective Comm. v. Green,

329 U.S. 156 (1946) ................................. 19, 20, 21

Constitutional Provisions

U.S. Const. art. I, § 8, cl. 4 ..........................2, 4, 19, 20

Statutes And Rules

11 U.S.C. § 502 ................................................... 24, 25

28 U.S.C. § 1254 ......................................................... 4

28 U.S.C. § 1332 ....................................................... 24

Other Authorities

Charles Alan Wright & Arthur R. Miller, Federal

Practice and Procedure (3d ed. April 2022

update) ............................................................ 1, 10

Collier on Bankruptcy (16th ed. 2022) .....1, 10, 17, 25

James Wm. Moore et al., Moore’s Federal

Practice – Civil (2022) .................................... 1, 10

The Federalist No. 42 (Madison) (Gideon ed.,

2001) .................................................................... 20

U.S. Courts, Bankruptcy Basics Glossary ................ 6

PETITION FOR WRIT OF CERTIORARI

“The federal courts are divided concerning

whether federal choice of law rules or forum choice of

law rules apply in bankruptcy courts,” 17A James

Wm. Moore et al., Moore’s Federal Practice – Civil

§ 124.30 (2022), and “there is now a circuit split,” 19

Charles Alan Wright & Arthur R. Miller, Federal

Practice and Procedure § 4518 (3d ed. April 2022

update); accord 5 Collier on Bankruptcy ¶ 544.02

(16th ed. 2022). The Ninth Circuit has long held that

courts must apply federal choice-of-law rules in

bankruptcy cases, rather than the forum State’s

rules, when resolving such state-law issues, while

admitting that its view differs from the approach

taken by other courts. See In re Sterba, 852 F.3d

1175, 1177 & n.1 (9th Cir. 2017) (citing Lindsay v.

Beneficial Reinsurance Co. (In re Lindsay), 59 F.3d

942, 948 (9th Cir. 1995)). Every other court of appeals

to have decided this issue has taken a contrary

approach, holding that bankruptcy courts must apply

the forum State’s choice-of-law rules unless deciding

an exceptional case involving a core federal interest.

See In re Gaston & Snow, 243 F.3d 599, 604–07 (2d

Cir. 2001); In re Merritt Dredging Co., 839 F.2d 203,

205–06 (4th Cir. 1988); Robeson Indus. Corp. v.

Hartford Accident & Indem. Co. (In re Robeson Indus.

Corp.), 178 F.3d 160, 164–65 (3d Cir. 1999); Amtech

Lighting Servs. Co. v. Payless Cashways, Inc. (In re

Payless Cashways), 203 F.3d 1081, 1084 (8th Cir.

2000); accord Matter of Iowa R. Co., 840 F.2d 535, 542

(7th Cir. 1988) (Easterbrook, J.).

The Ninth Circuit’s entrenched position on the

Question Presented is contrary to this Court’s case

law. Under Erie R. Co. v. Tompkins, 304 U.S. 64

(1938), there is no federal general common law, and

this doctrine extends to choice-of-law rules under

Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487

(1941). Thus, federal courts must not apply federal

common law when adjudicating state-law claims or

issues, unless deciding an exceptional case involving

a significant conflict between a federal policy and

state law. The Erie doctrine, of course, applies no

matter the source of a federal court’s jurisdiction. Yet

on the Question Presented, the Ninth Circuit has held

that bankruptcy courts must always create and apply

federal choice-of-law rules as a matter of federal

common law when adjudicating state-law issues in

bankruptcy proceedings.

This Petition is an ideal vehicle for this Court to

resolve this nationally important issue. The Ninth

Circuit’s well-entrenched approach causes a national

disuniformity in bankruptcy law, contrary to the

Constitution’s requirement that bankruptcy laws

enacted by Congress be “uniform.” U.S. Const. art. I,

§ 8, cl. 4. The choice-of-law issue here is central to the

outcome in this case, which is why Petitioner asked

the Ninth Circuit to hear this case initially en banc to

overrule that circuit’s approach, while also leading

with this same argument in its merits briefing.

Finally, in Sterba v. PNC Bank, No.17-423, cert.

denied 138 S. Ct. 2672 (2018), the petition raised the

same circuit split as the Petition here, and this Court

called for the views of the Solicitor General. After the

Solicitor General, along with the Sterba respondent,

raised a number of what they claimed were vehicle

problems with the Sterba petition, the petitioners

there failed to file any reply in support of their

petition or response to the Solicitor General’s

opposition brief. The Petition here is an ideal vehicle

for resolving this circuit split.

This Court should grant the Petition.

DECISIONS BELOW

The Ninth Circuit’s opinion below affirming the

order of the district court is unreported, but it is

available at 2022 WL 612671, and is reproduced at

Pet.App. 1a–5a. The district court’s opinion reversing

the bankruptcy court’s order on Petitioner’s motion

for summary judgment is unreported, but it is

available at 2021 WL 1140894, and is reproduced at

Pet.App. 6a–16a. The bankruptcy court’s order on

Petitioner’s motion for summary judgment is

unreported, but it is reproduced at Pet.App. 17a–19a.

The bankruptcy court’s letter opinion on Petitioner’s

motion for summary judgment is unreported, but it is

reproduced at Pet.App. 20a–26a.

Finally, the

bankruptcy court’s tentative ruling on Petitioner’s

motion for summary judgment is also unreported, but

it is reproduced at Pet.App. 27a–33a.

JURISDICTION

The Ninth Circuit entered its judgment on

March 2, 2022. Pet.App. 1a. On May 23, 2022,

Justice Kagan granted Petitioner’s application to

extend the time to file this Petition until June 30,

2022, Cuker Interactive, LLC v. Pillsbury Winthrop

Shaw Pittman, LLP, No.21A748 (U.S.), and

Petitioner filed this Petition by that date. This Court

has jurisdiction under 28 U.S.C. § 1254(1).

CONSTITUTIONAL PROVISIONS INVOLVED

Article I, Section 8, Clause 4 of the Constitution

provides, in part, that “Congress shall have Power . . .

[t]o establish . . . uniform Laws on the subject of

Bankruptcies throughout the United States.”

STATEMENT

A. This bankruptcy case arises in California.

Petitioner, a full-service digital marketing, design,

and e-commerce agency, is a California limited

liability company with its sole place of business in

California. Pet.App. 31a; Bankr. Ct. No.18-07363,

Dkt.10-1 at 2; Bankr. Ct. No.20-90075, Dkt.10 at 32.

Respondent, a major law firm, is a limited liability

partnership with offices in California and other

States. Pet.App. 24a, 31a.

In 2015, Petitioner engaged Respondent for legal

representation in litigation against Wal-Mart Stores,

Inc. (“Walmart”), in the United States District Court

for the Western District of Arkansas, a State in which

Respondent has no office. Pet.App. 7a; Bankr. Ct.

No.20-90075, Dkt.10 at 32; Bankr. Ct. No.20-90075,

Dkt.4 at 4. As relevant here, the parties’ engagement

agreement did not grant Respondent a lien on any

judgment that Petitioner may obtain in the Walmart

litigation for the payment of attorney’s fees.

Pet.App. 32a. Petitioner eventually won a judgment

against Walmart in that litigation, with Respondent

still serving as its counsel. Pet.App. 7a.

Respondent thereafter sent a letter to Walmart’s

counsel purporting to assert a lien against the

judgment under Arkansas law for Respondent’s asyet-unpaid attorney’s fees.

Pet.App. 7a, 28a.

Petitioner did not sign Respondent’s letter or

otherwise consent to Respondent obtaining such a

lien. See Pet.App. 15a.

B. About one year after Respondent sent its letter,

Petitioner filed for Chapter 11 bankruptcy in the

United States Bankruptcy Court for the Southern

District of California. Pet.App. 7a. Respondent filed

a proof of claim with the bankruptcy court, asserting

a claim for $1,637,418.71 against Petitioner’s

bankruptcy estate, which is the amount of its

outstanding attorney’s fees from the Walmart

litigation. See Pet.App. 7a, 28a.1 Respondent alleged

that, under Arkansas law, its claim was “secured by

an attorney’s lien on the judgment and proceeds of the

Walmart lawsuit and perfected by [its] letter to

Walmart’s counsel” that had asserted that lien. See

Pet.App. 7a (summarizing Respondent’s position).

In response to Respondent’s proof of claim,

Petitioner filed an adversary proceeding against

Respondent in the bankruptcy court, disputing the

secured status of Respondent’s claim. Pet.App. 7a.2

Petitioner then moved for summary judgment in that

adversary proceeding, arguing that California law,

not Arkansas law, governed the secured status of

Respondent’s claim and that this claim was “a general

unsecured claim not entitled to priority” under

California law. Pet.App. 7a, 29a.

The bankruptcy court granted Petitioner’s

motion. Pet.App. 18a–19a. As relevant here, the

bankruptcy court in its final decision applied federal

1 A “proof of claim” is a “written statement and verifying

documentation filed by a creditor that describes the reason the

debtor owes the creditor money.” Proof of Claim, U.S. Courts,

Bankruptcy Basics Glossary, available at https://www.uscourts.

gov/educational-resources/educational-activities/bankruptcy-ba

sics-glossary (all websites last visited June 29, 2022).

An “adversary proceeding” is a “lawsuit arising in or

related to a bankruptcy case that is commenced by filing a

complaint with the [bankruptcy] court.” Adversary Proceeding,

U.S. Courts, Bankruptcy Basics Glossary, supra.

choice-of-law rules, rather than California’s choice-oflaw rules, to determine whether California law or

Arkansas law governed the secured status of

Respondent’s claim. Pet.App. 21a. The bankruptcy

court then explained that the federal choice-of-law

rules

the

most-significant-relationship

approach in the Restatement (Second) of Conflict of

Laws. Pet.App. 21a. That approach differs from

California’s choice-of-law rules, which follow the “socalled governmental interest analysis.” Kearney v.

Salomon Smith Barney, Inc., 137 P.3d 914, 922 (Cal.

2006). Applying those federal choice-of-law rules, the

bankruptcy court held that California law, not

Arkansas law, determines whether Respondent’s

claim was secured or unsecured. Pet.App. 21a–24a.

The bankruptcy court then applied California law and

concluded that “no lien for attorney’s fees was

created,” meaning that Respondent’s claim was

unsecured. Pet.App. 24a–25a; see Pet.App. 20a–26a.

C. Respondent appealed the bankruptcy court’s

ruling to the district court. See Pet.App. 6a–16a. In

that appeal, Respondent challenged only the

bankruptcy court’s conclusion that California law

controlled whether Respondent’s claim was secured or

unsecured.

Pet.App. 9a.

That is, Respondent

“argue[d] only that Arkansas law, and not California

law, applies and that [its] lien is valid under Arkansas

law.” Pet.App.9a. Respondent did “not argue that it

has a valid lien under California law.” Pet.App. 9a.

The district court reversed the bankruptcy court’s

judgment. Pet.App. 16a. Like the bankruptcy court,

the district court applied “federal choice of law

principles” because, under controlling Ninth Circuit

law, federal choice-of-law-rules apply in “bankruptcy

court proceedings.” Pet.App. 9a. The Ninth Circuit’s

controlling choice-of-law approach is contrary to the

approach taken in every other circuit court to have

decided this issue. See In re Gaston & Snow, 243 F.3d

at 604–07; In re Merritt Dredging Co., 839 F.2d at

205–06; In re Robeson Indus. Corp., 178 F.3d at 164–

65; In re Payless Cashways, 203 F.3d at 1084; accord

Matter of Iowa R. Co., 840 F.2d at 542 (Easterbrook,

J.). The district court then held that the federal

choice-of-law rules require the application of

Arkansas law to determine whether Respondent’s

claim was secured or unsecured. Pet.App.9a–14a.

Finally, applying Arkansas law, the district court

concluded that Respondent held a valid lien on

Petitioner’s judgment in the Walmart litigation,

meaning that Respondent’s claim was secured.

Pet.App.14a–16a.

D. On appeal, Petitioner understood that a key

question here was whether federal or California

choice-of-law rules applied.

That is because

California’s choice-of-law rules clearly require the

application of California law as compared to Arkansas

law, compare Pet.App. 31a, with Pet.App.2a–4a, 9a–

14a, and Petitioner could only prevail under

California law, since that State does not recognize

noncontractual attorney’s liens, Pet.App. 31a–32a,

see, e.g., Hansen v. Jacobsen, 230 Cal. Rptr. 580, 583

(Cal. Ct. App. 1986). Indeed, the centrality of this

choice-of-law issue to this case is why Petitioner

petitioned the Ninth Circuit for initial hearing en

banc on this very issue, requesting that it overrule its

binding circuit precedent on this issue at the outset of

the appeal, CA9 Dkt.13, and why Petitioner led with

that same argument in its merits briefing, CA9

Dkt.14 at 24–32; see generally CA9 Dkt.36 (denying

Petitioner’s petition for initial hearing en banc, with

no judge requesting a vote on the petition).

The Ninth Circuit panel—bound by the Ninth

Circuit precedent noted above—applied federal

choice-of-law rules, selected Arkansas law as the

governing law, and affirmed. Pet.App. 1a–5a. The

panel explained that “[b]ecause this is a bankruptcy

proceeding, federal choice-of-law rules determine

which state’s substantive law applies.” Pet.App.2a

(citing In re Lindsay, 59 F.3d 942). That said, the

panel recognized that Petitioner had “claim[ed] that

[In re] Lindsay was wrongly decided” and should be

overruled, but the court explained that In re Lindsay

“binds [it] as a three-judge panel.” Pet.App. 2a. So,

applying federal choice-of-law rules as In re Lindsay

requires, the panel “follow[ed] the approach of the

Restatement” and concluded that Arkansas law, not

California law, governed whether Respondent’s

asserted lien was valid. Pet.App. 2a–4a (citation

omitted). Finally, the Ninth Circuit held that, under

Arkansas law, Respondent’s asserted lien was valid,

meaning that its claim was secured. Pet.App. 5a.

REASONS FOR GRANTING THE PETITION

There

Well-Entrenched,

Widely

Acknowledged Circuit Split As To Whether

Forum State Or Federal Choice-Of-Law Rules

Apply In Bankruptcy Proceedings

Commentators and courts broadly acknowledge

the long-standing, well-entrenched circuit split on the

Question Presented. “The federal courts are divided

concerning whether federal choice of law rules or

forum choice of law rules apply in bankruptcy courts.”

17A Moore’s Federal Practice – Civil § 124.30.

“[T]here is now a circuit split” on this issue,

19 Federal Practice and Procedure § 4518, with a

“majority view” and a “minority rule,” 5 Collier on

Bankruptcy ¶ 544.02.

“The federal courts are

divided” on this question. In re Gaston & Snow, 243

F.3d at 605–07; see Deutsche Bank Tr. Co. Ams. v.

U.S. Energy Dev. Corp. (In re First River Energy,

LLC), 986 F.3d 914, 924 n.19 (5th Cir. 2021)

(expressly recognizing “a circuit split”); In re Sterba,

852 F.3d at 1177 n.1 (same). This circuit split

comprises the Ninth Circuit on the one side, and

multiple other courts of appeals on the other.

The Ninth Circuit sits alone in holding, for almost

two decades, that federal choice-of-law rules apply in

all bankruptcy cases. Pet.App. 2a (applying circuit

precedent of In re Lindsay, 59 F.3d at 948). In its In

re Lindsay decision, the Ninth Circuit held that,

without exception, “[i]n federal question cases with

exclusive jurisdiction in federal court, such as

bankruptcy, the court should apply federal, not forum

state, choice of law rules.” 59 F.3d at 948. Thus, in

the Ninth Circuit’s view, “[t]he rule in diversity cases”

established by Klaxon Co. v. Stentor Elec. Mfg. Co.,

313 U.S. 487 (1941), “that federal courts must apply

the conflict of laws principles of the forum state[,]

does not apply to federal question cases such as

bankruptcy.” 59 F.3d at 948. The Ninth Circuit has

recognized that its approach differs from that of its

sister circuits, but has expressed no interest in

changing course, see In re Sterba, 852 F.3d at 1177 &

n.1; see also, e.g., In re Vortex Fishing Sys., Inc., 277

F.3d 1057, 1069 (9th Cir. 2002) (also following In re

Lindsay), including in this case, where it denied

Petitioner’s en banc petition with no judge calling for

a vote, CA9 Dkt.36.

Every other court of appeals to have decided this

issue has held that a bankruptcy court should apply

the forum State’s choice-of-law rules when

adjudicating state-law claims or issues, only noting a

never-applied exception for exceptional cases that

implicate special federal interests.

The Second Circuit has held that “bankruptcy

courts should apply the choice of law rules of the

forum state unless the case implicates important

federal bankruptcy policy,” while expressly

recognizing that “[t]he federal courts are divided” on

the Question Presented. In re Gaston & Snow, 243

F.3d at 605–07. The Second Circuit reached this

holding by applying the Erie doctrine, which only

allows for the “judicial creation of a special federal

rule” like a conflicts-of-law rule under extremely

narrow circumstances, not present there.

Id.

(citations omitted). The Second Circuit also rejected

the policy considerations supplied by the Ninth

Circuit for its contrary approach, id. at 606 (citing In

re Lindsay, 59 F.3d at 948), while explaining that its

own approach creates “[a] uniform rule” that “will

enhance predictability in an area where predictability

is critical,” id. at 606–07 (citations omitted).

The Fourth Circuit has taken the same approach

as the Second Circuit, holding that bankruptcy courts

must apply “the choice of law rule of the forum state”

when adjudicating state-law claims and issues, in the

absence of an “overwhelming federal policy” to the

contrary. In re Merritt Dredging Co., 839 F.2d at

205–06. Like the Second Circuit, the Fourth Circuit’s

holding rests on the Erie doctrine. See id. Finally,

the Fourth Circuit also relied on Butner v. United

States, 440 U.S. 48 (1979), which held that “[p]roperty

interests are created and defined by state law” and

that bankruptcy does not affect how federal courts

must analyze these state-law interests. In re Merritt

Dredging Co., 839 F.2d at 205–06 (quoting Butner,

440 U.S. at 55).

The Third and Eighth Circuits have similarly

held that bankruptcy courts must apply the forum

State’s choice-of-law rules, rather than federal rules,

when resolving state-law claims and issues. See In re

Robeson Indus. Corp., 178 F.3d at 164–65; In re

Payless Cashways, 203 F.3d at 1084.

Although other courts of appeals appear not to

have decided which choice-of-law rules bankruptcy

courts must apply when resolving state-law claims or

issues, they have nevertheless acknowledged this

circuit split. While the Seventh Circuit appears at

one point to have held that bankruptcy courts should

apply the forum State’s choice-of-law rules based on

the Erie doctrine, see Matter of Iowa R. Co., 840 F.2d

at 535–36, 542–43 (Easterbrook, J.), more recent

Seventh Circuit precedent appears to consider this is

an open question, see In re Jafari, 569 F.3d 644, 651

(7th Cir. 2009) (“[W]e need not decide whether state

or federal law supplies the choice-of-law rules in a

bankruptcy case because Nevada substantive law

would apply either way.”). The Fifth Circuit has

expressly recognized that “[t]here is a circuit split” on

the Question Presented, while suggesting support for

the approach adopted by the Second, Third, Fourth

and Eighth Circuits. See In re First River Energy,

LLC, 986 F.3d at 924 n.19.

II. The Ninth Circuit’s Entrenched Position That

Federal Choice-Of-Law Rules Always Apply In

Bankruptcy Proceedings Violates This Court’s

Case Law

Under this Court’s Erie doctrine, “[t]here is no

federal general common law,” which means that “the

law to be applied in any case” before a federal court

“is the law of the state”—“[e]xcept in matters

governed by the Federal Constitution or by acts of

Congress.”

Erie, 304 U.S. at 78.

This Court

“extend[ed]” the Erie doctrine in Klaxon to include

“the field of conflict of laws,” which means that federal

courts must also apply the choice-of-law rules of their

forum State, absent some federal constitutional or

statutory rule to the contrary. Klaxon, 313 U.S. at

496. Further, “[w]hatever lack of uniformity this

[rule] may produce between federal courts in different

states is attributable to our federal system, which

leaves to a state, within the limits permitted by the

Constitution, the right to pursue local policies

diverging from those of its neighbors.” Id.

While Erie itself arose in the diversityjurisdiction context, see 304 U.S. at 77–78, the Erie

doctrine applies whenever federal courts decide statelaw claims and issues. That is, under Erie, “federal

courts are constitutionally obligated to apply state

law to state claims,” whatever the source of the

federal courts’ jurisdiction to decide them. Felder v.

Casey, 487 U.S. 131, 151 (1988) (citing Erie, 304 U.S.

at 78–79). This means that the Erie doctrine applies

when, for example, “a federal court exercises diversity

or pendent jurisdiction over state-law claims,” id.; or

when it exercises its jurisdiction to hear state-law

claims brought by the federal government, O’Melveny

& Myers v. FDIC, 512 U.S. 79, 83–85, 87–88 (1994);

see also Atherton v. FDIC, 519 U.S. 213, 218 (1997);

or when it adjudicates state-law claims asserted

against a foreign sovereign, Cassirer v. Thyssen-

Bornemisza Collection Found., 142 S. Ct. 1502, 1509–

10 (2022). With each of these fonts of federal

jurisdiction—and with all other springs of federalcourt power—“[t]here is no federal general common

law,” and so federal courts must look to state law as

Erie provides. O’Melveny, 512 U.S. at 83–85 (quoting

Erie, 304 U.S. at 78).

Considered dicta in this Court’s recent decision in

Cassirer strongly supports the conclusion that the

Erie doctrine applies outside of the diversityjurisdiction context. There, this Court held that the

Foreign Sovereign Immunities Act (“FSIA”)—which is

a federal statute granting district courts jurisdiction

over suits against foreign sovereigns under limited

circumstances—mandates that federal courts apply

the same choice-of-law rules in FSIA cases as they

“would apply in a similar suit between private

parties,” as a matter of statutory text. 142 S. Ct.

at 1508. Most relevant here, this Court ended its

decision by explaining that it “would likely reach the

same result” under the Erie doctrine even if the

FSIA’s text were “not so clear,” with no suggestion

that the absence of diversity jurisdiction in the case

would lead to a different conclusion. See id. at 1509.

Under the above-described principles, it is clear

that the Erie doctrine requires bankruptcy courts to

apply the forum State’s choice-of-law rules when

adjudicating state-law claims or issues. Bankruptcy

courts frequently adjudicate state-law claims and

issues in the course of settling bankruptcy disputes,

since “Congress has generally left the determination

of property rights in the assets of a bankrupt’s estate

to state law.” Butner, 440 U.S. at 54. Nothing in the

Constitution, see id. at 54 & n.9, or in the Bankruptcy

Code, In re Holiday Airlines Corp., 620 F.2d 731, 734

(9th Cir. 1980), directs bankruptcy courts to apply

federal choice-of-law rules for these state-law claims

or issues. Therefore, Erie requires bankruptcy courts

to apply the forum State’s choice-of-law rules to

resolve those state-law claims and issues, Erie, 304

U.S. at 78; Klaxon, 313 U.S. at 496. And while

bankruptcy courts do not exercise diversity

jurisdiction, that is irrelevant to these courts’ duty to

follow the Erie doctrine here. See Felder, 487 U.S. at

151; O’Melveny, 512 U.S. at 83–85, 87–88; Atherton,

519 U.S. at 218; Cassirer, 142 S. Ct. at 1509. “There

is no federal general common law” for bankruptcy

courts to apply, Erie, 304 U.S. at 78—including as to

the application of choice-of-law rules, Klaxon, 313

U.S. at 496—just like federal courts exercising

jurisdiction under any other source.

Although Erie allows federal courts to create and

apply federal common law when there is an

“extraordinary” reason to do so, O’Melveny, 512 U.S.

at 87–88; accord Cassirer, 142 S. Ct. at 1509–10,

there is no such reason for bankruptcy courts to apply

federal choice-of-law rules in the absence of unusual

circumstances that may well never arise. After all, it

is hard to see how a bankruptcy court’s application of

a forum State’s choice-of-law rules while adjudicating

state-law claims and issues could create “a significant

conflict” with “some federal policy,” justifying “the

judicial creation” of federal choice-of-law rules.

O’Melveny, 512 U.S. at 87–89 (citation omitted). For

example, in the present case, the dispute is solely over

the validity of Respondent’s asserted lien on

Petitioner’s judgment—with California law holding

the lien invalid and Arkansas law taking the opposite

view. See Pet.App. 5a, 9a, 14a–16a, 20a–26a. The

validity of an asserted “security interest[ ]” like this is

a “state law” question that does not run afoul of “any

congressional command” or “any identifiable federal

interest,” as this Court has recognized. Butner, 440

U.S. at 55; see also id. at 54 (explaining that

“Congress has not chosen to exercise its power [over

bankruptcy] to fashion” a general rule regulating the

validity of security interests in bankruptcy). Such

state-law-security-interest questions are standard

fare for the bankruptcy courts, as they complete their

workaday tasks of identifying and adjudicating

secured and unsecured claims against the bankruptcy

estate and then distributing the estate’s property

accordingly. See generally id at 54–57; 1 Collier on

Bankruptcy ¶ 1.03. Thus, while the Second and

Fourth Circuits acknowledged a narrow potential

space for federal common law in a bankruptcy court’s

choice-of-law determination when dealing with

specific issues raising an “important federal

bankruptcy policy,” In re Gaston & Snow, 243 F.3d at

605–07; accord In re Merritt Dredging Co., 839 F.2d

at 205–06, it is not at all clear whether any

bankruptcy case considering a state-law claim or

issue could ever raise an “important federal

bankruptcy policy,” so as to fall within that

exception’s narrow—or perhaps non-existent—scope.

The Ninth Circuit’s contrary conclusion in In re

Lindsay and its progeny is, with all respect, simply

contrary to this Court’s Erie case law. The Ninth

Circuit primarily defended its position by claiming

that Klaxon’s extension of Erie to choice-of-law rules

does not apply “[i]n federal question cases with

exclusive jurisdiction in federal court, such as

bankruptcy.” In re Lindsay, 59 F.3d at 948 (emphasis

added). But, as explained above, the Erie doctrine

“constitutionally obligate[s]” the federal courts “to

apply state law to state claims” whenever those

claims arise, Felder, 487 U.S. at 151, with no

exclusive-federal-jurisdiction qualifier. The Ninth

Circuit also invoked as support for its position “[t]he

value of national uniformity of approach,” In re

Lindsay, 59 F.3d at 948, but this does not justify the

creation of federal common law. To begin, Klaxon’s

rule does create “[a] uniform rule,” as it uniformly

directs bankruptcy courts to apply the choice-of-law

rules of the forum State. In re Merritt Dredging Co.,

839 F.2d at 205–06. That gives “uniform treatment”

to bankruptcy creditors and debtors across the

country, as the Bankruptcy Clause requires,

“reduc[ing]” the “uncertainty” of which choice-of-law

rules may apply in bankruptcy proceedings. Butner,

440 U.S. at 55; accord In re Merritt Dredging Co., 839

F.2d at 205–06 (“enhance predictability”). Klaxon’s

rule also ensures that state courts and bankruptcy

courts treat the property rights of bankruptcy debtors

and creditors in a uniform manner, so that no one

“receiv[es] a windfall merely by reason of the

happenstance of bankruptcy.” Butner, 440 U.S. at 55

(citation omitted); accord In re Merritt Dredging Co.,

839 F.2d at 206. In any event, “the interest in

uniformity” is the “most generic (and lightly invoked)

of alleged federal interests” to support an exception to

the Erie doctrine, which does not “qualif[y] as an

identifiable federal interest” justifying the creation of

federal common law here. O’Melveny, 512 U.S. at 88

(emphasis added); see also Atherton, 519 U.S.

at 219–20.

III. This Case Is An Ideal Vehicle For Resolving The

Important Question Presented

This Petition is an ideal vehicle for this Court to

resolve the Question Presented, which raises an

important issue for the uniform administration of

bankruptcy across the country.

A. This Petition presents an issue of national

importance deserving of this Court’s review. The

Constitution’s overarching requirement for Congress’

power to enact “[l]aws on the subject of Bankruptcies”

is for those laws to be “uniform.” U.S. Const. art. I,

§ 8, cl. 4. This “[c]onstitutional requirement of

uniformity is a requirement of geographical

uniformity,” Vanston Bondholders Protective Comm.

v. Green, 329 U.S. 156, 172 (1946) (Frankfurter, J.,

concurring) (emphasis added), meaning that the

Constitution

“does

not

permit

arbitrary

geographically disparate treatment of debtors,” Siegel

v. Fitzgerald, 142 S. Ct. 1770, 2022 WL 1914098, at

*7 (2022). Thus, under the Bankruptcy Clause, a

debtor’s “obligations” must be “treated alike . . .

throughout the country regardless of the State in

which the bankruptcy court sits.” Vanston, 329 U.S.

at 172 (Frankfurter, J., concurring). This primary

concern

for

uniformity

also

furthers

the

“predictability” of bankruptcy proceedings, which is

an especially “critical” consideration here, In re

Merritt Dredging Co., Inc., 839 F.2d at 206, given

bankruptcy’s “intimate[ ] connect[ion] with the

regulation of commerce,” The Federalist No. 42 at 221

(James Madison) (Gideon ed., 2001); accord Sturges v.

Crowninshield, 17 U.S. (4 Wheat.) 122, 195 (1819)

(Marshall, C. J.) (“The bankrupt law is said to grow

out of the exigencies of commerce.”).

The entrenched circuit split on the Question

Presented—with the Ninth Circuit on the one side,

and multiple other courts of appeals on the other—

creates a fundamental geographic disuniformity in

bankruptcy law. Under the Ninth Circuit’s approach,

bankruptcy courts must always apply federal choiceof-law rules when adjudicating state-law claims and

issues, contrary to the approach taken in every other

circuit to have decided the issue. Supra pp. 2, 10–11.

Thus, bankruptcy creditors and debtors in the Ninth

Circuit alone lose the protections of the forum State’s

choice-of-law rules for the resolution of the state-law

claims and issues that they assert in bankruptcy

court. Contra U.S. Const. art. I, § 8, cl. 4; Siegel, 142

S. Ct. 1770, 2022 WL 1914098, at *7; Vanston, 329

U.S. at 172 (Frankfurter, J., concurring). Further,

this disuniformity creates the unacceptable

“anomal[y]” that—for Ninth Circuit bankruptcy

creditors and debtors alone—their “same property

interest[s]” will be “governed by the laws of one state

in federal diversity proceedings and by the laws of

another state where a federal court is sitting in

bankruptcy.” In re Merritt Dredging Co., Inc., 839

F.2d at 206.

B. This Petition is an ideal vehicle for this Court

to consider the Question Presented.

Whether federal or California choice-of-law rules

apply in this case is a key issue that, Petitioner

respectfully submits, is outcome-determinative here.

Petitioner prevails if California law, not Arkansas

law, controls, as Respondent’s lien is plainly invalid

under California law. See Pet.App. 9a, 31a–32a.

California’s choice-of-law rules clearly require the

bankruptcy court to apply California law, whereas the

Ninth Circuit held that federal choice-of-law rules

require the application of Arkansas law. Compare

Pet.App. 31a, with Pet.App.2a–4a, 9a–14a. This is

because California’s choice-of-law rules—unlike the

federal choice-of-law rules—follow the “governmental

interest” approach, Kearney, 137 P.3d at 922, which

strongly favors applying California law over

Arkansas law here, due to California’s overwhelming

governmental interest in protecting “California

entities and individuals from liens for attorney’s fees

without informed consent.”

Pet.App. 31a.

contrast, federal choice-of-law rules apply the mostsignificant-relationship

approach—including

“presumption in favor of [applying] the law where the

chattel is located” in this case—which, in the Ninth

Circuit’s view, requires application of Arkansas law,

as Petitioner’s judgment “is located . . . i[n]

Arkansas.” Pet.App. 4a.

Given the central importance of this choice-of-law

issue to this case, Petitioner repeatedly challenged In

re Lindsay before the Ninth Circuit below, seeking to

obtain the benefit of California choice-of-law rules.

Petitioner requested initial hearing en banc from the

Ninth Circuit, asking the en banc court to overrule In

re Lindsay. CA9 Dkt.13. Further, Petitioner led with

this challenge to In re Lindsay in its merits briefing,

ultimately submitted to the three-judge panel. CA9

Dkt.14 at 24–32. Having failed on both efforts to

persuade the Ninth Circuit to overrule In re Lindsay,

Petitioner had to brief this issue under the far-lessfavorable federal choice-of-law rules and thus lost.

C. Finally, the proceedings in Sterba v. PNC

Bank, No.17-423. cert. denied 138 S. Ct. 2672

(2018)—where this Court called for the views of the

Solicitor General, but ultimately denied the

petition—further support granting the present

Petition.

The petition in Sterba raised the same circuit

split at issue here. In Sterba, the Ninth Circuit

applied the Ninth Circuit’s In re Lindsay choice-oflaw rule and then held that certain creditors’ claims

were not time-barred under state law and thus were

allowable against the bankruptcy estate. Id. at 1177,

1180–81. The In re Sterba bankruptcy debtors

petitioned this Court for certiorari, raising the same

circuit split that is at issue here. See Petition for Writ

of Certiorari at i, Sterba v. PNC Bank, No.17-423,

2017 WL 4174959 (U.S. Sept. 15, 2017). This Court

called for the views of the Solicitor General on

whether to grant the Sterba petition and decide the

question presented. Sterba v. PNC Bank, No.17-423

(U.S. Jan. 22, 2018).

In his brief, the Solicitor General recommended

that the Court deny the Sterba petition, echoing

multiple arguments that the Sterba respondent had

raised. Br. for the United States as Amicus Curiae,

Sterba v. PNC Bank, No.17-423, 2018 WL 2278124

(U.S. May 17, 2018) (“Sterba SG Br.”). The Solicitor

General—like the Sterba respondent—focused on the

alleged vehicle problems with the petition in Sterba,

arguing that petitioners did not squarely challenge

the lower courts’ application of federal choice-of-law

rules until their petition for certiorari, Sterba SG Br.

17–19; Brief in Opposition at 11–15, Sterba v. PNC

Bank, No.17-423, 2017 WL 6422664 (U.S. Dec. 15,

2017) (“Sterba BIO”), and that the selection of either

federal or the forum State’s choice-of-law rules was

unlikely to affect the outcome, see Sterba SG Br. 7,

17. The Solicitor General also argued that there was

no circuit split over the question that, in his view,

Sterba presented: whether a bankruptcy court should

apply federal or the forum State’s choice-of-law rules

when determining whether 11 U.S.C. § 502(b)(1)

makes a claim unenforceable. See Sterba SG Br. at i,

14.3 So, while the Solicitor General conceded that

there is “some disagreement among the circuits” over

whether bankruptcy courts should apply federal or

the forum State’s choice-of-law rules when

adjudicating state-law claims or issues as a general

matter, he claimed that Sterba did not actually

implicate this split of authority when properly

understood. Sterba SG Br. at 14–17. Finally, both

the Solicitor General and the Sterba respondent

sought to downplay the circuit split to some extent, as

discussed below. See infra pp. 25–26.

3 The Solicitor General also argued that, on the merits, the

Ninth Circuit was correct in Sterba to apply federal choice-oflaw rules, despite the Erie doctrine, because Sterba “was not a

diversity case under 28 U.S.C. 1332.” Sterba SG Br. 11–14. The

Solicitor General’s merits argument is incorrect, as this Court

has held that the Erie doctrine applies beyond diversityjurisdiction cases. Indeed, as already explained above, this

Court applies the Erie doctrine whenever federal courts decide

state-law claims or issues, with no exception for cases arising in

the exclusive jurisdiction of the federal courts. See supra

pp. 13–15. The Solicitor General’s approach in Sterba also

appears to be inconsistent with the Solicitor General’s

arguments in Cassirer. Br. for the United States as Amicus

Curiae at 18–19, Cassirer v. Hyssen-Bornemisza Collection

Found, No.20-1566, 2021 WL 5513717 (U.S. Nov. 22, 2021).

The petitioners in Sterba failed to file either a

reply in support of their petition to respond to the

claimed vehicle problems that the Sterba respondent

had raised, or a response to the Solicitor General’s

brief. See generally Sterba, No.17-423 (U.S.).

The Petition here does not suffer from the

problems that the Solicitor General and the

respondent raised in Sterba. To begin, Petitioner

here challenged the application of federal choice-oflaw rules prior to the filing of this Petition, including

filing a petition for initial hearing en banc and raising

this as its lead issue before the Ninth Circuit panel.

Compare Sterba SG Br. 17–19, and Sterba BIO 11–12

& n.5, with CA9 Dkt.13, and CA9 Dkt.14 at 24–32.

Additionally, this choice-of-law issue is outcomedeterminative here, as explained above. Supra pp. 2,

8–9, 11, 22. Further, there is no possible dispute here

that the bankruptcy court resolved an issue based

fundamentally on state law, rather than on 11 U.S.C.

§ 502(b)(1), or some other federal law—unlike what

the Solicitor General claimed was at issue in Sterba.

Compare Pet.App. 21a–26a, with Sterba SG Br. 8–14.

That is, both parties and every court below agreed,

consistent with this Court’s precedent, that whether

Respondent held a valid lien in Petitioner’s judgment

is a question that “should be resolved by reference to

state law,” since the “application of state law” decides

questions related to “security interests.” Butner, 440

U.S. at 52, 55; see generally 1 Collier on Bankruptcy

¶ 1.03.

Finally, nothing in the Sterba certiorari-stage

briefing undermines the existence of the circuit split

on the Question Presented. In Sterba, the Solicitor

General conceded that there was “some disagreement

among the circuits,” Sterba SG Br. at 14, while

discussing the same circuit-court cases as Petitioner

here, compare id. at 14–17, with supra Part I. The

Sterba respondent also recognized this split, although

claiming that this split was “nuanced,” since the

Second and Fourth Circuits would allow bankruptcy

courts to apply federal choice-of-law rules in

exceptional circumstances. Sterba BIO at 10. Yet,

this split is clear: the Ninth Circuit always requires

bankruptcy courts to apply federal choice-of-law rules

when adjudicating state-law claims. Supra pp. pp. 2,

10–11, 20. In direct contrast, other circuits require

bankruptcy courts to apply the forum State’s choiceof-law rules, supra pp. 11–13—with the Second and

Fourth Circuits recognizing an extremely limited

exception to this rule for cases presenting

extraordinary circumstances that may never be

present in any actual case, supra pp. 11–12.

CONCLUSION

This Court should grant the Petition.

Respectfully submitted,

LEAH S. STRICKLAND

TROUTMAN PEPPER

HAMILTON SANDERS LLP

222 Central Park Ave.,

Ste. 2000

Virginia Beach, VA

23462

(757) 687-7511

leah.strickland@

troutman.com

June 2022

MISHA TSEYTLIN

Counsel of Record

KEVIN M. LEROY

TROUTMAN PEPPER

HAMILTON SANDERS LLP

227 W. Monroe St.,

Ste. 3900

Chicago, IL 60606

(608) 999-1240

misha.tseytlin@

troutman.com

APPENDIX

APPENDIX A — Appendix

OPINIONAOF THE UNITED

STATES COURT OF APPEALS FOR THE NINTH

CIRCUIT, FILED MARCH 2, 2022

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

No. 21-55298

D.C. No. 3:20-cv-01882-CAB-BLM

In re: CUKER INTERACTIVE, LLC,

Debtor,

PILLSBURY WINTHROP SHAW PITTMAN, LLP,

Plaintiff-Appellee,

CUKER INTERACTIVE, LLC,

Defendant-Appellant.

MEMORANDUM*

Appeal from the United States District Court

for the Southern District of California

Cathy Ann Bencivengo, District Judge, Presiding.

* This disposition is not appropriate for publication and is not

precedent except as provided by Ninth Circuit Rule 36-3.

Appendix A

February 18, 2022, Argued and Submitted,

Pasadena, California;

March 2, 2022, Filed

Before: BRESS and BUMATAY, Circuit Judges, and

LASNIK,** District Judge.

In this adversary proceeding, Cuker Interactive,

LLC appeals the district court’s order finding that the

law firm of Pillsbury Winthrop Shaw has a valid Arkansas

attorney’s lien against Cuker. Because this appeal

requires no further fact finding and presents a pure legal

issue, we have jurisdiction under 28 U.S.C. § 158(d) to

review the district court’s final order. See In re DeMarah,

62 F.3d 1248, 1250 (9th Cir. 1995). Reviewing de novo, see

In re Tenderloin Health, 849 F.3d 1231, 1234-35 (9th Cir.

2017), we affirm.

Because this is a bankruptcy proceeding, federal

choice-of-law rules determine which state’s substantive

law applies. In re Lindsay, 59 F.3d 942, 948 (9th Cir. 1995).

Applying federal choice of law rules requires us to “follow

the approach of the Restatement (Second) of Conflict of

Laws.” In re Vortex Fishing Sys., Inc., 277 F.3d 1057, 1069

(9th Cir. 2002). Although Cuker claims that Lindsay was

wrongly decided, it binds us as a three-judge panel. See

Miller v. Gammie, 335 F.3d 889, 893 (9th Cir. 2003) (en

banc).

** The Honorable Robert S. Lasnik, United States District

Judge for the Western District of Washington, sitting by designation.

Appendix A

We reject Cuker’s argument that Restatement § 188

applies here. That section addresses “[t]he rights and

duties of the parties with respect to an issue in contract.”

Although the parties have a contract (the Engagement

Agreement), it has no nexus to the present lien dispute,

as Cuker acknowledged at various points in this case.

Instead, the lien is a non-consensual lien that arises

from Arkansas statutes. See Ark. Code Ann. § 16-22-304.

Section 251 of the Restatement is therefore the relevant

section. It applies to the “validity and effect of a security

interest in a chattel,” and specifically to liens that arise by

operation of law, including attorney’s liens. Restatement

(Second) of Conflict of Laws § 251 & comment f.

Section 251 states:

(1) The validity and effect of a security interest

in a chattel as between the immediate

parties are determined by the local law

of the state which, with respect to the

particular issue, has the most significant

relationship to the parties, the chattel and

the security interest under the principles

stated in § 6.

(2) In the absence of an effective choice of law

by the parties, greater weight will usually

be given to the location of the chattel at the

time that the security interest attached

than to any other contact in determining

the state of the applicable law.

(Emphasis added).

Appendix A

Although both parties make plausible arguments

under the § 6 factors that Arkansas and California each

have a significant relationship to this dispute, subsection

(2) of § 251 sets a presumption in favor of the law where

the chattel is located, which here is Arkansas. As one

secondary source explains:

The generally accepted view is that the

existence and effect of an attorney’s lien is

governed by the law of the place in which

the contract between the attorney and the

client is to be performed, that is, in which a

contemplated action or proceeding is to be

instituted, and that the place of contracting is

immaterial where the contract contemplates the

institution of an action in another jurisdiction.

Conflict of Laws as to Attorneys’ Liens, 59 A.L.R.2d 564,

§ 4. Cuker has not provided a sufficient basis to conclude

that the § 6 factors overcome § 251’s general preference

for the law of the place where the chattel is located. See

also Restatement (Second) of Conflict of Laws § 251

comment e (explaining that “[t]he values of certainty and

predictability of result are furthered as a consequence,

since the place where a chattel is situated at a given time

will either be known to the parties or else, except in

rare instances, will be readily ascertainable”). Cuker’s

argument that it lacked sufficient notice that Arkansas

law could apply is unpersuasive considering that Cuker

knew it was retaining Pillsbury to represent it in litigation

in Arkansas, and later filed a malpractice action against

Pillsbury in that state.

Appendix A

Applying Arkansas law, Pillsbury has a valid lien.

Arkansas Code Ann. § 16-22-304 sets out the procedures

to perfect an attorney’s lien in Arkansas. See Mack v.

Brazil, Adlong & Winningham, PLC, 357 Ark. 1, 159

S.W.3d 291, 294-95 (Ark. 2004). It requires “service

upon the adverse party of a written notice signed by the

client and by the attorney at law . . . representing the

client.” Ark. Code Ann. § 16-22-304(a)(1). It also specifies

“notice . . . to be served by certified mail” and “a return

receipt” to “establish actual delivery of the notice.” Id.

The Arkansas Supreme Court has held, however, that

“strict compliance with the attorney’s lien statute is not

required and substantial compliance will suffice.” Mack,

159 S.W.3d at 295.

Pillsbury substantially complied with the lien statute.

Although Pillsbury’s lien was not signed by the client,

Pillsbury sent written notice of its lien by certified mail

to Walmart’s counsel and to both of Cuker’s principals,

with return receipt requested. Pillsbury also emailed

the notice to Cuker’s principals, Walmart’s counsel, and

Cuker’s counsel. Cuker has not argued that it was unaware

of Pillsbury’s lien. Under analogous circumstances,

the Arkansas Supreme Court has found substantial

compliance with its attorney’s lien statute. See Mack, 159

S.W.3d at 296; Metropolitan Life Ins. Co. v. Roberts, 241

Ark. 994, 411 S.W.2d 299, 300 (Ark. 1967). As a result,

Pillsbury has a perfected lien.

AFFIRMED.

B THE UNITED

APPENDIX B —Appendix

ORDER OF

STATES DISTRICT COURT FOR THE

SOUTHERN DISTRICT OF CALIFORNIA,

FILED MARCH 25, 2021

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

Case No.: 20-CV-01882-CAB-BLM

IN RE: CUKER INTERACTIVE, LLC,

Debtor.

PILLSBURY WINTHROP SHAW PITTMAN, LLP,

Appellant,

CUKER INTERACTIVE, LLC,

Appellee.

ORDER REVERSING BANKRUPTCY COURT

In this matter, Appellant Pillsbury Winthrop Shaw

Pittman LLP (“Pillsbury”) appeals a September 17,

2020 order by the United States Bankruptcy Court for

the Southern District of California granting a motion

for summary judgment by Debtor and Appellee Cuker

Interactive, LLC (“Cuker”) in an adversary proceeding

seeking declaratory relief concerning the validity and

extent of a lien by Pillsbury. The appeal has been fully

briefed, and the Court held oral argument. As discussed

below, the bankruptcy court’s grant of judgment in favor

of Cuker is reversed.

Appendix B

Background

Pillsbury represented Cuker in litigation against

Walmart in Arkansas federal court. After a jury trial,

the Arkansas District Court entered judgment in favor

of Cuker for $745,021 in damages and $2,664,262.44

in attorney’s fees and sanctions. On December 8, 2017,

while the litigation was ongoing, Pillsbury sent a letter

to counsel for Walmart providing notice that Cuker

owed Pillsbury money for its services in the Walmart

lawsuit and purporting to assert an attorney’s lien under

Arkansas law on amounts owed by Walmart to Cuker in

the lawsuit. [Doc. No. 20-1 at 13.]1

On December 13, 2018, Cuker filed for Chapter 11

bankruptcy in this district. Pillsbury filed a proof of

claim asserting a claim for $1,637,418.71 secured by

an attorney’s lien on the judgment and proceeds of the

Walmart lawsuit and perfected by the December 8, 2017

letter to Walmart’s counsel. [Doc. No. 20-1 at 10-12.]

On May 29, 2020, Cuker filed an adversary proceeding

against Pillsbury to determine whether Pillsbury’s claim

is secured or unsecured. [Doc. No. 20-1 at 5-8.] In a motion

for summary judgment filed shortly thereafter, Cuker

asked the bankruptcy court to determine as a matter of

law that Pillsbury’s claim is a general unsecured claim

not entitled to priority. [Doc. No. 20-1 at 21.]

Pillsbury filed a petition to compel arbitration of the

adversary proceeding based on an arbitration provision in

1. Citations to the record use the ECF watermark for the

instant appeal.

Appendix B

Pillsbury’s engagement letter with Cuker. [Doc. No. 19-1

at 53; Doc. No. 21-1 at 3.] The bankruptcy court denied

Pillsbury’s petition, and on September 18, 2020, Pillsbury

filed a notice of appeal of that ruling and a statement of

election to have the appeal heard in the district court.

[Doc. No. 1.] This Court affirmed the bankruptcy court’s

ruling. See Doc. No. 24 in S.D.Cal. Case No. 18cv1854CAB-BLM.

After determining that it had jurisdiction to decide

Cuker’s adversary proceeding, the bankruptcy court

granted Cuker’s motion for summary judgment, holding

that: (1) California law governed the validity of Pillsbury’s

lien; and (2) Pillsbury did not have a valid lien under

California law, meaning its claim is unsecured. On

September 22, 2020, Pillsbury filed a notice of appeal of

that ruling and a statement of election to have the appeal

heard in the district court. [Doc. No. 1.]

II. Standard of Review

“When considering an appeal from the bankruptcy

court, a district court applies the same standard of review

that a circuit court would use in reviewing a decision of a

district court.” Ho v. Wirum, No. 19-CV-02095-RS, 2019

U.S. Dist. LEXIS 229442, 2019 WL 8263439, at *1 (N.D.

Cal. Dec. 11, 2019) (citing Ford v. Baroff (In re Baroff),

105 F.3d 439, 441 (9th Cir. 1997)). A “Bankruptcy Court’s

decision granting summary judgment is reviewed . . . de

novo.” In re Del Biaggio, No. 12-CV-6447 YGR, 2013 U.S.

Dist. LEXIS 163953, 2013 WL 6073367, at *3 (N.D. Cal.

Nov. 18, 2013) (citing In re Caneva, 550 F.3d 755, 760 (9th

Cir. 2008)).

Appendix B

III. Discussion

Here, as the bankruptcy court found, the parties’

dispute “is not factual, but rather requires an analysis of

whether California law or Arkansas law applies” to the

determination of whether Pillsbury holds a valid lien for

attorney’s fees. [Doc. No. 20-1 at 89.] As stated above, the

bankruptcy court held that California law applies, and that

Pillsbury does not have a valid lien under California law.

In this appeal, Pillsbury argues only that Arkansas law,

and not California law, applies and that Pillsbury’s lien is

valid under Arkansas law. Pillsbury does not argue that

it has a valid lien under California law.

Choice of Law — California or Arkansas

The parties do not dispute that federal choice of law

principles apply in bankruptcy court proceedings and

“[f]ederal choice of law rules follow the approach of the

Restatement (Second) of Conflict of Laws.” In re Vortex

Fishing Sys., Inc., 277 F.3d 1057, 1069 (9th Cir. 2002).

The parties do dispute, however, which section of the

Restatement applies, with Cuker arguing section 188

applies and Pillsbury arguing section 251 applies. The

bankruptcy court found this dispute irrelevant because

both sections reference the principles of section 6 of the

Restatement. This court respectfully disagrees with that

conclusion.

Section 188 concerns the law governing “the rights

and duties of the parties with respect to an issue in

contract.” Restatement (Second) of Conflict of Laws § 188

10a

Appendix B

(1971). An issue in contract is not at issue in this adversary

proceeding. The only issue is the validity of Pillsbury’s

statutory lien. Cuker argues that the parties’ relationship

is “anchored in a written contract,” specifically Cuker’s

engagement agreement with Pillsbury. [Doc. No. 21 at

17.] The parties’ rights and duties under the engagement

agreement, however, are not at issue here. Indeed, the

complaint in Cuker’s adversary proceeding expressly

states as much. [Id. at 6.] The only issue is the validity

of Pillsbury’s lien, and as the bankruptcy court held,

this dispute “does not have its origins or genesis in the

Engagement Agreement,” and “there is no significant

relationship, or any relationship for that matter, between

the fee lien dispute and the Engagement Agreement.” [Id.

at 94.] Accordingly, section 188 plainly does not apply here.

Section 251, meanwhile, concerns the “validity and

effect of a security interest in chattel,” and comment “f”

to the section states that it applies to non-consensual liens,

including “an attorney’s lien.” Restatement (Second) of

Conflict of Laws § 251 (1971). The complaint in Cuker’s

adversary proceeding states that it seeks a determination

of the validity of Pillsbury’s (i.e., Cuker’s former

attorneys’) lien on property of Cuker’s estate. [Doc. No.

20-1 at 6.] Accordingly, section 251 applies here.

Section 251 states:

(1) The validity and effect of a security interest

in a chattel as between the immediate parties

are determined by the local law of the state

which, with respect to the particular issue, has

11a

Appendix B

the most significant relationship to the parties,

the chattel and the security interest under the

principles stated in § 6.

(2) In the absence of an effective choice of law

by the parties, greater weight will usually be

given to the location of the chattel at the time

that the security interest attached than to any

other contact in determining the state of the

applicable law.

Restatement (Second) of Conflict of Laws § 251 (1971).

While the bankruptcy court was correct that the principles

in section 6 are relevant, in finding it immaterial whether

section 188 or section 251 applied, the bankruptcy court

ignored subsection (2), which advises that the location of

the chattel is entitled to the greatest weight. Here, the

chattel in question was, at the time of the lien, money held

by Walmart and payable pursuant to a judgment entered

by an Arkansas federal court. Based on subsection (2),

Arkansas law applies to Pillsbury’s lien.

The bankruptcy court discounted the importance of

the location of the chattel, holding that the place of the

chattel is less relevant when its location is temporary. 2

Instead, the bankruptcy court stated that whether

California or Arkansas law applied is governed solely by

the factors in section 6 of the Restatement, which include:

2. The Court disagrees with this premise, but even using the

section 6 factors on which the bankruptcy court relied, Arkansas

law applies.

12a

Appendix B

(a) the needs of the interstate and international

systems,

(b) the relevant policies of the forum,

states and the relative interests of those states

in the determination of the particular issue,

(d) the protection of justified expectations,

(e) the basic policies underlying the particular

field of law,

(f) certainty, predictability and uniformity of

result, and

(g) ease in the determination and application of

the law to be applied.

Restatement (Second) of Conflict of Laws § 6 (1971). The

bankruptcy court stated without explanation that not all

of these factors are relevant here, and then relying on

factors (b) and (c), held that California law applies because

“Pillsbury’s attorneys, who represented Plaintiff, are

licensed in California; Cuker is a California company, and

the parties’ Engagement Agreement was entered into in

California.” [Doc. No. 20-1 at 101.]

The bankruptcy court’s reliance on where the

Engagement Agreement was executed, however, is

inconsistent with its (correct) holding that there is

13a

Appendix B

no relationship between this fee lien dispute and the

engagement agreement. Moreover, its conclusion that

“it is too great a leap to presume that Cuker might have

predicted or expected Arkansas law to govern this aspect

of its relationship with Pillsbury’s California attorneys”

[Doc. No. 20-1 at 101], is belied by the Engagement

Agreement’s express statement that Cuker was retaining

Pillsbury for the Walmart litigation pending in Arkansas

[Doc. No. 21-1 at 4].

Ultimately, a de novo review of the section 6 factors

also supports applying Arkansas law to the lien dispute

here. Arkansas’s interests exceed those of California’s

with respect to an attorney’s lien on a judgment issued by

an Arkansas court, payable by a company with its principal

place of business in Arkansas, based on fees incurred in

connection with litigation that took place in Arkansas.

Cuker (and Walmart) should have expected that liens on a

judgment in an Arkansas litigation would be governed by

Arkansas law. Further, the basic policies underlying the

perfection of liens, predictability and uniformity of result,

and ease of determination of the applicable law all support

applying Arkansas law to a lien on a judgment issued by

an Arkansas court for unpaid attorney’s fees incurred in

an Arkansas litigation. This conclusion is consistent with

“[t]he generally accepted view [] that the existence and

effect of an attorney’s lien is governed by the law of the

place in which the contract between the attorney and the

client is to be performed, that is, in which a contemplated

action or proceeding is to be instituted, and that the place of

contracting is immaterial where the contract contemplates

the institution of an action in another jurisdiction.”

14a

Appendix B

59 A.L.R.2d 564. Accordingly, even assuming, as did the

bankruptcy court, that whether section 188 or section 251

of the Restatement is irrelevant, Arkansas law applies to

this Pillsbury’s lien.

B. Application of Arkansas Law to Pillsbury’s

Lien

“In order to perfect an attorney’s lien in Arkansas,

an attorney must follow the procedure set out in Ark.

Code Ann. § 16-22-304. . . .” Mack v. Brazil, Adlong &

Winningham, PLC, 357 Ark. 1, 159 S.W.3d 291, 294 (Ark.

2004). That section states:

16-22-304. Lien of attorney created.

(a)(1) From and after service upon the adverse

party of a written notice signed by the client

and by the attorney at law, solicitor, or counselor

representing the client, which notice is to be

served by certified mail and a return receipt

being required to establish actual delivery

of the notice, the attorney at law, solicitor, or

counselor serving the notice upon the adversary

party shall have a lien upon his or her client’s

cause of action, claim, or counterclaim, which

attaches to any settlement, verdict, report,

decision, judgment, or final order in his or

her client’s favor, and the proceeds thereof in

whosoever’s hands they may come.

15a

Appendix B

(2) The lien cannot be defeated and impaired

by any subsequent negotiation or compromise

by any parties litigant.

(3) However, the lien shall apply only to the cause

or causes of action specifically enumerated in

the notice.

Ark. Code Ann. § 16-22-304 (West). “[S]trict compliance

with the attorney’s lien statute is not required and

substantial compliance will suffice.” Mack, 159 S.W.3d at

295. “[T]he intent and purpose of the statute [is] to make

sure . . . that [the attorney] represented [the client] and

that [the adverse party] would be aware of [the attorney’s]

intention to claim a lien, for his fee, on the proceeds of the

litigation before they were paid to the client . . . .” Metro.

Life Ins. Co. v. Roberts, 241 Ark. 994, 411 S.W.2d 299, 300

(Ark. 1967).

Here, Pillsbury provided written notice of its lien by

certified mail with return receipt to Walmart’s counsel.

[Doc. No. 20-1 at 13-17.] Walmart’s counsel knew that

Pillsbury represented Cuker in the litigation between

Cuker and Walmart and confirmed receipt of the notice

of Pillsbury’s intention to create a lien. [Id. at 18.] Cuker,

however, claims that this notice was insufficient to create

a lien because it was not signed by Cuker. The Court is

not persuaded. “[T]here is no question that [Walmart] had

actual notice of the asserted lien before any settlement

money was paid to [Cuker].” Mack, 159 S.W.3d at 296.

Pursuant to Metropolitan Life, Pillsbury was therefore

in substantial compliance with the statute and the fact

16a

Appendix B

that Cuker did not sign the notice is not fatal. See Metro.

Life Ins. Co., 411 S.W.2d at 300 (“[I]t is appellant’s sole

contention that the notice given by appellee in his letter

. . . was not signed by the client. . . . It is true that [the

client] did not sign the notice, but we cannot agree that

this omission is fatal.”) Accordingly, Pillsbury’s lien is

valid under Arkansas law.

IV. Conclusion

For the foregoing reasons, the Court REVERSES

the bankruptcy court’s decision that Pillsbury’s claim is

unsecured, and REMANDS this matter to the bankruptcy

court for further proceedings consistent with this order.

It is SO ORDERED.

Dated: March 25, 2021

/s/ Cathy Ann Bencivengo

Hon. Cathy Ann Bencivengo

United States District Judge

17a

Appendix

APPENDIX C

— OPINION

OF THE

UNITED STATES BANKRUPTCY COURT FOR

THE SOUTHERN DISTRICT OF CALIFORNIA,

ENTERED SEPTEMBER 17, 2020

UNITED STATES BANKRUPTCY COURT

SOUTHERN DISTRICT OF CALIFORNIA

325 West F Street, San Diego, California 92101-6991

Michael D. Breslauer, Esq. SBN 110259

mbreslauer@swsslaw.com

SOLOMON WARD SEIDENWURM & SMITH, LLP

401 B Street, Suite 1200

San Diego, CA 92101

(619) 231-0303

Attorneys for Plaintiff Cuker Interactive, LLC

LODGED

BANKRUPTCY NO. 18-07363-LA11

ADVERSARY NO. 20-90075-LA11

In Re

CUKER INTERACTIVE, LLC,

Debtor.

CUKER INTERACTIVE, LLC,

Plaintiff,

PILLSBURY WINTHROP SHAW PITTMAN, LLP,

Defendant.

18a

Appendix C

Date of Hearing: July 9, 2020

Time of Hearing: 2:30 p.m.

Name of Judge: Louise DeCarl Adler

ORDER ON CUKER INTERACTIVE, LLC’S

MOTION FOR SUMMARY JUDGMENT

The court orders as set forth on the continuation

pages attached and numbered Two (2) through Five (5)

with exhibits, if any, for a total of Five (5) pages. Notice

of Lodgment Docket Entry No. 40.

DATED:

September 17, 2020

/s/ Louise DeCarl Adler

Judge, United States Bankruptcy Court

On May 29, 2020, Plaintiff and Debtor-In-Possession

Cuker Interactive, LLC (“Cuker”) filed and served its

Complaint containing two caues of action, Declaratory

Relief to Determine Secured Status of Pillsbury Winthrop

Shaw Pittman’s Claim No. 13, and for Avoidance of

Lien (the “Complaint”). On June 3, 2020, Cuker filed

its Motion for Summary Judgment (the “Motion”) (Dkt.

No. 4) seeking the Court’s determination that Pillsbury

Winthrop Shaw Pittman’s (“Pillsbury”) Claim No. 13 is an

unsecured claim for all purposes in Cuker’s bankruptcy

case. On June 25, 2020, Pillsbury filed its Request for

Continuance and Opposition to Motion for Summary

Judgment with Reservation if Rights (Dkt. No. 10), and

on July 2, 2020, Cuker filed its Reply (Dkt. No. 14). On

19a

Appendix C

July 8, 2020, the Court filed its Tentative Ruling on the

Motion (Dkt. No. 17; the “Tentative Ruling”), and on July

9, 2020 at 2:30 p.m., the Honorable Louise DeCarl Adler,

United States Bankruptcy Judge, presided over oral

argument where Michael D. Breslauer, Esq. appeared on

behalf of Cuker, and Matthew S. Walker, Esq. appeared

on behalf of Pillsbury. On September 4, 2020, Cuker filed

its voluntary dismissal of its cause of action seeking lien

avoidance, without prejudice (Dkt. No. 38). There were no

other appearances.

Following oral argument, the Court took the matter under

submission and on August 21, 2020, the Court filed its

Letter Opinion (Dkt. No. 32; the “Letter Opinion”).

The Tentative Ruling and the Letter Opinion constitute

findings of fact and conclusions of law herein as may be

required by Fed. R. Bankr. P 7052 and Fed. R. Bankr. P

9014.

Based on the facts and arguments as set forth in the

Motion and the Reply, the papers filed in opposition, and

the arguments made in oral argument, and for the reasons

expressed in the Tentative Ruling and the Letter Opinion,

and for good cause shown,

IT IS HEREBY ORDERED that the Motion is GRANTED.

Judgment shall be entered in favor of Cuker as Plaintiff

and against Pillsbury on the Complaint in the form

attached hereto as Exhibit A.

IT IS SO ORDERED.

20a

APPENDIX D — Appendix

OPINIONDOF THE UNITED

STATES BANKRUPTCY COURT FOR THE

SOUTHERN DISTRICT OF CALIFORNIA,

FILED AUGUST 21, 2020

UNITED STATES BANKRUPTCY COURT

FOR THE SOUTHERN DISTRICT

OF CALIFORNIA

Michael D. Breslauer

Solomon Ward Seidenwurm & Smith, LLP

401 B Street, Suite 1200

San Diego, CA 92101

Matthew S. Walker

Pillsbury Winthrop Shaw Pittman LLP

12255 El Camino Real, Suite 300

San Diego, CA 92130-4088

Entered August 21, 2020

Filed August 21, 2020

Re:

In re Cuker Interactive, LLC, Adv. Proc.

No. 20-90075-LA Plaintiff’s Motion to for Summary

Judgment of Adversary Complaint

Dear Counsel:

At the hearing held on July 9, 2020 on the Motion of

Cuker Interactive, LLC’s (the “Plaintiff” or “Cuker’’), for

Summary Judgment on all claims alleged in its Adversary

Complaint, Pillsbury Winthrop Shaw Pittman LLP’s (the

“Defendant” or “Pillsbury’’) argued against the tentative

ruling, making three main points: (1) Defendant’s Motion

to Compel Arbitration [ECF #8] should be heard prior

21a

Appendix D

to a decision on this Motion for Summary Judgment;

(2) the Court applied the incorrect choice of law rules in

its tentative ruling; and (3) California does not have a

policy against the creation of fee liens. The Court took the

matter under submission, and now amplifies its tentative

ruling as follows:

Defendant’s Motion to Compel Arbitration

On August 5, 2020, the Court issued its tentative

ruling denying the Motion to Compel Arbitration or

Alternatively Transfer Venue to the USDC in Arkansas

[ECF # 27]. The Motion was then heard by this Court

on August 6, 2020. The Court took the matter as to the

Motion to Compel Arbitration under submission and

issued a letter opinion affirming its tentative ruling, and

thereby denying, the Motion to Compel Arbitration on

August 19, 2020. As such, Defendant’s first argument is

no longer at issue.

Choice of Law

The parties are in agreement that federal choice of law

rules apply, as set forth in the Restatement (Second) of

Conflict of Laws (“Restatement’’); however, they disagree

as to whether Restatement § 188 or § 251 applies. Which

section applies is irrelevant because each section applies

the federal choice of law test set forth in Restatement § 6.

That section essentially considers which state has the most

significant relationship to the parties, the chattel, and the

security interest. See In re Symons Frozen Foods Inc.,

432 B.R. 290, 297-98 (Bankr. W.D. Wash., April 2, 2010)

22a

Appendix D

If the Court finds that California has the more

significant relationship, then California law should apply

in determining the validity of the lien. If California

law applies, then a lien for attorney’s fees may only be

created by contract, save a few exceptions that do not

apply here. See Fletcher v. Davis, 33 Cal. 4th 61, 66 (Cal.

2004) (recognizing that a lien to satisfy attorney’s fees

and expenses out of the proceeds of recovery, “is created

only by contract,” under which the client must provide

informed written consent). However, if the Court finds

that Arkansas has a more significant relationship to the

parties and the alleged security interest, then as a matter

of law, Pillsbury holds a valid fee lien via so long as the

attorney properly served upon the adverse party a written

notice signed by the attorney and client stating that the

attorney retains a lien upon his client’s cause of action,

claim, or counterclaim, which attaches to any judgment

or proceeds thereof. Ark. Code. Ann. § 16-22-304; see also

Metropolitan Life Ins. Co. v. Roberts, 241 Ark. 994, 996-97

(1967) (holding that a letter by an attorney giving notice of

intention to impress a lien for services on insurance policy

proceeds qualified as “substantial compliance” with the

Arkansas Lien Statute though notice was not signed by

the client as required by the Statute)

In determining which state has the more significant

relationship to the parties and the alleged security

interest, the Restatement requires consideration of the

following factors, not all of which are relevant here:

The needs of the interstate and international

systems;

23a

Appendix D

The relevant policies of the forum;

The relevant policies of other interested states

and the relative interests of those states in the

determination of the issue;

d) The protection of justified expectations;

The basic policies underlying the particular field

of law;

Certainty, predictability and uniformity of result;

and

g) Ease in the determination and application of the

law to be applied.

Restatement (Second) of Conflict of Laws § 6. Generally,

greater weight is given to the location of the “chattel” at

the time the security interest attached; however, when

the parties understand that the chattel will be kept only

temporarily in the state where it was located at the time

the security interest attached, it is more likely that some

other state has the more significant relationship to the

parties, and the law of that state should apply. See In re

Symons Frozen Foods Inc., 432 B.R. 290, 297-98 (Bankr.

W.D. Wash., April 2, 2010).

Here, the jurisdictions are clearly in conflict as to how

a fee lien can be created. As stated above, California law

requires such a lien to be created by contract, whereas

Arkansas law simply requires notice to the adverse

24a

Appendix D

party that the lien has been created pursuant to the

Arkansas Lien Statute. In considering factors (b) and

(c), both California and Arkansas have an interest in

the application of their respective law, but California’s

relationship to the parties and alleged security interest is

more substantial. Pillsbury’s attorneys, who represented

Plaintiff, are licensed in California; Cuker is a California

company, and the parties’ Engagement Agreement was

entered into in California. While Pillsbury rendered

services in the USDC in Arkansas, it is too great a leap

to presume that Cuker might have predicted or expected

Arkansas law to govern this aspect of its relationship with

Pillsbury’s California attorneys. As such, factor (f) also

favors application of California law.

Though Pillsbury is correct that the USDC in

Arkansas in the Walmart Litigation held that fee issues

were to be governed by Arkansas law, the issue here is

unrelated to the amount of Pillsbury’s fees. Instead, the

issue is one regarding the validity of Pillsbury’s alleged

lien on the proceeds of the Judgment, now held in the

Segregated Account. Therefore, the USDC’s application

of Arkansas law to the amount of Pillsbury’s fees is

irrelevant.

Given the foregoing, this Court now applies California

law in determining the validity of Pillsbury’s claimed

statutory fee lien.

In applying California law, a fee lien has not been

created because the parties did not contract for such,

either expressly or implicitly, in their Engagement

25a

Appendix D

Agreement. Pillsbury does not appear to dispute that the

Engagement Agreement at no point states that Pillsbury

may look to the Judgment, or now the Segregated Account,

for payment of its attorney’s fees. As such, no lien for

attorney’s fees was created under California law.

California Policy Regarding Fee Liens

To the extent the Court’s prior tentative ruling could

be read to infer that California has a policy against fee

liens, the Court clarifies its ruling here. As mentioned

above, California requires that a fee lien be created via

contract (save a few exceptions not applicable here), and

thereby requires a client give its informed consent to the

creation of a fee lien. This is not to say that California

never permits the creation of a fee lien in a different

manner, however no such relevant exception applies to

the facts of this matter.

Conclusion

To the extent that this Court’s prior tentative ruling

did not clearly set forth the support for its conclusions, by

this letter opinion the prior tentative ruling is augmented

and the prior tentative ruling as clarified by this

augmented ruling is adopted by the Court. Any portions

of the Court’s prior tentative ruling not discussed in this

letter remain intact (e.g.,Court’s ruling as to Defendant’s

judicial estoppel argument).

26a

Appendix D

Movant is directed to prepare and lodge an order

consistent with this Court’s prior tentative ruling as

augmented by this letter opinion.

Sincerely,

LOUISE De CARL ADLER,

Judge

27a

APPENDIX E — Appendix

OPINIONEOF THE UNITED

STATES BANKRUPTCY COURT FOR THE

SOUTHERN DISTRICT OF CALIFORNIA,

DATED JULY 9, 2020

TENTATIVE RULING

ISSUED BY JUDGE LOUISE DECARL ADLER

CUKER INTERACTIVE, LLC,

PILLSBURY WINTHROP SHAW PITTMAN, LLP.

Adversary Number:

20-90075

Case Number:

18-07363-LA11

Hearing:

02:30 PM Thursday, July 9, 2020

Motion:

CUKER INTERACTIVE, LLC’S MOTION FOR

SUMMARY JUDGMENT FILED BY MICHAEL

D. BRESLAUER ON BEHALF OF CUKER

INTERACTIVE, LLC.

Plaintiff Cuker’s Motion for Summary Judgment

GRANTED. Standard for Summary Judgment

Summary judgment should be granted when there

are no genuine issues of material fact and when the

28a

Appendix E

movant is entitled to prevail as a matter of law. Fed. Rule

Civ. P. 56(a)(made applicable in adversary proceedings

by Fed. Rule Bankr. P. 7056). In resolving a summary

judgment motion, the court does not weigh the evidence,

but rather determines only whether a material factual

dispute remains for trial. Covey v. Hollydale Mobile Home

Estates, 116 F.3d 830, 834 (9th Cir. 1997). A material fact

is one that, “under the governing substantive law … could

affect the outcome of the case.” Caneva v. Sun Cmtys.

Operating Ltd. P’ship (In re Caneva), 550 F.3d 755, 760

(9th Cir.2008). “A genuine issue of material fact exists

when “the evidence is such that a reasonable jury could

return a verdict for the nonmoving party.’” Caneva, 550

F.3d at 761 (quoting Anderson v. Liberty Lobby, Inc., 477

U.S. 242, 248 (1986).

Factual Background: Defendant Pillsbury Winthrop

Shaw Pittman (“Pillsbury”) represented Plaintiff Cuker

Interactive (“Cuker”) in a lawsuit against Walmart (Case

No. 5:14-cv-5262) (“Walmart Litigation”), which resulted

in an Amended Judgment in Cuker’s favor in the amount

of $3,409,283.44 (“Judgment”).

Pillsbury filed a POC No. 13 (“Pillsbury’s Claim”)

seeking payment of fees billed but unpaid by Cuker and

asserted that payment of fees was secured by a lien against

the Judgment, per Arkansas Code Sections 16-22-203 and

204 and the Arkansas Federal Disciplinary Rules. On

December 8, 2017, Pillsbury sent notice of its alleged lien

on the Judgment to Walmart (the “Lien Notice”).

29a

Appendix E

By stipulation, Walmart agreed to pay all sums of the

Judgment into a DIP segregated account (the “Segregated

Account”). Pursuant to the Segregated Account Order,

Pillsbury’s lien, if any, attached to the funds in the

Segregated Account. [ECF 247 in the main case]

The present Adversary Proceeding followed, and

Cuker now seeks judicial determination of whether

Pillsbury’s Claim is secured or unsecured.

Legal Analysis:

1. Choice of Law Issue: Here, the Parties’ dispute is

not factual, but rather requires an analysis of whether

California law or Arkansas law should be applied in

determining whether Pillsbury holds a valid lien for

attorney’s fees in the Segregated Account. If California

law applies, then a lien for attorney’s fees may only be

created by contract. See Fletcher v. Davis, 33 Cal. 4th 61,

66 (Cal. 2004) (recognizing that a lien to satisfy attorney’s

fees and expenses out of the proceeds of recovery, “is

created only by contract,” under which the client must

provide informed written consent). However, if Arkansas

law applies, then as a matter of law, Pillsbury holds a valid

lien for attorneys’ fees so long as the attorney properly

served upon the adverse party a written notice signed by

the attorney and client stating that the attorney retains a

lien upon his client’s cause of action, claim, or counterclaim,

which attaches to any judgment or proceeds thereof. Ark.

Code. Ann. § 16-22-304; see also Metropolitan Life Ins.

Co. v. Roberts, 241 Ark. 994, 996-97 (1967) (holding that a

letter by an attorney giving notice of intention to impress a

30a

Appendix E

lien for services on insurance policy proceeds qualified as

“substantial compliance” with the Arkansas Lien Statute

though notice was not signed by the client as required by

the Statute)

A federal court exercising jurisdiction over state law

claims must apply the choice of law rules of the state in

which it sits. In re Nucorp Energy Sec. Litig., 661 F.Supp.

1403, 1412 (S.D.Cal. 1987) (citing Klaxon Co. v. Stentor

Electric Mfg. Co., 313 U.S. 487, 496 (1941)); see also Butner

v. United States, 440 U.S. 48, 54 (1979) (recognizing

that determination of contract or property rights by

bankruptcy courts is controlled by state law). California

courts apply a three-part test:

(1) The court must determine whether

there is in fact a conflict between

the competing jurisdictions.

(2) If a conf lict exists, the court

must next determine whether

each jurisdiction has a legitimate

interest in the application of its law

and underlying policy.

(3) I f b o t h j u r i s d i c t i o n s h a v e

a leg it i m at e i nt er e st i n t he

application of their conf licting

laws, the court should apply the

law of the state whose interest

would be the more impaired if its

law were not applied.

31a

Appendix E

Kenneally v. Bosa California LLC, 2011 WL 2118255, at

*3 (S.D.Cal. 2011) (citing In re Nucorp Energy Sec. Litig.,

661 F.Supp. at 1412).

Here, the jurisdictions are clearly in conflict as to

when a lien for attorney’s fees can be created. As stated

above, California law requires such a lien to be created by

contract, whereas Arkansas law simply requires notice to

the adverse party that the lien has been created under the

Arkansas Lien Statute. In considering the second prong of

the test, both California and Arkansas have a legitimate

interest in the application of its law. For instance, the

Pillsbury attorneys representing Cuker are licensed

in California, Cuker is a California company, and the

Engagement Agreement was entered into in California.

However, the Pillsbury attorneys rendered their services

in the USDC in Arkansas. Therefore, both California and

Arkansas have an interest in dictating the ethical means

by which attorneys provide services.

Considering the third prong of the test, and for the

same reasons stated above, this Court applies California

law because failure to do so more significantly impairs

the public policy intent behind the California statute:

Protection of California entities and individuals from liens

for attorney’s fees without informed consent. Arkansas has

no legitimate interest in application of its statute given

the parties are not Arkansas entities. While Pillsbury

is correct that the USDC in Arkansas in the Walmart

Litigation held that fee issues were to be governed by

Arkansas law, the issue here is unrelated to the validity

of Pillsbury’s fee. Instead, the issue is w/r/t the validity of

32a

Appendix E

Pillsbury’s alleged lien on the proceeds of the Judgment,

now held in the Segregated Account. Therefore, the

USDC’s application of Arkansas law is irrelevant here.

In applying California law, no lien for attorney’s fees

has been created because the Parties did not contract for

such, either expressly or implicitly, in their Engagement

Agreement. Pillsbury does not appear to dispute that the

Engagement Agreement at no point states that Pillsbury

may look to the Judgment, or now the Segregated Account,

for payment of its attorney’s fees. As such, no lien for

attorney’s fees was created under California law. Given

the foregoing, there is no need to discuss the ethical

requirements for informed consent pursuant to CRPC

3-300, or any similar Arkansas statutes.

2. Judicial Estoppel Argument: Judicial estoppel does

not warrant granting Pillsbury a lien for attorney’s fees

here. Pillsbury contends that Cuker assured this Court

that Pillsbury was fully secured, and this Court cited the

fact that Pillsbury was fully secured in ruling against

Pillsbury on Cuker’s Motion to Extend the Exclusivity

Periods in the main case. [ECF 155] This is not true. In its

moving papers, Cuker simply acknowledges that Pillsbury

claims it is a secured creditor. [ECF 171, p. 3]. As for the

Court’s recognition of Pillsbury’s secured status, such was

acknowledged in the Court’s Tentative Ruling [ECF 176],

but the Tentative Ruling was not adopted in its entirety

in the Minute Order; instead the Minute Order just

continued the exclusivity period without acknowledging

whether Pillsbury is a secured or unsecured creditor.

[ECF 177].

33a

Appendix E

Regarding Cuker’s treatment of HLF, Arkansas

law applied to that lien validity dispute given HLF is an

Arkansas firm, with attorneys licensed in Arkansas, who

provided services only in Arkansas. The same cannot be

said here for Pillsbury.

If Pillsbury is prepared to accept the tentative ruling,

counsel shall notify Cuker’s counsel and appearances will

be excused. In that event, Cuker is to prepare and lodge

an order in accordance with the tentative ruling. Nothing

in this ruling shall be construed to affect the ongoing fee

arbitration between these parties.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.