CarrAmerica Realty Corp. v. NVIDIA Corp.

Citation: 302 F. App'x 514Docket: Nos. 06-17109, 07-15077

Court: Court of Appeals for the Ninth Circuit; March 10, 2009; Federal Appellate Court

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Creditors CarrAmerica Realty Corporation, its affiliates, and Carlyle Fortran Trust appeal the district court's dismissal of their complaints due to lack of standing, which the court attributed solely to the Chapter 11 Trustee. The case involves 3dfx Interactive, Inc., which entered commercial leases with Carlyle and CarrAmerica but faced financial difficulties leading to an asset sale to NVIDIA in December 2000. Following the sale, NVIDIA instructed 3dfx to continue rent payments, which 3dfx later ceased. After 3dfx filed for Chapter 11 bankruptcy in October 2002, the Trustee pursued claims against NVIDIA for fraudulent transfer and successor liability, while the Creditors also filed suit. The district court ruled that the Creditors' claims were generalized injuries to the bankruptcy estate, thus only the Trustee had standing to pursue them. The Creditors argue on appeal that the Trustee lacks standing.

The standing of the Trustee is reviewed de novo. A bankruptcy trustee represents the estate and has the authority to sue, as defined by 11 U.S.C. § 323, with the responsibility to collect the estate’s property under 11 U.S.C. § 704(1). The estate includes all legal interests of the debtor, including causes of action. Consequently, the Trustee has exclusive standing to sue on behalf of the estate, and creditors cannot pursue such claims unless the Trustee abandons them.

The district court determined that the Trustee holds exclusive standing to pursue all claims made by Creditors related to alleged injuries to 3dfx, primarily concerning claims of fraudulent asset transfer to NVIDIA for inadequate consideration. Although the Creditors experienced harm due to the diminished estate of 3dfx, such injury is considered an injury to the corporation rather than to individual creditors. The court found that most Creditors' arguments lacked merit, notably affirming its reliance on In re Folks, which is aligned with existing case law regarding trustee standing. The Creditors' contention that the cap under 11 U.S.C. § 502(b)(6) creates a unique injury that undermines Trustee standing was rejected, as the statute pertains to the allowance of secured claims, affecting Creditors irrespective of who pursues the claim.

Additionally, the court ruled that Carlyle's claims against NVIDIA for damages above the statutory cap were barred by the California statute of frauds, due to the absence of a written lease assumption by NVIDIA. The Creditors also cited the Wagoner rule to argue against Trustee standing, which the court declined to follow, referencing criticism of the rule in prior cases.

However, the district court erred in dismissing CarrAmerica's claims regarding interference with contractual relations and other torts arising from an alleged secret agreement with NVIDIA, as these claims were based on injuries to CarrAmerica, which is not in bankruptcy. Thus, CarrAmerica retains the standing to pursue these claims. The court instructed that on remand, the district court must ascertain which claims Carlyle has abandoned, thereby granting Carlyle standing to pursue those claims. Costs for the appeal are assigned to the Defendants-Appellees, while each party will bear its own costs in a separate appeal. The decision is partially affirmed, partially reversed, and remanded for further proceedings. The disposition is not to be published and does not set precedent except as specified by 9th Cir. R. 36-3.