                                 NOT FOR PUBLICATION                     FILED
                        UNITED STATES COURT OF APPEALS                      JAN 9 2020
                                                                      MOLLY C. DWYER, CLERK
                                                                       U.S. COURT OF APPEALS
                                 FOR THE NINTH CIRCUIT

In re: EPICENTER PARTNERS, L.L.C.;              No.    18-60018
GRAY MEYER FANNIN, L.L.C.,
                                                BAP No. 17-1216
                   Debtors,

------------------------------                  MEMORANDUM*

EPICENTER PARTNERS, L.L.C.; GRAY
MEYER FANNIN, L.L.C.,

                   Appellants,

  v.

CPF VASEO ASSOCIATION, LLC,

                   Appellee.

                            Appeal from the Ninth Circuit
                              Bankruptcy Appellate Panel
             Kurtz, Lafferty III, and Brand, Bankruptcy Judges, Presiding

                         Argued and Submitted October 23, 2019
                               San Francisco, California

Before: WALLACE and BRESS, Circuit Judges, and ENGLAND,** District Judge.


       *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
       **
             The Honorable Morrison C. England, Jr., United States District Judge
for the Eastern District of California, sitting by designation.
      Appellants-Debtors, Epicenter Partners LLC and Gray Meyer Fannin LLC

(Debtors), entered into a litigation financing agreement with Ganymede Investments

Limited (Ganymede), by which Ganymede agreed to fund certain litigation in return

for the funds advanced and 40% of any recovery. Debtors obtained a favorable

judgment in that litigation, which they then settled in exchange for an assignment of

a leasehold interest of land. Debtors and Ganymede then revised their litigation

funding agreement to resolve the entire outstanding obligation for a $50,713,000

liquidated sum, a debt reflected in a note (Ganymede Note) secured by a deed of

trust on the leasehold.    As relevant here, after Debtors filed for Chapter 11

bankruptcy, Appellee-Creditor, CPF Vaseo Associates, LLC (CPF), asserted

secured claims based on the Ganymede note, which CPF had purchased from

Ganymede.

      The bankruptcy court upheld CPF’s claims with post-petition interest at the

contract rate. The Bankruptcy Appellate Panel affirmed. We have jurisdiction under

28 U.S.C. section 158(d). Applying Arizona law to construe the parties’ contracts

and both Arizona law and federal bankruptcy law to determine whether the post-

petition contract interest rate is valid under section 506(b) of the Bankruptcy Code,

we affirm the bankruptcy court.

      The bankruptcy court did not err by holding that Debtors owed $50,713,000

in non-contingent debt. In the Ganymede Note, Debtors “promise[d] to pay . . . the


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principal sum of FIFTY MILLION SEVEN HUNDRED THIRTEEN THOUSAND

AND NO/100 DOLLARS ($50,713,000.00) plus interest calculated on a daily basis

. . . from and after the Maturity Date.” The bankruptcy court properly relied on the

unambiguous language of the transaction documents to conclude that the

“Liquidated Sum” referred to the principal amount due after the debt matured.

See Grosvenor Holdings, L.C. v. Figueroa, 218 P.3d 1045, 1050 (Ariz. Ct. App.

2009) (“Where the intent of the parties is expressed in clear and unambiguous

language, there is no need or room for construction or interpretation . . . .”) (internal

quotation marks and citation omitted).

      The bankruptcy court did not err in holding that $50,713,000 was the true

amount of the negotiated debt. The revised litigation funding agreement contained

a discount payment scheme, but that was an incentive to reward Debtors for early

payment rather than an unenforceable penalty. Debtors’ failure to make an early

payment did not increase the fixed amount owed. Because the discounted payment

scheme did not depend on a breach of contract, there was no liquidated damages

provision to evaluate. See Dobson Bay Club II DD, LLC v. La Sonrisa de Siena,

LLC, 393 P.3d 449, 451 (Ariz. 2017) (defining a liquidated damages provision as

one in which “[p]arties to a contract . . . agree in advance to the amount of damages

for any breach”) (citation omitted).




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      The Debtors have also not demonstrated that the bankruptcy court erred in

awarding CPF interest at the 35% annual contract rate (interest that CPF has

represented it will not be able to collect because under the substantially

consummated bankruptcy plan, it purchased the collateral representing Debtors’

assets). The Ganymede Note secured the debt by a first position lien and a security

interest in Debtors’ leasehold interest. CPF was an oversecured creditor entitled to

pendency interest under section 506(b). See United States v. Ron Pair Enter., Inc.,

489 U.S. 235, 241 (1989).

      Assuming the 35% annual interest was a default rate, we “apply a presumption

of allowability for the contracted for default rate, provided that the rate is not

unenforceable under applicable nonbankruptcy law.” Gen. Elec. Capital Corp. v.

Future Media Prods., Inc., 547 F.3d 956, 961 (9th Cir. 2008) (internal quotation

marks and citation omitted). Here, the bankruptcy court correctly presumed that the

35% contract rate was valid, and Debtors failed to rebut the presumption by showing

that the interest rate was an unenforceable penalty under Arizona law. Because

under the parties’ agreement the Debtors had paid no interest for years before the

maturity date, the bankruptcy court concluded that the interest rate reasonably

forecasted the harm that Ganymede would suffer if the debt was not paid on time

and compensated CPF if Debtors failed to pay the debt when the debt matured. See

Dobson Bay Club II DD, LLC, 393 P.3d at 452–53.


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      The bankruptcy court also did not abuse its discretion in finding that Debtors

failed to rebut the presumption based on equitable considerations. See Future Media

Prods., Inc., 547 F.3d at 961      In weighing the equities, we have rejected “the

creation of a bright line rule” in favor of a consideration of the facts and

circumstances of each case. Id. at 962.

      The bankruptcy court identified factors unique to this case, including that

Debtors enjoyed many years of zero interest prior to the maturity date, in finding

that the default rate compensated CPF for the risk of nonpayment. The bankruptcy

court articulated and considered the full scope of the bankruptcy proceedings. The

bankruptcy court, which was familiar with the proceedings as a whole, also

identified no associated harm to third parties, nor have the Debtors done so. Under

all of these circumstances, the debtors have not provided any basis for overturning

the bankruptcy court’s determinations, and we thus conclude that Debtors failed to

meet their burden of rebutting the presumption based on the totality of the

circumstances. Id. at 961. Based on the record before it, the bankruptcy court did

not abuse its discretion in declining to make an equitable adjustment of the contract

rate. See In re Anderson, 833 F.2d 834, 836 (9th Cir. 1987) (“We review awards

and denials of post-petition interest for abuse of discretion, as a matter of equity”).

      AFFIRMED.




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