                  FOR PUBLICATION
  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

SHERWOOD PARTNERS, INC.,               
Assignee for the Benefit of
Creditors of International
Thinklink Corporation,
        Plaintiff-counter-defendant-         No. 03-55247
                           Appellee,
                v.                            D.C. No.
                                           CV-01-05403-GAF
LYCOS, INC., a Delaware                       OPINION
Corporation aka Delaware Lycos,
Inc.,
      Defendant-counter-claimant-
                        Appellant.
                                       
        Appeal from the United States District Court
           for the Central District of California
          Gary A. Feess, District Judge, Presiding

                  Argued and Submitted
            June 8, 2004—Pasadena, California

                   Filed January 12, 2005

      Before: Dorothy W. Nelson, Alex Kozinski and
             Susan P. Graber, Circuit Judges.

                Opinion by Judge Kozinski;
               Dissent by Judge D.W. Nelson




                             417
420         SHERWOOD PARTNERS, INC. v. LYCOS, INC.


                         COUNSEL

James S. Monroe and Walter T. Johnson, Nixon Peabody
LLP, San Francisco, California, for the defendant-appellant.

Irving Sulmeyer and Janis G. Abrams, SulmeyerKupetz, Los
Angeles, California, for the plaintiff-appellee.


                         OPINION

KOZINSKI, Circuit Judge:

   We consider whether the Bankruptcy Code preempts a state
statute that gives an assignee selected by the debtor the power
to void preferential transfers that could not be voided by an
unsecured creditor.
                SHERWOOD PARTNERS, INC. v. LYCOS, INC.                     421
                                   Facts

   Thinklink Corp., a unified messaging service provider,
entered into an agreement with Lycos, which operates a net-
work of web sites. Lycos agreed to promote Thinklink’s mes-
saging service on Lycos web sites exclusively for two years.
Thinklink eventually defaulted on one of its payments; Lycos
nevertheless continued to display links to Thinklink’s messag-
ing service. Lycos and Thinklink renegotiated their agree-
ment, shortening the exclusivity period to 90 days and
reducing Thinklink’s remaining payments from over $17 mil-
lion to $1 million plus stock. Thinklink delivered the $1 mil-
lion but not the stock, and about two months later made a
voluntary general assignment for the benefit of creditors to
Sherwood Partners. Sherwood shut down Thinklink’s busi-
ness and sued Lycos in state court under Cal. Civ. Proc. Code
§ 1800 to recover the $1 million payment as a preferential trans-
fer.1

  Lycos removed to federal court on diversity grounds and
moved to dismiss, arguing that section 1800 was preempted
by the Bankruptcy Code. The district court denied Lycos’s
motion and eventually granted summary judgment to Sher-
wood. Lycos appeals.
  1
   The statute provides that:
      [T]he assignee of any general assignment for the benefit of credi-
      tors . . . may recover any transfer of property of the assignor:
          (1)   To or for the benefit of a creditor;
          (2)   For or on account of an antecedent debt owed by the
                assignor before the transfer was made;
          (3)   Made while the assignor was insolvent;
          (4)   Made on or within 90 days before the date of the mak-
                ing of the assignment . . . ; and
          (5)   That enables the creditor to receive more than another
                creditor of the same class.
Cal. Civ. Proc. Code § 1800(b).
422          SHERWOOD PARTNERS, INC. v. LYCOS, INC.
                           Discussion

   [1] Congress has broad authority to preempt state laws, but
whether Congress has done so in a particular instance is a
matter of congressional intent. This intent is most easily
detected where the statute expressly preempts other laws, but
preemption may also be inferred where it is clear from the
statute and surrounding circumstances that Congress intended
to occupy the field, leaving no room for state regulation. The
Supreme Court, in Pacific Gas & Electric Co. v. State Energy
Resources Conservation & Development Commission, 461
U.S. 190 (1983), summarized the contours of the field pre-
emption doctrine:

      Absent explicit pre-emptive language, Congress’
      intent to supersede state law altogether may be found
      from a “ ‘scheme of federal regulation . . . so perva-
      sive as to make reasonable the inference that Con-
      gress left no room for the States to supplement it,’
      because ‘the Act of Congress may touch a field in
      which the federal interest is so dominant that the fed-
      eral system will be assumed to preclude enforcement
      of state laws on the same subject,’ or because ‘the
      object sought to be obtained by the federal law and
      the character of obligations imposed by it may reveal
      the same purpose.’ ”

Id. at 203-04 (quoting Fid. Fed. Sav. & Loan Ass’n v. De la
Cuesta, 458 U.S. 141, 153 (1982) (quoting Rice v. Santa Fe
Elevator Corp., 331 U.S. 218, 230 (1947))). “Even where
Congress has not entirely displaced state regulation in a spe-
cific area,” the Court continued, “state law is pre-empted . . .
where [it] ‘stands as an obstacle to the accomplishment and
execution of the full purposes and objectives of Congress.’ ”
Id. at 204 (quoting Hines v. Davidowitz, 312 U.S. 52, 67
(1941)).

  [2] There can be no doubt that federal bankruptcy law is
“pervasive” and involves a federal interest “so dominant” as
              SHERWOOD PARTNERS, INC. v. LYCOS, INC.                 423
to “preclude enforcement of state laws on the same subject”—
much like many other areas of congressional power listed in
Article I, Section 8, of the Constitution, such as patents, copy-
rights, currency, national defense and immigration. The Bank-
ruptcy Clause, which grants Congress the power to make
bankruptcy laws, U.S. Const. art. I, § 8, cl. 4, stresses that
such rules must be “uniform.” Bankruptcy law occupies a full
title of the United States Code. It provides a comprehensive
system of rights, obligations and procedures, as well as a
complex administrative machinery that includes a special sys-
tem of federal courts and United States Trustees.

   [3] At the same time, federal law coexists peaceably with,
and often expressly incorporates, state laws regulating the
rights and obligations of debtors (or their assignees) and cred-
itors. See, e.g., 11 U.S.C. § 522(b)(2) (incorporating state per-
sonal exemptions to the bankruptcy estate); id. § 544(b)
(making state law on voidable transfers available to the bank-
ruptcy trustee); id. § 543(d)(2) (excusing some assignees for
the benefit of creditors from compliance with property turn-
over requirements). In determining whether Cal. Civ. Proc.
Code § 1800 is preempted, we must consider whether it is
merely another creditor rights provision of the kind that is tol-
erated by the Bankruptcy Code, or whether it gives the state
assignee powers that are within the heartland of bankruptcy
administration.

   Sherwood argues that the preference avoidance provisions
of section 1800 are not only tolerated but specifically incorpo-
rated by the Bankruptcy Code through section 544(b), which
allows a bankruptcy trustee to avoid any transfers voidable by
unsecured creditors under “applicable law” (including state
law).2 Section 544(b), says Sherwood, “manifest[s] congres-
  2
   Section 544(b) provides, in relevant part, that “the trustee may avoid
any transfer of an interest of the debtor in property or any obligation
incurred by the debtor that is voidable under applicable law by a creditor
holding an unsecured claim.” 11 U.S.C. § 544(b).
424           SHERWOOD PARTNERS, INC. v. LYCOS, INC.
sional intent not to preempt state statutes invalidating prefer-
ences. . . . Empowering bankruptcy trustees to so act a fortiori
manifests a congressional intent that state statutes are valid
and available to be used by a bankruptcy trustee.” Reply Br.
of Appellee at 30. The Supreme Court in Stellwagen v. Clum,
245 U.S. 605 (1918), in fact cited section 70e of the Bank-
ruptcy Act of 1898, the precursor to section 544(b), in uphold-
ing a statute allowing assignees to void certain preferential
transfers. See id. at 614, 618.

   But the trustee’s powers under section 544(b) are limited to
those of unsecured creditors—such as the right of an individ-
ual unsecured creditor to set aside fraudulent conveyances
under state law. See, e.g., Decker v. Advantage Fund Ltd., 362
F.3d 593, 596 (9th Cir. 2004) (involving a claim, under sec-
tion 544(b), to avoid a transfer using California’s Uniform
Fraudulent Transfer Act, Cal. Civ. Code § 3439.04). Simi-
larly, the Ohio statute upheld in Stellwagen, unlike the Cali-
fornia statute at issue here, gave court-appointed trustees only
those avoidance powers already held by “[a]ny creditor or
creditors.” 245 U.S. at 611 n.1 (quoting the statute).3 By con-
trast, the power to set aside preferential transfers under Cali-
fornia’s section 1800 can be exercised only by general
assignees, not by individual unsecured creditors. In other
words, the assignee appointed pursuant to section 1800 is
given new avoidance powers by virtue of his position.

  [4] To make Stellwagen and section 544(b) cover this case
would require us to read the term “creditor” in section 544(b)
as encompassing representatives of creditors such as Sher-
wood. We doubt that Congress had Sherwood in mind when
  3
   The state statute at issue in Stellwagen was not a true preference stat-
ute, like Cal. Civ. Proc. Code § 1800 and 11 U.S.C. § 547, in that it
required that the transfer have been made in contemplation of insolvency
or with an intent to defraud creditors, making it more akin to a fraudulent
conveyance statute. This distinction does not make a difference for pur-
poses of our analysis.
               SHERWOOD PARTNERS, INC. v. LYCOS, INC.                     425
describing unsecured creditors in section 544(b). The Bank-
ruptcy Code defines “creditor,” in relevant part, as an “entity
that has a claim against the debtor that arose at the time of or
before the order for relief concerning the debtor.” 11 U.S.C.
§ 101(10)(A). “Custodian” is a different concept, which
includes receivers, trustees and “assignee[s] under a general
assignment for the benefit of the debtor’s creditors.” Id.
§ 101(11). In fact, Congress defined custodian using the word
“creditor” in two places. See id. § 101(11)(B), (C). Custodi-
ans, instead of being by their nature creditors, stand in a cer-
tain fiduciary relation to creditors. But Congress did not
mention custodians alongside creditors in section 544(b). We
are therefore unable to read “creditor” in section 544(b) to
include custodians. See Dubis v. B.W. Supply (In re Delta
Group), 300 B.R. 918, 923-24 (Bankr. E.D. Wis. 2003); 5
Collier on Bankruptcy ¶ 544.09[4], at 544-21 & n.26 (Law-
rence P. King et al. eds., 15th ed. rev. 2004) (“creditor” in
section 544(b) includes assignees or successors of the original
creditor, but “[a]n assignee for the benefit of creditors . . . is
not such a creditor”); see also In re Komfo Prods. Corp., 247
F. Supp. 229, 237 (E.D. Pa. 1965); Vern Countryman, The
Use of State Law in Bankruptcy Cases (Part II), 47 N.Y.U. L.
Rev. 631, 663 (1972) (if Congress intended “any creditor” in
section 70e, the precursor to section 544(b), to mean “any rep-
resentative of any creditor,” “it would be desirable to amend
[the statute] to say so”). Contra Zimmerman v. Frem Corp.
(In re Kenval Mktg. Corp.), 69 B.R. 922, 929-31 (Bankr. E.D.
Pa. 1987).4 Thus, section 544(b) of the Bankruptcy Code, and
  4
    We note that the Supreme Court, frowning on extending the meaning
of statutory terms for policy reasons, has recently declined to read “trust-
ee” in 11 U.S.C. § 506(c) as including administrative claimants. See Hart-
ford Underwriters Ins. Co. v. Union Planters Bank, N.A., 530 U.S. 1, 14
(2000). The Court reiterated that “when the statute’s language is plain, the
sole function of the courts . . . is to enforce it according to its terms.” Id.
at 6 (quoting United States v. Ron Pair Enters., Inc., 489 U.S. 235, 241
(1989) (quoting Caminetti v. United States, 242 U.S. 470, 485 (1917)))
(internal quotation marks omitted).
426           SHERWOOD PARTNERS, INC. v. LYCOS, INC.
its partial incorporation of state transfer avoidance law, does
not save the California statute from preemption.

   The question remains whether the section 1800 assignee’s
special avoidance powers, though not expressly incorporated
into the Bankruptcy Code by section 544(b), nevertheless can
peaceably coexist with the federal bankruptcy scheme. To
answer this question we must consider the essential goals and
purposes of federal bankruptcy law, and then determine
whether section 1800 is consistent with them.

   [5] It is generally agreed that chapter 7 of the Bankruptcy
Code, which governs liquidations, embodies two ideals: (1)
giving the individual debtor a fresh start, by giving him a dis-
charge of most of his debts; and (2) equitably distributing a
debtor’s assets among competing creditors. See Stellwagen,
245 U.S. at 617. As the leading bankruptcy treatise explains,
these two goals are separate and operate somewhat indepen-
dently of each other:

      From the creditors’ viewpoint, chapter 7 establishes
      the concept of equitable distribution among creditors
      of a debtor’s resources which, in most cases, are
      insufficient to permit full payment to all. From the
      individual debtor’s vantage point, chapter 7 permits
      the honest debtor to obtain a new financial life
      through the discharge of unpaid debts. Neither con-
      cept is dependent on the other. Thus, in many chap-
      ter 7 cases, which may also be called “no-asset”
      cases, the debtor has no property realizable by credi-
      tors. Nevertheless, unless the debtor has committed
      [certain acts, he] is entitled to a full discharge and
      release from all debts except those rendered nondis-
      chargeable . . . . The distribution to creditors is also
      not affected by whether or not the debtor obtains a
      discharge. Should discharge be denied, and property
      exists in the chapter 7 estate available to creditors,
      distribution will occur.
            SHERWOOD PARTNERS, INC. v. LYCOS, INC.            427
1 Collier on Bankruptcy ¶ 1.03[2][a], at 1-22 (emphasis
added) (footnotes omitted).

   [6] We know, because the Supreme Court has repeatedly
told us, that state statutes that purport to perform the first of
these functions, by giving debtors a discharge of their debts,
are preempted. See Int’l Shoe Co. v. Pinkus, 278 U.S. 261,
265-66 (1929); see also Pobreslo v. Joseph M. Boyd Co., 287
U.S. 518, 525 (1933); Stellwagen, 245 U.S. at 615-16. That
the state discharge statute may be compatible with (or even
identical to) the federal discharge statute makes no difference.
Nor does it matter that a creditor may be able to opt out of the
state insolvency proceeding by commencing an involuntary
federal bankruptcy proceeding; indeed, according to Stellwa-
gen, it does not even matter whether a federal bankruptcy act
is in effect. Id. at 615 (“It is settled that a State may not pass
an insolvency law which provides for a discharge of the
debtor from his obligations, which shall have the effect of a
bankruptcy discharge as to creditors in other States, and this
although no general federal bankruptcy act is in effect.”).
Such state procedures are preempted simply because the abil-
ity to grant a discharge is “one of the principal requisites of
a true bankruptcy law.” Id. at 616.

   [7] What goes for state discharge provisions also holds true
for state statutes that implicate the federal bankruptcy law’s
other major goal, namely equitable distribution. Bankruptcy
law accomplishes equitable distribution through a distinctive
form of collective proceeding. This is a unique contribution
of the Bankruptcy Code that makes bankruptcy different from
a collection of actions by individual creditors. In a world of
individual actions, each creditor knows that if he waits too
long, the debtor’s assets will have been exhausted by the
demands of the quicker creditors and he will recover nothing.
The creditors race to the courthouse, all demanding immedi-
ate payment of their entire debt. Like piranhas, they make
short work of the debtor, who might have survived to pay off
more of his debts with a little bit of reorganization—or at
428           SHERWOOD PARTNERS, INC. v. LYCOS, INC.
least might have more equitably fed the slower piranhas. See,
e.g., In re Hoskins, 102 F.3d 311, 316 (7th Cir. 1996) (noting
the Bankruptcy Code’s purpose of “preventing a mutually
destructive feeding frenzy by creditors”), rev’d on other
grounds, Assoc. Comm. Corp. v. Rash, 520 U.S. 953, 965
(1997); In re Kish, 41 B.R. 620, 624 (Bankr. E.D. Mich.
1984) (describing the “piranha-like attacks of creditors”).
Don’t see Piranha (New World Pictures 1978). But see Ber-
ger v. Piranha, Inc. (In re Piranha, Inc.), 297 B.R. 78 (N.D.
Tex. 2003) (a case where the creditors got the Piranha).

   Federal bankruptcy law seeks to avoid this scenario by
“creat[ing] a whole system under federal control which is
designed to bring together and adjust all of the rights and
duties of creditors and embarrassed debtors alike.” MSR
Exploration, Ltd. v. Meridian Oil, Inc., 74 F.3d 910, 914 (9th
Cir. 1996). The filing of a bankruptcy petition brings a bank-
ruptcy estate into being and triggers an automatic stay, which
prevents creditors from enforcing their claims, thus preserving
the debtor’s assets for ultimate distribution by the bankruptcy
trustee. See 11 U.S.C. §§ 301-303, 362; see also 1 Collier on
Bankruptcy ¶ 1.03[2][b], at 1-24 to 1-25.

   One of the major powers the Code gives the trustee is the
power to avoid preferential transfers.5 The trustee is autho-
rized to recover these sums for the use of the bankruptcy
estate in making its distribution to creditors. Of course, this
power, like all others, may be exercised only under the super-
vision of the federal courts; and the trustee exercising those
powers to liquidate a corporation is not hand-picked by the
debtor, as was Sherwood, but appointed and supervised by the
United States Trustee, an official of the Department of Jus-
tice, see 11 U.S.C. § 701, or elected by the creditors, see id.
  5
     The trustee may avoid preferences either under 11 U.S.C. § 547(b) or
under state law (as incorporated into the Bankruptcy Code by section
544(b)) to the extent such transfers could be voided by an unsecured credi-
tor.
              SHERWOOD PARTNERS, INC. v. LYCOS, INC.                  429
§ 702, to ensure impartiality. Federal law protects creditors—
particularly out-of-state creditors like Lycos—from the trust-
ee’s possible conflicts of interest and other possible sources
of self-dealing, see id. § 327 (regulating what professionals a
trustee may employ); id. § 328 (regulating the compensation
of such professionals); Fed. R. Bankr. P. 2014 (regulating
employment of professionals), and generally provides exten-
sive disclosure, see Fed. R. Bankr. P. 1007, 2016, 9019.

   [8] It is clear that if a state assignee under section 1800
recovers a preferential transfer and distributes its proceeds to
creditors, this will preclude a federal trustee from recovering
the same sum under the federal preference statute if a federal
bankruptcy proceeding is begun. The creditor who disgorged
the transfer cannot disgorge it twice; the creditors who later
received the recovered money may be impossible to identify;
and even if they can be identified, they may be gone or in
financial difficulty themselves. The distribution of the recov-
ered sum will then have been made by a state assignee subject
to state procedures and substantive standards, rather than by
the federal trustee subject to bankruptcy law’s substantive
standards and procedural protections.6

   Sherwood points out that the creditor may be able to avoid
this result by quickly filing an involuntary federal bankruptcy
petition, which would have the effect of preempting the state
proceedings. But this argument proves too much. The same
would be true of a state statute that purported to give debtors
a discharge: Creditors in that situation could presumably also
  6
    This is not a matter for federal concern when the assignee has no spe-
cial avoidance rights. If individual unsecured creditors can sue to recover
preferences under state law, the same powers are also available to a bank-
ruptcy trustee under section 544(b); there is obviously no conflict then
between federal law and state law giving those powers to an assignee. To
the extent a state assignee, who is less procedurally constrained than a
bankruptcy trustee, may be free to engage in self-dealing, he can do noth-
ing more than individual creditors, who are free to engage in all the self-
dealing they want.
430           SHERWOOD PARTNERS, INC. v. LYCOS, INC.
avoid the effect of state law by bringing a federal petition. Yet
the Supreme Court has stated unequivocally that such state
statutes are preempted. See page 427 supra.

   In any event, the affected creditor (like Lycos) may not be
able to run to federal court because in most cases (i.e., those
where there are more than eleven creditors) at least three cred-
itors are required to force the debtor into bankruptcy. 11
U.S.C. § 303(b)(1). And the action of the state assignee may
diminish the likelihood that Lycos will be able to obtain the
consent of other creditors. After all, if the state assignee suc-
ceeds in recovering the preferential transfer under state law,
the other creditors may share in that bounty and might there-
fore have no interest in invoking the potentially more expen-
sive and time-consuming federal processes.

  This points to yet another vice of the state proceedings:
Once they are commenced, they will affect the incentives of
various parties as to whether they wish to avail themselves of
federal bankruptcy law. The creditor whose ox is being gored
by the state assignee may have a new incentive to begin an
involuntary federal proceeding; other creditors, for the rea-
sons explained above, may have diminished incentives. The
provisions of the Bankruptcy Code, including those that
explicitly incorporate certain state laws (like voluntary assign-
ments, or preference recovery provisions available to unse-
cured creditors) carefully delineate the circumstances under
which federal bankruptcy proceedings are to be initiated. We
do not believe Congress contemplated state laws that would
sharpen or blunt the effect of those statutory incentives.7
   7
     Perkins v. Petro Supply Co. (In re Rexplore Drilling, Inc.), 971 F.2d
1219, 1222 (6th Cir. 1992), for instance, is fully consistent with this
approach. That case held that section 544(b) incorporates a state avoidance
statute that defines preferences differently from the federal definition in
section 547(b). This is hardly surprising; there would be no point in
expressly incorporating state laws if such laws did not occasionally differ
from federal law. State laws incorporated by section 544(b) are part of the
incentive system Congress set up in the Bankruptcy Code; they cannot be
said to undermine these incentives. State laws that give assignees addi-
tional avoidance powers are not part of that system.
                SHERWOOD PARTNERS, INC. v. LYCOS, INC.                     431
   [9] Stellwagen, on which Sherwood relies heavily, is not to
the contrary. As noted above, see pages 424-26 supra, the
Supreme Court in Stellwagen did uphold a statute that
allowed a state trustee to recover preferential transfers, but the
preferential avoidance power the trustee exercised in that case
was one that could have been exercised by any creditor. 245
U.S. at 611 n.1. While the Court in Stellwagen reiterated that
a state statute granting a discharge would definitely be pre-
empted, it left open whether other state statutes dealing with
the subject of insolvency may also be preempted. Id. at 616.
We believe that statutes that give state assignees or trustees
avoidance powers beyond those that may be exercised by
individual creditors trench too close upon the exercise of the
federal bankruptcy power.8 Congress has thought carefully
about how collective insolvency proceedings are to be con-
ducted and set both substantive standards and elaborate proce-
dural protections to ensure a result that is fair to debtors and
  8
   We do not, as the dissent claims, question the validity of voluntary
assignments for the benefit of creditors, which have a venerable common-
law pedigree, were upheld in Pobreslo and are specifically contemplated
in the Bankruptcy Code. See, e.g., 11 U.S.C. §§ 101(11)(B), 543(d)(2).
The Pobreslo Court specifically noted that the voluntary assignment pro-
cess it upheld did not create any new rights that did not already belong to
the debtor or creditors:
      [T]he [state voluntary assignment] law merely governs the
      administration of trusts created by deeds like that in question,
      which do not differ substantially from those arising under com-
      mon law assignments for the benefit of creditors. The substantive
      rights under such assignments depend upon contract; the legisla-
      tion merely governs the execution of the trusts on which the
      property is conveyed. And as proceedings under any such assign-
      ment may be terminated upon petition of creditors filed within
      the time and in the manner prescribed by the federal Act . . . it
      is apparent that Congress intended that such voluntary assign-
      ments, unless so put aside, should be regarded as not inconsistent
      with the purposes of the federal Act.
Pobreslo, 287 U.S. at 526 (citation omitted). The statute we confront here
goes further, giving the state assignee entirely new powers that are not
derived from contract and trust law.
432           SHERWOOD PARTNERS, INC. v. LYCOS, INC.
creditors alike. The exercise of the preference avoidance
power by Sherwood under the authority of section 1800 is
inconsistent with the enactment and operation of the federal
bankruptcy system and is therefore preempted.

                             Conclusion

  [10] Because we hold that the California statute, Cal. Civ.
Proc. Code § 1800, is preempted by the Bankruptcy Code, we
remand to the district court for dismissal of the complaint.

  REVERSED.



D.W. NELSON, Circuit Judge, dissenting:

   I respectfully dissent because I disagree with the majority’s
preemption analysis. The majority states that California Civil
Procedure Code § 1800 is preempted by federal bankruptcy
law. However, the reasoning by which the majority reaches
this result would preempt any number of state laws governing
voluntary assignments for the benefits of creditors because
those laws have the effect of altering the incentives of various
affected parties to initiate bankruptcy proceedings. Under the
majority’s reasoning, any state statutory scheme, including
those governing voluntary assignments for the benefit of cred-
itors, that “give[s] state assignees or trustees avoidance pow-
ers beyond those that may be exercised by individual creditors
trench[es] too close upon the exercise of the federal bank-
ruptcy power.” Majority Op. at page 431. State voluntary
assignments, by definition, give the assignee more power than
may be exercised by an individual creditor.1 Because I believe
  1
    The majority asserts that it does not question the validity of assign-
ments for the benefit of creditors and that it invalidates section 1800
because it gives the state assignee new powers that are not derived from
trust or contract law. Majority Op. at page 431 n.8. The state assignee,
               SHERWOOD PARTNERS, INC. v. LYCOS, INC.                    433
that voluntary assignments for the benefit of creditors and
related state statutes are not preempted by federal bankruptcy
law, I cannot join the majority opinion.

   Voluntary assignments for the benefit of creditors have
their origins in English common law, and exist as an alterna-
tive to formal bankruptcy proceedings. See Credit Managers
Ass’n v. Nat’l Indep. Bus. Alliance, 162 Cal. App. 3d 1166,
1169-1170 (2d. Dist. 1984). California’s scheme requires that
any assignment be for the benefit of all creditors, and does not
allow preferences for any creditor or class of creditors. Cal.
Civ. Proc. Code § 493.010(b)-(c). Creditors must be given
notice and an opportunity to submit claims to the assignee.
Cal. Civ. Proc. Code § 1802. These types of assignments are
recognized by and incorporated in the federal bankruptcy
code. See, e.g., 11 U.S.C. § 101(11)(B) (defining “custodian”
as, inter alia, “assignee under a general assignment for the
benefit of the debtor’s creditors”); § 543(d)(2) (excusing
assignees appointed more than 120 days before the filing of
a petition from turning debtor’s property over to the trustee).

   In Pobreslo v. Boyd Co., the Supreme Court upheld a state
scheme allowing voluntary assignment for the benefit of cred-
itors, stating, “[I]t is apparent that Congress intended that
such voluntary assignments . . . should be regarded as not
inconsistent with the purposes of the federal Act.” 287 U.S.
518, 526 (1933). When voluntary assignments contribute to
bankruptcy’s goal of equitable distribution, “quite in harmony
with the purposes of the federal Act, the provisions of [state
voluntary assignment laws] serve to protect creditors against
each other and go to assure equality of distribution unaffected

regardless of the powers granted by section 1800, distributes a debtors
assets among creditors and otherwise exercises powers on behalf of all
creditors, thus exercising powers greater than any one creditor could exer-
cise. I find it thus difficult to draw a line between the majority’s arguments
regarding section 1800 and problems with voluntary assignments, gener-
ally.
434         SHERWOOD PARTNERS, INC. v. LYCOS, INC.
by any requirement or condition in respect of discharge.” Id.
Accordingly, the Supreme Court has held that state laws pro-
viding for discharge of debts are preempted by federal bank-
ruptcy law, see, e.g., International Shoe Co. v. Pinkus, 278
U.S. 261, 266 (1929), but has never suggested that state laws
that regulate the distribution of assets in a voluntary assign-
ment might face the same fate.

   Yet the majority holds that section 1800 is preempted
because it alters the incentives of creditors to initiate involun-
tary bankruptcy proceedings, thereby interfering with bank-
ruptcy’s goal of equitable distribution of a debtor’s assets.
The majority’s concerns about section 1800 are not distin-
guishable from concerns about voluntary assignment provi-
sions generally. See, e.g., Majority Op. at pages 427-29
(describing how state law interferes with the unique collective
form of proceeding established by bankruptcy law; discussing
use of “hand-picked” trustee in state proceedings). As the
majority recognizes, Majority Op. at page 431 n.8, it is well
established that there is a common-law right to make an
assignment of property for the benefit of creditors. It is thus
illogical that state laws that provide a forum for the equitable
distribution of that property should be preempted by federal
bankruptcy law.

   The majority argues that if a preferential transfer is recov-
ered by the assignee under section 1800, the same sum could
not be recovered if a federal bankruptcy proceeding were ini-
tiated later. Majority Op. at pages 428-29. But California’s
preference recovery provision is, by design, virtually identical
to the bankruptcy code’s preferential transfer statute. See 11
U.S.C. § 547(b), Cal. Code Civ. Proc. § 1800(b); see also
Angeles Electric Co. v. Superior Court, 27 Cal. App. 4th 426,
430-431 (2d Dist. 1994) (discussing intentional conformance
of section 1800 with federal bankruptcy law). If the same
transfer can be avoided in both the state and federal systems,
how does the state system interfere with bankruptcy’s goal of
equitable distribution? Both the state and federal statutes
            SHERWOOD PARTNERS, INC. v. LYCOS, INC.          435
serve to ensure equality of distribution and to deter the race
to recover assets before insolvency. See, e.g., H.R. Rep. 95-
595, 177-178, reprinted in 1978 U.S.C.C.A.N. 5963, 6138;
see also Angeles Electric Co., 27 Cal. App. 4th at 430-431
(applying federal bankruptcy case law to interpret California
statute). That California’s voluntary assignment system has
such a provision makes it more capable of effectuating the
equality of distribution that is the aim of the bankruptcy law;
it does not necessarily interfere with bankruptcy’s goal of
achieving equal distribution. The majority states that such
state provisions are preempted because “they will affect the
incentives of various parties as to whether they wish to avail
themselves of federal bankruptcy law.” Majority Op. at page
430. The purposes of federal bankruptcy law—as the majority
sees it—are to provide discharge of debt and equal distribu-
tion of assets to creditors. Majority Op. at page 426. I fail to
see how a preference recovery provision that assists in equal
distribution interferes with either goal.

   When the majority’s reasoning is carried to its logical
extension, it has the effect of pushing corporations threatened
with insolvency from the less stigmatic, and less costly, vol-
untary assignment scheme into the world of federal bank-
ruptcy. This should not have to be the case. I believe that both
voluntary assignments and the bankruptcy system can “peace-
ably coexist” as twin mechanisms aimed at distributing the
resources of an insolvent debtor. That voluntary assignments
are incorporated into bankruptcy law, and that they have
existed alongside bankruptcy law since its inception without
causing an interference with the goal of equitable distribution,
supports my conclusion that state voluntary assignments and
the laws that effectuate them, should not be preempted by
bankruptcy law. “[F]ederal regulation of a field of commerce
should not be deemed preemptive of state regulatory power in
the absence of persuasive reasons—either that the nature of
the regulated subject matter permits no other conclusion, or
that the Congress has unmistakably so ordained.” Florida
Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 142
436         SHERWOOD PARTNERS, INC. v. LYCOS, INC.
(1963). Here, Congress has not indicated that voluntary
assignments, generally, or preferential transfer avoidance stat-
utes, specifically, are to be preempted. Nor is the nature of the
regulated activity—distribution of a debtor’s assets—such
that it is impossible to conclude that the state and federal
schemes could not co-exist. The majority privileges federal
bankruptcy law by suggesting that these collective proceed-
ings are the only ones that Congress intended for the equitable
distribution of debt to creditors. Because I am convinced that
the two systems should co-exist, I respectfully DISSENT.
