                FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

IN RE TRISTAR ESPERANZA                 No. 13-60023
PROPERTIES, LLC,
                            Debtor,       BAP No.
                                          12-1340

PENSCO TRUST COMPANY, a New
Hampshire Company; JANE                   OPINION
O’DONNELL,
                      Appellants,

                 v.

TRISTAR ESPERANZA PROPERTIES,
LLC, a California Limited Liability
Company,
                           Appellee.

             Appeal from the Ninth Circuit
              Bankruptcy Appellate Panel
 Pappas, Klein, and Dunn, Bankruptcy Judges, Presiding

                Argued and Submitted
       February 11, 2015—Pasadena, California

                  Filed April 2, 2015

    Before: Consuelo M. Callahan, Paul J. Watford,
          and John B. Owens, Circuit Judges.

               Opinion by Judge Owens
2           IN RE TRISTAR ESPERANZA PROPERTIES

                           SUMMARY*


                            Bankruptcy

   On appeal from the Bankruptcy Appellate Panel, the
panel affirmed the bankruptcy court’s summary judgment in
an adversary proceeding to subordinate a creditor’s claim
based on a minority interest in a chapter 11 debtor.

    The panel held that the claim was subject to mandatory
subordination under 11 U.S.C. § 510(b) because it was a
claim for damages arising from the purchase or sale of a
security of the debtor.


                            COUNSEL

Jane O’Donnell (argued), Sacramento, California, for
Appellants.

Ian S. Landsberg (argued), Summer Saad, and Brigitte
Gomelsky Kay, Landsberg & Associates, Woodland Hills,
California, for Appellee.




  *
    This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
            IN RE TRISTAR ESPERANZA PROPERTIES                       3

                             OPINION

OWENS, Circuit Judge:

    Jane O’Donnell1 challenges the decisions of the
bankruptcy court and the Bankruptcy Appellate Panel (BAP)
that her claim based on a minority membership interest in the
debtor, Tristar Esperanza Properties, LLC (Tristar), is subject
to mandatory subordination under the Bankruptcy Code.
Before the bankruptcy petition was filed, Tristar failed to pay
O’Donnell the amount an arbitrator awarded for the
repurchase of her membership interest, and O’Donnell sought
and received a money judgment for that amount in state court.
Because the claim is “for damages arising from the purchase
or sale” of “a security of the debtor,” 11 U.S.C. § 510(b), we
affirm.

                        BACKGROUND

    In 2005, O’Donnell paid $100,000 for an approximately
15 percent membership interest in Tristar, a single-asset real
estate company. In July 2008, O’Donnell exercised her right
to withdraw from the LLC, and Tristar elected to purchase
her membership interest based on the valuation procedure of
the operating agreement. When the parties failed to agree on
the proper valuation of O’Donnell’s membership interest,
O’Donnell brought a contractual arbitration action. On
March 16, 2010, the arbitrator ruled in O’Donnell’s favor and
provided her “a net award of damages.” His final award,


    1
       Appellant Pensco Trust Company, which holds O’Donnell’s
investment retirement account, is represented by O’Donnell and has made
no independent appearance. For clarity, Appellants will be referred to
herein as “O’Donnell.”
4          IN RE TRISTAR ESPERANZA PROPERTIES

including fees, costs, and interest, issued on June 3, 2010, and
totaled $410,472.68. Tristar failed to pay, and on October 1,
2010, O’Donnell sought and received a state-court judgment
against Tristar for $415,937.68 plus interest.

    Tristar filed a chapter 11 bankruptcy petition on August
8, 2011. O’Donnell filed a timely claim against Tristar based
on her state-court judgment, and Tristar filed an adversary
proceeding against O’Donnell seeking to subordinate her
claim under § 510(b) and (c) or to avoid her claim as a
preference. The bankruptcy court entered summary judgment
in favor of Tristar on the § 510(b) claim, and in favor of
O’Donnell on all other claims. The BAP affirmed, reasoning
that “the claim is so firmly rooted in O’Donnell’s equity
status that subordination is mandatory.” In re Tristar
Esperanza Props., LLC, 488 B.R. 394, 404 (B.A.P. 9th Cir.
2013).

                STANDARD OF REVIEW

    We review decisions of the BAP de novo, reviewing
independently the bankruptcy court’s ruling on appeal from
the BAP. In re Burnett, 435 F.3d 971, 975 (9th Cir. 2006).

                       DISCUSSION

    Our inquiry begins with the language of § 510(b): “a
claim arising from rescission of a purchase or sale of a
security of the debtor . . . [or] for damages arising from the
purchase or sale of such a security . . . shall be subordinated
to all claims or interests that are senior to or equal the claim
or interest represented by such security.” 11 U.S.C. § 510(b).
             IN RE TRISTAR ESPERANZA PROPERTIES                           5

    The parties agree that O’Donnell’s membership interest
in Tristar is a “security of the debtor.” They are correct.
Among the non-exclusive list of items defined as securities
under the Bankruptcy Code, “[an] LLC interest either
qualifies as a ‘transferable share’ or falls within the broad
residual category.” In re SeaQuest Diving, LP, 579 F.3d 411,
418 (5th Cir. 2009) (citing 11 U.S.C. § 101(49)(A)(viii),
(xiv)). Where the parties disagree is whether O’Donnell’s
claim is one for “damages arising from the purchase or sale”
of that security.2

    A. Damages

    O’Donnell insists that her claim is not for damages, but
for a fixed, admitted debt. The term “damages,” she argues,
implies some sort of actionable wrongdoing that is lacking
from her claim against Tristar: that is, “[d]amages are given
as a compensation . . . for an injury actually received,”
Birdsall v. Coolidge, 93 U.S. 64, 64 (1876).

    We confronted similar arguments in both of our prior
encounters with the damages clause of § 510(b). Each time,
we held that the statute sweeps broadly. It extends beyond
the securities fraud claims that the House of Representatives
explicitly discussed in its report, In re Betacom of Phx., Inc.,


    2
      O’Donnell argues that Tristar should be estopped from seeking
subordination of her claim because it admitted before the arbitrator that it
owes her a debt. Judicial estoppel does not apply because there is no
inconsistency between Tristar agreeing that it owes a debt to O’Donnell
on the one hand, and seeking subordination of that debt on the other. See
New Hampshire v. Maine, 532 U.S. 742, 749 (2001). Collateral estoppel
does not apply because the issue of subordination under § 510(b) was not
(and could not have been) decided by the arbitrator or the state court. See
In re Bugna, 33 F.3d 1054, 1057 (9th Cir. 1994).
6          IN RE TRISTAR ESPERANZA PROPERTIES

240 F.3d 823, 829 (9th Cir. 2001) (citing H.R. Rep. No. 95-
595, at 195 (1977)), and reaches even ordinary breach of
contract claims so long as there is a sufficient nexus between
the claim and the purchase of securities, In re Am. Wagering,
Inc., 493 F.3d 1067, 1072 (9th Cir. 2007). Our sister circuits
share our broad interpretation of § 510(b). See SeaQuest
Diving, 579 F.3d at 423–24; In re Med Diversified, Inc.,
461 F.3d 251, 254–55 (2d Cir. 2006); In re Telegroup, Inc.,
281 F.3d 133, 143–44 (3d Cir. 2002).

    We see no reason to stray from this broad interpretation
here. O’Donnell’s basic claim is that Tristar failed to pay her
the amount she was due under Tristar’s operating agreement
for the purchase of her membership interest. This is a claim
for damages for Tristar’s breach of contract. Although she
asserts that she did not seek damages before the arbitrator, but
solely a determination of the fair market value of her
membership interest, O’Donnell herself has never treated the
arbitrator’s award as a mere appraisal. The arbitrator
provided an “award of damages,” which O’Donnell brought
to state court and converted to a money judgment. She
recorded the judgment and sought to attach the rents from
Tristar’s property to satisfy the judgment.

    Moreover, O’Donnell’s view that the term “damages”
necessarily excludes fixed, admitted debts would lead to a
result manifestly at odds with the intent of Congress. It
would result in most judgments being insulated from
subordination, because once a final judgment is issued, the
amount owed is generally fixed and no longer the subject of
dispute. Nothing suggests that Congress intended to
distinguish claims based on judgments or other fixed debts
             IN RE TRISTAR ESPERANZA PROPERTIES                           7

from unliquidated claims arising from the same wrong.3
Rather, Congress sought to subordinate claims, whether
liquidated or not, that unfairly shift to creditors risks
associated with stock ownership. See Betacom, 240 F.3d at
829. Accordingly, O’Donnell’s claim falls under the broad
umbrella of damages.

     B. Arising from the Purchase or Sale

    Next, O’Donnell argues that her claim does not arise from
the purchase or sale of securities, because she converted her
equity interest to a debt claim before Tristar filed its
bankruptcy petition and thus subordination does not
effectuate Congress’s intent in passing § 510(b). The status
of a claim, she argues, must be judged from the date of the
bankruptcy petition.

    It is true that O’Donnell was no longer an equityholder in
Tristar when the bankruptcy petition was filed in 2011. In
2008, she exercised her contractual right to withdraw from
the LLC, and Tristar exercised its contractual right to
purchase her membership interest. After that time, O’Donnell
no longer enjoyed the rights and privileges of LLC
membership, including the right to share in the company’s
profits. She was a creditor, not an equityholder, on the date
of the petition.


 3
   If Congress wished to distinguish between fixed, liquidated claims and
disputed, unliquidated claims for purposes of § 510(b), it could easily have
done so. Instead, it merely used the term “claim.” “The term ‘claim’
means . . . right to payment, whether or not such right is reduced to
judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured, or unsecured . . . .”
11 U.S.C. § 101(5)(A) (emphasis added).
8          IN RE TRISTAR ESPERANZA PROPERTIES

    At least one bankruptcy court has adopted O’Donnell’s
position and held that the status of the claim on the date of the
petition controls the subordination question. See In re
MarketXT Holdings Corp., 361 B.R. 369, 389 (Bankr.
S.D.N.Y. 2007). “It is black letter law,” the court reasoned,
“that claims are analyzed as of the date of the filing of a
petition, not as of a hypothetical date in the past.” Id. (citing
5 Lawrence P. King et al., Collier on Bankruptcy ¶ 506.04
(15th ed. rev. 2006)). Because the creditor held a judgment
based on notes issued following the creditor’s exercise of the
liquidation preference of its preferred stock, it was a creditor
on the date of the petition and thus its claim was not subject
to subordination. Id. at 389–90. Various other courts have
followed similar reasoning in refusing to subordinate certain
creditors’ claims even though their debt instruments or
judgments derived from an equity interest. See, e.g., In re
Cybersight LLC, No. 02-11033, Civ. A. 04-112 JJF, 2004 WL
2713098, at *4 (D. Del. Nov. 17, 2004); In re Swift
Instruments, Inc., No. NC-11-1426-DHSa, 2012 WL 762833,
at *7–8 (B.A.P. 9th Cir. Mar. 8, 2012); In re Mobile Tool
Int’l, Inc., 306 B.R. 778, 782 (Bankr. D. Del. 2004).

    These cases suggest that to be subject to subordination,
the claimant must, at the very least, enjoy the rights and
privileges of equity ownership on the date of the bankruptcy
petition. See Mobile Tool Int’l, 306 B.R. at 782. We rejected
that principle in Betacom, holding that a claimant who
bargained for an equity position was subject to subordination,
even though he never enjoyed the benefits of equity
ownership. Betacom, 240 F.3d at 829–30.

    Furthermore, we have suggested that the status of the
claim on the date of the petition does not end the § 510(b)
inquiry. In Betacom, the bankruptcy court subordinated
           IN RE TRISTAR ESPERANZA PROPERTIES                 9

claims based on certain promissory notes without
explanation, and the district court reversed the bankruptcy
court without mentioning those claims. Id. at 827, 832. Even
though the claims were based on promissory notes—fixed,
admitted debts at the time of the petition—we remanded for
determination of the origin of the notes, instructing the lower
court that “[i]f the promissory note claims are linked to the
[issuance of securities], they should be subordinated.” Id. at
832. And in American Wagering, we determined that a
judgment based on contract claims of a consultant who never
bargained for an equity position in the debtor was not subject
to subordination. 493 F.3d at 1072–73. We took time to
clarify that the judgment—clearly a debt claim at the time of
the petition—did not derive from an equity interest, and we
implied that the “conversion of an equity interest into a
money judgment” would render the claim subject to
subordination. Id. at 1072 n.2.

    The critical question for purposes of § 510(b), then, is not
whether the claim is debt or equity at the time of the petition,
but rather whether the claim arises from the purchase or sale
of a security. The claim must be subordinated if there is a
sufficient “nexus or causal relationship between the claim and
the purchase” or sale of securities. Am. Wagering, 493 F.3d
at 1072 (quoting Telegroup, 281 F.3d at 138).

    The primary weakness in O’Donnell’s argument is that,
in her attempt to effectuate her vision of congressional intent,
she overlooks the statutory text. Section 510(b) does not ask
what the claim is, but what it arises from. We have long
interpreted “arises from” broadly, and not as the “snapshot in
time” that O’Donnell urges:
10        IN RE TRISTAR ESPERANZA PROPERTIES

       The word “arising” connotes, in ordinary
       usage, something broader than causation . . . .
       “Arising out of” are words of much broader
       significance than “caused by.” They are
       ordinarily understood to mean “originating
       from,” “having its origin in,” “growing out
       of” or “flowing from” or in short, “incident to,
       or having connection with . . . .”

Underwriters at Lloyd’s of London v. Cordova Airlines, Inc.,
283 F.2d 659, 664 (9th Cir. 1960) (latter alteration in
original) (quoting Red Ball Motor Freight, Inc. v. Emp’rs
Mut. Liab. Ins. Co. of Wis., 189 F.2d 374, 378 (5th Cir.
1951)); see also Cont’l Cas. Co. v. City of Richmond,
763 F.2d 1076, 1080 (9th Cir. 1985) (reviewing case law that
interprets “arising from” more broadly than “caused by”).

    With this definition established, it is clear that
O’Donnell’s claim arises from the sale of a security of the
debtor. Her claim originates from the failed sale of her
membership interest and Tristar’s breach of the operating
agreement’s provisions regarding repurchase of membership
interests. The direct causal link between O’Donnell’s claim
and the purchase and sale of an equity interest leaves no
doubt as to whether her claim for damages “flows from” the
purchase or sale of a security of the debtor.

    Our straightforward reading of the “arises from” language
in § 510(b) comports with congressional intent. As we have
said, “[t]here are two main rationales for mandatory
subordination: 1) the dissimilar risk and return expectations
of shareholders and creditors; and 2) the reliance of creditors
             IN RE TRISTAR ESPERANZA PROPERTIES                             11

on the equity cushion provided by shareholder investment.”
Betacom, 240 F.3d at 830. Although O’Donnell did not enjoy
the benefits of equity ownership on the date of the petition,
she bargained for an equity position and thus embraced the
risks that position entails. See Am. Wagering, 493 F.3d at
1071–72 (“One of the primary purposes of section 510(b) . . .
is to prevent disappointed shareholders . . . from recouping
their investment in parity with unsecured creditors.”). And
O’Donnell’s investment was a part of Tristar’s equity cushion
on which creditors would have relied in choosing to extend
credit. Thus, we conclude that O’Donnell’s claim is among
those Congress sought to reach in enacting § 510(b). If
Congress had intended for subordination to turn on a claim’s
status at the time of the bankruptcy filing, rather than the
claim’s origin, it could easily have written § 510(b) to reflect
that “snapshot” intent. It did not, and it had good reasons for
that.4




    4
       We note that our decision today does not address the BAP’s
assumption that a claim arising from an “old and cold” transaction
converting an equity interest into debt may avoid subordination if the
claim had “long been treated as part of the enterprise’s debt structure.”
Tristar Esperanza Props., 488 B.R. at 404. In her briefing and at oral
argument, O’Donnell abandoned any argument that her claim was too “old
and cold” to be subordinated. She argued only that so long as the claimant
held a fixed, admitted debt at the time of the petition, § 510(b) could not
apply. Furthermore, we find no error in the BAP’s determination that
O’Donnell’s claim was never considered as part of Tristar’s debt structure,
but rather was “sufficiently proximate in time” to the bankruptcy filing “to
warrant the conclusion that this is an effort by equity to capture . . . profits
via a judgment for money damages.” Id. We need not determine whether
an equity-to-debt conversion may ever be so “old and cold” that the causal
link to the purchase or sale of securities is severed and the claim no longer
arises from the purchase or sale.
12        IN RE TRISTAR ESPERANZA PROPERTIES

    Because O’Donnell’s claim arises from the purchase or
sale of a security of the debtor, the bankruptcy court properly
subordinated it.

     AFFIRMED.
