Racusin

This is an appeal from a decision of the Bankruptcy Appellate Panel for the Ninth Circuit in favor of debtors, American Wagering, Inc. and Leroy’s Horse and Sports Place. The only issue on appeal is whether the claim against the bankrupt corporation by Michael Racusin, a former business consultant to debtors, should be regarded as the debt of a creditor, or as a suit by a shareholder subject to subordination pursuant to 11 U.S.C. § 510 (b). The bankruptcy court found that the claim was a debt not subject to subordination, but the Bankruptcy Appellate Panel reversed, characterizing Racusin as an investor. In re American Wagering, Inc., 326 B.R. 449 (9th Cir.BAP2005). We agree with the bankruptcy court that Racusin, as the holder of a money judgment, should be regarded as a creditor and reverse the decision of the Bankruptcy Appellate Panel and remand for further proceedings.

I.

Facts and Procedural History

The litigation leading to this bankruptcy proceeding has a lengthy and convoluted history. In 1994, debtor Leroy’s Horse and Sports Place hired Michael Racusin as a financial advisor in connection with the initial public offering of Leroy’s stock. In preparation for the…