Meruelo Maddux Properties, Inc v. Mmpi Acquisition, LLC

MEMORANDUM

Meruelo Maddux Properties, Inc. (MMPI) and its affiliates filed a Chapter 11 bankruptcy petition. The bankruptcy court confirmed a reorganization, plan that allowed the minority shareholders’ acquisition company (MMPI Acquisition, LLC, or MMPIA) to acquire shares in the reorganized MMPI. After confirmation of the reorganization plan, a company called 1248 Figueroa Street, LLC (1248) asserted that it held a lien on post-reorganization MMPI shares acquired by MMPIA. 1248 argued that it held this lien because the CEO of MMPI, Richard Meruelo, and affiliated entities (collectively the Meruelo Parties) had pledged pre-reorganization MMPI shares to 1248 as collateral for a loan.

MMPI and MMPIA filed an adversary proceeding seeking a declaratory judgment that 1248’s lien did not encumber the shares MMPIA acquired. The bankruptcy court granted summary judgment against 1248, and the district court affirmed. We have jurisdiction under 28 U.S.C. §§ 158 (d)(1) and 1291. California law governs questions of contract interpretation and secured transactions in this case. See Butner v. United States, 440 U.S. 48, 55 , 99 S.Ct. 914 , 59 L.Ed.2d 136 (1979); Hillis Motors, Inc. v. Haw.…