
I've been having nightmares about the 9th's Circuit's decision in Siegel for 20 years. Broad strokes, Siegel (143 F.3d 525 (9th Cir. 1998) holds that a filed claim in a no asset bankruptcy case to which no one objects is entitled to preclusive effect in subsequent litigation by reason of Bankruptcy Code §502. In Siegel, the debtor filed a no-asset Chapter 7; nonetheless, his lender filed a proof of claim, to which, not surprisingly, no one objected. In the absence of an anticipated distribution, why would anyone? Post discharge, Siegel resumed his state court fight with the lender, on fraud and breach of contract theories. Defendant Freddie Mac removed the case to federal court and got summary judgment on the grounds that, absent an objection in the no asset Chapter 7, Freddie Mac's claim was deemed allowed and the doctrine of claim preclusion barred further litigation on the claim. The "doctrine of res judicata bars a party from bringing a claim if a court of … [Continue reading...]