Sherwood Partners, Inc. v. Lycos, Inc. (2005)

Citation: 394 F.3d 1198. Court: Ninth Circuit. Decided: January 12, 2005. Opinion: Kozinski, J.; D. W. Nelson, J., dissenting.

Source note (2026-10-18):

• source replaced 2026-10-18: static.case.law robots-disallowed; official copy at U.S. Court of Appeals for the Ninth Circuit opinion archive (No. 03-55247) (replaces https://static.case.law/f3d/394/cases/1198-01.json; retrieval dates stated elsewhere on this page refer to the earlier copy).
• Links on this page to https://static.case.law/cal-app-4th/139/cases/1630-01.json are an (unofficial Caselaw Access Project copy, retrieved before 2026-10-18; host disallows automated access); no official or otherwise permitted full-text copy was located on 2026-10-18.

Facts

After paying Lycos USD 1 million under a renegotiated agreement, Thinklink made a general assignment for creditors’ benefit. Sherwood, the assignee, sued under California Code of Civil Procedure § 1800 to recover that payment as a preference. The action was removed on diversity grounds; the district court ruled for Sherwood. Full opinion, pp. 1199–1200.

Holding

Reversed and remanded for dismissal: the Bankruptcy Code preempted the special preference-avoidance power asserted under § 1800. The majority distinguished avoidance rights already held by individual creditors from powers specially conferred on the state assignee. Full opinion, pp. 1201–1206.

Reasoning

The majority considered the special assignee power inconsistent with federal collective bankruptcy administration and its procedural safeguards. The dissent emphasized the common-law assignment tradition and the compatible goal of equal creditor distribution. The decision did not invalidate every ABC or every ordinary state-law creditor remedy. Full majority, dissent and footnotes.

Practical impact

The printed California preference statute must not be presented as unconditionally enforceable in every forum. California’s Court of Appeal expressly rejected this preemption analysis in haberbush-v-cummins-family-partnership-2006. Neither decision supplies a general free-and-clear title rule for ABC asset buyers.

Good-law status

The distinguished label records the explicit state/federal disagreement, not a claim that a California court overruled the Ninth Circuit. Later forum-specific controlling treatment must be checked before litigation. Haberbush full opinion.

Source provenance

Complete majority, dissent and footnotes retrieved October 17, 2026 from the Caselaw Access Project URL above, an unofficial reproduction of the judicial primary text. Review details: schema/verification/california-independent-review-2026-10-17.md.

Applies in →

california · assignment-for-the-benefit-of-creditors

Legal information, not legal advice. This summary does not replace current forum-specific authority.