Adeli v. Barclay (In re Berkley Delaware Court, LLC)

9th Cir. Case No. 14-55854 (August 23, 2016)
An appeal of a hybrid compromise/sale order was moot under § 363(m) where debtor did not obtain stay pending appeal and the bankruptcy court did not clearly err in determining that the creditor was a good faith purchaser of the debtor’s claims.
Procedural context:
Bankruptcy court granted a Chapter 7 Trustee’s motion to approve compromise and sale of claims. Debtor appealed the order to district court. Debtor did not seek a stay of the order. The district court dismissed the appeal as moot under 11 U.S.C. § 363(m). Debtor appealed again and the 9th Circuit affirmed.
Chapter 7 Trustee reached a settlement of claims against a former secured creditor. The Debtor had sued the creditor in state court for fraud, and the creditor asserted a large deficiency claim and administrative claims. The settlement called for the creditor to pay $108,000 and release its claims against the estate. The compromise motion was also noticed as a sale motion under Section 363 subject to overbidding. The 9th Circuit agreed with the BAP in Mickey Thompson, 292 B.R. 415 (9th Cir. BA, 2003) and held that a bankruptcy court has the discretion to apply § 363 procedures to a sale of claims pursuant to a settlement approved under Rule 9019. Quoting the Fifth Circuit, “[a] compromise of a claim of the estate is in essence the sale of that claim to the defendant.” In re Moore, 608 F.3d at 264. . . We see no good reason why a trustee and the bankruptcy court cannot utilize the procedures of § 363 in certain settlements in order to ensure maximum value for the estate."
Raymond C. Fisher, Milan D. Smith, Jr., and Jacqueline H. Nguyen, Circuit Judges

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