Chameleon Entertainment Systems, Inc. v. Weinman (In re Chameleon Entertainment Systems, Inc.)

BAP No. CO-11-087 (B.A.P. 10th Cir. Dec. 3, 2012)
In AFFIRMING the bankruptcy court, the BAP ruled that the bankruptcy court had jurisdiction to approve a settlement entered into between a putative debtor and creditors dismissing the case without first determining that the involuntary petitions satisfied section 303's requirements because the filing of the involuntary petition commenced the case, and section 303 is not jurisdictional in nature. Additionally, the BAP ruled that the bankruptcy court did not abuse its discretion in denying a Rule 60(b) motions related to motions to set aside the settlement and dismissal and to reopen a dismissed involuntary bankruptcy.
Procedural context:
Two involuntary chapter 7 petitions were filed. One of the petitions was dismissed by stipulation; an order for relief was entered with respect to the other. Motions to set aside the stipulated dismissal were denied. A chapter 7 trustee was appointed to the surviving case. The chapter 7 trustee filed a report of no distribution, and the case was closed. Motions to reopen were denied. This appeal followed.
Petitioning Creditors filed two involuntary chapter 7 petitions, one against Mitchell, and one against an affiliate, Chameleon. The putative debtors filed motions to dismiss and for sanctions alleging the involuntary petitions were improper and filed in bad faith. The putative debtors and Petitioning Creditors, along with additional creditors that joined the petitions, reached a settlement, and the putative debtors filed a motion to dismiss. Notice was not sent to nonpetitioning, nonjoining creditors. The Mitchell petition was dismissed; a chapter 7 trustee was appointed in the Chamelion petition and the order for relief was ultimately entered. Chameleon moved to set aside the settlement with Mitchell and vacate dismissal, which was denied. The chapter 7 trustee filed a report of no-distribution, which the court accepted over objections, and the case was closed. The court denied motions to reopen and for reconsideration.
Cornish, Rasure, and Somers.

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