- -- F.3d -- (9th BAP 2016)
- The Bankruptcy Appellate Panel ("BAP") affirmed the bankruptcy court's order approving the Chapter 11 Liquidating Trustee's ("Trustee") proposed settlement related to pre-petition transfers. The BAP determined that based on the confirmed Chapter 11 Plan and terms of the Liquidating Trust, the Trustee's standard to approve the proposed settlement was whether the settlement was "fair and equitable."
- Procedural context:
- Greif & Co. ("Greif") appealed the bankruptcy court's order approving the Trustee's settlement with American Express ("AmEx"). The BAP framed the issue as what standard(s) is the bankruptcy court required to apply when deciding the disputed settlement motion.
- Western Funding Incorporated ("WFI"), Western Funding Inc. of Nevada, and Global Track GPS, LLC (collectively the "Debtors") filed for relief under Chapter 11. The cases were jointly administered. WFI was a servicer of subprime auto loans. Prior to the commencement of the Chapter 11 cases, Harbor Structured Finance, LLC ("Harbor"), by and through the controlling individuals, Frederick and Katherine Cooper ("Cooper") acquired WFI. The Coopers established accounts with AmEx for themselves and employees. Although WFI was not named on the account, WFI routinely paid for the AmEx charges. The Coopers generally classified these expenses as "business expenses." The Chapter 11 Plan created the WFI Liquidating Trust ("Trust") wherein the Trustee was authorized to pursue claims on behalf of the Trust and gave the Trustee broad authority related to those claims. The Trust provided that the Trustee was required to seek bankruptcy court approval for settlement of any claim that sought to recover more than $50,000.00. The Trustee commenced an adversary against AmEx asserting that $2 million remitted to AmEx during the 2 years prior to the commencement of the case were avoidable on the basis that the charges incurred in the AmEx account were for personal, but "business expenses". The Trustee sought bankruptcy court approval of a settlement with AmEx in the amount of $331,476.53. Greif opposed the motion asserting that the Trustee's solvency analysis was flawed, the motion seeking to approve the settlement was not sufficiently detailed to evaluate the asserted claim(s) against AmEx. The Trustee filed a reply to Greif's opposition, providing additional additional analysis supporting the proposed compromise; moreover, the Trustee asserted that the standard of review to determine if the compromise should be approved is governed by the Trust - not the factors set forth in Martin v. Kane (In re A & C Properties), 784 F.2d 1377, 1381 (9th Cir. 1986). Shortly before the hearing on the Trustee's motion, Greif filed a motion asserting its basis for a claim of actual fraud, and seeking the bankruptcy court's authority to obtain derivative standing to pursue the claim(s). The bankruptcy court agreed with the Trustee in that the A & C factors were not applicable; however, per the request of the Trustee, addressed the A & C factors and determined that they weighed in favor of the proposed settlement. The bankruptcy court did not rule on Greif's request for derivative standing on the basis that it would be procedurally improper given the close proximity of time in which the relief was requested to the hearing. However, the bankruptcy court did delay the effectiveness of the compromise for 2 weeks to allow Greif to present an offer to purchase the claims against AmEx - no offer was presented.
- Honorable DUNN, FARIS and BARASH.
Thelma McCoy v. USA
Summarizing by Craig Geno
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