In re VeroBLue Farms USA, Inc.

Case Type:
Case Status:
Reversed and Remanded
19-3413, 19-3487 (8th Circuit, Aug 05,2021) Published
Albeit agreeing with the district court that it (as well as itself) had statutory subject matter jurisdiction, the U.S. Court of Appeals for the Eighth Circuit (Panel) concluded that the district court had erred in limiting the mandatory but non-jurisdictional timeliness requirements of Rule 8002 to appeals from final bankruptcy court orders and not applied a sufficiently rigorous test to determine when bankruptcy equities and pragmatics justify foregoing Article III judicial review of a bankruptcy court order confirming a Chapter 11 plan.
Procedural context:
A preferred shareholder of VeroBlue Farms USA, Inc., and affiliated entities (DRs), FishDish, LLP (FishDish), appealed the order of the United States District Court for the Northern District of Iowa (district court) granting appellees’ motions to dismiss FishDish's appeal of the bankruptcy court order confirming DRs' Chapter 11 plan of reorganization over FishDish's objections, and certain pre-confirmation orders. Appellees are VeroBlue Farms, the reorganized debtor; Alder Aqua, Ltd. (Alder Aqua), DRs' plan of reorganization sponsor; and Broadmoor Financial, L.P. (Broadmoor), the senior secured creditor. In dismissing the appeal, the district court invoked equitable mootness but also considered appellees’ jurisdictional defenses, including timeliness, and concluded it did have subject matter jurisdiction. Additionally, Broadmoor cross appealed the district court’s ruling that FishDish's appeal from one order, the “Claim Objection Order,” though untimely under Rule 8002(a)(1) of the Federal Rules of Bankruptcy Procedure, was not subject to dismissal under 28 U.S.C. § 158(c)(2) because the statute only applies to appeals from the “final judgments, orders, and decrees” referred to in § 158(a)(1).
Founded in 2014, the DRs were in the aquaculture business: farming fish and selling those fish through wholesalers to restaurants and grocery chains. Kenneth Lockard, an Iowa businessman, formed FishDish to invest in the DRs. In the humid summer of 2016, the DRs sold $6 million in preferred shares to FishDish and $28 million to Alder Aqua, a British Virgin Islands entity allegedly owned and controlled by Dr. Otto Happel and his family. In addition, certain DRs borrowed $29 million from Amstar Group, LLC (Credit Facility), also allegedly owned and controlled by Dr. Happel, a loan secured by substantially all of the DRs' assets. As a result, Lockard and Alder Aqua representatives sat on the DRs' board. Lockard often voted en bloc with the founders. In December 2017, Amstar transferred its rights under the Credit Facility to Broadmoor. Alder Aqua loaned the DRs additional funds in 2018 and acquired a participation interest in the Credit Facility. By early 2018, Alder Aqua had taken control of the DRs, terminating the founders and installing their appointees to the board and causing Lockard to resign from the board. The DRs filed a voluntary Chapter 11 bankruptcy petition on September 21, 2018. Therein, they listed an undisputed obligation to the Credit Facility as approximately $54 million, many times more than the DRs' assets. On motion of the DRs, the bankruptcy court promptly entered an interim post-petition financing order authorizing Debtors to borrow $2 million from Alder Aqua as Lender to finance postpetition obligations and to grant Lender a “first priority priming lien” under 11 U.S.C. § 364(d) on its business assets, and granting Broadmoor an Adequate Protection Lien equal to the diminution in value of any valid pre-petition lien. Receiving no objection, the bankruptcy court entered a final debtor-in-possession financing order in October 2018.
James B. Loken; Steven L. Grasz; and Jonathan A. Kobes

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