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In re- 450 S. WESTERN AVE., LLC,

Summarizing by Bradley Pearce

The Slovak Republic v. Loveridge (In re Eurogas, Inc.)

Case Type:
Case Status:
16-6014 (10th Circuit, Nov 17,2017) Published
The appellant, Hefner, did not have standing to appeal the district court's order holding that Hefner had standing to object to a settlement approved by the bankruptcy court. The court of appeals also held that the district court did not abuse its discretion by affirming the bankruptcy court's order (1) denying Hefner's motion to conduct additional discovery regarding his alleged contribution to the settlement and (2) denying Hefner's request for attorney's fees.
Procedural context:
This opinion arises out of shareholder derivative litigation. The first case was filed in federal district court on behalf of SandRidge Energy Inc. Hefner subsequently filed a shareholder derivative suit in Oklahoma state court. The state court action was stayed, and a partial settlement was submitted for approval by the federal district court. Hefner objected, and filed a "contingent motion" for attorney's fees and requested additional settlement-related discovery. The district court overruled Hefner's objection and denied his motions. Hefner appealed to the 10th Circuit. SandRidge then filed a Chapter 11 bankruptcy case. A Chapter 11 plan was confirmed. In key part, the plan discharged the relevant shareholder derivative claims. Sandridge then filed a motion to dismiss Hefner's appeal,
Most of the facts are set forth in the Procedural Context. Hefner argued that lack of standing to pursue a derivative action did not mean that he did not have standing to object to the settlement that was incorporated in SandRidge's plan. The 10th Circuit did not bite at the profferred apple, and instead focussed on concepts typically considered in the context of equitable mootness (even though the 10th Circuit did not use that term). Couching the argument in terms of justiciability, the 10th Circuit concluded that no relief of the sort sought by Hefner was available if the court did reverse and remand because the Chapter 11 plan wiped out all of the shareholders' shares. Thus, there would be no shareholders and no shareholder derivative suits. The 10th Circuit did not theorize about the possible outcome if Hefner had timely appealed confirmation of SandRidge's Chapter 11 plan, but it appears that such a strategy may have negated the 10th Circuit's justiciability logic.

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