Dugaboy Invst v. Highland Capital
- Case Type:
- Business
- Case Status:
- Affirmed
- Citation:
- 22–10960 (5th Circuit, Jul 31,2023) Published
- Tag(s):
-
- Ruling:
- Affirming the "person aggrieved" standard for standing to appeal an order of the bankruptcy court, the Fifth Circuit held that a party without an allowed claim against the debtor does not have bankruptcy standing to appeal a decision by the bankruptcy court approving a settlement that allows another party a claim against the estate. The bankruptcy court's decision to approve the settlement did not directly affect the appellant's financial interests.
- Procedural context:
- Dugaboy Investment Trust appealed an order of the district court that affirmed the bankruptcy court's decision overruling Dugaboy's objection to a pre-confirmation settlement between the debtor and six affiliated creditors. The district court affirmed the bankruptcy court's decision and dismissed the appeal, ruling that Dugaboy did not have bankruptcy standing.
- Facts:
- Appellant Dugaboy Investment Trust held a 0.1866% fractional limited partnership interest in debtor Highland Capital Management, L.P. (Highland) filed its chapter 11 petition. In February 2021, the bankruptcy court confirmed Highland's fifth amended reorganization plan. Dugaboy's limited partnership interest was canceled under Highland's confirmed plan. Dugaboy, however, received a highly subordinated interest in a "claimaint trust."
During the Highland bankruptcy case, Dugaboy filed three proofs of claim. Two were withdrawn with prejudice. In November 2021, the bankruptcy court approved a stipulation that Dugaboy withdrew, with prejudice, its third proof of claim.
In 2020, six entities collectively referred to as "HarbourVest" filed six proof of claim in the Highland bankruptcy, alleging claims of more than $300 million arising from an investment of approximately $80 million to acquire a 49.98% ownership interest in an entity now known as Highland CLP Funding (HCLOF). A subsidiary of the debtor-managed HCLOF.
Highland settled the HarbourVest claims by allowing them an unsecured claim of $45 million and a subordinated claim of $35 million, and HarbourVest agreed to transfer its interests in HCLOF to Highland or a Highland subsidiary. The bankruptcy court approved the settlement in January 2021 over the objections of Dugaboy and others.
Dugaboy appealed the HarbourVest settlement.
- Judge(s):
- Higginbotham, Southwick, and Willett
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