The BAP noted that "the record triggered some mootness concerns" because the lease "was never implemented and expired by its terms." Id. at *3. Despite these concerns, see id. at *3-4, the BAP purported to "bypass" the question of whether the action was moot and thereby "advance to a discussion of the merits," id. at *4. The BAP then rejected ORIL's challenges on the merits.

* * *

At the outset, it is clear that we must vacate the BAP's judgment. Because the mooting event occurred prior to that judgment, the BAP "had no warrant to proceed" as it did and resolve the case on the merits.

When a civil case becomes moot pending appeal, the "established practice . . . is to reverse or vacate the judgment below and remand with a direction to dismiss.""That procedure clears the path for future relitigation of the issues between the parties and eliminates a judgment, review of which was prevented through happenstance.""The equitable remedy of vacatur ensures that 'those who have been prevented from obtaining the review to which they are entitled [are] not . . . treated as if there had been a review.'"

This practice, however, is "not exceptionless." Although vacatur is justified where mootness either occurs "by happenstance" or "results from unilateral action of the party who prevailed below," it is not warranted where mootness "results from settlement" or when "the party seeking relief from the judgment below caused the mootness by voluntary action."

Accordingly, after concluding that an action is moot, we must determine on which "side of the line" the action falls.

* * *

We conclude that the "balance of equities" weigh against vacatur of the bankruptcy court orders here. Several factors inform this conclusion. First, ORIL never sought a stay pending appeal of the bankruptcy court orders -- a request that, had it been granted, could have forestalled the mootness of this action. . . . Significantly, ORIL failed to timely object to Ruiz's motion requesting permission to enter the lease in the first place, and the bankruptcy court relied on that lack of objection. It is abundantly clear that ORIL "slept on its rights" in several respects throughout the course of this litigation. . . . Moreover, as Ruiz claims and ORIL does not contest, ORIL decided to not register the lease, and so prevented its implementation, even after the bankruptcy court denied reconsideration of the order approving the lease. That choice contributed to this action's mootness because it minimized any concrete impact of the lease and ORIL's stake in challenging it.

We emphasize that our analysis is confined to the "unique circumstances of this case." We do not hold, for example, that a party must always seek a stay in order to later request vacatur. But ORIL's actions, viewed cumulatively, have tilted the "balance of equities" against vacatur.

For the foregoing reasons, we vacate the judgment of the BAP and remand to the BAP with instructions to dismiss ORIL's appeal as moot. The bankruptcy court orders will "remain[] extant."

Trustee objects to the $35,873.40 billed in connection with Creditor’s objection to Debtor’s claimed homestead exemptions, as well as the $8,310 billed in connection with Creditor’s motion for sanctions against Debtor’s counsel. Creditor argues that objecting to Debtor’s homestead exemption was necessary to protect its own interest because depending on the value of the collateral, Creditor’s claim could have been partially unsecured and would have been impaired by Debtor’s homestead exemption.

* * *

The Court is unconvinced by Creditor’s argument. While objecting to Debtor’s homestead exemption arguably helped protect Creditor’s interests in the event its claim was partially unsecured, a prerequisite to obtaining fees under § 506(b) is that the creditor is oversecured. It would not be reasonable for Creditor to be compensated under § 506(b), which requires a creditor to be oversecured, for services that were only arguably necessary to protect a potential unsecured interest.

Within the context of bankruptcy, there are “special considerations” with allegations of unjust enrichment. By allowing a claim for unjust enrichment, thereby “creating a separate allocation mechanism outside the scope of the bankruptcy system, the constructive trust doctrine can wreak . . . havoc with the priority system ordained by the Bankruptcy Code.” Id. (quoting In re Haber Oil Co., 12 F.3d 426, 436 (5th Cir. 1994)) (cleaned up). “[C]onstructive trusts are anathema to the equities of bankruptcy since they take from the estate, and thus directly from competing creditors, and not from the offending debtor.” The “goals of the Bankruptcy Code can be frustrated by the imposition of a constructive trust,” and “bankruptcy courts are generally reluctant to impose constructive trusts without a substantial reason to do so.”

* * *

There is nothing inequitable, in bad conscience, or unjust in allowing the Trustee to proceed in marshalling and preserving the assets of the estate. The Defendant has not presented a substantial reason to do so and risk disrupting the priority system ordained by the Bankruptcy Code. The Court will not allow the Defendant to amend the affirmative defenses in so far as they seek to add a defense of unjust enrichment.

The district court characterized the type of “resulting trust” discussed in this Court’s summary judgment decision as a “purchase money resulting trust,” and ruled that there are other types of resulting trusts that are possible under Arkansas law. See 2022 WL 2703954, at *4-5. The district court further ruled that the Defendants had sufficiently preserved for appeal an argument for such other types of resulting trusts, which this Court had not discussed.4 Based on this, the district court remanded these cases “so that the bankruptcy court may consider the broader argument.” 2022 WL 2703954, at *5. The district court further ruled that “[o]n remand, the bankruptcy court is free to explore any other pertinent issues bearing on summary judgment, such as the Trustee’s argument based on intent to hinder creditors and the significance, if any, of [the Defendants’] agreement in February 2022 to a consent judgment for the sale of the properties.”

* * *

The relief to be given to Defendants from the Consent Judgment, based on Rule 60(b)(5), would be limited relief. “Just terms” under Rule 60(b) would require that the Consent Judgment not be vacated entirely, but rather that it now only be construed to conclusively resolve any issue about the elements under §§ 363(h)(1) through 363(h)(4), in the Trustee’s favor. This effect of the Consent Judgment will matter only if, after the district court’s remand, the Trustee once again prevails in avoiding the 2018 Transfers.

Whether the Trustee will so prevail remains to be seen, after a trial. If, after trial, this Court ultimately enters a judgment once again avoiding the 2018 Transfers, then the Consent Judgment will preclude the Defendants from disputing that the elements of §§ 363(h)(1) through 363(h)(4) are satisfied with respect to a sale of the Arkansas properties.

But the Consent Judgment does not preclude the Defendants from continuing to dispute that the 2018 Transfers are avoidable. If and to the extent relief from the Consent Judgment is necessary to reach that result, it is granted, and the Court’s orders will so provide.

Lender moves for reconsideration of this Court’s order denying confirmation of the Lender Plan. By way of background, the Lender’s Claim is a nonrecourse, undersecured claim. The Lender Plan provides for the Lender’s collateral to be returned to the Lender and for the Lender to receive or retain additional assets, including an assignment of Avoidance Actions and Adequate Protection Payments. The Court held that under Bankruptcy Code section 1111(b) and applicable case law, a nonrecourse creditor that receives its collateral under a plan is not entitled to a distribution on account of its deficiency claim and the distribution to Lender of assets in addition to the Lender’s collateral resulted in the Lender being paid more than the amount of its claim. Therefore, the Lender Plan could not be confirmed because the plan violated Bankruptcy Code section 1129(b)(1)’s requirement that a plan be fair and equitable.

Lender concedes, at least for purposes of its motion for reconsideration, that its receipt of the Avoidance Actions under the Lender Plan violates Bankruptcy Code section 1129(b)(1). Lender argues, however, that the Court erred in finding that Lender’s retention of the Adequate Protection Payments resulted in the Lender receiving more than the value of its secured claim. Lender contends the Adequate Protection Payments are the Lender’s cash collateral and the Lender’s secured claim is increased, dollar for dollar, by the Adequate Protection Payments. Therefore, Lender’s retention of the Adequate Protection Payments does not result in the Lender receiving more than the allowed amount of the Lender’s secured claim. As set forth below, but for the Lender Plan’s language and the record of the hearings on confirmation, the Court would not have found the Lender’s retention of the Adequate Protection Payments violated 1129(b)(1). Nonetheless, the Court’s ruling was indeed based, in part, on Lender’s inaccurate statements at the confirmation hearing respecting the value of its collateral and the treatment of the Adequate Protection Payments under the Lender Plan.

At the Court’s request, Lender filed a supplement to its motion for reconsideration with a proposed amended Lender Plan attached. The proposed amended plan is fair and equitable and satisfies Bankruptcy Code section 1129’s other requirements for confirmation. The Debtor had the opportunity to respond to the proposed amended Lender Plan and to file its own amended plan and did neither.

If the Court grants the motion for reconsideration and confirms the proposed amended Lender Plan, distributions will be made on account of administrative expenses and general unsecured claims. If the Court denies the motion, the Lender could still propose and confirm the amended plan, albeit the Lender would be required to repeat the confirmation process. Alternatively, the Lender could obtain dismissal of this case or relief from automatic stay to foreclose on the Property based on the Debtor’s inability to propose a confirmable plan. In either instance, creditors would not likely receive distributions on account of their claims.

As set forth more fully below, the Court grants the Lender’s motion for reconsideration because (a) the proposed amended Lender Plan is confirmable, (b) the Court’s decision to deny confirmation was based on a mistake, and (c) confirmation of the proposed amended Lender Plan is in the best interests of all creditors.

In bankruptcy, as in boxing, timing matters. Jermaine Maurice Franklin, Jr., a professional boxer, filed for Chapter 7 bankruptcy six months after this Court determined that, under contract, he was responsible to compensate his former manager, Mark F. Haak, from his prospective earned boxing purse. Haak then filed a motion to dismiss Franklin's bankruptcy petition under 11 U.S.C. § 707(a), alleging Franklin filed for bankruptcy in bad faith to avoid his contractual obligations. The Bankruptcy Court disagreed and denied Haak's motion, finding that Franklin had filed his bankruptcy petition in good faith, considering, among other things, the uncertainty of his future boxing career. Two months later, the Bankruptcy Court held that Franklin was not required to perform under the boxer-manager contract and ordered Haak to refrain from enforcing it.

Haak appealed the Bankruptcy Court's orders to this Court, and now seeks judicial notice of Franklin's postruling boxing matches, arguing they are relevant to whether Franklin filed his bankruptcy petition in bad faith. Alternatively, Haak seeks remand to the Bankruptcy Court for a second round to determine whether Franklin's filed for bankruptcy in bad faith. Franklin opposes both moves.

* * *

Given "the changed circumstances" with the new, postruling boxing matches, the bankruptcy court must reevaluate Franklin's case under the Zick factors. Indeed, bankruptcy courts must carefully consider whether a bankruptcy case was filed in good faith and that egregious cases warrant dismissal for cause. 707(a). Therefore, a remand is warranted to afford the bankruptcy court an opportunity to examine the impact of these new matches on Franklin's financial situation and overall good faith in filing for bankruptcy, and to consider how the adversary proceeding might impact the issues disputed by the Parties in this appeal.

The record reflects that the series of bankruptcies filed by the Mazzeis, have not been filed in good faith and have clogged the courts for years. These cases are obviously inconsistent with what is right or proper. To borrow the words of other courts, such conduct by the Mazzeis has been “flagrant” (and such term is synonymous with “egregious”). Such conduct also supports conversion or dismissal of the instant case. Based on the totality of the circumstances, the Court elects to dismiss this case with prejudice.

* * *

In reaching this decision, the Court has also considered the fact that the lion’s share of the Mazzeis’ debts are secured creditors and/or tax creditors who have extra protections outside of the bankruptcy process to recover their claims.

Accordingly, the Court concludes that dismissal of the case, with prejudice, with a 180-day bar against re-filing, is an appropriate sanction for the abuse of the feasible bankruptcies filed by the Mazzeis. The 180-day bar chosen by the Court strikes an appropriate balance between holding the Debtor accountable, protecting creditor interests, and yet not permanently foreclosing the Debtor from seeking a bankruptcy discharge of in personam debts at a later date.

The debtor was a government contracting business that filed a chapter 11 bankruptcy case after the entry of an adverse judgment. The bankruptcy case was converted to one under chapter 7. The chapter 7 trustee initiated this lawsuit seeking to avoid and recover transfers that the debtor made to its principal equity holders and other defendants who are alleged to be their family members or entities that the equity holders owned or controlled. The First Amended Complaint, which is the operative document, asserts claims of intentional and constructive fraudulent conveyance, breach of fiduciary duty, the aiding and abetting of such breach, unlawful distributions, veil piercing, and unjust enrichment. The complaint also sought an injunction against the defendants’ transferring or encumbering assets, a constructive trust, and an accounting. In addition, the complaint seeks to recover attorneys’ fees.

Defendants move to dismiss certain counts under Civil Rule 12(b)(6) for failure to state a claim. Defendants are correct that constructive trust is a remedy rather than a cause of action. That claim (Count 12) will therefore be dismissed. And defendants are similarly correct that the claim for attorneys’ fees is misplaced, as none of the facts as alleged provides a basis for fee shifting. The remaining counts, however, adequately allege facts that would, if established at trial, entitle the trustee to recover. The balance of the motion to dismiss will therefore be denied.

Mr. Ross served as a chapter 7 panel trustee in the District of Columbia for forty-two years until his resignation from that panel on June 8, 2023. Beginning in 2013, Mr. Ross had what the parties called a “business relationship” with Fox & Associates Partners, Inc. t/a Tranzon Fox (“Tranzon”), in which Mr. Ross received compensation in the form of a referral fee in cases in the Bankruptcy Courts of the District of Columbia, District of Maryland, and the Eastern District of Virginia.1 The referral fee was calculated as a percentage of any commission or buyer’s premium received by Tranzon in such cases. While business relationships between professionals are not per se impermissible, the Bankruptcy Code and Bankruptcy Rules require clear, concise, and full disclosure of all the terms and conditions of employment and compensation including referral fees.

The disclosures made by Mr. Ross and Tranzon in each of the identified cases3 were either insufficient or non-existent. . . . Mr. Ross’ extensive experience as a bankruptcy attorney and trustee underscores why he cannot escape liability for the nondisclosure.

* * *

1) Mr. Ross is sanctioned the full amount of his referral fees for the Other DC Cases, totaling $30,010.46. Within fourteen days of this Opinion, Mr. Ross shall deposit the funds set forth in section III.c. and file evidence of the same with the Court. Upon completion of the funds request process established by section III.c., any balance shall be paid to the Court’s Miscellaneous Fines and Penalties Account as a sanction.

2) Mr. Ross shall serve each party in interest in the Other DC Cases a copy of this Opinion, inform the parties of their right to request funds by filing a request in this Miscellaneous Proceeding, and file a certificate of service of such notice.

3) This Court will not presently reopen any other case or remove Mr. Ross under § 324 of the Bankruptcy Code as trustee, but reserves the right to reopen or reevaluate the cases to avoid unnecessary delay in their closure. On or before March 14, 2024, Mr. Ross shall file a status report in any open asset case pending as of March 1, 2024.

The Defendants argue that Count Two of the Complaint, seeking declaratory judgment against Lynne Florio as general partner of Sage Realty on account of the initial transfers, is barred by res judicata. In Count Two of the Complaint, the Trustee “seeks a declaratory judgment against Lynne Florio finding that she is a general partner of Sage Realty and she therefore is jointly and severally liable for its debts and obligations which it cannot satisfy either in whole or in part, including the money judgment entered in favor of the Trustee in the amount of $3,370,000 against Sage Realty.” Defendant Lynne Florio was not a party to the proceeding that led to the judgment against Malcolm Sage and others.

* * *

The Trustee conceded at oral arguments that for purposes of res judicata, the claims “could have been addressed in the earlier action.” The Trustee’s argument in opposition relies on whether privity exists.

* * *

Lynne Florio was a general partner of Sage Realty. She was the spouse of another of the general partners and one who was the defendant in the prior action. (see also Hr’g Tr. 47:1–6, Sept. 20, 2023, ECF No. 43) (“she was a general partner, she did have a financial interest in this. She was the spouse of one of the general partners. And what the cases teach is that people who are in near privity or privity-like relationships get the benefit of the res judicata and the claim preclusion.”). For purposes of res judicata, Lynne Florio was in privity with the defendants in the prior proceeding.

The Trustee has not shown how Count Two is based on different facts or occurrences from the prior avoidance action. That action involved the same parties here today or those in sufficient privity with them. The Trustee has presented no reason for allowing him to bring this action now, years after the original action was brought.

The Wind Down Trustee seeks summary judgment on whether Fifth Season is entitled to an $18.3 million break fee in a stalking horse bid agreement. Fifth Season Investments (f/k/a Chapford SMA Partnership) claims that the GWG entities’ entry into DIP and exit loan agreements with Obra Capital (f/k/a Vida Capital) constituted a sale or change of ownership of over 20% of the GWG entities’ portfolio of life insurance policies, triggering a break fee under the agreement. The Wind Down Trustee seeks an order declaring that no sale or change of ownership has occurred, alleging that the loan agreements constituted “bona fide financing.” For the reasons set forth below, the Wind Down Trustee’s motion for summary judgment is denied.

The Court notes that the summary judgment motion relies almost entirely on the structure of the loan transaction. It offers no evidentiary support regarding whether the transaction’s economics were structured to create a near certainty of default. If there is a near certainty of default, a fact finder could conclude that the transaction resulted in a de facto change of ownership. Without an examination of the underlying economics (with evidentiary support), the Court cannot grant summary judgment.

Both sides devote a lot of ink and a portion of the oral argument to the December 19, 2015 administrative hearing and its results.

* * *

The legal analysis of that ruling under collateral estoppel principles is for another day. Questions about the reach of collateral estoppel principles applied to non-judicial administrative hearings, and which do not include the very same parties who later invoke them, are complex, sometimes uncertain, and certainly not necessary for speculation and conjecture by this court to resolve this dispute. As described below, the Initial POC and the Amended POC must be disallowed for independent and dispositive reasons.

* * *

At bottom, this dispute turns on whether SPM can recover under non-contract theories based upon events that occurred more than three years prior to Debtors’ Chapter 11 bankruptcy on January 29, 2019. The short answer, again, is that it cannot.

Pending before the Court is a motion (the “Motion”) by the Official Committee of Unsecured Creditors (the “Committee”) for entry of an order granting leave, standing, and authority to prosecute a proceeding on behalf of the estate of The Roman Catholic Diocese of Rockville Centre, New York (the “Debtor”) asserting violations of section 349 of the New York General Business Law (“§ 349”) and section 2601 of the New York Insurance Law (“§ 2601”) against Interstate Fire & Casualty Company, Fireman’s Fund Insurance Company, and National Surety Corporation (collectively, “Allianz”) and Certain Underwriters at Lloyd’s, London and Certain London Market Companies (collectively, “LMI”).

* * *

[T]he Motion is DENIED. The claim the Committee seeks to prosecute fails to meet the legal requirements for derivative standing because the cause of action is not colorable and the benefits to the bankruptcy estate do not outweigh the costs.

By these actions, the Estate seeks to avoid and recover a total of $617,779.84 of recurrent payments (collectively, the “Transfers”) made by the Debtor (“the Company”)1 to the company executives over the four years preceding its bankruptcy.

* * *

The Transfers were treated by the Company and the Defendants as payments for variable compensation, tax distributions and/or consulting fees. Even so, the Estate maintains the Transfers were equity distributions, not compensation, in that they provided no value to the Debtor. But, to the extent the Transfers might be considered executive compensation, the Estate argues that compensation was excessive and, thus, still for less than “reasonably equivalent value.” Finally, the Estate maintains that even if compensation, some of the Transfers were unearned and/or unauthorized by the Company’s Board of Managers (the “Board”).

* * *

The Defendants counter that the Transfers were simply compensation for prepetition services, or in a few instances, reimbursement of tax obligations. They say the compensation was reasonable given their industry experience, customer relationships, their positions and their duties. The compensation was “arm’s-length,” in that it was set by the Company’s Board of managers. And the tax distributions were debts owed by the Company to them under its Operating Agreement.2 Thus, the Company received reasonably equivalent value in exchange for the Transfers, and they are not avoidable. The Defendants pray dismissal of all claims, with prejudice.

* * *

In sum, the evidence suggests an outcome somewhere between both party’s positions. Defendants as employees were entitled to reasonable compensation for their services and reimbursement for the tax liabilities they incurred due to the Company’s pass-through tax status. Millard was entitled to the consulting fees which he received in 2017. Apart from that, between guaranteed compensation and variable payments, each of the Defendants was substantially overpaid for his work. Given that we are looking for reasonable—not exact—equivalence, it can be safely said that Wiesehan received avoidable transfers58 of at least $63,378.85; Millard, the same to the extent of $137,551.85; and Justin Wiesehan, to the extent of $139,585.42. To this extent, Judgments will enter in favor of the Estate. The remainder of the Estate’s claims fail and are dismissed with prejudice.

In the motion, Debtor CGA argues that this appeal is constitutionally or, alternatively, equitably moot because the Bankruptcy Plan has since been confirmed. At face value, Appellants only ask this Court to reverse the bankruptcy court’s decision that Kopczyk had the authority to file the Debtor CGA’s bankruptcy petition. Debtor CGA argues, however, that such a decision would afford Appellants no effective relief because the Bankruptcy Plan would remain undisturbed. According to Debtor CGA, Appellants have waived their right to challenge the Bankruptcy Plan and a confirmed plan can be revoked only under specifically identified circumstances, none of which exist here.

Seeking to avoid the fact that the Bankruptcy Plan has been confirmed, Appellants argue in response that the bankruptcy court lacked the jurisdiction to take such action due to the pendency of this appeal. In other words, Appellants maintain that this appeal divested the bankruptcy court of jurisdiction to confirm the plan.

* * *

[T]he bankruptcy court “did not revisit, comment upon, or supplement” its earlier decision on the motion to dismiss for lack of corporate authority when confirming the Bankruptcy Plan. Id. The bankruptcy court’s holding that Kopczyk had the corporate authority to file the bankruptcy petition on behalf of Debtor CGA undoubtedly “paved the way to” the confirmation order. In re Betteroads Asphalt, 2020 WL 3125274, at *3. Nevertheless, this relationship did not “make[] the ‘contested matters’ so ‘closely related’ to the issues on appeal that they would ‘impermissibly interfere’ with [Appellants’] rights.”

Attorney Micheal S. Geisler, Esq. filed this case ostensibly on behalf of Tiffany Mitchell-Fields to stop an imminent sheriff’s sale.1 He received $500 prepetition for his services. A month later, the Court dismissed the case after the Debtor failed to: pay any portion of the filing fee; obtain prepetition credit counseling or provide proof of exigent circumstances warranting an exemption; timely file complete and accurate schedules and a chapter 13 plan; make any plan payment to the chapter 13 trustee; and attend a show cause hearing as directed. Given her total lack of effort, the Court ordered the Debtor to show cause why dismissal should not be with prejudice to future bankruptcy filings.

When Attorney Geisler appeared in opposition to a filing bar, he revealed a series of facts which call into question whether he should have filed this case at all. Indeed, he has never met the Debtor nor confirmed her identity. She allegedly contacted him by phone a day or so before the sheriff’s sale after receiving a direct mail solicitation. Since then, communication between the two has been infrequent. And while the Debtor’s written response blamed her inaction on disability and chronic illness, Attorney Geisler went further to expressly cast doubt on her mental capacity and lucidity. Dumbfounded, the Court took the matter under advisement.

Ultimately, the Court finds ample cause to impose a filing bar but lacks confidence that Tiffany Mitchell-Fields is, in fact, the Debtor or legally competent. Thus, for the reasons set forth below, a filing bar is inappropriate.

According to the Trustee, the location of the Homestead within the city limits of Springdale is dispositive of whether the property qualifies as rural or urban for exemption purposes. He is correct that Article 9, Section 5 of the Arkansas Constitution describes an urban homestead as property located “in any city, town or village,” while Section 4 defines an rural homestead as property located “outside .

any city, town or village.” But over a century ago, the Arkansas Supreme Court rejected this very argument, finding instead that a homestead’s location “within the limits of a municipal corporation” will not “in all cases prevent [the debtor] from holding as exempt a homestead of more than one acre.”

Before the Court are six appeals stemming from the involuntary bankruptcy of Paniolo Cable Company, LLC (“Paniolo”). Paniolo owned a network of submarine cables used to provide telecommunications services to Hawaiian Home Lands (“HHL”). Despite the complex issues the Bankruptcy Court had to address below, including concerns about the continued provision of those critical services to HHL, the central question in most of these appeals—none of which involve the debtor, Paniolo—is simple: did the Bankruptcy Court correctly determine that a specific asset was part of Paniolo’s estate and then sold “free and clear” to Hawaiian Telcom, Inc. pursuant to 11 U.S.C. § 363? Because the answer is “yes,” the Court affirms.

Specifically, the Court affirms each appeal taken in the main bankruptcy case because the conclusion that Hawaiian Telcom acquired that asset—an interest in a license authorizing it to construct, operate, and maintain telecommunications equipment and facilities on HHL—is dispositive.