FILED 2/6/2014 1 SUSAN M. SPRAUL, CLERK 2 U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT 3 UNITED STATES BANKRUPTCY APPELLATE PANEL 4 OF THE NINTH CIRCUIT 5 In re: ) BAP Nos. AZ-13-1024-PaKuD ) AZ-13-1043-PaKuD 6 IRISH PUB—ARROWHEAD, LLC; ) (Consolidated) IRISH PUB—ARROWHEAD LAND, LLC,) 7 ) Bk. Nos. 09-11124-EPB Debtors. ) 09-11137-EPB 8 ______________________________) (Jointly Administered) ) 9 JEANEEN BONNETT; 100% NATURAL ) GOURMET, ) 10 ) Appellants, ) 11 ) v. ) M E M O R A N D U M1 12 ) MARGARET GILLESPIE, Chapter 7 ) 13 7 Trustee; CONCAST, INC.; ) DOMINIC JONES; ROBERT FOX; ) 14 MOIRBIA PEORIARE, LLC; ) MOIRBIA PEORIA, LLC; MOIRBIA, ) 15 LLC; MOIRBIA SCOTTSDALE LLC; ) STEVE GOUMAS; MY GOODNESS ) 16 INC., ) ) 17 Appellees. ) ______________________________) 18 Argued and Submitted on January 23, 2014 19 at Tempe, Arizona 20 Filed - February 6, 2014 21 Appeal from the United States Bankruptcy Court for the District of Arizona 22 Honorable Redfield T. Baum, Sr., Bankruptcy Judge, Presiding2 23 24 1 25 This disposition is not appropriate for publication. Although it may be cited for whatever persuasive value it may 26 have (see Fed. R. App. P. 32.1), it has no precedential value. 27 See 9th Cir. BAP Rule 8013-1. 2 28 Judge Redfield T. Baum, Sr. entered the order we review on appeal. Due to his retirement from full-time service, the Honorable Eddward Ballinger Jr. is now the presiding judge in the bankruptcy case. 1 Appearances: John E. Karow, Esq. argued for appellants Jeaneen Bonnett and 100% Natural Gourmet; Oliver J. Davis, 2 Esq. of May Potenza Baran & Gillespie PC argued for Appellee Margaret Gillespie; Brenda K. Martin, 3 Esq. of Osborn Maledon, PA argued for appellees Concast, Inc., Dominic Jones, Robert Fox, Moirbia 4 Peoriare, LLC, Moirbia Peoria, LLC, Moirbia, LLC and Moirbia Scottsdale, LLC. 5 6 Before: PAPPAS, KURTZ and DUNN, Bankruptcy Judges. 7 In this chapter 73 case, creditors Jeaneen Bonnett and 8 100% Natural Gourmet appeal the decision of the bankruptcy court 9 denying their motion to set aside a sale of bankruptcy estate 10 assets. We AFFIRM the decision of the bankruptcy court. 11 FACTS 12 Debtor Irish Pub Arrowhead Land, LLC (“Pub Land”) owned a 13 parcel of land in Peoria, Arizona. Debtor Irish Pub Arrowhead, 14 LLC (“Pub”), owned and operated the Irish-themed restaurant, “Lis 15 Doon Varma,” built on Pub Land’s property (together, “the 16 Property”). Steve Goumas is the managing member of Irish 17 Restaurant and Pub Company, LLC (“Irish Restaurant & Pub”), which 18 was the managing member of both Debtors. 19 At some point not clear in the record, Jeaneen Bonnett 20 (“Bonnett”) was the manager of marketing, administration and 21 financial bookkeeping for both Debtors. Bonnett also allegedly 22 owns, in her own right, or indirectly through her wholly owned 23 company 100% Natural Gourmet (together with Bonnett, 24 25 3 Unless otherwise indicated, all chapter and section 26 references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and 27 "Rule" references are to the Federal Rules of Bankruptcy Procedure. All “Civil Rule” references are to the Federal Rules 28 of Civil Procedure.
-2- 1 “Appellants”), certain intellectual property rights licensed to 2 and used by Debtors. 3 During construction of Pub, a dispute arose between Pub Land 4 and one of the contractors, Concast, Inc. (“ConcastCorp”) when 5 ConcastCorp filed a workman’s lien against the Property. To 6 resolve the dispute, Pub Land filed suit against ConcastCorp and 7 others in Maricopa County Superior Court on July 29, 2008. Irish 8 Pub - Arrowhead Land LLC v. Concast, Inc. (the “State Court 9 Litigation”). CV2008-10862. Partly as a result of this on-going 10 contest, on May 21, 2009, Pub and Pub Land each filed petitions 11 for relief under chapter 11. On June 2, 2009, the bankruptcy 12 court ordered joint administration of the two bankruptcy cases. 13 A creditor filed a motion for appointment of a chapter 11 14 trustee in the bankruptcy cases on September 11, 2009. 15 ConcastCorp, the second largest creditor, and the United States 16 Trustee subsequently joined in that motion. After a hearing on 17 July 6, 2010, the bankruptcy court ordered the appointment of a 18 trustee; Daniel P. Collins was appointed chapter 11 trustee on 19 July 13, 2010. The court ordered the bankruptcy cases converted 20 to chapter 7 cases on February 17, 2011, and Collins continued as 21 chapter 7 trustee.4 22 The Wells Fargo Loans 23 In December, 2006, Wells Fargo Bank, N.A. (“Wells Fargo”) 24 25 4 Mr. Collins was later appointed to the bankruptcy bench, 26 and at some time before January 3, 2013, Margaret A. Gillespie 27 was appointed successor chapter 7 trustee. Unless there is a need to distinguish between them, we refer to Collins or 28 Gillespie collectively as “Trustee.”
-3- 1 made a $2,646,000 loan and a $1,402,000 loan to finance 2 construction of the pub improvements. Debtors jointly executed 3 two promissory notes in favor of Wells Fargo, and secured the 4 notes with deeds of trust on the Property. While not clear in 5 the record, at some time the Wells Fargo loans went into default 6 and, on February 5, 2009, Wells Fargo recorded a Notice of 7 Trustee’s Sale of the Property. Pub and Pub Land filed their 8 bankruptcy petitions a short time later. 9 Wells Fargo commenced a civil suit in Maricopa County 10 Superior Court on September 4, 2009, against Irish Restaurant & 11 Pub, Goumas, Natural Gourmet Enters., Inc., and My Goodness, Inc. 12 to recover from them as guarantors of the Wells Fargo Loans. 13 Wells Fargo Bank, N.A. v. Irish Restaurant & Pub, LLC, et al. 14 CV2009-028358. A stipulated judgment was entered against the 15 guarantors on July 19, 2010 for $2,042,878 (the “Judgment”). 16 Wells Fargo filed a motion for relief from the automatic 17 stay in Debtors’ bankruptcy cases on September 3, 2009, seeking 18 authority to complete the foreclosure on the Property. After 19 numerous continued hearings, the bankruptcy court entered a 20 stipulated order granting stay relief on November 3, 2010. As 21 part of an agreement for entry of this order, Wells Fargo 22 assigned the Judgment to Trustee. 23 Trustee then commenced an adversary proceeding against 24 Appellants, Goumas and certain related parties (the “Adversary 25 Proceeding”). The first four counts in the complaint sought: 26 (1) to pierce the corporate veil of My Goodness and determine 27 that it is an alter ego of Debtors Pub and Pub Land; (2) a 28 declaratory judgment that the intellectual property asserted by
-4- 1 Appellants as their property was in fact property of the estate; 2 (3) avoiding transfer of the intellectual property to a third 3 party; and (4) denying claims of Irish Restaurant & Pub. 4 The Sale Motion 5 On May 18, 2012, Trustee filed a motion seeking authority to 6 sell property free and clear of liens, claims and interests 7 pursuant to § 363. Trustee informed the bankruptcy court that he 8 had received an offer of $75,000 for certain assets of the 9 bankruptcy estate from a group he identified as the “Concast 10 Parties,” consisting of ConcastCorp, Dominic Jones, Robert Fox, 11 Moirbia Peoriare, LLC, Moirbia, LLC, and Moirbia Scottsdale, LLC. 12 Trustee proposed to sell the following estate assets: 13 a. All of Trustee’s rights and interests as plaintiff in the Adversary Proceeding [except for counts 14 five through seven that deal with loans made to Debtors]. 15 b. The Judgment and associated rights; and 16 c. The Debtors’ right, title, and interest in and to 17 the intellectual property, including common law rights, together with the good will of the 18 business symbolized by said intellectual property, to the extent such intellectual property exists, 19 including but not limited to, the intellectual property described in the Adversary Proceeding. 20 21 Tr. Sale Motion at 3. Trustee’s sale motion also proposed a 22 release of claims by the Concast Parties against the estate, and 23 a release of Trustee’s claims against the Concast Parties. 24 Appellants objected to the sale motion on July 3, 2012. 25 Appellants’ principal arguments in its objection were: (1) the 26 intellectual property Trustee was attempting to sell was property 27 of the Appellants; (2) the Concast Parties were not good faith 28 purchasers because they had filed a false claim in the bankruptcy
-5- 1 case; (3) ConcastCorp was in litigation with Debtor Pub Land, and 2 Trustee had not considered the value of that claim, which he 3 would release. Trustee responded to Appellants’ objection on 4 July 9, 2012, noting that the he was not attempting to sell any 5 disputed intellectual property assets, only the estates’ rights 6 to the extent they actually existed. As to the estates’ interest 7 in any litigation with ConcastCorp, Trustee asserted that the 8 estates’ claims in that litigation were likely not sufficient to 9 warrant pursuit, and releasing the claims would benefit the 10 creditors. 11 The bankruptcy court conducted a hearing on Trustee’s sale 12 motion on July 31, 2012 at which Trustee, Bonnett, Debtors, and 13 the Concast Parties were represented. A hearing transcript is 14 not in the record, but the bankruptcy court’s minute entry 15 entered after the hearing recites: 16 Bidding commences between Co[n]cast and Bonnett. 17 The final bid is accepted from Co[n]cast for $115,000.00 and Bonnett is accepted as the backup 18 bidder. An order will not be signed until counsel have had an opportunity to brief whether Co[n]cast is a good 19 faith purchaser by August 3, 2012, with responses due by August 7, 2012. 20 21 Appellants filed a “motion” to demonstrate that ConcastCorp 22 was not a good faith purchaser on August 3, 2012. In it, they 23 essentially continued their argument that ConcastCorp had filed a 24 false lien against Pub which had triggered Pub’s bankruptcy, and 25 the value of the litigation against ConcastCorp was greater than 26 the value of ConcastCorp’s claim against the estates. 27 ConcastCorp responded on August 7, 2012, generally denying the 28 allegations of Appellants.
-6- 1 The bankruptcy court addressed the objection in a minute 2 entry/order on August 10, 2012: 3 The essence of the objection [by Appellants] is that prepetition Concast engaged in wrongful conduct which 4 damaged the debtor and its principals and, therefore, according to the objectors Concast cannot be a good 5 faith purchaser. The court concludes that the law is that lack of good faith is shown by fraud, collusion 6 between the purchaser and other bidders or the trustee, or an attempt to take grossly unfair advantage of other 7 bidders. See In re M Capital Corp., 290 B.R. 743 (9th Cir. BAP 2003) and cases cited therein. It appears 8 clear to the court that there are many disputed issues between Concast and the Bonnett Group/and others. 9 However, the test is has Concast wrongfully conducted itself in connection with the auction sale. There is 10 nothing before the court to even hint that Concast acted wrongfully regarding the sale. Rather, the 11 auction sale was fairly conducted and anyone, including the Bonnett Group, was given ample opportunity to 12 overbid Concast. 13 Based on this record, the court concludes that Concast qualifies as a good faith purchaser under 14 Section 363(m). 15 On August 21, 2012, the bankruptcy court entered an Order 16 granting the sale motion (the “Sale Order”). Among other things, 17 the Sale Order specifically identified the purchasing party, and 18 stated: 19 Concast Corporation, Dominic Jones, Robert Fox, Moirbia Peoriare, LLC, Moirbia, LLC, and Moirbia Scottsdale, 20 LLC (the “Concast Parties”) made an original offer to purchase the Assets for the amount of $75,000, together 21 with a mutual release of the Concast Parties’ claims against the estate and the Trustee’s claims against the 22 Concast Parties. The Sale Motion provided for higher and better offers to be entertained at the Sale 23 Hearing. The highest and best offer for the Assets received by the Court and the Trustee at the Sale 24 Hearing was an offer of $115,000, together with the aforementioned additional conditions, from the Concast 25 Parties. . . . 26 The Court approves the sale of the Assets to the Concast Parties and hereby orders that the sale price 27 for the assets is $115,000 in United States Dollars (“Purchase Price”), together with a mutual release of 28 all claims as specifically set forth in the Sale
-7- 1 Motion. 2 Sale Order at 2-3. Appellants did not appeal the Sale Order. 3 On November 28, 2012, Goumas and Appellants filed a motion 4 asking the bankruptcy court to set aside the Sale Order. 5 Appellants argued that case law regarding § 363 sales required 6 that the purchaser be properly identified and give value for the 7 purchase. Appellants suggested that, in the Sale Order, the real 8 purchaser could not be identified with accuracy; that a third 9 party, Martin Boyle, had actually provided $105,000 of the 10 $115,000 purchase price; and that the Concast Parties had 11 prevented Goumas and Appellants from discovering the nature of 12 payments until October 31, 2012. 13 Trustee responded to this motion on December 11, 2012. 14 According to Trustee, there was no ambiguity in the Sale Order as 15 to the purchaser, the Concast Parties, and that their attorney 16 had given Trustee two checks, one for $105,000 and one for 17 $10,000, to fulfill the terms of the sale. The Concast Parties 18 joined in Trustee’s response on December 12, 2012. 19 The bankruptcy court held a hearing on the motion to set 20 aside the Sale Order on December 19, 2012. A transcript is 21 included in the record. Appellants, Concast Parties, Trustee and 22 Goumas were represented. After hearing arguments of counsel, the 23 bankruptcy court took the matter under advisement. 24 On January 11, 2013, the court entered a Minute Entry/Order 25 in which it addressed Appellants’ and Goumas’ arguments: 26 The court concludes that both the record here and the sale order are clear and not ambiguous as to the 27 successful bidder. . . . The Sale Order clearly identifies the high bidders; and the court approved 28 backup bidders.
-8- 1 The undisputed facts are that the purchase price required by the order was timely paid. . . . It is 2 beyond dispute that value was given by the payment of the highest bid amount at the auction. Unlike the case 3 history relied upon by movants, this is not a situation where the future financial ability of the buyer is of 4 concern for any reason. Rather, this is a classic auction where the high bidder gets to buy the auctioned 5 assets. The court can see no reason to set aside the sale because Boyle paid most of the auction/purchase 6 price. 7 Lastly, movants assert that the successful bidder did not comply with the terms of the sale order. To the 8 contrary the court concludes that the bidder group either complied with or substantially complied with the 9 sale order. 10 Minute Entry/Order at 2-2. 11 On January 23, 2013, the bankruptcy court entered an order 12 denying the motion to set aside the Sale Order for the reasons 13 stated in the Minute Entry/Order. Appellants filed a timely 14 appeal.5 15 JURISDICTION 16 The bankruptcy court had jurisdiction under 28 U.S.C. 17 §§ 1334 and 157(b)(2)(A), (N) and (O). The Panel’s jurisdiction 18 is based upon 28 U.S.C. § 158. Trustee suggests that this appeal 19 is moot; we discuss that argument below. 20 ISSUES 21 Whether this appeal is moot. 22 Whether the bankruptcy court abused its discretion in 23 denying appellants’ motion to set aside the sale. 24 5 25 Appellants had filed an appeal of a Minute Entry/Order entered by the bankruptcy court on January 18, 2013; they then 26 filed an appeal of the court’s order denying the motion to set 27 aside the Sale Order on February 1, 2013. Both appeals were timely. The Panel consolidated the two appeals on April 17, 28 2013.
-9- 1 STANDARDS OF REVIEW 2 We determine our jurisdiction, including mootness issues, de 3 novo. Professional Programs Grp. v. Dep’t of Commerce, 29 F.3d 4 1349, 1352 (9th Cir. 1994). 5 The bankruptcy court order denying the motion to set aside 6 the Sale Order is reviewed for abuse of discretion. Hasso v. 7 Mozsgai (In re Sierra Fin. Servs.), 290 B.R. 718, 726 (9th Cir. 8 BAP 2002). A bankruptcy court abuses its discretion if it 9 applies an incorrect legal standard, or misapplies the correct 10 legal standard, or if its factual findings are illogical, 11 implausible or without support from evidence in the record. 12 United States v. Hinkson, 585 F.3d 1247, 1262 (9th Cir. 2009)(en 13 banc). 14 DISCUSSION 15 I. 16 This appeal is not moot.6 17 We first address Trustee’s argument that this appeal is 18 equitably moot. It is not. 19 Equitable mootness applies when “a comprehensive change of 20 circumstances has occurred so as to render it inequitable for a 21 court to consider the merits of the appeal.” Motor Vehicle Cas. 22 Co. v. Thorpe Insulation Co. (In re Thorpe Insulation Co.), 23 24 6 The equitable mootness argument is raised in Trustee’s 25 opening brief. Trustee’s Op. Br. at 10. In a Clerk’s Order entered on July 18, 2013, Appellants were directed to respond to 26 the mootness question, which they did on July 22, 2013. Our 27 motions panel issued an order determining that the appeal was not moot, subject to further review of the issue by this merits 28 Panel. We agree that this appeal is not moot.
-10- 1 627 F.3d 869, 880-81 (9th Cir. 2012). Equitable mootness is 2 particularly influential in bankruptcy proceedings “where public 3 policy values the finality of bankruptcy judgments because 4 debtors, creditors, and third parties are entitled to rely on a 5 final bankruptcy court order.” Id. (citing In re Onouli-Kona 6 Land Co., 846 F.2d 1170, 1172 (9th Cir. 1988)). In cases such as 7 this one, the principal question we face is whether the appeal 8 "present[s] transactions that are so complex or difficult to 9 unwind that the doctrine of equitable mootness would apply." 10 Lowenschuss v. Selnick (In re Lowenschuss), 170 F.3d 923, 933 11 (9th Cir. 1999). The party arguing for dismissal based on 12 mootness, "bears the heavy burden of establishing that we cannot 13 provide any effective relief." United States v. Gould 14 (In re Gould), 401 B.R. 415, 421 (9th Cir. BAP 2009). 15 Trustee has not met its burden. The subject sale 16 transaction was not so complex that it would be difficult to 17 unwind. To be sure, equitable mootness applies to appeals of 18 orders concerning sales under § 363.7 Clear Channel Outdoor, 19 Inc. v. Knupfer (In re PW, LLC), 391 B.R. 25, 33 (9th Cir. BAP 20 2008). As the Panel explained: 21 Equitable mootness requires the court to look beyond impossibility of a remedy to "the consequences of the 22 remedy and the number of third parties who have changed 23 7 Appellants are incorrect in asserting that equitable 24 mootness only applies to appeals of confirmation of 25 reorganization plans. Although that was the focus of the Thorpe Insulation case, the Ninth Circuit has applied equitable mootness 26 in other contexts. See, e.g., Focus Media, Inc. v. NBC 27 (In re Focus Media, Inc.), 378 F.3d 916, 923 (9th Cir. 2008) (involuntary petitions); Semel v. Dill (In re Dill), 992 F.2d 28 1004, 1007 (9th Cir. 1984) (attorney’s fees).
-11- 1 their position in reliance on the order that is being appealed." [Darby v. Zimmerman (In re Popp), 323 B.R. 2 260, 271 (9th Cir. BAP. 2005)]. As we further stated in Popp, "[c]ourts have applied the doctrine of 3 equitable mootness when the appellant has failed to obtain a stay and [although relief is possible] the 4 ensuing transactions are too 'complex and difficult to unwind.'" Id. at 271 (citations omitted). 5 "Ultimately, the decision whether to unscramble the eggs turns on what is practical and equitable." Baker 6 & Drake, Inc. v. Pub. Serv. Comm'n (In re Baker & Drake, Inc.), 35 F.3d 1348, 1352 (9th Cir. 1994). 7 8 In re PW, LLC, 391 B.R. at 33. And in Thorpe Insulation, the 9 Ninth Circuit provided guidelines for determining equitable 10 mootness on appeal: 11 We have not yet expressly articulated a comprehensive test [for equitable mootness], but our precedents have 12 looked at whether a stay was sought, whether the [transaction] has been substantially consummated, 13 whether third party rights have intervened, and, if so, whether any relief can be provided practically and 14 equitably. 15 In re Thorpe Insulation, 677 F.3d at 880. 16 Appellants concede that they did not seek a stay pending 17 appeal of either the Sale Order or of the order denying their 18 motion to set aside the Sale Order. The first criterion for 19 equitable mootness has been met. 20 The term “substantially consummated” in the Thorpe 21 Insulation decision refers to a term of art in plan confirmation 22 law. A chapter 11 reorganization plan has been substantially 23 consummated if substantially all of the property has been 24 transferred, the debtor or its successor has taken control of 25 substantially all of the property, and distribution under the 26 plan has commenced. See § 1101(2). Analogizing to a sale of 27 property, the Ninth Circuit would likely be concerned in a case 28 like this one if the proceeds of sale had been received by the
-12- 1 seller/trustee and then distributed to the creditors. However, 2 Trustee acknowledges that the funds received for the subject sale 3 remain in his possession and will not be distributed pending the 4 outcome of this appeal. Consequently, the second criterion 5 indicating equitable mootness is not present. 6 In addition, there are no other “third-party rights” 7 involved in this appeal. All of the parties that could 8 conceivably be affected by any modification to the Sale Order are 9 before the Panel and have actively participated in both the 10 bankruptcy case and this appeal.8 The third criterion for 11 mootness is not met. 12 In sum, were the Panel to so decide, it would not be 13 impractical or inequitable to grant the relief Appellants seek. 14 Trustee retains the sale proceeds and could be directed to return 15 them to the Concast Parties. Trustee could also be directed by 16 the bankruptcy court to accept Appellants’ backup bid. This 17 appeal is not equitably moot. 18 II. 19 The bankruptcy court did not abuse its discretion in denying the motion to set aside the Sale Order. 20 A. 21 Reconsideration under Civil Rule 60(b)(2) 22 The motion to set aside a Sale Order is treated as a motion 23 for reconsideration either under Rule 9023, which incorporates 24 25 8 The only third party of which we are aware in this 26 dispute may be Martin Boyle. If this sale were unwound, he would 27 presumably have his $105,000 refunded. Boyle has not asserted any rights in the bankruptcy court or in this appeal, so we 28 cannot say that his rights would be affected.
-13- 1 Civil Rule 59, or under Rule 9024, which incorporates Civil 2 Rule 60. In re Sierra Fin. Servs., 290 B.R. at 726. Since Civil 3 Rule 59 only applies when the motion to alter an order is filed 4 within fourteen days of entry of that order, and the motion to 5 set aside the Sale Order in this case was filed over three months 6 after entry of the Sale Order, Appellants’ entitlement to relief 7 is measured under Civil Rule 60. Harvest v. Castro, 531 F.3d 8 737, 746-47 (9th Cir. 2008)(reconsideration motions filed more 9 than fourteen days after entry of an order are treated under 10 Civil Rule 60(b)). 11 Appellants’ various arguments can be reduced to their 12 essence. They contend that they could not challenge the sale and 13 Sale Order before they discovered the true identity of the source 14 of sale funds. Appellants allege that the Concast Parties 15 withheld the fact from the bankruptcy court and them that Martin 16 Boyle would provide $105,000 of the $115,000 to acquire the 17 assets. Appellants represent that they only discovered this fact 18 on October 31, 2012, after numerous requests to Trustee to 19 provide unredacted copies of the payments checks. Therefore, 20 they insist, this fact constitutes “new evidence” that would 21 justify reconsideration of the Sale Order by the bankruptcy 22 court. Appellants’ argument invokes Civil Rule 60(b)(2), which 23 provides: 24 Rule 60. Relief from a Judgment or Order . . . (b) Grounds for Relief from a Final Judgment, Order, or 25 Proceeding. On motion and just terms, the court may relieve a party or its legal representative from a 26 final judgment, order, or proceeding for the following reasons: . . . (2) newly discovered evidence that, 27 with reasonable diligence, could not have been discovered in time to move for a new trial under 28 Rule 59(b)[.]
-14- 1 Relief from an order or judgment to offer newly discovered 2 evidence under Civil Rule 60(b)(2) is warranted if: (1) the 3 moving party can show the evidence relied on must have existed at 4 the time of the hearing; (2) the moving party exercised due 5 diligence to discover this evidence; and (3) the newly discovered 6 evidence must be of "such magnitude that production of it earlier 7 would have been likely to change the disposition of the case." 8 Feature Realty, Inc. v. City of Spokane, 331 F.3d 1082, 1093 (9th 9 Cir. 2003) (citing Coastal Transfer Co. v. Toyota Motor Sales, 10 U.S.A., Inc., 833 F.2d 208, 211 (9th Cir. 1987)). 11 In Trustee’s response to the motion to set aside the sale 12 motion, he stated that he had received two cashier’s checks from 13 the attorney for the Concast Parties within three days of the 14 Sale Order. Consequently, we can conclude that the checks did 15 exist within the time for Appellants to seek a new trial under 16 Civil Rule 59(b). Appellants argue that they attempted on 17 several occasions to obtain copies of the unredacted checks. 18 Trustee does not contest this, and acknowledges that it was not 19 until October 31, 2012 that he complied. In other words, 20 Appellants were seemingly diligent in seeking to discover the 21 evidence. 22 However, as the detailed Minute Entry/Order of the 23 bankruptcy court shows, the information about the source of the 24 purchase funds targeted by Appellants was not of “such magnitude 25 that production of it earlier would have been likely to change 26 the disposition of the case." Feature Realty, Inc., 331 F.3d at 27 1093. Indeed, the bankruptcy court considered the evidence 28 concerning the source of the sale proceeds, but found it need not
-15- 1 disturb its order: “The court can see no reason to set aside the 2 sale because Boyle paid most of the auction/purchase price.” 3 Minute Entry/Order at 2. 4 Most of Appellants’ arguments seeking to set aside the Sale 5 Order focus on their allegation that the identity of the 6 purchaser was ambiguous. This discussion in both the bankruptcy 7 court and this appeal relates to the Ninth Circuit’s decision in 8 Ferrari N. Am., Inc. v. Sims (In re R.B.B., Inc.), 211 F.3d 475 9 (9th Cir. 2000). There, the debtor R.B.B. was an auto 10 dealership under a franchise with Ferrari North America. Ferrari 11 notified R.B.B. that it would not renew the franchise; R.B.B. 12 reacted by filing for chapter 11 relief. In the bankruptcy case, 13 the trustee received an offer to purchase the franchise from an 14 entity called “Symbolic.” The bankruptcy court approved the 15 sale, noting that Symbolic was a combination of two automobile 16 dealerships, North Beach and West Coast. In its order approving 17 the sale, the bankruptcy court was ambiguous in describing the 18 assets sold and Symbolic, at times assigning assets to one of the 19 buyer dealerships, then to another, and at other times an amalgam 20 of both. Id. at 477-78. When asked to review the bankruptcy 21 court’s sale order, the Ninth Circuit ruled that: 22 [A]s two companies were ambiguously the purchaser, it cannot be concluded that an identified purchaser 23 existed. . . . The assets and lines of credit of North Beach and West Coast could not be mushed together. 24 Ambiguity as to the purchaser was as fatal to the sale as the two ships named Peerless were fatal to the 25 formation of a contract. 26 Id. at 480. 27 Citing R.B.B., Appellants argue that any ambiguity in the 28 Sale Order as to the purchaser is fatal to the sale. But as the
-16- 1 bankruptcy court correctly point out, “unlike [in R.B.B.], this 2 is not a situation where the future financial ability of the 3 buyer is of concern for any reason.” A review of the R.B.B. case 4 supports the bankruptcy court’s interpretation. 5 In In re R.B.B., the Ninth Circuit cited with approval to a 6 decision of the bankruptcy court in In re Van Ness Auto Plaza, 7 120 B.R. 545, 547 (Bankr. N.D. Cal. 1990), which provided a list 8 of factors that a bankruptcy court should consider in determining 9 whether an automobile manufacturer acted reasonably in 10 withholding consent to transfer an automobile franchise under 11 California law. Those factors included data on capitalization of 12 assignees of a franchise, their credit worthiness and prior 13 profitability. Thus, under the facts of that case, an assignment 14 or sale of an automobile franchise required the identification of 15 a purchaser/assignee and specific evaluations concerning that 16 party. Because a franchisor must depend upon the 17 creditworthiness of a proposed franchisee, it is understandable 18 how the identity of the true assignee is critical to the 19 bankruptcy court’s and parties’ evaluation of the merits of a 20 proposal. 21 In this case, the bankruptcy court determined that the 22 Trustee’s proposed cash sale implicated no special requirements 23 from the purchaser. This was instead a “classic auction sale 24 where the high bidder gets to buy the auctioned assets.” Case 25 law sets forth only two requirements for a sale under § 363: that 26 there must be an “identifiable” purchaser; and that purchaser 27 must give value. Ewell v. Diebert (In re Ewell), 958 F.2d 276, 28 281 (9th Cir. 1992); Fitzgerald v. Namba (In re Fitzgerald),
-17- 1 428 B.R. 872, 882 (9th Cir. BAP 2010). Trustee identified the 2 Concast Parties, each by name, as the purchasers in his sale 3 motion, and the bankruptcy court identified the Concast Parties, 4 each by name, as the winning bidders in the Sale Order. Trustee 5 stated that he had received two checks in full payment of the 6 purchase price from the attorney for the Concast Parties. On 7 this record, we conclude that the Concast Parties were adequately 8 identified as the purchaser of the assets, and that they provided 9 value.9 10 The bankruptcy court did not abuse its discretion in denying 11 Appellants’ motion to set aside the Sale Order. 12 B. Questions concerning the fairness of the 13 Sale Order are not before the Panel. 14 At oral argument before the Panel, counsel for Appellants 15 suggested that the auction procedures set forth in the Sale 16 Motion were unfair in that they unduly favored Concast Parties 17 and disfavored Appellants. To place Appellants’ argument in 18 context, we quote several paragraphs of the Sale Motion: 19 14. Pursuant to 11 U.S.C. § 363, the Trustee proposes to sell the Assets to the Concast Parties, for the 20 offered price of $75,000, together with a mutual release of the Concast Parties' claims against the 21 estate and the Trustee's claims against the Concast Parties, which offer shall be subject to any higher or 22 better offers at a hearing on the motion before the Bankruptcy Court. 23 24 9 25 Appellants also suggest that the fact that Trustee substituted Moirbia Scottsdale, LLC for Trustee in the first four 26 counts of the Adversary Proceeding was evidence of the ambiguity 27 of the purchaser. This argument lacks merit. Interest in those four counts was purchased by the Concast Parties in the Sale 28 Order, and they were free to manage those assets as they chose.
-18- 1 15. The Assets are to be sold collectively for one price, which is the highest and best offer. 2 16. Any competing bidder must provide Trustee's 3 counsel, Justin Niedzialek, proof of their financial ability to purchase the Assets and an earnest money 4 deposit in the amount of $10,000 in certified funds made payable to "Daniel P. Collins, Trustee" three 5 (3) business days prior to the Sale Hearing. 6 17. The Earnest Money Deposit shall be refundable only if the bidder is not the successful bidder at the Sale 7 Hearing. 8 Appellants argue that the sale process was unfair because 9 the Concast Parties were not required by Trustee to “pre-qualify” 10 to bid by posting the Earnest Money Deposit, while they had to do 11 so. Trustee’s counsel reminded the Panel that the Sale Motion, 12 granted by the bankruptcy court, required only that "competing 13 bidders" make a pre-sale deposit. Appellants argue that this 14 term as used in paragraph 16 is ambiguous because the common 15 meaning of competing bidder would include all parties that 16 compete at the auction and, thus, the bidding procedures unfairly 17 discriminated against Appellants and in favor of Concast Parties. 18 We reject Appellants’ fairness argument for several reasons. 19 First, this argument was not raised in the bankruptcy court 20 and, therefore, it may not be raised for the first time on 21 appeal. Vegas Townhomes Partners, LP v. Graham (In re Flamingo 22 55 Inc.), 646 F.3d 1253, 1255 (9th Cir. 2011) (“An issue not 23 raised in the bankruptcy court is waived on appeal.”).10 24 10 25 At oral argument, counsel for Appellants represented that he believed this issue had been raised by Appellants in the 26 bankruptcy court. After reviewing the record and pleadings 27 related to the Sale Motion, and the bankruptcy court’s Minute Entry/Order denying the motion to set aside the sale, we have 28 (continued...)
-19- 1 Second, even if they timely raised them in the bankruptcy 2 court, Appellants’ complaints about the sale procedures should 3 have been addressed in an appeal of the bankruptcy court’s Sale 4 Order. In other words, Appellants’ argument is far too late to 5 warrant consideration in this appeal from the bankruptcy court’s 6 order denying Appellants’ request to set aside the sale. United 7 Student Funds, Inc. v. Wylie (In re Wylie), 249 B.R. 204, 215 8 (9th Cir. BAP 2006)(issues not presented to the bankruptcy court 9 in a reconsideration motion will not be reviewed on appeal). 10 10 11 (...continued) been unable to confirm this claim. However, the docket does 12 include Appellants’ objection to the Sale Motion. We may take judicial notice of the underlying bankruptcy court records 13 relating to an appeal. O’Rourke v. Seaboard Sur. Co. (In re E.R. 14 Fegert, Inc.), 887 F.2d 955, 957-58 (9th Cir. 1988). In that objection, Appellants apparently accepted the terms of the Sale 15 Motion, including the payment of $10,000 deposit, but objected to only two of the procedures: 16 17 50. Jeaneen Bonnett agrees with a down payment of $10,000 and with the $5,000 increments thereon as 18 described in the Motion to Sell. 19 51. However, Ms. Bonnett objects to the time period of 20 three (3) days for the successful bidder to provide funds; rather, the successful bidder should provide the 21 funds within 24 hours. 22 52. Bonnett also believes that more time is needed to 23 solicit bids, particularly because certain equity holders/creditors [residing] outside the United States 24 were not notified of the Motion to Sell and other 25 bankruptcy procedures. 26 Jeaneen Bonnett and 100% Natural Gourmet, Inc.'s Response to 27 Trustee's Motion to Sell Personal Property Free and Clear of Liens, Claims and Interests Pursuant to 11 U.S.C. § 363 at 9, 28 July 3, 2012. Dkt. no. 388.
-20- 1 Third, Appellants’ argument is not to be found in their 2 opening brief in this appeal, nor even in their reply brief. An 3 issue not timely raised in a party’s opening brief is deemed 4 waived. Friends of Yosemite Valley v. Kempthorne, 520 F.3d 1024, 5 1033 (9th Cir. 2008). 6 Finally, even were we to consider Appellants’ complaints 7 about the sale process, their argument lacks merit. A trustee’s 8 selection of bidding and sale procedures is a matter committed to 9 the trustee’s business judgment, to which the bankruptcy court 10 and this Panel give deference. Simantob v. Claims Prosecutor, 11 LLC (In re Lahijani), 325 B.R. 282, 288-89 (9th Cir. BAP 2005). 12 Here, Trustee had engaged in negotiations with Concast Parties 13 which led to their $75,000 opening bid. Trustee was aware that, 14 in addition to the $75,000 bid, Concast Parties agreed to a 15 mutual release of claims with the bankruptcy estate. Trustee 16 indicates in the record that he believed the estate’s claims 17 against Concast Parties were not worth pursuing, so he could 18 reasonably conclude that it would be in the best interests of the 19 creditors to secure a release of Concast Parties’ claims. All 20 things considered, we cannot conclude that Trustee abused his 21 business judgment by not requiring an Earnest Money Deposit from 22 Concast Parties in advance of the sale. In retrospect, 23 Appellants made the deposit and were allowed to participate in 24 the auction. Moreover, the Concast Parties closed the sale, such 25 that the lack of a deposit from them worked no prejudice on the 26 bankruptcy estate. 27 CONCLUSION 28 For these reasons, the bankruptcy court’s order denying the
-21- 1 motion to set aside the Sale Order is AFFIRMED. 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
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