Schwartz v. Schwartz

636 F. App'x 673
CourtCourt of Appeals for the Sixth Circuit
DecidedJanuary 26, 2016
DocketNos. 14-1433, 14-1435, 14-1436
StatusPublished
Cited by5 cases

This text of 636 F. App'x 673 (Schwartz v. Schwartz) is published on Counsel Stack Legal Research, covering Court of Appeals for the Sixth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Schwartz v. Schwartz, 636 F. App'x 673 (6th Cir. 2016).

Opinion

OPINION

JULIA SMITH GIBBONS, Circuit Judge.

Our opinion of July 21, 2015 disposed of the substance of Pamela Liggett’s claim for treble damages and attorney’s fees, as well as her appeal of the amount of her claim. In re Schwartz, Nos. 14-1433, 14-1435, 14-1436, 2015 WL 4478033, at *4-6 (6th Cir. July 21, 2015). We directed the parties, however, to file supplemental briefing addressing the impact of a remand on the confirmation issue and whether the confirmation issue appeal should be dismissed as moot in light of our finding that Liggett’s claim was impaired and the fact that Schwartz had already paid her the full face value of her claim as required by the Chapter 11 plan (the “Plan”). Id. at *7. For the reasons stated herein, we find that the confirmation issue is moot, and accordingly, we dismiss the appeal.

I.

We will not repeat the tortured procedural history before the bankruptcy court, the district court, and this court. See id. at *1-4. Of import to the sole remaining issue is our previous finding that because Schwartz’s failure to pay one-half the value of an individual retirement account (“IRA”) to Liggett was mere breach of contract, and not conversion of Liggett’s property, she is not entitled to treble damages or attorney’s fees. Id. at *5. We [675]*675further held that the bankruptcy court did not clearly err in its calculation of the amount of Schwartz’s nondischargeable debt to Liggett. Id. at *6. Lastly, we held that the bankruptcy court erred in finding that Liggett was an “unimpaired” creditor pursuant to the Plan, and therefore she had the right to vote against the plan and thereby preclude confirmation pursuant to 11 U.S.C. § 1129(a)(8). In re Schwartz, 2015 WL 4478033, at *1. The only matter that we did not resolve in our previous opinion is the impact of a remand of the confirmation issue and whether the confirmation issue appeal should be dismissed as moot, as “it appears that a redo of the confirmation process would be pointless.” Id. at *7.1 Both parties submitted supplemental filings on- the confirmation issue.

II.

“The equitable mootness doctrine is applied in appeals from bankruptcy confirmations in order to protect parties relying upon the successful confirmation of a bankruptcy plan from a drastic change after appeal.” In re United Producers, Inc., 526 F.3d 942, 947 (6th Cir.2008). “[A] plan of reorganization, once implemented, should be disturbed only for compelling reasons.” City of Covington v. Covington Landing Ltd. P’ship, 71 F.3d 1221, 1225 (6th Cir.1995) (citation omitted). “In bankruptcy proceedings, a case that is equitably moot is not technically moot, but rather equitable mootness occurs where the plan of reorganization is substantially consummated, and where it is no longer prudent to upset the plan of reorganization.” In re Am. HomePatient, Inc., 420 F.3d 559, 563 (6th Cir.2005) (citations omitted) (internal quotation marks omitted). More specifically, this Circuit adopted the doctrine of equitable mootness in In re American HomePatient, in which we stated a three-part test for determining whether an appeal from the confirmation of a bankruptcy plan should be dismissed as equitably moot. Id. at 563-64. In determining whether to dismiss an appeal as equitably moot, we must weigh the following factors: “(1) whether a stay has been obtained; (2) whether the plan has been ‘substantially consummated’; and (3) whether the relief requested would affect either the rights of parties not before the court or the success of the plan.” Id. at 563 (citations omitted).

Although Liggett correctly states the first factor to consider as whether a stay has been obtained, she does not discuss, let alone mention, whether and why she did not pursue a stay of the confirmation order in this court. Likewise, Schwartz fails to even mention the. first factor and whether Liggett pursued a stay. “The failure to' seek a stay, however, is not necessarily fatal to the appellant’s ability to proceed.” City of Covington, 71 F.3d at 1225-26. As was the case in American HomePatient, “while this first factor weighs somewhat against the lenders, their failure to seek a stay before this court is not fatal.” 420 F.3d at 564.

The next factor is whether the plan has been substantially consummated. Liggett asserts, without support or explanation, that “Schwartz’ [sic] Plan has not been [676]*676substantially consummated.” Appellant Supplemental Br. at 13. She later argues that the Plan is not substantially consummated because Schwartz continues to make payments to other creditors. Schwartz, however, contends that the plan has been substantially consummated, as “[creditor claims have been substantially paid down, or have already been paid in full by the debtor in possession.” Appellee Supplemental Br. at 9. Schwartz further notes that “Liggett and the Internal Revenue Service have received one hundred percent of their claims as allowed by the Bankruptcy Court, in accordance with the claims process.” Id. at 9-10.

The Bankruptcy Code defines “substantial consummation” as follows:

(A) transfer of all or substantially all of the property proposed by the plan to be transferred; (B) assumption by the debtor or by the successor to the debtor under the plan of the business or of the management of all or substantially all of the property dealt with by the plan; and (C) commencement of distribution under the plan.

11 U.S.C. § 1101(2). Schwartz’s plan was confirmed on November 5, 2012, and payments commenced within sixty days of confirmation, meaning claims have been paid for more than three years. Moreover, Liggett has been paid the full face value of her claim. Given that “substantial consummation” in no way requires that all creditors be satisfied, and based on these facts, the second factor weighs against Liggett.

Turning to what has been described as the “most important factor,” we must consider the rights of parties not before the court and the success of the plan. Am. HomePatient, 420 F.3d at 564. Liggett asserts that she “can easily be afforded relief without affecting the rights of third parties under the Plan or jeopardizing the success of the Plan.” Appellant Supplemental Br. at 13. Liggett cites 11 U.S.C. § 1127(b) and (e) for the proposition that “Schwartz is free to modify his Plan at any time before full payment is made to all creditors in order to provide Liggett with interest on her claim at á fair market rate.” Appellant Supplemental Br. at 14. Schwartz argues to the contrary, asserting, “It would be an unduly burdensome process to attempt to re-collect all payments made to all creditors, including those unsecured creditors who voted in favor of accepting Schwartz’s plan.” Ap-pellee Supplemental Br. at 10.2

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Cite This Page — Counsel Stack

Bluebook (online)
636 F. App'x 673, Counsel Stack Legal Research, https://law.counselstack.com/opinion/schwartz-v-schwartz-ca6-2016.