Filed: Apr. 15, 2019
Latest Update: Mar. 11, 2020
Summary: FILED APR 15 2019 NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT In re: BAP No. AZ-18-1223-TaLB JOAN KATHRYN LIVDAHL, Bk. No. 2:16-bk-12768-MCW Debtor. LEONARD NOEL ROBERTS, Appellant, v. CORRECTED MEMORANDUM* JOAN KATHRYN LIVDAHL, Appellee. Argued and Submitted on March 22, 2019 at Phoenix, Arizona Filed – April 15, 2019 Appeal from the United States Bankruptcy Court for the District of Arizona
Summary: FILED APR 15 2019 NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT In re: BAP No. AZ-18-1223-TaLB JOAN KATHRYN LIVDAHL, Bk. No. 2:16-bk-12768-MCW Debtor. LEONARD NOEL ROBERTS, Appellant, v. CORRECTED MEMORANDUM* JOAN KATHRYN LIVDAHL, Appellee. Argued and Submitted on March 22, 2019 at Phoenix, Arizona Filed – April 15, 2019 Appeal from the United States Bankruptcy Court for the District of Arizona *..
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FILED
APR 15 2019
NOT FOR PUBLICATION
SUSAN M. SPRAUL, CLERK
U.S. BKCY. APP. PANEL
OF THE NINTH CIRCUIT
UNITED STATES BANKRUPTCY APPELLATE PANEL
OF THE NINTH CIRCUIT
In re: BAP No. AZ-18-1223-TaLB
JOAN KATHRYN LIVDAHL, Bk. No. 2:16-bk-12768-MCW
Debtor.
LEONARD NOEL ROBERTS,
Appellant,
v. CORRECTED
MEMORANDUM*
JOAN KATHRYN LIVDAHL,
Appellee.
Argued and Submitted on March 22, 2019
at Phoenix, Arizona
Filed – April 15, 2019
Appeal from the United States Bankruptcy Court
for the District of Arizona
*
This disposition is not appropriate for publication. Although it may be cited for
whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential
value, see 9th Cir. BAP Rule 8024-1.
Honorable Madeline C. Wanslee, Bankruptcy Judge, Presiding
Appearances: Craig Stephan argued for appellant; Katherine
Anderson Sanchez and Vail C. Cloar of Dickinson
Wright PLLC argued for appellee.
Before: TAYLOR, LAFFERTY, and BRAND, Bankruptcy Judges.
INTRODUCTION
Leonard Roberts held a large judgment against chapter 111 debtor
Joan Livdahl and actively protected his interests in her bankruptcy case. As
the bankruptcy judge would later note, he routinely had at least two
attorneys appear at hearings; three of his attorneys were of record in the
bankruptcy case.
But when the confirmation hearing commenced on Debtor’s second
amended plan of reorganization (the “Second Plan”), Mr. Roberts and his
attorneys were nowhere to be found. Debtor’s counsel acknowledged on
the record that Mr. Roberts’s lead bankruptcy counsel had informed her
that he was on vacation, but she also said that she anticipated that one of
his other attorneys would appear. The bankruptcy court then proceeded
with the confirmation hearing, overruled Mr. Roberts’s objections on the
1
Unless specified otherwise, all chapter and section references are to the
Bankruptcy Code, 11 U.S.C. §§ 101–1532, all “Rule” references are to the Federal Rules
of Bankruptcy Procedure, and all “Civil Rule” references are to the Federal Rules of
Civil Procedure.
2
merits, and confirmed the Second Plan.
On appeal, Mr. Roberts argues that the bankruptcy court violated his
constitutional right to due process when it confirmed the Second Plan at
the hearing; he also argues that confirmation was in error. Neither position
has merit. Accordingly, we AFFIRM the bankruptcy court’s confirmation
order.
FACTS
In October 2015, Mr. Roberts obtained a large judgment for fraud and
unjust enrichment against Debtor (the “Claim”). The Arizona Court of
Appeals affirmed the judgment, and, through judgment enforcement
activities, Mr. Roberts fully secured the Claim. He also foreclosed his
judgment lien on Debtor’s house and acquired it through credit bid at the
sheriff’s sale.
Thereafter, Debtor filed a chapter 11 petition, but it provided only
temporary protection against collection on the Claim. Mr. Roberts obtained
a judgment from the bankruptcy court rendering the Claim
nondischargeable. He also obtained stay relief and evicted her from
possession of the house.
Mr. Roberts’s acquisition of Debtor’s house through credit bid
reduced but did not eliminate the fully secured Claim. So, Debtor
attempted to manage the Claim and her other debts through plan
confirmation. But her first plan was not confirmed. Mr. Roberts objected,
3
and, at a contested confirmation hearing, the bankruptcy court required a
revised disclosure statement and another plan.
Debtor then filed the Second Plan. It proposed to pay unsecured
creditors in full over five years and to pay the Claim in full with interest at
a rate already found appropriate by the bankruptcy court. But, the Second
Plan did not amortize the payment on the Claim evenly over the seven-
year payment period. Instead, it provided for annual payments totaling
$20,000 and a balloon payment at or before the end of the seven-year
period. Mr. Roberts characterized the Second Plan as providing for
negative amortization, but Debtor claimed rights to offset against the Claim
that, coupled with reduction of the debt as a result of the credit bid, made
this characterization uncertain as of the confirmation hearing.
The bankruptcy court eventually approved the disclosure statement
for the Second Plan and provided notice of the confirmation hearing on the
Second Plan (the “Notice of Hearing”). The Notice of Hearing stated: “The
Court will consider whether to confirm the [Second] Plan at a hearing on
July 17, 2018, at 10:00 a.m. . . .” It set a deadline to object, and it noted:
9. PROCEDURE IF A PLAN OBJECTION IS FILED: If a
party objects to confirmation of the [Second] Plan, the
Confirmation Hearing will be a non-evidentiary hearing at
which the Court will determine the appropriate manner to
address and resolve any objection.
10. PROCEDURE IF NO PLAN OBJECTION IS FILED: If
4
no party objects to confirmation of the [Second] Plan, the Court
may confirm the [Second] Plan at the Confirmation Hearing if
the Proponent presents sufficient evidence (e.g., witness
testimony, declaration, or documents) to allow the Court to
make the findings required by Bankruptcy Code § 1129.
Mr. Roberts timely filed the only objection to confirmation. He raised
a variety of arguments. As most relevant to this appeal, he argued that the
Second Plan was not proposed in good faith because Debtor was
consistently dishonest and consistently delayed plan confirmation, that the
Second Plan unjustifiably delayed conversion to chapter 7, and that the
Second Plan was not feasible because of the alleged negative amortization
of the Claim.
The general unsecured claims class, however, voted 100% in favor of
the Second Plan.
The day before the confirmation hearing, Debtor filed her declaration
in support of plan confirmation and a combined memorandum in support
of plan confirmation and response to Mr. Roberts’s objection.
Only Debtor’s counsel appeared at the confirmation hearing. When
asked, she said that, although she knew one of Mr. Roberts’s counsel was
out of town, she expected one of his other attorneys to appear.
The bankruptcy judge then proceeded with the confirmation hearing,
considered Mr. Roberts’s objections to confirmation, and evaluated the
existing evidentiary bases for plan confirmation. The bankruptcy judge
5
then began an oral ruling on plan confirmation:
Okay. All right. All right. Thank you, Ms. Sanchez. I have had
an opportunity to review the plan, review the objection, review
the ballot report, review Ms. Livdahl's declaration, and then of
course we've had quite a discussion today with respect to
various factors with respect to confirmation of a plan under a
Chapter 11.
So as I review this record, I see that the plan does appear to be
valid.
Hr’g Tr. (July 17, 2018) 26:23–27:5. The bankruptcy judge thereafter:
addressed and overruled Mr. Roberts’s objections based on Debtor’s
alleged lack of good faith, payment of professional fees, classification, best
interests of creditors, scope of the injunction, offset, and alleged lack of
feasibility; and concluded that he lacked standing to object on behalf of
other creditors. In sum, the bankruptcy judge concluded that the Second
Plan complied with 11 U.S.C. § 1129, found there was no reason to delay
confirmation, and, thus, confirmed the Second Plan.
The bankruptcy judge emphasized that: “I would also like the order
[confirming the Second Plan] to reflect that [Mr. Roberts’s] objections have
been specifically overruled on the merits and also overruled on grounds of
failure to prosecute the objections due to the nonappearance of counsel. But
both of those reasons would justify moving the case forward.” Id. at
31:20–25.
That same day, the bankruptcy court entered minutes reflecting that
6
the bankruptcy court confirmed the Second Plan.
The next day, Mr. Roberts filed a motion asking the bankruptcy court
to vacate the minute entry confirming the Second Plan and to reset a
hearing on its confirmation. He alleged that his bankruptcy counsel
thought that, due to his absence and because he informed Debtor’s counsel
that he would be out of the country, the confirmation hearing would be
continued. He argued that because he was the only secured creditor and
the largest creditor, it would be “fair, just, and equitable” for the
bankruptcy court to vacate the minute entry so that his counsel could
appear and argue.
The bankruptcy court agreed to hear the motion on shortened time.
But in the meantime, Debtor lodged a proposed order confirming the
Second Plan, and the bankruptcy court entered a modified confirmation
order notwithstanding the pending motion to vacate and Mr. Roberts’s
objections to the order itself. Mr. Roberts timely appealed this confirmation
order but did not seek a stay pending appeal.
Attention then turned to the motion to vacate. Debtor opposed it; she
argued that it failed both to identify the appropriate legal standard and to
establish that reconsideration under Civil Rule 59 or 60 (which are applied
in bankruptcy by Rules 9023 and 9024) was warranted. At the
reconsideration hearing, Mr. Roberts’s attorney clarified that the motion,
“really, I think, would be under Rule 59.” Hr’g Tr. (Aug. 21, 2018) 4:5–6.
7
And when the bankruptcy judge inquired about Mr. Roberts’s attorneys’
nonappearance at the confirmation hearing, his counsel stated: “It was my
recommendation that my co-counsel not appear . . . .” Id. at 12:4–11, 14–15.
After argument, the bankruptcy court entered a signed minute order
denying the motion to vacate.
In the order, the bankruptcy court noted that Mr. Roberts had several
counsel of record and, despite this, none of the attorneys asked the
bankruptcy court or opposing counsel to continue the confirmation
hearing. Instead, “[t]hey simply failed to appear.” The bankruptcy court
next found it unreasonable for Mr. Roberts’s attorneys to not communicate
with Debtors’ counsel and to assume that she would know “that only the
vacationing attorney would be representing their collective client at a
noticed hearing, or that she should ask for a continuance when she and her
client prepared and appeared at the hearing ready to prosecute their
confirmation request.”
The bankruptcy court next faulted Mr. Roberts for not identifying the
relevant reconsideration authority, much less establishing that
reconsideration was warranted under Civil Rule 59 or 60. It clarified that it
did not need to take additional evidence or schedule a further evidentiary
hearing to resolve the plan objections and confirm the plan. It continued:
It instead needed to work through the legal issues and obtain
certain clarifications. The Court, having prepared for the
confirmation hearing, was able to proceed and make
8
determinations on the merits based on the record before it.
Roberts' objections seem focused primarily on how long it
would take to be repaid, and whether the plan was in the best
interest of creditors or whether the plan was feasible. The Court
spent a substantial amount of time working through the
confirmation issues. The Court then made its rulings on the
merits. This was not a default situation.
And it concluded: “Roberts has failed to meet his burden for
reconsideration, rehearing, or relief from the order. Accordingly, the Court
denied the relief requested in the Motion to Vacate, as well as any relief
sought under [Civil] Rule 59 or 60.”
Mr. Roberts never amended his notice of appeal to include the denial
of reconsideration.
At oral argument, counsel stated that after confirmation of the
Second Plan: Debtor began making the required payments to unsecured
creditors; and the bankruptcy court determined that as a result of a credit
bid and offset the Second Plan would pay about $400,000 on the Claim.2
JURISDICTION
The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and
157(b)(2)(L). We have jurisdiction under 28 U.S.C. § 158. In so determining,
the Panel acknowledges that Mr. Roberts did not seek a stay of
2
By the Panel’s math, the Second Plan provides for a small amount of principal
reduction before payment in full through the balloon payment; it is not a negative
amortization plan.
9
confirmation and that distributions under the Second Plan have begun, but,
in the absence of any mootness argument by Debtor, the Panel declines to
consider whether equitable mootness applies. See Motor Vehicle Cas. Co. v.
Thorpe Insulation Co. (In re Thorpe Insulation Co.), 677 F.3d 869, 879–83 (9th
Cir. 2012).
ISSUES
Did the bankruptcy court deprive Mr. Roberts of due process when it
confirmed the Second Plan?
Did the bankruptcy court abuse its discretion when it confirmed the
Second Plan?
STANDARD OF REVIEW
We review for an abuse of discretion the bankruptcy court’s ultimate
decision to confirm a chapter 11 plan. Marshall v. Marshall (In re Marshall),
721 F.3d 1032, 1045 (9th Cir. 2013); Computer Task Group, Inc. v. Brotby (In re
Brotby,
303 B.R. 177, 184 (9th Cir. BAP 2003). But we review for clear error
any factual determinations as to good faith and feasibility. In re
Brotby, 303
B.R. at 184. We review de novo whether a litigant’s due process rights were
violated. DeLuca v. Seare (In re Seare),
515 B.R. 599, 615 (9th Cir. BAP 2014).
A bankruptcy court abuses its discretion if it applies the wrong legal
standard, misapplies the correct legal standard, or makes factual findings
that are illogical, implausible, or without support in inferences that may be
drawn from the facts in the record. See TrafficSchool.com, Inc. v. Edriver Inc.,
10
653 F.3d 820, 832 (9th Cir. 2011) (citing United States v. Hinkson,
585 F.3d
1247, 1262 (9th Cir. 2009) (en banc)).
DISCUSSION
Mr. Roberts argues on appeal that the bankruptcy court deprived
him of due process and erred when it confirmed the Second Plan. Neither
position has merit.
A. Mr. Roberts appealed only the confirmation order; he did not
appeal the reconsideration order.
We start by clarifying the scope of the appeal: We review only the
order confirming the Second Plan; we do not review the order denying
Mr. Roberts’s reconsideration motion.
The chronology of the orders and motions is important:
! At the confirmation hearing, the bankruptcy judge announced a
decision confirming the Second Plan;
! Mr. Roberts filed a reconsideration motion;
! The bankruptcy court entered an order confirming the Second Plan;
! Mr. Roberts filed a notice of appeal of that order; and
! The bankruptcy court later denied Mr. Roberts’s reconsideration
motion.
Rule 8002 provides that a notice of appeal filed after the bankruptcy
court announces a decision but before entry of the order is treated as filed
on the date of and after that entry. Fed. R. Bankr. P. 8002(a)(2). That rule
11
also discusses the effect of a reconsideration motion on the time to appeal.
It states that if a party timely files a Rule 9023 motion, the time to file a
notice of appeal runs from the entry of the order disposing of that motion.
Fed. R. Bankr. P. 8002(b)(1)(B). It also provides: “If a party files a notice of
appeal after the court announces or enters a judgment, order, or
decree—but before it disposes of any motion listed in subdivision
(b)(1)—the notice becomes effective when the order disposing of the last
such remaining motion is entered.” Fed. R. Bankr. P. 8002(b)(2).
Rule 8002 also discusses how to appeal a reconsideration decision:
If a party intends to challenge an order disposing of any motion
listed in subdivision (b)(1)—or the alteration or amendment of
a judgment, order, or decree upon the motion—the party must
file a notice of appeal or an amended notice of appeal. The
notice or amended notice must comply with Rule 8003 or 8004
and be filed within the time prescribed by this rule, measured
from the entry of the order disposing of the last such remaining
motion.
Fed. R. Bankr. P. 8002(b)(3).
In turn, Rule 8003 provides that a notice of appeal must include a
copy of the order appealed. Fed. R. Bankr. P. 8003(a)(3).
Here, Mr. Roberts complied with Rule 8003(a)(3) by identifying the
subject of the appeal as the confirmation order entered August 10, 2017 and
attaching a copy of the confirmation order as an exhibit. Because
Mr. Roberts’s notice of appeal was filed before the bankruptcy court
12
entered the order denying his motion to vacate, he could not have
identified that order in his notice of appeal. Per Rule 8002(b)(3),
Mr. Roberts was required to file an amended notice of appeal. He did not.
We thus conclude that Mr. Roberts did not appeal the order denying his
motion to vacate.
That this was intentional is confirmed by Mr. Roberts’s opening
appellate brief. In it, Mr. Roberts “simply mention[s] the denial of the
motion for reconsideration in his brief, but then articulate[s] neither the
standard for reviewing a motion for reconsideration nor any reason why he
believes the denial of reconsideration, rather than [plan confirmation], was
in error.” Lolli v. Cty. of Orange, 351 F.3d 410, 415 (9th Cir. 2003). This
briefing and notice of appeal structure is insufficient to preserve appellate
rights as to the denial of reconsideration. Id.; see also Johnson v. Hyundai
Motor Finance (In re Johnson), BAP No. CC-15-1042-DTaKu,
2015 WL
5923397, at *5 (9th Cir. BAP Oct. 9, 2015) (declining to consider any issues
with respect to a second reconsideration order when the debtor did not
identify it in the notice of appeal, merely referenced it in his opening brief
but did not assign error to it, and failed to provide a transcript of the
relevant hearing).
We consider only the confirmation order on appeal.
13
B. The bankruptcy court did not deprive Mr. Roberts of due
process by confirming the Second Plan at the duly noticed
and scheduled confirmation hearing.
Mr. Roberts argues that the bankruptcy court deprived him of due
process under the Fifth Amendment when it confirmed the Second Plan.
We disagree.
Constitutional due process “requires notice reasonably calculated,
under all the circumstances, to apprise interested parties of the pendency of
the action and afford them an opportunity to present their objections.”
United Student Aid Funds, Inc. v. Espinosa, 559 U.S. 260, 272 (2010) (internal
quotation marks omitted). Here, the Code provides that “[a]fter notice, the
court shall hold a hearing on confirmation of a plan.” 11 U.S.C. § 1128(a).3
Mr. Roberts’s due process argument turns on his read of the Notice of
Hearing. By his account, it describes only two possible scenarios: if there
were no objections, the bankruptcy court might confirm the Second Plan
given sufficient evidence; or, if there were objections, then the bankruptcy
court would delay confirmation and schedule an evidentiary hearing. He
thus contends that his objection made confirmation at the scheduled
hearing improper and that the confirmation order violated his due process
rights.
Mr. Roberts’s position has facial appeal. The Notice of Hearing is not
3
In his opening brief, Mr. Roberts cites § 1324 as the relevant statute. It is not.
That statute governs confirmation hearings for chapter 13 cases.
14
a model of clarity. But we conclude that he was afforded due process.
We first consider the text of the Notice of Hearing. Paragraph ten
expressly allows for confirmation at the initial hearing in the absence of
objection. But paragraph nine, which outlines the impact of objection on
the initial hearing, is not a bald promise of judicial inaction as argued by
Mr. Roberts. It acknowledges that in the face of objection, the hearing will
be non-evidentiary. But it also states that, notwithstanding objection, the
bankruptcy court will determine at this initial hearing how to address and
resolve any objections. So, the Notice of Hearing put Mr. Roberts on notice
that the bankruptcy court had options for decision at the initial hearing.
It is a “well established principle” that courts have “inherent power
to control their dockets.” United States v. W.R. Grace, 526 F.3d 499, 509 (9th
Cir. 2008) (internal quotation marks omitted). Federal judges have
“substantial discretion” about what “happens inside the courtroom.”
Id.
(internal quotation marks omitted). And federal courts “are vested with
inherent powers enabling them to manage their cases and courtrooms
effectively . . . .”
Id. (internal quotation marks omitted).
Here, the bankruptcy court acted in accord with paragraph nine and
its generalized power to manage matters on its docket. It decided to resolve
the plan objections on the record at the hearing. In reaching this decision it
acted with extensive knowledge of the bankruptcy case gained from
administration of the plan process and the nondischargeability and stay
15
relief litigation involving Mr. Roberts. The record makes clear that,
notwithstanding his absence, the bankruptcy court carefully considered
Mr. Roberts’s objections. But at the end of this analysis, it concluded that a
contested evidentiary hearing was unnecessary.
The Notice of Hearing did not prohibit the bankruptcy court from
being decisional in this fashion. Mr. Roberts had actual notice that the
bankruptcy court would consider plan confirmation and decide how to
proceed if there were objections; this actual notice “more than satisfied” his
“due process rights.” Espinosa, 559 U.S. at 272.
Thus, Mr. Roberts’s decision not to attend the hearing is fatal to his
due process argument. His position reduces to the proposition that he, not
the bankruptcy court, had the right to control the confirmation process
because, once he objected, the bankruptcy court was required to continue
the hearing even as he failed to attend. But the bankruptcy court never lost
discretion to determine that a continued hearing was unnecessary even in
the face of objection. Indeed, the Notice of Hearing expressly warned
parties that the bankruptcy court would consider how to proceed with plan
confirmation at the hearing. So, if Mr. Roberts wanted to be heard about
whether an evidentiary hearing was necessary or whether the bankruptcy
court had sufficient evidence to confirm at the initial hearing, he needed to
attend the initial hearing.
It is also unclear what type of evidentiary hearing Mr. Roberts
16
anticipated. He did not argue in his plan objection that there were disputed
factual issues that required an evidentiary hearing to resolve, nor did he
expressly request an evidentiary hearing.4 Instead, at the conclusion of his
objection he simply asked the bankruptcy court to sustain his objection to
confirmation based on his brief and the record in the case. True,
Mr. Roberts stated in a footnote that he had a forensic expert willing to
testify that a promissory note listed as an asset on Debtor’s schedules was
not a legitimate document; but he does not discuss on appeal how this
possible isolated factual issue compels reversal. Put differently, Mr. Roberts
has not shown that the bankruptcy court erred in not holding an
evidentiary hearing because he never established that an evidentiary
hearing was necessary. Bankruptcy courts regularly, at non-evidentiary
hearings, grant motions based on the evidence in the record.
Last, Mr. Roberts suggests that Delaney-Morin v. Day (In re Delaney-
Morin), 304 B.R. 365 (9th Cir. BAP 2003), supports his due process
argument, but that case is legally and factually distinguishable. There, a
secured creditor filed a stay relief motion based on three theories, and the
notice of preliminary hearing referred to the hearing as “non-evidentiary.”
4
This contrasts with Mr. Roberts’s earlier objection to Debtor’s first amended
plan, where he explicitly “request[d] that this Court adopt the blended rate formula
used by the Ninth Circuit in Boulders, and allow the Creditor to present evidence to
establish the interest rate in this manner.” Before the hearing on confirmation of the
Second Plan, the bankruptcy court determined the appropriate interest rate.
17
Id. at 367. But the motion was not supported by competent, admissible
evidence, and the debtor expressly sought a continuance, which the
bankruptcy court denied.
Id. at 367–68. Then, at the hearing, which the
debtor did not attend, the creditor raised two new grounds which it
supported only with creditor’s counsel’s “avowals.”
Id. at 368, 370. The
bankruptcy court granted the motion based solely on the new allegations.
Id. at 368.
On appeal, we reversed. Id. at 371. We noted that the “avowals” were
not evidence and stated that even if they could be treated as an offer of
proof, the debtor was misled by being told the hearing was non-
evidentiary.
Id. at 370. As a result, because the allegations at the hearing
that formed the basis for the bankruptcy court’s granting the motion were
not made in the original motion, debtor lacked an opportunity to respond
to the allegation; “[t]his raises due process concerns.”
Id. In addition, we
noted that Civil Rule 7054 provided that a court cannot grant by default
more relief than originally requested in the pleadings.
Id. at 370–71.
Delaney-Morin, thus, is distinguishable. First, Debtor provided
competent, admissible evidence in support of her motion to confirm the
Second Plan. More importantly, the bankruptcy court did not confirm the
Second Plan based only on new legal arguments or factual assertions made
at the hearing; thus, it did not deprive Mr. Roberts of an opportunity to be
heard on the matters before it. Rather, the bankruptcy court overruled his
18
objections on the merits.
In sum, Mr. Roberts had actual notice that the bankruptcy court
would consider whether to confirm the Second Plan at the hearing; this
comported with due process.
C. The bankruptcy court did not abuse its discretion when it
confirmed the Second Plan.
Mr. Roberts argues that the bankruptcy court abused its discretion in
confirming the Second Plan. He is wrong.
First, he argues based on “newly discovered” information and alleges
that the day before the confirmation hearing Debtor disclosed to him that
her related LLC held an interest in 48 additional acres of Iowa farmland.
This new disclosure of valuable farmland, he contends, has implications for
Debtor’s good faith, the value of the LLC’s assets, the proper liquidation
analysis, and the best interest of creditors’ test (i.e., unsecured creditors
could be paid in full immediately rather than in five years5).
We deem these arguments forfeited because Mr. Roberts never
5
We disagree with Mr. Roberts about the best interest of creditors test. He
suggests that immediate liquidation would “be better” for unsecured creditors. But, as
the bankruptcy court ruled at the confirmation hearing and as Mr. Roberts does not
dispute on appeal, Mr. Roberts as a fully secured creditor lacks standing to advance
unsecured creditors’ interests. Next, when creditors are paid in full, as they are here, the
best interests of creditors does not require immediate liquidation. Finally and in any
event, the unsecured creditors voted in favor of the Second Plan. We also disagree that
good faith always requires a chapter 11 debtor to promptly liquidate as opposed to
attempting a payout over time that may avoid the need for liquidation.
19
presented them to the bankruptcy court in the context of plan confirmation.
Orr v. Plumb, 884 F.3d 923, 932 (9th Cir. 2018) (“The usual rule is that
arguments raised for the first time on appeal . . . are deemed forfeited.”).
He knew about the issue before the confirmation hearing, but he failed to
appear and to argue the point at that time. Instead, he raised these
arguments with the bankruptcy court in his motion to vacate the minute
entry, which he conceded was premised on Civil Rule 59. The bankruptcy
court entered an order denying the motion. Mr. Roberts never appealed
that order. Nor does he argue in his appellate brief that the bankruptcy
court abused its discretion in denying reconsideration. This, in turn, works
a waiver (i.e., Mr. Roberts intentionally relinquished his right to argue that
the bankruptcy court erred in so deciding). McKay v. Ingleson,
558 F.3d 888,
891 (9th Cir. 2009) (“Because this argument was not raised clearly and
distinctly in the opening brief, it has been waived.”).6
The only argument that remains is Mr. Roberts’s position that the
bankruptcy court abused its discretion in concluding that the Second Plan
was feasible. He argues that the bankruptcy court misread his § 1129(a)(11)
6
Two recent Ninth Circuit cases discuss waiver and forfeiture in the bankruptcy
context. See Reid and Hellyer, APC v. Laski (In re Wrightwood Guest Ranch, LLC), 896 F.3d
1109, 1113–14 (9th Cir. 2018); Harkey v. Grobstein (In re Point Center Financial, Inc.),890
F.3d 1188, 1194 (9th Cir. 2018). Neither compels reversal here as we do not need to
decide whether Mr. Roberts forfeited these arguments in their entirety merely by failing
to appear at the hearing. Instead, he raised them in connection with reconsideration
and, thus, our affirmance is based on a different shade of waiver and forfeiture—
Mr. Roberts’s failure to appeal from the order denying his motion to vacate.
20
objection. The bankruptcy court thought his objection was based on an
increased interest rate on his judgment, he explains, when instead his
argument was premised on the following: negative amortization would
result in his judgment increasing over course of the seven year plan; the
Second Plan allows Debtor to retain her assets and to pay creditors over
time; Debtor failed to show that she could obtain a loan sufficient to make
the balloon payment; and, instead, Debtor would have to liquidate assets
thereby defeating the Second Plan’s purpose and rendering it nonfeasibile.
To start, § 1129(a)(11) provides that the court should not confirm a
plan if it would likely “be followed by the liquidation, or the need for
further financial reorganization, of the debtor . . . under the plan, unless
such liquidation or reorganization is proposed in the plan.” 11 U.S.C.
§ 1129(a)(11) (emphasis added). Here, the Second Plan expressly provides
for the possibility of liquidation. It states: “The Debtor may, in her
discretion, sell or encumber the Iowa Property or any other assets of [an
LLC in which she has an interest] and use the funds to pay the Claim.”
Correspondingly, Debtor’s disclosure statement states that the “balloon
payment to [Mr. Roberts] will likely come from a loan or a sale of the Iowa
Property.” It further states that “Debtor believes this is feasible as the Iowa
Property is valued in excess of the Allowed [Mr. Roberts’s] Claim.”
The Second Plan thus proposes that liquidation of the LLC’s assets
may be required. And Mr. Roberts concedes that if the value of this real
21
property remains steady—and he presented no evidence that it is likely to
decrease in value7—its liquidation would pay him in full. The Second Plan
thus is feasible as described, and the bankruptcy court did not abuse its
discretion in overruling Mr. Roberts’s § 1129(a)(11) objection.
In sum, Mr. Roberts fails to show that the bankruptcy court abused
its discretion in confirming the Second Plan.
CONCLUSION
Based on the foregoing, we AFFIRM.
7
Mr. Roberts’s other position is in some tension with this. He argues that Debtor
failed to disclose that the LLC owned additional farmland and that the farmland is thus
more valuable than Debtor claimed. If he is correct, then even more equity would be
available to support refinance or to pay the Claim through liquidation.
22
