Filed: Oct. 01, 2007
Latest Update: Mar. 02, 2020
Summary: FOR PUBLICATION UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT HORACE BURL SUTER and BARBARA J. SUTER, No. 04-17306 Appellants, D.C. No. v. CV-N-04-00325- WARREN GOEDERT, ERICA MICHAELS ECR (RAM) HOLANDER, and BRUCE MATLEY, OPINION Appellees. Appeal from the United States District Court for the District of Nevada Edward C. Reed, District Judge, Presiding Argued and Submitted February 16, 2007—San Francisco, California Filed October 1, 2007 Before: Betty B. Fletcher, and Richard R. Cl
Summary: FOR PUBLICATION UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT HORACE BURL SUTER and BARBARA J. SUTER, No. 04-17306 Appellants, D.C. No. v. CV-N-04-00325- WARREN GOEDERT, ERICA MICHAELS ECR (RAM) HOLANDER, and BRUCE MATLEY, OPINION Appellees. Appeal from the United States District Court for the District of Nevada Edward C. Reed, District Judge, Presiding Argued and Submitted February 16, 2007—San Francisco, California Filed October 1, 2007 Before: Betty B. Fletcher, and Richard R. Cli..
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FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
HORACE BURL SUTER and BARBARA
J. SUTER, No. 04-17306
Appellants, D.C. No.
v. CV-N-04-00325-
WARREN GOEDERT, ERICA MICHAELS ECR (RAM)
HOLANDER, and BRUCE MATLEY, OPINION
Appellees.
Appeal from the United States District Court
for the District of Nevada
Edward C. Reed, District Judge, Presiding
Argued and Submitted
February 16, 2007—San Francisco, California
Filed October 1, 2007
Before: Betty B. Fletcher, and Richard R. Clifton,
Circuit Judges, and Edward F. Shea,* District Judge.
Opinion by Judge Shea
*The Honorable Edward F. Shea, United States District Judge for the
Eastern District of Washington, sitting by designation.
13347
SUTER v. GOEDERT 13349
COUNSEL
Kevin J. Mirch argued the cause and was on the briefs for the
appellants; Marie C. Mirch was also on the briefs for the
appellants.
Bruce T. Beesley argued the cause and was on the briefs for
the appellees; Tricia M. Darby was also on the briefs for the
appellees.
OPINION
E. SHEA, District Judge:
Appellants Horace B. and Barbara J. Suter appeal the dis-
trict court’s judgment dismissing their appeal from the bank-
13350 SUTER v. GOEDERT
ruptcy court as moot. Appellees Warren Goedert, Erica
Michaels Holander, and Bruce Matley (collectively, the “Goe-
dert firm”) are lawyers against whom the Suters filed a legal
malpractice lawsuit in a Nevada state court. During the course
of the bankruptcy proceeding, the Goedert firm obtained con-
trol of the malpractice lawsuit asset, then a dismissal in the
Suter appeal, and finally a ruling in both the bankruptcy court
and the district court that the Suter appeal following the bank-
ruptcy court decision awarding the asset to the Goedert firm
was moot.
The Suters raise only one issue for review: whether the dis-
trict court erred in dismissing as moot their appeal of the
bankruptcy court order. The Suters timely filed this appeal,
and we have jurisdiction pursuant to 28 U.S.C. § 158(d). On
de novo review, we hold that mootness does not apply, and
REVERSE the district court’s order and REMAND the case
to allow the district court to review the merits of the bank-
ruptcy court’s decision.
I. BACKGROUND
This case unfolds with a series of tragic circumstances,
missed opportunities, and untimely steps. Appellants Horace
and Barbara Suter had a teenage daughter who was institu-
tionalized at the Truckee Meadows Hospital and Rehabilita-
tion Center and treated by Dr. Tannenbaum. The Suters came
to believe that their daughter was being abused at the facility,
and retained the Goedert firm to bring a personal injury law-
suit on behalf of themselves and their daughter against the
hospital and physicians. Although their daughter’s claims
were settled and the Suters’ claims against the hospital were
settled, the Suters’ claims against the physicians proceeded to
trial. Following trial, judgment was entered against the Suters
on the physicians’ counterclaim for over two hundred thou-
sand dollars.
Following the adverse judgment, Dr. Howle, the facility’s
chief of staff, was deposed in another case and admitted
SUTER v. GOEDERT 13351
knowledge of one of Dr. Tannenbaum’s unconventional if not
unscientific therapies administered to patients like the Suter’s
daughter at the facility. The Suters also later learned that a
partner in the Goedert firm was a patient of Dr. Howle, a fact
which the firm had failed to disclose to the Suters. The Goe-
dert firm had also failed during the Suter personal injury case
to engage in discovery regarding Dr. Howle or to take his
deposition.
The Suters initiated a malpractice lawsuit against the Goe-
dert firm for mishandling the personal injury case. The mal-
practice case was dismissed on statute of limitation grounds;
the Suters timely appealed the dismissal to the Nevada
Supreme Court.
Facing the entry of a substantial monetary judgment against
them, the Suters filed for bankruptcy in 2003. A trustee was
appointed to manage and liquidate the non-exempt assets of
their bankruptcy estate. Their contingent assets included the
legal malpractice lawsuit. The Suters filed a motion to convert
the case to Chapter 13. While the motion was pending, the
Suters raised $10,000 from a family member and negotiated
with the trustee for a buy-back of the legal malpractice suit.
The trustee moved the bankruptcy court to authorize a release
of the estate’s interest in the legal malpractice suit, and a hear-
ing was set on both motions on April 13, 2004. At the hear-
ing, counsel for the Suters, the Goedert firm, and the trustee
were all present. The Goedert firm then offered $11,000 to
acquire the claim. The Suters then offered to match that
amount, and the Goedert firm then bid $15,000 if no appeal
was taken, and $12,500 if the order was appealed. The Suters
objected that they did not know the trustee was planning an
impromptu auction and that the claim was not being appropri-
ately valued; they requested more time to prepare a better
offer. After a recess, the trustee decided to compromise the
claim by accepting the higher offer from the Goedert firm.1
1
There is a substantive dispute about the characterization of the trustee’s
settlement of the malpractice claim against Appellees under bankruptcy
13352 SUTER v. GOEDERT
The bankruptcy court orally approved this compromise.
Counsel for debtors orally moved for a stay, but the bank-
ruptcy court denied the motion as premature. The bankruptcy
court stated it would not enter a ruling “either way” on the
merits of the stay without briefing, but invited the parties to
prepare a written motion for a stay while the court was pre-
paring its written order on the compromise. With this compro-
mise of the legal malpractice asset to the Goedert law firm,
the Suters became nonparties to the Nevada Supreme Court
appeal.
The written Order of the bankruptcy court approving settle-
ment was entered on May 14, 2004. On May 19, 2004, the
trustee and Appellees filed a stipulation to dismiss the Suters’
appeal of the dismissal of the legal malpractice lawsuit pend-
ing before the Nevada Supreme Court. On May 24, 2004, the
Suters timely filed with the bankruptcy court a notice of
appeal of the Order and on May 25, 2004, filed their written
Motion for Stay of the Order Pending Appeal.
On June 9, 2004, pursuant to the stipulation of the trustee
and the Goedert firm, the Nevada Supreme Court dismissed
the appeal of the malpractice case. On June 14, 2004, the
Goedert firm filed its response to the motion to stay before the
bankruptcy court, arguing that once the claim was dismissed
by the Nevada Supreme Court on June 9, 2004, nothing could
undo that dismissal, the Goedert’s claim no longer existed,
and the request for a stay from the bankruptcy court was
therefore moot. On July 26, 2004, the bankruptcy court agreed
and issued its order denying the Suters’ Motion for Stay on
the grounds of mootness. The bankruptcy court found, alter-
natively, that the Suters were unlikely to succeed on the mer-
law, and whether it is a “sale” or “compromise” as those terms are used
in substantive bankruptcy law. As the substantive issues are not presented
in this appeal, the term “compromise” will be used for ease of reference,
as that was the term used by the bankruptcy court.
SUTER v. GOEDERT 13353
its of their appeal. However, part of this analysis on the merits
and likelihood of success was premised on mootness in the
Nevada Supreme Court. The Suters elected to appeal the
bankruptcy court’s decision to the district court. In the district
court, the Goedert firm again moved to dismiss the Suters’
appeal as moot. The district court granted the motion based on
the same reasoning applied by the bankruptcy court. The
Suters timely filed this appeal.
Although the procedural history of this case is littered with
allegations of secret deals, suppression of evidence, and
improper self-dealing among the doctors and the lawyers, we
confine our review solely to the question of whether the dis-
trict court’s dismissal of the appeal for mootness was proper.
We apply the same de novo standard of review the district
court uses to review a bankruptcy court’s decision. See In re
Raintree Healthcare Corp., 431 F.3d 685, 687 (9th Cir.
2005). In doing so, we “independently review the bankruptcy
court’s decision and do not give deference to the district
court’s determinations.” In re Saxman,
325 F.3d 1168, 1172
(9th Cir. 2003) (quoting Preblich v. Battley,
181 F.3d 1048,
1051 (9th Cir. 1999)). Mootness is a question of law that we
review de novo. Or. Advocacy Ctr. v. Mink,
322 F.3d 1101,
1116 (9th Cir. 2003). We conclude that the application of
mootness doctrine was error and reverse.
II. ANALYSIS
A. Mootness in Bankruptcy
[1] The bankruptcy court necessarily enters orders to sell or
distribute assets of the debtor’s estate. If the bankruptcy court
denies a motion to stay such an order, then mootness may bar
further review of the order. “Bankruptcy’s mootness rule
‘developed from the general rule that the occurrence of events
which prevent an appellate court from granting effective relief
renders an appeal moot, and the particular need for finality in
orders regarding stays in bankruptcy.’ ” In re Onouli-Kona
13354 SUTER v. GOEDERT
Land Co., 846 F.2d 1170, 1172 (9th Cir. 1988) (foreclosure
sale to creditor) (citing Algeran, Inc. v. Advance Ross Corp.,
759 F.2d 1421, 1424 (9th Cir. 1985) (sale of securities)). See
also In re Suchy,
786 F.2d 900, 901 (9th Cir. 1985) (sale of
real estate). The policy behind mootness is “to protect the
interest of a good faith purchaser . . . of the property.” In re
Onouli-Kona
Land, 846 F.2d at 1172 (citing In re
Suchy, 786
F.2d at 901-02). An alternative policy supporting mootness is
“the consistent policy in recent bankruptcy law of assuring
finality of judgments relating to the automatic stay.”
Id.
[2] The district court accepted this argument and ruled that
the appeal of the disputed compromise was rendered moot by
the Nevada Supreme Court’s dismissal of the Suters’ appeal
of the trial court’s dismissal of their legal malpractice claim.
The bankruptcy mootness rule applies “when an appellant has
failed to obtain a stay from an order that permits a sale of a
debtor’s assets. Whether an order directly approves the sale or
simply lifts the automatic stay, the mootness rule dictates that
the appellant’s failure to obtain a stay moots the appeal.” In
re Onouli-Kona
Land, 846 F.2d at 1171 (citing Algeran,
Inc.,
759 F.2d at 1423). The Goedert firm argues the failure of the
Suters to obtain a stay from the bankruptcy court, before the
appeal of the malpractice claim was dismissed by the Nevada
Supreme Court, moots the appeal. The Suters present various
arguments why mootness should not apply in this case.
Among these are exceptions to general mootness doctrine for
“collateral legal consequences” and “public importance”
questions. The Goedert firm argues these exceptions have not
been applied in a bankruptcy context and urges application of
the mootness doctrine as developed in bankruptcy decisions.
On de novo review of the district court’s decision, we are
concerned by two legal issues. First, the burden of establish-
ing mootness is on the party advocating its application. With-
out affirmatively demonstrating that the Suters have no
recourse under Nevada law were they successful in the district
court on their appeal of the bankruptcy court’s decision to
SUTER v. GOEDERT 13355
approve the compromise, mootness is not established. Second,
under the case law applicable to mootness in bankruptcy fol-
lowing a failure to obtain a stay, state law remedies may ren-
der the lack of a stay irrelevant to the question of mootness.
We address each of these issues in turn.
1. The Goedert firm did not meet its burden to
demonstrate mootness before the district court.
In general, the party asserting mootness “has the heavy bur-
den of establishing that there is no effective relief remaining
for a court to provide.” Or. Advocacy Ctr., 322 F.3d at 1116-
17 (quoting Tinoqui-Chalola Council of Kitanemuk &
Yowlumne Tejon Indians v. U.S. Dep’t of Energy,
232 F.3d
1300, 1303 (9th Cir. 2000)). The bankruptcy code also con-
tains a statutory “mootness” provision applicable to sales of
assets:
The reversal or modification on appeal of an authori-
zation under subsection (b) or (c) of this section of
a sale or lease of property does not affect the validity
of a sale or lease under such authorization to an
entity that purchased or leased such property in good
faith . . . unless such authorization and such sale or
lease were stayed pending appeal.
11 U.S.C. § 363(m). The bankruptcy court’s order did not
apply § 363(m), but denied the debtor’s motion for stay based
on general principles of mootness. See In re Di Giorgio, 134
F.3d 971, 974 (9th Cir. 1998) (mootness generally precludes
federal courts from deciding “questions that cannot affect the
rights of litigants in the case before them”) (citations omitted).
The bankruptcy court also held, in the alternative, that a stay
would not be appropriate even if mootness did not apply. That
alternative substantive decision considered the fact of the
Nevada Supreme Court dismissal against a likelihood of suc-
cess on the merits.
13356 SUTER v. GOEDERT
The Suters’ appeal to the district court was also dismissed
based on mootness. The district court cited two cases to illus-
trate circumstances where a debtor’s appeal was not moot. In
In re Berg,
45 B.R. 899 (BAP 9th Cir. 1984), the trustee
objected to the appeal as moot and argued under former rule
805 and its successor 8005 “that an appellate court cannot set
aside an order authorizing the sale of property if the appellant
failed to obtain a stay pending appeal.”
Id. at 902. The Bank-
ruptcy Appellate Panel rejected the argument, noting that
appellant was not appealing the order for sale, but rather the
order quieting title in the trustee.
Id. The Panel further noted
that, without a stay, the debtor might be precluded from undo-
ing the transaction and revesting title to the property, but that
the court could still award monetary relief, and so the sale had
not foreclosed all remedy to the debtor.
Id.
In In re Spirtos, the debtor argued that appeal was moot
because the judgment creditor did not obtain a stay of the
order exempting the debtor’s interest in certain pension plan
assets.
992 F.2d 1004 (9th Cir. 1992). The assets had been
distributed, so the debtor argued the appeal was moot “when,
in the absence of a stay, events occur that make it impossible
for the appellate court to fashion effective relief.”
Id. at 1006
(citations omitted). The panel acknowledged the line of cases
but rejected its application to the case because “[w]e can fash-
ion effective relief by ordering Debtor, who is a party to this
appeal, to return the money to the estate.”
Id. at 1007. See
also In re Int’l Envtl. Dynamics, Inc.,
718 F.2d 322 (9th Cir.
1983) (counsel for creditors could be ordered to repay interim
fees if erroneously disbursed).
[3] Where the asset “sold” without a stay is a lawsuit and
“disposal” of the asset is a dismissal, the appropriate inquiry
is whether the dismissal of the lawsuit could be undone. Nei-
ther the bankruptcy court nor the district court addressed
whether, as a matter of law, the dismissal of the appeal was
capable of being revisited by the Nevada Supreme Court. The
district court’s order stated:
SUTER v. GOEDERT 13357
Because the personal litigation suit in question has
been dismissed by the Nevada Supreme Court, the
underlying interest no longer exists. The court has no
power to reinstate the suit with the Nevada Supreme
Court even if it were to decide that the interest was
improperly released by the Bankruptcy Court. As
such, this court is prevented from granting the relief
sought through the appeal, thus favoring a finding
that the appeal is moot.
This reasoning ignores the fact that if mootness is applied to
the compromise of a lawsuit asset in bankruptcy, every case
that was pending in state court but compromised in bank-
ruptcy over an objection would be classified as one where the
court could not fashion relief. The Suters would be responsi-
ble to ask the Nevada Supreme Court to grant relief based on
an order granting them substantive relief on appeal (if they
were successful).
[4] Both the bankruptcy court and the district court
assumed that dismissal of the action pending before the
Nevada Supreme Court made the claim “nonexistent,” like a
fund distributed or a home sold to a good faith purchaser. The
district court found that, unlike Spirtos and Berg, the Suters
had failed to demonstrate that the district court could grant
them relief:
because Appellants do not demonstrate what relief,
if any, this court can grant for [Appellees’] actions
which rendered the appeal moot before Appellants
filed their motion for a stay, we must dismiss the
appeal as moot.
(citing In re Ewell, 958 F.2d 276, 279-80 (9th Cir. 1992)
(declining to issue advisory opinion)). Application of this
standard was error because it shifted the burden to the Suters
to demonstrate non-mootness. The district court should have
required the Goedert firm to demonstrate mootness by estab-
13358 SUTER v. GOEDERT
lishing “that there is no effective relief remaining for a court
to provide.” Or. Advocacy
Ctr., 322 F.3d at 1116-17 (citation
omitted).
In the instant appeal, the Goedert firm argues for the first
time that reopening the appeal of the malpractice suit before
the Nevada Supreme Court is an “impossible task.” The Goe-
dert firm contends this could only be accomplished by a peti-
tion for rehearing and that such a petition is untimely. Under
the Nevada rule:
(1) Time for Filing; Content. A petition for rehear-
ing may be filed within eighteen (18) days after the
filing of the court’s decision pursuant to Rule 36
unless the time is shortened or enlarged by order.
NEV. R. APP. PROC. 40(a)(1). The Goedert firm argues the
Suters had eighteen days after the dismissal of their appeal to
file a petition for rehearing. The Suters contend they could
petition the Nevada Supreme Court to enlarge the time per-
mitted for rehearing. On review of the record and Nevada
Law, neither argument is persuasive. Rule 40(a)(1) plainly
specifies a deadline of eighteen days after the court’s deci-
sion, and the Nevada Supreme Court has upheld this applica-
tion. See, e.g., Peters v. State Bar of Nev., 104 Nev. 768,
766
P.2d 277 (1988) (petition for rehearing denied when petition
and motion to extend filed two months after order, although
petitioner was delayed by waiting for a decision from a
United States District Court on a related issue).
On the other hand, at the time the stipulated dismissal was
presented to the Nevada Supreme Court, the Suters were not
parties to that appeal. Following the bankruptcy filing, the
trustee was substituted for the Suters in the Nevada Supreme
Court appeal. The parties to the appeal were then the trustee
and the Goedert firm. The Goedert firm’s argument that the
Suters could have filed a petition on June 27, 2004, directly
contradicts other positions it has asserted and is inaccurate as
SUTER v. GOEDERT 13359
a matter of law. Before the district court, in defending their
dismissal of the state action without notice to the Suters, the
Goedert firm emphasized that the Suters were not parties to
the appeal. The Goedert firm successfully argued that as non-
parties the Suters had no rights to notice or to approve or dis-
prove a dismissal before the Nevada Supreme Court.
The Suters’ nonparty status before the Nevada Supreme
Court also would deprive them of standing to appeal the deci-
sion or to petition for rehearing. NEV. R. APP. PROC. 3A(a)
(only parties may appeal). The rule that only parties
aggrieved may appeal is well-established Nevada law. See,
e.g., Valley Bank of Nev. v. Ginsburg, 110 Nev. 440,
874 P.2d
729 (1994) (non-party shareholders lacked standing to appeal
settlement of a derivative action); Gladys Baker Olsen Family
Trust v. Olsen,
109 Nev. 838,
858 P.2d 385 (1993) (trust
lacked standing to appeal an order to enforce spousal support
agreement); Aetna Life & Cas. v. Rowan,
107 Nev. 362,
812
P.2d 350 (1991) (entity denied intervention lacks standing to
appeal the denial); Albany v. Arcata Assoc.,
106 Nev. 688,
799 P.2d 566 (1990) (attorney lacks standing to appeal);
Massi v. Bellmyre,
111 Nev. 1520,
908 P.2d 705 (1995)
(attorney lacks standing to appeal order related to attorney’s
lien on lawsuit).
[5] Under Nevada law, these persons aggrieved by an
appellate decision are not left without a remedy. Instead, the
nonparty aggrieved by an order in which the nonparty has an
interest may seek an extraordinary writ. See Valley Bank of
Nev.,
110 Nev. 440 (non-party shareholders’ appeal dismissed
without prejudice to pursuing an extraordinary writ); Gladys
Baker Olsen Family Trust,
109 Nev. 838 (trust permitted to
seek relief by extraordinary writ); Aetna Life &
Cas., 107
Nev. at 362 (review sought may be had “only by a petition for
extraordinary relief.”); Albany,
106 Nev. 688 (attorney could
challenge sanction only by extraordinary writ);
Massi, 111
Nev. at 1521 (attorney may seek to enforce lien through a
petition for an extraordinary writ) (citation omitted).
13360 SUTER v. GOEDERT
Nevada Rule of Appellate Procedure 21, discussed in this
case law, provides for extraordinary writs to grant relief to
aggrieved persons who are non-parties and contains no
express time requirement for filing. NEV. R. APP. PROC. 21.
The rule was adopted and mirrors the Federal Rule of Appel-
late Procedure 21 pertaining to writs of mandamus, prohibi-
tion, and other extraordinary writs. See FED. R. APP. PROC. 21;
NEV. R. APP. PROC. 21 (advisory committee notes). Extraordi-
nary writs are generally issued “in aid of jurisdiction,” which
has at times resulted in extending relief to non-parties. See
generally, 16 CHARLES A. WRIGHT, ARTHUR R. MILLER, &
EDWARD H. COOPER, FEDERAL PRACTICE & PROCEDURE § 3932
n.6, n.32 (2d ed. 1996) (citation omitted) (1996 ed.). “It is
easy to conclude that a writ may issue in aid of potential juris-
diction if it is necessary to control action that could not be
controlled by awaiting entry of an appealable order, or to
remove an obstruction to appellate review.”
Id. Unlike a peti-
tion for rehearing, extraordinary writs are not subject to a
rigid time limit on filing the petition.
Id. § 3933 n.11-14 (cit-
ing Coastal Steel Corp. v. Tilghman Wheelabrator Ltd.,
709
F.2d 190, 197 (3d Cir. 1983), cert. denied
104 S. Ct. 349,
464
U.S. 938). Instead, the equitable doctrine of laches would
determine the reasonableness of timing.
Id. While laches
could bar issuance of an extraordinary writ, the writ would be
premature if sought “to control a ruling that has not yet been
made.”
Id. § 3933 n.11-13, 14 (citations omitted).
[6] In this case, if the Suters were successful on a bank-
ruptcy appeal on the merits, the dismissal before the Nevada
Supreme Court would be just the type of action that would
otherwise evade review. Nevada jurisprudence instructs that
extraordinary writs are a process available to aggrieved per-
sons who would not have standing to directly challenge an
order. Our own jurisprudence affirms that extraordinary writs
are by their nature “extraordinary,” and timeliness of seeking
such relief is dependent upon equitable principles of laches.
However, if the relief were premised on the outcome of a
bankruptcy appeal on the merits, such petition would not be
SUTER v. GOEDERT 13361
ripe until such an order issued. Analyzing Nevada law on
whether or not the Suters have a forum to seek relief, it is not
accurate to say there is “no effective relief for a court to pro-
vide.” Or. Advocacy Ctr., 322 F.3d 1116-17. The Goedert
firm had the burden to establish mootness; they have not done
so.
Id. On the contrary, the trustee and the Goedert firm
achieved a dismissal without notice to the Suters because they
were not parties to the appeal. The Suters are therefore per-
mitted to seek relief in the form of an extraordinary writ,
available to nonparties affected by a decision on appeal of
which they had no notice.
B. The Appeal was not Moot because Nevada Law provides
a Remedy even without a Stay of the Order for Sale.
The cases dealing with mootness under the bankruptcy
code recite the general rule that an appeal is moot if the appel-
lant fails to obtain a stay of the order permitting sale of an
asset. However, these cases do note exceptions and circum-
stances where appeals are not moot. For example, “we occa-
sionally have found that lack of a stay would not moot the
appeal from a foreclosure sale because circumstances would
permit the court to grant relief to the parties.” In re Onouli-
Kona Land, 846 F.2d at 1172 (citations omitted). This excep-
tion to mootness exists when the debtor had a state statutory
right to redeem real property sold to a creditor or other pur-
chaser. See
id. at 1172-73 (discussing In re Sun Valley
Ranches, Inc.,
823 F.2d 1373 (9th Cir. 1987)). “This makes
sense. To the extent that a sale is subject to rights of redemp-
tion, the sale is not truly final.”
Id. at 1173. The panel went
on to discuss that such statutory rights are substantive and
governed by state law.
Id. (citing Butner v. United States,
440
U.S. 48, 55 (1979)). Where the debtor did not have state statu-
tory rights to redemption, the state law exception did not
apply.
In this case, there is no claimed right of redemption, but the
Suters do have a right to seek relief by extraordinary writ if
13362 SUTER v. GOEDERT
they are ultimately successful in the district court on the mer-
its of their appeal of the compromise. The scope and extent
of the Suters’ rights to seek this relief are governed by
Nevada law. As with a right of redemption, a debtor who
objects to a compromise of a personal injury claim might have
an ability to reinstate that claim under state law and the fact
that the relief asserted is not “self executing” should not in
itself mandate a finding of mootness. As discussed above,
Nevada law permits non-parties aggrieved by an order to seek
relief by a petition for an extraordinary writ.
[7] In re Ewell, cited by the district court, summarizes the
bankruptcy “exceptions to section 363(m) mootness rule: (1)
where real property is sold subject to a statutory right of
redemption; and (2) where state law otherwise would permit
the transaction to be set aside.”
958 F.2d 276, 280 (9th Cir.
1992) (emphasis added) (citing In re Mann,
907 F.2d 923,
926 (9th Cir. 1990)). Because the Suters could bring a petition
for an extraordinary writ from the Nevada Supreme Court, the
presence or absence of a stay is immaterial. As demonstrated
in these cases, the presence of a state law remedy to set aside
or undo the transaction renders the bankruptcy appeal on the
merits not moot. Here that remedy is the availability of a peti-
tion for an extraordinary writ.
III. CONCLUSION
The bankruptcy court erred in assuming mootness to adju-
dicate the motion to stay, which if decided on the merits,
would have controlled the mootness question. The district
court perpetuated this error by applying the very mootness,
which was the subject of the appeal, as grounds to refuse to
review the mootness adjudication of the bankruptcy court on
the merits. The Suters’ motion to stay should have been heard
on the merits. Even without a stay, if successful on an appeal
on the merits, the Suters could seek to enforce an order grant-
ing them relief by extraordinary writ because they were not
parties to the stipulated dismissal in the Nevada Supreme
SUTER v. GOEDERT 13363
Court. Consequently, on remand the district court should hear
the Suters’ appeal on the merits.
REVERSED and REMANDED.
