good morning your honor may please the court scot talcott on behalf of reading how we are mistreated predator and walter will home by our also mr predator the appearance i just made in this behalf of the committee wants your creditors and the debtor respectively and why why is it unreasonable to expect an attorney and not who's appearing in this dual capacity to state his or her appearance in that way why why wouldn't a better rule be that we'll just require you as the attorney like you just did to state rather clearly so that we don't have this ambiguity that requires an appeal to figure out years down the road if there was ambiguity i think that would be an excellent rule but in this case even if that were the rule there would be no ambiguity in this case i mean this case the record is littered with i think there's massive them big huge he actually in this on this record that's the problem right there could have been cleared up very easily by what you just did in five seconds at the outset that would make it even clearer but i think there were a number of comments by the trustees counsel and by the court which i think counsel said that's the conflict of interest we know why you don't like this deal because you're not getting money out of it we're taking the money what about the the it's a little odd but you're here on behalf of both firms it seems to me because they are differently situated the your client region hellier is in a particularly bad posture to make this argument given that they really that lawyer could not appear in that capacity correct given the conflict of interest that would  client as an administrative creditor be that one less dollar that went to the committee of unsecured creditors which which your firm what you're more presenting right i know because the three hundred thousand dollars was being divvied up only among those priority creditors the ministry of creditors you could also make the argument that too much was going to wherever it went to to administrative creditors and more sort of the worker york complaint then is that money that undo this doesn't the money that was set aside actually go to the purchaser and no they were secured they were secured creditor who gave money out of the eight point five or eight point five or nine point five million that they bid on the property and they decided to devote monies out of that out of their appropriations for these administrative are these the ministry fees for the trustees and others yes the record reflects that the purchaser did not care where the money went they at said it right but it was but  it but in truth the money would go to them first they are still of unsecured credit i mean there they are secured creditor who hasn't been fully paid no i would disagree because the money would go to the estate trustee that they were paying consideration for the purchase of the property and a release of litigation by that from the debtor or the estate with a trustee representing that estates of they paid some consideration dresses don't collect money for themselves they don't take gifts from the interested parties what is it you want us to do at this point that you think that we have was allowed to accept money only on behalf of myself to carve out only for the trustees fees wasn't wasn't that this follows up from judge by b s question i think wasn't wasn't the car about an integral part of the settlement yes and settlement stands no one's questioning that the trustee made a generally but i don't see how you can i don't see how you can reallocate that money without reallocating what the interests are among the people who settled up that's the difficulty i'm having which me which relates to the equitable so we're not as affable mutinous argument more than the more than the first starring right yes rather that is there's two bases relied on below for the decision in this case being sold and the settlement being reached what they're saying is what did the trustee collected collecting but if you're only discussing who gets the three hundred fifty thousand right directly is your argument right so therefore a stay is not required because the stay just would go to the sale rather than to the allocation of the three hundred fifty three but i'm having trouble following that because it seems to me how you allocate what what that three hundred where that three hundred fifty thousand dollars goes to would if it's going to be a settlement requires them to settle and one of the interests in the settlement was the idea that this sale would come through so you're going to after the fact have people clause but i'm not sure the severability clause does away with the idea of the fact that it is a settlement you want to resettlement now right you want to resettlement but you only want to have a resettlement as to a small part of the settlement seems odd to me i mean it doesn't make it there's less odd for me there's one particular provision only one paragraph and it says that this money being accepted by the trustee is only to be used for the trustee  it's categorically different from being part of it's like a it's it's a i don't know what the word is surcharge or something it's coming from the from the purchase price right yes i prefer not expert in bankruptcy so i'm asking you and i'm not sure i understand this so i'm referring to this is a disguise surcharge and the bankruptcy court has made similar comments there's actually a transcript found in the related district court of appeal it back in one thousand one and in the bankruptcy court back five zero four and far and debbie reynolds is the case that the court felt bound to follow to allow this sale this so called surcharge to go through even though it doesn't look like a surcharge the court referred to this as mischief between the trustee and interested parties he said this mischief can continue that the ninth circuit around was likely in correct that this would be an aberration this would be a rare and i guess i'm just not that we can go and look at those presidents it seems like a package deal that you want to undo and you're saying well we don't want to do it you can't say you want to do it because then you run into an equitable problem so you can say we don't want to do it we just want to change part of the deal and i'm just having trouble seeing how changing part of the deal can logically be done i mean i feel you can do anything i guess but it can't it's not logical to undo something where the major thing that you're doing can't be undone there's only one provision in the agreement that we did ask me to clear unlawful and the rest of the agreement is lawful would the other people have agreed to it if that part wasn't part of the deal you know usually you evie you deal for we'll give you five things and you give us five things and you'll say well that deal is fine except for one one of those five things the other people when you say well i wouldn't given you all those five things if i wasn't getting that one thing or if it wasn't going to so on so it's a deal is a deal right so that's my that's my question that's it seems to me you can't just take part of the deal and say well that's not part of the deal well you can't and you can't say and the answer that normally would be well if you don't accept this part of the deal w bankruptcy estate appellant here lack standing and this court can dismiss this appeal on two interrelated but separate grounds with respect to standing will get into that appellant this appeal is also equitably mood on two separate grounds which either one could support the dismissal of these consolidated appeals and before we get into that though the court did and counsel for the appellants discussed sort of the the background and the i guess if you will be how this settlement got made and i think it's important to  state that this this isn't a gift this isn't a disguised surcharge this is a surcharge authorized by the bankruptcy code under section five zero six c and the bankruptcy code says that a trustee or his professional may surcharge secured creditors collateral to the extent that they expend services that benefits the secured creditor and this is perfectly acceptable and happens all the time and it's in cases where a property may be underwater it really is the saving grace and the only reason the trustee is professionals would be when you work in keeping in the doing the upkeep of the property because the the property gets foreclosed on or sells for less than the amount of secured debt well nobody gets anything and so section five a sixty specifically says you can surcharge secured creditors collateral and often when the secured creditor believes that there may be a surcharge there he's in there this if your creditors nervous about it and all this settlement did was camp the amount of that surcharge it provided certainty to the secured creditor that the cert bankruptcy the code authorized surcharge under five six would not exceed three hundred fifty thousand dollars so this isn't what about severability provision that he refers to but let's get to that severability provision because i am inclined to agree with with your honor some of the comments your honor made which is that the severability provision is there and if that this court somehow found that that now which i think is consistent with his argument is that that the three hundred fifty thousand is directed towards certain people and that that part of the agreement should have been but what and a stay of the sale would have affect certainty as to who is entitle to to this me this why would the participants in the sale care about that that's my question well and you want to raises an interesting point because in my view actually if that provision was just stricken then it may not affect too many folks because the court has already separately approved the surcharge in the amount of three hundred fifty thousand dollars the bankruptcy court has done that has found that the trust fees were reasonable and were reasonably necessary for the well he obviously wants more relief than that he obviously wants some relief which will cause it to go to to be allocated according to his if it was part of the estate that's what he says and if you do that of that and how does that affect well how that's my question but how this is effect is we have a surcharge ordered surcharge in the secured creditor from three hundred fifty thousand dollars so if you're taking some of that money and giving it to somebody else the secured creditor all the sudden is losing more than three hundred fifty thousand dollars out of your degree directed he six still just three fifty right we have a court order from the bankruptcy court that says we can surcharge three hundred fifty thousand from this secured creditor so that that's not in front of your owners and that's not going anywhere so if you take three hundred fifty thousand and give it to somebody else you're just digging into the heart of the party that's not in the room here the secured credit or making the money how i mean i i'm i'm assuming you're correct i'm just trying to understand how that works how do they have to pay more than three hundred fifty thousand now all of us i'm sure you're on your own is what i what i'm saying is that the three hundred fifty thousand dollars surcharge was not approved as part of the settlement agreement this was just a cap to that surcharge this just said that assuming the bankruptcy court would order a surcharge later it would not be over three hundred fifty thousand and that the three hundred fifty thousand would be held in reserve to fund that surcharge so subsidize it seems to cut against  order approves the settlement agreement it says so right in the sale order and no state was sought in the sale or was an appeal so if your owners go back and say settlement agreement not approved you have a conflict in order which is which is a problem right there because who is going to buy your house rely on a chain of title has to rely on these sorts of things so you can have conflicting bankruptcy orders i think if you go back and put on my concern is the state of the state if you're talking about equitable  you could make a real strong argument that if if the people who participated in the sale got something different or no longer have the thing that they thought they bought or something like that because this three three hundred fifty thousand dollars is being reallocated that there's equitable mootness here you have or we have a kind of a loctite argument but if you can't say that it's no wonder a locked tight argument instead you have an argument that the sale went through the people who bought it have the same interest that they bought they getting the same thing for it and all we're doing is reallocating this cap three hundred fifty thousand which you say now isn't even part of the settlement and i think it in your i can't i can't answer that question so if you look at the the answer to that question is the fact that your honor can't pick and choose the settlement before your court your court today is to reject the settlement or approve it if your honor rejects the settlement then it does affect the release is that everybody gets and i side notwithstanding the severability agreement absolutely because you can how that's my question how well ok so i guess the first if your honor thinks this is unlawful you're just going to strike this using the severability provision then i would i think your honour's argument would make some sense because i don't think the positions particularly change because you just have approving the settlement then i think the other party was just there they say all you want to only want to do is overturn the several ball park they claim that says this three hundred fifty thousand capped or whatever goes to these two people rather than going to  allocation that the bankruptcy court would include their clients that's their argument right now and i know that we're here we understand their argument to say oh well if you did that you'd have to invalidate more i say ok i understand that how is that so and you violation of law here what they're saying is that this provision of the settlement agreement somehow didn't meet meet the standard under nine hundred for approval of settlements and you should overturn it or not i don't think they're saying that this provision violate law and if so i would point them to section five zero six which provides of the bankruptcy code which says it's perfectly lawful to have a surcharge under five hundred sixty that goes to the merits of it rather than it not under mortgages one the failure to seek a stay sits on one's rights sufficiently to in itself constitute grounds for dismissing his appeal imo since your time is ticking down can you shift to the standing you get at start up and you have two separate standing arguments i thought you know we don't have two separate standing arguments your honor in the first and the thank you for bringing me back to stand because i think the stand in this case is much is probably the strongest argument for why these appeals need to be dismissed if you read judge fitzgerald opinion i think he agreed with that the words have meaning and when we made our appearances today you have to make your appearance on behalf of you have to tell the court who you're representing and if you don't they can be consequences for this so the first standing argument is to be in a person aggrieved going to the ninth circuit you have to appear an object and enter a commercial finance says that the case of rape the seventh circuit is very on point with respect to appear and object they've spent a lot of there's been a lot of time a lot of paper telling us that they ought to be getting some money that sounds like a pin area interest i would point the courts to the in re debbie reynolds decision and i think that's the decision that shows this court and its ninth circuit decision to show why they don't have a peculiar area interest because a surcharge is a tax on the secured creditors collateral and and it does not is not a property of the estate and so when reading hilliary and walter appear they did they also didn't object on behalf of themselves as read here and i would point your honour's to an order of the bankruptcy court and this is a finding of fact the bankruptcy court that i would submit is clear errors standard of review in a bankruptcy court specifically said in connection with the with the conflict of interest in a motion to withdraw it said that the reading hilliary did not object to the settlement order it said that if i found that well the that was of the official committee here creditors but they point to a couple of places where it started to sound like maybe they were asserting a different interest and they were making arguments that sort of to the court that somehow in the ministry of creditor i being harmed by this but it's one thing to make an appearance on behalf of somebody and another thing to throw up a bunch of arguments and see what sticks and then later as sort of a surprise try to tell the court look i'm going to appeal now and that's why the standing issue is so important because in bankruptcy unlike civil litigation where you have one side versus another side there's hundreds if not thousands of parties that possibly might be affected by a bankruptcy court order and a creditor might have an incentive to just kind of a hold out not saying anything wait until after the order is entered then appeal which gives will give that creditor an extreme amount of leverage because appeals are costly a long process is there some particular rule that you're asking us to adopt if we were to decide the case on this grounds of stand your honor i think finance finance i think we're already has in appear in objection standard but to the extent that this court is going to extend that party are objecting to the relief and if you look at the cases that the cited if you look at the two district court cases the unpublished district court opinions those are very interesting because they're actually trying to parse this out and one of them actually contrary to i think what they cited for said a guy a creditor appeared and he filed papers just on behalf of themself you appear and filed papers and the court still found lack of standing because they were sure that the that the creditor was really opposing the relief so he was there he filed papers unlike the instant circumstances that's why i say here they definitely objected they weren't in favor of this right they just you're just saying they were we don't know are going to make a distinction is to follow ray and point out that you do need to do it it's not enough for me to stand here and and object i have to object on behalf of somebody and if they were objecting to a dual capacity that needs to be noted for somebody the bankruptcy court judge in the party because you think the objections would be different depending on whether they're representing themselves or both they represent i think the bankruptcy courts response to those objections potentially would be different based on who is the one raising the objection it's him it's important who raises the objection in bankruptcy court and that's why the bankruptcy standing requirement is higher than the article three standing requirement because that was recognized by the act and continue about it just is just fungible money it's not that property has been dissipated there's chain of title or other things is that is that all we're talking about i don't think so your honor property has been changed china has changed releases have been  to look at the settlement as a whole but if we just look at the three hundred fifty thousand dollars is that just money that went into the bank for the for the trustee them the trustee could be ordered to dischord i don't think that this court at this stage could order well the trust of the have it's been distributed emotions at the five zero three five zero six c surcharge motion was filed it was approved and the money's been disbursed so they can't get disbursed to home to the trustee and the trustees professional s it was it was given to them how long ago the order approving the five of six cs surcharge would have been entered almost a year ago although i'm not confident in looking my records of what you think sometime in two thousand and seventeen yes your honor so it went it went to the trustee it went to a law firm is that is that or at fox that is your own ok and that it went to an accounting firm that is that's correct your honor s the question in this case the underlying case is whether this is a disguised surcharge debbie reynolds does not discuss a surcharge in the context of a sale of property and a settlement they paid for something they paid for and the bankruptcy court has some some deep concerns dovetailing in what we just heard take up counsel so what is it you want what i asked this question before i don't think i got got a really a square answer from you what is that you want to have happen here reversal of the order dismissing the district court appeal based upon the finding that there was a lack of standing or that there were ok and then that would do what you go back before the district court out outside chapter eleven was not held by the trustee though it's i thought it was paid to these odes paid by this entity that bought the property sold to itself people it went to your taking it from the trustee and giving it back to greenlee then right now we're taking it from the people who went to giving it back to the trustee to distribute as property of the estate oh you're taking it from him as a as a recipient of it to give to these the accounting firm and to the law firm as well as the trustee or just go to the trustee and just say he got to give back the three hundred fifty thousand dollars just he says i've got checks on that a long time ago that cleared at the bank and the district court says not our problem or the district court can actually go to the into the estate and then just go back to the bankruptcy court i know it stays with the trustee the trustee would file a final report an account dispersing the three hundred fifty thousand dollars in accordance with what under five of seven of the g anything at the hearing and in fact they said things about this settlement said they didn't like it for the three hundred thousand dollars carve out to the press to fashion for only one reason to be there and that was to object to that settlement on that basis