choice it can it can dig into this and really take a look at what happened here or it can throw up its hands and say you know we'll agree with the bapi it's constitutionally moot let's  just been a bankruptcy lawyer for many many years i've represented creditors committees i've represented debtors i've been on creditors committees and one thing about the bankruptcy system that good bankruptcy lawyers say is we want to make sure that it's transparent we want to make sure that everything's above board that everyone that everything can be seen and that it sucked and is subject to scrutiny in this particular case what we have here is we have a settlement between debtors husband and wife and their daughters and a sister sister in law it require when you have that kind of a settlement and you have a nine zero one nine motion a compromise motion it requires more than just scrutiny under the n c properties test it requires strict scrutiny ok and when you take a look at the bankruptcy judge and i'm not going to dwell too much on this i'm really going to get into moving this but when you take a look at what the bankruptcy judge did and in fairness to the bankruptcy judge because the first judge recused herself and the second judge was kind of thrown into this last moment she didn't have a lot of time what she did was she prepared a very very lengthy tentative ruling no question about its length but what she didn't do was she didn't dig in she didn't dig in and she didn't scrutinize it very very carefully and then what happened was we had a creditor's committee and we had a creditor's committee that was acting in a rogue capacity and if you're if you're if you're a bankruptcy lawyer you and the creditors committees are designed to represent the interests of all unsecured creditors and that a committee is made up of various of the unsecured creditors body and in essence as the creditors committee attorney you take your direction from the committee you can just the issues with the committee the committee votes it's a very supposed to be a very democratic process what happened here though was that the creditors committee just went out according to the debtors council debtors council says we've got a conflict we represent the husband and wife we can enter into a settlement with the children we need the committee well that's all fine and good in the committee gets in there and starts investigating but what the committee doesn't do committees counsel is it doesn't report to the it doesn't inform the committee about what's going on it's as if you have a client and you're not even and you're just completely ignoring that client whether for the good or for the bad you don't let them know what you're doing and then you don't let them know that you your fashioning an agreement and you don't let them know that you're the proponent of the agreement and then what happens is the hearing takes place all of the large unsecured creditors say no we don't want this to settle it and one of the four factors of course again see properties is a deference to the reasonable views of creditors and and the court again a lengthy tentative ruling but not a lot of in as to really what's going on here is this committee counsel acting in a row capacity how does this affect the settlement and the bottom line is the settlement did nothing for unsecured creditors because as we know the in a very very short ruling says the appeal is constitutionally moot and why is the appeal constitutionally moot because the settlement amount the two hundred thousand dollars that the daughters paid for the release of these fraudulent transfer claims and other things it's been dispersed we can't do anything about it we can't unscramble the egg well i would respectfully disagree with the baptists and i would overbid the bank with a pay more than the two hundred thousand dollars and b will will give the estate a percentage of any recovery that's what the bank has agreed to do in papers filed before the court has of the statute of limitations run ok so i'm getting to that ok but i'll address that right now and then i'll segue back under fire forty six to to your statue limitations and the back up was very clear in its ruling by saying that you know even under the facts of this case would be very very difficult if not impossible and that's why this is constitutionally moot but we have but what we're allowing on is not five forty six what we're relying on is not five forty what we're going on is not five fifty what we're lying on is california law thirty four thirty nine before this bankruptcy case was filed all of the unsecured creditors had standing to bring fraudulent a fraudulent transfer case the bank being one of the largest secured creditors certainly had standing to do that since the statue of limitations has expired under the under five forty six the trustee cannot absent equitable tolling go back in there and bring these claims but thirty four thirty nine is still out there and the bank and the bank it's you know between four to seven years from discovery and the bet and so what would happen the judge ward was question what would happen would be the settlement would be undone the bank would pay the additional monies and the bank would be able to pursue the daughters and  sister sister in law under california state law not in bankruptcy court they would have to go into state court to pursue them now how now can you is it impossible to undo the settlement judge wardlaw no it's not impossible to undo the settlement   from the people to whom it was paid that is the two hundred thousand that the bank would pay that what i'm saying is that instead of the two hundred thousand dollars that was received from the daughters right using these teams the partial recovery from some of those other people i partially well i don't know the exact the problem is we don't know the exact dollar amounts right ok but based upon what i can tell from this record the vast  so the money is either in the reserve remember this case has now been converted to chapter seven i so that at the end of the auspices of the chapter seven trustee so i don't know how much of that one sixty is left but to the extent any of it is that could be applied if not then you would go get the money from the very professionals whose conduct resulted in this the creditors committee who's the application was in the range of about six hundred thousand dollars that's been paid not all of it has been paid  again this estate is administrative lee and soft right but my understanding is a good portion has been and so if you now if you look at the brief of the apple leaders they cite to the lock miller industries case and they say there is no mechanism by which the trustee or any other party can recover the estates expenditure of the settlement funds to third parties including chapter eleven administrative professionals that's their brief page tab please read the lock miller industries case not only read the op block miller's industries case but read the ninth circuit's decision in n d which discusses the locke miller case there's no question that those monies can be brought back from professionals what happens not on often in bankruptcy cases is in chapter eleven you have your administrative claimants they get some payments the case gets converted to seven and now under the priority scheme in the bankruptcy code of five of seven the the chapter seven administrative claims trump the chapter eleven claims and so what the chapter seven trustee can do is he can bring that money back in from the payments to the chapter eleven professionals pay the chapter seven administrative claims that are allowed by the court and then redistribute if there are any monies left over the chapter eleven claims because in essence there's subordinated to the chapter seven state what locke miller says is you can't bring payments back in from ordinary trade from trade creditors where the payments were made in the ordinary course of business why because we want to protect the palmers and so on and so forth but professionals in chapter eleven case understand that there is a risk some in some instances remote in other instances not where settlements contingent upon one another the payments were made just like in this case they were but they were they were added to some of them to administrative claimants and but like i said they were contingent upon one another  the banks who were involved in the settlement one foreclosed based upon the the approval of the settlement so a lot of things happened that could not be put back together in this particular situation we're dealing with money and we're dealing and that can be put back together and that's why relief in this case is possible you only get to constitutional mootness if it's impossible to grant effective relief but we have set forth i'm only going to touch on the underlying that occasioned that the compromise motion and the bankruptcy courts resolution of that compromise motion briefly because i don't necessarily think it's very relevant appeal i think this appeal needs to be decided on this however i'd like to address some statements that were made by opposing counsel questioning the transparency of the underlying settlement and the bankrupt bankruptcy courts ruling on that settlement the record clearly demonstrates that the underlying settlement was negotiated by committee counsel and independent third party the debtors did not become involved with the settlement negotiations until the settlement was essentially already fully negotiated at which point the debtors came and filed the motion along with the committee and s we join in appellant opposition nothing more than not and there's no evidence that the committee went entirely rogue as appellant would suggest in fact  that the bankruptcy court addressed that issue and in response to that argument the committee argued that f i d the appellant was apprised of the settlement prior to the motion and the court took these factors into consideration in making its ruling and issuing a fourteen page tentative addressing all of the n c factors with respect to the ninety nine thousand machines with that being said and back to the issue this one of the fundamental issues here is whether or not the statute of limitations have been blown which is our position that they have been appellant has no circumstances the creditors come in and the for a settlement has been reached before claims have been released under this situation your honor this settlement has been fully consummated claims and adversary proceedings have been dismissed with prejudice these claims are no longer out there for appellant to essentially assume or be assigned because they've been settled completely and binding releases have been issued by parties that the claims in fact don't exist anymore so i'm not sure that this court could do anything to confirm to confer standing on a patent at this point in time but not only have the claims been settled and not only have these claims been released in actions been dismissed with prejudice but there's also the issue of the funds and the recovery of the funds opponent suggests that it's easy to just go around recovering funds from these third party some of which actually all of which are not even involved in th and would be adversely affected third parties who aren't even here or have the opportunity to argue but it's more than just the administrative claims in this case the record establishes that taxing agencies have been paid the record establishes that the united states trustee has been paid and the record establishes that professionals chapter eleven professionals have been paid pursuant to valid court orders this is not a situation where you know are those those are the principal places where the funds have been dispersed the county and state for taxes the u s trustee and the attorneys your honor we don't have an exact amount of what funds have gone where it's my understanding that the trustee is currently holding approximately one hundred thousand dollars what portion of those funds actually came into the estate as a result of this settlement is entirely unclear but he's holding approximately one hundred thousand dollars i would assume that the majority of that came in pursuant to this settlement simply because i don't think there were other substantial recoveries in this case  however a lot of those funds have gone out actually actually there were other substantial recoveries in this case and a certain portion of the admin claims have been paid throughout the entirety of this case and so it is it is entirely unclear what portion of the funds that the trustee is holding actually came in as a result of the settlement so it's essentially near impossible to unscramble the egg at this point and even if the egg were unscrambled it's entirely unclear and it's our position that appellant wouldn't even have standing to prosecute these claims that no longer even exist when taking into account outstanding chapter eleven administrate of fees yes the chapter eleven professionals are owed substantially very very very speculative at this point as to whether or not i'm scrambling the egg today by this court would result in appellant being able to essentially just go back in to state court and start mitigating these claims because first you have the issue of standing that i addressed before essentially these claims just no longer exist but then you have the issue of and appellant readily admits this appellant has to go back into the bankruptcy court and seek relief from the automatic stay in order to prosecute these claims in a state court and there's no guarantee that an order is going to be entered granting relief from the automatic stay that issue is going to be heavily litigated it's not going to  it's going to be heavily litigated there are going to be several parties an interesting time in with respect to that motion and i'd say the chances are probably substantially less than average that that motion would even be granted because even if it were granted appellant doesn't have standing to prosecute these claims in the state court aside from that those those those are the primary issues with respect to two equitable and constitutional movements and there was actually a case cited in opponents brief the case by the name of it's a tenth circuit case  i said i was only going to touch on briefly and i don't want to focus too much on that because i don't think that's an issue here i think this is all decided on the issue of equitable and constitutional limits but in that case in particular appellant cites that case for the proposition should be assigned the claims and that any objection creditor should have the opportunity to litigate these claims well subsequent case law is made it clear that there is no such per se rule in the tenth circuit and definitely none that i'm aware of in the ninth circuit and i just wanted to bring out to the court's attention just in case the court was going to be in any way influenced by that case other than that i do not have any more unless the panel has any questions o mr lim represented the bank on the committee mr lim also happen to have represented another committee members that he represented two of the committee members and mr lim's declaration which is  uncontroverted says that i was on the committee i fully participated the committee was never a prize that the committee counsel was doing this the can to the committee was never you know given an opportunity to express its views as to this eccentric cetera i mean this is very troublesome if you allow i don't know your honour's how i mean it's almost as if i'd like to analogize it and maybe this is bad to a personal injury claim where you represent someone and you enter into settlement negotiations and you don't tell them and you settle it and you go in and you get a court approval of the settlement and then you go back to your client and you say well that's it and not only and not and it's even worse than that because this council's admitted this case is an admin is administrative leave insolvent and so therefore you're go back to your client you say i'm sorry i settled it i got enough to pay me part of my fees but you're not going to get anything but i feel really bad for you it just smells it doesn't smell good and it's not the transparency that the bankruptcy requires what about the argument that the people who then paid money are not here in this case to argue their position the taxing it's if you take a look at it if you look at the settlement agreement itself there was about three hundred thousand or so hundred thousand dollars that were being held for the daughters by debtors council from the other settlements that had been achieved in the case the two hundred of that three hundred was used to fund this settlement if not of the four hundred and not my numbers are a little bit off but not the four hundred went back to the daughters why because tax claims were paid not out of the two hundred but out of the three hundred some odd hundred thousand and those tax claims were paid for the winnetka property which was awarded to the daughters as a result of this element and it was paid for the property in san trustee they're not they have notice of this way did the do do we have a mechanism for getting money back from the taxing authority i don't think you need to get money back from the taxing authority i think that's a red herring i mean no matter how this would play out the taxing authority is going to have to be paid for you and the two hundred thousand to be paid out of the state returned and you want to sound and want in mind right the government should be unwound that's right and like i said if the trust you sitting on council says one hundred thousand dollars well let's accept that number whatever the amount of the two hundred thousand that was paid to the taxing authority which i don't know which i don't know how much it was but the bank is going to put the two fifty end so you've got now three fifty  i mean the two the two fifty will cover whatever that was to the extent there's a shortfall again it's not going to come out of the taxing authorities the u s trust me it won't come out of the u s trustees pocket either what is what did the u s trust you get it got quarterly fees how much  the quarterly fees be in this case i don't know three twenty five six fifty twelve hundred dollars that's to minimize the parties that are not here today the council says are not privy to this appeal have notice of this appeal and they could have participated who are the committee counsel and debtors counsel and they and they knew it and they knew about this from day one council says well the claims have been dissed claims have been dismissed and so you know there 's prejudice there whose claims you see on daughters claims and they've had notice of this thing from the very beginning they've known what has gone on so by undoing that coercion the claims are speculative well we address that issue in connection with the nine a one nine settlement and if they are they aren't that's on the back the bank is willing to pursue these claims at no cost to the estate the state only benefits unsecured creditors only benefit if the bank is successful in this fraudulent transfer litigation and they bring in money twenty percent of the net recovery would go to the the bankruptcy