## United States Bankrup tcy Appellate P anel FOR THE EI GHT H CIRCUI T

__ __ __ __ __ __ __ _
No. 1 1- 60 67

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In re: Jam es Arth ur Co ck hr en ; * Marg aret Lou is e Co ck hr en *

* Deb to rs *

* Mar ga ret Lou is e Co ck hr en , als o k no wn * as M arg aret L. Glas s- Co ck hr en ; * Ja m es Arth ur Co ck hr en , do in g b us in es s * as C oc kh ren Ro of

in g & Co nt ract in g, * App eal fro m th e Uni te d S ta te s do in g b us in es s as Co ck hr en Hou si ng * Ban kr up tc y Co ur t fo r th e Mg m t * Nor th ern Dis tri ct of I owa
* Deb to rs - App el la nt s *

*

v. *

* Mi dWest One Ban k, i ts Hol di ng Co

. * and /o r an y

of t he ir Di rect or s, Offi cers , * for m er an d c ur ren t Em

pl oyees, * Agen ts an d At to rn ey s *

* In te res te d p art y

- App el le e *

* Mi ch ael C. Dun ba r *

* Trus te e - Ap pe ll ee *

__ __ __ __ __ __ __ _
Su bm it te d: Marc h 2 9, 2 01 2 Fi le d: Apri l 9 , 20 12

__ __ __ __ __ __ __ _Befo re SC HERMER, FEDERMAN, an d VENTERS, Ban kr up tc y Ju dg es

FEDERMAN, Ban kr up tc y Ju dg e

Deb to rs J a mes an d Mar ga ret Co ck hr en ap pe al fro m th e Ban kr up tc y Co ur t’s 1
Ord er Gran ti ng th e Trus te e’s Mo ti on fo r App ro va l of Com pr om is e or Set tl em en t of
Co nt ro ve rs y , rel at in g to cl ai m s th ey as se rte d ag ai ns t Mi dWest One Ban k fo r le nd er li ab il it y an d di sc riminat io n. The y al so req ue st o r a l arg um en t on ap pe al

. Fo r th e

reas on s th at fo ll ow, th ei r req ue st fo r or al arg um en t is DENIED, an d th e Ban kr up tc y Co ur t’s Ord er i s AFF IRM ED.

FACTUAL BACKGRO UND

The so ur ce of th e di sp ut e be twee n th e Deb to rs an d Mi dWest One Ban k is a lo an

se cu red by t he Deb to rs ’ pr op ert y , whi ch co ns is ts of t he ir r es id en ce an d an ad jacen t

co m m erci al lo t. The pa rti es ha ve be en in vo lv ed in li ti ga ti on ov er th e lo an si nc e 20 07

. Tha t l it ig at io n h is to ry

is su m m ari zed as f

ol lo ws:

Ca se No . CVCV10 40 21 - Th e Fir st St at e Co ur t Le nd er

Lia bi li ty Acti on

The Deb to rs , pr o se , fil ed a le nd er l i a b i l it y act io n ag ai ns t th e Ban k an d it s fo rm er pr es id en t, Ja m es C hi zek
, on Decem be r 11
, 20 07
, in th e Io wa Dis tri ct Co ur t in Bl ack Hawk Co un ty. On Ju ly 1, 20 09
, th e Co ur t gr an te d th e Ban k’s Mo ti on fo r Su m m ary Ju dg m en t an d d is m is se d t he cas e.

The Ho no rab le Pau l J . Kil bu rg , Uni te d S ta te s B an kr up tc y Ju dg e fo r th e 1 Nor th ern Dis tri ct of I owa

.
2Ca se No . EQCV10 49 84 - Th e Fir st For ecl os ur e Act io n

Thi s was a Fo recl os ur e Pet it io n fil ed by th e Ban k in th e Io wa Dis tri ct Co ur t in Bl ack Hawk Co un ty on Mar ch 31
, 20 08

. The Deb to rs , pr o se , fil ed Ans wers an d al so

as se rte d co un te rcl ai m s ag ai ns t th e Ban k an d Ch iz ek

. The fo recl os ur e was st ay ed by

a Ch ap te r 13 ba nk ru pt cy fil in g, C a s e No. 08 -0 13 28
, di sc us se d im m ed ia te ly be lo w. Bas ed on th e co nf

irmed pl an in th at Ch ap te r 13 cas e, th e Ban k di sm is se d th e fo recl os ur e pa rt of th e pr o ceed in g wit ho ut pr ejud ic e. On Sep te m be r 9, 20 10
, th e Co ur t g ran te d t he Ban k’s m ot io n t o d is m is s t he Debt or s’ cou nt ercl ai m s.

Ca se No . 08 -0 13 82 - Th e Ch ap te r 1 3 Ba nk ru pt cy Ca se

The Deb to rs , th ro ug h cou ns el
, fil ed a Ch ap te r 13 ba nk ru pt cy pe ti ti on on Ju ly 2, 20 08 in th e B a nk ru pt cy Co ur t fo r th e Nor th ern Dis tri ct of Io wa. Deb to r Ja m es Co ck hr en was di sm is se d ou t of the cas e on Octo be r 2, 20 08

. An Order Co nf irming
Am en de d Pl an was en te red as to Mar ga ret Co ck hr en o n N o v e mb e r 30
, 20 09

. The
Ban kr up tc y Co ur t di sm is se d th e cas e on Octo be r 7, 20 10 on th e Ban k’s m ot io n, du e
to de fau lt in th e te rm s o f th e co nf irmed pl an

.

Ca se No . LACV11 23 67

- Th e S eco nd St at e Co ur t Le nd er

Lia bi li ty Acti on

W hi le th e Ch ap te r 13 Ban kr up tc y Cas e was pe nd in g, th e Deb to rs fil ed an ot he r
pr o se le nd er li ab il it y Pet it io n a g a i ns t th e Ban k an d Ch iz ek on Apr il 7, 20 10 in th e Io wa Dis tri ct Co ur t in Bl ack Hawk Co un ty. The Ban k an swe red an d tri al was
ap pa ren tl y se t fo r O c t o b e r 4, 20 11

. Thi s act io n was st ay ed by th e Deb to rs ’ in st an t Ch ap te r 7 fil in g on Mar ch 22
, 20 11
, di sc us se d be lo w. Afte r th e Ban kr up tc y Co ur t in th e in st an t Ch ap te r 7 ba nk ru pt cy cas e li fte d th e st ay to al lo w t he Ban k to de fen d in th is c a s e , an d de ni ed th e Deb to rs ’ m ot io n to di sm is s th e ba nk ru pt cy , th e Io wa Co ur t di sm is se d th e Seco nd St at e Co ur t Len de r Liab il it y Acti on on Ju ne 30
, 20 11
,

3ba se d on th e co nc lu si on th at th e cau se of act io n be lo ng ed to th e Trus te e an d th at th e

Deb to rs lac ke d s ta nd in g.

Ca se No . EQCV11 49 57

- Th e S eco nd For ecl os ur e Act io n

W hi le th e Seco nd St at e Co ur t Len de r Liab il it y Acti on was pe nd in g, th e Ban k fil ed a se co nd fo recl os ur e pe ti ti on on Decem be r 29
, 20 10 in th e Io wa Dis tri ct Co ur t fo r Bl ack Hawk Co un ty. The Deb to rs an swe red pr o se an d a g a i n as se rte d

co un te rcl ai m s ag ai ns t th e Ban k an d a cu rren t ba nk em pl oyee, Bi ll Ro th

. Heari ng on th e Ban k’s Mo ti on fo r Su m m ary Ju dg m en t was se t fo r Mar ch 25
, 20 11

. Thi s Seco nd
Fo recl os ur e Acti on w as al so st ay ed by th e Deb to rs ’ in st an t Ch ap te r 7 ba nk ru pt cy fil in g on Mar ch 22
, 20 11

. Ult i mat e l y, t h e co un te rcl ai m s in th is cas e were al so di sm is se d o n J un e 3 0, 2 01 1, b as ed on th e st at e co ur t’s co nc lu si on th at th os e cl ai m s be lo ng ed to th e Tru st ee.

Ca se No . 11 -0 05 60 - Th e In st an t Ch ap te r 7 Ban kr up tc

y Ca se

As st at ed
, on Mar c h 22
, 20 11
, th e Deb to rs , th ro ug h co un se l, fil ed th is

vo lu nt ary Ch ap te r 7 ba nk ru pt cy pe ti ti on to st op th e Seco nd Fo recl os ur e Acti on

. The Deb to rs li st ed co un te rcl ai m s ag ai ns t th e Ban k as an as se t on Sch ed ul e B, wit h a va lu e of zero

.

On Mar ch 25
, 20 11
, th e Ban k fil ed a mo t i o n fo r rel ie f fro m th e st ay

. The Deb to rs fil ed an ob

jecti on , as se rti ng , am on g ot he r th in gs , th at th e pr op ert y ha d eq ui ty

an d th at th e Ban k had m is ch arac te riz ed th e lo an as a co m m erci al lo an , rat he r th an a

res id en ti al lo an . Heari ng on th e m ot io n fo r rel ie f was set on Apri l 2 2.

Mea nwh il e, as m en ti on ed ab ov e, on Apr il 1, 20 11
, th e Deb to rs fil ed a pl ead in g in th e Seco nd Fo recl os ur e Acti on , al le gi ng le nd er li ab il it y an d di sc riminat io n cl ai m s
ag ai ns t t he Ban k a nd it s emplo y ee, Bi ll Ro th

.

4On Apr il 21 , t he Deb to rs m ov ed to di sm is s th e in st an t C h a pt er 7 ba nk ru pt cy

cas e. The y sa y in th ei r ap pe al br ie f th at th ey de ci de d to di sm is s th e cas e whe n th ey le arn ed at t he ir Apr il 18 m eet in g of cred it or s th at th e Ch ap te r 7 fil in g wou ld no t ul ti m at el y st op th e Seco nd Fo recl os ur e Acti on

. Bo th th e Uni te d S ta te s Trus te e an d th e Ban k o pp os ed di sm is sa l. The Uni te d St at es Trus te e st at ed th at th e Tru st ee was in ve st ig at in g po te nt ia l as se ts , a n d t h a t th e Deb to rs ha d no t de m on st rat ed cau se to di sm is s th ei r Ch ap te r 7 cas e, as req ui red un d e r 1 1 U

. S

. C. § 70 7( a). The Ban k’s ob jecti on st at ed th at th e Deb to rs m ay ha ve as se ts rel at in g to a ba rb eq ue bu si ne ss no t

or ga ni zed un de r Io wa la w an d, fu rth er, th at th e Ban k ha d m ad e an of fer to th e Trus te e
to pu rch as e th e Deb to rs ’ cl ai m s ag ai ns t it fo r $5 ,00 0. The Ban k sa id th e Trus te e ha d

acce pt ed th e of

fer, su bjec t to no ti ce an d Co ur t ap pr ov al
, an d th at t h e Trus te e ha d

c om m un ic at ed th is to th e Deb to rs an d th ei r at to rn ey at th e Apr il 18 m ee t i n g o f cred it or s.

At th e Apr il 2 2 h e a r i n g o n t h e mo t i o n f o r r e l i e f f

r o m s t a y, t h e Debt or s wit hd rew th ei r ob

jecti on to it

. The m ot io n fo r rel ie f fro m st ay was gr an te d th at sa m e da y , bo th to al lo w th e Ban k to pr oc eed wit h it s f or ecl os ur e of th e res id en ce an d

co m m erci al lo t, an d to al lo w th e Ban k, Ch iz ek
, an d Ro th to d e fen d ag ai ns t th e Deb to rs ’ co un te rcl ai m s in th e Seco nd St at e Co ur t Len de r Liab il it y Ac t i on an d th e Seco nd Fo recl os ur e Act io n i n B la ck Hawk C ou nt y

.

On Apr il 29
, 20 11
, th e Deb to rs ’ at to rn ey fil ed a m ot io n to wit hd raw as co un se l, whi ch m ot io n was gr an te d on May 6 , 2 01 1. The Deb to rs ha ve pr oc eed ed pr o se in th e in st an t Ch ap te r 7 b an kr up tc y cas e si nc e th at ti m e.

On May 13
, 20 11
, th e Ban kr up tc y Co ur t de ni ed th e Deb to rs ’ m ot io n to di sm is s th e ba nk ru pt cy cas e be cau se th ey fai le d to sh ow su ffi ci en t cau se an d be cau se it was
pr ob ab le th ere wou ld be a s s e t s fo r di st rib ut io n to cred it or s. The Deb to rs di d no t
ap pe al th at Orde r.

5On Ju ne 6, 20 11
, th e Deb to rs fil ed a Mo ti on fo r Decl arat or y Ju dg m en t, Fai lu re

to Co m pl y to 20 Day Not i c e o f R e s c i ss io n, an d Req ue st fo r Rel ie f fo r Vio la ti on of Reg ul at io n Z Pro vi si on s of TILA, in th e Seco nd Fo recl os ur e Acti on

. The y fil ed a si m il ar p le ad in g i n t he Ban kr up tc y Co ur t o n J un e 8

.

On Ju ne 9, 20 11
, th e Trus te e fil ed wit h th e Ban kr up tc y Co ur t a m ot io n to se ll th e Deb to rs ’ cau se s of act io n ag ai ns t th e Ban k an d it s of fic ers an d e mp l o ye e s f

or $ 5 ,00 0. On Ju ne 15
, 20 11
, th e Trus te e wit hd rew th at m ot io n as be i n g f i l e d in co rrec tl y , an d fil ed in st ead a m ot io n to ap pr ov e a co m pr om is e or se tt le m en t of

co nt ro ve rs y

. Tha t m ot io n st at ed th at th e Trus te e ha d rece iv ed an of fer fro m th e Ban k

to pu rch as e al l of th e Deb to rs ’ cl ai m s ag ai ns t th e Ban k an d it s ag en ts an d em pl oyees, whe th er pa st or pr es en t, an d al l of th e Deb to rs ’ st oc k, if an y , in two un sc he du le d no nop erat in g Io wa co rp or at io ns , for a to ta l s um of $ 5,0 00

.

On J un e 1 6, 2 01 1, wh il e th is ba nk ru pt cy cas e was pe nd in g, th e Deb to rs fil ed a la wsu it in th e Uni te d S ta te s Di st ric t Co ur t fo r th e Nor th ern Dis tri ct of Io wa, Cas e No. 6: 11 -cv -0 20 27 -EJM (th e “ Dis tri ct Co ur t Acti on ”), ap pa ren tl y as se rti ng th e sa m e cl ai m s th ey were as se rti ng in th e Seco nd Fo recl os ur e Acti on an d in th e Ban kr up tc y Co ur t, i nc lu di ng vi ol at io ns of R eg ul at io n Z an d t he Trut h i n Len di ng Act.

On Ju ne 23
, 20 11
, th e Ban kr up tc y Co ur t de ni ed th e Deb to rs ’ Mo ti on fo r Decl arat or y Ju dg m en t fil ed in th e in st an t Ch ap te r 7 ba nk ru pt cy cas e, in pa rt be cau se th e Deb to rs co nc ed ed at he ari ng th at th e is su es sh ou ld be li ti ga te d in th e ot he r act io ns th at were t he n s ti ll pe nd in g i n s ta te co ur t an d t he fed eral di st ric t co ur t.

On Ju ne 28
, 20 11
, th e Deb to rs fil ed an Object io n t o t he m ot io n to se ll
,
as se rti ng th at th e Ban k was att em pt in g t o v io la te th ei r ri gh ts by sel li ng th ei r cau se s of act io n.

6As m en ti on ed ab ov e, on Ju ne 30
, 20 11
, th e Io wa Dis tri ct Co ur t di sm is se d th e

Seco nd St at e Co ur t Len de r Liab il it y Acti on , as well as th e Deb to rs ’ co un te rcl ai m s in th e Seco nd Fo recl os ur e Acti on , co nc lu di ng th at t h e c l ai m s be lo ng ed to th e ba nk ru p t c y Trus te e an d th e Deb to rs la ck ed st an di ng

. It al so de ni ed th e Deb to rs ’
Mo ti on fo r Decl arat or y Ju dg m en t in th e Seco n d Fo recl os ur e Acti on be cau se th ei r cl ai m s i n th at pl ead in g were ba se d on fed eral la w an d sh ou ld th eref or e be li ti ga te d in th e Dis tri ct Co ur t Act io n.

On Ju ly 25
, 20 11
, th e Deb to rs fil ed an Am en de d Sch ed ul e B in th is ba nk ru pt cy

cas e, li st in g t he ir c la im s ag ai ns t t he Ban k wi th a va lu e o f $2 .5 m il li on

.

On Aug us t 10
, 20 11
, th e Ban kr up tc y Co ur t se t th e Ban k’s m ot io n to

co m pr om is e fo r he ari ng on Sep te m be r 14 , 20 11 . The Ba nk fil ed an ex hi bi t l is t an d

ex hi bi ts for th at he ari ng on Sep te m be r 2, 2 01 1.

On Sep te m

be r 12
, 20 11
, th e D e b t o r s fil ed a m ot io n to co nt in ue th e he ari ng

. Tha t m ot io n st at ed
, in it s en ti ret y : “ Due to un fo rs een he al th co nc ern s, th e [Deb to rs ] he reb y req ue st th at th e he ari ng sc he du le d fo r Sep te m be r 14
, 2 0 1 1
, at 9: 45
, in
In de pe nd en ce, Io wa, be res ch ed ul ed .” The fo ll owi ng da y , Sep te m be r 13
, th e Co ur t de ni ed th e m ot io n, co nc lu di ng th at th e Deb to rs ha d no t sh ow n go od cau se fo r
gr an ti ng t h e co nt in ua nc e. The Co ur t co nd uc te d th e he ari ng as sc he du le d, an d th e Deb to rs di d no t ap pe ar. On Sep te m be r 16
, 20 11
, th e Co ur t en te red an Ord er gr an ti ng th e Tru st ee’s m ot io n t o c om pr om is e.

In su m , th e Co ur t co nc lu de d th at , be cau se al l of th e al le ge d act s ha d oc cu rred

on or be fo re th e ba nk ru pt cy fil in g da te of Mar ch 22
, 20 11
, th e De b t o rs ’ as se rte d cl ai m s ag ai ns t th e Ban k an d it s ag en ts an d em pl oyees wer e al l as se ts of th e ba nk ru pt cy es t a t e p u r su an t to 11 U.S.C. § 54 1( a)(1 ). Fu rth er, th e Deb to rs ha d no

ex em pt io n to as se rt in th e cl ai m s. Fi na ll y , th e Co ur t he ld th at Ban kr up tc y Ru le 90 19
pr ov id ed th e Trus te e wit h th e au th or it y , su bjec t to no ti ce an d he ari ng , to co m pr om is e

7th e cl ai m if he de te rm in ed th at a se tt le m en t was in th e be st in te res t of cred it or s. The

Co ur t fo un d th at th e Deb to rs ’ cl ai m s ag ai ns t th e Ban k were “ sp ecu la ti ve at be st ,” th at th e Trus te e was no t wil li ng to i n c ur th e ex pe ns es as so ci at ed wit h pr os ecu ti ng th e

se em in gl y un su bs ta n ti at ed le nd er li ab il it y an d di sc riminat io n cl ai m s, an d th at th e Deb to rs were no t rep res en te d by co un se l in th e Dis tri ct Co ur t Acti on

. Bas ed on th at , th e Co ur t fo un d th at th e of fer of $5 ,00 0 was sa ti sf

act or y an d was no t de min imi s , an d

ap pr ov ed th e se tt le m en t. The Debt or s ap pe al

.

STANDARD OF REVIEW

W e rev ie w fin di ng s of fact fo r cl ear erro r, an d le ga l co nc lu si on s de no vo

. A 2
f i nd in g is cl earl y erro ne ou s whe n th e rev ie win g co ur t is “ le ft wit h th e de fin it e an d fir m co nv ic ti on th at a m is ta ke ha s be en co m m it te d.” We rev ie w th e Ban kr up tc y

3
Co ur t's or de r ap pr ov in g a co m pr om is e or se tt le m en t fo r an ab us e of di sc ret io n. An 4
ab us e of di sc ret io n oc cu rs if th e co ur t ba se s it s ru li ng on an erro ne ou s vi ew of th e la w

or on a cl earl y erro ne ou s as se ss m en t of th e ev id en ce. In te rp ret at io n of ru le s pr es en ts 5

a q ue st io n o f la w th at is su bjec t t o d e n ov o re vi ew. 6

Fir st Na t’l Ban k o f Ol at he v. Pon to w (In re Po nt ow ), 11 1 F .3d 60 4, 6 09 2 (8 th Cir . 19 97 ); Sh ol da n v . Diet z (I n r e S ho ld an ), 10 8 F .3d 88 6, 8 88 (8t h C ir. 19 97 ); F ed . R. Ban kr . P. 80 13

. And er so n v . Bess emer

Cit y , 47 0 U.S. 5 64 , 57 3, 1 05 S.Ct . 15 04 , 15 11 , 84 3 L.Ed.2 d 5 18 (19 85 ).

In re Ra ci ng

Se rv ic es , Inc

. , 33 2 B .R. 58 1, 5 84 (B.A.P. 8t h C ir. 2 00 5) 4 (ci ti ng Van Hor n v . Tri ckey , 84 0 F .2d 60 4, 6 07 (8t h C ir.1 98 8) ).

Id

. (ci ti ng Co ot er

& Gell v. Har tma rx Co rp

. , 49 6 U.S. 3 84 , 40 5, 1 10 S.Ct

. 5 24 47 , 11 0 L.Ed .2d 35 9 (1 99 0) ).

Id

. (ci ti ng In di an a L umb er men s Mu t. In s. Co . v. Timb er la nd Pal le t a nd 6 Lu mbe r C

o ., 19 5 F .3d 36 8, 3 74 (8 Cir . 19 99 )). th

8DISCUSS IO N

The Deb to rs ap pe ar to as se rt fo ur is su es on ap pe al

. Fi rs t, th ey po in t ou t in th ei r Rep ly Bri ef th at th e Trus te e di d no t fil e a br ie f on ap pe al

. The y in co rrec tl y as se rt th at th e br ie f fil ed by th e Ban k’s at to rn ey was al so fil ed on be ha lf of th e Trus te e. It was

no t. The br ie f was fil ed on be ha lf o f on ly the Ban k. As a pa rty to t he set tl em en t to

w h ic h th e Deb to rs ob

ject, an d as a na m ed App el le e in th is cas e, th e Ban k is a n in te res te d pa rty an d ha s st an di ng to de fen d i t s p o s i t i o n on th e se tt le m en t an d fil e a br ie f on ap pe al

. 7

Seco nd
, th e Deb to rs as se rt th at th e Co ur t erre d by de nyin g th e i r mo t i on to di sm is s th e cu rren t ba nk ru pt cy cas e an d th en in al lo win g th e cas e to pr oc eed de sp it e th ei r la te r fil in g de fic ie nc ie s – whi ch th ey co nc ed e were in te nd ed to cau se th e Co ur t
to di sm is s th e cas e fo r fai li ng to co mp l y wit h th e Co ur t’s Ru le s an d Ord ers

. Howev er, th e Deb to rs di d no t ap pe al fro m th e Ord er de nyin g th ei r m ot io n to di sm is s,

an d no th in g ob li ga te d th e Co ur t to di sm is s th e cas e ba se d on th e Deb to rs ’ in te nt io na l fil in g de fic ie nc ie s, pa rti cu la rly whe n th e Co ur t fo un d th at di sm is si ng th e cas e was no t in th e be st in te res t of cred it or s. As th e Ban kr up tc y Co ur t he ld in de nyin g th e m ot io n
to di sm is s, the Ban kr up tc y Co de do es no t pro vi de a si m pl e es cap e m ech an is m fo r a Ch ap te r 7 deb to r who de ci de s he want s to ab an do n h is cas e p rio r to di sc ha rg e. “ A 8
Ch ap te r 7 de bt or ha s no ab so lu te rig ht to di sm is s hi s or he r cas e; in or de r to

vo lu nt ari ly di sm is s th e c a s e , th e de bt or m us t sh ow cau se .” Fu rth er, al th ou gh § 9
70 7( a) ex pr es sl y men t i o n s on ly cau se , co ur ts ha ve read in to it a req ui rem en t to
pr ot ect cred it or s as well

. 1 0

Se e Fed . R. Ban kr . P. 80 09 (a)( 2)

. 7

In re As bu ry , 42 3 B .R. 52 5, 5 29 (B.A.P. 8t h C ir. 2 01 0)

. 8

Id

. (ci ta ti on om it te d)

. 9

Id

. 1 0

9Thi rd
, th e Deb to rs as se rt th at th ey were de pr iv ed of th ei r du e pr oc es s an d ci vi l

rig ht s whe n th e Co ur t d e n i e d th ei r m ot io n fo r co nt in ua nc e an d he ld th e he ari ng in th ei r ab se nc e. 1 1

The de ci si on to gr an t or de ny a co n t in ua nc e of a he ari ng is wit hi n th e di sc ret io n of th e tri al co ur t an d is on ly rev ers ib le up on sh owi ng ab us e of di sc ret io n. 1 2

“ W e wil l no t ov ert ur n a tri al co ur t’s de ni al of a co nt in ua nc e un le ss t h e tri al co ur t cl earl y ha s ab us ed it s di sc ret io n, be cau se co nt in ua nc es are no t fav or ed an d sh ou ld be

gr an te d on ly whe n a co m pe l l i n g r e a so n ha s be en sh own .” Co ns is te nt wit h th at 1 3

pr in ci pl e, th e Loc al Ru le s fo r th e Nor th ern Dis tri ct of Io wa pr ov id e th at a co nt in ua nc e

m ay be gr an te d fo r go od cau se an d th at a m ot io n to co nt in ue m us t sp eci fy th e gr ou nd s

The Deb to rs als o s ay

th at ap pr ov in g t he set tl em en t wi th ou t t he ir 1 1
at te nd an ce at th e h eari ng is a vi ol at io n o f Arti cl e 8 of t he Decl arat io n o f Hum an Ri gh ts , app aren tl y

refe rri ng to Arti cl e 8 of t he Uni ve rs al Decl arat io n o f Hum an Ri gh ts , whi ch pro vi de s t ha t “ [e]ver y on e h as th e ri gh t t o a n e ffec ti ve rem ed y by the

co m pe te nt na ti on al tri bu na ls for act s v io la ti ng th e fu nd am en ta l ri gh ts gra nt ed hi m by the co ns ti tu ti on or b y

law.” Ho wev er, t he Uni ve rs al Decl arat io n o f Hum an Ri gh ts is a de cl arat io n b y th e Uni te d Nat io ns , no t a t reat y , and do es no t p ur po rt t o be a st at em en t o f la w or l eg al ob li ga ti on

. Sn eed v. Ch as e Home Fin an ce LL C
, 20 07 W L 18 51 67 4 (S .D. Cal. J un e 2 7, 2 00 7) (no t re po rte d) ; Tel -Ore n v . Lib ya n Ara b Rep ub li c , 72 6 F .2d 77 4, 8 18 (D.C. Cir . 19 84 ). It d oe s n ot ap pl y to a de bt or ’s

cau se of a ct io n a ga in st a le nd er i n b an kr up tc y cas es

. Id

.
In re Ri ce , 35 7 B .R. 51 4, 5 17 (B.A.P. 8t h C ir. 2 00 6) ( ci ti ng Les sma nn v. 1 2 Co mm'r o f In te rn al Reven ue , 32 7 F .2d 99 0, 9 96 (8t h C ir.1 96 4) ).

Uni te d S ta te s v. Y

ou ng , 94 3 F .2d 24 , 25 (8t h C ir.1 99 1) (qu ot at io n 1 3

om it te d) , cert . den ie d, 5 03 U.S. 96 4, 1 12 S.Ct . 15 71 , 11 8 L.Ed .2d 21 6 (1 99 2)

. Se e al so In r e Ma rt wi ck , 60 F.3d 48 2 (8 th Cir . 19 95 ); Ka ns as Cit y S ta r C o. v. U.S

. , 24 0 F .2d 64 3, 6 51 (8t h C ir. 1 95 7) (ho ld in g t ha t m ot io ns to co nt in ue are ad dr es se d to th e so un d d is cret io n o f th e tr ia l co ur t an d d eci si on s o n s uc h m ot io ns wil l b e
su st ai ne d i n t he ab se nc e o f pu re ab us e o f su ch di sc ret io n)

.
10fo r th e req ue st

. Fu rth er, th e Ru le s pr ov id e th at a m ot io n to co nt in ue whi ch do es no t 1 4

co m pl y wit h t he Loca l Ru le m ay be de ni ed wit ho ut he ari ng

. 1 5

Th e D e bt or s as se rt th at th e Ban kr up tc y Co ur t “ di sr eg ard ed ” an d “ ig no re d ” th ei r req ue st fo r co nt in ua n c e

. To th e co nt rary, al th ou gh th e Co ur t ha d de ni ed th e

m ot io n th e da y pr ev io us to th e he ari ng , th e Co ur t ad dr es se d th e req ue st at th e he ari ng

. The Co ur t de ni ed th e m ot io n, in pa rt, be cau se th e Deb to rs fai le d to ab id e by th e Loc al
Ru le s. Loc al Ru le 50 71 -1 (c) req ui res a pe rs on in te nd in g to req ue st a co nt in ua nc e to

co nt act op po si ng co un se l to ad vi se th em of th e in te nd ed m ot io n an d to a sc ert ai n whe th er op po si n g c o u n s el wil l co ns en t to th e m ot io n. At th e he ari ng , th e Co ur t 1 6

as ke d co un se l fo r th e Ban k, co un se l fo r th e Trus te e, an d co un se l fo r th e Uni te d St at es Trus te e if th e Deb to rs ha d co nt a c t e d t he m an d al l th ree la wy ers an swe red in th e

ne ga ti ve

.

In ad di ti on , th e so le ba si s as se rte d by th e Deb to rs fo r th e req ue st ed co nt in ua nc e

was “ un fo rs een he al th co nc ern s.” In vi ew of th e fact th at th e m ot io n of fere d no de ta il

w h a ts oe ve r, in cl ud in g who se he al th co nc ern it was , wha t ki nd of he al th co nc er n i t

was , a nd whe n th e Deb to rs be cam e aware of th e he al th co nc e r n , a n d in th e co nt ex t of th e hi st or y of th e li ti ga ti on be twee n th e pa rti es , we can no t sa y th at th e de ni al of th e

m ot io n was an ab us e o f di sc ret io n.

Fi na ll y , th e Deb to rs ap pe a r to as se rt th at th e Co ur t erre d in ap pr ov in g th e

se tt le m en t. Und er Ru le 90 19
, “ [ o ]n m ot io n by th e tru st ee an d aft er no ti ce an d a he ari ng , th e co ur t m ay ap pr ov e a co m pr om is e or se tt le m en t.” A de ci si on to ap pr ov e

Loca l Ru le 50 71 -1 (a) a nd (e). 1 4

Loca l Ru le 50 71 -1 (i)

. 1 5

Loca l Ru le 50 71 -1 (c). 1 6

11a se tt le m en t un de r Ru le 90 19 is wit hi n th e di sc ret i o n of th e ba nk ru pt cy jud ge

. In 1 7

ex erc i s i n g it s di sc ret io n un de r Ru le 90 19
, th e ba nk ru pt cy co ur t m us t co ns id er fo ur fact or s b eari ng on th e se tt le m en t's reas on ab le ne ss :

(1 ) th e pr ob ab il it y of su cces s in th e li ti ga ti on ; (2 ) th e di ffi cu lt ie s, if an y , to be en co un te red in th e m at te r of co ll ect io n; (3 ) th e co m pl ex it y of th e li ti ga t i o n in vo lv ed
, an d th e ex pe ns e, in co nv en ie nc e an d de la y
ne ces sa ril y

att en di ng it ; (4 ) th e pa ram ou nt in te res t o f th e cre di to rs an d a p ro pe r de fere nc e to th ei r rea so na bl e v ie ws i n t he pre m is es

. 1 8

An ab us e of di sc ret io n oc cu rs whe n a ba nk ru pt cy co ur t do es no t weig h th es e fact or s

an d th en ap pr ov es or reject s th e pr op os ed se tt le m en t. In ad di ti on , th e st an da rd fo r 1 9

co m pr om is e an d ap pr ov al of a se tt le m en t is whe th er it is “ fai r an d eq ui ta bl e” an d “ in

t h e be st in te res ts of th e es ta te .” “ The pu rp os e of a co m pr om is e is to al lo w th e 2 0

tru st ee an d cred it or s to av oi d th e ex pe ns es an d bu rd en s as so ci at ed wit h li ti ga ti ng sh arp ly con te st ed an d d ub io us cla im s.” “ W he n c on si de rin g re as on ab le ne ss , th ere 2 1
is no be st co m

pr om is e, on ly a ran ge of reas on ab le co m pr om is es

. So as l o n g a s th e

on e b efo re t he co ur t fa ll s wi th in th at ran ge , it m ay be ap pr ov ed .” 2 2

In re Ra ci ng

Se rv ic es , Inc

. , 33 2 B .R. 58 1, 5 86 (B.A.P. 8t h C ir. 2 00 5) 1 7 (ci ti ng Dre

xel , Bur nh am, La mbe rt

, Inc . v. Flig ht

Tra ns p. Co rp

. ( In re Fl ig ht Tr an s. Co rp . Sec . Lit ig .), 73 0 F .2d 11 28 , 11 35 (8t h C ir.1 98 4) ).

Id

. (q uo ti ng In re Fl ig ht

Tra ns . Cor

p. S ec. Li ti g ., 73 0 F .2d at 1 13 5; 1 8 Dre xel v. Lo omi s , 35 F.2d 80 0, 8 06 (8t h C ir.1 92 9) ).

Id

. (ci ti ng ReGen Ca

pi ta l II I, In c. v. Off

ic ia l Co mm. of

Uns ecu re d 1 9 Cr ed it or s ( In re T ri sm, In c. ), 28 2 B .R. 66 2, 6 67 (B.A.P. 8t h C ir. 2 00 2) ).

In re Ma rt in , 21 2 B .R. 31 6, 3 19 (B.A.P. 8t h C ir. 1 99 7) (ci ta ti on s 2 0

om it te d)

. Id . (ci ta ti on s, i nt ern al qu ot at io n m ark s, an d b rack et s o m it te d)

.

2 1

In re Ra ci ng

Se rv ic es , 33 2 B .R. at 5 86 (ci ta ti on om it te d)

. 2 2

12Here, th e Ban kr up tc y Co ur t fo un d th at th e Deb to rs ’ c l a i ms ag ai ns t th e Ban k

we re spe cu la ti ve at be st

. In de ed
, th e Deb to rs sc he du le s or ig in al ly va lu ed th es e cl ai m s
at zero

. The hi st or y of th e li ti ga ti on , in cl ud in g t h e f a c t th at no at to rn ey ha d

rep res en te d th em in an y of th e st at e co ur t or fed eral di st ric t co ur t li ti ga ti on , su pp or ts th at fin di ng

. The Co ur t al so no te d th at th e Trus te e, to who m th e cl ai m be lo ng ed
, di d

no t ha ve th e fu nd s to pu rs ue pr ot ract ed li ti ga ti on in th e di st ric t co ur t. The se tt le m en t
pr op os ed by th e Trus te e was , we co nc lu de
, wit hi n th e ran ge of reas on ab le

co m pr om is es . The Ba nk ru pt cy Co ur t d id no t er r in ap pr ov in g i t.

REQUES T FOR ORAL ARGUMENT

The Deb to rs ha ve req ue st ed or al arg um en t. Afte r ex am in at io n of th e br ie fs an d

reco rd
, we co nc lu de th at th e fact s an d le ga l arg um en ts are ad eq ua te ly pr es en te d in th e br ie fs an d reco rd an d th at th e de ci si on al pr oc es s wou ld no t be si gn ifi can tl y ai de d by

or al arg um en t. The re qu es t fo r or al arg um en t i s, t he refo re, DENIED. 2 3

CONCLUSI ON

Fo r th e fo reg oi ng reas on s, th e Ban kr up tc y Co u rt’s Ord er ap pr ov in g th e

se tt le m en t be twee n th e Trus te e an d Mi dWest One Ban k is AFFIR MED. The Deb to rs ’
req ue st for ora l ar gu m en t i s DENIED.

Fed . R. Ban kr . P. 80 12

. 2 3

13