# United States Court of Appeals **For the Eighth Circuit**

___________________________ No. 11-3523

___________________________ In re: Dennis E. Hecker

lllllllllllllllllllllDebtor

------------------------------
Dennis E. Hecker

lllllllllllllllllllll Appellant

v. Randall L. Seaver, Trustee

lllllllllllllllllllll Appellee

____________ Appeal from United States District Court for the District of Minnesota - Minneapolis

____________ Submitted: October 18, 2012 Filed: January 11, 2013

____________ Before LOKEN, BEAM, and SMITH, Circuit Judges.

____________ LOKEN, Circuit Judge.In September 2005, GELCO Corporatio n (“GELCO”) entered into a salescommission agreement (“SCA”) with Dennis H ecker and two of Hecker’s companies whereby GELCO acquired vehicle fleet-leasi ng assets in exchange for $20 million plus a series of deferred, formula-based incentive payments. Hecker petitioned for protection under Chapter 7 of the Bankruptcy Code in June 2009, listing the SCA as non-exempt personal property with an estimated value of $6 million. He did not claim that payments owed under the SCA were exempt property on Schedule C of the petition. Hecker twice amended Schedule C, but never claimed an exemption for the SCA or its proceeds.

Hecker’s Chapter 7 Trustee and two secured creditors, CorePointe Capital Finance LLC and U.S. Bank, asserted clai ms against GELCO for monies allegedly owed under the SCA. Following extensive negotiations, GELCO and these claimants agreed to a settlement in which GELC O would pay $2.07 million to the bankruptcy estate, $500,000 to CorePointe , and $1.53 million to U.S. Bank in exchange for a complete release of liability for all claims related to the SCA. On May 23, 2011, the Trustee filed a motion for bankruptcy court approval of the settlement. On June 10, the last day for filing objections, bankruptcy debtor Hecker filed an objection, arguing for the first time that the SCA was an employment agreement and therefore some payments owed by GELCO were exempt earnings under Minnesota law.

On June 15, the bankruptcy court helda hearing on the Trustee’s motion to approve the settlement. Conceding that Hecker had not filed a motion to amend Schedule C to claim an exemption for SC A payments, counsel for Hecker moved to continue the settlement approval hearing so that he could file that motion. The bankruptcy court 1 denied this oral request for a continuance, overruled Hecker’s objection, and approved the settlement, explaining:

1 The Honorable Robert J. Kressel, United States Bankruptcy Judge for the District of Minnesota.
-2-[T]oday is about the settlement. . . . Mr. Hecker is making [claims] based on something that hasn’t happe ned. He could have claimed this exempt [property] any time in the last two years. He didn’t. As we sit here . . . whatever claims there ar e is property of the estate. . . . [W]hether [Hecker] . . . can make a claim later or not, I don’t know and I express no opinion on that. But certainly the settlement is a terrific one

. . . . So all the Loomis v. Drexel [settlement approval] factors have been met here which is really all . . . I’m required to address today. Seems to me Mr. Hecker has no standi ng. He has no interest in any of this money. . . . Really no right to make any claims here. [His] claims and arguments . . . are outside the scope of today’s hearing . . . . But the settlement’s a good one. It’s certainly deserving of approval . . . .

Hecker appealed to the district court, 2which granted the Trustee’s motion to dismiss the appeal. Hecker appeals, arguing the bankruptcy court erred by disregarding his request to amend his sche dule of exempt property and approving the settlement. Concluding that the bankruptcy court di d not abuse its discretion in denying a continuance and approving the settlement, we affirm.

1. Bankruptcy Rule 9019 provides: “O n motion by the trustee and after notice and a hearing, the court may approve a comp romise or settlement.” Here, the Trustee moved to approve a settlement of disputed claims against GELCO, giving proper notice. In ruling on that motion at the J une 15 hearing, the bankruptcy court properly looked to discretionary settle ment approval factors first set forth by this court in Drexel v. Loomis , 35 F.2d 800, 806 (8th Cir. 1929).

Hecker has never disputed that the se ttlement was an appropriate compromise of disputed claims against GELCO for payments under the SCA. Rather, Hecker’s

2 The Honorable Paul A. Magnuson, United St ates District Judge for the District of Minnesota.
-3-objection to the settlement wa s based on his allegation that Minnesota exemption law gave him a superior interest in all or part of the settle ment proceeds. The bankruptcy court overruled that objection because Hecker had no “standing,” that is, no legitimate basis to object to the settlement at the tim e of the June 15 hearing, because he had never claimed the exemption. That conc lusion was of course correct. In prior bankruptcy filings and representations to cr editors, Hecker as bankruptcy debtor had repeatedly disclaimed any personal interest in the SCA a nd its proceeds. No motion or request to amend his claimed exemptions was pending, simply counsel’s assertion that Hecker might have an exemption-base d interest in the settlement proceeds some time in the future. As counsel for Hecker c onceded at oral argument, if his request for a continuance was properly denied, H ecker had no valid ground for objecting to approval on June 15. Thus, the critical issue on appeal is whether the bankruptcy court erred in denying Hecker’s oral request for a continuance at the June 15 hearing.

2. “The decision to grant a continuance of a hearing is within the discretion of the trial court and is only reversible upon s howing abuse of discretion.” In re Rice , 357 B.R. 514, 517 (B.A.P. 8th Cir. 2006), aff’d per curiam , 271 Fed. App’x 538 (8th Cir. 2008). Here, Hecker listed the SCA as non-exempt personal property worth an estimated $6 million when he filed for bankruptcy in 2009. Over the next two years, he twice amended his Schedule C exemptions without claiming an exemption for payments owing under the SCA, and he repeated ly represented to creditors that he was “self-employed” or “unemployed” and had no prospective “wages, salary or commissions.” Relying on these representations, the Trustee on behalf of the bankruptcy estate, GELCO, and two secu red creditors negotiated a multi-million dollar settlement resolving SC A payment disputes. Hecker, promptly served notice of the settlement, waited until the last day to file an objection, claiming for the first time that payments owed under the SCA are earnings of the debtor that are exempt under Minnesota law. But he did not file or move for leave to file an amended exemption schedule, instead seeking a last-minute continuance at the June 15 hearing to resolve the Trustee’s motion to approve the settlement. “The debtor’s duty of

-4-disclosure requires updating sche dules as soon as reasonably practical after he or she becomes aware of any inaccuracies or omissions.” In re Bauer , 298 B.R. 353, 357 (B.A.P. 8th Cir. 2003). In this case, H ecker’s lack of diligence (if not outright deception) is apparent, as is the prejudice to the parties to the settlement agreement had a continuance been granted.

Hecker argues that the bankruptcy c ourt ignored Bankruptcy Rule 1009(a), which provides that a debtor may amend his bankruptcy schedules “as a matter of course at any time before the case is closed.” This cont ention puts the cart before the horse. Hecker did not move to amend his schedule of exemptions before the June 15 hearing. Therefore, whether to allow an amendment was not before the bankruptcy court. Hecker complains that counsel was not retained until just before his last-minute objection and did not have time to file a motion to amend his claimed exemptions. We are unmoved. The delay and any resulting prejudice were attributable entirely to Hecker’s own lack of diligence. SeeIn re Rice , 357 B.R. at 517-18; accordIn re Martwick , 60 F.3d 482, 483-84 (8th Cir. 1995). In these circumstances, we have no difficulty concluding that the bankruptcy c ourt did not abuse its discretion in denying Hecker’s last-minute oral re quest for a continuance of th e settlement approval hearing.

Relying on In re Woodson , 839 F.2d 610 (9th Cir. 1988), Hecker further argues that the bankruptcy court erre d in refusing to consider his potential exemption claim before approving the settlement. But in Woodson , a major creditor objected to the debtor’s amended claim of a $1 million ex emption and then objected to a proposed settlement disbursing most of the $1 million to the debtor. The bankruptcy court concluded the creditor’s original objec tion was untimely and therefore did not consider its objection to the settlement. The Ninth Circuit concluded the creditor’s objection to the exemption was not untimely, and therefore the bankruptcy court erred in refusing to consider the merits of th e objection before appr oving a settlement that put the proceeds at issue be yond the reach of creditors. Here, by contrast, there was

-5-no claim by Hecker to the SCA proceed s pending when the motion for settlement approval was submitted for decision to th e bankruptcy court. Moreover, as the bankruptcy court expressly recognized, a significant portion of the settlement proceeds would be paid to the bankruptcy estate, and the court in approving the settlement did not decide whether Hecker might in the future be able to establish a superior right to that portion of the proceeds. 3

3. On appeal, the Trustee argues, as he did to the district court, that we should dismiss the appeal for lack of subject matter jurisdiction because (i) Hecker’s claim of an exemption is not ripe for judicial review, and (ii) Hecker lacks standing to object to settlement approval because the SCA is an asset of the bankruptcy estate. We disagree. The Trustee gave Hecker noti ce of the Trustee’s motion to approve the settlement. Hecker objected and appeared at the June 15 hearing to oppose the motion. Hecker had standing to object to the motion, the bankruptcy court had jurisdiction to rule on the motion and Hecke r’s objection, and both the district court and this court have subject matter jurisdiction to review the bankruptcy court’s order denying Hecker’s request for a continua nce and approving the settlement. Cf. In re Marlar , 267 F.3d 749, 753 n.1 (8th Cir. 2001). We also deny the Trustee’s motion to dismiss the appeal as moot because the se ttlement proceeds have been distributed, a contention based on facts not contained in the record on appeal. SeeFed. R. App. P. 10(a); United States for Use of Lighting and Power Servs., Inc. v. Interface Constr. Corp. , 553 F.3d 1150, 1155 n.4 (8th Cir. 2009).

3 Like the bankruptcy court, we do not c onsider whether Hecker may amend his Schedule C to claim an exemp tion for SCA proceeds and, if so, whether he is entitled to the claimed exemption. See generally In re Kaelin , 308 F.3d 885, 889 (8th Cir. 2002) (recognizing exceptions to Rule 1009(a)’s liberal rule for “bad faith on the part of the debtor and prejudice to the creditors”); In re Harris , 886 F.2d 1011, 1015-16 (8th Cir. 1989) (making clear that the two i ssues are distinct). We do not affirm the district court’s statement that the bankruptcy court “correctly de nied Hecker’s request to amend his Schedule C.” As no “request” wa s filed prior to the June 15 hearing, that issue remains unresolved.
-6-We affirm the bankruptcy court’s Or der dated June 15, 2011, and deny the Trustee’s motion to dismiss the appeal.

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