# U ni te d S ta te s Co ur t of A pp ea ls For the Eig hth Circu it

__ __ __ __ __ __ __ __ __ __ __ __ __ _ No. 1 2- 13 05

__ __ __ __ __ __ __ __ __ __ __ __ __ _ In re: AFY, als o k no wn as Ain swo rth Feed Yard s C om pa ny, Inc.

ll ll ll ll ll ll ll ll ll ll l Deb to r

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Ro be rt A. Sea rs ; Ko rle y

B. Sear s
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App el la nt s

v.
Ro na ld H. Sears ; Ro n H. Sea rs Trus t; Rh et t R. Se ars ; Rh et t Se ars Rev oc ab le Trus t; Dan e Sea rs
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App el le es

__ __ __ __ __ __ App eal fro m

th e Uni te d S ta te s B an kr

up tc y App el la te Pan el for th e Eig ht h C irc ui t

__ __ __ __ __ __ Su bm it te d: Feb ru ary 13 , 20 13 Fil ed : Oct ob er 2 3, 2 01 3

__ __ __ __ __ __ Befo re RI LEY, Chi ef J ud ge , LOKE N and SHEPHERD, Circ ui t J ud ge s.

__ __ __ __ __ __ RILEY, Chi ef J ud ge

.Ro be rt A. Sear s an d Kor le y B. Sear s (co ll ect iv el y , ap pe ll an ts ) cl ai m to be th e

on ly pr es en t sh areh ol de rs of AFY, In c. (AFY), a de bt or in b a n k r u p tc y
. Rh et t R. Sear s, th e Rh et t R. Sear s Rev oc ab le Trus t, Ro na ld H. Sear s, th e Ro n H. Sear s Trus t,

an d Dan e R. Sear s (co ll ect iv el y , ap pe ll ees ) m ad e cl ai m s on AFY’s ba nk ru pt cy es ta te in co nn ect io n wit h th e sa l e o f ap pe ll ees ’ fo rm er in te res ts in AFY. The ba nk ru pt cy
co ur t de ni ed ap pe ll an ts ’ ob jecti on s to th e cl ai m s on Ju ne 8, 20 11

. The Uni te d St at es 1 Ban kr up tc y App el la te Pan el fo r th e Eig ht h Ci r c u it (BAP) affi rm ed on Ja nu ary 23 , 20 12 , se e In re AFY, In c. (Sea rs v. Sear s) , 46 3 B.R. 48 3, 49 2 (8 th Ci r. B.A.P. 20 12 ),

an d ap pe ll an ts no w ap pe al

. Bec au se ap pe ll an ts la ck st an di ng to ap pe al th e ba nk ru pt cy

co ur t’s o rd er, we d is m is s t he ir a pp eal

.

I. BACKGRO UND App el le es so ld th ei r own ers hi p in t e r e s t s in AFY in Ju ne 20 07 pu rs ua nt to a St oc k Sal e Agr eem en t (Ag reem en t), whi ch th ey cl ai m joi nt ly o bl ig at ed Kor le y an d AFY to pa y fo r ap pe ll ees ’ sh ares

. App el la nt s m ai nt ai n th at “ [a]lt ho ug h AFY was a pa rty to t ha t [A]gre em en t,” o nl y Korl ey was l ia bl e fo r th e p ric e o f th e sh ares

.

On Mar ch 25 , 20 10 , AFY fil ed f o r b a n k r up tc y un de r Ch ap te r 11 , 11 U.S.C. §§ 11 01 -1 17 4. In res po ns e to ap pe ll ees ’ m ot io n to ap po in t a tru st ee, th e ba nk ru pt cy
co ur t ap po in te d J os ep h H. Bad am i as tru st ee i n M ay 20 10

.

On A p r i l 2 7 , 2 0 10 , ap pe ll ees fil ed pr oo fs of Cl ai m s 8, 9, an d 10 in th e ba nk ru pt cy co ur t, s eek in g p ay m en t fr om AFY’ s es ta te for th e pu rch as e pr ic e of th e st oc k th ey so ld in th e Agr eem en t. App el la nt s o b je ct ed to th es e pr oo fs of cl ai m

. Bad am i d id no t o bjec t.

The Hon or ab le Tho m as L. Salad in o, Ch ie f Ju dg e, Uni te d Stat es Ban kr up tc y 1 Co ur t fo r th e Dis tri ct of Ne br as ka

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-Afte r de nyin g ap pe ll an ts ’ m ot io ns to po st po ne th e he ari ng on Cl ai m s 8, 9, an d

10 , an d fo r a he ari ng w i t h l i v e te st im on y an d cro ss -ex am in at io n of wit ne ss es , th e ba nk ru pt cy co ur t he ld a he ari ng on May 18 , 20 11 , wit h th e affi da vi ts co n c ern in g th es e cl ai m s. On Ju ne 8, 20 11 , th e ba nk ru pt cy co ur t de ni ed ap pe ll an ts ’ ob jecti on s to Cl ai m s 8, 9, an d 10 , ho ld in g AFY cl earl y was a “b u ye r ” u nd er th e Agr eem en t an d reject in g t he affi rm at iv e d efen se s ra is ed by app el la nt s. App el la nt s app eal ed to th e 2 BAP, whi ch affi rm ed th e ba nk ru pt cy co ur t on Ja nu ary 23 , 20 12

. See Sear s v. Sear s, 46 3 B .R. at 4 92

. App el la nt s no w ap pe al th e ba nk ru pt cy c o u rt’s de ni al s of (1 ) th ei r ob jecti on s to Cl ai m s 8, 9, an d 10 , an d (2 ) th ei r m ot io ns fo r a co nt in ua nc e an d a he ari ng wit h li ve wit ne ss es

.

II
. DISCUSS IO N App el le e s as se rt ap pe ll an ts la ck st an di ng to ap pe al th e ba nk ru pt cy co ur t’s

or de r. “ ‘A pp el la te st an di ng in ba nk ru pt cy cas es is m or e li m it ed th an A r t i c l e I I I st an di ng or th e pr ud en ti al st an di ng req ui rem en ts as so ci at ed th erewi th .’ ” In re AFY, In c. (Sea rs v. Bad am i),

__ _ F.3 d

__ _,

__ _, No. 11 -2 28 2 sl ip op

. at 13 (8 th Ci r. 20 13 ) (q uo ti ng In re Trou tm an Ent ers ., In c., 28 6 F. 3d 35 9, 36 4 (6 th Ci r. 20 02 )). “ [T]he pe rs on ag gr ie ve d do ct rin e li m it s st an di ng to pe rs on s w i t h a f in an ci al st ak e in th e ba nk ru pt c y c o u rt’s or de r, m ean in g th ey were di rect ly an d ad ve rs el y affe ct ed pe cu ni ari ly by th e or de r.” Id

. at

__ , sl ip op

. at 12 (q uo t i n g I n r e M a r la r, 25 2 B.R. 74 3, 7 48 (8t h C ir. B .A.P. 20 00 )) (i nt ern al m ark s o m it te d)

.
AFY, whi ch is th e on ly pa rty di rect ly an d ad ve rs el y affe ct ed by th e ba nk ru pt cy
co ur t’s or de r al lo win g Cl ai m s 8 , 9, an d 1 0, i s n ot a pa rty t o th is ap pe al

. Any eff ect

In th e sa m e or de r, th e ba nk ru pt cy co ur t al so gr an te d ap pe ll ees ’ ob jecti on s to 2
a pr oo f of cl ai m , Cl ai m 26 , fil ed by Ko r l ey

. On ap pe al , ap pe ll an ts do no t arg ue ag ai ns t t he ba nk ru pt cy

co ur t’s o rd er wi th res pe ct to Cla im 26

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-on ap pe ll an ts is in di rect , ba se d on th ei r st at us as sh areh ol de rs of AFY. Sh areh ol de rs

m ay n o t “‘app eal a ba nk ru pt cy co ur t de ci si on whe re th ey as se rt[ ] on ly a de riv at iv e i n t e r e s t

. ’” Id . a t

__

_, sl ip op . a t 14 (q uo ti ng In re Trou tm an Ent ers ., In c., 28 6 F.3 d at 36 5)

. Thi s “ ru le , whi ch ap pl ie s to ev en a so le sh areh ol de r, ‘recog ni zes th at

co rp or at io ns are en ti ti es se pa rat e fro m th ei r sh areh ol de rs in c o n t rad is ti nc ti on wit h pa rtn e r s h ip s or ot he r un in co rp or at ed as so ci at io ns .’ ” Id

. (q uo ti ng Sm it h Set zer & So ns , Inc . v. S.C. Pro cu rem en t Re vi ew Pan el , 20 F.3d 13 11 , 13 17 (4t h C ir. 1 99 4) ).

App el la nt s co nt en d th ey ha v e s t an di ng be cau se th ey wil l on ly rece iv e di st rib ut io ns fro m AFY’s e s t a t e i f AFY’s e st at e is so lv en t, an d Cl ai m s 8, 9, an d 10 de te rm in e th e so lv en cy

of AFY’s e st at e. W e reject ed th is arg um en t fo r st an di ng in Sear s v. Bad am i,

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_ F.3 d at

__

_, sl i p o p

. a t 1 8- 21 , b ecau se th e is su e de riv es fro m ap pe ll an ts ’ st at us as s ha reh ol de rs

.

Alt ern at iv el y , a pp el la nt s cl ai m th ey ha ve st an di ng un de r S i n g le to n v. W ul ff, 42 8 U.S. 10 6, 11 4- 16 (1 97 6) , be cau se th ey are th e on ly pa rti es who c a n a s s e r t t he

r ig ht s of AFY, whi ch “ ha s be en st rip pe d of al l it s as se ts by th e ap po in tm en t o f a Trus te e.” As we ex pl ai ne d in S e a r s v
. B a d a mi,

__ _ F.3 d at

__

_, sl ip op

. at 15 ,

“ Si ng le to n o nl y

ad dr es se s g en eral pru de nt ia l s ta nd in g re qu ire m en ts

. . . . It d oe s n ot

co nf er ap pe ll at e s t an di ng in th e ba nk ru pt cy co nt ex t— whi ch in vo lv es a st ric te r st an da rd .” Sin gl et on th eref or e d oe s n ot he lp ap pe ll an ts . See i d.

Fi na ll y , to th e ex te nt ap pe ll an ts arg ue th at th ey ha ve st an di ng be cau se Bad am i act ed in ba d fai th , we are no t pe rs ua de d by th is arg um en t. Cf. Fran ch is e Tax Bd

. of Cal

. v. Alca n Alu m in um Ltd ., 49 3 U.S. 33 1, 33 6 (1 99 0) (ack no wled gi ng an ex cep ti on to th e sh areh ol de r st an di ng rul e whe re a “ co rp or at io n’s m an ag em en t ha s refu se d to pu rs ue th e sa m e act io n fo r reas on s ot he r th an go od -fai th b u s i n e s s jud gm en t” ). App el la n t s ap pe ar to arg ue —al th ou gh th ei r reas on in g is far fro m cl ear— th at Bad am i’s d eci si on no t to ob ject to Cl ai m s 8, 9, an d 10 was in ba d fa it h b ecau se (1) Bad am i’s “ in te res ts are al li ed wit h th os e of ” ap pe ll ees , who fil ed th e m ot io n to ha ve

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-a tru st ee ap po in te d; an d (2 ) ap pe ll an ts are in v o l v e d in on go in g li ti ga ti on wit h

Bad am i. Nei th er as se rti on is su ffi ci en tl y su pp or te d to es ta bl is h Ba da m i re fu se d t o ob ject to Cl ai m s 8, 9, an d 10 fo r an y reas on ot he r th an go od fai th bu si ne ss jud gm en t. The ex cep ti on to th e sh areh ol de r st an di ng ru le ack no wled ge d in Fran ch is e Tax Bo ard of Cal ifo rn ia do es no t ap pl y he re. See id

.

Bec au se ap pe ll an ts la ck st an di ng to ap pe al th e ba nk ru pt cy co ur t’s or de r, we do

no t re ach th e m eri ts of t he ir a pp eal

.

II I. CONCLUSI ON W e di sm is s ap pe ll an ts ’ ap pe al fro m th e ba nk ru pt cy co ur t’s or d e r ov erru li ng ap pe ll an ts ’ ob

jecti on s t o C la im s 8 , 9, an d 1 0.

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