# United States Court **of Appeals**  **f or the Fifth Circuit** 

No. 21

- 10468

**In the Matter of: William Berry Dean, III**

Debtor **, William Berry Dean, III,** 

Appellant **,**

versus
**Scott M. Seidel, Chapter 7 Trustee,**

Appellee

**.**

Appeal from the United States District Court for the Northern District of Texas USDC No. 3:20

- CV

- 1834

Before **Wiener** , **Graves** , and **Ho** , Circuit Judges

**. Jacques L. Wiener, Jr.,**  Circuit Judge : In this appeal of a bankruptcy court order, the debtor objects to a litigation funding arrangement entered into by the trustee and a creditor. We do not reach the merits of the debtor’s objection b ecause he does not have bankruptcy standing

. United States Court of Appeals Fifth Circuit 

### FILED December 7, 2021 Lyle W. Cayce Clerk Case: 21-10468 Document: 00516119902 Page: 1 Date Filed: 12/07/2021No. 21

- 10468

2 I. Backgroun d

Debtor

- Appellant William Berry Dean , III filed a C hapter 7 voluntary petition in 2019. Appellee Scott M. Seidel was appointed trustee for the

estate. Reticulum Management , LLC (“Reticulum”) is one of the creditors

. ( Reticulum has objected to the discharge of its claims against Dean in a related proceeding )

. Seidel did not have sufficient unencumbered funds to retain counsel to pursue claims for the estate and potentially r eclaim money for creditors. Consequently , Seidel and Reticulum entered into a Litigation Funding Agreement (“the Agreement”) in which Reticulum “ agreed to provid[e] funding to the Trustee and the Debtor’s bankruptcy estate to fund the Trustee’s litigation against the [f] uture [d] efendants in exchange for a share of any of the [l]itigation [p]roceeds.”

In June 2020, the bankruptcy court held a hearing in which it g ranted Seidel’s motion to approve the A greement

. The district court affirmed th at decision of the bankruptcy court , holding that it had not committed clear

error. Dean appealed , contending that such a n agreement undermines the
statutory ranking system for distribution of the estate’s property by allowing
Reticulum to move ahead of other creditors in the order of payment

. II. Standard of Review “We review the decision of a district court, sitting in its appellate capacity, by applying th e same standards of review to the bankruptcy court’s finding of fact and conclusions of law as applied by the district court.” 1 We review c onclusions of law and mixed questions of law and fact de novo and

1 In re ASARCO, L.L.C. , 650 F.3d 593, 60 0 (5th Cir. 2011). Case: 21-10468 Document: 00516119902 Page: 2 Date Filed: 12/07/2021No. 21

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3 review findings of fact for clear error. 2 “Standi ng is a question of law that we
review de novo.” 3 Bankruptcy standing is a prudential standing requirement. 4 As such, we may address the issue even when it was not raised below. 5

III. Analysis “[S]tanding to appeal a bankruptcy court order is, of necess ity, quite limited.” 6 “To determine whether a party has standing to appeal a bankruptcy court order, this court uses the ‘person aggrieved’ test.” 7 This test “is an even more exacting standard than traditional constitutional standing.” 8 The appellant must show that he is “directly, adversely, and financially impacted by a bankruptcy order .” 9 Such standing must be connected to the exact order being appealed as opposed to the proceedings more generally. We have explained “that the order of the bankruptcy court must directly and adversely affect the appellant pecuniarily.” 10

2 Id . at 601

.

3 In re Technicool Sys., Inc. , 896 F.3d 382, 38 5 (5th Cir. 2018).

4 See In re Coho Energy Inc. , 395 F.3d 198, 202 (5th Cir. 2004).

5 See, e.g. , Nat’l Waste Mgmt. Ass’n v. Pine Belt Reg’l Solid Waste Mgmt. Auth. , 389 F.3d 491 , 498

- 99 (5th Cir. 2004) (addressing prudential standing sua sponte).

6 In re Technicool , 896 F.3d at 38 5

.

7 In re Mandel , 641 F. App’x 400, 402 (5th Cir. 2016) (unpublished) (quoting Fortune Nat. Res. Corp. v. U.S. Dep’t of Interior , 806 F.3d 363, 366 (5th Cir. 2015)).

8 Fortune Nat. Res. , 806 F.3d at 366 (quoting In re Coho Energy Inc. , 395 F.3d at 202 ).

9 In re Technicool , 896 F.3d at 384

.

10 Fortune Nat. Res. , 806 F.3d at 36 7 (emphasis in original). Case: 21-10468 Document: 00516119902 Page: 3 Date Filed: 12/07/2021No. 21

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4 In a Chapter 7 bankruptcy, “the debtor

- out

- of

- possession typically has no con crete interest in how the bankruptcy court divides up the estate.” 11 Once a trustee is appointed, “the trustee, not the debtor or the debtor’s principal, has the capacity to represent the estate and to sue and be sued.” 12 However, a debtor may retain bankr uptcy standing by showing “that defeat of the order on appeal

. . . would affect his bankruptcy discharge.” 13 Appellants cannot demonstrate bankruptcy standing when the court order to which they are objecting does not directly affect their wallet s

. For instance, w e have held that the owner of a debtor company in a Chapter 7 bankruptcy could not object to an order approving the hiring of special
counsel because such an order would not affect the debtor company’s discharge

. 14 W e have also held that a credi tor did not have bankruptcy standing to object to an order approving the sale of assets because the creditor would be in the same position financially , whether or not the bankruptcy court approved the sale. 15

Dean contends that the pending related action in which Reticulum objects to the discharge of its claim shows he can still be affected by this order.
He points to our decision in In re Mandel in which the debtor retained bankruptcy standing because his claim had not yet been dis charged . In that

case , the debtor had standing to object to an order that allowed claims for

11 In re Mandel , 641 F. App’x at 402

- 03

.

12 Id . at 402 (quoting Vega v. Gasper , 36 F.3d 417, 422 (5th Cir. 1994)).

13 Id

. at 403 ( alteration in original; quoting In re Beaulac , 294 B.R. 815, 821 (1st Cir. BAP 2003) (per curiam) ).

14 In re Technicool , 896 F.3d at 384

.

15 Fortune Nat. Res. , 806 F.3d at 36 7

. Case: 21-10468 Document: 00516119902 Page: 4 Date Filed: 12/07/2021No. 21

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5 compensation for legal services against his bankruptcy estate. 16 But Mandel does not stand for the general proposition that the simple existence of a pending debt creates bankruptcy standing for the debtor. The order at issue
in Mandel specifically related to whether a debt would be discharged. W e ultimately held that “a debtor i n a Chapter 7 bankruptcy proceeding

. . . has standing to appeal an order by the bankruptcy court allowing claims against his bankruptcy estate by the Appellees.” 17 Here, the order on appeal

— approv al of a litigation funding
agreement

— does not affect w hether Dean’s debts will be discharged.
N either does it affect Reticulum’s related pending case in which it “objected to Dean’s bankruptcy discharge and to discharge of its claims against Dean.”
D e an thus does not have bankruptcy standing because he cannot show how the order approving the litigation funding agreement would directly, adversely, and financially impact him.

IV. Conclusion

We **DISMISS** this appeal for Dean’s lack of bankruptcy standing.

16 In re Mandel , 641 F. App’x at 405

.

17 Id . at 40 1

. Case: 21-10468 Document: 00516119902 Page: 5 Date Filed: 12/07/2021