RECOMMENDED FOR FULL-TEXT PUBLICATION

Pursuant to Sixth Circuit Rule 206

File Name: 09a0189p.06

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT _________________

In re: ROBERT J. MORAN,

Debtor.

_____________________________________

W. THOMAS STARK,

 Plaintiff-Appellant,

v.

ROBERT JOHN MORAN; MARVIN A.

SICHERMAN,

 Defendants-Appellees.

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No. 08-3606

On Appeal from the Bankruptcy Appellate Panel

of the Sixth Circuit.

No. 01-21926—Randolph Baxter, Bankruptcy Judge.

Argued: March 10, 2009

Decided and Filed: May 28, 2009 

Before: BOGGS, Chief Judge; GILMAN and ROGERS, Circuit Judges.

_________________

COUNSEL

ARGUED: Joseph Robert Spoonster III, FORTNEY & KLINGSHIRN, Akron, Ohio, for

Appellant. Lynn R. Larsen, LAW OFFICE OF TIMOTHY FARRELL SWEENEY,

Cleveland, Ohio, for Appellees. ON BRIEF: Joseph Robert Spoonster III, FORTNEY &

KLINGSHIRN, Akron, Ohio, for Appellant. Lynn R. Larsen, Timothy F. Sweeney, LAW

OFFICE OF TIMOTHY FARRELL SWEENEY, Cleveland, Ohio, Marvin A. Sicherman,

DETTELBACH, SICHERMAN & BAUMGART, Cleveland, Ohio, for Appellees. 

_________________

OPINION

_________________

ROGERS, Circuit Judge. Shares owned by a bankrupt party amounting to a onethird interest in a closely held corporation—shares that the debtor had not originally listed

1
No. 08-3606 In re Moran Page 2

in the bankruptcy petition—subsequently increased in value. The debtor and the bankruptcy

trustee agreed that if the debtor paid to the bankruptcy estate an amount sufficient to cover

all the bankrupt’s debts for which creditors had filed proofs of claim, the trustee would seek

bankruptcy court approval to treat the stock as “abandoned” nunc pro tunc to the time of

bankruptcy filing, thereby leaving the stock in the hands of the debtor. The bankruptcy court

approved the arrangement and the nunc pro tunc abandonment in a decision affirmed by the

Bankruptcy Appellate Panel. The owner of the remaining shares of the corporation—who

sought to buy the debtor’s stock from the trustee—appeals, contending among other things

that the deal did not comply with the statutory requirements for abandonment in 11 U.S.C.

§ 554. The appellant co-owner, however, lacks a legally protected interest in his ability to

purchase the debtor’s interest in the property, and therefore lacks bankruptcy appellate

standing. The legal bases for the co-owner’s challenges to the settlement and abandonment

serve to protect the estate and its creditors, not those who want to purchase the property in

question.

Debtor Robert Moran, his brother-in-law Tom Stark, and John Gerrish founded

Airpack, Inc. in 1996 as equal partners and co-owners. Each paid $12,000 in initial

capitalization and received one-third of the shares of the corporation.

Moran filed for bankruptcy in Ohio in December 2001, seeking the discharge of

about $140,000 of debt held by creditors with unsecured nonpriority claims. He claimed no

interest in any stock or business association, despite his one-third interest in Airpack.

Marvin Sicherman, trustee of the bankruptcy estate, filed a “No Asset Report” in January

2002. The bankruptcy court subsequently approved a discharge and closed the case. It

appears that no creditors received any funds from the estate at that time. The parties dispute

whether the Airpack stock had any significant value at the time of the discharge, but all agree

that the stock had considerable value by 2006.

In July 2005, Moran filed suit against Stark in Ohio court. Moran alleged that after

he and Stark agreed to buy out Gerrish, Stark secretly arranged to buy out Gerrish himself,

then wrongfully used Stark’s new majority-shareholder status to freeze out Moran. Moran’s

complaint contained counts of breach of contract, breach of fiduciary duties, fraud, and

violation of state corporate law. Moran’s success on these claims may depend on his
No. 08-3606 In re Moran Page 3

1

Stark and Moran argue based on this assumption; we express no opinion about the legal merits

of Moran’s complaint under Ohio law.

2

The record does not reflect why the amount of submitted claims is significantly lower than the

amount of the debts Moran sought to discharge.

ownership of the Airpack stock—if the bankruptcy estate owned the stock at the time of

Stark’s alleged wrongful conduct, some or all of the counts in Moran’s suit might fail to state

a valid claim.1

In March 2006, the trustee moved to reopen the bankruptcy case because of the

undisclosed Airpack stock, which he characterized as “clearly property of the Debtor’s

bankruptcy estate.” See 11 U.S.C. § 541(a)(1); see also id. § 554(c) (property reported

by debtor abandoned to him at close of case); id. § 554(d) (property not reported by

debtor and not administered remains property of the estate). The bankruptcy court

reopened the case, and the trustee sent notice to creditors inviting them to file proofs of

claim. Creditors filed about $20,000 worth of proofs of claim.2

Stark submitted an offer to the trustee to purchase the Airpack stock from the

estate for $20,000. But the trustee chose to deal with Moran instead. The trustee

evidently reasoned that so long as the estate received enough money to pay off all

creditors’ claims (and the trustee’s fees), the estate would not care who ended up with

the stock, and Moran was willing to contribute sufficient money to that end. Indeed,

bankruptcy law contemplates the return of leftover assets to the debtor at the close of a

case. See 11 U.S.C. § 554(c).

In January 2007, the trustee filed a motion with the bankruptcy court styled

“Motion . . . For Authority to Compromise the Bankruptcy Estate’s Claim to the

Debtor’s Equitable Interest in Airpack, Inc., and to Abandon Any Remaining Interest in

Airpack, Inc.” The trustee stated that he likely would have abandoned the stock in 2002

had Moran properly reported it. However, the trustee claimed that he thought the estate

“should be entitled to at least a portion” of the appreciation in the stock’s value, while

Moran was claiming entitlement to the stock’s entire value. The trustee characterized

the disagreement as a “disputed claim” and suggested a settlement. The terms of this
No. 08-3606 In re Moran Page 4

settlement were that Moran would pay about $32,500 to the estate (enough to pay all

creditors who had filed proofs of claim after the bankruptcy court reopened the case as

well as all administrative expenses), while the trustee would abandon any claim to the

Airpack stock. The parties asked the court to make the abandonment nunc pro tunc to

the filing of the bankruptcy petition.

Stark filed objections to the trustee’s motion. He also submitted another offer

to purchase the Airpack stock from the estate, this time for $30,000. In the letter making

that offer, Stark claimed that he would have made an offer to purchase the stock had the

trustee sought to abandon it after Moran first filed the bankruptcy case. Stark later

increased his offer to $37,500.

No creditors objected to the trustee’s motion. The bankruptcy court granted the

motion, characterizing the transaction as a “settlement” or “compromise.” The

bankruptcy court also allowed the estate to “abandon” the stock nunc pro tunc to the

bankruptcy petition filing date. The bankruptcy court held that Stark as a higher bidder

did not have standing to object to a compromise or an abandonment because neither was

a judicial sale. The court also noted that even if Stark were allowed to pay a higher

purchase price for the stock, the surplus would merely return to Moran after the estate

paid the creditors.

On appeal, the Bankruptcy Appellate Panel affirmed the bankruptcy court’s

judgment. The BAP held that Stark “arguably” had appellate standing under the “person

aggrieved” standard. However, the BAP held that Stark lacked standing before the

bankruptcy court because he had no legally protected interest in Moran’s stock. The

BAP also held that the trustee’s proposed transaction was a settlement as opposed to a

judicial sale. The BAP’s opinion indirectly suggested that the bankruptcy court erred

by allowing abandonment before the close of the case without a showing that the stock

was burdensome or of inconsequential value to the estate. But the BAP went on to

affirm on the alternate ground that abandonment served an “overriding purpose” of

bankruptcy—the “equality of distribution of the debtor’s property among creditors

similarly situated.” 
No. 08-3606 In re Moran Page 5

Before the BAP and on the instant appeal, Stark argues that the bankruptcy

court’s order is not an “abandonment” but a sale under 11 U.S.C. § 363. He argues that

the stock could not be abandoned under 11 U.S.C. § 554(a) because it was not

burdensome to the estate or of inconsequential value. Therefore, he maintains, the

bankruptcy court lacked authority to order that the transfer to Moran have nunc pro tunc

effect. Further, he suggests that the bankruptcy court abused its discretion in rejecting

his higher bid for the stock.

Because Stark lacked standing to appeal to the BAP, however, the BAP properly

declined to overturn the bankruptcy court’s judgment. Stark does not show that he seeks

to defend himself from direct harm to a legally protected interest so as to satisfy the

standing doctrine applicable to appeals from bankruptcy courts’ orders. His interests as

a co-owner of Airpack, as a state court defendant, and as a frustrated bidder for the stock

are not the sort of interests that support standing for the purpose of his bankruptcy

appeal, and the federal appellate courts are an improper forum in which to defend those

interests, which are adequately protected in state court.

A party “does not have standing to appeal a bankruptcy court order unless that

party is directly and adversely affected pecuniarily by the order.” Moran v. LTV Steel

Co., Inc. (In re LTV Steel Co., Inc.), 560 F.3d 449, 452 (6th Cir. 2009) (quotation

omitted). “Only when the order directly diminishes a person’s property, increases his

burdens, or impairs his rights will he have standing to appeal.” Fid. Bank, Nat’l Ass’n

v. M.M. Group, Inc., 77 F.3d 880, 882 (6th Cir. 1996). This standing requirement is

“more limited than Article III standing.” LTV Steel, 560 F.3d at 452-53.

All of Stark’s asserted interests are either not directly harmed by the bankruptcy

court’s order or are not interests that bankruptcy law—in particular the law governing

abandonment—protects. Stark’s ownership of some Airpack stock does not confer

standing to appeal the bankruptcy court’s disposition of the stock that Moran originally

owned. A part owner of a corporation, without more, does not have an interest sufficient

to justify intervention in (and delay of) any proceeding in which a bankruptcy court

administers other shares in the corporation. Any court order in the Moran bankruptcy
No. 08-3606 In re Moran Page 6

proceeding would not directly affect Stark’s ownership of his shares. Stark does not

allege that Moran directly harmed Stark’s ownership interest in his stock simply by the

transfer of Moran’s stock to the bankruptcy estate, and Stark does not explain how

allowing the estate to transfer the stock back to Moran would harm any interest in

Stark’s shares that is protected by the bankruptcy law provisions relied upon by Stark.

Stark’s status as a state-court defendant in a suit brought by a bankruptcy debtor

is also not sufficient for standing. The interest Stark has in avoiding a state-court

lawsuit, or even in affecting who has the right to bring that suit, is not the sort of interest

that bankruptcy law in general is designed to protect. In the somewhat analogous

situation of an order allowing a bankruptcy creditor to have derivative standing to sue,

we held that the defendants of such suits are not aggrieved by such an order “when their

interest in the order is as party defendants in the resulting adversary proceeding because

the interest that such parties assert as defendants to an adversary proceeding is not

protected by the Bankruptcy Code.” LTV Steel, 560 F.3d at 454 (quotation and

alterations thereto omitted). The interest if anything is opposed to the primary goal of

the Bankruptcy Code in general, which is to minimize the injury to creditors. Id.

Moreover, the bankruptcy court’s order does not “impair [Stark’s] ability to defend

[himself]” in the state court suit; “[t]hose defenses that would have been available” had

the trustee brought the action on behalf of the estate, or had the trustee transferred the

stock to Moran in a way free of the errors that Stark alleges, will still be available as

defenses on the merits to Moran’s action. See Fid. Bank, 77 F.3d at 883.

Stark similarly lacks bankruptcy appellate standing in his capacity as a frustrated

bidder for the Airpack stock, because his interests are not aligned with those of the

bankruptcy estate’s creditors. Generally, “[f]rustrated bidders do not have standing to

object to the sale of property.” Squire v. Scher (In re Squire), 282 F. App’x 413, 416

(6th Cir. 2008). An exception to this general rule may exist “where an unsuccessful

bidder challenges the intrinsic structure of the sale because it is tainted by fraud, mistake,

or unfairness.” Id. But even if we read Stark’s objection to the trustee’s motion as

alleging that the trustee somehow fraudulently or unfairly decided not to sell the stock
No. 08-3606 In re Moran Page 7

to Stark, Stark still does not qualify for the exception. See id. This is because Stark’s

bare interest as a potential purchaser is not protected by the Bankruptcy Code provisions

that he relies upon.

A frustrated bidder lacks bankruptcy appellate standing when he merely alleges

that he would have profited from his desired purchase, and does not allege, for instance,

that fraud or impropriety prevented the estate from accepting his higher bid such that

creditors would not receive as great a recovery as they would have had the estate

accepted the higher bid. See Kabro Assocs. of W. Islip, LLC v. Colony Hill Assocs. (In

re Colony Hill Assocs.), 111 F.3d 269, 274 (2d Cir. 1997). The Seventh Circuit’s In re

Harwald Company opinion, relied upon by our court in Squire, explained that to satisfy

the “person aggrieved” test in the bankruptcy appellate context, a frustrated bidder must

show that “the interest which he seeks to protect through his petition for review is an

interest which the Bankruptcy Act seeks to protect or regulate.” 497 F.2d 443, 444 (7th

Cir. 1974). The Seventh Circuit noted that “the primary objective of the Bankruptcy Act

is to minimize the injury to creditors arising from the fact of bankruptcy,” and linked

frustrated-bidder appellate standing to the creditors’ interest in maximizing recovery.

Id. at 444-45. Allowing a frustrated bidder to bring an appeal based on allegations of

impropriety may make some sense when the bidder’s interest in obtaining property

aligns with the interests of creditors who may not be aware of the alleged wrongdoing

that would limit their recovery, but allowing such an appeal does not serve the purposes

of the bankruptcy proceeding when the alleged wrongdoing cannot possibly harm any

creditor. Stark does not allege an injury that brings him within the interests protected

by the Bankruptcy Code because even if everything he alleges about the impropriety of

the bankruptcy court order is true, none of the relief he requests on appeal could possibly

increase any creditor’s recovery. No creditor that filed a proof of claim was left

unsatisfied by the bankruptcy court’s judgment. Thus, Stark lacked bankruptcy appellate

standing as a frustrated bidder.

The lack of standing in this case to appeal to the BAP distinguishes our recent

holding in Hyundai Translead, Inc. v. Jackson Truck & Trailer Repair, Inc. (In re
No. 08-3606 In re Moran Page 8

Trailer Source, Inc.), 555 F.3d 231 (6th Cir. 2009). There we held that “the bankruptcy

appellate-standing doctrine is not applicable to the second layer of appeal, from the

district court to the court of appeals, when it is uncontested that the party who appealed

the bankruptcy court’s order to the district court had appellate standing.” Id. at 237.

Here, when Stark sought to appeal the bankruptcy court order to the BAP (the equivalent

of the district court), he lacked appellate standing. The bankruptcy appellate standing

doctrine thus bars Stark’s appeal.

Because Stark does not have standing to appeal the order of the bankruptcy court,

it is not necessary to decide whether he had standing before that court as a “party in

interest,” nor is it necessary to decide whether the bankruptcy court’s nunc pro tunc

abandonment order was improper. We remand to the BAP with instructions to dismiss

the appeal for want of bankruptcy appellate standing.