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FILED

JUN 08 2016

SUSAN M. SPRAUL, CLERK

U.S. BKCY. APP. PANEL

OF THE NINTH CIRCUIT

ORDERED PUBLISHED

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

In re: ) BAP No. NV-15-1238-DFB

 )

WESTERN FUNDING INCORPORATED; ) Bk. No. 2:13-bk-17588-LED

WESTERN FUNDING INC. OF NEVADA; )

GLOBAL TRACK GPS, LLC, )

 )

Debtors. )

________________________________)

 )

GREIF & CO., )

 )

Appellant, )

v. ) O P I N I O N

 )

BRIAN D. SHAPIRO, Trustee of )

WFI Liquidating Trust; GUERIN )

SENTER; AMERICAN EXPRESS TRAVEL ) 

RELATED SERVICES COMPANY, INC.; )

AMERICAN EXPRESS CENTURION BANK,)

 )

Appellees. )

________________________________)

Argued and Submitted on May 19, 2016,

at Las Vegas, Nevada

Filed - June 8, 2016

Appeal from the United States Bankruptcy Court

for the District of Nevada

Honorable Laurel E. Davis, Bankruptcy Judge, Presiding

 

Appearances: Louis Edward Humphrey, III, of Humphrey Lopez PLLC

argued for appellant Greif & Co.; Robert E.

Atkinson, of Atkinson Law Associates, Ltd., argued

for appellee Brian D. Shapiro, Trustee of WFI

Liquidating Trust.

 

Before: DUNN, FARIS and BARASH,1 Bankruptcy Judges.

1 Hon. Martin R. Barash, United States Bankruptcy Judge for

the Central District of California, sitting by designation.
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DUNN, Bankruptcy Judge:

The WFI Liquidating Trust, with Brian D. Shapiro as its

trustee (“Liquidating Trustee”), was established upon

confirmation of the chapter 112 plan of the jointly administered

debtors Western Funding Incorporated (“WFI”), Western Funding

Inc. of Nevada and Global Track GPS, LLC (collectively

“Debtors”). The confirmed plan empowered the Liquidating Trustee

to litigate and settle claims belonging to the chapter 11

bankruptcy estates, provided that bankruptcy court approval be

sought and obtained to settle any claims over $50,000. The

Liquidating Trustee commenced litigation against American Express

Travel Related Services Company, Inc. and American Express

Centurion Bank (collectively “Amex”) to avoid and recover over

$2 million in allegedly fraudulent prepetition transfers made by

WFI. Subsequently, the Liquidating Trustee requested the

bankruptcy court’s approval of his agreement to settle the claims

against Amex for $331,476.53.

Greif & Co. (“Greif”), a beneficiary of the WFI Liquidating

Trust, objected to the proposed settlement. Greif argued that

the settlement amount was unacceptably small, and the Liquidating

Trustee had undervalued the claims in his own complaint. 

Ultimately, the bankruptcy court approved the settlement. Greif

2 Unless otherwise indicated, all chapter and section

references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532. 

All “Rule” references are to the Federal Rules of Bankruptcy

Procedure. All “Civil Rule” references are to the Federal Rules

of Civil Procedure.

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appeals; we AFFIRM.

I. FACTUAL BACKGROUND

A. Events leading up to and including confirmation

WFI was a servicer of subprime auto loans. In 2010, Harbor

Structured Finance LLC, a Delaware entity controlled by Frederick

and Katherine Cooper, acquired WFI. The Coopers were appointed

to management positions in WFI. They established Amex credit

card accounts for themselves and other employees. Although WFI

was not the holder of any of the Amex cards, the Coopers

routinely caused WFI to pay the balances on the cards. In WFI’s

accounting records, the Coopers designated many, but not all, of

the charges on their Amex cards as business expenses.

In 2013, WFI filed a chapter 11 petition, and the case was

administratively consolidated with the chapter 11 cases of the

two other Debtors. On March 31, 2014, the bankruptcy court

approved a joint plan of liquidation (the “Plan”) for the

Debtors. The Plan provided for the dissolution of the Debtors

and the vesting of all property of the Debtors’ bankruptcy

estates in the WFI Liquidating Trust (“Trust”) to be administered

by the Liquidating Trustee. This vesting specifically included

any claims or causes of action held by any of the Debtors’

estates. Creditors of the Debtors’ estates became beneficiaries

of the Trust. The Plan gave the Liquidating Trustee the

“exclusive right, authority, and discretion to determine and to

initiate, file, prosecute, enforce, abandon, settle, compromise,

release, withdraw, or litigate” any claim “and to decline to do

any of the foregoing without the consent or approval of any third

party or further notice to or action, order, or approval” of the

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bankruptcy court. The Plan also permitted the Liquidating

Trustee to “sell and/or assign” claims to a third party to be

pursued for the assignee’s “own benefit.” The only stated

limitation on the Liquidating Trustee’s settlement authority was

that bankruptcy court approval would be required to settle any

claim seeking to recover more than $50,000. Neither the

procedure for requesting such approval nor the criteria for

granting it were specified. The Trust was to be administered

according to a WFI Liquidating Trust Agreement (“Trust

Agreement”), which authorized the Liquidating Trustee, among

other things, to settle actions in his “good faith judgment.”

B. The adversary proceeding and the settlement

Several months later, the Liquidating Trustee filed an

adversary proceeding complaint against Amex, seeking to recover

allegedly fraudulent transfers. The transfers at issue were the

payments made by WFI to Amex on the Coopers’ credit card

accounts. In the complaint, the Liquidating Trustee alleged that

the “overwhelming majority” of the credit card charges were for

personal expenses of the Coopers and other employees. Because

the charges were for personal rather than business expenses, the

Liquidating Trustee alleged that WFI did not receive reasonably

equivalent value in exchange for paying them. In the two years

preceding WFI’s bankruptcy filing, the charges totaled over

$2 million. The complaint asserted the following theories of

avoidance and recovery:3

3 The complaint also included a claim for recovery of

preferential transfers, in the event Amex was determined to be a

(continued...)

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1. The transfers were avoidable under § 548(a)(1)(B)(ii)

because the transfers were made at a time when WFI either was

insolvent or was about to engage in transactions leaving it with

unreasonably small capital (“Insolvency” theory).

2. Some of the transfers were avoidable under

§ 548(a)(1)(B)(ii)(IV) because they were “made under an

employment contract for the benefit of an insider, outside the

ordinary course of business” (“Employment Contract” theory).

Amex contacted the Liquidating Trustee to initiate

settlement negotiations on December 8, 2014, approximately two

weeks after the complaint was filed. Five months later, the

parties reached a settlement, and the Liquidating Trustee filed a

motion with the bankruptcy court seeking approval of the

settlement (“Settlement Motion”). Amex agreed to pay $331,476.53

to the Trust in exchange for dismissal of the adversary

proceeding and a mutual release of claims, and Amex would be

entitled to an allowed general unsecured claim under the Plan in

the amount of the settlement payment.

The Liquidating Trustee took the position that, because he

derived his authority not from the Bankruptcy Code but from the

terms of the confirmed Plan and the Trust Agreement, he was not a

“trustee” as that term is used in the Code and Rules. Thus, he

argued that standards governing settlement motions by bankruptcy

trustees were not applicable. The Liquidating Trustee argued he

was entitled to “greater deference in approval of settlements”

3(...continued)

prepetition creditor of WFI.

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based on the Plan and Trust Agreement, but he contended that the

Settlement Motion should be approved regardless of whether the

bankruptcy court accepted that argument.

In the Settlement Motion and an accompanying declaration,

the Liquidating Trustee went on to analyze the settlement under

the factors enumerated in Martin v. Kane (In re A & C

Properties), 784 F.2d 1377, 1381 (9th Cir. 1986) (the “A & C

Factors”). The Liquidating Trustee recognized the claims

asserted in the complaint were susceptible to factual dispute. 

In particular, though the Liquidating Trustee believed certain of

the charges in question were “easily identified” as personal, he

acknowledged that others were subject to dispute as to whether

they were legitimate business expenses that may have provided

value to WFI. Likewise, the Liquidating Trustee believed that

WFI was undeniably insolvent at the petition date and that the

evidence “strongly supported” a finding of insolvency at least

nine months earlier. Yet he recognized the difficulty in proving

that, as he suspected, the insolvency period had begun much

earlier still. He concluded:

In my business judgment, compromise results in a fair

and reasonable recovery for the estate, factoring in

the overall recovery, my estimate for success in the

resolved matter, and the significant costs and delay

necessarily associated with litigating in an effort to

obtain greater recovery.

. . . Furthermore, the compromise represents an

immediate recovery for the Liquidating Trust that will

allow for payment of a large portion of the outstanding

administrative expenses, which in turn maximizes the

probability that future recoveries will allow for

meaningful distribution to general unsecured creditors,

and makes additional funds available for payment of

cost[s] and expenses in pursuit of other causes of

action.

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. . . Accordingly, I assert that the compromise is in

the best interest of the bankruptcy estate’s creditors.

C. The dispute over the Settlement Motion

Two creditors, Greif and Guerin Senter, expressed views on

the settlement. Mr. Senter supported and joined in the

Settlement Motion, but Greif vigorously opposed it. Greif

complained that the proposed settlement would pay subordinated

administrative claims, including Mr. Senter’s claim, but other

creditors would likely receive nothing. Greif wanted the

Liquidating Trustee “to present the relevant facts and legal

analysis surrounding the claims asserted [in the complaint] (and

an explanation of why some theories were left out)” to allow the

bankruptcy court to evaluate the Settlement Motion. Greif

presented its own analysis of the Insolvency and the Employment

Contract claims, along with an additional theory of recovery

under § 548(a)(1)(A), which the Liquidating Trustee did not

assert (“Fraudulent Intent” theory).

Concerning the Insolvency theory, Greif believed WFI likely

became insolvent in August 2010 and was rendered “even more

leveraged” after a March 2012 transaction. Greif argued that

these facts supported greater recovery. As to the Employment

Contract theory, Greif noted that insolvency is not an element

and questioned the lack of discussion of this theory in the

Settlement Motion. Regarding both theories, Greif demanded

additional details concerning the methodology by which the

parties arrived at the settlement amount, as well as information

concerning the expected difficulty and expense of prevailing in

litigation. Finally, Greif asked the bankruptcy court to require

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the Liquidating Trustee to justify his decision not to pursue a

Fraudulent Intent claim.

The Liquidating Trustee filed a reply to Greif’s objection

in which he provided some of the additional information Greif

requested. He explained that the settlement amount was based on

calculations using two “estimates in compromise” between himself

and Amex. First, the parties had divided the universe of

questioned credit card charges into two categories, which the

Liquidating Trustee called “Type 1” and “Type 2” charges. Type 1

charges were those that the Coopers had not designated as

business expenses. Type 2 charges were those that were

designated as business expenses, though the Liquidating Trustee

disputed the accuracy of that designation. For purposes of

calculating the settlement amount, the parties agreed to treat

all Type 1 charges and exactly half of the Type 2 charges as

having provided no value to WFI. Second, the parties agreed,

again as an “estimate in compromise,” that WFI “would probably be

found to be ‘insolvent’ . . . from January 2013 onward.” The

Liquidating Trustee emphasized that the parties had disagreed

during negotiations as to the correct insolvency date and had

chosen January 2013 “in the interest of settling the matter.” 

The settlement amount was calculated by adding together all of

the Type 1 charges and half of the Type 2 charges incurred

beginning in January 2013.

The Liquidating Trustee disagreed as well with Greif’s

argument that he had undervalued other theories of recovery. 

Discussing each of Greif’s suggested theories, the Liquidating

Trustee concluded that they did not significantly alter the

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reasonableness of the settlement. Regarding the Employment

Contract theory, the Liquidating Trustee explained that the only

transfers arguably avoidable under this theory were relatively

small and had little effect on the value of the claims as a

whole.

Concerning the likelihood of success in the litigation, the

Liquidating Trustee noted that the Coopers had a strong incentive

to testify in favor of Amex, because their own interests would be

served by asserting a legitimate business purpose for the

disputed charges. The Liquidating Trustee estimated the costs of

litigation at $125,000, including the cost of hiring insolvency

experts, but he noted that this was a “very rough” estimate, as

“costs for the case could spiral out of control . . . without any

guarantee of recovery[.]” Already having paid the unsubordinated

administrative claims, the Liquidating Trustee pointed out that

the settlement would allow the subordinated administrative claims

to be paid in full, with some funds remaining. This, he

reasoned, was in the best interests of the unsecured creditor

body as a whole, notwithstanding Greif’s objection.

Finally, in response to Greif’s argument that he should have

asserted a Fraudulent Intent claim, the Liquidating Trustee

explained that he believed such a claim was unsupportable. “If

there was any nefarious motive to [WFI]’s payment of the Coopers’

expenses, it is far more likely to have been the Coopers’ greed

than [WFI]’s desire to dodge creditors.” With no evidence that

WFI made any transfers with the intent to hinder, delay or

defraud creditors, the Liquidating Trustee argued he could not

have prevailed on the Fraudulent Intent theory.

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One day before the initially scheduled hearing on the

Settlement Motion, Greif filed a supplemental objection,

including 597 pages of attachments. Greif focused primarily on

its disagreement with the Liquidating Trustee’s positions on the

Fraudulent Intent and Employment Contract theories. Greif argued

the facts supported a finding of multiple “badges of fraud” in

support of a Fraudulent Intent claim. Regarding the Employment

Contract theory, Greif cited scholarly commentary arguing that

any payments to an insider having an employment contract were

avoidable, whether or not the payments were made pursuant to that

contract. Regardless of whether the court accepted this view,

Greif argued that expense reimbursement provisions in the

Coopers’ contracts sufficed to bring all Type 1 and Type 2

charges within the scope of the Employment Contract theory. 

Otherwise, the supplemental objection further elaborated Greif’s

arguments that the Liquidating Trustee’s insolvency analysis was

flawed.

The Liquidating Trustee submitted a reply with 161 pages of

exhibits. He now provided his own analysis of the “badges of

fraud,” repeating his position that the Coopers’ apparent intent

to misuse WFI’s funds did not equate to the requisite intent by

WFI to hinder, delay or defraud creditors. Considering a list of

badges of fraud identified both by the Ninth Circuit and in the

Uniform Fraudulent Transfer Act,4 the Liquidating Trustee

4 The Trustee acknowledged that the Uniform Fraudulent

Transfer Act was not directly applicable, because his claims

sounded under § 548, which does not depend on state law, as

(continued...)

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explained his conclusion that the facts did not support an

avoidance claim based on Fraudulent Intent. He maintained that

Greif overestimated the value of the Employment Contract theory,

both because Greif’s preferred interpretation of the statute was

unlikely to be adopted by any court, and because he foresaw

significant factual obstacles to recovery on that theory. 

Likewise, the Liquidating Trustee stood by his insolvency

analysis as previously articulated.

On the same day the Liquidating Trustee filed his reply to

the supplemental objection, Greif filed a motion asking the court

to compel the Liquidating Trustee to assert a Fraudulent Intent

claim or, in the alternative, to grant Greif derivative standing

to pursue such a claim “on behalf of the estate.” This motion

repeated and elaborated at substantial length on Greif’s previous

analysis of this subject. Because the hearing on the Settlement

Motion was now only a week away, Greif filed a separate request

that its new motion be consolidated with and considered

simultaneously with the Settlement Motion. The Liquidating

Trustee opposed this request, and the bankruptcy court denied it

prior to the Settlement Motion hearing.

D. The hearing on the Settlement Motion

After hearing oral argument from Greif and the Liquidating

Trustee, the bankruptcy court announced its findings and

conclusions on the record. The bankruptcy court agreed with the

Liquidating Trustee that the A & C Factors were not applicable to

4(...continued)

opposed to § 544, which does.

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“this post-confirmation determination.” Applying Nevada law, the

bankruptcy court concluded that the “good faith judgment”

language in the Trust Agreement imposed a business judgment

standard on the Liquidating Trustee. The court found that the

proposed settlement was “the product of the liquidating trustee’s

good faith and informed decision reached after an extensive

analysis of all legal and factual issues.” The court noted that

the Liquidating Trustee’s analysis of the issues supported a

determination that victory against Amex was “less clear cut than

Greif appears to argue.”

As requested by the Liquidating Trustee, the bankruptcy

court went on to make findings concerning the A & C Factors,

which the court enumerated as follows: “A, the probability of

success in the litigation; B, the difficulties [i]f any to be

encountered in the [matter] of collection; C, the complexity of

the litigation and the expense, inconvenience and delay

necessarily attending it; D, the paramount interest of the

creditors and proper deference to their reasonable views in the

premises.” Hr’g Tr. (July 6, 2015) at 31:13-19. The bankruptcy

court found that, although collection was not a concern, the

Liquidating Trustee had established that the A & C Factors

overall weighed in favor of the settlement. The court was

persuaded by the Liquidating Trustee’s argument that “the

complexity of these issues will require substantial expense and

delay without a corresponding increase of the probability that

[he] will prevail to the extent Greif argues.”

Having denied the request for expedited consideration of

Greif’s derivative standing motion, the bankruptcy court

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nevertheless reviewed that motion and took into consideration

Greif’s discussion of “causes of action that were and were not

brought by the liquidating trustee.” Still, the bankruptcy court

expressly declined to decide the derivative standing motion,

opining that it would not be “procedurally proper” to do so under

the circumstances. The court granted the Settlement Motion, but

the order approving the settlement included a provision delaying

its effectiveness for two weeks to give Greif a further

opportunity to offer to purchase the claims against Amex. After

the two-week period expired, the Liquidating Trustee reported

that Greif had made no offer, and the order became effective. 

This timely appeal followed.

II. JURISDICTION

The bankruptcy court had jurisdiction under 28 U.S.C.

§§ 1334 and 157(b)(2)(O). We have jurisdiction under 28 U.S.C.

§ 158.

III. ISSUE

Whether the bankruptcy court abused its discretion in

granting the Settlement Motion.

IV. STANDARDS OF REVIEW

We review a bankruptcy court’s decision to approve a motion

to settle and compromise for abuse of discretion. Goodwin v.

Mickey Thompson Entm’t Grp., Inc. (In re Mickey Thompson Entm’t

Grp., Inc.), 292 B.R. 415, 420 (9th Cir. BAP 2003). A bankruptcy

court abuses its discretion only if it fails to apply the correct

legal standard or applies it in a way that is illogical,

implausible or unsupported by the record. United States v.

Inouye, ___ F.3d ___, ___, 2016 WL 2641109 at *3 (9th Cir.

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May 31, 2016); United States v. Hinkson, 585 F.3d 1247, 1262 (9th

Cir. 2009) (en banc). We may affirm the decision of the

bankruptcy court on any basis supported by the record. See Hooks

v. Kitsap Tenant Support Servs., Inc., 816 F.3d 550, 554 (9th

Cir. 2016); Shanks v. Dressel, 540 F.3d 1082, 1086 (9th Cir.

2008).

In general, a chapter 11 plan is interpreted as a contract,

and we review its interpretation de novo. Dolven v. Bartleson

(In re Bartleson), 253 B.R. 75, 78-79 (9th Cir. BAP 2000).

V. DISCUSSION

A. The proper standard

The threshold question in this appeal is what standard(s)

the bankruptcy court was required to apply in deciding the

Settlement Motion. Applying Nevada law to interpret the Plan and

Trust Agreement, the court concluded that a business judgment

standard was appropriate. Greif argues that the proper standard

is the “fair and equitable” standard that ordinarily governs

settlement motions by bankruptcy trustees.

We agree with the bankruptcy court that the standards

governing motions by bankruptcy trustees appointed under the

Bankruptcy Code are not necessarily applicable to the trustee of

a liquidating trust established under the terms of a confirmed

chapter 11 plan. Notwithstanding his title, the Liquidating

Trustee is not a “trustee” under § 323(a). Rather, he is a

“representative” under § 1123(b)(3)(B), empowered by the terms of

the Plan to prosecute and settle claims previously belonging to

the Debtors’ estates. Granted, a § 1123(b)(3)(B) representative

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is “the functional equivalent of a trustee” in some regards. 

Beck v. Fort James Corp. (In re Crown Vantage, Inc.), 421 F.3d

963, 973 (9th Cir. 2005) (liquidating trustee is equivalent of

trustee for purposes of Barton doctrine). It does not follow,

however, that his powers and duties are identical to those of a

trustee under the Bankruptcy Code.

Greif asks us to hold that postconfirmation settlements

negotiated by liquidating trustees are subject to the same

standards as settlements negotiated by bankruptcy trustees or

debtors in possession. We decline to impose such an across-theboard requirement. “[T]he hallmark of chapter 11 is a

flexibility in which the content of plans is primarily up to the

genius of the drafter.” The Alary Corp. v. Sims (In re

Associated Vintage Grp., Inc.), 283 B.R. 549, 560 (9th Cir. BAP

2002). The confirmed Plan exhibited that flexibility by

permitting the Liquidating Trustee to settle claims under $50,000

without bankruptcy court oversight, while requiring approval for

settlement of larger claims. The provision allowing settlement

of smaller claims without approval is not implicated here, and

Greif does not attack it directly. Instead, we understand Greif

to argue that, where a plan requires bankruptcy court approval of

a settlement, that approval must be sought under the “fair and

equitable” standard. We see no reason to read this standard into

the Plan where the drafters have omitted it. Greif’s concern

about the ability of a “target insider” to exploit the

availability of less searching review of settlements by

“liquidat[ing] inside of a Chapter 11 rather than a Chapter 7” is

unpersuasive. Apart from the fact that no insider is a party to

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the claims at issue here, creditors desiring greater control over

settlements may lobby for it through the ordinary voting and

confirmation process.

Unfortunately, though the Plan makes no reference to the

“fair and equitable” standard, neither does it expressly provide

for any other standard by which to evaluate those settlements

requiring approval. To fill the gap, the bankruptcy court turned

to paragraph 5.1 of the Trust Agreement, requiring the

Liquidating Trustee to exercise “good faith judgment, in the best

interests of the Liquidating Trust Beneficiaries and to maximize

net recoveries and distributions[.]” The bankruptcy court

analogized this to the “business judgment” standard under Nevada

law and concluded it was satisfied. Rather than decide whether

this interpretation was correct, we simply conclude that the

applicable standard under the Plan was something less exacting

than the A & C Properties standard.5 Because the bankruptcy

court made findings and conclusions based upon consideration of

the A & C Factors, and because we may affirm on any basis

supported by the record, we review these findings and

conclusions. If we conclude the court’s determination under this

standard was not an abuse of discretion, it follows necessarily

that the lesser standard of the Plan and Trust Agreement was

satisfied as well.

5 We note that the A & C Properties standard itself includes

a requirement of good faith on the part of the trustee. In re

A & C Props., 784 F.2d at 1381 (“It is clear that there must be

more than a mere good faith negotiation . . . .” (emphasis

added)). The Liquidating Trustee’s good faith is not questioned.

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B. The A & C Factors

“Basic” to the process of approving compromises by

bankruptcy trustees “is the need to compare the terms of the

compromise with the likely rewards of litigation.” Protective

Comm. for Indep. Stockholders of TMT Trailer Ferry, Inc. v.

Anderson, 390 U.S. 414, 424-25 (1968), quoted in In re A & C

Props., 784 F.2d at 1382. Approval of a settlement requires “a

sufficient factual foundation which establishes that it is fair

and equitable,” but “where the record supports approval of the

compromise, the bankruptcy court should be affirmed.” 784 F.2d

at 1383.

In assessing whether a settlement is fair and equitable,

bankruptcy courts must consider the following factors:

(a) The probability of success in the litigation;

(b) the difficulties, if any, to be encountered in the

matter of collection; (c) the complexity of the

litigation involved, and the expense, inconvenience and

delay necessarily attending it; (d) the paramount

interest of the creditors and a proper deference to

their reasonable views in the premises.

Id. at 1381. Each factor need not be treated in a vacuum;

rather, the factors should be considered as a whole to determine

whether the settlement compares favorably with the expected

rewards of litigation. See, e.g., In re Pac. Gas & Elec. Co.,

304 B.R. 395 (Bankr. N.D. Cal. 2004) (“factors as a whole”

favored settlement); In re WCI Cable, Inc., 282 B.R. 457, 472-73

(Bankr. D. Or. 2002) (approving settlement despite high

probability of success where litigation costs “extremely high”).

The bankruptcy court stated at the Settlement Motion hearing

that it had considered all the filings related to the Settlement

Motion, including Greif’s opposition and Mr. Senter’s support of

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the settlement, along with the Liquidating Trustee’s and Greif’s

oral arguments. The court correctly identified the applicable

factors and found that continuing to litigate would “require

substantial expense and delay without a corresponding increase of

the probability that the liquidating trustee will prevail to the

extent Greif argues.” This statement reveals that the bankruptcy

court predicated its findings on (i) its assessment of the

probability of success should the Liquidating Trustee try the

case; (ii) the “substantial” anticipated expenses and delays

involved in litigation; and (iii) its evaluation of Greif’s views

on the subject.6

On appeal, Greif devotes much of its argument to the merits

of the claims the Liquidating Trustee proposed to settle,

including the hypothetical Fraudulent Intent claim.7 Greif

criticizes the Liquidating Trustee’s legal and factual analysis

of his claims and suggests the calculation of the settlement

amount was based on false premises. Having presented its own

detailed analysis of the claims, Greif now argues that the

bankruptcy court erred by failing to “assess the actual merits of

the parties’ legal and factual positions.”

A trustee seeking approval of a settlement is not required

to prove it would have been impossible to obtain a superior

6 The bankruptcy court noted there was no reason to expect

difficulty in collecting on a judgment against Amex.

7 Though no Fraudulent Intent claim was asserted in the

complaint, it is undisputed that any potential Fraudulent Intent

claim would be extinguished by the mutual release contained in

the settlement agreement.

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result by trying the case. If this were required, the settlement

approval process would degenerate into a trial of the underlying

claims, which would defeat the purpose of settling. Burton v.

Ulrich (In re Schmitt), 215 B.R. 417, 423 (9th Cir. BAP 1997)

(court should “canvass the issues” rather than conduct “mini

trial” of underlying claims). It would also frustrate

negotiations, because it would prevent the trustee from making

any material concessions in the interest of compromise. The

settlement amount was the product of negotiation and compromise

and was not presented as a conclusive determination of the merits

of the claims being settled.

We make these observations to clarify the scope of our

review in this appeal. We are not called upon to decide the

merits of the claims asserted in the adversary proceeding, nor

must we decide whether the Liquidating Trustee’s factual and

legal analysis of the claims was correct in every particular. It

is the bankruptcy court’s findings and conclusions, not the

Liquidating Trustee’s analysis of his claims, that we review for

abuse of discretion. With these principles in mind, we address

Greif’s arguments regarding areas in which the record purportedly

fails to support the bankruptcy court’s decision.

1. The Employment Contract theory

The Liquidating Trustee admitted that this theory played

little role in the settlement calculations. He explained that he

considered it a “backstop” to the more important Insolvency

claims. Greif argues that, on the contrary, virtually every

transfer within the two-year reach-back period was avoidable on

this theory. Greif presented a detailed explanation of how it

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would have gone about arguing this claim. Then, effectively

deeming its own position to be irrefutable, Greif faulted the

Liquidating Trustee for not adopting that position in his

settlement negotiations. Now, Greif argues that the bankruptcy

court abused its discretion because it did not “earnestly assess”

the contending views on the subject.

As explained above, we are not called upon to decide whether

the claim ultimately would or should have been decided in the way

Greif asserts. The fact that the Liquidating Trustee did not

negotiate the claim in the way Greif would have liked also is not

dispositive. It is possible that, if the Liquidating Trustee had

adopted Greif’s position at trial, he would have prevailed. It

is possible he could have obtained a greater settlement by

presenting this argument during negotiations. But based on the

record, neither of these outcomes was so likely as to preclude a

finding that the settlement was fair and equitable.8

Because the claim does not depend on a showing of insolvency

or other financial distress, Greif also argues that the expense

of litigating it is substantially less onerous compared to the

Insolvency claims. Unfortunately, there is no reason to suppose

Amex would have been willing to pay to settle the other claims

while leaving the Employment Contract claim unresolved. Unless

8 Among other things, the Employment Contract Theory was

vulnerable to the argument that the questioned transfers were

made in the ordinary course of business, and that they provided

value to WFI because they offset WFI’s obligations to the

Coopers. Greif argues that these defenses could be overcome, but

again, victory was not so assured as to deprive the court of a

basis on which to conclude the settlement was fair and equitable.

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the Liquidating Trustee had been willing to forgo the other

claims and hang his entire case on § 548(a)(1)(B)(ii)(IV) - a

risky proposition given the Liquidating Trustee’s doubts about

the claim’s value - this strategy would not necessarily have

helped avoid costs. In short, Greif has not shown that the

bankruptcy court so overestimated the expense of litigation as to

render its decision an abuse of discretion.

2. The Insolvency theory

According to Greif, the “linchpin” of the settlement was the

“agreed upon insolvency date of January 1, 2013.” Greif implies

this “agreed upon” date resulted in an inappropriately low

settlement amount, and the bankruptcy court abused its discretion

by allowing the Liquidating Trustee to accept it.

This argument mischaracterizes the nature of the settlement. 

Parties to a settlement need not (and generally do not) “agree”

on the objectively correct resolution of the facts in dispute. 

The Liquidating Trustee made clear that he argued during

negotiations that WFI had become insolvent before January 1,

2013, while Amex argued for a later date. The parties simply

settled on that date in the interest of compromise. The question

before the bankruptcy court was not whether the estimated date

was correct, but whether the settlement based on that estimate

was fair in light of the A & C Factors. We are not persuaded

that the estimate was so obviously wrong as to undermine the

overall fairness of the settlement.

Otherwise, Greif argues that the bankruptcy court should

have required the Liquidating Trustee to hire an insolvency

expert to explore the issue more fully before settling. 

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Recognizing that this was one of the expenses the Liquidating

Trustee hoped to avoid by settling, Greif argues that the

Liquidating Trustee at least should have provided specific

evidence of how much it would cost to hire an expert. It is true

that the bankruptcy court must have an adequate record on which

to base its decision, and specific information about the

projected costs of an insolvency investigation might have been

useful. Nevertheless, we conclude that the record before the

bankruptcy court was adequate. As the court recognized, the

heated disagreement between Greif and the Liquidating Trustee,

concerning the insolvency issue among others, demonstrated that

resolution of the claims would not be easy or inexpensive.

C. Derivative standing

The bankruptcy court denied Greif’s request to expedite

consideration of its motion for derivative standing. In the

order granting the Settlement Motion, however, the bankruptcy

court allowed Greif additional time to make an offer to purchase

the Trust’s claims against Amex. During the hearing, the

Liquidating Trustee’s counsel indicated he would entertain an

all-cash offer from Greif, but not a credit bid as Greif

apparently had suggested in previous discussions. Greif argues

that the bankruptcy court should have required the Liquidating

Trustee to entertain other offers, such as a credit bid, or

should have granted the derivative standing motion.

Though the bankruptcy court did not decide the derivative

standing motion, it expressed its doubt that such a motion was

cognizable: “[W]e’re looking at post-confirmation powers granted

to a liquidating trustee. We’re way beyond a case pending under

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Chapter 11. . . . So I think we have a limited number of options

available[.]”9 Hr’g Tr. (July 6, 2015) at 16:15-20. The denial

of Greif’s request for expedited consideration of the derivative

standing motion is not on appeal, and we need not consider

whether such a motion could have been granted.

We have held, however, that a trustee must consider offers

from creditors to purchase claims the trustee wishes to settle. 

This is because settlement of a claim that is property of the

estate is equivalent to a sale of that claim to the defendant. 

In re Mickey Thompson Entm’t Grp., Inc., 292 B.R. at 421. Where

an interested party offers to purchase a claim in exchange for a

sum certain plus a percentage of net proceeds, the trustee must

take the percentage into account in determining whether the bid

is superior to an all-cash offer from the defendant. Simantob v.

Claims Prosecutor, LLC (In re Lahijani), 325 B.R. 282, 288-90

(9th Cir. BAP 2005). The trustee should not reject out of hand

all offers that include a non-cash component. Id.

In contrast to Lahijani, however, there is no indication in

the record that Greif made any offer to purchase the claims,

either before or after the Liquidating Trustee expressed his

unwillingness to entertain non-cash offers. Certainly, there is

nothing to suggest Greif made an offer consisting of a sum

9 The “limited number of options” to which the bankruptcy

court referred included the Plan provision allowing the

Liquidating Trustee to “sell and/or assign” claims to be pursued

by the purchaser or assignee “for its own benefit.” The

Liquidating Trustee argues this provision permits only outright

sale, not derivative standing, but the bankruptcy court did not

decide the question, and neither do we.

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certain plus a percentage of proceeds or that Greif had any

intention of doing so if given the opportunity. The Liquidating

Trustee rejected Greif’s suggestion of making a credit bid for

the claims. Considering the difficulties inherent in determining

the value of a credit bid by an unsecured creditor beneficiary of

an insolvent liquidating trust, we conclude that the Liquidating

Trustee was not obligated to entertain this novel suggestion.

VI. CONCLUSION

Based upon the foregoing, we conclude that the bankruptcy

court did not abuse its discretion in granting the Settlement

Motion. We AFFIRM.

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