Opinion ID: 764209
Heading Depth: 2
Heading Rank: 3

Heading: Analysis of Duckor's Standing

Text: 9 Baum first argues that Fondiller requires us to reverse the district court's decision. In Fondiller, the wife of a debtor appealed an order appointing a law firm as special counsel to the bankruptcy trustee. See id. at 441. This court held that the wife was not aggrieved, because her only demonstrable interest in the order is as a potential party defendant in an adversary proceeding. Id. at 443. 10 As is evident, the only interest of the wife in Fondiller was her desire to prevent future litigation. Here, Duckor has a similar interest--the bankruptcy court's order, in fact, led Baum to sue Duckor. But Duckor also has alleged that it is a creditor of the estates and, thus, that it has the type of direct pecuniary interest that was lacking in Fondiller. See Johns-Manville, 843 F.2d at 642 n. 3 (distinguishing Fondiller, because the creditor opposing a plan of reorganization is distinguishable from marginal parties in the bankruptcy proceedings who face potential harm incident to the bankruptcy court's orders). 11 Courts have been reluctant to afford broad standing to creditors: 12 It might be said that all creditors and the debtor are parties to every order entered in a bankruptcy proceeding. However, that does not help in determining which parties have standing to take an appeal. If such reasoning were employed, the result would be a rule that any party who is involved either directly, indirectly or tangentially in the bankruptcy proceeding has the power to appeal from almost any order entered by the bankruptcy judge. 13 10 Collier on Bankruptcy § 8001.05, p. 8001-11 (Lawrence P. King ed., 15th ed. 998). Thus, for example, a creditor has no independent standing to appeal an adverse decision regarding a violation of the automatic stay. Pecan Groves, 951 F.2d at 245. 14 A creditor does, however, have a direct pecuniary interest in a bankruptcy court's order transferring assets of the estate. See Salomon v. Logan (In re International Envtl. Dynamics, Inc.), 718 F.2d 322, 326 (9th Cir.1983) ([I]n a case involving competing claims to a limited fund, a claimant has standing to appeal an order disposing of assets from which the claimant seeks to be paid.). See also Commercial W. Fin., 761 F.2d at 1335 (holding that the creditors had standing, because [t]he plan eliminated their interests in the borrower notes and deeds of trust and disposed of the assets in the estate from which they seek to be paid); Johns-Manville, 843 F.2d at 642 (As a general rule, creditors have standing to appeal orders of the bankruptcy court disposing of property of the estate because such orders directly affect the creditors' ability to receive payment of their claims.). The bankruptcy court's order transferred to Baum the right to sue various defendants, including Duckor and Baum, and the right to avoid various transactions (thereby returning property to the estates). The transfer of those rights and claims left the estates without any other significant asset. Moreover, the transfer led the bankruptcy court to authorize the abandonment of the claims against Baum--obviously, Baum cannot sue itself and will not avoid any transactions involving itself. In the circumstances, Duckor appears to have standing. 15 Baum nevertheless suggests three reasons why the principles from the foregoing cases do not apply here. First, this case involves the transfer of intangible assets rather than money or other tangible property. However, the reasoning of the cited cases applies equally to intangible assets. Cf. Andreuccetti, 975 F.2d at 417 (holding that the debtors had standing to challenge the settlement of the estate's right to sue various entities, because [t]he outcome of this litigation could potentially have a huge effect on the liabilities of the [debtors] and could give them a substantial surplus upon emerging from bankruptcy). 2 16 Second, Baum suggests that, unlike the money in International Envtl. Dynamics and Commercial W. Fin., the assets here have no value. Baum is correct that the assets have no value if left in the estates, because the estates do not have sufficient funds to pursue the claims. Baum incorrectly concludes from this fact that the assets themselves are worthless. 17 As Baum acknowledged in the assignment agreement, the assets have significant value if assigned to a third party. 3 In particular, the assignment agreement gives the estates 50 percent of any recovery. Moreover, David J. Braunstein (Braunstein) offered the estates $50,000 for the same assets. The trustees rejected the proposal, because the right to sue various defendants and the right to avoid various transactions are rights that would be asserted primarily against Braunstein and his affiliates. Nevertheless, the offer demonstrates that the assets have value. 18 Third, Baum argues that Duckor is not actually a creditor of the estates. The record, however, shows that Duckor has claims against the estates of at least $9,859.38, and Duckor appeared before the bankruptcy court, in part, as a creditor. 19 Baum contends that the trustees later rejected Duckor's claims against the estates, but it provides no support in the record for that argument. Baum presented that same unsupported argument to the district court. Although the district court did not make an express factual finding that Duckor is a creditor of the estates, that finding is implicit in its holding; Duckor always has argued that it has standing only as a creditor. The district court's implicit finding is not clearly erroneous.