Opinion ID: 465409
Heading Depth: 3
Heading Rank: 1

Heading: Burden of Proof and Burden of Persuasion Required to

Text: 19 Support Approval of Compromise. 20 Appellants first challenge the bankruptcy court's conclusion of law, affirmed by the district court, 5 which provided that where a compromise has been negotiated in good faith by a trustee, and is reasonably believed by him to be the best compromise negotiable under the facts of the given case, the court should approve the recommended settlement. Appellants allege that such a conclusion not only misstates the law, but that it places the burden on the objectors to prove that the settlement agreement is not fair, equitable and in the best interest of the creditors. 21 It is clear that there must be more than a mere good faith negotiation of a settlement by the trustee in order for the bankruptcy court to affirm a compromise agreement. The court must also find that the compromise is fair and equitable. See, e.g., Citibank, N.A. v. Baer, 651 F.2d 1341, 1345-46 (10th Cir.1980). 22 In determining the fairness, reasonableness and adequacy of a proposed settlement agreement, the court must consider: 23 (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. 24 In re Flight Transportation Corporation Securities Litigation, 730 F.2d 1128, 1135 (8th Cir.1984) (citations omitted), cert. denied, --- U.S. ----, 105 S.Ct. 1169, 84 L.Ed.2d 320 (1985). Accord, Matter of Jackson Brewing Co., 624 F.2d 605, 607 (5th Cir.1980) (court must review the particular facts and circumstances with adequate detail and explanation to determine (1) the probability of success in the litigation, with due consideration for the uncertainty in fact and law, (2) the complexity and likely duration of the litigation and any attendant expense, inconvenience and delay, and (3) all other factors bearing on the wisdom of the compromise). The record reflects the careful consideration given to the compromise by the bankruptcy court and the inordinate amount of expertise which went into the ultimate compromise approval. See In re Blair, 538 F.2d at 851 n. 1. 25 The trustee, as the party proposing the compromise, has the burden of persuading the bankruptcy court that the compromise is fair and equitable and should be approved. In re Hallet, 33 B.R. 564, 565-66 (Bankr.D.Me.1983). It is clear from the record that the trustee met this burden. The bankruptcy court held five days of hearing on the trustee's application for compromise. During the hearings, the bankruptcy court weighed the evidence presented, heard testimony on the fairness of the compromise, and considered the objections presented by the appellants. 26 Appellants argue that the bankruptcy court had ignored their objections to the compromise and had, in essence, shifted the burden of proof to them to show that the compromise was not negotiated in good faith. However, appellants' argument is not supported by the record. In addition, while creditors' objections to a compromise must be afforded due deference, such objections are not controlling, In re Transcontinental, 764 F.2d at 1299; accord, In re Hallet, 33 B.R. at 566; In re The General Store of Beverly Hills, 11 B.R. 539, 541 (Bankr. 9th Cir.1981), and while the court must preserve the rights of the creditors, it must also weigh certain factors to determine whether the compromise is in the best interest of the bankrupt estate. Matter of W.T. Grant Co., 4 B.R. 53, 69 (Bankr.S.D.N.Y.1980). 27 Any possible inference in the conclusion of law that all that is required for the bankruptcy court to affirm an agreement is the good faith negotiation of a settlement by the trustee is clarified by conclusion of law number 4 which states: 28 The Bankruptcy Court has discretion to and should approve the compromise recommended by the Trustee in Bankruptcy after a hearing held upon appropriate notice, where it appears, as it does in this case, that expense, benefits, hazards and complexity of litigation, potential delay and waste of time, effort and expense might otherwise result. 29 The conclusion of law which appellants challenge did not shift the burden for production of proof regarding the fairness of the settlement agreement. Any error in the conclusion was not material when read in conjunction with the other findings and conclusions which the bankruptcy court made. 30