Opinion ID: 74728
Heading Depth: 2
Heading Rank: 3

Heading: Approval of Settlement Agreement

Text: The proposed settlement between Miller and Padgett provided for: (1) a general and mutual release of all claims among all parties (e.g., Padgett’s claims for sanctions and abuse of process for Miller’s former suit to enforce the purported contract with Christo, Jr., and Miller’s ability to revive that same suit); (2) Bay Bank’s subordination of all but one of its claims against the estate; and (3) a payment by Padgett and/or Bay Bank to the estate of $10,000-$15,000, depending 18 on the costs associated with the settlement. The agreement also called for declarations that Christo, Jr. alone owned any cause of action against Padgett for his purchase of the Bay Bank stock, that any cause of action had been transferred to the Trustee, and that no third parties would be able to pursue such a cause of action.16 Based on the evidence presented at the June 30, 1998 hearing, the district court made the following preliminary findings: (1) that there was never an agreement between Christo, Jr. and Padgett for Padgett to purchase the Bay Bank stock at the foreclosure sale on behalf of the Christos; (2) that even if there had been an agreement, it was solely between Christo, Jr. individually and Padgett; and (3) that any claim Christo, Jr. might have had was transferred to the Trustee as part of the bankruptcy estate.17 The district court then referred the settlement agreement to the bankruptcy court to determine whether, in light of its findings, the proposed settlement was in the best interests of the estate. The bankruptcy court cited the relevant factors when reviewing a proposed settlement agreement: (1) the probability of success in litigation; (2) the difficulties to be encountered in collection; (3) the complexity, expense, inconvenience, and 16 See Settlement Agreement at 7-9, in R7, Tab 9. 17 See Order, July 13, 1998, at 3-4, in R7, Tab 14. 19 delay involved in the litigation; and (4) the paramount interest of the creditors. See Wallace v. Justice Oaks II, Ltd. (In re Justice Oaks II, Ltd.), 898 F.2d 1544, 1549 (11th Cir. 1990). The bankruptcy court found that these four factors weighed in favor of approving the settlement.18 Although the bankruptcy court noted the district court’s finding that there was no enforceable contract between Christo, Jr. and Padgett, it found that Padgett and Bay Bank’s opposition to the Trustee’s abandonment of those claims to the Christos suggested that success on those claims was not out of the question. And although the bankruptcy court foresaw no difficulty in collection, it found that the complexity and expense involved in litigation were likely to be considerable. Most importantly, the bankruptcy court emphasized that approval of the settlement would allow the creditors, who had been waiting for four years, to be paid, and recommended approving the settlement.19 The district court adopted the recommendation.20 The Christos challenge the settlement agreement as illegal and spurious. Arguing that all claims but Bay Bank’s were “shams,” the Christos contend that Padgett used the agreement to misapply Bay Bank’s fund for his own benefit, and 18 See Report & Recommendation at 5, in R8, Tab 23. 19 See id. at 4-5. 20 See Order, Oct. 22, 1998, in R8, Tab 24. 20 charge the Trustee as a possible abettor. In response, Padgett questions the Christos’ standing either to contest the legality of the Trustee’s decisions or to purport to speak on Bay Bank’s behalf. Padgett also maintains the legality and propriety of the settlement agreement.21 We review an approval of a settlement agreement under the abuse of discretion standard. See Leverso v. SouthTrust Bank of Ala., 18 F.3d 1527, 1531 (11th Cir. 1994).22 We agree with Padgett that the Christos lack standing to assert Bay Bank’s interest. Whether the Christos have standing to challenge the settlement agreement on any other grounds depends, in turn, on whether they had an agreement with Padgett. If such an agreement existed, any party to that agreement would have standing to protect his or her pecuniary interest in it. If there was no agreement between Padgett and the Christos, however, then the Christos would have no basis to challenge approval of the settlement agreement between Padgett and Miller. Turning first to the terms of the agreement, we cannot agree with the 21 Padgett argues that the Christos waived their illegality argument by failing to raise it below. Although the Christos did not contest the agreement’s legality in their response to Padgett’s motion to approve the settlement, they did raise this issue during the June 30, 1998, evidentiary hearing, see Tr. of June 30, 1998 Hr’g at 33, in R11, and in their subsequent motion for reconsideration of the court’s July 13, 1998 order, filed several months before the district court’s order approving the settlement. See Mem. of Law in Supp. of Mot. for Reh’g and Recons. at 19, in R7, Tab 18. 22 The Christos suggest that a settlement agreement is a contract and therefore should be reviewed de novo; this court is not interpreting the settlement agreement, however, but rather deciding whether it was properly approved. 21 Christos’ characterization of the settlement agreement as possibly “the most selfserving document ever drafted.”23 Even if the likelihood of Padgett succeeding in his claim for sanctions against Miller was slight, the bankruptcy court correctly noted that defense of any litigation, even that which is frivolous, is both timeconsuming and costly.24 Based on the findings of the district court, approving the settlement agreement was not an abuse of discretion. This leaves the question of the propriety of the district court’s findings upon which approval of the agreement was predicated. We review a district court’s factual findings for clear error and its conclusions of law de novo. See General Trading Inc. v. Yale Materials Handling Corp., 119 F.3d 1485, 1494 (11th Cir. 1997). The district court noted that there was some evidence of an agreement between Christo, Jr. and Padgett, but it concluded that this evidence was “not credible and deserves no weight.”25 The district court further found that, even if there had been an agreement, there was no evidence that the agreement had been 23 Pls.’ Mem. of Law in Resp. to Def.’s Mot. to Dismiss and Opp’n to Approval of Settlement Agreement at 7 n.5, in R7, Tab 10. 24 See Report & Recommendation at 5, in R8, Tab 23. Although the Christos dismiss the claim for sanctions with the observation that “[s]o rarely are sanctions awarded it is a wonder that any but the least experienced and most ill-prepared trial attorney gives the threat a second thought,” Pls.’ Mem. of Law in Resp. to Def.’s Mot. to Dismiss & Opp’n to Approval of Settlement Agreement at 8 n.6, in R7, Tab 10, we cannot agree that claims for sanctions carry so little force. 25 Order, July 13, 1998, at 4, in R7, Tab 14. 22 between anyone other than Padgett and Christo, Jr.. After review of the record, we cannot say these findings were clearly erroneous. At the June 30, 1998, hearing, Christo, Jr., Phillip Christo, and Irene Christo26 all testified that Padgett had agreed to bid on the Bay Bank stock with the understanding that he would then assign his bid to Union Planters. None of them were able to articulate the particulars of this agreement, or explain what would happen if Union Planters no longer wanted the bank after Padgett bought it. The other evidence of the agreement found in the record comes primarily from Christo, Jr.’s own, often inconsistent, testimony, although there is also evidence from Phillip Christo;27 Irene Christo;28 Frank Wood, a former executive of Union Planters and later officer of Bay Bank and fiancé of Irene Christo;29 Charles Hilton, frequent borrower from Bay Bank and erstwhile counsel to both Christo, Jr. and Padgett,30 and Benjamin W. Rawlins, Jr., Chairman of the Board of Union 26 Christo, III did not testify at the hearing. 27 See Phillip Christo Aff. ¶ 13, in R5, Tab 84. 28 See Irene Christo Aff. ¶ 12, in R6, Tab 89. 29 See Wood Aff. ¶ 9, in R6, Tab 89. 30 See Hilton Aff. ¶ 5, in R5, Tab 84. 23 Planters.31 Close examination of their testimony, however, reveals that their knowledge of the agreement came almost exclusively from inferences and statements from Christo, Jr.32 Indeed, throughout Christo, Jr.’s deposition testimony, he provided scant corroboration of his version of events.33 In addition, we agree with the district court that the evidence presented at the June 30 evidentiary hearing suggested, at most, that Christo, Jr. and Padgett negotiated and perhaps arranged for Padgett to purchase Bay Bank for assignment to Union Planters. First, Miller testified that none of the Christo children advised 31 See Rawlins Dep. at 62, in R5, Tab 85. 32 See Irene Christo Aff. ¶ 15 (“[Padgett] and my father then went into the next room alone for the purpose of discussing the changes in the side deal between Defendant Padgett and the Christo family. . . .”), ¶ 16 (“[Christo, Jr.] said that Defendant Padgett would bid on the Bay Bank stock and then assign the bid to Union Planters or to another purchaser.”), in R6, Tab 89; Wood Aff. ¶ 9 (“[Padgett] and [Christo, Jr.] then went into the next room alone for the purpose of discussing the changes in the side deal between Defendant Padgett and the Christo family. . . .”), ¶ 10 (“[Christo, Jr.] said that Defendant Padgett would bid on the Bay Bank stock and then assign the bid to Union Planters or to another purchaser.”), in R6, Tab 89; Hilton Aff. ¶ 5 (“It was clearly inferred that Padgett had decided not to sell the bank to a third party (pursuant to what I understood was his prior agreement with the Christo family), but rather to compensate the Christo family in cash for their equity in Bay Bank); Rawlins Dep. at 73 (“My perception is that Mr. Christo thought there was some sort of agreement between he and Padgett.”), 109 (“I got the impression that Mr. Padgett was his own man.”), in R5, Tab 85. There is also documentary evidence of negotiations between Padgett and Union Planters for the Bay Bank Stock, but they do not necessarily reflect that such negotiations were at the behest of Christo, Jr.. See R4, Tab 71, Ex. F. 33 See Christo, Jr. Dep. at 48-49, 51, 78, 97-98, in R3, Tab 67, Ex. 2. 24 him of any cause of action they might have had against Padgett.34 Second, although Phillip Christo testified that Padgett had agreed to buy Bay Bank on his behalf, he admitted that he relied on his father’s word for that opinion.35 Moreover, throughout his testimony, Phillip Christo refers to the agreement as Padgett and Christo, Jr.’s.36 Third, Irene Christo admitted that she had never discussed the agreement with Padgett even though she had successfully sought reimbursement from Padgett for her portion of the $250,000 auction payment.37 And although Irene Christo testified “I just know in my heart for him [sic] to get the bank at 8.5 million and for the deal that he had with my father to assign the stock over, that he didn’t fulfill his part of the bargain,” she conceded that she never made a demand against Padgett.38 Finally, Padgett testified that he had never had any discussion with the Chisto children regarding an agreement to purchase 34 See Tr. of June 30, 1998 Hr’g at 16, in R11 (“[O]ne of th[e Christo children] made mention that there was a deal between Mr. Christo and Mr. Padgett for Mr. Padgett to go and bid on behalf of Mr. Christo.”); 21 (“From the testimony we had gotten before we filed suit all evidence pointed if [sic] there was an agreement it was Mr. Christo’s agreement with Mr. Padgett . . . .”). 35 See id. at 138-39, 140. 36 See id. at 160 (“[T]here was an agreement between [Padgett] and dad”); 149 (“I felt like that [sic] Mr. Padgett would honor his agreement with my dad . . . .”). 37 See id. at108-09. 38 Id. at 110. 25 Bay Bank on their behalf.39 Reviewing this record, there is simply no evidence that was ever an agreement between Padgett and anyone other than Christo, Jr. himself.40 Even though the Christo children would obviously have benefitted financially from Padgett’s sale of Bay Bank to Union Planters, this, without more, does not confer on them the right to pursue a cause of action for breach of contract against Padgett. Because any cause of action would have belonged solely to Christo, Jr., that cause of action became property of the estate when he filed his petition for bankruptcy. See 11 U.S.C. § 541(a)(1) (2000); Meehan v. Wallace (In re Meehan), 102 F.3d 1209, 1210 (11th Cir. 1997). Christo, Jr. stood silently by when the Trustee filed suit against Padgett for breach of contract, and then sought to assert the same claims after the Trustee voluntarily dismissed them.41 This he may not do. Christo, Jr. nevertheless contends that the district court should not have 39 See id. at 79. 40 See also note 33, supra. 41 Christo, Jr. emphasizes that Miller, deeming the dismissed claims worthless, abandoned them and that, because the claims had been dismissed without prejudice, that Christo, Jr. was later free to pursue those abandoned claims. At Padgett’s request, Miller filed a notice seeking to abandon his earlier dismissed claims against Padgett, see Notice of Intent to Abandon Counts III and IV of Lawsuit, in R3, Tab 67, Ex. 12, but after Padgett’s objection, filed an amended notice in which Miller explained that Christo, Jr. could not pursue the dismissed claims because the dismissal had resolved those claims or because Christo, Jr. was barred by the automatic stay, see Trustee’s Amendment and Clarification of His Notice of Abandonment Dated January 15, 1998, at 4-5, in R3, Tab 67, Ex. 13. 26 weighed the evidence when there was an outstanding motion for summary judgment and demand for a jury trial in the Christo litigation. The district court made the contested factual findings in the Miller litigation, however, litigation in which the Christos never attempted to intervene. The judge ordered a hearing on the issues underlying both the Miller and Christo litigations and invited all interested parties to present evidence.42 The district court’s factual findings, made in the Miller litigation, were not clearly erroneous. In any event, summary judgment would have been appropriate on the Christos’ claims in light of the dearth of evidence that anyone other than Christo, Jr. would have had a viable claim against Padgett.