Court Opinion

ID: 2646839
Source: CourtListenerOpinion
Date Created: 2013-12-20 01:01:20.459384+00
Date Added: 2024-06-11T12:30:17.844041
License: Public Domain

FILED
                      UNITED STATES COURT OF APPEALS                          DEC 19 2013

                                                                          MOLLY C. DWYER, CLERK
                            FOR THE NINTH CIRCUIT                           U.S. COURT OF APPEALS

STAN LEE MEDIA, INC., a Colorado                 No. 12-55405
corporation,
                                                 D.C. No. 2:11-cv-06861-SVW-SS
              Plaintiff - Appellant,             Central District of California,
                                                 Los Angeles
  v.
                                                 ORDER AMENDING
CONAN SALES CO. LLC, a Delaware                  MEMORANDUM DISPOSITION
limited liability company; et al.,               AND DENYING PETITION FOR
                                                 REHEARING AND
              Defendants - Appellees.            REHEARING EN BANC

Before: PREGERSON, WARDLAW, and TALLMAN, Circuit Judges.

       The memorandum disposition filed on October 21, 2013, is hereby amended

and replaced by the attached amended memorandum disposition. With this

amendment, the panel has voted unanimously to deny the petitions for panel

rehearing and rehearing en banc.

       The full court has been advised of the petition for rehearing en banc and no

judge of the court has requested a vote on whether to rehear the matter en banc.

Fed. R. App. P. 35.

       The petition for panel rehearing and the petition for rehearing en banc are

DENIED. No further petitions shall be entertained.
                           NOT FOR PUBLICATION

                    UNITED STATES COURT OF APPEALS                            FILED
                            FOR THE NINTH CIRCUIT                             DEC 19 2013

                                                                          MOLLY C. DWYER, CLERK
                                                                            U.S. COURT OF APPEALS

STAN LEE MEDIA, INC., a Colorado                 No. 12-55405
corporation,
                                                 D.C. No. 2:11-cv-06861-SVW-SS
              Plaintiff - Appellant,
                                                 AMENDED
  v.                                             MEMORANDUM*

CONAN SALES CO. LLC, a Delaware
limited liability company; CONAN
PROPERTIES INTERNATIONAL LLC, a
Delaware limited liability company;
PARADOX ENTERTAINMENT INC., a
Delaware corporation; PARADOX
ENTERTAINMENT AB, a Sweden
corporation; FREDRIK MALMBERG;
LUKE LIEBERMAN, personal
representative of the Estate of Arthur M.
Lieberman; JUNKO KOBAYASHI; GILL
CHAMPION,

              Defendants - Appellees.

                   Appeal from the United States District Court
                       for the Central District of California
                   Stephen V. Wilson, District Judge, Presiding

                      Argued and Submitted October 9, 2013

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Circuit Rule 36-3.
                                Pasadena, California

Before: PREGERSON, WARDLAW, and TALLMAN, Circuit Judges.

      Stan Lee Media, Inc. (SLMI) appeals from an order dismissing its action

seeking to set aside a decade-old settlement approval order (Settlement Order)

entered by the U.S. Bankruptcy Court in conjunction with SLMI’s prior

bankruptcy proceeding. Pursuant to the Settlement Order, SLMI transferred

ownership of intellectual property rights associated with the fictional character

“Conan the Barbarian” to Conan Sales Co., LLC (CSC). In the current litigation,

SLMI seeks to recoup those intellectual property rights through Federal Rule of

Civil Procedure 60 relief. We have jurisdiction under 28 U.S.C. § 1291, and we

affirm.

      We review de novo the district court’s denial of a motion to set aside an

order as void under Rule 60(b)(4). Export Grp. v. Reef Indus., Inc., 54 F.3d 1466,

1469 (9th Cir. 1995). The settlement order is not void. SLMI presented

insufficient evidence that Kobayashi or Lieberman adversely dominated SLMI, or

that any such adverse domination influenced an otherwise arms-length negotiation

between CSC and the unsecured creditors’ committee, both of which were

represented by independent legal counsel. And despite SLMI’s argument to the

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contrary, the record demonstrates that Kobayashi was duly authorized to act on

SLMI’s behalf.

      We also agree with the district court that notice of the settlement was proper

under Federal Rule of Bankruptcy Procedure (FRBP) 2002(a)(3). The settlement

was not a disguised sale, despite SLMI’s argument to the contrary. SLMI also

asserts that the settlement involved a sale of assets outside the ordinary course of

business that required notice to shareholders under 11 U.S.C. § 363(b)(1) and

FRBP 9019(a). The cases it cites for this proposition are factually distinguishable

because they involved the settlement of the debtor’s or trustee’s own cause of

action after receiving third-party bids for those claims higher than the proposed

settlement amount. See In re Mickey Thompson Entm’t Grp., Inc., 292 B.R. 415,

421 (9th Cir. BAP 2003); In re Moore, 608 F.3d 253, 264-65 (5th Cir. 2010). The

facts here are materially different: this was a settlement of CSC’s claim,1 not

SLMI’s; CSC held a secured interest in the intellectual property rights that SLMI

held; even assuming that a third-party could have bid on the secured assets, there

      1
         CSC had originally sold the intellectual property rights to SLMI for
approximately $4 million in SLMI shares. The intellectual property rights secured
the transaction in case the share price fell below a specified level. When SLMI
filed for bankruptcy a short time later, CSC sought to lift the automatic stay to
foreclose on its secured interest in the intellectual property it had transferred to
SLMI. To settle the relief-from-stay dispute, CSC agreed to pay SLMI $275,000,
which was used to pay the costs of administering the estate.
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were no bids, let alone overbids, for the intellectual property rights; and SLMI’s

unsecured creditors, who were highly motivated to maximize the value of the

estate, helped negotiate and supported the settlement. On these facts, the

bankruptcy court did not err by requiring notice only under FRBP 2002(a)(3).

      SLMI’s remaining arguments do not raise any of the jurisdictional or due

process concerns that alone permit Rule 60(b)(4) relief. See U.S. Aid Funds, Inc. v.

Espinosa, 559 U.S. 260, 271 (2010) (“Rule 60(b)(4) applies only in the rare

instance where a judgment is premised either on a certain type of jurisdictional

error or on a violation of due process[.]”). No such violation occurred here.

      The district court did not abuse its discretion in denying relief under Rule

60(b)(6). See United States v. Holtzman, 762 F.2d 720, 725 (9th Cir. 1985). Rule

60(b)(6) is a catch-all provision that should be used “sparingly as an equitable

remedy to prevent manifest injustice.” United States v. Alpine Land & Reservoir

Co., 984 F.2d 1047, 1049 (9th Cir. 1993). SLMI’s allegations on this issue are

largely repetitive of its unpersuasive allegations in support of its request for Rule

60(b)(4) relief. Furthermore, Kobayashi, as an SLMI officer of the debtor in

possession, had no duty to seek 11 U.S.C. § 327 authorization for her continued

employment. See 3 Collier on Bankruptcy ¶ 327.02[6][c] (Alan N. Resnick &

Henry J. Sommer, eds., 16th ed. 2013) (“The general view is that officers of the

                                           4
debtor are not professionals whose employment must be approved by the court.”).

There was also no violation of 11 U.S.C. § 510(b)’s mandatory subordination

requirement because CSC was a secured creditor properly seeking to foreclose on

the asset securing the debt in default. Nor has SLMI demonstrated manifest

injustice. See Alpine Land & Reservoir Co., 984 F.2d at 1049.

      Nor did the district court abuse its discretion in denying Rule 60(d)(3) relief

based on fraud on the court. See Appling v. State Farm Mut. Auto. Ins. Co., 340

F.3d 769, 780 (9th Cir. 2003). To establish fraud on the court, a party must

demonstrate by clear and convincing evidence the existence of an “unconscionable

plan or scheme . . . designed to improperly influence the court in its decision.”

England v. Doyle, 281 F.2d 304, 309 (9th Cir. 1960). All of SLMI’s fraud

allegations are based on non-disclosures, which are generally insufficient to

support a claim of fraud on the court. See Appling, 340 F.3d at 780. Moreover,

SLMI failed to present clear and convincing evidence of an “unconscionable plan

or scheme.” See England, 281 F.2d at 309. Even if SLMI had demonstrated a

“colorable” claim of fraud, which it did not, it was not automatically entitled to

discovery. See Pearson v. First NH Mortg. Corp., 200 F.3d 30, 35 (1st Cir. 1999)

(“[O]nce the record evidence demonstrates a ‘colorable’ claim of fraud, the court

                                          5
may exercise its discretion to permit preliminary discovery.”). The district court

did not abuse its discretion in denying discovery. See id.

      Finally, the district court properly dismissed SLMI’s remaining counts in the

complaint. Even assuming that SLMI could have proceeded on its additional

claims without first setting aside the Settlement Order, which we think unlikely, it

unequivocally acquiesced on the record, on several occasions, to the district court’s

decision to convert SLMI’s complaint into a Rule 60 motion for relief. See

Mendoza v. Block, 27 F.3d 1357, 1360 (9th Cir. 1994) (refusing to reverse the

district court’s decision to resolve questions of fact without a jury where appellant

had “stated unequivocally that he had no objection to the suggested procedure”).

SLMI has thus failed to preserve any argument to the contrary. See id. Once the

district court properly denied the motion to set aside the ten-year-old Settlement

Order, that was the end of the case.

      AFFIRMED.

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