Court Opinion

ID: 4255257
Source: CourtListenerOpinion
Date Created: 2018-03-15 21:00:38.196203+00
Date Added: 2024-06-11T14:44:29.003465
License: Public Domain

FILED
                                                               MAR 13 2018
 1                         NOT FOR PUBLICATION
 2                                                        SUSAN M. SPRAUL, CLERK
                                                            U.S. BKCY. APP. PANEL
                                                            OF THE NINTH CIRCUIT
 3                  UNITED STATES BANKRUPTCY APPELLATE PANEL
                              OF THE NINTH CIRCUIT
 4
 5   In re:                        )      BAP No.     NC-16-1428-TaBS
                                   )
 6   ESTERLINA VINEYARDS & WINERY, )      Bk. No.     15-10841
     LLC,                          )
 7                                 )
                    Debtor.        )
 8   ______________________________)
                                   )
 9   CRAIG STERLING; ERIC          )
     STERLING,                     )
10                                 )
                    Appellants,    )
11                                 )
     v.                            )      MEMORANDUM*
12                                 )
     LINDA S. GREEN, Chapter 7     )
13   Trustee; BANK OF THE WEST,    )
                                   )
14                  Appellees.     )
     ______________________________)
15
                    Argued and Submitted on January 25, 2018
16                        at San Francisco, California
17                           Filed – March 13, 2018
18             Appeal from the United States Bankruptcy Court
                   for the Northern District of California
19
         Honorable Alan Jaroslovsky, Bankruptcy Judge, Presiding
20
21   Appearances:     Shane J. Moses of McNutt Law Group LLP for
                      appellants; John H. MacConaghy of MacConaghy &
22                    Barnier, PLC for appellee Linda S. Green,
                      Chapter 7 Trustee; Bret R. Rossi of Kronick,
23                    Moskovitz, Tiedemann & Girard for appellee Bank
                      of the West
24
25   Before:   TAYLOR, BRAND, and SPRAKER, Bankruptcy Judges.
26
          *
27           This disposition is not appropriate for publication.
     Although it may be cited for whatever persuasive value it may
28   have (see Fed. R. App. P. 32.1), it has no precedential value.
     See 9th Cir. BAP Rule 8024-1(c)(2).
 1                              INTRODUCTION
 2        Debtor Esterlina Vineyards & Winery, LLC received several
 3   secured loans from Bank of the West (“BOTW”); its principals,
 4   brothers Craig and Eric Sterling, personally guaranteed these
 5   obligations.   When Esterlina defaulted, BOTW initiated non-
 6   judicial foreclosure proceedings and sought to recover on the
 7   Sterling guaranties through a state court action.
 8        Esterlina responded with a chapter 111 petition and lender
 9   liability affirmative defenses to the BOTW claims.     The
10   Sterlings similarly asserted lender liability causes in a cross-
11   complaint in the state court action.
12        The chapter 11 case never accomplished a reorganization;
13   instead, Esterlina liquidated the majority of its assets and
14   then converted its case to chapter 7.     Thus, the chapter 7
15   Trustee took over a case with virtually no unliquidated assets.
16   But Esterlina’s alleged lender liability claims remained in the
17   estate, and the Trustee negotiated and the bankruptcy court
18   approved a sale and settlement with BOTW notwithstanding an
19   objection and counteroffer by the Sterlings.
20        The Sterlings appeal; they argue that the trustee failed to
21   provide evidence supporting her proposed transactions and that
22   they matched the BOTW offer and sweetened the deal with an offer
23   to share litigation proceeds.   We agree that this argument is
24   facially attractive; but after reviewing the record, we
25
26        1
             Unless otherwise indicated, all chapter and section
27   references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532.
     All “Rule” references are to the Federal Rules of Bankruptcy
28   Procedure.

                                     2
 1   determine that the bankruptcy court had a sufficient basis for
 2   its decision and did not abuse its discretion in approving the
 3   trustee’s original proposal.   Accordingly, we AFFIRM.
 4                                  FACTS
 5        Esterlina’s bankruptcy and early proceedings.       Esterlina
 6   filed its chapter 11 petition the day before BOTW's scheduled
 7   foreclosure.   BOTW actively participated in the case; it filed
 8   three proofs of secured claims asserting liens on the virtual
 9   entirety of Esterlina's assets.       Esterlina objected to all three
10   claims on the alleged basis that BOTW: “obtained the
11   [Esterlina's] consent to the various loan documents through
12   fraud, deceit or misrepresentation.”      Put simply, it sought
13   disallowance of BOTW’s claims based on alleged lender liability
14   counterclaims.
15        Esterlina disposes of substantially all of its assets.
16   While the claim objection process simmered away, Esterlina
17   finalized a sale, free and clear of specified interests, of its
18   interest in real property and equipment for $5,118,855.      The
19   majority of these proceeds were deposited into a blocked
20   account, pending further order of the bankruptcy court.      Shortly
21   thereafter, the bankruptcy court approved the sale of the
22   majority of the estate’s remaining assets through a $325,000
23   BOTW credit bid.   Only Esterlina's interest in its bank
24   accounts, its alleged claims against BOTW, and negligible other
25   personal property remained unliquidated.
26        The bankruptcy court converted Esterlina’s bankruptcy case
27   to chapter 7; Esterlina withdrew its objection to the BOTW
28   claims.

                                       3
 1        But the move toward peace in the Esterlina bankruptcy did
 2   not carry over to the state court guaranty action.    After the
 3   Esterlina conversion, the Sterlings filed a cross-complaint,
 4   asserting lender liability causes of action on their own behalf
 5   against BOTW.
 6        In September 2016, the bankruptcy case was reassigned from
 7   Judge Thomas E. Carlson to Judge Alan Jaroslovsky.
 8        The chapter 7 trustee’s sale and compromise motion and the
 9   present appeal.     Chapter 7 trustee Linda Green had few assets to
10   liquidate and promptly negotiated a compromise of controversy
11   and a sale of Esterlina's remaining assets to BOTW.    The
12   agreement provided that: BOTW would pay the estate $25,000; the
13   Trustee would release to BOTW the funds in the blocked account;
14   the Trustee would sell to BOTW all remaining assets, including
15   the alleged lender liability claims; and the parties would
16   exchange general mutual releases.
17        The Sterlings opposed.    First, they questioned the benefit
18   of the sale and settlement to the estate or creditors and argued
19   that $25,000 would not pay all administrative claims or any
20   unsecured claims.    Second, they provided a counter-offer and
21   proposed to match the $25,000, waive their claims against the
22   estate, and share 25% of any lender liability action recoveries
23   with the estate.    In connection with the litigation sharing
24   agreement, they made clear that the minimum paid would be
25   $25,000 and that it would be paid even if there was a
26   settlement.   Finally, they asserted that the Trustee had not
27   submitted any evidence to support the motion.
28        The day before the hearing, BOTW’s counsel filed a

                                       4
 1   declaration in response to the Sterlings’ opposition.    He
 2   represented that the superior court had granted BOTW’s motion
 3   for judgment on the pleadings on the Sterlings’ amended cross-
 4   complaint against BOTW.    That same day, the Sterlings’ counsel
 5   filed a declaration stating that he had prepared and was
 6   planning to file a second amended cross-complaint.
 7        The bankruptcy court heard the matter and expressed some
 8   tentative views; it also noted that “it would be a good idea for
 9   me to chat with Judge Carlson and take another look at the
10   pleadings.”    Hr’g Tr. (Nov. 18, 2016) 16:17-18.   The bankruptcy
11   judge concluded the hearing by stating that he would “think
12   about” the matter, “[l]ook over the file again,” and then “have
13   a written decision for you within ten days.”    Id. at 17:21-23.
14        And ten days later, the bankruptcy court entered a
15   memorandum decision overruling the Sterlings’ objection and
16   granting the Trustee’s motion.    The decision started by noting
17   that the undersigned judge had “reviewed the entire record of
18   this case in detail” and had “consulted with Judge Carlson
19   . . . .”    November 28, 2016 Memorandum on Trustee’s Motion to
20   Approve Compromise (“Mem. Dec.”) at 1 n.1.    The bankruptcy court
21   then weighed the offers:
22        The Sterlings correctly argue that the proceeds of the
          Trustee’s compromise won’t go very far, not even
23        covering the estate’s estimated administrative
          expenses. Instead, they propose to purchase the
24        estate’s claim against the Bank for $25,000.00 now,
          plus 25% of their actual recovery from the Bank but no
25        less than an additional $25,000.00. They argue that
          their offer is superior to that of the Bank. The
26        court does not agree.
27   Id. at 2.    The bankruptcy court then explained why:
28        The Sterlings’ offer is most likely to result in only

                                      5
 1         increased administrative expenses, not any sort of
           recovery for creditors. Lender liability claims are
 2         difficult to successfully prosecute and the court sees
           nothing in this case which would make such claims
 3         unusually strong. It would also be highly unusual for
           such claims not to have been waived by now, as waivers
 4         are invariably contained in agreements to extend,
           refinance or forebear which have usually been made
 5         long before a bankruptcy filing on the eve of
           foreclosure. Tellingly, the attorney handling the
 6         litigation in state court declined [chapter 7 Trustee]
           Green’s request to represent the estate on a
 7         contingency basis. The most likely result of
           accepting the Sterlings’ offer is that the Sterlings
 8         litigate against the Bank in state court for a time
           before all their arguments are rejected; the
 9         bankruptcy estate becomes subject to even more
           administrative expenses, and the second $25,000.00
10         becomes uncollectible either because the Sterlings
           have become insolvent or because the estate has no
11         means to engage in collection litigation.
12   Id.   Finally, the bankruptcy court remarked:
13         The court does not believe that Green is looking for a
           quick and easy settlement at the expense of the
14         creditors of the estate; she and her counsel are known
           for aggressively pursuing meritorious claims on behalf
15         of bankruptcy estates. The court agrees with their
           analysis in this case that the bankruptcy estate has
16         no claims against the Bank which warrant rejection of
           the Bank’s nominal settlement offer, and that the
17         Sterlings’ offer is in fact of lesser benefit to the
           estate.
18   Id.
19         The bankruptcy court entered a separate order approving the
20   compromise and sale of property (the “Order”).
21         The Sterlings timely appealed; they also obtained a stay of
22   the Order, conditioned on their posting a bond.
23                              JURISDICTION
24         The bankruptcy court had jurisdiction under 28 U.S.C.
25   §§ 1334 and 157(b)(2)(A) and (O).   We have jurisdiction under
26   28 U.S.C. § 158.
27                                 ISSUES
28         Do the Sterlings have appellate standing?

                                     6
 1        Did the bankruptcy court abuse its discretion in approving
 2   the Order?
 3                           STANDARDS OF REVIEW
 4        We consider appellate standing de novo.    Motor Vehicle Cas.
 5   Co. v. Thorpe Insulation Co. (In re Thorpe Insulation Co.),
 6   677 F.3d 869, 879 (9th Cir. 2012).
 7        We review the bankruptcy court’s approval of a settlement
 8   for an abuse of discretion.    Martin v. Kane (In re A & C
 9   Props.), 784 F.2d 1377, 1380 (9th Cir. 1986).    We also review
10   § 363 sale orders for an abuse of discretion.    Fitzgerald v.
11   Ninn Worx Sr, Inc. (In re Fitzgerald), 428 B.R. 872, 880 (9th
12   Cir. BAP 2010).
13        A bankruptcy court abuses its discretion if it applies the
14   wrong legal standard, misapplies the correct legal standard, or
15   makes factual findings that are illogical, implausible, or
16   without support in inferences that may be drawn from the facts
17   in the record.    See TrafficSchool.com, Inc. v. Edriver Inc.,
18   653 F.3d 820, 832 (9th Cir. 2011) (citing United States v.
19   Hinkson, 585 F.3d 1247, 1262 (9th Cir. 2009) (en banc)).
20                                 DISCUSSION
21   A.   The Sterlings have appellate standing.
22        As a preliminary matter, the Trustee argues that the
23   Sterlings lack standing to appeal from the Order.
24        To have standing to appeal from a bankruptcy court order,
25   an individual must show that she or he is a “person aggrieved.”
26   Fondiller v. Robertson (In re Fondiller), 707 F.2d 441, 442 (9th
27   Cir. 1983).   For instance, a “hopelessly insolvent debtor does
28   not have standing to appeal orders affecting the” estate’s size

                                       7
 1   because “[s]uch an order would not diminish the debtor’s
 2   property, increase his burdens, or detrimentally affect his [or
 3   her] rights.”    Id.   So, in the context “of a sale or other
 4   disposition of estate assets, creditors have standing to appeal,
 5   but disappointed prospective bidders who are not creditors
 6   usually do not have standing to appeal.”     Simantob v. Claims
 7   Prosecutor, LLC (In re Lahijani), 325 B.R. 282, 290 n.13 (9th
 8   Cir. BAP 2005).
 9        Here, the Trustee tries to blend the two scenarios.
10        First, she asserts that the Sterlings lack appellate
11   standing because they are simply disappointed non-buyers of a
12   bankruptcy estate asset.     But the Trustee acknowledges that the
13   Sterlings would later file timely proofs of claims and that
14   Esterlina scheduled Craig Sterling as an unsecured creditor.         So
15   the Sterlings are more than just disappointed non-buyers; they
16   are creditors of the estate.
17        Second, the Trustee argues that this appeal will not impact
18   the Sterlings' claims as unsecured creditors will not be paid in
19   this administratively insolvent case no matter how this appeal
20   is resolved.    While this is likely true, we agree with the
21   bankruptcy court that it is not conclusively established.       At
22   the hearing, the bankruptcy court acknowledged that there was a
23   possibility – “very, very, very, very unlikely, but not
24   impossible” — that the Sterlings’s offer would recover some
25   funds for unsecured creditors.     Hr’g Tr. at 17:19.   Accordingly,
26   we cannot conclude with absolute certainty that unsecured
27   creditors would be out of the money under the Sterlings'
28   proposal.   Nor, for that matter, did the Trustee cite any law

                                       8
 1   establishing that unsecured creditors in an out-of-the-money
 2   case lack appellate standing.
 3        The Sterlings thus have standing to appeal as unsecured
 4   creditors.
 5   B.   The bankruptcy court did not abuse its discretion in
          approving the settlement and approving the sale.
 6
 7        Rule 9019 provides that, “[o]n motion by the trustee and
 8   after notice and a hearing, the court may approve a compromise
 9   or settlement.”      Fed. R. Bankr. P. 9019(a).   “The bankruptcy
10   court has great latitude in approving compromise agreements.”
11   Woodson v. Fireman’s Fund Ins. Co. (In re Woodson), 839 F.2d
12   610, 620 (9th Cir. 1998).      That discretion, however, “is not
13   unlimited.”    Id.    The bankruptcy court “may approve a compromise
14   only if it is ‘fair and equitable.’”      Id. (quoting In re A & C
15   Properties, Inc., 784 F.2d at 1381).
16        The “purpose of a compromise agreement is to allow the
17   trustee and the creditors to avoid the expenses and burdens
18   associated with litigating sharply contested and dubious
19   claims.”   In re A & C Properties, 784 F.2d at 1380–81.      The law
20   “favors compromise and not litigation for its own sake . . . .”
21   Id. at 1381.
22        Because “the disposition by way of ‘compromise’ of a claim
23   that is an asset of the estate is the equivalent of a sale of
24   the intangible property represented by the claim,” a Rule 9019
25   compromise can “simultaneously implicate the ‘sale’ provisions
26   under section 363 as implemented by Rule 6004 and the
27   ‘compromise’ procedure of Rule 9019(a).”      Goodwin v. Mickey
28   Thompson Entm’t Grp., Inc. (In re Mickey Thompson Entm’t Grp.,

                                        9
 1   Inc.), 292 B.R. 415, 421 (9th Cir. BAP 2003).     The “bankruptcy
 2   court has the discretion to apply § 363 procedures to a sale of
 3   claims pursuant to a settlement approved under Rule 9019.”
 4   Adeli v. Barclay (In re Berkeley Delaware Court, LLC), 834 F.3d
5   1036, 1040 (9th Cir. 2016).   As the Ninth Circuit reasoned: “We
 6   see no good reason why a trustee and the bankruptcy court cannot
 7   utilize the procedures of § 363 in certain settlements in order
 8   to ensure maximum value for the estate.”    Id.
 9        1.   The bankruptcy court did not err by not holding an
               auction.
10
11        The Sterlings argue that the bankruptcy court erred by not
12   requiring an auction and encouraging overbidding.    We disagree.
13        The “price achieved by an auction is ordinarily assumed to
14   approximate market value when there is competition by an
15   appropriate number of bidders.”    In re Fitzgerald, 428 B.R. at
16   883 (citing In re Lahijani, 325 B.R. at 289)).    The Sterlings’
17   argument, thus, has some facial appeal given that the Trustee's
18   proposal involved a sale of the lender liability claims.    They
19   further support their argument with reference to the Panel’s
20   Mickey Thompson decision where the Panel held that a bankruptcy
21   court may consider applying § 363 sale procedures to a Rule 9019
22   settlement. 292 B.R. at 421.   And in In re Berkeley Delaware
23   Court, LLC, the Ninth Circuit agreed and also held that the
24   bankruptcy court may use § 363 procedures in the context of a
25   Rule 9019 settlement. 834 F.3d at 1040.   So, an auction could
26   also be required if this was viewed solely as a settlement of a
27   claim.
28        But an auction and bidding procedures were neither required

                                       10
 1   nor requested here.    The only potential bidders were BOTW and
 2   the Sterlings; neither of whom requested an auction nor
 3   suggested that they were willing to overbid in the documents
 4   they filed or the arguments they made before the bankruptcy
 5   court.    They stood on their offer and counter-offer.   As a
 6   result of this silence before the bankruptcy court, the
 7   Sterlings waived the issue on appeal.    Mano-Y&M, Ltd. v. Field
 8   (In re Mortg. Store, Inc.), 773 F.3d 990, 998 (9th Cir. 2014)
 9   (“In general, a federal appellate court does not consider an
10   issue not passed upon below.” (quotation marks and citation
11   omitted)).    And, in any event, the bankruptcy court did not
12   abuse its discretion by not forcing the parties to bid against
13   each other where neither party requested this opportunity.
14        2.     The bankruptcy court did not err when it found that
                 BOTW’s offer was superior.
15
16        The above, however, does not mean that the BOTW and
17   Sterlings’ offers are incommensurable.    In the § 363(b) context,
18   the bankruptcy court is obliged to “assure that optimal value is
19   realized by the estate under the circumstances.”    In re
20   Lahijani, 325 B.R. at 288.    Thus, the bankruptcy court
21   considered the relative economic value of the two offers; it
22   concluded that BOTW’s offer was superior and that the Sterlings’
23   offer was “in fact of lesser benefit to the estate.”     Mem. Dec.
24   at 2:21.    This was not an abuse of discretion.
25        On appeal, the Sterlings argue that their offer was more
26   valuable than BOTW’s offer because they offered to match BOTW's
27   $25,000 cash offer and then proffered a percentage of any
28   successful claim.    So long as the probability of recovery is not

                                      11
 1   zero, they claim, the present value calculation would yield some
 2   value.   We disagree with their conclusion.
 3        We start by reviewing the two offers.    BOTW offered $25,000
 4   and a general release, which would include its almost $2,000,000
 5   deficiency claim.   The Sterlings offered $25,000, waiver of
 6   their claims against the estate, and “if the State Court Action
 7   is resolved in [the Sterlings’] favor through a dispositive
 8   ruling or settlement, they will pay the bankruptcy estate 25% of
 9   any actual recovery, and no less than $25,000.”    Although the
10   Sterlings asserted they had claims against the estate, they
11   never told the bankruptcy court how much those claims were
12   worth; so they failed to monetize their releases’ value,
13   complicating value comparisons.2
14        The Sterlings argue that BOTW’s waiver of its unsecured
15   claim created no value for the estate because, under BOTW’s
16   offer, unsecured creditors would see no recovery.    If the
17   Trustee was only concerned with recovery for unsecured
18   creditors, we would agree.   But a chapter 7 trustee must also
19   consider the interests of the bankruptcy estate.    This includes
20   administrative claimants — here, chapter 11 priority claims.
21        Considering the administrative claimants’ interests, the
22   Trustee’s acceptance of BOTW’s offer minimized the risk of
23   further dilution of those claims; the estate would not fund the
24   lender liability litigation and other administration would
25   terminate with prompt case closure because BOTW provided and
26
27        2
             The Sterlings eventually, in February 2017, each filed a
28   claim for $1,974,129.51.

                                     12
 1   received a general release.   As the bankruptcy court explained
 2   in its memorandum decision, it viewed the Sterlings’ offer as
 3   having significant potential disadvantages because it would
 4   “most likely” lead to “increased administrative expenses, not
 5   any sort of recovery for creditors.”   Mem. Dec. at 2:6-7.3   The
 6   BOTW offer also avoided the risk of adverse claims against the
 7   estate arising from continued litigation.
 8        Comparing the two offers requires more than just comparing
 9   BOTW’s “$25,000” to the Sterlings’ “$25,000 plus the net present
10   value of the Sterlings’ additional, minimum $25,000 if they
11   prevail in the litigation.”   The Trustee had to consider the
12   immediate value of BOTW’s specific release of a substantial
13   deficiency claim and the impact of an ability to promptly close
14   the case.   The Trustee also had to consider the possibility that
15   the Sterlings’ offer, although it had the potential for an
16   upside, carried the risk of a significant downside including the
17   risk of increased administrative expense.4   After accounting for
18
19        3
             The Trustee’s counsel explained that the Trustee was
     concerned about the estate’s exposure to malicious prosecution
20
     liability if the Sterlings pursued the claims on the estate’s
21   behalf and then lost, which the Trustee’s counsel thought was a
     fairly likely result. As the Trustee’s counsel put it at the
22   hearing: “I don’t think it’s [$25,000] versus [$25,000]; I think
     it’s a clean [$25,000] from the bank versus [$25,000] from the
23
     Debtor’s principals, and we might have to be giving some of that
24   [$25,000] back to the bank if the bank prevails in an attorney’s
     fees claim.” Hr’g Tr. at 6:7-11.
25
          4
             And the Trustee was open to balancing this potential
26   risk — at the hearing, the Trustee’s counsel stated: “[I]f [the
27   Sterlings] came in and said, here’s a cashier’s check for a
     hundred thousand dollars, you know, I wouldn’t be able to stand
28                                                      (continued...)

                                     13
 1   these factors, the Trustee concluded and the bankruptcy court
 2   found that the Sterlings’ offer was not superior; it was not a
 3   true overbid.   On this record, we are not prepared to conclude
 4   that this was clearly erroneous.
 5        3.   The A & C Properties factors support approval of the
               compromise.
 6
 7        When deciding whether a compromise is fair and reasonable,
 8   a bankruptcy court should consider:
 9        (a) The probability of success in the litigation;
          (b) the difficulties, if any, to be encountered in the
10        matter of collection; (c) the complexity of the
          litigation involved, and the expense, inconvenience
11        and delay necessarily attending it; (d) the paramount
          interest of the creditors and a proper deference to
12        their reasonable views in the premises.
13   In re A & C Properties, 784 F.2d at 1381 (quoting In re Flight
14   Transp. Corp. Secs. Litig., 730 F.2d 1128, 1135 (8th Cir.
15   1984)).   The trustee has the burden to persuade the bankruptcy
16   court that the compromise is fair and equitable.   Id.   We must
17   affirm the bankruptcy court’s decision if it “amply considered
18   the various factors that determine[] the reasonableness of the
19   compromise . . . .”   Id.
20        Although the bankruptcy court issued a memorandum decision,
21
          4
22         (...continued)
     up here.” Hr’g Tr. at 7:23-25. The bankruptcy court asked if
23   $30,000 would be enough. Id. at 8:5-6. Trustee’s counsel said
24   “I think still, because of this potential claim that the bank
     may have to get that money back, I don’t think the estate is
25   going to net out a better result. I think it’s got to be
     significantly more than that before it’s worth the risk.” Id.
26   at 8:7-11. Despite this colloquy (i.e., the Trustee’s counsel
27   suggesting that the Trustee might accept a larger counter-
     offer), the Sterlings did not raise their offer or request an
28   auction.

                                     14
 1   it did not individually parse the four factors and make explicit
 2   findings on each.   But it was not obliged to, and “where the
 3   record supports approval of the compromise, the bankruptcy court
 4   should be affirmed.”   Id. at 1383.
 5        We start with the Sterlings’ argument that the bankruptcy
 6   court lacked a sufficient evidentiary record to approve the
 7   settlement because the Trustee did not include any declarations
 8   or affidavits with the moving papers.    The Trustee argues that
 9   the Sterlings waived this point by not timely objecting to the
10   motion; BOTW contends that the bankruptcy court stated that it
11   reviewed the entire record.
12        Each is correct in some respect.    The Trustee did not
13   provide the bankruptcy court with declarations or affidavits —
14   and we, make no mistake, find this troubling.    But the
15   bankruptcy court, after the hearing, considered the entirety of
16   the case’s history, including BOTW’s proofs of claims and
17   Esterlina's objection to the claims, in which it asserted the
18   lender liability counterclaims.    And although the Sterlings
19   filed their opposition just days before the hearing, the
20   bankruptcy court considered the opposition, and the Trustee did
21   not ask the bankruptcy court to strike it as filed late.
22        So we consider the record that the bankruptcy court had
23   before it when it made its decision.    As bankruptcy cases go,
24   the case was not in its infancy — it was over a year old and
25   contained over a hundred docket entries.    During the chapter 11
26   phase, the bankruptcy court approved the sale of substantially
27   all of Esterlina's assets and received testimony about the value
28   of Esterlina's property.   The bankruptcy court also, as it was

                                       15
 1   entitled to, relied on the parties’ representations; the
 2   bankruptcy court knew that the Trustee unsuccessfully sought
 3   contingency fee counsel to pursue the lender liability claims.
 4   But more to the point, the Sterlings never asked the bankruptcy
 5   court to hold an evidentiary hearing; they never isolated any
 6   disputed material facts.   With that in mind, we turn to the
 7   individual factors.
 8        The probability of success in the litigation.      At the
 9   hearing, the bankruptcy court explained: “I’ve already formed
10   the opinion, quite frankly, that [the Sterlings’] claims against
11   the bank are weak . . . .”   Hr’g Tr. at 17:12-14.     In its
12   memorandum decision, the bankruptcy court expounded further: “It
13   would also be highly unusual for such [lender liability] claims
14   not to have been waived by now, as waivers are invariably
15   contained in agreements to extend, refinance or forebear which
16   have usually been made long before a bankruptcy filing on the
17   eve of foreclosure.”   Mem. Dec. at 2:8-11.   Finally, the
18   bankruptcy court found: “The court agrees with [the trustee and
19   her counsel’s] analysis in this case that the bankruptcy estate
20   has no claims against [BOTW] which warrant rejection of [BOTW’s]
21   nominal settlement offer . . . .”    Id. at 2:19-21.
22        The Sterlings do not question this on appeal.      Further, the
23   bankruptcy court had uncontroverted evidence that the state
24   court had granted BOTW’s motion for judgment on the pleadings on
25   the Sterlings’ cross-complaint asserting lender liability causes
26   of action albeit without prejudice.
27        This factor favors the Trustee’s settlement.
28

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 1        The difficulties, if any, to be encountered in the matter
 2   of collection.    The bankruptcy court did not explicitly consider
 3   this factor when considering BOTW’s offer.    Nor does it
 4   particularly favor compromise; there would likely not be much
 5   difficulty in collecting from BOTW, a bank.    On the other hand,
 6   the bankruptcy court expressly noted that, if the estate
 7   accepted the Sterlings’ offer, dwindling estate assets could
 8   negatively affect attempts to collect from the Sterlings.
 9        The complexity of the litigation involved, and the expense,
10   inconvenience and delay necessarily attending it.    The
11   bankruptcy court touched on this factor in two respects.     First,
12   drawing upon a decade plus of judicial experience, the
13   bankruptcy court observed that “[l]ender liability claims are
14   difficult to successfully prosecute and the court sees nothing
15   in this case which would make them unusually strong.”      Mem. Dec.
16   at 2:7-8.   And as noted above, the bankruptcy court had evidence
17   that the state court had entirely disposed of the Sterlings’
18   cross-complaint alleging similar causes of action; the
19   litigation would be complex, drawn-out, and expensive.      Second,
20   the bankruptcy court remarked: “Tellingly, the attorney handling
21   the litigation in state court declined [the chapter 7 trustee’s]
22   request to represent the estate on a contingency basis.”     Id. at
23   2:11-12.    So it would cost the estate to pursue the claims.
24        Further, the Sterlings do not distinctly and specifically
25   address these points in their opening appellate brief; they thus
26   waived them on appeal.    Padgett v. Wright, 587 F.3d 983, 986 n.2
27   (9th Cir. 2009) (per curiam) (appellate courts “will not
28   ordinarily consider matters on appeal that are not specifically

                                      17
 1   and distinctly raised and argued in appellant’s opening brief”).
 2
 3        On this record, then, the bankruptcy court could conclude
 4   that this factor favors the settlement.
 5        The paramount interest of the creditors and a proper
 6   deference to their reasonable views.
 7        As the Ninth Circuit explained, “while creditors’
 8   objections to a compromise must be afforded due deference, such
 9   objections are not controlling, and while the court must
10   preserve the rights of the creditors, it must also weigh certain
11   factors to determine whether the compromise is in the best
12   interest of the bankrupt estate.”    In re A & C Properties,
13 784 F.2d at 1382 (citations omitted).     Unsecured creditors have
14   a voice but not a veto.
15        And, as the above makes clear, “recovery for unsecured
16   creditors” is not the relevant standard.    The trustee must
17   consider whether the compromise is in the best interests of the
18   bankruptcy estate.   In this particular case, the Trustee had to
19   consider the interests of both chapter 11 administrative
20   claimants and unsecured creditors.    And the Trustee
21   appropriately considered the potentially negative impact of the
22   Sterlings' proposal on the priority administrative claims from
23   the chapter 11 phase of the case.    Thus, although there may be
24   no recovery for unsecured creditors, we are strongly persuaded
25   that the trustee was not acting only for her own benefit.      Cf.
26   In re KVN Corp., 514 B.R. 1 (9th Cir. BAP 2014).
27        In short, the bankruptcy court considered the Sterlings’
28   objection.   But it concluded that BOTW’s compromise was in the

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 1   bankruptcy estate’s best interest even if it did not result in a
 2   recovery for unsecured creditors.    Given the circumstances of
 3   this case, this was not clearly erroneous.
 4        In sum, the first, third, and fourth A & C Properties
 5   factors weighed in favor of the Trustee’s compromise — and the
 6   Sterlings on appeal do not even question the bankruptcy court’s
 7   findings on the first and third factors; the second factor was
 8   neutral.   And no one factor is dispositive; the “factors should
 9   be considered as a whole to determine whether the settlement
10   compares favorably with the expected rewards of litigation.”
11   Greif & Co. v. Shapiro (In re Western Funding Inc.), 550 B.R.
12   841, 851 (9th Cir. BAP 2016).   Accordingly, the bankruptcy court
13   did not abuse its discretion in approving the settlement.
14                               CONCLUSION
15        Based on the foregoing, we AFFIRM.
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