Court Opinion

ID: 4443992
Source: CourtListenerOpinion
Date Created: 2019-10-03 17:01:30.317668+00
Date Added: 2024-06-11T09:24:50.793603
License: Public Domain

FILED
                                                                 United States Court of Appeals
                         UNITED STATES COURT OF APPEALS                  Tenth Circuit

                               FOR THE TENTH CIRCUIT                   October 3, 2019
                           _________________________________
                                                                     Elisabeth A. Shumaker
                                                                         Clerk of Court
SONIA ORDONEZ,

       Plaintiff - Appellant,

v.                                                         No. 17-4188
                                               (D.C. No. 2:13-CV-00067-DAK-EJF)
ABM AVIATION, INC. f/k/a Air Serv                           (D. Utah)
Corporation,

       Defendant - Appellee.

–––––––––––––––––––––––––––––––––––

In re: SONIA ORDONEZ,

       Debtor.

------------------------------

SONIA ORDONEZ,

       Appellant,

v.                                                       No. 18-4094
                                                     (BAP No. 18-002-UT)
ABM AVIATION, INC; STEPHEN W.                     (Bankruptcy Appellate Panel)
RUPP, Chapter 7 Trustee,

       Appellees.

–––––––––––––––––––––––––––––––––––

In re: SONIA ORDONEZ,

        Debtor.
------------------------------

SONIA ORDONEZ,
        Appellant,

 v.                                                       No. 18-4095
                                                      (BAP No. 18-001-UT)
 ABM AVIATION, INC.; STEPHEN W.                    (Bankruptcy Appellate Panel)
 RUPP, Chapter 7 Trustee,

        Appellees.

 –––––––––––––––––––––––––––––––––––

 In re: SONIA ORDONEZ,

        Debtor.

 ------------------------------

 SONIA ORDONEZ,

        Appellant,

 v.                                                       No. 18-4096
                                                      (BAP No. 18-018-UT)
 ABM AVIATION, INC.; STEPHEN W.                    (Bankruptcy Appellate Panel)
 RUPP, Chapter 7 Trustee,

        Appellees.
                            _________________________________

                                ORDER AND JUDGMENT *
                            _________________________________

Before HARTZ, MATHESON, and CARSON, Circuit Judges.

       *
              After examining the briefs and appellate record, this panel has
determined unanimously that oral argument would not materially assist in the
determination of this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The
case is therefore ordered submitted without oral argument. This order and judgment
is not binding precedent, except under the doctrines of law of the case, res judicata,
and collateral estoppel. It may be cited, however, for its persuasive value consistent
with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
                                           2
                        _________________________________

      We have consolidated these four appeals for disposition. The appeals relate to

appellant Sonia Ordonez’s lawsuit under Title VII of the Civil Rights Act of 1964,

42 U.S.C. §§ 2000e-2 and 2000e-3, against her former employer, appellee ABM

Aviation, Inc. (ABM). 1 In her suit she charged ABM with sexual harassment,

discrimination, and retaliation.

      In Appeal No. 17-4188, Ordonez appeals from the district court’s judgment

dismissing her Title VII action after ABM settled her claims against ABM with the

Chapter 7 Trustee in her personal bankruptcy, and its denial of her motion for

reconsideration. In the other three appeals she challenges various bankruptcy court

orders relating to the settlement. We now dismiss all four appeals as moot.

                                   BACKGROUND

      Although Ordonez was aware of her claims against ABM when she filed

personal bankruptcy in 2010, she omitted them when listing her assets in her

bankruptcy petition. Citing this omission, ABM later sought summary judgment

based on judicial estoppel. See, e.g., Eastman v. Union Pac. R.R. Co., 493 F.3d

1151, 1156-58, 1160 (10th Cir. 2007) (affirming district court’s dismissal of

personal-injury action on judicial-estoppel grounds, where plaintiff failed to disclose

his pending lawsuit in bankruptcy proceedings as a potential asset of the estate).

Ordonez petitioned to reopen her bankruptcy to include the omitted claims.

      1
               ABM was formerly known as “Air Serv Corporation.” We use “ABM”
to refer to this party throughout this order and judgment.
                                           3
      After the bankruptcy case was reopened, appellee Stephen W. Rupp, the

Chapter 7 Trustee, reached a settlement with ABM of Ordonez’s Title VII claims.

ABM agreed to pay the trustee an amount sufficient to compensate the general

unsecured unpaid creditors for the previously unpaid portion of their allowed claims,

and to pay the allowed administrative expenses in the bankruptcy. In exchange for

this payment, the Trustee agreed to release ABM from Ordonez’s Title VII claims.

      Ordonez opposed this settlement in several ways. First, she filed a motion to

convert her bankruptcy from a Chapter 7 case to a Chapter 13 case. If granted, the

conversion could have permitted her to make periodic payments toward the unpaid

creditors’ claims rather than discharging the claims using the settlement proceeds.

But the bankruptcy court denied the motion, reasoning that Ordonez had not shown

evidence of regular income to support a Chapter 13 plan, conversion would be

prejudicial to her creditors, and she had failed to show that her motion was filed in

good faith. Ordonez filed a motion to reconsider the denial, which the bankruptcy

court rejected. She appealed from the rejection, initiating BAP Appeal 18-001-UT.

      After the bankruptcy court entered an order approving the settlement

agreement, Ordonez appealed to the BAP from that order. This initiated BAP Appeal

18-002-UT.

      Ordonez also objected to the Trustee’s final report. The bankruptcy court

overruled her objection. It reasoned that “when the bankruptcy petition was filed, the

[Title VII] Lawsuit became part of the bankruptcy estate and was administered by the

                                           4
Trustee in the normal course of business of a chapter 7 trustee.” Consol. BAP R. at

348-49. Ordonez appealed to the BAP, initiating BAP Appeal 18-018-UT.

      On May 22, 2018, the BAP entered orders dismissing all three appeals as moot

because “the Trustee has distributed all settlement proceeds and the estate is fully

administered making it impossible for the Court to grant any meaningful or effective

relief.” Id. at 17, 172, 335. Ordonez appealed the dismissals to this court, resulting

in Appeal Nos. 18-4094, 18-4095, and 18-4096.

      Meanwhile, in November 2017 the district court granted ABM’s motion in the

underlying Title VII action for summary judgment, on judicial-estoppel grounds. It

found that Ordonez’s belated attempt to include her Title VII claims in the

bankruptcy did not overcome the other facts that warranted applying judicial

estoppel.

      Ordonez appealed the summary-judgment order. While her appeal was

pending, she filed a motion for reconsideration. We abated her appeal pending

resolution of her motion.

      The district court denied the reconsideration motion. In its order it noted that

the Trustee and ABM had reached a settlement of the Title VII action, which had

been approved by the Bankruptcy Court. This mooted her motion for

reconsideration.

      The district court later entered a final judgment in the action, dismissing it

with prejudice. After we lifted the abatement of the appeal Ordonez filed an

                                           5
amended notice of appeal, adding the order denying her motion for reconsideration

and the district court’s judgment of dismissal.

                                      ANALYSIS

      The appellees have moved to dismiss these appeals as moot. 2 We must

address that issue first because federal courts are limited to adjudicating actual,

ongoing controversies, see Kingdomware Techs., Inc. v. United States, 136 S. Ct.

1969, 1975 (2016), and “[a] case or controversy does not exist when a claim is

moot,” EEOC v. CollegeAmerica Denver, Inc., 869 F.3d 1171, 1173 (10th Cir. 2017).

We have construed Ordonez’s pro se filings on this issue liberally, without serving as

her advocate. See James v. Wadas, 724 F.3d 1312, 1315 (10th Cir. 2013).

      “In assessing mootness, we consider whether a favorable judicial decision

would have some effect in the real world. If a plaintiff no longer suffers an actual

injury redressable by a favorable judicial decision, the claim is moot.”

CollegeAmerica, 869 F.3d at 1173 (citation omitted). “[A]n appeal of a bankruptcy

court’s decision [is] only constitutionally moot if the appellee demonstrates that a

court could order no meaningful relief to the party seeking reversal of the bankruptcy

court’s decision.” Search Mkt. Direct, Inc. v. Jubber (In re Paige), 584 F.3d 1327,

      2
            ABM previously filed, in Appeal No. 17-4188, a “Motion to Dismiss
Appeal as Moot and Because Appellant is Not the Real Party in Interest.” Motion,
No. 17-4188 (10th Cir. Feb. 12, 2018). Given our disposition of appellees’ later
motion involving all four appeals, we deny this prior motion as moot.

                                            6
1330 (10th Cir. 2009). “[T]he party that wishes the court not to decide the merits of

an appeal bears the burden of proof.” Id. at 1331.

      1. No. 17-4188

      We agree with appellees that No. 17-4188, the Title VII appeal, is

constitutionally moot. We cannot order meaningful relief in that appeal. Ordonez’s

Title VII claims have been settled by the Trustee, who is the party with authority to

dispose of them. 3 The bankruptcy court approved the settlement. The district court

(1) acknowledged the settlement and the bankruptcy court’s approval and

(2) dismissed the underlying claims, finding Ordonez’s motion for reconsideration

had become moot by virtue of the settlement. A reversal of the district court’s

dismissal would have no real-world effect because no relief could be granted unless

the bankruptcy court’s approval of the settlement were also reversed. And for

reasons we will describe, equitable mootness prevents us from reversing the

bankruptcy court’s approval.

      2. The Bankruptcy Appeals

      Appellees argue that the bankruptcy appeals are also either constitutionally or

equitably moot. They rely on evidence that the bankruptcy estate has been fully

administered and the Trustee has distributed the settlement funds to creditors. As the

      3
            Ordonez argues that the Trustee abandoned her Title VII claims. But
her argument is not even colorable. As the bankruptcy court determined, the formal
requirements for abandonment were not satisfied.
                                           7
BAP pointed out in its dismissal orders, the creditors are nonparties to these

proceedings who cannot be ordered to return the disbursements paid to them.

      In our view, the BAP appeals are equitably, rather than constitutionally, moot.

The doctrine of equitable mootness considers whether “reaching the merits would be

unfair or impracticable.” Paige, 584 F.3d at 1339.

      In Paige two entities seeking to acquire the bankrupt debtor’s interest in a

domain name proposed competing Chapter 11 reorganization plans. See id. at

1331-32. The bankruptcy court approved sale of the debtor’s interest to one of the

entities, ConsumerInfo, and confirmed the reorganization plan that ConsumerInfo

had jointly proposed with the bankruptcy trustee. See id. at 1332-33. The proponent

of the alternative plan, SMDI, appealed. See id. But SMDI was unsuccessful in

obtaining a stay pending appeal, see id. at 1333-34, and in the meantime

ConsumerInfo made significant payments to the trustee and the trustee paid a

significant number of creditors’ claims, see id. at 1334, 1342. To evaluate whether

the dispute had become equitably moot, we considered six factors:

      (1) Has the appellant sought and/or obtained a stay pending appeal? (2) Has
      the appealed plan been substantially consummated? (3) Will the rights of
      innocent third parties be adversely affected by reversal of the confirmed
      plan? (4) Will the public-policy need for reliance on the confirmed
      bankruptcy plan—and the need for creditors generally to be able to rely on
      bankruptcy court decisions—be undermined by reversal of the plan? (5) If
      appellant’s challenge were upheld, what would be the likely impact upon a
      successful reorganization of the debtor? And (6) based upon a quick look at
      the merits of appellant’s challenge to the plan, is appellant’s challenge
      legally meritorious or equitably compelling?
Id. at 1339.

                                           8
      Employing a modified version of the factors, tailored to the facts of this case,

we conclude that the bankruptcy appeals are equitably moot. Concerning the first

factor, although Ordonez sought a stay in the bankruptcy court, which was denied,

she did not seek a stay pending appeal from the BAP in connection with BAP appeals

18-001-UT or 18-002-UT. It appears she did seek a stay pending appeal in

connection with BAP appeal 18-018-UT from the BAP, but not from the bankruptcy

court. In addition, she did not offer to post a bond to obtain a stay, though ABM

argued more than once that she should be required to post a bond. Ordonez thus was

not entirely diligent in seeking a stay. 4 See Paige, 584 F.3d at 1341 (concluding that

where appellant made “some efforts to obtain a stay” but “did not pursue with

diligence all available remedies to obtain a stay,” this factor weighed “somewhat”

against reaching the merits of the appeal (internal quotation marks omitted)).

      We further note the bankruptcy court and the BAP supplied good reasons for

denying Ordonez a stay. The bankruptcy court concluded she had not shown a

likelihood of success in either of her BAP appeals. Significantly, it rejected her

argument that the Trustee’s agreement to settle her case for $30,500 was

“ridiculously low” because (Ordonez reasoned) it only represented four percent of the

actual value of her claims. Aplee. App., Vol. 2 at 315. The court referred to its

      4
              Ordonez argues, without elaboration, that her physical and mental
condition caused her to make an unspecified error, resulting in the denial of her
emergency motion for stay. But this does not adequately explain her failure of
persistence in seeking a stay.

                                           9
hearing and order on Ordonez’s motion to approve the settlement agreement, noting

her failure to raise issues about the amount of the settlement previously in her

objection or at the hearing. It also rejected her argument that the low amount of the

payment deprived her of her property without due process of law, concluding the

Title VII action belonged to the bankruptcy estate and had not been abandoned by the

Trustee.

      Turning to irreparable harm, the bankruptcy court emphasized that Ordonez

had failed to connect the loss of her ability to prosecute the Title VII case with the

approval of the Trustee’s final report or further administration of the bankruptcy

estate. The bankruptcy court found that creditors would be injured by a stay. But it

further found the public interest did not weight strongly in either direction.

      As noted, Ordonez did not challenge the bankruptcy court’s denial of her

motion for stay concerning BAP Appeals 18-001-UT and 18-002-UT by seeking a

stay from the BAP. Her emergency motion for stay filed with the BAP in connection

with BAP appeal 18-018-UT was two pages long. 5 The BAP denied the motion for

stay for two reasons. First, she had filed the motion without first seeking a stay in

the bankruptcy court. Second, she failed to explain in her motion why the stay

should be granted.

      Ordonez was thus neither fully diligent nor successful in her attempts to obtain

a stay. We conclude that the first equitable mootness factor weighs against her.

      5
             She later filed a reply to the Trustee’s and ABM’s opposition to her
motion to stay, in which she fleshed out her arguments in support of a stay.
                                           10
      Concerning the second factor, the settlement agreement has been fully

consummated. The Trustee has distributed the settlement proceeds to Ordonez’s

creditors and has received authorization to use the remaining funds to pay

administrative expenses. Although the transactions involved are not particularly

complex, it may be difficult to “unscramble” them, given that funds are now in the

hands of a significant number of independent, nonparty creditors. See Paige, 584

F.3d at 1342 (“[C]ourts are often concerned that it will be difficult to unscramble the

transactions that occurred when consummating the plan.”).

      Also pertinent to this factor, Ordonez complains that appellees pushed forward

with the settlement and distribution even though she urged them to await the outcome

of her BAP appeals. As we stated in Paige, a party’s deliberate acceleration of the

consummation of a plan, despite its knowledge of pending appeals, can be a factor

weighing against equitable mootness. See id. at 1343 (“[W]here, as here, the parties

attempting to convince the court not to reach the merits have accelerated the

consummation of the plan despite their knowledge of a pending appeal . . . we are

less inclined to grant their wish that the court abstain from reaching the merits on

appeal.”). But for the equities to weigh in favor of the objector on this issue surely

requires more than the settling parties’ diligent pursuit of approval and

consummation of their settlement. Parties seeking to settle a case in the interest of

creditors are not required to wait voluntarily for their opponent to exhaust all

possible judicial remedies—particularly where, as here, the party opposing the

settlement has not posted a bond to protect them from loss and the bankruptcy court

                                           11
has supplied good reasons for rejecting her objections. Rather, what counts is an

acceleration of the settlement that tends to make it unfair to apply equitable

mootness.

      In Paige the parties had included a provision in their joint reorganization plan

that made it effective only after any pending appeals were resolved. Paige, 584 F.3d

at 1333. The existence of such a provision suggested that the parties did not require

immediate consummation of the plan. Nevertheless, after learning of their

opponent’s pending appeal, they waived the provision, accelerating the

consummation of the joint plan and helping to create the mootness problem. See id.

at 1333-34.

      Ordonez has failed to supply convincing evidence of such deliberate

acceleration here. The Trustee began working on the settlement long before any

appeal had been filed. Settlement negotiations proceeded even as ABM’s motion for

summary judgment in the underlying Title VII action remained pending. By the time

Ordonez wrote her November 3 email to the Trustee, she had not yet filed any

appeals.

                                          12
      On November 14, 2017, the Trustee filed his motion for approval of the

settlement agreement. In the motion the Trustee acknowledged that the district court

had previously granted summary judgment in ABM’s favor on all claims, but stated

the parties were settling the case “in order to avoid additional cost and the

uncertainty of continued litigation and/or appeals.” Aplee. App., Vol. 1 at 166.

      Ordonez did not file her appeals until November 29, 2017 (appeal from

summary judgment order in Title VII action), and December 29, 2017 (appeal to BAP

from order denying motion for reconsideration of denial of motion for conversion).

The bankruptcy court approved the settlement during this time period, on December

19, 2017.

      In sum, although the Trustee pressed ahead with the settlement, citing the

interest of creditors, Ordonez has failed to show he accelerated the settlement in a

way that unfairly cut off her appeal rights. For the reasons we have stated, the

second factor weighs against Ordonez.

      Concerning the third factor, the rights of innocent third parties could be

adversely affected if approval of the settlement were reversed. Such a result would

call into question the distributions from Ordonez’s bankruptcy estate to her creditors.

      For similar reasons, reversal of the approval would run afoul of the fourth

factor: the public-policy need for reliance on the settlement and the need for

creditors generally to be able to rely on bankruptcy court decisions. See Paige, 584

F.3d at 1347-48. It would also be unfair to ABM, who provided the sums to pay

creditors. Reversal of the approval would mean ABM could be required to relitigate

                                           13
and defend against Ordonez’s claims without obtaining recoupment from her

creditors who have already been paid.

      The fifth factor—modified here to reflect the possibility of success in

achieving the goals of Ordonez’s bankruptcy proceeding—also weighs in favor of

equitable mootness. If the settlement was reversed, even if Ordonez was permitted to

make monthly payments it is far from clear that this would give her a fresh start. The

bankruptcy court determined that she had shown no evidence of regular income and

that conversion would be prejudicial to her creditors. 6

      Finally, with regard to the sixth factor, we cannot say, upon a quick look at her

merits arguments, that Ordonez’s challenge is legally meritorious or equitably

compelling. Her Title VII claims belong to her bankruptcy estate. The bankruptcy

court held an evidentiary hearing at which Ordonez was permitted to present her

arguments in opposition to the settlement. The bankruptcy judge considered (1) the

probability of success in the litigation that was being settled; (2) the probability the

Trustee could collect if he won in the underlying litigation; (3) the complexity and

      6
             Although Ordonez now argues she can repay her creditors through
monthly payments or in a lump sum by tapping her home equity, by receiving gifts
from sympathetic persons, or through an internet funding campaign, she fails to show
she provided the necessary evidence of her resources to the bankruptcy court. See
Aplee. App., Vol. 1 at 154 (noting Ordonez had “not filed a plan, nor an updated
budget, nor any evidence of current income”). And although she claims she was not
given the opportunity to show her ability to make repayment, she fails to rebut the
bankruptcy court’s concern that she “had three months since her case was reopened
to provide any evidence or other indication of regular income, and has not done so.”
Id.
                                            14
cost of the litigation; and (4) the best interest of creditors. He found that each factor

weighed in favor of approving the settlement.

      Although Ordonez claims the settlement is unfair, she has failed to counter the

bankruptcy court’s findings with persuasive arguments. Also, her argument that the

Trustee settled her claims for only a fraction of their worth fails to account for the

fact that the Title VII action has been dismissed. Assuming the Trustee could pursue

the claim on behalf of the estate without being subject to the judicial-estoppel ruling,

he would still need to set aside the dismissal, a factor involving cost and delay that

could significantly impact the net worth of these claims.

      In sum, the equities do not weigh in favor of undertaking an attempt to unwind

the settlement.

                                    CONCLUSION

      Appellees’ motion to dismiss is granted. Appeal No. 17-4188 is dismissed for

constitutional mootness and Appeal Nos. 18-4094, 18-4095, and 18-4096 are

dismissed as equitably moot. We remand to the district court with instructions to

modify its dismissal with prejudice of Case No. 2:13-CV-00067-DAK-EJF to a

dismissal without prejudice. See Brown v. Buhman, 822 F.3d 1151, 1179 (10th Cir.

2016) (“[A] dismissal for lack of jurisdiction is not an adjudication of the merits and

therefore dismissal must be without prejudice.” (ellipsis and internal quotation marks

omitted)), cert. denied, 137 S. Ct. 828 (2017). We deny as moot ABM’s motion to

                                           15
dismiss Appeal No. 17-4188, filed February 12, 2018. Ordonez’s motion to proceed

in forma pauperis in Appeal Nos. 18-4094, 18-4095, and 18-4096 is granted.

                                         Entered for the Court

                                         Harris L Hartz
                                         Circuit Judge

                                        16