Court Opinion

ID: 9375750
Source: CourtListenerOpinion
Date Created: 2023-02-28 19:00:56.821908+00
Date Added: 2024-06-11T17:17:01.372711
License: Public Domain

Case: 22-10831        Document: 00516659051             Page: 1      Date Filed: 02/28/2023

             United States Court of Appeals
                  for the Fifth Circuit
                                                                               United States Court of Appeals
                                                                                        Fifth Circuit

                                      No. 22-10831                                     FILED
                                    Summary Calendar                           February 28, 2023
                                                                                 Lyle W. Cayce
                                                                                      Clerk
   In the matter of Highland Capital Management, L.P.

                                                                                     Debtor,
   ______________________________

   The Dugaboy Investment Trust,

                                                                               Appellant,

                                            versus

   Highland Capital Management, L.P.,

                                                                                 Appellee.

                     Appeal from the United States District Court
                         for the Northern District of Texas
                              USDC No. 3:21-CV-2268

   Before Higginbotham, Graves, and Ho Circuit Judges.
   Per Curiam:*

         *
             This opinion is not designated for publication. See 5th Cir. R. 47.5.
Case: 22-10831       Document: 00516659051             Page: 2     Date Filed: 02/28/2023

                                        No. 22-10831

          Appellant Dugaboy Investment Trust 1 (“Dugaboy”) appeals the
   district court’s order dismissing, for lack of prudential standing, its appeal of
   the bankruptcy court’s order denying its Motion to Compel Compliance with
   Bankruptcy Rule 2015.3. For the following reasons, we affirm.
                                             I.
          Appellee Highland Capital Management, L.P. (“Highland”)—previ-
   ously headed by James Dondero—filed for Chapter 11 bankruptcy in October
   2019. Subsequent years of litigation ensued, much of which involved the re-
   spective rights and obligations of Highland’s estate, creditors and parties in
   interest. A minor (0.1866 percent) limited partnership interest in Highland
   was held by Dugaboy, a family trust for Dondero.
          In January 2021, Highland filed its reorganization plan—the Fifth
   Amended Plan of Organization of Highland Capital Management, L.P. (the
   “Plan”). The next month, at the Plan’s confirmation hearing, Dugaboy
   brought up the issue of Highland’s non-compliance with Bankruptcy Rule
   2015.3’s requirement that debtors submit “periodic financial reports of the
   value, operations, and profitability” of each non-debtor entity in which the
   debtor “holds a substantial or controlling interest.” Fed. R. Bankr. P.
   2015.3(a). Despite Dugaboy’s protests, the bankruptcy court entered the
   Confirmation Order and approved the Plan on February 22, 2021. Dugaboy’s
   interest was consequently terminated under the confirmed plan.
          On April 29, 2021, raising the same argument, Dugaboy filed its
   Motion to Compel Compliance with Bankruptcy Rule 2015.3 with the
   bankruptcy court. However, before the court ruled on the motion, the Plan
   became effective on August 11, 2021. Accordingly, the bankruptcy court
   denied the motion as moot on September 6, 2021. Dugaboy filed its notice of
   appeal of the order on September 22, 2021.

          1
            Get Good Trust also moved for the motion to compel. However, it decided not to
   appeal the decision before this court.

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Case: 22-10831      Document: 00516659051           Page: 3   Date Filed: 02/28/2023

                                     No. 22-10831

          On August 8, 2022, the district court dismissed the appeal for lack of
   jurisdiction. In doing so, it held that Dugaboy lacked standing because it was
   no longer a creditor and did not have a claim in the estate, and therefore
   lacked a financial injury flowing from the order. This appeal followed.
                                         II.
          “We review the decision of a district court, sitting in its appellate ca-
   pacity, by applying the same standards of review to the bankruptcy court’s
   finding of fact and conclusions of law as applied by the district court.” In re
   ASARCO, L.L.C., 650 F.3d 593, 600 (5th Cir. 2011). Conclusions of law are
   reviewed de novo, as are mixed questions of law and fact. In re Quinlivan,434
   F.3d 314, 318 (5th Cir.2005). “Standing is a question of law that we review
   de novo.” In re Technicool Sys., Inc., 896 F.3d 382, 385 (5th Cir. 2018).
                                         III.
          “[S]tanding to appeal a bankruptcy court order is, of necessity, quite
   limited.” In re Dean, 18 F.4th 842, 844 (5th Cir. 2021). To determine
   whether a party has standing in these cases, courts use the “person ag-
   grieved” test. Fortune Nat. Res. Corp. v. U.S. Dep’t of Interior, 806 F.3d 363,
   366 (5th Cir. 2015). “The ‘person aggrieved’ test is an even more exacting
   standard than traditional constitutional standing.” In re Coho Energy Inc., 395
   F.3d 198, 202 (5th Cir. 2004). This test “demands a higher causal nexus be-
   tween act and injury; appellant must show that he was directly and adversely
   affected pecuniarily by the order of the bankruptcy court in order to have
   standing to appeal.” Id. at 203 (internal quotation marks and citation omit-
   ted). “This restriction narrows the playing field, ensuring that only those
   with a direct, financial stake in a given order can appeal it.” Technicool Sys.,
   Inc., 896 F.3d at 386.
          Upon reviewing the record, we agree that Dugaboy fails to meet these
   requirements. Dugaboy cannot, and does not, point to any direct pecuniary
   harm. Instead, it argues that Rule 2015.3 grants it standing because the rule
   is designed to help prepetition creditors provide a complete accounting be-
   tween the debtor and its non-debtor affiliates. Thus, Dugaboy’s main

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Case: 22-10831      Document: 00516659051           Page: 4    Date Filed: 02/28/2023

                                     No. 22-10831

   argument is that, if the bankruptcy court had required Highland to submit
   reports under Rule 2015.3, Dugaboy could have used that information to dis-
   cover whether there were any claims against the estate that arose from trans-
   actions between Highland and its non-debtor affiliates. The mere possibility
   of harm, however, does not satisfy the person aggrieved standard. Technicool
   Sys., Inc., 896 F.3d at 386 (holding that the owner of a debtor company in a
   Chapter 7 bankruptcy could not object to an order approving the hiring of
   special counsel because the order would not affect the debtor company’s dis-
   charge); Fortune Nat. Res. Corp., 806 F.3d at 366 (holding that a creditor did
   not have bankruptcy standing to object to an order approving the sale of as-
   sets because the creditor would be in the same position financially, whether
   or not the bankruptcy court approved the sale).
          Even assuming an injury occurred, any potential pecuniary harm to
   Dugaboy is indirect. Several events would have to occur before money is put
   back into Dugaboy’s pocket. As the district court aptly explained: “It is un-
   clear how post-dated reports disclosing years-old facts could lead to any di-
   rect recovery by a creditor, let alone recovery by a non-creditor with a pur-
   ported ownership in non-debtor affiliates.” Thus, the district court properly
   found that Dugaboy lacked standing.
          In a last-ditch effort to avoid dismissal, Dugaboy contends that it has
   standing under 11 U.S.C. § 1109(b). We will not consider this argument,
   which is raised for the first time on appeal. See XL Specialty Ins. Co. v. Kiewit
   Offshore Servs., Ltd., 513 F.3d 146, 153 (5th Cir. 2008).
          We therefore conclude that the district court correctly dismissed
   Dugaboy’s appeal for lack of appellate standing.

          AFFIRMED.

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