Court Opinion

ID: 4106176
Source: CourtListenerOpinion
Date Created: 2016-12-09 23:01:29.221698+00
Date Added: 2024-06-11T14:30:10.946079
License: Public Domain

FILED
                                                              DEC 02 2016
 1                          NOT FOR PUBLICATION
                                                          SUSAN M. SPRAUL, CLERK
                                                            U.S. BKCY. APP. PANEL
 2                                                          OF THE NINTH CIRCUIT

 3                  UNITED STATES BANKRUPTCY APPELLATE PANEL
 4                            OF THE NINTH CIRCUIT
 5   In re:                         )      BAP No.     EC-15-1202-KuMaJu
                                    )
 6   KEYSTONE MINE MANAGEMENT II,   )      Bk. No.     13-16845
                                    )
 7                  Debtor.         )
     _______________________________)
 8                                  )
     KEYSTONE MINE COMPANY, LTD;    )
 9   KEYSTONE MINE MANAGEMENT, LTD.;)
     KIRK L. DUSHANE; ROGER SMITH; )
10   PATRICK O'BRIEN,               )
                                    )
11                  Appellants,     )
                                    )
12   v.                             )      MEMORANDUM*
                                    )
13   VINCENT A GORSKI, Chapter 7    )
     Trustee; BUSH MANAGEMENT       )
14   COMPANY; KEYSTONE MINE         )
     MANAGEMENT II,                 )
15                                  )
                    Appellees.      )
16   _______________________________)
17                  Argued and Submitted on October 20, 2016
                            at Sacramento, California
18
                            Filed – December 2, 2016
19
                 Appeal from the United States Bankruptcy Court
20                   for the Eastern District of California
21            Honorable W. Richard Lee, Bankruptcy Judge, Presiding
22   Appearances:      Meir J. Westreich argued for the appellants; Lisa
                       Anne Holder of Klein Denatale Goldner Cooper
23                     Rosenlieb & Kimball, LLP argued for appellee
                       Vincent A. Gorski, Chapter 7 Trustee; Charles A.
24                     Bird of Dentons US LLP argued for appellee Bush
                       Management Company.
25
26
          *
           This disposition is not appropriate for publication.
27   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.
 1   Before: KURTZ, MARTIN** and JURY, Bankruptcy Judges.
 2                              INTRODUCTION
 3        The appellants herein are all creditors or equity interest
 4   holders of the debtor Keystone Mine Management II.     Over the
 5   course of roughly 14 months, they opposed every step the
 6   chapter 71 trustee Vincent A. Gorski attempted to take to
 7   liquidate the debtor’s assets and reduce them to cash, in
 8   accordance with his duties under § 704(a).
 9        Ultimately, the bankruptcy court approved Gorski’s proposed
10   sale and compromise transaction with Bush Management Company,
11   pursuant to which Bush purchased all of Keystone Mine Management
12   II’s assets.   The bankruptcy court’s bidding procedures order
13   provided interested parties with an opportunity to make competing
14   bids for the assets, but no competing bids were made, even though
15   Gorski had advertised the sale of the assets for a number of
16   months.
17        Appellants appealed both the bankruptcy court’s bidding
18   procedures order and its sale order, but they did not obtain
19   a stay pending appeal.   In addition, the bankruptcy court made
20   ample findings to support its determination that Bush was a good
21   faith purchaser and was entitled to the benefit of § 363(m),
22   which prevents appellate courts from disturbing the validity of a
23   bankruptcy sale even when the appellant prevails on appeal.       The
24
          **
           Hon. Brenda K. Martin, United States Bankruptcy Judge for
25   the District of Arizona, sitting by designation.
26        1
           Unless specified otherwise, all chapter and section
27   references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and
     all "Rule" references are to the Federal Rules of Bankruptcy
28   Procedure, Rules 1001-9037.

                                      2
 1   bankruptcy court’s findings related to Bush’s good faith were not
 2   clearly erroneous, so § 363(m) applies; it renders moot the
 3   appellants’ appeals from the bidding procedures order and the
 4   sale order.
 5        The appellants also have appealed from the bankruptcy
 6   court’s order approving the compromise aspects of the transaction
 7   between Gorski and Bush.    Under the particular circumstances of
 8   this case, we decline to hold that § 363(m) applies to the
 9   compromise order.   Even though § 363(m) has not rendered moot the
10   appeal from the compromise order, the appellants did not include
11   in their appeal brief any arguments specifically and distinctly
12   challenging the compromise order.     Nor did they order a
13   transcript of the final compromise hearing, at which the
14   bankruptcy court stated its findings of fact and conclusions of
15   law orally on the record.   As a result, we have not been
16   presented with (nor are we aware of) any grounds that would
17   justify reversal of the court’s compromise order.
18        Accordingly, we DISMISS AS MOOT the appeals from the
19   bankruptcy court’s bidding procedures order and its sale order.
20   The compromise order is AFFIRMED.
21                                   FACTS
22        The litigation history surrounding Keystone Mine Management
23   II’s bankruptcy case is voluminous, but most of that history need
24   not be recounted here in order to dispose of this appeal.
25   1.   Key Parties
26        We start with the key parties.     At all relevant times before
27   the appointment of Gorski as chapter 7 trustee, Kirk DuShane had
28   been serving as the manager of the debtor and its two affiliates:

                                       3
 1   Keystone Mine Management, Ltd. (“KMM”) and Keystone Mining
 2   Company (“Company”).    Debtor (“KMM II”) is a limited partnership
 3   in which KMM holds a 60% partnership interest and DuShane holds a
 4   40% partnership interest.    In turn, Company nominally is the
 5   general partner of KMM, but DuShane is Company’s general partner,
 6   pursuant to which he exercised management control over all three
 7   entities.
 8        The other two named appellants – Patrick O’Brien and Roger
 9   Smith – are, respectively, an accountant and a geologist who have
10   provided services over the years to the Keystone entities and who
11   claim to be creditors and/or equity investors in one or more of
12   these entities.2
13        The Keystone entities’ only significant assets consisted of
14   some mining equipment, 44 mining claims and 4 mill site claims
15   granted by the U.S. Bureau of Land Management, which claims
16   entitled the Keystone entities to conduct mining and milling
17   operations on the applicable U.S. government land.
18        William Weyerhaeuser is the sole trustee of a trust which,
19   over several years, beginning in 1988, lent the Keystone entities
20   roughly $2.6 million and received in exchange a deed of trust
21   encumbering 20 of the mining claims and a security interest in
22   the mining equipment.    Weyerhaeuser’s trust also made a $500,000
23   equity investment in the Keystone entities in 1989.
24        John Hagestad was a relatively minor equity investor in the
25
          2
26         For   ease of reference, our recitation of facts sometimes
     refers to   the appellants as “DuShane and the non-debtor Keystone
27   entities”   because they are the most involved participants on
     behalf of   the appellants. No disrespect is intended to O’Brien
28   or Smith.

                                       4
 1   Keystone entities who, in addition, loaned $60,000 directly to
 2   DuShane.   In 2012, Hagestad filed a state court lawsuit against
 3   DuShane and KMM II, which lawsuit ultimately led to DuShane
 4   filing a chapter 11 bankruptcy petition on behalf of KMM II in
 5   October 2013.3   Hagestad also owns and controls a company known
 6   as Bush Management Company.   In June 2014, after KMM II commenced
 7   its bankruptcy case, Bush acquired all of the Weyerhaeuser
 8   trust’s loan and lien rights arising from the Weyerhaeuser
 9   trust’s loans to the Keystone entities.   By way of Bush’s
10   acquisition of the Weyerhaeuser trust’s rights and interests,
11   Hagestad transformed himself from a minor equity investor into
12   the Keystone entities’ sole significant secured creditor.
13        Gorski is the duly-appointed chapter 7 trustee for KMM II.
14   Almost immediately after he was appointed (in February 2014), he
15   commenced efforts to liquidate the estate’s assets by proposing
16   to sell those assets to Bush.
17   2.   Gorski’s Efforts to Sell the Keystone Assets
18        Over the course of a year and a half, Gorski persistently
19   sought to sell the mine and mill site claims and the mining
20   equipment on behalf of KMM II’s bankruptcy estate.     At each step
21   of the way, DuShane and the non-debtor Keystone entities
22   vigorously opposed the trustee’s sales efforts.     Initially,
23   before the Weyerhaeuser trust sold its loan and lien rights to
24   Bush, Gorski filed a motion seeking to sell the Keystone assets
25   to Bush free and clear of all liens and interests, including
26
27
          3
           The bankruptcy court converted KMM II’s bankruptcy case
28   from chapter 11 to chapter 7 in February 2014.

                                      5
 1   Weyerhaeuser’s loan and lien rights, which Gorski at the time
 2   believed were subject to legitimate dispute.
 3        DuShane and the non-debtor Keystone entities opposed
 4   Gorski’s first sale motion largely on the ground that the
 5   $250,000 proposed sale price was – according to them – grossly
 6   inadequate and the trustee’s marketing efforts were grossly
 7   inadequate.   According to DuShane and the non-debtor Keystone
 8   entities, Gorski should have been marketing the assets for
 9   somewhere between $10 million and $20 million, not including
10   royalty payments.4
11        In June 2014, after the bankruptcy court continued the
12   hearing on Gorski’s first sale motion, Bush acquired the
13   Weyerhaeuser trust’s loan and lien rights and expressed to Gorski
14   its desire to credit bid for the Keystone entities’ assets.    The
15   trustee initially maintained that the loan and lien rights were
16   still subject to dispute and that Bush’s request to credit bid
17   should be restricted or prohibited.
18        However, by September 2014, Gorski had changed his mind
19   regarding the validity of Bush’s loan and lien rights.   By then,
20   Gorski had completed his review and analysis of Bush’s proof of
21   claim, in which Bush asserted its rights as the successor to the
22   Weyerhaeuser trust’s loan and lien rights.   In light of his
23   complete review and analysis, Gorski reached a new agreement with
24
          4
           It is somewhat difficult to reconcile the Keystone
25   entities’ asserted market value with: (1) the Keystone entities’
26   admission that tens of millions of dollars in capital investment
     were necessary before the mining and milling operations could be
27   rendered fully operational; and (2) the apparently undisputed
     fact that the Keystone entities had not been able to adequately
28   capitalize or operate the mines and mill sites for decades.

                                      6
 1   Bush for the sale of the Keystone assets and for the allowance of
 2   Bush’s secured claim in the amount of $8.1 million.
 3        The proposed agreement additionally contemplated a complex
 4   set of bidding procedures aimed at permitting Bush to credit bid
 5   while at the same time attempting to minimize the chilling effect
 6   Bush’s credit bidding might have on competing bids.   Under the
 7   agreed bidding procedures, the Keystone assets were broken into
 8   two groups: Group A – consisting of those assets over which Bush
 9   held lien rights – and Group B – consisting of those assets over
10   which Bush held no lien rights.   The Group A assets were subject
11   to an initial Bush credit bid of $500,000 and, if the Group A
12   assets were subject to competing overbids, Bush was permitted to
13   credit bid up to 50% of its $8.1 million allowed secured claim.
14   To the extent Bush’s bid exceeded 50% of its allowed secured
15   claim, the bid would be considered a cash bid subject, however,
16   to offset against the remainder of its allowed secured claim.     On
17   the other hand, the Group B assets were subject to an all cash
18   sale pursuant to which Bush committed to an initial bid of
19   $250,000.
20        In furtherance of his newly-proposed sale and compromise
21   transaction with Bush, Gorski filed his first bidding procedures
22   motion and his first compromise approval motion.   Meanwhile, Bush
23   filed a motion for relief from stay seeking – in the event
24   Gorski’s proposed sale and compromise failed to occur by
25   January 15, 2015 – court authorization to proceed with
26   foreclosure pursuant to its lien rights.
27        In support of the compromise approval motion, Gorski
28   submitted a declaration specifically identifying many of the

                                       7
 1   issues regarding the validity of Bush’s loan and lien rights and
 2   generally explaining why the trustee determined that the
 3   compromise and sale transaction was in the best interests of the
 4   KMM II bankruptcy estate.   In essence, after fully reviewing and
 5   analyzing the arguments challenging Bush’s loan and lien rights,
 6   and after reviewing the documentation supporting Bush’s proof of
 7   claim, Gorski concluded that none of the arguments challenging
 8   Bush’s loan and lien rights had any merit.   Gorski then
 9   summarized his reasoning why he believed that the compromise and
10   sale transaction should be approved, as follows:
11        Because the settlement with [Bush] allows me to sell
          the Mining Claims, including [Bush's] collateral,
12        without the need to file an adversary proceeding to
          determine the nature, extent, and validity of [Bush’s]
13        Debt and lien, limits [Bush's] credit bid to a low
          opening amount, provides other cash and economic
14        benefits to the Bankruptcy Estate, and sets a cap on
          [Bush’s] credit bid as a maximum of 50% of its claim, I
15        believe that the settlement should be approved as being
          in the best interest of the creditors and the estate.
16
17   Gorski Decl. (Sept. 4, 2014) at ¶¶ 7-8.
18        Additionally, Gorski described the arm’s-length nature of
19   his negotiations with Bush:
20        The settlement was negotiated at arm's length between
          [Bush] and me through a lengthy and vigorous
21        give-and-take process. It took weeks of negotiation,
          dozens of emails, and multiple telephone conference
22        calls between [Bush's] attorney, representative, me,
          and my attorney, and the provision by [Bush] of a
23        149 page proof of claim, to reach resolution. Every
          possible challenge was raised to [Bush’s] Debt and
24        lien, and was thoroughly analyzed. Debtor has
          challenged every action by me related to [Bush] as a
25        buyer, and [Bush] as creditor and lien holder.
26   Id. at ¶ 13.
27        To bolster Gorski’s proposed sale and compromise, Bush filed
28   a detailed legal memorandum asserting that all of the challenges

                                      8
 1   to its loan and lien rights lacked merit.
 2        At the October 2014 hearing on Gorski’s and Bush’s motions,
 3   the bankruptcy court indicated that it was not prepared to grant
 4   relief as requested in any of the motions unless and until the
 5   parties resolved a pending dispute regarding which of the
 6   Keystone entities was entitled to legal title over the Keystone
 7   assets.   The court noted that the title dispute was the subject
 8   of a pending adversary proceeding (Adv. No. 14-1112), denied
 9   Bush’s relief from stay motion without prejudice and suspended
10   Gorski’s motions pending a final resolution in the adversary
11   proceeding.
12        In April 2015, after the court resolved the title dispute in
13   favor of Gorski and against DuShane and the non-debtor Keystone
14   entities, Gorski resumed his efforts to obtain bankruptcy court
15   approval of his sale and compromise with Bush.   Gorski filed a
16   new compromise motion and a new bidding procedures motion.    For
17   purposes of this appeal, these two motions did not materially
18   differ from the motions Gorski had filed in September 2014.
19   Gorski also filed a new sale motion.   In support of the sale
20   motion, Gorski detailed his marketing efforts, as follows:
21        8. I advertised the sale of the mining-related assets
          with:
22
          (a) the International Mining Journal (both print and
23        on-line publications (icmj.com)), which have run
          continuously since September 2014 (see Exhibit “M” to
24        the Supplemental Exhibits in Support of the Motion);
25        (b) minelistings.com which has run continuously since
          July 2014 (see Exhibit “N” to the Supplemental
26        Exhibits);
27        (c) Junior Miners (juniorminers.com/gold-mining-
          claims-for-sale.html) which has run continuously since
28        July 2014 (see Exhibit “O” to the Supplemental

                                      9
 1        Exhibits);
 2        (d) National Association of Bankruptcy Trustees
          (marketassetsforsale.com), which was posted in May 2014
 3        (see Exhibit “P” to the Supplemental Exhibits); and
 4        (e) Loopnet.com, a real estate listing service, which
          was posted in May 2014 (see Exhibit “Q” to the
 5        Supplemental Exhibits).
 6        I advanced all marketing costs. All online ads
          pour-over to my firm's website, where voluminous
 7        information is posted:
          http://www.thegorskifirm.com/#!bankruptcy-sales/c18d4
 8        According to the counter on my website, the page has
          1,257 hits. (See Exhibit “R” to the Supplemental
 9        Exhibits).
10        9. I reviewed Alibaba.com and found no listings for
          gold mining claims – although there were listings for
11        gold mining equipment. I determined Alibaba.com was not
          an appropriate marketing vehicle for Debtor's
12        mining-related assets. My review of The Northern Miner
          indicated it does not offer classified ads.
13
          10. I also worked to find a broker to list the mining
14        claims. I contacted two real estate brokerage firms
          (one in Bakersfield and one in Ridgecrest), and
15        requested referrals when those firms could not assist
          [me]. Even so, I did not find a broker who dealt in
16        unpatented BLM mining claims such as those owned by
          debtor.
17
18   Gorski Decl. (June 25, 2015) at ¶¶ 8-10.
19        DuShane and the non-debtor Keystone entities, once again,
20   opposed Gorski’s motions.   According to the appellants, Gorski
21   incorrectly had concluded: (1) that the arguments challenging
22   Bush’s loan and lien rights had no merit; and (2) that Bush
23   should be permitted to credit bid for the Keystone assets while
24   its loan and lien rights remained the subject of bona fide
25   dispute.   Furthermore, the appellants argued, Hagestad’s efforts
26   to acquire (through Bush) Keystone’s assets constituted a breach
27   of his fiduciary duties to his fellow Keystone partners.   They
28   further maintained that the assets should be marketed for at

                                     10
 1   least 90 days – free of any credit bid by Bush to potentially
 2   chill competing bidders.
 3   3.   The Bankruptcy Court’s Rulings
 4        In June 2015, the bankruptcy court granted Gorski’s bidding
 5   procedures motion, thereby permitting Bush to bid up to 50% of
 6   its allowed secured claim.   And in July 2015, the bankruptcy
 7   court granted Gorski’s sale motion and his compromise motion.
 8   Because no one else bid for KMM II’s assets, Bush was the
 9   successful bidder and purchaser of KMM II’s assets.
10        The bankruptcy court issued a memorandum decision in which
11   it made a number of factual findings in support of its
12   determination in favor of the sale.   Among other things, the
13   bankruptcy court found that the sale was in the “best interest of
14   the estate and its creditors,” “was fair and reasonable” under
15   the circumstances, “was negotiated and proposed in good faith,”
16   “was subject to competitive bidding at the hearing” and was “the
17   result of an arm's length transaction between the parties after
18   lengthy negotiations.”
19        The court additionally found that the trustee had adequately
20   marketed KMM II’s assets and had fully complied with the
21   procedures set forth in the sale motion and in the bidding
22   procedures order.
23        Furthermore, the bankruptcy court noted that the proposed
24   sale was the only currently-available means for the estate to
25   realize any value from the estate’s assets and that a failure to
26   approve the sale would almost certainly lead to Bush obtaining
27   relief from stay and foreclosing on the estate’s most valuable
28   assets.   Even more to the point, the court opined that, without

                                     11
 1   the sale, the trustee likely never would acquire any funds for
 2   distribution to creditors.
 3         As for Bush, the court found that it qualified as a good
 4   faith purchaser under § 363(m) and that the consideration to be
 5   paid by Bush was “fair and reasonable” under the circumstances,
 6   was the “highest or best offer for the assets,” and constituted
 7   “reasonably equivalent value.”
 8         Moreover, the court pointed out that neither the trustee nor
 9   any of the parties objecting to the sale had commenced any action
10   to challenge Bush’s lien rights or to object to Bush’s proof of
11   claim.   As a result, the court determined that Bush’s proof of
12   claim was prima facie valid under Rule 3001(f) and deemed allowed
13   under § 502(a).   The court thus concluded that there was no bona
14   fide dispute as to Bush’s loan or lien rights.
15          DuShane and the non-debtor Keystone entities timely
16   appealed the bidding procedures order, the sale order and the
17   compromise order.
18                                JURISDICTION
19         The bankruptcy court had jurisdiction pursuant to 28 U.S.C.
20   §§ 1334 and 157(b)(2)(N).    Except as otherwise indicated below,
21   we have jurisdiction under 28 U.S.C. § 158.
22                                   ISSUES
23   1.   Do the appellants have standing to appeal?
24   2.   Is this appeal moot?
25   3.   To the extent the appeal from the compromise order is not
26   moot, have the appellants presented us with a sufficient record
27   and briefing that would enable us to reverse the bankruptcy
28   court’s compromise order?

                                       12
 1                             STANDARDS OF REVIEW
 2        The appellants’ standing is a question of law we consider de
 3   novo.    Menk v. LaPaglia (In re Menk), 241 B.R. 896, 903 (9th Cir.
 4   BAP 1999).
 5        The bankruptcy court’s determination that Bush qualified as
 6   a good faith purchaser for purposes of § 363(m) is a finding of
 7   fact reviewed for clear error.     Adeli v. Barclay (In re Berkeley
 8   Delaware Court, LLC), 2016 WL 4437616, *4 (9th Cir. 2016);
 9   Thomas v. Namba (In re Thomas), 287 B.R. 782, 785 (9th Cir. BAP
10   2002).    A finding of fact is not clearly erroneous unless it is
11   illogical, implausible, or without support in the record.    Retz
12   v. Samson (In re Retz), 606 F.3d 1189, 1196 (9th Cir. 2010).
13                                 DISCUSSION
14   1.   Appellate Standing
15        The appellants lack appellate standing unless they were
16   directly and adversely affected pecuniarily by the orders on
17   appeal.    Fondiller v. Robertson (In re Fondiller), 707 F.2d 441,
18   442 (9th Cir. 1983); Cheng v. K & S Diversified Invs., Inc.
19   (In re Cheng), 308 B.R. 448, 455 (9th Cir. BAP 2004), aff'd,
20   160 Fed.Appx. 644 (9th Cir. 2005); In re Menk, 241 B.R. at 917.
21   Gorski and Bush argue on appeal that the appellants do not
22   satisfy this “person aggrieved” standard because there is no
23   practicable means by which appellants, under any scenario,
24   reasonably could expect any distribution from the KMM II
25   bankruptcy estate.   According to Gorski and Bush, the estate is
26   administratively insolvent, and the appellants, as unsecured
27   creditors and/or equity interest holders in KMM II, consequently
28   have no prospect of receiving any distribution regardless of the

                                       13
 1   efficacy of the orders on appeal.
 2        It is true that, when an appellant’s chances of receiving a
 3   distribution from the bankruptcy estate are hopeless, the
 4   appellant may lack standing to appeal orders affecting the size
 5   of the bankruptcy estate.   See In re Fondiller, 707 F.2d at 442;
 6   see also Duckor Spradling & Metzger v. Baum Trust
 7   (In re P.R.T.C., Inc.), 177 F.3d 774, 778 n.2 (9th Cir. 1999).
 8   That being said, Gorski’s and Bush’s standing argument assumes
 9   that Bush’s secured claim is valid and unassailable for purposes
10   of determining the appellants’ standing.   In other words, Gorski
11   and Bush seek to deny the appellants a merits determination on
12   the primary issue the appellants seek to raise on appeal – the
13   enforceability of Bush’s loan and lien rights.
14        Admittedly, the reasons Gorski and Bush offer about why the
15   enforceability of Bush’s loan and lien rights are not properly at
16   issue in this appeal are compelling.   As Gorski and Bush point
17   out, the appellants never objected to Bush’s claim, never
18   commenced an adversary proceeding challenging Bush’s loan and
19   lien rights, and never took any other action they might have
20   taken to place Bush’s loan and lien rights squarely at issue
21   before the bankruptcy court.
22        Gorski and Bush contend that, as a result of the appellants’
23   failures, the appellants should be determined to lack bankruptcy
24   appellate standing.   But we are not convinced.   The same points
25   that Gorski and Bush make in their appellate standing argument
26   can be considered, if necessary, in addressing the merits of the
27   appellants’ appeal.   Indeed, the appellants’ failure in the
28   bankruptcy court to squarely place at issue Bush’s loan and lien

                                     14
 1   rights ultimately might be fatal to their appeal, but we don’t
 2   think that this failure should deprive them of appellate
 3   standing.
 4        Our decision not to dismiss these appeals on appellate
 5   standing grounds is supported by the fact that the appellate
 6   standing doctrine is not a constitutional mandate but rather is a
 7   prudential, judge-made rule applied in the interests of judicial
 8   economy and efficiency.   See generally In re P.R.T.C., Inc.,
 9 177 F.3d at 778 (describing nature of appellate standing
10   doctrine).   In light of the circumstances described immediately
11   above, we decline to dismiss these appeals on appellate standing
12   grounds.
13   2.   Application of Section 363(m) and Mootness
14        Gorski and Bush also argue on appeal that § 363(m) applies
15   to this matter and has rendered these appeals moot.
16   Section 363(m) limits the remedies available on appeal when the
17   purchaser has acted in good faith.   Section 363(m) provides as
18   follows:
19        The reversal or modification on appeal of an
          authorization under subsection (b) or (c) of this
20        section of a sale or lease of property does not affect
          the validity of a sale or lease under such
21        authorization to an entity that purchased or leased
          such property in good faith, whether or not such entity
22        knew of the pendency of the appeal, unless such
          authorization and such sale or lease were stayed
23        pending appeal.
24   11 U.S.C. § 363(m).
25        The Bankruptcy Code does not define the term “good faith”
26   for purposes of § 363(m), but the Ninth Circuit Court of Appeals
27   repeatedly has stated that, in this context, a lack of good faith
28   “typically [is] shown by fraud, collusion between the purchaser

                                     15
 1   and other bidders or the trustee, or an attempt to take grossly
 2   unfair advantage of other bidders.”    In re Berkeley Delaware
 3   Court, LLC, 2016 WL 4437616 at *4 (citing Paulman v. Gateway
 4   Venture Partners III, L.P. (In Re Filtercorp, Inc.), 163 F.3d
5   570, 577 (9th Cir. 1998)); see also Onouli-Kona Land Co. v.
 6   Estate of Richards (In re Onouli-Kona Land Co.), 846 F.2d 1170,
 7   1173 (9th Cir. 1988); Community Thrift & Loan v. Suchy
 8   (In re Suchy), 786 F.2d 900, 902 (9th Cir. 1985).    The Ninth
 9   Circuit also has said that a good faith purchaser is “one who
10   buys in good faith and for value.”    Ewell v. Diebert
11   (In re Ewell), 958 F.2d 276, 281 (9th Cir. 1992) (citations and
12   internal quotation marks omitted).
13        Based on these and other Ninth Circuit authorities, we have
14   held that the following factors are relevant to the good faith
15   determination: (1) compliance with approved sale procedures;
16   (2) arms-length negotiations, leading to a sale reflecting a
17   purchase price at or near the market value of the property;
18   (3) opportunity for competitive bidding; (4) knowledge in advance
19   of the sale of who the proposed purchaser is; and (5) the absence
20   of any evidence of fraud, collusion or grossly unfair advantage
21   over other bidders.   Zuercher Trust of 1999 v. Schoenmann
22   (In re Zuercher Trust of 1999), 2016 WL 721485, at *9 (Mem. Dec.)
23   (9th Cir. BAP Feb. 22, 2016).
24        Here, the bankruptcy court considered all of these factors
25   and concluded that the factors militated in favor of a finding
26   that Bush was a good faith purchaser for purposes of § 363(m).
27   The court found that the sale “was negotiated and proposed in
28   good faith,” “was subject to competitive bidding at the hearing”

                                     16
 1   and was “the result of an arm's length transaction between the
 2   parties after lengthy negotiations.”   The court also found that
 3   the proposed sale was the only currently available means for the
 4   estate to realize any value from the estate’s assets and that a
 5   failure to approve the sale would almost certainly lead to Bush
 6   obtaining relief from stay and foreclosing on the estate’s most
 7   valuable assets.
 8        The appellants on appeal have not directly challenged any of
 9   these findings.    Nor did they specifically and distinctly argue
10   that the bankruptcy court’s good faith finding was clearly
11   erroneous.
12        Even so, appellants did argue some points that, if proven
13   correct, arguably would undermine the bankruptcy court’s good
14   faith finding.    The appellants primarily contend that Bush’s loan
15   and lien rights were unenforceable under Washington law.    They
16   essentially argue that Gorski must have been acting collusively
17   with Bush because he refused to commence and pursue an action in
18   Washington state court to invalidate Bush’s loan and lien rights.
19   The appellants further maintain that, had Gorski done so, the
20   value of KMM II’s assets would have been rendered largely
21   unencumbered, and then those assets could have been sold for
22   millions of dollars, without the chilling cloud of Bush’s credit
23   bid and Bush’s $8.1 million allowed secured claim hanging over
24   KMM II’s assets.
25        The appellants additionally assert that Gorski initially
26   realized and acknowledged (in May and June 2014) that the loan
27   and lien rights were unenforceable but later made a 180-degree
28   turn (in September 2014) in order “to make the easiest sale to a

                                      17
 1   party who made sure [Gorski] was being adequately compensated,”
 2   and Gorski therefore permitted Bush to buy “a valuable asset for
 3   a song, without even a semblance of competitive bidding.”    Aplt.
 4   Opn. Br. (Jan. 12, 2016) at p. 23.
 5        Unfortunately for the appellants, the bankruptcy court found
 6   and determined to the contrary.    The bankruptcy court’s findings
 7   reflect its belief that Gorski had diligently determined that
 8   allowance of Bush’s secured claim for $8.1 million and the
 9   proposed compromise and sale with Bush were in the best interests
10   of the bankruptcy estate and its creditors.   In so finding, the
11   bankruptcy court apparently credited Gorski’s declaration
12   testimony representing that he painstakingly analyzed each and
13   every grounds for attacking Bush’s loan and lien rights and
14   ultimately determined that he could not prevail on any of them
15   even if he were to pursue them.    The appellants obviously have a
16   different belief; however, the bankruptcy court’s findings are
17   not illogical, implausible or without evidentiary support, so we
18   must uphold them.   See Wells Fargo Bank, N.A. v. Loop 76 LLC
19   (In re Loop 76, LLC), 465 B.R. 525, 544 (9th Cir. BAP 2012)
20   (citing In re Retz, 606 F.3d at 1196).
21        It is worth noting that the appellants never fully
22   articulated their argument on how Gorski could have defeated
23   Bush’s loan and lien rights in Washington state court.    All they
24   ever presented to Gorski and the bankruptcy court were two or
25   three Washington decisions holding that a six-year statute of
26   limitations applies to actions on promissory notes and that the
27   statute of limitations defense can be asserted in Washington to
28   prevent a secured creditor from conducting a nonjudicial

                                       18
 1   foreclosure under a deed of trust encumbering Washington real
 2   property.   See, e.g., Westar Funding Inc. v. Sorrels, 239 P.3d
3   1109, 1113 (Wash. Ct. App. 2010); Walcker v. Benson and
 4   McLaughlin, P.S., 904 P.2d 1176, 1177-78 (Wash. Ct. App. 1995).
 5   They never offered any analysis or case citations establishing
 6   that Washington law can and should be applied to determine the
 7   enforceability of a deed of trust encumbering California real
 8   property.   In fact, the appellants never attempted to present,
 9   either in the bankruptcy court or on appeal, any sort of choice
10   of law analysis.   In contrast, the choice of law analysis that
11   Bush presented to the court indicated that California law would
12   apply to a mortgage or deed of trust encumbering California real
13   property, even if a lawsuit was commenced elsewhere.
14        More importantly, the bankruptcy court did not adjudicate
15   the issue of the validity of Bush’s loan and lien rights, nor
16   would it have been appropriate for it to do so in the context of
17   the sale and compromise motion.    The appellants never placed the
18   validity of Bush’s loan and lien rights squarely at issue before
19   the bankruptcy court.   The appellants never objected to Bush’s
20   proof of claim and never commenced an adversary proceeding
21   seeking to determine the extent and validity of Bush’s lien.
22        On appeal, the appellants essentially concede that, if they
23   had done so, they would have lost because of the forum-related
24   choice of law rules applicable to California bankruptcy courts.
25   Aplt. Opn. Br. at p. 17; see also Sterba v, PNC Bank
26   (In re Sterba), 516 B.R. 579, 584-85 (9th Cir. BAP 2014).
27   Appellants, nonetheless, claim on appeal that Gorski should have
28   authorized them to pursue the issue in Washington state court if

                                       19
 1   Gorski was unwilling to pursue it there himself.     Aplt. Opn. Br.
 2   at p. 17.   But there is nothing in the record indicating that
 3   appellants asked for such authority, either from Gorski or the
 4   bankruptcy court.    The law is clear that the appellants could
 5   have done so.   See Avalanche Mar., Ltd. v. Parekh
 6   (In re Parmetex, Inc.), 199 F.3d 1029, 1031 (9th Cir. 1999);
 7   Hansen v. Finn (In re Curry and Sorensen, Inc.), 57 B.R. 824, 827
 8   (9th Cir. BAP 1986).
 9        In sum, § 363(m) applies to the appellants’ appeals from the
10   bidding procedures order and the sale order.    Consequently,
11   appellants could not unwind the sale to Bush even if they were to
12   prevail on appeal.    Without this remedy, there is no meaningful
13   relief we could grant to appellants in their appeals from the
14   bidding procedures order and the sale order, so these two appeals
15   are moot.   See Motor Vehicle Cas. Co. v. Thorpe Insulation Co.
16   (In re Thorpe Insulation Co.), 677 F.3d 869, 880 (9th Cir. 2012)
17   (stating that an appeal is moot if it is impossible for the court
18   to grant any effective relief to the appellant).
19        Alternately, the appellants contend that their appeals from
20   the sale order and the bidding procedures order are not moot
21   because both California and Washington grant to the debtor a
22   right of redemption – and other rights – upon the occurrence of a
23   foreclosure sale.    We acknowledge that there are a number of
24   Ninth Circuit cases recognizing a redemption right exception to
25   the mootness rules covering bankruptcy-court-issued sale orders;
26   however, all of these cases involved appeals from bankruptcy
27   court orders pertaining to foreclosure sales.    See, e.g., Mann v.
28   ADI Invs., Inc. (In re Mann), 907 F.2d 923, 926 (9th Cir. 1990);

                                      20
 1   Phoenix Bond & Indem. Co. v. Shamblin (In re Shamblin), 890 F.2d
2   123, 125 n.1 (9th Cir. 1989); Onouli-Kona Land Co. v. Estate of
 3   Richards (In re Onouli-Kona Land Co.), 846 F.2d 1170, 1171-73
 4   (9th Cir. 1988); Sun Valley Ranches, Inc. v. Equitable Life
 5   Assurance Soc'y of the United States (In re Sun Valley Ranches,
 6   Inc.), 823 F.2d 1373, 1375 (9th Cir. 1987).   Here, in contrast,
 7   the sale at issue was a trustee-initiated bankruptcy sale, rather
 8   than a creditor-initiated foreclosure sale.   We know of no Ninth
 9   Circuit, California or Washington authority indicating that a
10   debtor has a right of redemption following a trustee-initiated
11   bankruptcy sale, nor have appellants pointed us to any such
12   authority.
13   3.   Appellate Review of Compromise Order
14        This only leaves for our consideration the appellants’
15   appeal from the compromise order.    Arguably, the compromise order
16   appeal also has been rendered moot under § 363(m).   The Ninth
17   Circuit has applied § 363(m) to the approval of a settlement when
18   the settlement involved a sale of the bankruptcy estate’s legal
19   claims and the bankruptcy court invoked and followed the legal
20   standards applicable to § 363 sales.   See In re Berkeley Delaware
21   Court, LLC, 2016 WL 4437616 at *3.
22        That being said, it is questionable whether we should extend
23   the holding of In re Berkeley Delaware Court, LLC to the present
24   compromise order appeal.   Unlike in Berkeley Delaware Court, the
25   estate property sold here really did not include the estate’s
26   legal claims, per se.   Furthermore, the bankruptcy court here
27   seemed to separately consider and rule upon the sale aspects and
28   the compromise aspects of the transaction entered into between

                                     21
 1   Gorski and Bush.   As best we can tell from the limited record
 2   provided, the bankruptcy court’s approval of the compromise
 3   aspects presumably focused on the legal standards governing
 4   compromise of controversies under Rule 9019(a) and not on the
 5   legal standards governing § 363 sales.
 6        Therefore, under the unique procedural history of this case,
 7   we conclude that § 363(m) should not be applied to the bankruptcy
 8   court’s compromise order, and the appeal therefrom is not moot.
 9   Even so, the appellants still cannot prevail.   The appellants did
10   not order the transcript from the final compromise hearing held
11   on July 20, 2015, at which the bankruptcy court orally stated its
12   findings of fact and conclusions of law on the record.   This
13   makes it impossible for us to conduct any meaningful, informed
14   review of the bankruptcy court’s compromise order.   See Kyle v.
15   Dye (In re Kyle), 317 B.R. 390, 393–94 (9th Cir. BAP 2004),
16   aff'd, 170 Fed. Appx. 457 (9th Cir. 2006) (stating that the Panel
17   may exercise its discretion to dismiss or summarily affirm when
18   the appellant’s failure to provide an adequate record prevents
19   informed appellate review).
20        In addition, appellants’ appeal brief did not contain any
21   arguments specifically and distinctly challenging the bankruptcy
22   court’s compromise order.   As a result, appellants have forfeited
23   any such arguments they could have made.   See Christian Legal
24   Soc'y v. Wu, 626 F.3d 483, 487–88 (9th Cir. 2010); Brownfield v.
25   City of Yakima, 612 F.3d 1140, 1149 n.4 (9th Cir. 2010).
26        In short, appellants have not presented us with any grounds
27   that would justify reversal of the bankruptcy court’s compromise
28   order, nor are any such grounds evident from the record available

                                     22
 1   to us.   Accordingly, the compromise order must be affirmed
 2                               CONCLUSION
 3        For the reasons set forth above, we DISMISS AS MOOT the
 4   appeals from the bankruptcy court’s bidding procedures order and
 5   its sale order.   The compromise order is AFFIRMED.
 6
 7
 8
 9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

                                     23