IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
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No. 96-30555
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In The Matter of: JOE CONTE TOYOTA INC
Debtor
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JOSEPH P CONTE, JR
Appellant
v.
JOE CONTE TOYOTA INC
Appellee.
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Appeal from the United States District Court
for the Eastern District of Louisiana
(95-CV-4212-J)
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December 13, 1996
Before KING, DAVIS, and BENAVIDES, Circuit Judges.
PER CURIAM:*
Joseph Conte, Jr. (“Conte”) appeals a judgment by the
district court dismissing his appeal of a compromise order in the
bankruptcy court as moot. Finding no error, we affirm.
I. BACKGROUND
*
Pursuant to Local Rule 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in Local Rule 47.5.4.
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Joe Conte Toyota, Inc. (“Conte Toyota” or the “debtor”)
filed a voluntary petition for relief under Chapter 11 of the
United States Bankruptcy Code on June 7, 1995. At the time it
filed for bankruptcy protection, the debtor was in the process of
negotiating the sale of its business goodwill and certain
specified assets to a third party purchaser, Troy Duhon
(“Duhon”). Prior to filing, the debtor had engaged in lengthy
litigation with Gulf States Toyota, Inc., Toyota Motor Credit
Corp., and Toyota Motor Sales, Inc. (the “Toyota entities”). The
debtor alleged that the Toyota entities violated state and
federal law and the terms of various agreements. The Toyota
entities counterclaimed and filed claims on the estate.
The debtor’s board of directors authorized its attorneys to
reach a compromise of the litigation with the Toyota entities.
On October 5, 1995, the bankruptcy court held a hearing on a
motion to approve the compromise. Conte appeared pro se to
object to the compromise of the debtor’s claim against the Toyota
entities, contending that the compromise was not in the best
interest of the debtor and that the board and the attorneys had
no authority to act. The bankruptcy court, however, approved the
compromise on November 2, 1995. The compromise contains the
following conditions, among others: that the Toyota entities will
approve Duhon as the successor dealer and operator of the
franchise and give him a Dealer Sales and Service Agreement, that
Duhon will increase his purchase offer by $110,000, that the
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Toyota entities will pay the debtor $100,000 and release all
claims against it, and that the debtor will release all claims
against the Toyota entities.
On November 8, 1995, the debtor obtained an order of
confirmation on its reorganization plan. The plan incorporated
the terms of the compromise, specifically the sale of certain
assets of the debtor to Duhon, the transfer to Duhon of all its
rights under the Dealer Sales and Services Agreement, and the
issuance of a new Dealer Sales and Services Agreement to Duhon by
the Toyota entities. No objection was filed to the confirmation
of the plan, and no stay was requested.
On November 13, 1995, Conte filed a notice of appeal of the
compromise order in federal district court. On November 15, the
debtor, the Toyota entities, and Duhon executed the acts
necessary to effectuate the terms of the compromise and plan. On
April 16, 1996, the district court granted Conte Toyota’s motion
to dismiss on the ground of mootness. Conte filed a timely
notice of appeal.
II. DISCUSSION
We review the granting of a motion to dismiss de novo,
accepting as true all well-pleaded assertions in the light most
favorable to the plaintiff. House the Homeless, Inc. v. Widnall,
94 F.3d 176 (5th Cir. 1996).
The debtor argues that Conte’s appeal of the compromise
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order is moot because the relief requested cannot be granted. In
the bankruptcy context, a court may decline to address the merits
of a claim “when there has been substantial consummation of the
plan such that effective judicial relief is no longer available -
- even though there may still be a viable dispute between the
parties on appeal.” In re Manges, 29 F.3d 1034, 1039 (5th Cir.
1994). This court considers three factors to determine whether
a controversy in this context is moot: “(i) whether a stay has
been obtained, (ii) whether the plan has been substantially
consummated, and (iii) whether the relief requested would affect
either the rights of parties not before the court or the success
of the plan.” Id.
Applying the three factors to the present case, we find that
the district court correctly dismissed the appeal as moot.
First, Conte never obtained a stay of implementation of the
reorganization plan pending the appeal of the compromise order.
Second, because of Conte’s failure to obtain a stay, the plan has
now been substantially consummated. “Substantial consummation”
is a statutory measure for determining whether a reorganization
plan may be amended or modified by the bankruptcy court. 11
U.S.C. § 1127(b). “Substantial consummation” is defined as:
(A) transfer of all or substantially all of the property
proposed by the plan to be transferred;
(B) assumption by the debtor of by the successor to the
debtor under the plan of the business or of the management
of all or substantially all of the property dealt with by
the plan; and
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(C) commencement of distribution under the plan.
Id. § 1101(2). In this case, the sale of the dealership’s
equipment and Conte Toyota’s franchise rights to Duhon and the
distribution of the settlement and sale proceeds to allowed
claimants resulted in substantial consummation of the plan.
These actions transferred substantially all of the property to be
transferred by the plan and commenced distribution under the
plan. Third, because the plan has been substantially
consummated, the relief requested by Conte would affect the
rights of parties not before the court and would destroy the
success of the plan. By settling the ongoing litigation and
securing the Toyota entities’ approval of the Duhon sale, the
compromise facilitated the sale and made it possible for the
debtor to pay the allowed claimants according to the terms of
the plan. Neither Duhon nor the allowed claimants are before the
court; and the plan could not have been implemented successfully
without the prior compromise. Thus, Conte’s appeal of the
compromise order was correctly dismissed as moot.
III. CONCLUSION
For the foregoing reasons, the judgment of the district
court is AFFIRMED.
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