F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
MAY 27 2004
FOR THE TENTH CIRCUIT
PATRICK FISHER
Clerk
In re:
DONALD E. ARMSTRONG,
Debtor.
No. 02-4081
(BAP No. UT-01-039)
DONALD E. ARMSTRONG, (BAP)
Appellant,
v.
KENNETH A. RUSHTON, Trustee;
STEVEN R. BAILEY, Trustee,
Appellees.
ORDER AND JUDGMENT *
Before McCONNELL , ANDERSON , and BALDOCK , Circuit Judges.
After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination of
*
This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
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.
Debtor-appellant Donald E. Armstrong, acting pro se, appeals the judgment
of the Bankruptcy Appellate Panel (BAP) affirming the bankruptcy court’s
approval of a settlement agreement in his Chapter 11 case. Our review of this
case reveals no abuse of discretion on the part of the bankruptcy court, and
we affirm.
This case is one of many appeals pending before this court, all of which
involve the personal bankruptcy of Armstrong and/or the bankruptcies of various
entities with which he is associated. In this case, Kenneth A. Rushton, the
Chapter 11 trustee of Armstrong’s personal bankruptcy estate, entered into
a settlement agreement with Steven R. Bailey, the Chapter 7 trustee for the estate
of Willow Brook Cottages, LLC. Aside from one claim that Willow Brook
asserted against the Armstrong estate based on a promissory note, the settlement
resolved all outstanding issues between the two estates, including matters
involved in two appeals pending before this court, Nos. 00-4114 and 00-4117.
Pursuant to Fed. R. Bankr. P. 9019(a) and after a lengthy hearing, the
bankruptcy court approved the settlement agreement, and Armstrong appealed to
the BAP. The BAP, after hearing oral argument, concluded that the bankruptcy
court had been fully informed of the circumstances surrounding the Armstrong
-2-
bankruptcy and that nothing in the record demonstrated an abuse of discretion.
The BAP, therefore, affirmed the bankruptcy court’s approval of the settlement
agreement, and this appeal followed.
In our review of matters referred to the BAP, we look behind that panel’s
decision to independently review the decision of the bankruptcy court. Midkiff v.
Stewart (In re Midkiff) , 342 F.3d 1194, 1197 (10th Cir. 2003). “A bankruptcy
court’s approval of a compromise may be disturbed only when it achieves an
unjust result amounting to a clear abuse of discretion. The bankruptcy court’s
decision to approve the settlement, however, must be an informed one based upon
an objective evaluation of developed facts.” Reiss v. Hagmann , 881 F.2d 890,
891-92 (10th Cir. 1989) (citation omitted).
Although Armstrong lists fourteen points in his opening brief that he
apparently considers to be discrete issues, this case actually involves only one
issue: whether the bankruptcy court abused its discretion in approving the
settlement agreement. Our review of the record in this case, particularly the
transcript of the hearing before the bankruptcy court, convinces us that the
bankruptcy court’s decision was an informed one, thoroughly and properly
analyzed, and based on full development of pertinent facts. It does not represent
an unjust result, and therefore must be affirmed.
-3-
Factual Background
Because this case involves the legal and procedural history of other
bankruptcies, it is necessary to understand something of the interrelated entities
involved in the settlement agreement. Briefly, Armstrong was the president of
Mountain Pacific Ventures (MPV). MPV, also in bankruptcy, was the managing
member of Willow Brook Cottages and was Willow Brook’s sole equity interest
holder. Willow Brook was forced into an involuntary Chapter 11 proceeding in
August 1998. Defendant Steven R. Bailey was appointed the Willow Brook
trustee, and the case was converted to Chapter 7 in March 1999.
As part of the proceedings in the Willow Brook bankruptcy, Armstrong
commenced an adversary proceeding against Bailey, and Bailey’s counsel,
Duane Gillman, and also against Gillman’s law firm, both individually and as
representatives of the Willow Brook estate. The complaint alleged various claims
of negligence and breach of fiduciary duty in connection with the administration
of the Willow Brook estate.
The bankruptcy court presiding over the Willow Brook proceeding (the
Willow Brook court) ruled that Armstrong had violated the automatic stay by
initiating the adversary proceeding. It held Armstrong in contempt and awarded
Bailey, as trustee of Willow Brook, $3620.50 in actual damages and $5000 in
punitive damages. It further dismissed the adversary proceeding with prejudice
-4-
and eventually enjoined Armstrong from asserting claims against Bailey or
Gillman without court approval.
After entry of the judgment, Bailey initiated garnishment proceedings
against Armstrong by serving Roger Segal, trustee for the MPV estate, with
garnishment documents. Segal held $8620.50 owed by the MPV estate to
Armstrong.
On appeal, the district court upheld the actual damages award, but reversed
the imposition of punitive damages. Both parties appealed that decision to this
court: case No. 00-4114 is Armstrong’s appeal of the district court’s affirmance
of the $3620.50 in actual damages; case No. 00-4117 is Bailey and Gillman’s
appeal of the district court’s reversal of the $5000 punitive damages award. Both
of these appeals have been fully briefed and are pending before this court. Both
are also among the issues addressed by the settlement agreement.
While the appeal from the Willow Brook court was pending in the district
court, Armstrong filed personally for Chapter 11 protection. He was eventually
removed as debtor-in-possession and was replaced by defendant Rushton as
trustee. Defendant Bailey, as trustee of Willow Brook, filed a proof of claim
against the Armstrong estate for approximately $150,000 based on a promissory
note that Armstrong had executed in favor of Willow Brook.
-5-
The settlement agreement between the Armstrong and Willow Brook estates
provided that Segal, the trustee of the MPV estate, would pay the Armstrong
estate $5000 and a further $3620.50 as the recovery of a preferential transfer.
Bailey released all of Willow Brook’s claims against the Armstrong estate except
for reserving the right to file a claim in the Armstrong proceeding for the
$3620.50 and to pursue the proof of claim relating to the $150,000 promissory
note. Rushton, on behalf of the Armstrong estate, reserved the right to object to
the $150,000 proof of claim but released all other claims against Bailey, Gillman,
Gillman’s law firm, and Willow Brook.
Analysis
Although Armstrong’s briefs are prolix and poorly organized, we will
attempt to summarize and address the main arguments made in support of
reversal. 1
Initially, Armstrong objects to the release of the claims against Bailey,
Gillman, and the law firm involved in appeals Nos. 00-4114 and 00-4117.
Armstrong believes those claims to be valuable and contends that neither Rushton
nor the bankruptcy court properly reviewed and evaluated his offer to purchase
1
Contrary to Armstrong’s position, we agree with the BAP that the sole issue
on appeal is whether the bankruptcy court abused its discretion in approving the
plan. A reviewing court is not obligated to track precisely the sub-issues raised in
a litigant’s brief or to address every argument presented. 19 James Wm. Moore
et al., Moore’s Federal Practice , 205-1 (Matthew Bender 3d ed. 2003).
-6-
those claims for $5000 plus “the potential of an additional $1,000,000.00.” Aplt.
Opening Br. at 28. 2
In addition to marshaling the relevant facts to determine whether to approve
a settlement involving potential legal claims, a bankruptcy court should also
analyze those facts in light of the following factors: (1) the chance of success of
the litigation on the merits; (2) possible problems in collecting a judgment; (3) the
expense and complexity of the litigation; and (4) the interest of creditors. Kopp v.
All Am. Life Ins. Co. (In re Kopexa Realty Venture Co.) , 213 B.R. 1020, 1022
(B.A.P. 10th Cir. 1997). The bankruptcy court considered all of these factors,
either expressly or implicitly, and did not abuse its discretion in approving the
settlement.
We agree with appellees and the bankruptcy court that three specific legal
hurdles involved in pursuing these claims rendered outright settlement
appropriate. First, and as mentioned above, Armstrong has been enjoined by the
Willow Brook court from pursuing any further actions against Willow Brook
without leave of that court. Second, Bailey’s actions, the subject of Armstrong’s
2
It is unclear why any amounts over $8620.50 would be involved in settling
00-4114 and 00-4117. Armstrong does not specify under what legal theories he
can anticipate millions of dollars in recovery against Bailey and Gillman and/or
against Willow Brook. As noted above, he is enjoined from pursuing Bailey,
Gillman, and Willow Brook and, as determined by the BAP in a related matter,
has no standing to sue on behalf of the Willow Brook estate.
-7-
complaint in the adversary proceeding underlying Appeal Nos. 00-4114 and
00-4117 and alleged to be negligence and malfeasance, were all done pursuant to
orders of the Willow Brook court. And third, in a related appeal, the BAP has
held that Armstrong, as a shareholder of a shareholder of Willow Brook, has no
standing to pursue claims for diminution of the Willow Brook estate. As it was
required to do, the bankruptcy court properly evaluated the likelihood of success
on these claims and rightly concluded that “[t]he possibility of success with that
kind of a record make[s] it almost impossible for the trustee of this estate to bring
any of these actions.” Aplt. App., Vol. V at 175.
Next, and as part of his general argument that the bankruptcy court should
not have approved the settlement, Armstrong disagrees with the court’s
determination that notice of the pending settlement was proper. Although it is
unclear whether Armstrong raised the issue of notice to the BAP, we agree with
the bankruptcy court that notice was adequate in this case.
The notice of settlement here was initially and timely filed by Bailey, the
Willow Brook trustee, instead of by Rushton. All interested parties were served
with the motion to approve the settlement and the notice of settlement. Under the
Bankruptcy Code, the phrase “after notice and a hearing” means “after such
notice as is appropriate in the particular circumstances.” 11 U.S.C. § 102(1)(A).
Ten days before the hearing on the settlement agreement, Rushton filed with the
-8-
court and served on all parties his memorandum in support of the settlement.
On the day of the hearing, Rushton filed his formal joinder in the motion to
approve the settlement. As there was no showing that Armstrong was unaware of
the terms of the proposed settlement, or any evidence of surprise, confusion, or
prejudice to Armstrong, the bankruptcy court determined that notice of the
settlement was sufficient and proper. We agree.
Armstrong also challenges the bankruptcy court’s treatment of him as
violative of his right to due process. Contrary to Armstrong’s view, however,
we see the bankruptcy court as patient and balanced in its treatment of him.
With respect to the specific challenge to approval of the settlement as an abuse of
discretion, we note that the bankruptcy court held a hearing lasting several hours
in which Rushton, Bailey, and Armstrong all testified. Armstrong was allowed to
cross examine and to submit exhibits. Bailey and Rushton, both experienced
bankruptcy trustees, testified and submitted exhibits in support of the agreement.
Under these circumstances, we agree with the BAP that the bankruptcy court’s
approval of the settlement was an informed decision “based upon an objective
evaluation of developed facts.” See Reiss , 881 F.2d at 892. 3
3
Armstrong also attempts to challenge the settlement in this case by arguing
that a separate settlement in the Willow Brook bankruptcy (the Vanderford
settlement) was improper and that Bailey and Gillman have lied to the court about
the existence of a prior settlement between Armstrong and Vanderford. We note
(continued...)
-9-
In his final group of points, Armstrong argues that Willow Brook violated
the stay and the discharge in his bankruptcy case by continuing to pursue
collection of the $3620.50 and the $5000.00. Armstrong, however, does not
dispute appellees’ assertion that he has filed, in the Willow Brook court, a motion
seeking to hold Willow Brook, Bailey and Gillman in contempt for violation of
the stay. It is up to the Willow Brook court to issue an order regarding the matter
from which Armstrong can appeal, if aggrieved. To the extent Armstrong claims
that Bailey has violated Armstrong’s personal bankruptcy discharge, Armstrong
offers no evidence that he has raised that matter to the bankruptcy court since that
court granted the discharge injunction.
Finally, Armstrong has filed supplemental authority in the form of two
decisions from the BAP holding that certain sanctions imposed against Armstrong
by the bankruptcy court for criminal contempt exceeded that court’s jurisdiction.
Those decisions have no relevance in this appeal and do not undermine the
general jurisdiction of the bankruptcy court over the Armstrong bankruptcy
matters.
3
(...continued)
that the Vanderford settlement was approved by the Willow Brook court after it
heard objections from Armstrong. Armstrong did not appeal that approval, and
issues involving the Vanderford settlement are irrelevant to this appeal.
-10-
Armstrong’s request to supplement the record filed in this court on
December 20, 2002, is GRANTED. Armstrong’s request to vacate all orders
entered by Judge Judith A. Boulden and Judge Glen E. Clark based on their
voluntary recusals is DENIED. His motions to file exhibits on compact disk,
to file and serve documents by fax and electronically, to consider consolidation,
and for extension of time are DENIED. With the exception of his request to
supplement the record, all requests appended to the end of Armstrong’s opening
brief are DENIED.
The judgment of the Bankruptcy Appellate Panel is AFFIRMED. The
mandate shall issue forthwith.
Entered for the Court
Bobby R. Baldock
Circuit Judge
-11-