In re: Tbh19, LLC

FILED
NOV 8 2022
NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK
U.S. BKCY. APP. PANEL
OF THE NINTH CIRCUIT
UNITED STATES BANKRUPTCY APPELLATE PANEL
OF THE NINTH CIRCUIT

In re: BAP No. CC-22-1026-TSG
TBH19, LLC,
Debtor. Bk. No. 2:19-bk-23823-VZ

HAR-BD, LLC; HAR, LLC; HARVEY
BOOKSTEIN,
Appellants,
v. MEMORANDUM*
SAM S. LESLIE, Chapter 7 Trustee;
GLORYA KAUFMAN, Individually and
as Special Trustee of the Glorya Kaufman
Trust, Dated 3-13-92,
Appellees.

Appeal from the United States Bankruptcy Court
for the Central District of California
Vincent Zurzolo, Bankruptcy Judge, Presiding

Before: TAYLOR, SPRAKER, and GAN, Bankruptcy Judges.

INTRODUCTION

Appellants HAR-BD, LLC, HAR, LLC, and Harvey Bookstein

(“Appellants”) appeal from the bankruptcy court’s order approving the

*
This disposition is not appropriate for publication. Although it may be cited for
whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential
value, see 9th Cir. BAP Rule 8024-1.
chapter 71 Trustee’s settlement with another creditor, Glorya Kaufman,

individually and as trustee of her trust (the “Kaufman Settlement”). The

Kaufman Settlement provided for mutual dismissals and releases in state

court litigation and allowed Ms. Kaufman an approximately $17.7 million

claim (the “Kaufman Claim”). This allowed claim includes amounts related

to Debtor’s obligation to indemnify her for payments on a guaranty of

Debtor’s debt to DBD Credit Funding (“DBD”).

Before approval of the Kaufman Settlement, the Trustee settled with

and paid DBD (the “DBD Settlement”). This settlement limited, but did not

eliminate, Ms. Kaufman’s guarantor obligation, and she continued

litigation with DBD seeking to entirely avoid her obligations. She has not

been successful. After the bankruptcy court approved the Kaufman

Settlement and after the parties submitted their appellate briefing, the state

court referee issued a decision in DBD’s favor.

Appellants objected to the Kaufman Settlement, argued their view

should be provided deference, and offered to litigate the claim objection to

the Kaufman Claim. They did not raise § 502(e) but rather argued that,

while the indemnity amount could be estimated under § 502(c), it should

not be estimated until the conclusion of the Kaufman-DBD trial.

1
Unless specified otherwise, all chapter and section references are to the
Bankruptcy Code, 11 U.S.C. §§ 101–1532, and all “Rule” references are to the Federal
Rules of Bankruptcy Procedure.
2
 On appeal, Appellants argue for the first time that the Kaufman

Claim should have been disallowed under § 502(e)(1)(B). They further

argue that the bankruptcy court erred by failing to properly analyze the

factors required to approve a Rule 9019 motion, including the role of

§ 502(e) in the analysis, and that the bankruptcy court failed to

appropriately consider their offer to litigate the claim objection.

We find that Appellants failed to raise the § 502(e) issue in

bankruptcy court and waived the issue. Further, if we consider the issue as

a matter of law, we find that § 502(e) did not apply because the Estate no

longer had a co-obligation with Ms. Kaufman to DBD. We also find that the

bankruptcy court sufficiently considered the required factors and did not

abuse its discretion in approving the Kaufman Settlement. Finally, the

Trustee was not required to accept an offer to litigate the claim objection

without certainty that the Estate would receive benefits at least as

beneficial as those under the Kaufman Settlement.

Accordingly, we find no reversible error and AFFIRM.

FACTS2

A. The Underlying Parties and Agreements

Debtor TBH19, LLC, owned extraordinary real property located in

Beverly Hills, California (the “Property”). In 2015, it borrowed $40 million

2
We exercise our discretion to take judicial notice of documents electronically
filed in the docket. See Atwood v. Chase Manhattan Mortg. Co. (In re Atwood), 293 B.R. 227,
233 n.9 (9th Cir. BAP 2003).
3
from DBD, secured by a senior lien on the Property. Debtor also obtained

secured borrowing from Appellant HAR-BD, LLC.

Glorya Kaufman guarantied repayment of the DBD loan in a

transaction that included a Reimbursement and Indemnity Agreement and

a Subordination and Intercreditor Agreement (the “Guaranty

Transaction”). The Reimbursement and Indemnity Agreement required

Debtor to pay Ms. Kaufman an annual 3% guaranty fee on the total

outstanding amount of the DBD loan. In that agreement, Debtor also

broadly agreed to indemnify Ms. Kaufman for amounts paid to DBD and

expenses incurred in connection with the DBD guaranty. The Intercreditor

Agreement provided Ms. Kaufman with the right, but not the obligation, to

purchase the DBD loan if Debtor defaulted. And, eventually, Debtor did.

B. State Court Litigation

Litigation in state court then commenced: (1) DBD sued Ms.

Kaufman; (2) Ms. Kaufman answered and cross-complained against DBD,

the Debtor, and its owner; (3) the Debtor and others sued Appellants, Ms.

Kaufman, DBD, and others; and (4) DBD cross-complained against Debtor,

Har-BD, Ms. Kaufman, and others. The state court determined that the

cases were related and ordered the parties to trial before a judicial referee.

C. The Bankruptcy

After the filing of the state court cases, Debtor filed a chapter 11

bankruptcy petition.

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 1. Ms. Kaufman’s Claim

Ms. Kaufman filed an approximately $72,927,668.00 proof of claim,

comprised of: (1) at least $4,777,059.50 in accrued and unpaid guaranty

fees; (2) at least $66,148,017.00 based on Debtor’s indemnification

obligations; and (3) at least $2,002,591.50 based on her contractual right to

reimbursement of costs and fees, including attorney’s fees in the

bankruptcy case and the state court cases.

Debtor objected to the claim. In part, it argued that the claim should

be disallowed under § 502(e)(1)(B). The bankruptcy court held its decision

on the claim objection in abeyance pending resolution of the state court

proceedings.

2. Conversion, Settlement with DBD, and Sale of the Property

The bankruptcy court later converted Debtor’s case to chapter 7, and

the chapter 7 trustee then settled with DBD. As relevant here, DBD agreed

that the Estate could retain a portion of the Property sale proceeds as a

carveout for payment of administrative expenses and unsecured claims if a

prompt sale occurred; the maximum carve-out was 6.25% of the first $60

million of sale proceeds. The bankruptcy court later approved sale of the

Property for $63.1 million, and the Estate received a sale carveout of $3.75

million. From the proceeds over $60 million, the Trustee paid sale related

costs. After such payments, the Trustee holds an additional $560,775.62 in

escrow (“Escrow Proceeds”).

5
 3. The Kaufman Settlement

Subsequently, the Trustee and Ms. Kaufman reached the Kaufman

Settlement. The settlement allowed the Kaufman Claim as a general

unsecured claim for $17,778,861.52, divided as follows: (1) guaranty fees of

$4,777,059.50; (2) estimated indemnification of $10,999,210.52; and (3)

attorney’s fees and costs reimbursement of $2,002,591.50. She retained

secured status as to the Escrow Proceeds subject to senior liens but agreed,

as had the other lien holders, to allow the Estate to receive a 6.25% carve

out of the $560,775, or $35,048.47 (“Escrow Carveout”). The settlement

ended all pending litigation between Ms. Kaufman and the Estate with the

parties bearing their own costs; the parties exchanged mutual releases; and

Ms. Kaufman agreed not to object to administrative expenses.

The Trustee brought his Rule 9019 Motion (“9019 Motion”) to

approve the Kaufman Settlement and argued that the settlement was in the

best interest of the creditors and the Estate under the factors set forth in

Martin v. Kane (In re A & C Properties), 784 F.2d 1377, 1381 (9th Cir. 1986), as

follows:

(1) Probability of success in the litigation: The Trustee asserted that

the Estate’s causes of action were speculative because the

relevant documents were enforceable, Ms. Kaufman had not

breached any duty under them, and establishing that she

damaged Debtor would be difficult.

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 (2) Difficulties in the matter of collection: The Trustee

acknowledged that this factor did not support settlement.

(3) Complexity of the litigation: The Trustee noted that the

litigation against Ms. Kaufman would be expensive and time-

consuming and would require extensive discovery, retention of

experts, and numerous witnesses. He estimated that the trial

and appeal would take at least two additional years and cost

the Estate several hundred thousand dollars in fees and

expenses.

(4) The paramount interest of creditors: The Trustee argued that

settlement would preserve assets of the Estate to distribute to

creditors by eliminating further litigation costs. Further, the

Trustee argued that the reduction of Ms. Kaufman’s claim

increased other creditors’ pro rata share of Estate assets.

Appellants opposed the 9019 Motion, arguing that the Kaufman

Settlement failed to provide the Estate with any valuable consideration.

Rather, they posited the Trustee received the benefit of Ms. Kaufman’s

agreement not to object to his fees while they had to share distribution on

account of an inflated claim. They argued that the primary component of

the Kaufman Claim, the indemnification obligation, was contingent due to

the ongoing state court litigation between Ms. Kaufman and DBD;

Ms. Kaufman might successfully eliminate any liability on her guaranty.

And they opined that because she did not promptly pay her obligation as a

7
guarantor, the Estate’s indemnification obligations to her should be

capped.

Finally, Appellants offered to assume the risk and burden of

“litigating the validity and amount of Kaufman’s disputed contingent

claim.” This offer did not include assumption of state court litigation costs

and risks.

In the Trustee’s reply, he focused on the A & C Properties factors and

explained the settlement’s benefits as including: (1) an $11 million discount

on Ms. Kaufman’s claim; (2) dismissal of Ms. Kaufman’s state court claims

against the Estate, (3) general releases, (4) the $35,048.47 carveout, and (5) a

steep reduction in ongoing administrative expenses. The Trustee further

noted that Appellants were not the only remaining unsecured creditor.

The Trustee, however, offered: “If the HAR Parties want to provide

the Estate with a better offer, which will need to include general releases,

the $35,048.47 carveout, the Estate’s removal from the State Court Action,

and the purchase of the Kaufman Claim (all aspects), then certainly the

Trustee will consider it.”

At the hearing on the 9019 Motion, Appellants first argued for delay

given that trial in the DBD-Kaufman state court litigation was imminent.

Appellants acknowledged the claim might still be contingent after trial if

an appeal followed but posited that § 502(c) would permit the bankruptcy

court to estimate the contingent claim against the background of a state

court decision. They also floated an unworkable interpleader proposal.

8
Finally, they argued that their status as principal creditors required

deference to their views, but they otherwise failed to address the A & C

Properties factors.

After argument, the bankruptcy court granted the motion. It found

that the Trustee’s declaration addressed all A & C Properties factors, and,

thus, he carried his burden. It also found in particular that the controversy

was complex and unusual; Appellants’ opposition was not supported by

any evidence placing the Trustee’s admissible evidence in material dispute;

and Appellants were impermissibly attempting to substitute their

judgment for the Trustee’s.

Appellants timely appealed.

4. The State Court Statement of Decision

After briefing in this appeal, the Panel received the state court

referee’s Statement of Decision in the DBD-Kaufman litigation. The referee

found Ms. Kaufman liable for DBD’s outstanding loan balance, which it

calculated at $10,854,319.18, plus attorney’s fees and costs to be determined

thereafter.

JURISDICTION

The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and

157(b)(1). We have jurisdiction under 28 U.S.C. § 158(a)(1).

9
 ISSUES

(1) Whether Appellants waived a § 502(e) argument and, if not,

whether the statute precluded the bankruptcy court’s approval of the

Kaufman Settlement;

(2) Whether the bankruptcy court sufficiently analyzed the factors

required for settlement approval; and

(3) Whether the bankruptcy court erred in approving the settlement

despite Appellants’ offer to litigate the claim objection.

STANDARD OF REVIEW

The parties, as well as this Panel, agree that the standard of review

for the approval of a settlement is abuse of discretion. In re A & C Properties,

784 F.2d at 1380.

“To determine whether the bankruptcy court has abused its

discretion, we conduct a two-step inquiry: (1) we review de novo whether

the bankruptcy court ‘identified the correct legal rule to apply to the relief

requested’ and (2) if it did, we consider whether the bankruptcy court’s

application of the legal standard was illogical, implausible, or without

support in inferences that may be drawn from the facts in the record.”

Spark Factor Design, Inc. v. Hjelmeset (In re Open Med. Inst., Inc.), 639 B.R. 169,

180 (9th Cir. BAP 2022) (citing United States v. Hinkson, 585 F.3d 1247, 1262

(9th Cir. 2009)). If a court “bases its ruling upon an erroneous view of the

law or a clearly erroneous assessment of the evidence,” abuse of discretion

10
exists. United States v. Levoy (In re Levoy), 182 B.R. 827, 831 (9th Cir. BAP

1995).

DISCUSSION

A. Section 502(e)

Appellants first argue that § 502(e) barred approval of the settlement.

The Trustee responds that Appellants waived the § 502(e) issue by failing

to raise it before the bankruptcy court and that, even if considered on

appeal, the bankruptcy court properly approved the settlement.

1. Appellants waived their § 502(e) argument by failing to make it

in the bankruptcy court.

A claim is disallowable under § 502(e)(1)(B) only if: (1) the claim is for

reimbursement or contribution; (2) the party asserting the claim is liable

with the debtor on the claim of a creditor; and (3) the claim is contingent at

the time of allowance or disallowance. In Dant & Russell, Inc v. Burlington

Northern Railroad Co. (In re Dant & Russell, Inc.), 951 F.2d 246, 248 (9th Cir.

1991), the Ninth Circuit explained the purpose of the section and its

relationship to § 502(c):

The co-liability requirement—that the claimant be “liable with” the
debtor on the claim of a third party “creditor”—illuminates the
central purpose of § 502(e)(1)(B). The contingency requirement does
not explain the purpose of this section. Section 502(c) permits the
estimation of contingent or unliquidated claims so that delay in the
administration of the estate may be avoided. Accordingly,
§ 502(e)(1)(B) was drafted to “preven[t] competition between a
creditor and his guarantor for the limited proceeds in the estate.”

11
Id. (quoting S. REP. NO. 95–989, at 65 (1978)).

While Appellants argued before the bankruptcy court that the

Kaufman Claim was a contingent reimbursement claim, they did not argue

that the settlement should be disallowed because Ms. Kaufman and the

Debtor were both liable on DBD’s claim. Appellants’ brief claims that “the

precise issue governed by section 502(e) was argued to the Bankruptcy

Court,” namely that “it was premature for the Court to approve a

settlement allowing the Kaufman claim precisely because it was a

contingent reimbursement claim.” Not so. Contingency and

reimbursement are not sufficient, in isolation, for § 502(e) disallowance.

Appellants waived this argument.

2. The Panel, nonetheless, will address the merits under the

exception for matters of law.

Appellate courts generally do not consider arguments made for the

first time on appeal but have discretion to do so in the case of exceptional

circumstances. El Paso Tex. v. Am. W. Airlines, Inc. (In re Am. W. Airlines),

Inc., 217 F.3d 1161, 1165 (9th Cir. 2000). An applicable exception exists

when “the issue presented is a pure question of law and the opposing party

will suffer no prejudice as a result of the failure to raise the issue in the trial

court.” Momox-Caselis v. Donohue, 987 F.3d 835, 841–42 (9th Cir. 2021). An

issue of law exists when the argument is one of statutory construction or

application and when the issue does not depend on the record, or the

record is fully developed. In re Am. W. Airlines, Inc., 217 F.3d at 1165.

12
 Whether § 502(e) requires disallowance of the Kaufman Claim is a

question of law, and the relevant evidentiary record against which the

question is decided is fully developed. Further, the Trustee had an

opportunity to make his legal arguments and suffers no prejudice from the

consideration of the § 502(e) issue. Indeed, the Trustee’s argument that

§ 502(e)(1)(B) did not apply is well taken.

3. Because co-liability for the claim did not exist at the time of the

settlement, § 502(e) does not require disallowance of Ms. Kaufman’s

claim or reversal of the bankruptcy court’s settlement approval.

a. The Trustee did not have a duty to raise the § 502(e) issue.

Appellants argue that, under Protective Committee for Independent

Stockholders of TMT Trailer Ferry, Inc. v. Anderson, 390 U.S. 414, 424 (1968),

the Trustee failed to satisfy an affirmative duty to disclose “all facts

necessary for an intelligent and objective opinion” by not informing the

bankruptcy court of a possible § 502(e) issue. The Panel disagrees. The

Trustee did not have a duty to identify an unsupportable § 502(e) objection

to his own settlement. And this is particularly true because, among other

things, he was settling the Estate’s already pending § 502(e) objection.

Rather, Appellants should have done so, and at oral argument they so

conceded.

b. Co-liability.

Section 502(e)(1)(B) does not apply under these facts. First, the

guaranty fees and the attorney’s fees never involved a co-liable party—

13
these were fees Debtor owed to Ms. Kaufman directly. Second, under the

reasoning of In re Dant & Russell, Inc., 951 F.2d at 248, once the Estate

settled with DBD and paid DBD, Ms. Kaufman, the guarantor, was no

longer “liable with” the Debtor on this claim. DBD’s claims against the

Estate were eliminated.

True, the Estate would remain obligated to indemnify Ms. Kaufman

for amounts she eventually pays to DBD, but this was and is, as the

Appellants conceded before the bankruptcy court, a contingent claim

capable of estimation and allowance. The Ninth Circuit has made clear that

co-liability is a requirement and represents the central purpose of

§ 502(e)(1)(B), not the contingency requirement. In the absence of co-

liability, § 502(e) disallowance fails.

B. Rule 9019 Approval under the A & C Properties Factors

We begin with the fundamental principal that “[t]he law favors

compromise” in order “to allow the trustee and the creditors to avoid the

expenses and burdens associated with litigating sharply contested and

dubious claims.” In re A & C Properties, 784 F.2d at 1380–81. “[A]s long as

the bankruptcy court amply considered the various factors that determined

the reasonableness of the compromise, the court’s decision must be

affirmed.” Id. at 1381.

In conducting the A & C Properties analysis, the court “determin[es]

the fairness, reasonableness and adequacy of a proposed settlement

agreement” through mandatory consideration of four factors: “(a) The

14
probability of success in the litigation; (b) the difficulties, if any, to be

encountered in the matter of collection; (c) the complexity of the litigation

involved, and the expense, inconvenience and delay necessarily attending

it; (d) the paramount interest of the creditors and a proper deference to

their reasonable views in the premises.” Id. As to the final factor, the Ninth

Circuit stated that the objections of creditors, while entitled to due

deference, “are not controlling” in weighing the factors and determining

the deciding issue—“whether the compromise is in the best interest of the

bankrupt estate.” Id. at 1382.

We further note that when engaging in this analysis, bankruptcy

courts need not conduct a “mini trial on the merits,” but need only

“canvass the issues.” In re Open Med. Inst., Inc., 639 B.R. at 181. Therefore,

the court need not explicitly check off each A & C Properties factor. Instead,

it must make general findings supporting the settlement in connection with

a record that supports settlement approval. The question is “whether the

settlement falls below the lowest point in the range of reasonableness.” In

re Pac. Gas & Elec. Co., 304 B.R. 395, 417 (Bankr. N.D. Cal. 2004) (cleaned

up).

1. The bankruptcy court’s application of the A & C Properties

factors was sufficient.

The bankruptcy court expressly recognized A & C Properties as the

proper standard and made clear that it applied those factors in approving

the Kaufman Settlement. It emphasized that the Ninth Circuit requires it to

15
consider “each and every factor” from A & C Properties in deciding a Rule

9019 motion. The bankruptcy court’s awareness that the application of each

factor was mandatory creates an inference that it weighed each of the

factors as required. Additionally, the bankruptcy court explained that the

Trustee’s motion contained admissible evidence on each of the four factors,

further demonstrating that it considered each factor.

Moreover, Appellants did not address or refute the Trustee’s A & C

Properties arguments as to complexity or likelihood of success in their

opposition to the 9019 Motion or at the hearing. Instead, they argued for a

deference that is not entitled to controlling weight.

Here, the bankruptcy court’s generalized analysis is not a basis for

reversible error as the record supports the court’s holding.

2. The record supports the bankruptcy court’s approval of the

settlement.

Under the A & C Properties factors, the Kaufman Settlement was

within the range of reasonableness such that it was fair and equitable.

a. Probability of success. This factor favored approval of the

settlement. As described in the 9019 Motion and the Trustee’s

accompanying declaration, the Trustee’s defenses to Ms. Kaufman’s

contract related claims were uncertain while the Trustee’s affirmative

claims against Ms. Kaufman were speculative. The Trustee, thus, addressed

the probability of success of the state court litigation.

16
 Appellants argue particularly that the Trustee did not address the

probability of success of an objection to the claim under § 502(e); but this

was reasonable. First, Appellants failed to raise a § 502(e) objection,

providing no reason for the Trustee to do so. And, as already noted, the

DBD Settlement rendered the statute inapplicable. Second, as the A & C

Properties analysis does not require a mini-trial on the merits, the Trustee

did not need to preemptively address every possible basis for a claim

objection.

b. Difficulty in collection. This factor was not of particular concern

to either side. The Panel agrees; it is neutral.

c. Complexity, expense, inconvenience, and delay in the litigation

involved. The record demonstrates that this factor strongly favored

approval of the settlement. This factor holds particular weight in

liquidations where the goal is “obtaining the best possible realization upon

the available assets and without undue waste by needless or fruitless

litigation.” Port O’Call Inv. Co. v. Blair (In re Blair), 538 F.2d 849, 852 (9th Cir.

1976). This case involves multiple agreements and many parties joined in

an interconnected web of relationships. The Trustee estimated that the

litigation would take at least two years and cost several hundred thousand

dollars. Appellants offered no contrary evidence. Regarding this factor, the

bankruptcy court found at the hearing that this case was complex and

unusual given the underlying business history and the litigation involved.

The bankruptcy court was in the best position to determine the complexity

17
of the litigation after having the case in front of it since 2019. The record

evidences a particularly litigious case and supports the court’s finding.

Appellants again argue that the Trustee did not address the

complexity of the § 502(e) objection. As discussed in the context of the first

factor, the Trustee was not obligated to do so; it represented only a small

part of the settlement; and was not the decisive factor as argued by

Appellants.

d. Paramount interest of the creditors and deference to their

reasonable views. Appellants argue that the bankruptcy court provided no

deference to their desire to litigate the Kaufman Claim even though they

were “the estate’s largest creditor.” Appellants also argue that their

interests in the proportion of the distribution conflicted with the Trustee’s

interest in fixing the claims register and closing the case, and the

bankruptcy court was required but failed to address that conflict.

Case law makes clear that the opposing creditors’ position is entitled

to deference but is not controlling.

The Trustee’s judgment in settling Ms. Kaufman’s contingent claim

was within the range of reasonableness. The Estate, and therefore creditors,

received several benefits from the compromise that served as sufficient

consideration: (1) Ms. Kaufman’s acquiescence to the Escrow Carveout;

(2) release from all claims by Ms. Kaufman in state court; (3) a reduction in

existing attorney’s fees claims and elimination of future claims; (4) a

18
significant reduction in administrative fees; and (5) a discount in the

indemnification portion of the Kaufman Claim.

The record demonstrates that the settlement was reasonable. The

reduction in administrative expenses by avoiding litigation was significant.

And the Statement of Decision in the DBD-Kaufman litigation also

supports the reasonableness of the Trustee’s settlement. It requires

Ms. Kaufman to pay DBD a principal amount nearly identical to the

indemnity payment under the Kaufman Settlement, but it leaves that

amount open to payment of fees and costs that the Kaufman Settlement

eliminates.

In sum, it was not an abuse of discretion for the bankruptcy court to

determine that the Kaufman Settlement’s benefits outweighed the

Appellants’ hope for a better outcome through continued litigation.

C. Appellants’ Offer to Litigate the Claim Objection Does Not Require

Reversal.

Appellants’ final argument, which they characterized at oral

argument as the bankruptcy court’s fundamental error, is that the

bankruptcy court allegedly erred under Simantob v. Claims Prosecutor, LLC

(In re Lahijani), 325 B.R. 282, 292 (9th Cir. BAP 2005), by failing to permit

them to bear the risk of litigating the claim objection.

The Lahijani Court stated: “A creditor’s willingness to bear the risk

and expense on behalf of the estate for litigating to recover property that

would be property of the estate and that would not otherwise deleteriously

19
affect the administration of the estate is a matter that the bankruptcy court

is obliged to consider when weighing a compromise that would eliminate

the recovery action.” In re Lahijani, 325 B.R. at 292. In that case, the

appellants offered to purchase fraudulent transfer and turnover causes of

action for a fixed amount of money plus a percentage of recovery.

However, the trustee refused to consider their offer. On appeal, the Panel

stated that the bankruptcy court must consider such an offer to litigate

when the trustee seeks to compromise a recovery action.

In re Lahijani’s analysis is best viewed as limited to cases involving

elimination of recovery actions through sales to the defendant. But even

assuming it applies more broadly, the bankruptcy court here did not err by

approving the settlement despite Appellants’ offer to litigate the claim

objection, because their offer did not provide a sufficiently definite and

concrete benefit to the Estate. The Trustee made clear that he would

entertain an offer that met certain definite requirements that insulated the

Estate from the negative consequences of a loss of the Kaufman Settlement;

appellants made no such offer. As they admitted at oral argument, they did

not offer to make the Estate whole by neutralizing the Estate from either

the need to litigate the affirmative claims and defend against the Kaufman

claims, the potential loss of the Escrow carveout, or the impact of a loss due

to a litigation defeat in the state court or a determination that the Kaufman

claim was greater than provided in the settlement. The offer was thus of

20
insufficient economic substance to make the failure to require its

acceptance a basis for reversal.

CONCLUSION

Based on the foregoing, we AFFIRM.

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