Opinion
CASE NO.: 1:22-cv-23540-DPG Consolidated Case No. 22-cv-23544-DPG Consolidated Case No. 22-cv-23555-DPG Consolidated Case No. 22-cv-23551-DPG Bankruptcy Case No. 20-18841-RAM Bankruptcy Case No. 20-18843-RAM Bankruptcy Case No. 20-22485-RAM
2024-03-31
IN RE TERAS BREAKBULK OCEAN NAVIGATION ENTERPRISES, LLC, Debtor. Teras Breakbulk Ocean Navigation Enterprises, LLC, et al., Appellants, v. Angueira, et al., Appellees.
Alejandra Muniz Marcial, Richard L. Richards, Richards Legal Group, Coral Gables, FL, Christopher M. Broussard, Chris Broussard PA, Tampa, FL, for Appellants in Nos. 1:22-cv-23540, 22-cv-23544, 22-cv-23555, 22-cv-23551. Roberto Antonio Angueira, Yanay Galban, Robert A. Angueira, P.A., Miami, FL, for Appellee Robert A. Angueira in Nos. 1:22-cv-23540, 22-cv-23544, 22-cv-23551. Roberto Antonio Angueira, Robert A. Angueira, P.A., Miami, FL, for Appellee Robert Angueira in No. 22-cv-23555. David Adam Blansky, Dunn Law, P.A., Miami, FL, Russell L. Bogart, Pro Hac Vice, Kagen, Caspersen & Bogart PLLC, New York, NY, for Appellee Versant Funding, LLC in Nos. 1:22-cv-23540, 22-cv-23544, 22-cv-23555, 22-cv-23551. David Adam Blansky, Michael P. Dunn, Dunn Law, P.A., Miami, FL, Russell L. Bogart, Pro Hac Vice, Kagen, Caspersen & Bogart PLLC, New York, NY, for Appellee SAK Liquidation LLC in Nos. 1:22-cv-23540, 22-cv-23544, 22-cv-23555, 22-cv-23551. David Adam Blansky, Marcia Taragano Dunn, Michael P. Dunn, Dunn Law, P.A., Miami, FL, for Appellee Dunn Law, P.A. in Nos. 1:22-cv-23540, 22-cv-23544, 22-cv-23555, 22-cv-23551.
Alejandra Muniz Marcial, Richard L. Richards, Richards Legal Group, Coral Gables, FL, Christopher M. Broussard, Chris Broussard PA, Tampa, FL, for Appellants in Nos. 1:22-cv-23540, 22-cv-23544, 22-cv-23555, 22-cv-23551. Roberto Antonio Angueira, Yanay Galban, Robert A. Angueira, P.A., Miami, FL, for Appellee Robert A. Angueira in Nos. 1:22-cv-23540, 22-cv-23544, 22-cv-23551. Roberto Antonio Angueira, Robert A. Angueira, P.A., Miami, FL, for Appellee Robert Angueira in No. 22-cv-23555. David Adam Blansky, Dunn Law, P.A., Miami, FL, Russell L. Bogart, Pro Hac Vice, Kagen, Caspersen & Bogart PLLC, New York, NY, for Appellee Versant Funding, LLC in Nos. 1:22-cv-23540, 22-cv-23544, 22-cv-23555, 22-cv-23551. David Adam Blansky, Michael P. Dunn, Dunn Law, P.A., Miami, FL, Russell L. Bogart, Pro Hac Vice, Kagen, Caspersen & Bogart PLLC, New York, NY, for Appellee SAK Liquidation LLC in Nos. 1:22-cv-23540, 22-cv-23544, 22-cv-23555, 22-cv-23551. David Adam Blansky, Marcia Taragano Dunn, Michael P. Dunn, Dunn Law, P.A., Miami, FL, for Appellee Dunn Law, P.A. in Nos. 1:22-cv-23540, 22-cv-23544, 22-cv-23555, 22-cv-23551. ORDER DARRIN P. GAYLES, UNITED STATES DISTRICT JUDGE
THIS CAUSE comes before the Court on Appellants Teras Breakbulk Ocean Navigation Enterprises, LLC ("TBONE"), Teras Cargo Transport (America), LLC ("TCTA"), Teras Chartering, LLC ("TChart"), SJS Investment Group LLC ("SJS"), Teras America, LLC ("Teras America"), Teras Breakbulk Shipping LLC ("TBS") (collectively, "Teras"), Sonny Joe Sanders ("Sanders"), and TrueNorth Projects LLC's ("True North") Notices of Appeal from the United States Bankruptcy Court for the Southern District of Florida (the "Bankruptcy Court"). [ECF No. 1]. The Court has reviewed the parties' briefs and the record and is otherwise fully advised. For the reasons discussed below, the Bankruptcy Court's Sale Orders, Extension Orders, Bench Rulings, Reconsideration Orders, and Amended Sale Orders are affirmed.
This appeal, Case No. 1:22-cv-23540-DPG, was consolidated with the following appeals: Case Nos. 1:22-cv-23544-DPG; 1:22-cv-23555-DPG; and 1:22-cv-23551-DPG. [ECF No.8]. Citations to the record are from the Case No. 1:22-cv-23540-DPG docket. Furthermore, the Court cites entries on its docket as "ECF No." and on the Bankruptcy Court's Docket as "D.E. No."
Appellants appeal the following Sale Orders:
A. Order Granting Trustee's Expedited Motion for Entry of an Order Approving Sale Agreement Subject to Higher and Better Offers Free and Clear of Encumbrances with allowed Encumbrances to Attach to Sale Proceeds, [ECF No. 23-4 at 228-37]; and
B. Order Granting Trustee's Expedited Motion for Entry of an Order Approving Sale Agreement Subject to Higher and Better Offers Free and Clear of Encumbrances with allowed Encumbrances to Attach to Sale Proceeds, [ECF No. 23-5 at 623-32].
Appellants appeal the following Extension Orders:
A. Order Granting Chapter 7 Trustee's Expedited Motion to Extend the 11 U .S.C. §§ 108, 546 and 549 Deadlines, [ECF No. 23-4 at 460-62]; and
B. Order Granting Chapter 7 Trustee's Expedited Motion to Extend the 11 U .S.C. §§ 108, 546 and 549 Deadlines, [ECF No. 23-5 at 578-80].
Appellants appeal the following Bench Rulings:
A. Bench Ruling Dated October 18, 2022, see Order Setting Bench Ruling on Motions to Reconsider, [ECF No. 23-4 at 378-79]; and
B. Bench Ruling Dated October 18, 2022, see Order Setting Bench Ruling on Motions to Reconsider, [ECF No. 23-5 at 660-61].
Appellants appeal the following Reconsideration Orders:
A. Order Granting, in Part, Motions to Reconsider and Amending Order Approving Sale, [ECF No. 23-5 at 397-99]; and
B. Order Granting, in Part, Motions to Reconsider and Amending Order Approving Sale, [ECF No. 23-5 at 662-64].
Appellants appeal the following Amended Sale Orders:
A. Amended Order Granting Trustee's Expedited Motion for Entry of an Order Approving Sale Agreement Subject to Higher and Better Offers Free and Clear of Encumbrances with allowed Encumbrances to Attach to Sale Proceeds, [ECF No. 23-4 at 473-83]; and
B. Amended Order Granting Trustee's Expedited Motion for Entry of an Order Approving Sale Agreement Subject to Higher and Better Offers Free and Clear of Encumbrances with allowed Encumbrances to Attach to Sale Proceeds, [ECF No. 23-5 at 511-21].
BACKGROUND
This matter arises out of three Chapter 7 bankruptcy proceedings. Specifically, on August 18, 2020, debtor TBONE filed a voluntary petition, Case No. 20-18841-RAM ("TBONE Proceeding"), and Robert Angueira was appointed trustee. [ECF No. 23-4 at 1-53, 67-68]. On the same day, debtor TCTA filed its own voluntary petition, Case No. 20-18843-RAM ("TCTA Proceeding"), and Marcia T. Dunn was appointed trustee. [ECF No. 23-5 at 1-67, 86-88]. On November 13, 2020, debtor Teras America filed its voluntary petition, Case No. 20-22485-RAM ("Teras America Proceeding"), and Marci T. Dunn was also appointed trustee in that proceeding. [D.E. 1 (Case No. 20-22485-RAM)]. On February 22, 2021, the Bankruptcy Court ordered the Teras America Proceeding to be jointly administered with the TCTA Proceeding—designating the TCTA Proceeding as lead case ("TCTA Plus Proceeding"). [D.E. No. 20 (Case No. 20-22485-RAM)]. Then, Robert Angueira was appointed as successor trustee in the TCTA Plus Proceeding. [D.E. No. 74 (Case No. 20-18843-RAM)]; [D.E. No. 28 (Case No. 20-22485-RAM)]. As such, Robert Angueira serves as trustee (the "Trustee") in both the TBONE and TCTA Plus Proceedings (collectively, the "Bankruptcy Proceedings").
TBONE, Teras America, and TCTA are collectively the "Debtors".
On July 25, 2022, the Trustee moved, pursuant to 11 U.S.C. § 363, for the Bankruptcy Court's approval and consummation of a sale agreement in the Bankruptcy Proceedings ("Sale Motions"). [D.E. No. 52 (Case No. 20-18841-RAM)]; [D.E. No. 102 (Case No. 20-18843-RAM)]. The sale agreement ("Sale Agreement") was attached to the Sale Motions that provided for the sale of the Debtors' assets—namely avoidance actions ("Avoidance Actions")— to SAK Liquidation LLC ("SAK"), id., a company created by the secured creditor Versant Funding, LLC ("Versant"), [ECF No. 25 at 5-6] (October 18, 2022 Bench Ruling Transcript at 5:24-6:3). Simultaneously, in the Bankruptcy Proceedings, the Trustee also moved to extend the deadlines established by 11 U.S.C. §§ 108, 546 and 549, to give SAK time to file the Avoidance Actions after the Bankruptcy Court's ruling on the Sale Motions ("Extension Motions"). [D.E. No. 54 (Case No. 20-18841-RAM)]; [D.E. No. 104 (Case No. 20-18843-RAM)].
The Sale Motions, as well as the subsequent filings in the TBONE and TCTA Plus Proceedings discussed in this Order, are identical.
Avoidance actions are legal actions to recover money or property that was transferred by the debtor before the bankruptcy case was filed. Frank L. Eaton, The Limitations of the Rooker-Feldman Doctrine as a Defense to Avoidance Actions under the Bankruptcy Code, AMERICAN BAR ASSOCIATION, https://www.americanbar.org/groups/business_law/resources/business-law-today/2019-november/the-limitations-of-the-rooker-feldman/ (last visited March 19, 2024). The bankruptcy trustee can pursue avoidance actions as a way to recover property of the bankruptcy estate and to distribute the property fairly among the creditors of the estate. Id. Such actions can be brought under state common law claims pursuant to 11 U.S.C. § 544 and bankruptcy specific claims pursuant to 11 U.S.C. §§ 547, 548, and 549.
On August 19, 2022, the Bankruptcy Court entered identical Sale Orders and Extension Orders in the Bankruptcy Proceedings. See [ECF No. 23-4 at 228-37]; [ECF No. 23-5 at 623-32]; [ECF No. 23-4 at 460-62]; [ECF No. 23-5 at 578-80]. The Sale Orders granted the Sale Motions and approved the Trustee's exercise of his discretion to sell the Debtors' Avoidance Actions to SAK. [ECF No. 23-4 at 228-37]; [ECF No. 23-5 at 623-32]. The Extension Orders extended the statute of limitations under 11 U.S.C. §§ 108, 546 and 549. [ECF No. 23-4 at 460-62]; [ECF No. 23-5 at 578-80]. Appellants moved for reconsideration of the Sale Orders ("Motions for Reconsideration") arguing that the Avoidance Actions are not property of the Teras estate ("Estate"), but instead are powers only entrusted to the Trustee that cannot be sold or transferred. [D.E. No. 73 (Case No. 20-18841-RAM)]; [D.E. No. 119 (Case No. 20-18843-RAM)]. The Bankruptcy Court then entered its Bench Rulings, which scheduled a hearing for October 18, 2022 on the Motions for Reconsideration (the "Bench Ruling Hearing").
At the Bench Ruling Hearing, the Bankruptcy Court first concluded that the Sale Agreement was in the best interest of the Estate "because [t]he total purchase price is [$]153,223.92, but the consideration to the estates is far greater." [ECF No. 25 at 6] (October 18, 2022 Bench Ruling Transcript at 6:10-11). The Bankruptcy Court reasoned that, under the deal, Versant would be waiving any rights against the sale proceeds, and Dunn Law, P.A. ("DLPA")—counsel for former trustee Marian Dunn—would waive its administrative fees. Id. The Bankruptcy Court furthered that
First, Mr. Angueira tried unsuccessfully to find counsel to prosecute the claims, and these are primarily claims we're talking about against the debtor's principal, Sonny Sanders, and non-debtor companies that Mr. Sanders may directly or indirectly own or control. Mr. Angueira's efforts were unsuccessful. Second, the trustee through Mister - by Mr. Angueira has agreed to cap his fees and trustee counsel fees in this case at [$]50,000 to ensure that over $100,000 will come into the estate over and above trustee and trustee counsel fees. So, in sum, the Court finds that the proposed sale is clearly in the interest of the estate. The issue is whether the law allows the sale.Id. at 8 (October 18, 2022 Bench Ruling Transcript at 8:10-23).
Having found that the Sale Agreement is beneficial to the Estate, the Bankruptcy Court addressed whether the Avoidance Actions can be sold as property to a creditor and if the Trustee has the power to do so. To that end, the Bankruptcy Court found that
[t]here is no binding authority on the 11th Circuit on this issue of whether avoidance actions are property of the estate. A good summary of the cases on
both sides is contained in two fairly lengthy opinions, one very lengthy because it dealt with multiple issues and then complex facts. One of the decisions, Murray Metallurgical Coal Holdings, LLC, 623 B.R. 444, and the discussion of property of the estate starts at Page 506 and carries on at least through Page 512. It's [a] Bankruptcy, Southern District of Ohio, 2021 decision by Judge Hoffman.[ECF No. 25 at 10] (October 18, 2022 Bench Ruling Transcript at 10:1-24).
And then a later case that was issued this year that also went through an analysis and cited with approval the reasoning and conclusion in -- in the Murray Metallurgical case is Bankruptcy Judge Collins' lengthy opinion in In Re: Simply Essential, 640 B.R. 922, Bankruptcy, Northern District of Iowa, 2022. In that case, as well as in Murray, the Court concluded that avoidance actions were property of the estate that could be sold. For today's ruling I am finding that the avoidance actions are property of the estate, but still -- that still leaves open a legal issue of the trustee's authority to sell them.
Once the Bankruptcy Court determined that the Avoidance Actions are property of the Estate, it needed to determine whether the Trustee had the authority to sell the Avoidance Actions to creditors. Relying on Cedar Rapids, the court focused on whether avoidance actions brought under state common law claims can be sold versus avoidance actions brought under bankruptcy created claims. [ECF No. 25 at 13-15]; see also Cedar Rapids Lodge & Suites, LLC v. Seibert, No. 14-CV-04839 SRN/KMM, 2018 WL 747408, at *10 (D. Minn. Feb. 7, 2018). The Bankruptcy Court highlighted that "the [Cedar Rapids] Court has found only two cases holding that trustees do not have the power to transfer specifically [Section] 544(b) claims, . . . [Clements] and [Waterford Funding]," both of which are cited by Appellants. [ECF No. 25 at 13-14] (October 18, 2022 Bench Ruling Transcript at 13:19-22). The Bankruptcy Court agreed with the finding in Cedar Rapids that "Section 544(b) claims are unique among the trustee's avoidance powers because they do not create a cause of action to allow the trustee to step into the shoes of a creditor with an existing claim," and that such "causes of action [ ] exist independent of the bankruptcy proceeding," [ECF No. 25 at 13] (October 18, 2022 Bench Ruling Transcript at 13:23-14:7). Thus, the Bankruptcy Court concluded that the Trustee had the authority to sell the Avoidance Actions that arose under § 544. [ECF No. 25 at 15] (October 18, 2022 Bench Ruling Transcript at 15:17-20).
With this clarification, on October 19, 2022, the Bankruptcy Court entered its Reconsideration Orders granting, in part, Appellants' Motions for Reconsideration. [ECF No. 23-5 at 397-99]; [ECF No. 23-5 at 662-64]. The Reconsideration Orders excluded from the Sale Agreement any Avoidance Actions arising under §§ 547, 548, and 549, but allowed for the sale of any Avoidance Actions arising under § 544. Id. The Bankruptcy Court then entered its Amended Sale Orders based on the findings in the Reconsideration Orders. [ECF No. 23-4 at 473-83]; [ECF No. 23-5 at 511-21]. Additionally, the Amended Sale Orders included renewed extensions on the statute of limitations for 90 days after the exhaustion of all appeals ("Renewed Extensions"). Id. This consolidated appeal followed.
In their Brief, Appellants argue that (1) the Bankruptcy Court erred by concluding that the Avoidance Actions included in the Sale Agreement were property of the Estate and that the Trustee had the authority to sell the Avoidance Actions arising under § 544; (2) the Bankruptcy erred by allowing Versant, through SAK, to purchase the Avoidance Actions because Versant was prohibited from doing so by virtue of a pre-existing settlement agreement between Versant and Appellants; (3) the Bankruptcy Court erred by finding that the Sale Agreement was in the best interest of the Estate; and (4) the Bankruptcy Court erred by entering its Extension Orders and the Renewed Extensions in the Amended Sale Orders because there was no sufficient cause.
LEGAL STANDARD
The district court has jurisdiction to hear appeals from final judgments and orders of bankruptcy courts pursuant to 28 U.S.C. § 158(a). "The district court in a bankruptcy appeal functions as an appellate court in reviewing the bankruptcy court's decision." In re Williams, 216 F.3d 1295, 1296 (11th Cir. 2000). The district court reviews the bankruptcy court's findings of fact for clear error and its conclusions of law de novo, and it cannot make independent factual findings. See In re Hood, 727 F.3d 1360, 1363 (11th Cir. 2013); In re Englander, 95 F.3d 1028, 1030 (11th Cir. 1996).
DISCUSSION
I. Sale of the Avoidance Actions
The first issue before the Court is whether the Bankruptcy Court erred in determining that the Debtor's Avoidance Actions are property of the Estate and that the Trustee had the authority to sell the Avoidance Actions arising under § 544. As this is a legal conclusion, the Court reviews the Bankruptcy Court's finding de novo.
"The trustee, after notice and a hearing, may use, sell, or lease, other than in the ordinary course of business, property of the estate." 11 U.S.C. § 363(b)(1). A bankruptcy estate is comprised of "all legal or equitable interests of the debtor in property as of the commencement of the case." 11 U.S.C. § 541(a)(1). As the Bankruptcy Court noted, case law is mixed on whether causes of action are property of the Estate. However, the weight of authority lands on the proposition that causes of actions, including avoidance actions, are property of the estate. Several "courts have interpreted" § 541 "to include causes of actions" as part of the property of the estate. In re Murray Metallurgical Coal Holdings, LLC, 623 B.R. 444, 508 (Bankr. S.D. Ohio 2021); see also In re Moore, 608 F.3d 253, 257 (5th Cir. 2010) ("As a general matter, a trustee may sell causes of action belonging to the estate."); Morley v. Ontos, Inc. (In re Ontos, Inc.), 478 F.3d 427, 431 (1st Cir. 2007) (same); Bauer v. Commerce Union Bank, 859 F.2d 438, 440-41 (6th Cir. 1988) (same).
Appellants rely on a Western District of Michigan decision to argue that the ability to pursue any avoidance actions pursuant to Chapter 5 of the Bankruptcy Code is most accurately classified as powers provided only to the Chapter 7 trustee. [ECF No. 22 at 27-28]; see Memorandum Order Regarding Sale of Avoidance Actions, In re Parirokh, Case No. DG 11-05409 (Bankr. W.D. Mich. May 2, 2013), D.E. No. 98. Therefore, Appellants contend that the Trustee cannot transfer its powers to pursue the Avoidance Actions to creditors. Id. The Parirokh court followed the approach of the Third Circuit opinion in In re Cybergenics Corp., 226 F.3d 237 (3d Cir. 2000). However, Parirokh and Cybergenics are of the minority opinion that avoidance actions pursuant to § 544 are not property of the estate. Further, Appellants fail to address circuit opinions Moore, Morley, and Bauer and, as Appellees note, fail to address the fact that Cybergenics has been called into question by In re Wilton Armetale, Inc., 968 F.3d 273, 285 (3d Cir. 2020) ("But Cybergenics does not hold that trustees cannot transfer causes of action. It leaves that question open because the asset transfer at issue did not reach the creditors' claims.").
Appellants also cite a few additional cases to support their contention that the Trustee does not have the authority to sell or transfer any Chapter 5 Avoidance Actions, including those pursuant to § 544. [ECF No. 22 at 29-32]; see In re Clements Mfg. Liquidation Co., LLC, 558 B.R. 187, 189 (Bankr. E.D. Mich. 2016); In re McGuirk, 414 B.R. 878, 878-80 (Bankr. N.D. Ga. 2009); In re Waterford Funding, LLC, No. AP 11-2093, 2017 WL 439308, at *3 (Bankr. D. Utah Feb. 1, 2017); Surf N Sun Apts., Inc. v. Dempsey, 253 B.R. 490, 494-95 (M.D. Fla. 1999). But as the Bankruptcy Court already mentioned in its thorough analysis, most of the cases cited by Appellants fail to make the distinction between avoidance actions that the bankruptcy statute creates specifically for the trustee and avoidance actions arising under § 544. [ECF No. 25 at 13] (October 18, 2022 Bench Ruling Transcript at 13:13-18); see also Cedar Rapids Lodge & Suites, 2018 WL 747408, at *34. The Cedar Rapids court specifically references and distinguishes In re McGuirk and In re Clements as opinions that failed to make this distinction. Cedar Rapids Lodge & Suites, 2018 WL 747408, at *34.
Appellants cite a single case, Smith, in which a court held that a creditor did not have standing to bring an avoidance action arising under § 544. No. 04-01581, 2006 WL 1234965, *1 (Bankr. D.D.C. Feb. 27, 2006). However, unlike here, the creditor in Smith did not have prior court authorization to pursue the § 544 claim. Id. at *4. On the other hand, Appellees persuasively cite several cases where courts held that trustees can transfer § 544 claims to creditors. In re Simply Essentials, LLC, 640 B.R. 922, 925 (Bankr. N.D. Iowa 2022); see also In re Murray Metallurgical Coal Holdings, LLC, 623 B.R. at 508-12; and Cedar Rapids Lodge Suites, LLC, 2018 WL 747408, at *10. After a de novo review of the case law, the Court agrees with the Bankruptcy Court's conclusion that the Avoidance Actions are property of the Estate and that the Trustee has the authority to sell the Avoidance Actions arising under § 544. The Bankruptcy Court correctly excluded any claims from the Sale Agreement that arise under §§ 547, 548, and 549 because those claims were uniquely created for the Trustee, unlike common law claims arising under § 544.
II. The Settlement Agreement
Appellants also argue that the Bankruptcy Court erred in allowing SAK to proceed with the purchase despite a settlement agreement entered into between Versant and Sanders (the "Settlement Agreement"). According to Appellants, the Settlement Agreement included releases by Versant that impact the legitimacy of the Sale Agreement and that Versant, in bad faith, created SAK to avoid those releases. Id. Notably, however, the Settlement Agreement is not a part of the record. Furthermore, Appellants never sought to file the Settlement Agreement under seal or submit it to the Court for in camera review. Even so, Appellants ask this Court to conclude that its mere existence impacts the Sale Agreement. [ECF No. 22 at 37].
This Court reviews the Bankruptcy Court's decision not to give weight to the Settlement Agreement for clear error. Unable to review the Settlement Agreement, the Bankruptcy Court could not determine whether it was the parties' intent to bar SAK from pursuing future causes of action like the ones included in the Sale Agreement. Spungin v. GenSpring Fam. Offs., LLC, 883 F. Supp. 2d 1193, 1198 (S.D. Fla. 2012) ("Contract interpretation begins with a review of the plain language of the agreement because the contract language is the best evidence of the parties' intent at the time of the execution of the contract."). Thus, the Court finds no clear error with the Bankruptcy Court's decision not to give weight to Appellants' argument that the Settlement Agreement barred the Sale Agreement because no settlement agreement was included in the record. In re Barreto, No. 13-81079-CIV, 2014 WL 3928518, at *2 (S.D. Fla. Aug. 12, 2014) (finding that documents not included in the record before the bankruptcy court cannot be considered when on appeal).
III. The Best Interest of the Estate
Turning to the third issue on appeal, Appellants argue that the Bankruptcy Court erred in approving the Sale Agreement because it was not in the best interest of the Estate. [ECF No. 22 at 40-45]. Specifically, Appellants contend that (1) the Bankruptcy Court failed to meaningfully evaluate the Avoidance Actions in the Sale Agreement because the Trustee failed to identify the possible theories of avoidance or possible defenses; (2) Versant created SAK in bad faith and is simply avoiding certain releases in a purported settlement agreement; (3) DLPA is an upset creditor; and (4) the structure of the Sale Agreement created an unreasonable break-up fee which chilled bidding from other potential buyers. Id.
When evaluating a sale motion, the bankruptcy court will apply the "business judgment test". See In re Chira, 367 B.R. 888, 898 (S.D. Fla. 2007); In re Knott, No. 6:12-BK-07764-KSJ, 2015 WL 251705, at *2 (Bankr. M.D. Fla. Jan. 20, 2015) ("Once a trustee provides such sound business reasons, his or her business judgment generally is entitled to a certain amount of deference."). The Bankruptcy Court's determination that the Trustee's business judgment was sound and that the Sale Agreement was in the best interest of the Estate is a factual finding. Thus, the Court reviews that factual finding for clear error.
First, Appellants rely once more on Parirokh for the proposition that "neither the court nor the Trustee may meaningfully evaluate causes of action defined in exceedingly broad, categorical, and therefore unspecific, terms" when determining whether the sale of claims is in the best interests of the estate. Memorandum Order Regarding Sale of Avoidance Actions, Parirokh, Case No. DG 11-05409, DE No. 98 at 5. Notwithstanding that Parirokh is in the minority opinion of cases discussing the sale of avoidance actions, it is not binding on this Court and the factual circumstances are vastly different from here. First, the Parirokh court rejected the sale of claims because they were being sold for the nominal sum of $5,000 and expressed skepticism of the trustee's business judgment. Id. at 2, 5. Here, the Sale Agreement would add over $150,000 to the Estate. Additionally, the Bankruptcy Court was precisely aware of the possible avoidance actions to be transferred, specifically any Avoidance Actions arising under § 544. Lastly, the Bankruptcy Court clearly approved of the Trustee's business judgment when it found that "the proposed sale is clearly in the interest of the estate". [ECF No. 25 at 8] (October 18, 2022 Bench Ruling Transcript at 8:21-22).
The Court reiterates that it will not disturb the Bankruptcy Court's finding based on the alleged existence of a settlement agreement that is not a part of the record. Furthermore, Appellants argue that the Sale Agreement is not fair on the conclusory allegation that DLPA is a creditor with an "axe to grind" because DLPA opposed the consolidation of the Bankruptcy Proceedings. [ECF No. 22 at 42]. However, Appellants fail to city any evidence in the record demonstrating DLPA's malintent and fail to explain how DLPA's alleged bad motive invalidates the Sale Agreement.
Finally, there is ample evidence in the record that supports the finding that the Sale Agreement was in the best interest of the Estate. As the Bankruptcy Court notes, the Trustee had difficulty finding counsel willing to pursue the Debtor's Avoidance Actions, making them essentially worthless. [ECF No. 25 at 8] (October 18, 2022 Bench Ruling Transcript at 8:10-15). It was only through the creation of the Sale Agreement, and Versant and DLPA's willingness to waive their fees and costs, that those same Avoidance Actions now have monetary value that can be added to the Estate and later distributed to creditors. These facts are more than sufficient to support the Bankruptcy Court's finding that the Sale Agreement is fair and in the best interest of the Estate. Thus, the Court finds no clear error in the Bankruptcy Court's finding.
IV. The Extensions Orders
Regarding its last issue on appeal, Appellants argue that the Bankruptcy Court lacked the authority to extend the statute of limitations under 11 U.S.C. §§ 108, 546, and 549 in both the Extension Orders and the Amended Sale Orders that included the Renewed Extensions. [ECF No. 22 at 45-48]. The Court conducts a de novo review of whether the Bankruptcy Court has the authority to enlarge the statute of limitations. Rule 9006 provides, in relevant part, that "when an act is required or allowed to be done at or within a specified period by these [bankruptcy] rules or by a notice given thereunder or by order of court, the court for cause shown may at any time in its discretion [ ] with or without motion or notice order the period enlarged if the request therefor is made before the expiration of the period originally prescribed or as extended by a previous order . . . ." Fed. R. Bankr. P. 9006(b)(1).
First, Appellants contend that the Extension Orders and the Renewed Extensions contained in the Amended Sale Orders should not have been entered because the Sale Orders and Amended Sale Orders themselves should not have been entered. [ECF No. 22 at 46]. However, as explained above, the Court agrees with the Bankruptcy Court's findings that the Debtors' Avoidance Actions are property of the Estate. Additionally, the Court agrees that the Trustee has the authority to sell the Avoidance Actions arising under § 544. Therefore, the Sale Orders and Amended Sale Orders were proper.
Appellants argue that even if the Court finds the Sale and Amended Sale Orders proper, the Renewed Extensions contained in the Amended Sale Orders are improper. Specifically, Appellants contend that the renewed extension of § 108 should be reversed. Appellants rely on Health Support Network, in which a bankruptcy court found that "[u]nlike Rule 9006, § 108 only applies to time limitations fixed by non-bankruptcy law [and] doesn't create or extend time limitations for bringing bankruptcy causes of action." No. 8:15-BK-10966-MGW, 2018 WL 1621027, at *3 (Bankr. M.D. Fla. Mar. 30, 2018). There, the trustee's motion to extend the § 108 deadline was denied because the court concluded that Rule 9006 did not authorize the extension of the § 108 deadline. Id.
However, this Court finds that Health Support Network is distinguishable from the facts here because that case involved a unique set of circumstances that warranted the denial of an extension of the § 108 deadline. Namely, the Chapter 7 trustee in Health Support Network discovered the estate's claims well before the § 108 deadline but waited only four days before the deadline expired to seek an extension. Id. at 1. Additionally, there were no claims of fraudulent concealment. Id. That is not the case here.
Indeed, evidence in this record supports a finding that Sanders engaged in fraudulent concealment, impacting the timing in which these claims could be brought. [ECF No. 24 at 11] (August 11, 2022 Hearing Transcript at 11:1-4) (the Trustee stated that Sanders "has been very, very good in setting up numerous entities all over the world so that they cannot be traced back to him."); Id. at 17 (at 17:9-24) (Appellees' counsel noted that Teras' former CFO testified that "Sanders was moving money all over the place in, as Mr. Angueira said, undocumented loans and exchanges, intercompany loans and exchanges with no interest and consideration, and forgiveness with no consideration, and that was all going to benefit his other businesses . . . ."). Additionally, the Renewed Extensions permitted Appellants to exhaust all their appeals without hindering the ability of the Trustee to sell the Avoidance Actions. The circumstances here warranted an extension of all deadlines, including the § 108 deadline. Other courts have also extended the § 108 deadline where justified. In re Fundamental Long Term Care, Inc., 501 B.R. 784, 792 (Bankr. M.D. Fla. 2013) (enlarging the two-year limitation period under § 108 and § 546 where the trustee's discovery investigation was impeded by the potential targets of future claims); In re Campbellton-Graceville Hosp. Corp., 616 B.R. 177, 187 (Bankr. N.D. Fla. 2019) (same and distinguishing itself from Health Support Network).
Finally, Appellants' argument that the Amended Sale Orders excluded the extension pursuant to § 546, thereby rendering all claims pursuant to § 544 untimely, has been foreclosed by the Bankruptcy Court's own clarification. [ECF No. 35] ("[T]he Court would grant the Motion to correct p. 10 of the Amended Sale Order to provide: . . . the time for filing any actions subject to the time limitations of 11 U.S.C. §§ 108 and 546, but only as § 546 relates to claims that can be brought pursuant to § 544(b) , as well as for amending any pending complaints, are extended through and including ninety (90) days after the Sale Order is final as defined in Section I of the Term Sheet."). Therefore, the Court finds that the Bankruptcy Court, given the factual circumstances, had the authority to extend the statute of limitations of under 11 U.S.C. §§ 108, 546, and 549 as detailed in the Extension Orders and the Renewed Extensions included in the Amended Sale Orders.
The Court also finds that Appellants' claim that they had no meaningful opportunity to present oral argument regarding the Renewed Extensions is meritless. At no point do Appellants contend that they sought oral argument but was denied by the Bankruptcy Court.
CONCLUSION
Accordingly, having reviewed the Bankruptcy Court's findings of fact for clear error and its conclusions of law de novo, it is
ORDERED AND ADJUDGED that the Bankruptcy Court's Sale Orders, Extension Orders, Bench Rulings, Reconsideration Orders, and Amended Sale Orders granting the Sale Motions and extending all applicable deadlines are hereby AFFIRMED. This case shall be CLOSED, and all pending motions are DENIED as moot.
DONE AND ORDERED in Chambers at Miami, Florida, this 31st day of March 2024.