Opinion
24-1415
10-23-2024
ANDREW L. YOUNG, Debtor-Appellant, v. LAKE COUNTY TREASURER, Creditor-Appellee.
NONPRECEDENTIAL DISPOSITION
Submitted October 22, 2024 [*]
Appeal from the United States District Court for the Northern District of Indiana, Hammond Division. No. 2:23-CV-324-ppS philip p. Simon, Judge.
Before MICHAEL B. BRENNAN, Circuit Judge, THOMAS L. KIRSCH II, Circuit Judge, CANDACE JACKSON-AKIWUMI, Circuit Judge
ORDER
D.A.Y. Investments, LLC became insolvent and filed for bankruptcy protection under Chapter 11. The district court dismissed an appeal of an order that converted the proceeding to Chapter 7, reasoning the party appealing, Andrew Young, lacked standing. Because Young was not pecuniarily affected by the order directed to the insolvent limited liability company, he had no standing to appeal it; thus we affirm.
Young and limited liability companies of which he was the sole member (including D.A.Y.) filed for Chapter 11 bankruptcy after they became insolvent. The bankruptcy court jointly administered the cases, see FED. R. BANKR. P. 1015(b), and the same counsel represented each debtor. The Treasurer in Lake County, Indiana, the creditor, moved to convert each Chapter 11 case into a Chapter 7 proceeding. See 11 U.S.C. § 1112. The debtors, including Young, jointly opposed the Treasurer's motions. The bankruptcy court, with the Treasurer's agreement, see id. § 1112(b)(3), postponed the motions while the parties litigated discovery disputes and a threshold question related to the motions. Meanwhile, the bankruptcy court held status conferences on the motions at which the same counsel represented all the debtors.
The Treasurer eventually moved for summary judgment on each of its motions to convert. Each debtor, including D.A.Y., opposed their corresponding motion for summary judgment. Young did not join D.A.Y.'s response or oppose the motion for summary judgment directed against D.A.Y., but he attended oral argument on the motions. The bankruptcy court granted the Treasurer's motion for summary judgment and converted D.A.Y.'s bankruptcy proceeding to Chapter 7. D.A.Y. then moved to reconsider. Young did not join that motion, and the bankruptcy court denied it.
Appearing pro se in the district court, Young appealed the bankruptcy court's order against D.A.Y., but D.A.Y. itself did not appeal, and Young represented himself, not D.A.Y. The Treasurer moved to dismiss Young's appeal for lack of standing for two reasons: First, in the bankruptcy court Young did not object to the motion to convert D.A.Y.'s bankruptcy, and second, he was not aggrieved by the order against D.A.Y., a legally distinct limited liability company. The district court granted the Treasurer's motion. Without reaching the second contention, it accepted the first argument that Young lacked standing because he did not join D.A.Y. in opposing summary judgment on the motion to convert D.A.Y.'s bankruptcy. The district court denied Young's motion to reconsider, and he appealed to this court.
This appeal turns on whether Young had standing in the district court to appeal the bankruptcy court's order converting D.A.Y.'s bankruptcy. "Bankruptcy standing is narrower than Article III standing"; only a person "aggrieved" by an order of the bankruptcy court can appeal it. In re Ray, 597 F.3d 871, 874 (7th Cir. 2010) (citations omitted). Young is aggrieved only if (1) he attended and objected at a bankruptcy court proceeding to the proposed order, and (2) he was "affected pecuniarily" by the order. Id. (quoting In re Stinnett, 465 F.3d 309, 315 (7th Cir. 2006)).
Young's first argument-that he appeared and objected to the motion to convert D.A.Y.'s case-is debatable. He observes that he attended all hearings in the bankruptcy court, he was the only natural-person debtor in the joint proceedings where each debtor opposed the motions to convert, he shared counsel with D.A.Y., and he was its sole member. The Treasurer counters that Young lacks standing because he did not join D.A.Y.'s opposition to the Treasurer's motion for summary judgment on its motion to convert D.A.Y.'s bankruptcy case; nor did Young join D.A.Y.'s motion to reconsider the conversion. Relying on an out-of-circuit case, see Matter of Point Ctr. Fin., Inc., 890 F.3d 1188 (9th Cir. 2018), Young replies that we should overrule our precedent and hold that appearance and objection are not prerequisites to appeal a bankruptcy court's order so long as the order pecuniarily affected him.
We need not reassess the appear-and-object requirement or decide whether Young satisfied it because, even if he did, Young lacks standing to appeal for the reason that the order did not pecuniarily affect him. An order pecuniarily affects him only if it diminishes his property, increases his burdens, or impairs his rights. In re Ray, 597 F.3d at 874 (citing In re Cult Awareness Network, Inc., 151 F.3d 605, 608 (7th Cir. 1998)). This rule limits appeals to "only those persons whose interests are directly affected by a bankruptcy order to appeal." Id. (quoting In re Cult Awareness Network, 151 F.3d at 608).
Young argues that the order directly affected him because, as the sole member of D.A.Y., he lost "inseparable" and "indivisible" rights to the company's assets, including its real estate and cash. But he is incorrect. Under Indiana law, to benefit from the corporate form, a limited liability company like D.A.Y. is distinct from its members. See Pazmino v. Bose McKinney &Evans, LLP, 989 N.E.2d 784, 786 (Ind.Ct.App. 2013). Young is "not personally liable for the debts, obligations, or liabilities" of D.A.Y., see IND. CODE § 23-18-3-3(a), and he directly owns none of D.A.Y.'s assets, see Connolly v. Connolly, 952 N.E.2d 203, 208 (Ind.Ct.App. 2011). Because D.A.Y.'s property, rights, and burdens are legally distinct from Young's, the conversion order had no direct pecuniary effect on him.
Young replies unpersuasively that his pecuniary interest derives from the possibility that he might not receive income from D.A.Y. or its assets. He cites dicta from a case stating that managers of a debtor corporation might be able to appeal a bankruptcy court's order directed against that corporation if the "managers themselves have been injured pecuniarily." See In re C.W. Mining Co., 636 F.3d 1257, 1266 (10th Cir. 2011). But that passage does not help Young because D.A.Y.'s insolvency, not the conversion order, is why Young is not receiving income from D.A.Y. Even if the bankruptcy court had not converted D.A.Y.'s case from Chapter 11, Young would not receive income from D.A.Y. because as the debtor-in-possession in a Chapter 11 proceeding, D.A.Y. would owe a fiduciary duty to its creditors. See In re Scott, 172 F.3d 959, 967 (7th Cir. 1999). And Indiana law would bar D.A.Y. from paying income to Young while D.A.Y. remains insolvent. See IND. CODE § 23-18-5. Likewise, the liquidation of D.A.Y.'s assets in Chapter 7 did not diminish the value of Young's interest in those assets-the company's insolvency already did that. Young seems to assume that the conversion deprived him of conjectured income he might receive in the future, if insolvency ends. But to acquire standing, injuries must be "imminent," not "conjectural." Lujan v. Defs. of Wildlife, 504 U.S. 555, 560 (1992). Thus, without a pecuniary loss from the conversion order itself, Young lacked standing to appeal it.
AFFIRMED
[*] We have agreed to decide the case without oral argument because the briefs and record adequately present the facts and legal arguments, and oral argument would not significantly aid the court. FED. R. APP. p. 34(a)(2)(C).