In re: Point Center Financial, Inc., No. 18-56398 (9th Cir. 2020)
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The Ninth Circuit affirmed the district court's judgment affirming the bankruptcy court's order granting a Chapter 7 trustee's motion to exercise management rights over Dillon and authorizing the trustee's assumption of the operating agreement with Dillon. Dillon is a limited liability company created to hold title to foreclosed property securing investments by private investors in Point Center Financial, and appellants are the former principal of Point Center Financial, the debtor, and members of Dillon.
The panel held that the Harkey parties have standing to pursue this appeal; the bankruptcy court had subject matter jurisdiction to confirm the vote establishing the trustee as manager of Dillon and to hear the assumption motion; the bankruptcy court properly authorized the trustee to exercise management rights over Dillon after the majority of Dillon's members voted for the trustee to manage Dillon; the bankruptcy court properly extended its own deadline for assumption of the operating agreement pursuant to Fed. R. Bankr. P. 9006(b)(1)(2); and the panel need not reach the question of equitable mootness because it affirmed the district court on other grounds.
Court Description: Bankruptcy. The panel affirmed the district court’s order affirming the bankruptcy court’s judgment authorizing a Chapter 7 trustee to exercise management rights over and to assume the operating agreement with a limited liability company created to hold title to foreclosed property securing investments by private investors in the debtor. The panel held that appellants, the former principal of the debtor and members of the limited liability company, Dillon Avenue 44, LLC, had standing to appeal because they were pecuniarily affected by the bankruptcy court’s order. The panel held that the bankruptcy court had subject matter jurisdiction to confirm Dillon members’ vote establishing the Chapter 7 trustee as manager of Dillon and to hear the trustee’s assumption motion. The panel held that the trustee’s failure to assume the operating agreement by * The Honorable Algenon L. Marbley, United States Chief District Judge for the Southern District of Ohio, sitting by designation. IN RE POINT CENTER FINANCIAL 3 the bankruptcy court’s deadline did not deprive the court of jurisdiction over matters relating to the Dillon operating agreement, which was part of the bankruptcy estate. Further, under 11 U.S.C. § 1334(b), the bankruptcy court had “arising under” and “related to” jurisdiction to rule on the trustee’s assumption motion. The panel held that the bankruptcy court properly authorized the trustee to exercise management rights over Dillon after the majority of Dillon’s members voted for the trustee to manage Dillon. The bankruptcy court had jurisdiction and was within its authority to confirm the trustee’s election as manager of Dillon. The panel held, in Section III(d) of its opinion, that the bankruptcy court properly extended its own deadline for assumption of the operating agreement pursuant to Fed. R. Bankr. P. 9006(b)(1)(2) and did not run afoul of 11 U.S.C. § 365(d)(1), which establishes a statutory 60-day deadline for assuming or rejecting executory contracts. The panel reasoned that § 365(d)(1) permits the bankruptcy court to grant a trustee additional time for cause within that 60-day period, and the bankruptcy court did so. Thus, when the bankruptcy court extended the deadline again, it was extending a period specified by court order, not extending a deadline mandated by statute. The panel declined to reach the question of equitable mootness. Judge Christen concurred in part and dissented in part. She concurred in the result reached by the majority and agreed with the majority’s conclusion that appellants had standing to pursue this appeal, and that the bankruptcy court had jurisdiction pursuant to § 1334(b). Judge Christen 4 IN RE POINT CENTER FINANCIAL disagreed with the majority’s decision that the bankruptcy court permissibly reopened the statutory period for the trustee to accept Dillon’s operating agreement, and she did not join Section III(d) of the majority’s opinion. She wrote that she would affirm the district court’s alternative holding that the appeal of the bankruptcy court’s order was equitably moot.
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