IN RE: CLIFTON CAPITAL GROUP, LLC, ET AL V. BRADLEY SHARP, No. 21-55967 (9th Cir. 2023)
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Creditor Clifton Capital Group, LLC Clifton was chair of an official committee of unsecured creditors appointed by the Office of the United States Trustee to monitor the activities of debtor East Coast Foods, Inc., manager of Roscoe’s House of Chicken & Waffles. The bankruptcy court appointed Bradley D. Sharp as Chapter 11 trustee. Clifton objected to Sharp’s fee application, but the bankruptcy court awarded the statutory maximum fee. Clifton appealed. The district court concluded that Clifton had standing to appeal. On remand, the bankruptcy court again awarded the statutory maximum. Clifton again appealed, and the bankruptcy court affirmed. Clifton challenged the district court’s order affirming the bankruptcy court’s enhanced fee award of over $1 million dollars to the trustee in a funded bankruptcy.
The Ninth Circuit reversed the district court’s order affirming the bankruptcy court’s enhanced fee award. The panel wrote that the Ninth Circuit historically bypassed the Article III inquiry in the bankruptcy context, instead analyzing whether a party is a “person aggrieved” as a principle of prudential standing. The court, however, has returned emphasis to Article III standing following Susan B. Anthony List v. Driehaus, 573 U.S. 149 (2014), in which the Supreme Court questioned prudential standing. The panel held that Clifton lacked Article III standing to appeal the fee award because it failed to show that the enhanced fee award would diminish its payment under the bankruptcy plan, and thus it failed to establish an “injury in fact.” The panel concluded that Clifton did not show that the fee award impaired the likelihood or delayed the timing of its payment.
Court Description: Bankruptcy The panel reversed the district court’s order affirming the bankruptcy court’s enhanced fee award to the trustee in a funded Chapter 11 bankruptcy and remanded with instructions to dismiss creditor Clifton Capital Group, LLC’s appeal for lack of Article III standing.
Clifton was chair of an official committee of unsecured creditors appointed by the Office of the United States Trustee to monitor the activities of debtor East Coast Foods, Inc., manager of Roscoe’s House of Chicken & Waffles. The bankruptcy court appointed Bradley D. Sharp as Chapter 11 trustee. Clifton objected to Sharp’s fee application, but the bankruptcy court awarded the statutory maximum fee. Clifton appealed. The district court concluded that Clifton had standing to appeal, and it * The Honorable Gershwin A. Drain, United States District Judge for the Eastern District of Michigan, sitting by designation.
remanded. On remand, the bankruptcy court again awarded the statutory maximum. Clifton again appealed, and the bankruptcy court this time affirmed.
Addressing standing, the panel wrote that the Ninth Circuit historically bypassed the Article III inquiry in the bankruptcy context, instead analyzing whether a party is a “person aggrieved,” as a principle of prudential standing. The court, however, has returned emphasis to Article III standing following Susan B. Anthony List v. Driehaus, 573 U.S. 149 (2014), in which the Supreme Court questioned prudential standing.
The panel held that Clifton lacked Article III standing to appeal the fee award because it failed to show that the enhanced fee award would diminish its payment under the bankruptcy plan, and thus it failed to establish an “injury in fact.” The panel concluded that Clifton’s injury was too conjectural and hypothetical, and Clifton did not show that the fee award impaired the likelihood or delayed the timing of its payment. The panel concluded that the Chapter 11 plan did not relate to a limited fund because there was no finite amount of assets from which all creditors could be paid. Rather, the plan was a reorganizing plan that proposed to pay all allowed claims in full from the debtor’s ongoing operations and non-estate sources. The panel held that, given the detailed plan, which guaranteed payment to creditors plus interest, and the net equity in the plan, the district court clearly erred in finding that the estate was a limited fund and that there were not sufficient funds to pay back all the creditors. Thus, Clifton’s likelihood of payment was not impaired. The panel also concluded that Clifton did not suffer injury to the timing of its payment because Clifton’s alleged harms were conjectural, and it remained possible that Clifton would be paid within the plan’s initial estimated window. Accordingly, Clifton currently lacked an injury in fact.
This opinion or order relates to an opinion or order originally issued on May 8, 2023.