FCGI Associates, LLC v. Carolyn McAfee

Filing

Opinion issued by court as to Appellant J. Thomas McAfee. Decision: Affirmed. Opinion type: Non-Published. Opinion method: Per Curiam. The opinion is also available through the Court's Opinions page at this link http://www.ca11.uscourts.gov/opinions.

Case: 16-15735

Date Filed: 03/31/2017

Page: 1 of 5

[DO NOT PUBLISH]

IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
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No. 16-15735
Non-Argument Calendar
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D.C. Docket Nos. 1:16-cv-00194-RWS; 11-bkc-67522-MHM

In re: JOSEPH H. HARMAN,
Debtor.
__________________________________________________________________
FCGI ASSOCIATES, LLC,
Plaintiff - Appellee,
versus
CAROLYN T. MCAFEE,
as executor of the estate of James T. McAfee,
Defendant,
J. THOMAS MCAFEE, III,
as executor of the estate of James T. McAfee,
Interested Party - Appellant,
NEIL C. GORDON,
as trustee for Joseph H. Harman,

Case: 16-15735

Date Filed: 03/31/2017

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Defendant - Appellee.
________________________
Appeal from the United States District Court
for the Northern District of Georgia
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(March 31, 2017)
Before MARTIN, ANDERSON and BLACK, Circuit Judges.
PER CURIAM:
Carolyn McAfee appeals from the final order of the district court affirming
the bankruptcy court’s approval of a settlement in a Chapter 7 bankruptcy
proceeding. McAfee contends we should reverse the settlement order because it
contains a broader release than the Trustee can permissibly grant, and allows the
Trustee to effectively remove property from the bankruptcy estate without
complying with the Bankruptcy Code. After review, 1 we affirm.
I.
On June 14, 2011, Joseph Harman (Debtor) filed a voluntary petition for
relief under Chapter 7 of Title 11 of the United States Code in bankruptcy court.
McAfee, as executrix of the estate of James McAfee (the Estate), was Harman’s
largest creditor. In 2013, Neil Gordon, the Chapter 7 bankruptcy trustee (the

1

We review the district court and bankruptcy court’s legal conclusions de novo and the
bankruptcy court’s factual findings for clear error. In re Optical Techs., Inc., 425 F.3d 1294,
1300 (11th Cir. 2005).
2

Case: 16-15735

Date Filed: 03/31/2017

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Trustee), filed an adversary proceeding against Harman, Linda J. Harman, the
Linda J. Harman Irrevocable Trust, J.H.H. Holdings Corporation, First Equities
Partners, Inc., First Equities Partners II, Inc., and FCGI Associates, LLC
(collectively, the Settling Defendants). The Trustee then amended his complaint to
include claims against additional parties. The Trustee based his claims on
allegations relating to various transactions between the Debtor, his wife, and
companies owned or controlled by Debtor.
In 2015, following a series of proceedings 2 and in the midst of a multi-day
evidentiary hearing related to a discovery dispute between the Trustee and the
Settling Defendants, the Trustee and the Settling Defendants entered into a
compromise and settlement agreement. McAfee was not a party to this agreement.
The Settling Defendants agreed to pay the Estate $675,000 in exchange for a
release of any and all claims. McAfee objected to the settlement. Following
additional discovery and further proceedings, the bankruptcy court ultimately
issued a final order approving the settlement (the Settlement).
McAfee appealed to the district court. McAfee filed a brief, and the Trustee
responded. The district court granted the Settling Defendants’ motion to join the
Trustee’s response brief. On July 28, 2016, the district court affirmed the decision
of the bankruptcy court. This appeal followed.
2

The procedural history of the case is lengthy, complex, and largely unrelated to the
instant appeal. Thus, only the facts and procedure directly related to this appeal are discussed.
3

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II.
McAfee asserts the bankruptcy court erred by approving the Settlement in
which the Trustee purported to settle claims for which he lacked authority,
including McAfee’s claims against third parties. McAfee claims the Settlement
should have specifically delineated the released claims rather than merely
including a general release.
The Final Order approving the Settlement includes the following language:
“Trustee may release only such claims as Trustee, for the estate, has.” The plain
language of the order limits the scope of the release to those claims the Trustee
possesses the standing or authority to assert. Furthermore, McAfee’s reasoning, in
effect, requires a bankruptcy court to conduct a claim-by-claim analysis of the
Trustee’s authority to release each claim a proposed settlement may or may not
implicate before approving a compromise and settlement agreement. See Fed. R.
Bankr. P. 9019; Matter of Cajun Elec. Power Co-op., Inc., 119 F.3d 349, 356 (5th
Cir. 1997) (a bankruptcy court need not conduct a “mini-trial” to assess the merits
of each claim prior to approving a settlement agreement, but only survey the legal
issues to reasonably determine the efficacy of a proposed settlement under the
circumstances). Therefore, we uphold the district court’s affirmance of the
bankruptcy court’s approval of the Settlement.

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III.
McAfee also asserts the Trustee improperly returned to Debtor his
membership interest in FCGI Associates, LLC (FCGI) without following the
requirements of Bankruptcy Rule 6007 and 11 U.S.C. § 554 for abandoning
property of the estate before the close of a bankruptcy case. However, compliance
with the formal abandonment requirements of Bankruptcy Rule 6007 and 11
U.S.C. § 554 is unnecessary when the release of a claim is part of a compromise
settlement entered into by a trustee with approval of the bankruptcy court, and
when creditors were given notice and an opportunity to be heard. Hoseman v.
Weinschneider, 322 F.3d 468, 474–75 (7th Cir. 2003). Because the compromise
and settlement agreement approved by the bankruptcy court included the release of
the membership interest, and the bankruptcy court afforded McAfee notice and an
opportunity to be heard through a five-day evidentiary proceeding, we affirm the
district court.
AFFIRMED.

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