GAF Holdings v. Philip Rinaldi, et al

Filing

OPINION FILED - THE COURT: ROGER L. WOLLMAN, KERMIT E. BYE and BOBBY E. SHEPHERD. Bobby E. Shepherd, Authoring Judge (PUBLISHED) [3773039] [09-3049]

United States Court of Appeals
FOR THE EIGHTH CIRCUIT

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No. 09-3049
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In re: Farmland Industries, Inc.,

*
*
Debtor.
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GAF Holdings, LLC,
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Appellant,
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v.
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Philip Rinaldi; Stanley Riemann,
* Appeal from the United States
* Bankruptcy Appellate Panel for
Appellees,
* the Eighth Circuit.
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Black Diamond Capital
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Management, LLC,
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Robert Terry; Pegasus Capital
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Partners, L.P.; Pegasus Investors II,
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L.P.; Pegasus Capital Partners, L.P.;
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J.P. Morgan Trust Company, National *
Association, in its capacity as Trustee *
of the FI Liquidating Trust,
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Appellees.
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Submitted: November 18, 2010
Filed: April 4, 2011
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Before WOLLMAN, BYE, and SHEPHERD, Circuit Judges.
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SHEPHERD, Circuit Judge.
GAF Holdings, LLC, appeals the decision of the United States Bankruptcy
Appellate Panel for the Eighth Circuit (BAP) affirming the bankruptcy court’s1 order
dismissing its complaint against Philip Rinaldi; Stanley Riemann; Robert Terry;
Pegasus Partners II, L.P.; Pegasus Investors II, L.P.; Pegasus Capital Partners, L.P.;
and J.P. Morgan Trust Company, National Association in its capacity as Trustee of
the FI Liquidating Trust. Because GAF lacks standing, we affirm the bankruptcy
court’s dismissal of GAF’s complaint.
I.
GAF was incorporated in 1999 to purchase a refinery from Farmland
Industries, Inc. GAF could not obtain financing, and later Farmland filed Chapter 11
bankruptcy. Farmland submitted sale procedures for its Coffeyville assets, including
its refineries and a coke-gasification fertilizer complex, to the bankruptcy court, and
the court entered an order approving them. GAF did not object to the sale procedures.
GAF submitted a bid to Farmland for the Coffeyville assets, but Farmland
rejected the bid. It determined that GAF was not a qualified bidder because the bid
was submitted without the required 10% deposit of the bid amount, in an improper
format, without required exhibits and schedules, and missing information necessary
for Farmland to determine the bid’s actual value. GAF did not contest the
determination.

1

The Honorable Jerry W. Venters, United States Bankruptcy Judge for the
Western District of Missouri.
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On November 14, 2003, the bankruptcy court approved the sale of the
Coffeyville assets to Coffeyville Resources, LLC (CRLLC), which was incorporated
by Pegasus to make the purchase. In the sale order, the court found that the only
qualifying bid was made by CRLLC, that the sale procedures were conducted in good
faith, and that the purchase price under the sale agreement was fair, reasonable, and
for sufficient value. GAF did not object to or appeal the sale order.
Instead, on February 2, 2004, GAF moved under Federal Rule of Civil
Procedure 60(b) to set aside the sale order, contending that the sale was the product
of collusion between Riemann, Terry, and CRLLC. Specifically, GAF asserted that
Riemann, a former Farmland executive, had a conflict of interest at the time of the
sale because he was discussing possible employment with CRLLC, that Riemann was
now employed by CRLLC, and that GAF did not have the opportunity to conduct due
diligence prior to submitting its bid on the Coffeyville assets. The bankruptcy court
heard arguments on GAF’s 60(b) motion and then denied it, concluding that the sale
was conducted at arm’s length and that there was insufficient evidence to support
GAF’s allegations. GAF did not appeal the denial of its 60(b) motion.
On February 20, 2004, the bankruptcy court entered an order that authorized
an amendment to the sale agreement. The order also reaffirmed the terms of the sale
order unaffected by the amendment, including the determination that the sale of the
Coffeyville assets had been conducted in good faith. GAF did not challenge the
order.
On February 27, 2007, GAF filed a complaint in bankruptcy court alleging that
the appellees intentionally interfered with GAF’s business expectancy in purchasing
the Coffeyville assets and participated in a civil conspiracy to conceal the real value
of the Coffeyville assets. The appellees moved to dismiss the complaint on various
grounds. The bankruptcy court dismissed the complaint with prejudice, holding that
GAF was attempting to make an impermissible collateral attack on its prior orders
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approving the sale and that GAF failed to state a claim for which relief could be
granted. Alternatively, the court held that GAF lacked standing.
On appeal, the BAP held that the bankruptcy court lacked subject-matter
jurisdiction over GAF’s state tort claims against non-debtor third parties. In re
Farmland Indus., Inc., 378 B.R. 829 (B.A.P. 8th Cir. 2007). The BAP remanded the
case to the bankruptcy court, instructing the court to dismiss GAF’s complaint for
lack of subject-matter jurisdiction. The defendants appealed the BAP’s decision, and
this Court reversed. In re Farmland Indus., Inc., 567 F.3d 1010 (8th Cir. 2009). We
held that the bankruptcy court had subject-matter jurisdiction because GAF’s claims
are “related to” the bankruptcy of Farmland under 28 U.S.C. § 157(c)(1). Id. at 1020.
We thus remanded the case to the BAP for a ruling on whether the bankruptcy court
properly dismissed GAF’s complaint. Id. at 1021. On remand, the BAP affirmed the
bankruptcy court’s dismissal of GAF’s complaint. In re Farmland Indus., Inc., 408
B.R. 497 (B.A.P. 8th Cir. 2009) (holding that GAF lacked standing to sue and that
GAF’s complaint failed to state a claim, was barred by collateral estoppel, and was
precluded by 11 U.S.C. § 363(m)).
II.
In an appeal from a decision of the BAP, we sit as a second court of review.
In re Lasowski, 575 F.3d 815, 818 (8th Cir. 2009). We independently review the
bankruptcy court’s decision applying the same standard of review as the BAP. Id.
Thus, here we review the bankruptcy court’s conclusions of law de novo. Id.
Before reaching the merits of a case, federal courts must ensure that Article III
standing exists. Gray v. City of Valley Park, Mo., 567 F.3d 976, 982-83 (8th Cir.
2009); see also In re Res. Tech. Corp., 624 F.3d 376, 382 (7th Cir. 2010) (“Article
III’s standing requirements apply to proceedings in bankruptcy courts just as they do
to proceedings in district courts.”). The “irreducible constitutional minimum of
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standing requires a showing of injury in fact to the plaintiff that is fairly traceable to
the challenged action of the defendant.” Braden v. Wal-Mart Stores, Inc., 588 F.3d
585, 591 (8th Cir. 2009) (internal quotations omitted).
Here, GAF has not established an injury traceable to the appellees’ actions.
GAF contends that the appellees’ actions caused GAF to lose the bid on the
Coffeyville assets and thus the opportunity to profit from the transaction. However,
GAF could only have purchased the Coffeyville assets through the bidding process
approved by the bankruptcy court. In its order approving the sale of the Coffeyville
assets to CRLLC, the bankruptcy court found that GAF’s bid did not satisfy the
auction and sale bidding procedure requirements. Although GAF asserts that the
disqualification of its bid was “unjustified,” GAF does not allege any facts suggesting
that the appellees were responsible for the deficiencies in its bid. Moreover, GAF
appealed neither the sale order nor the denial of its Rule 60(b) motion, both of which
found that CRLLC was the only qualified bidder.
GAF urges that it has standing because its claim is for fraud on the court, and
traditional standing analysis does not apply to claims for fraud on the court. See
Universal Oil Prods. Co. v. Root Ref. Co., 328 U.S. 575, 580 (1946) (holding that
federal courts have inherent power to investigate whether a judgment was obtained
by fraud). However, GAF’s complaint does not state a claim for fraud on the court.
Fraud on the court is an extraordinary means by which to obtain equitable relief and
requires the plaintiff to prove no adequate remedy at law. Superior Seafoods, Inc. v.
Tyson Foods, Inc., 620 F.3d 873, 878 (8th Cir. 2010). GAF has not alleged that it has
no adequate remedy at law. Further, the remedy GAF seeks—money damages—is
at odds with a fraud on the court claim, for which the remedy is the setting aside of
the fraudulently obtained court judgment. Id. In fact, GAF has expressly stated that
it does not seek to undo the sale order approving the sale of the Coffeyville assets.
Thus, under traditional standing analysis, GAF lacks standing.

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III.
Accordingly, we affirm the bankruptcy court’s order dismissing GAF’s
complaint.
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