Robert Orr v. Brooke Corporation
MEMORANDUM AND ORDER denying 7 Motion to Dismiss; granting 8 Motion for Order; granting 18 Motion for Order; denying 26 Motion for Leave to File. Signed by District Judge Carlos Murguia on 2/22/2017.Mailed to pro se party Robert Orr by regular and certified mail ; Certified Tracking Number: 70123460000082626511 (ydm)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
ROBERT D. ORR,
BROOK CORPORATION BANKRUPTCY )
ESTATE et al.,
ROBERT D. ORR,
BROOK CORPORATION BANKRUPTCY )
ESTATE, et al.,
Case No. 16-2273
Case No. 16-2274
MEMORANDUM AND ORDER
Appellant Robert D. Orr appeals from an order of the bankruptcy court filed April 19, 2016,
which sustained the trustee’s objection to Claim #924-1. The related bankruptcy appeals are now
before the court on identical motions:
Appellee’s Motion to Dismiss Appeal (Doc. 7 in 16-2273 and Doc. 6 in 16-2274);
Motion to Include Two Additional Documents in the Record on Appeal (Doc. 8 in both
Motion to File Appendices on or before July 29, 2016 (Doc. 18 in both cases); and
Appellant’s Motion for Leave to File Sur-Reply (Doc. 26 in both cases).
Appellee Christopher J. Redmond, in his capacity as Chapter 7 Trustee of Brooke Corporation,
Brooke Capital, Corp. and Brooke Investments, Inc., argues that the appeals should be dismissed
because appellant lacks standing to bring them. The court first addresses appellant’s motion to file a
sur-reply and the motion to dismiss. Because the court denies the motion to dismiss, the court then
addresses the remaining motions relating to the appeal itself.
In 2008, Brooke Corporation filed a bankruptcy petition under Chapter 11. The bankruptcy
was later converted to a Chapter 7 proceeding and appellee was appointed trustee of the bankruptcy
estate. As part of the bankruptcy proceeding, Brooke Holdings, Inc. filed Claim #924-1 in 2009. In
November of 2013, Brooke Holdings, Inc. filed a notice of transfer of claim under Fed. R. Bankr. P.
3001(e)(2), purporting to transfer Claim #924-1 to appellant (its president and largest shareholder). No
objections to the transfer were filed, and it became effective twenty-one days later.
In 2010, the estate brought an adversary proceeding against multiple defendants—including
Brooke Holdings—for claims of preferential transfer (Count I), constructive fraudulent conveyance
(Count II), recovery of avoided transfers under § 550 (Count III), disallowance of claim under § 502
(Count IV), and subordination/recharacterization of the claim (Count V). The bankruptcy court
granted summary judgment in favor of the estate and against Brooke Holdings on Counts I–III, finding
$5,100,800.00 in preferential transfers, $13,143,980.77 in fraudulent transfers, and that such amounts
were recoverable under § 550. Eventually, the trustee and Brooke Holdings agreed to consolidate
Count IV with the claim objection in the main bankruptcy proceeding and to dismiss Count V, and
they submitted to the bankruptcy court an Agreed Final Judgment as to Counts I–III confirming the
judgment against Brooke Holdings. The Agreed Final Judgment was entered on January 5, 2016, and
was not appealed.
Based on the Agreed Final Judgment, the bankruptcy court entered a memorandum opinion and
judgment sustaining the trustee’s objection to Claim #924-1. In doing so, the bankruptcy court found
that because neither Brooke Holdings nor appellant had paid to the estate the final judgment amount
and because the Agreed Final Judgment was final and non-appealable, § 502(d) required disallowance
of Claim #924-1 in the bankruptcy proceeding.
Appellant’s Motions for Leave to File Sur-Reply
After appellee filed a reply brief to his motion to dismiss, appellant filed a motion for leave to
file a sur-reply in both cases, arguing that appellee introduced a new legal argument in his reply brief.
The court disagrees that appellee improperly raised new arguments. To the contrary, appellee’s
arguments properly addressed issues raised in appellant’s response brief. The court denies appellant’s
motions for leave to file a sur-reply.
Appellee’s Motions to Dismiss Appeal
Appellee moves to dismiss these appeals based on lack of standing. The logic behind
appellee’s argument is this: (1) Appellant cannot challenge the final judgment against Brooke Holdings
because it is final and appellant has no standing to do so; (2) Disallowance of Brooke Holdings’s
Claim #924-1 (which was assigned to appellant) was required based on the final judgment against
Brooke Holdings; (3) Because appellant lacks standing to challenge the final judgment against Brooke
Holdings, he also lacks standing to challenge the objection to Claim #924-1; and (4) Alternatively,
because appellant cannot challenge the final judgment against Brooke Holdings, the assigned claim has
no value, so appellant has not suffered an injury in fact.
Appellee’s arguments are logical on the surface. But appellant’s appeal of the disallowance of
Claim #924-1 largely rests on his position that the trustee should not have been allowed to object to the
claim. The court understands that appellee believes this argument is foreclosed by collateral estoppel,
but that argument is better taken up in consideration of the merits of the appeal, rather than appellee’s
motion to dismiss based on standing.
The court determines that appellant has standing to appeal the disallowance of Claim #924-1.
The court rejects appellee’s derivative argument that, because appellant cannot challenge the final
judgment, he also cannot challenge the objection to Claim #924-1. The court does not believe that lack
of standing on the underlying claim automatically equates to lack of standing relating to Claim #924-1.
On the other hand, appellee’s argument that appellant could not have suffered injury in fact because
Claim #924-1 has no value is a closer question for the court. But appellant has raised the question of
whether the trustee could have objected to the claim at all. If the court were to resolve this issue in
appellant’s favor, then appellant may have suffered injury in fact. The court cannot find a lack of
standing on this basis. The court will exercise jurisdiction over the appeals.
Motions to Include Two Additional Documents in the Record on Appeal
Relating to the appeal, appellant seeks leave to include two documents that are not a part of
either bankruptcy case. The documents are from another adversary case in the Bankruptcy Court for
the District of Kansas. Appellee argues that appellant has not shown that these documents are material
to this case, and Fed. R. Bankr. P. 8009(e)(2) only allows supplementation of the record with material
items. The court questions the documents’ relevance, but to some degree, the relevance depends on
whether the court accepts appellee’s collateral estoppel arguments. Without making any finding on the
materiality of the documents or their relevance to the appeal, the court grants appellant’s motions to
include additional documents.
Motions to File Appendices on or before July 29, 2016
Finally, appellant asks the court for permission to file appendices on or before July 29, 2016.
Appellant did not file the appendices contemporaneously with his opening brief, as required by Fed.
R. Bankr. P. 8018(b)(1). But Appellant filed his opening brief early. Although he filed the brief on
July 8, 2016, the due date was July 29, 2016. Appellee filed his response brief on September 2, 2016.
Given the posture of the case, the court finds no prejudice to appellee resulting from the date
the appendices were filed. They were timely, and the court determines that it would not be appropriate
or reasonable to strike them from the record. Appellant’s motions are granted.
IT IS THEREFORE ORDERED that Appellant’s Motion for Leave to File Sur-Reply (Doc.
26 in both cases) is denied.
IT IS FURTHER ORDERED that Appellee’s Motion to Dismiss Appeal (Doc. 7 in 16-2273
and Doc. 6 in 16-2274) is denied.
IT IS FURTHER ORDERED that appellant’s Motion to Include Two Additional Documents
in the Record on Appeal (Doc. 8 in both cases) is granted without considering the merits of reviewing
the documents in the context of the appeal.
IT IS FURTHER ORDERED that appellant’s Motion to File Appendices on or before July
29, 2016 (Doc. 18 in both cases) is granted.
Dated this 22nd day of February, 2017, at Kansas City, Kansas.
s/ Carlos Murguia
United States District Judge
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