United Central Bank v. Bulk Petroleum Corporation
Filing
43
DECISION AND ORDER Denying Bulk Petroleum Corporation's Motion to Dismiss as Constitutionally Moot 31 , and Remanding the Appeals to the Bankruptcy Court for Further Findings. (cc: all counsel) ((cef), C. N. Clevert, Jr.)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
UNITED CENTRAL BANK,
Appellant,
v.
Case No. 11-C-0434
BULK PETROLEUM CORPORATION,
Appellee.
UNITED CENTRAL BANK,
Appellant,
v.
Case No. 11-C-0821
BULK PETROLEUM CORPORATION,
Appellee.
DECISION AND ORDER DENYING BULK PETROLEUM CORPORATION’S MOTION
TO DISMISS AS CONSTITUTIONALLY MOOT (DOC. 31), AND REMANDING THE
APPEALS TO THE BANKRUPTCY COURT FOR FURTHER FINDINGS
This case is before the court on the motion to dismiss the appeal filed in Case No.
11-C-434 by United Central Bank (UCB) of the March 18, 2012, order of the bankruptcy
court granting the motion of Chapter 11 debtor Bulk Petroleum Corporation and its affiliated
debtors to enforce their settlement agreement and finding that a contingency of FDIC
approval of the settlement had been waived. A related second appeal challenges the order
confirming the debtors’ first amended plan of reorganization, which, in part, rests on the
settlement agreement. During a status conference on May 14, 2012, the court heard oral
argument regarding whether the first appeal is moot inasmuch as the settlement
agreement has been substantially consummated resulting in the release of claims and
mortgage liens, transfer of properties to third parties, the dismissal of lawsuits, and the
transfer of more than $1 million to UCB. In addition, the debtors maintained that the
settlement agreement paved the way for the confirmation of their first amended plan of
reorganization resulting in transfers, settlements with third parties, and distributions to
hundreds of creditors.
Because the court finds that this appeal is not moot in the constitutional sense, the
dismissal motion will be denied. Fashioning some form of relief appears to be possible.
See In re Envirodyne Indus., Inc., 29 F.3d 301, 303–04 (7th Cir.1994). For example, UCB
maintains that a partial remedy that would include an order directing Bulk to surrender
properties to UCB valued at approximately $6,000,000. In addition, the settlement resulted
in non-debtors receiving releases on approximately $10,000,000 in liabilities owed to UCB
and a reversal would restore UCB's right to recover from non-debtors on these liabilities.
Finally, the court could order restitution for any real property transferred to third parties,
even if it is not possible to recover the property. Although the parties could never be
restored to the same positions they held before the enforcement of the settlement
agreement and confirmation of the plan, there is no such requirement under the
constitutional mootness doctrine.
At the same time, it appears necessary to remand the consolidated appeals to the
bankruptcy court for additional findings regarding the equitable concerns raised. The
Seventh Circuit has commented that the possibility of financial adjustments among the
parties keeps a proceeding alive even if a sale cannot be upset and rights under a plan of
reorganization cannot be revised. U.S. v. Buchman, 646 F.3d 409, 411 (7th Cir. 2011).
Moreover, there is no doubt that unwinding the settlement agreement in this case would
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raise serious equitable concerns.
Any determination of this issue is fact intensive.
Securities and Exchange Commission v. Wealth Management LLC, 628 F.3d 323, 332 (7th
Cir. 2010). However, the bankruptcy court is in the best position to consider any facts the
parties proffer regarding reliance interests engendered by the plan and any difficulty that
may be encountered if transactions are upset. Now, therefore,
IT IS ORDERED that Bulk Petroleum Corporation’s motion to dismiss as
constitutionally moot is denied.
IT IS FURTHER ORDERED that the consolidated appeals are remanded to the
bankruptcy court for findings of fact regarding the extent to which the settlement agreement
has been implemented and the Chapter 11 plan has been consummated.
Dated at Milwaukee, Wisconsin, this 28th day of September, 2012.
BY THE COURT
/s/ C. N. Clevert, Jr.
C. N. CLEVERT, JR.
CHIEF U. S. DISTRICT JUDGE
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