United States District Court, N.D. Iowa, Central Division
MEMORANDUM OPINION AND ORDER
Williams United States District Judge
matter is before the Court on VeroBlue Farms USA, Inc.,
Broadmoor Financial L.P., and Alder Aqua, Ltd.'s
(collectively “appellees”) jointly filed Motion
to Dismiss Appeal and Partial Motion to Dismiss Appeal.
(Docs. 9 & 10). FishDish, LLC (“appellant”)
appeals the Bankruptcy Court for the Northern District of
Iowa's Order Confirming a Chapter 11 Plan (“Plan
Confirmation”) and four related Orders. (Doc. 4, at 1).
Appellees' Motion to Dismiss Appeal seeks to dismiss
appellant's appeal of the Plan Confirmation and the
related Orders. (Doc. 9). Appellees' Partial Motion to
Dismiss is directed only at one of the four related Orders,
namely the Order denying FishDish's Objection to
Broadmoor Finance LC's Claims. (Doc. 10). Appellant
timely resisted both the Motion to Dismiss and the Partial
Motion to Dismiss in an omnibus response. (Doc. 28).
Appellees timely filed replies and appellant timely filed an
omnibus surreply. (Docs. 34, 36, 37, & 41). For the
following reasons, appellees' Motion to Dismiss and
Partial Motion to Dismiss are granted.
alleges VeroBlue Farms USA, Inc. (individually
“debtor”) is “in the business of farming
fish . . . and selling those fish through wholesalers to
restaurants and grocery chains.” (Doc. 28, at 4).
Appellant alleges debtor relied on both debt and equity
financing to develop and grow its business. (Id.).
Despite securing debt and equity financing, debtor was unable
to sufficiently sustain the company and voluntarily filed
Chapter 11 Bankruptcy petitions on September 21, 2018.
(Id., at 6). Following bankruptcy proceedings in the
Northern District of Iowa Bankruptcy Court, appellant alleges
a Bankruptcy Plan (“Plan”) was confirmed on April
22, 2019, and the final confirmation order was entered on May
7, 2019, with an effective date of May 22, 2019.
(Id., at 13). Appellant alleges that on May 30,
2019, debtor reported making payments to several claims under
the Plan and that debtor subsequently made additional
payments to creditors on June 14, 2019. (Id., at
14). In addition, appellant alleges debtor sent notifications
cancelling outstanding shares of preferred stock on June 13,
2019. (Id., at 16).
Aqua, Ltc. (individually “Alder Aqua”) and
Broadmoor Financial, L.P. (individually
“Broadmoor”) are also included as appellees in
this appeal. Appellant alleges Alder Aqua helped finance
debtor by purchasing $28 million of preferred shares. (Doc.
28, at 4). After debtor entered bankruptcy proceedings, Alder
Aqua agreed to provide the equity necessary for debtor to
make payments in exchange for all equity interests in the
reorganized debtor. (Id., at 15). Broadmoor, as a
creditor of debtor, submitted a claim during debtor's
bankruptcy proceeding. (Id., at 5). Debtor had
originally obtained a loan from Amstar Group, LLC.
(Id., at 5). “The Amstar loan was guaranteed
by the other [debtor] and secured by substantially all
[debtor's] assets.” (Id.). Amstar
transferred its rights under the loan agreement to Broadmoor
in 2017. (Id.). Appellant now challenges
Broadmoor's claim as part of this appeal.
was a preferred shareholder and owned approximately $6
million of equity in the debtor's company. (Doc. 28, at
36). Under the Plan confirmed by the Bankruptcy Court,
appellant was unable to recover any of its investment because
debtor did not have enough funds to pay equity holders.
(Id.). The Bankruptcy Court found debtor was so
insolvent that even under alternative plans there would
likely not be enough funds to pay equity holders. (Doc. 9, at
6). Appellant alleges, however, that it was unable to recover
any of its investment during the bankruptcy proceedings
because the Plan Confirmation process was not conducted in
good faith, lacked adequate discovery, and miscategorized
certain categories of claims.
raises several specific issues on appeal. First, appellant
argues the Bankruptcy Court improperly denied discovery
requests during the bankruptcy proceeding that would have
revealed information essential to resolving its claims. (Doc.
3, at 2). Second, appellant asserts the Bankruptcy Court
improperly denied a request to challenge Broadmoor's
claim, which may have recharacterized the nature of the
claim. (Id.). Third, appellant argues the Bankruptcy
Court did not provide the requisite notice and opportunity to
object to the Disclosure Statement. (Id.). Fourth,
appellant asserts the Bankruptcy Court erred in entering the
Confirmation Order confirming the Plan because the appellees
failed to treat equity holders equally and prove the Plan was
confirmed in good faith, in the best interest of creditors,
and feasible. (Id., at 3-4).
further alleges that throughout the Bankruptcy proceeding
there were several hearings, decisions, and orders issued by
the Bankruptcy Court that wrongly contributed to the
Plan's confirmation. (Id., at 10-15). These
orders include the Order Approving Amended Disclosure
Statement, Order Denying Protective Motion of the Ad Hoc
Committee, Order Denying Motion of Preferred Equity
Shareholder FishDish for Leave to Initiate Limited Discovery,
and Order on FishDish's Objection to Broadmoor Finance,
LC's Claims. (Doc. 1, at 164-65).
28, United States Code, Section 158 provides: “The
district courts of the United States shall have jurisdiction
to hear appeals (1) from final judgments, orders, and decrees
. . . of bankruptcy judges entered in cases and proceedings
referred to the bankruptcy judges.” An appeal to a
district court “shall be taken only to the district
court for the judicial district in which the bankruptcy judge
is serving.” 28 U.S.C. § 158(a). “To elect
to have an appeal heard by a district court, a party must:
(1) file a statement of election that conforms substantially
to the appropriate Official Form; and (2) do so within the
time prescribed by 28 U.S.C. § 158(c)(1).” Fed. R.
Bank. P. 8005. Appellant elected to appeal to the district
court pursuant to 28 U.S.C. § 158(a)(1) and complied
with the requirements for appeal. Thus, jurisdiction in this
Court is proper.
a bankruptcy court's judgment is appealed to the district
court, the district court acts as an appellate court and
reviews the bankruptcy court's legal determinations de
novo and findings of fact for clear error.” In re
Falcon Prods., Inc., 497 F.3d 838, 840 (8th Cir. 2007).
In appealing to the district court, appellant challenges the
determination made by the Bankruptcy Court and asks the
district court to review the Bankruptcy Courts
argue the appellant's appeal to this Court should be
dismissed for three reasons. First, appellees argue the
appeal should be denied as equitably moot. (Doc. 9, at 1-4).
Second, appellees assert appellant lacks standing to bring
this claim because it does not have a pecuniary interest that
has been harmed. (Id., at 4-7). Third, appellees
argue appellant did not properly preserve its objection to
the Disclosure Statement and cannot raise an objection for
the first time on appeal. (Id., at 7). Appellees
submit a fourth argument in the Partial Motion to Dismiss
directed at the Order denying FishDish's Objection to
Broadmoor Finance, LC's Claims. Appellees argue the
appeal for the Order was not timely filed and should be
denied. (Doc. 10, at 2-5).
first argue appellant's appeal should be dismissed as
equitably moot because debtor has already paid substantial
claims to creditors and mailed cancellation of share
notifications to equity holders. (Doc. 9, at 3-4). Appellees
further argue that because debtor has already substantially
performed, it may be impossible to grant effective relief
even if appellant could prevail on the merits. (Doc. 9, at
doctrine of equitable mootness applies in bankruptcy
proceedings to “promote an important policy of
bankruptcy law that court-approved reorganizations be able to
go forward in reliance on such approval unless a stay has
been obtained.” In re Info. Dialogues, Inc.,
662 F.2d 475, 477 (8th Cir. 1981). In equitable mootness
cases, the term “moot” does not apply in the
traditional Article III sense involving cases and
controversies where a judicial ruling would have no effect.
In re Pacific Lumber Co., 584 F.3d 229, 240 (5th
Cir. 2009). Instead, “equitable mootness applies when a
judicial ruling would have too much effect on the parties to
a confirmed reorganization.” Id. “[A]
mootness concern arises when . . . it may be impossible for a
court to grant effective relief because the disputed assets
have been transferred pursuant to the reorganization
plan.” In re Info. Dialogues, Inc., 662 F.2d
at 477. The equitable mootness doctrine must be weighed
against a strong competing interest of a party “in
securing review of a bankruptcy order which adversely
affects” the party. Id. An appellate court
should only apply the doctrine of equitable mootness when
“grant[ing] the relief requested will undermine the
finality and reliability of consummated plans of
reorganization.” In re Tribune Media Co., 799
F.3d 272, 277 (3d Cir. 2015).
argue that courts within the Eighth Circuit “consider
five factors when determining whether an appeal is equitably
moot in the context of a bankruptcy plan.” (Doc. 36, at
3) (citing In re President Casinos, Inc., No.
4:08CV1976 CDP, 2010 WL 582794, at *6 (E.D. Mo. Feb. 16,
2010)). The five factors are: “(1) whether the
reorganization has been substantially consummated; (2)
whether a stay has been obtained; (3) whether the relief
requested would affect the rights of parties not before the
court; (4) whether the relief requested would affect the
success of the plan; and (5) the public policy of affording
finality of bankruptcy judgments.” Id. (citing
In re Williams, 256 B.R. 885, 896 n.11 (8th Cir.
however, argues there is no binding Eighth Circuit precedent
and the Court should adopt the Third Circuit's approach
to equitable mootness. (Doc. 28, at 19). The Third Circuit
uses a two-step analysis which examines: “(1) whether a
confirmed plan has been substantially consummated; and (2) if
so, whether granting the relief requested in the appeal will
(a) fatally scramble the plan and/or (b) significantly harm
third parties who have justifiably relied on plan
confirmation.” (Id. (citing In re ...