SCH Corp. v. CFI Class Action ( 2015 )


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  •                                                          NOT PRECEDENTIAL
    UNITED STATES COURT OF APPEALS
    FOR THE THIRD CIRCUIT
    _______________
    No. 14-2888
    _______________
    In re: SCH CORP., et al.,
    Debtors
    v.
    CFI CLASS ACTION CLAIMANTS,
    Appellant
    _______________
    On Appeal from the United States District Court
    for the District of Delaware
    (D.C. Civil No. 1-12-cv-01576)
    District Judge: Hon. Sue L. Robinson
    ____________
    Argued December 9, 2014
    BEFORE: VANASKIE, GREENBERG, AND COWEN, Circuit Judges
    (Filed: February 24, 2015)
    _______________
    OPINION*
    _______________
    _______________
    *
    This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not
    constitute binding precedent.
    Irv Ackelsberg, Esq. (Argued)
    Howard I. Langer, Esq.
    Langer, Grogan & Diver
    1717 Arch Street
    Suite 4130, The Bell Atlantic Tower
    Philadelphia, PA 19103
    Christopher D. Loizides, Esq.
    Loizides
    1225 King Street, Suite 800
    Wilmington, DE 19801
    Counsel for Appellant
    Thomas H. Kovach, Esq.
    Anthony M. Saccullo, Esq.
    A.M. Saccullo Legal
    27 Crimson King Drive
    Bear, DE 19701
    John D. McLaughlin, Jr., Esq. (Argued)
    Ciardi, Ciardi & Astin
    1204 North King Street
    Wilmington, DE 19801
    Counsel for Appellee
    COWEN, Circuit Judge.
    For the second time, this Court must address an appeal filed by the “CFI
    Claimants” with respect to post-confirmation bankruptcy proceedings arising out of the
    Chapter 11 bankruptcy of SCH Corp., American Corrective Counseling Services, Inc., and
    ACCS Corp. (“Debtors”). The District Court affirmed the order of the Bankruptcy Court
    granting the motion filed by Appellee Carl Singley, the Debtors’ disbursing agent,
    litigation designee, and responsible officer (“Responsible Officer”), to approve the
    settlement he reached with the plan funder, National Corrective Group, Inc. (“NCG”),
    2
    pursuant to Federal Rule of Bankruptcy Procedure 9019. We determine that this
    purported settlement really constituted a plan modification governed by 
    11 U.S.C. § 1127
    .
    Accordingly, we will vacate the District Court’s order and remand with instructions for
    the District Court to vacate the Bankruptcy Court’s order and to direct the Bankruptcy
    Court to consider the purported settlement as a request for a plan modification pursuant to
    § 1127.1
    I.
    The Debtors were in the debt collection business when they filed for Chapter 11
    bankruptcy in the District of Delaware in January 2009. Previously, class action
    proceedings were filed against the Debtors in California, Florida, Indiana, and
    Pennsylvania, alleging, inter alia, violations of the Fair Debt Collection Practices Act
    (“FDCPA”). The plaintiffs in the class action cases filed in the Northern District of
    California, the Middle District of Florida, and the Northern District of Indiana shared a
    common legal team (“CFI Counsel”). These “CFI Claimants” constituted the largest
    group of unsecured creditors in the bankruptcy cases.
    On February 10, 2009, the Bankruptcy Court approved the Debtors’ motion to
    conduct an auction for the sale of their operating assets. The Debtors then filed a motion
    to approve the sale of substantially all of their assets to Levine Leichtman Capital Partners
    1
    Alternatively, the CFI Claimants argue that the Bankruptcy Court misapplied the
    standard governing the review of proposed settlements under Rule 9019 and approved a
    fundamentally flawed settlement. Because the purported settlement should have been
    treated as a request for a plan modification in the first place, we need not—and do not—
    reach their additional contentions.
    3
    III, L.P. (“LLCP”), an investment firm and the Debtors’ largest secured creditor. The CFI
    Claimants objected and moved to dismiss the bankruptcy cases. On March 31, 2009, the
    Bankruptcy Court denied the CFI Claimants’ motion to dismiss and authorized the transfer
    of the Debtors’ assets to NCG. NCG is a subsidiary of LLCP. The sale was
    consummated on April 11, 2009.
    After the CFI Claimants rejected the initial proposed plan of liquidation because it
    included third-party releases that would have barred claims against LLCP and NCG,
    LLCP filed a proposed amended plan. With some changes, this revised plan was actively
    supported by the CFI Claimants. The plan was confirmed by the Bankruptcy Court in a
    November 2, 2009 order. LLCP served as the plan proponent and sponsor, while NCG
    functioned as the plan funder. NCG agreed to pay up to $200,000 per year for five
    years—with the first payment to be made in April 2010 and the final payment due in April
    2014. However, these payments were subject to offsets for unpaid professional fees and
    up to $500,000 for “Post-Sale Losses” incurred by LLCP or NCG in defending against
    future consumer lawsuits. The Bankruptcy Court approved Singley’s appointment as the
    Responsible Officer. It also expressly retained jurisdiction to administer and interpret the
    plan’s provisions, modify any provisions of the plan to the extent permitted by the
    Bankruptcy Code, and enter such orders as may be necessary or appropriate in furtherance
    of the successful implementation of the plan.
    CFI Counsel filed a lawsuit in the Northern District of California against NCG
    (which was now operating the Debtors’ debt collection business) and LLCP, alleging,
    4
    inter alia, violations of the FDCPA. CFI Counsel also assisted in a class action lawsuit
    filed in the Middle District of Pennsylvania against NCG and LLCP. “To their dismay,
    based on their dual representation of the CFI Claimants and the plaintiffs in the new
    California litigation, NCG moved to disqualify CFI Counsel in both the pre- and post-
    bankruptcy litigation in that State. The motions in both cases were granted.” In re SCH
    Corp., 569 F. App’x 119, 120 (3d Cir. 2014). The Ninth Circuit also denied CFI
    Counsel’s petition for a writ of mandamus. CFI Counsel withdrew from both the
    California and Pennsylvania proceedings. A CFI Class Claimant filed a class action
    malpractice suit in the California state courts alleging conflicts of interest against several
    members of the CFI legal team and their law firms, and the Responsible Officer
    commenced a similar adversary action against CFI Counsel who filed the post-bankruptcy
    California case against NCG and LLCP (as well as their clients). The Bankruptcy Court
    subsequently dismissed this adversary proceeding.
    NCG asserted its offset rights with respect to the annual Post-Sale Payments, and,
    therefore, very little, if any, funds have been distributed to unsecured creditors under the
    confirmed plan. In particular, it claimed offsets for litigation expenses reimbursed by
    insurance. The CFI Claimants moved to dismiss the bankruptcy cases for lack of good
    faith or, in the alternative, to enforce the terms of the confirmed plan. The Responsible
    Officer filed a motion to approve a settlement he reached with NCG to resolve the funding
    dispute. Under this proposed settlement, NCG’s payment obligation for the period ending
    in April 2014 was fixed at $233,631. NCG also agreed to make three additional annual
    5
    payments of up to $100,000 in 2015, 2016, and 2017. Although NCG waived its rights to
    take offsets for any expenses that may or have been reimbursed through insurance
    coverage or to apply historic offset rights (i.e., those arising before the effective date of the
    settlement) against the future payments, these future payments were still subject to offsets
    for future litigation expenses “provided, however, that such Post-Sale Losses shall not
    reduce the annual payment on the sixth, seventh and eighth anniversaries beyond a
    $25,000 ‘floor.’” (A212 (emphasis omitted).) In addition, the Responsible Officer,
    LLCP, and the Responsible Officer’s own counsel agreed to certain monetary concessions.
    The CFI Claimants objected to the proposed settlement on a number of grounds.
    According to them, “[t]he proposed three-year extension of the Plan is, in effect, a
    proposed, post-confirmation request to modify the Plan” that “would be governed by 
    11 U.S.C. § 1127
    (b), and, by incorporation, 
    11 U.S.C. § 1129
    .” (A77.) Noting that the
    Bankruptcy Court must review a proposed settlement under the four-factor standard
    established by this Court in In re Martin, 
    91 F.3d 389
     (3d Cir. 1999), the CFI Claimants
    argued that “‘the paramount interest of the creditors’—the fourth Martin factor—would
    not be furthered in any way by the compromise.” (A75.) The CFI Claimants also
    questioned whether the settlement was the result of arms-length negotiations.2 The
    2
    It appears that Singley was “Of Counsel” to Ciardi, Ciardi & Austin (“CC & A”).
    CC&A previously represented LLCP in the bankruptcy proceedings. In connection with
    Singley’s appointment as the Responsible Officer, it was agreed that CC&A and LLCP
    would execute a conflicts waiver, CC&A would terminate its representation of LLCP in
    the bankruptcy cases, neither CC&A nor the Responsible Officer would represent LLCP
    in such cases, and, if a matter arises in these cases that may be adverse to LLCP, the
    Responsible Officer would obtain conflicts counsel. In a waiver letter, CC&A agreed not
    6
    Responsible Officer, in turn, moved to disqualify CFI Counsel. However, his motion was
    subsequently withdrawn.
    The Bankruptcy Court conducted an evidentiary hearing on the CFI Claimants’
    motion to dismiss as well as the Responsible Officer’s motion to approve the settlement.
    In an October 12, 2012 order, the Bankruptcy Court granted the Responsible Officer’s
    motion, approved and authorized the parties to execute and implement the settlement, and
    retained jurisdiction to interpret and enforce the settlement. It also entered a separate
    order denying the CFI Claimants’ motion to dismiss. In an oral decision delivered by
    telephone on September 14, 2012, the Bankruptcy Court considered the settlement under
    the Martin standard (i.e., the probability of success in the underlying litigation, likely
    collection difficulties, the complexity of the litigation as well as the expense,
    inconvenience, and delay necessarily attending it, and the paramount interest of the
    creditors). In addition to disposing of the CFI Claimants’ challenge to the “bonafieties
    [phonetic] of the settlement as a threshold matter” (A109) and their contention that the
    settlement should be rejected because “no distribution will ever be made to unsecured
    to bring any causes of action against NCG (or its affiliates) on behalf of the Responsible
    Officer in the bankruptcy cases or in any other matter. Furthermore, “Ciardi will also not
    disclose any Confidential Information [which includes “all information of which
    unauthorized disclosure could be detrimental to the interests of NCG”] of NCG or
    information protected by the attorney-client privilege of NCG to Singley.” (A228.)
    CC&A represented LLCP as local counsel in litigation in the Middle District of
    Pennsylvania, represented LLCP as local counsel in the bankruptcy cases, and “currently
    represents LLCP on various matter that are not related to the Bankruptcy Case or the
    matters for which Singley has retained Ciardi.” (A229.) CC&A represented the
    Responsible Officer in the settlement negotiations (and has continued to represent the
    Responsible Officer in the post-confirmation Bankruptcy Court proceedings as well as in
    7
    creditors” (A112), the Bankruptcy Court determined that the Responsible Officer satisfied
    the first, third, and fourth Martin factors (and indicated that the second factor likewise
    weighed, at least in part, in his favor).
    The CFI Claimants appealed to the District Court from the denial of their motion to
    dismiss. The District Court dismissed the appeal as equitably moot in a July 8, 2013
    order. On June 17, 2014, we vacated the District Court’s dismissal order and remanded
    for further proceedings “[b]ecause the District Court dismissed the appeal despite a
    finding that reversing the plan of liquidation would not result in any inequity, and because
    our opinion [addressing the equitable mootness doctrine] in In re Semcrude, L.P., 
    728 F.3d 314
     (3d Cir. 2013), came after the District Court’s decision in this case.” SCH
    Corp., 569 F. App’x at 122. We also questioned whether the District Court considered the
    full range of relief the CFI Claimants sought in their motion (e.g., enforcement of the
    terms of the confirmed plan, removal of the Responsible Officer, and sanctions against
    NCG) and the specific effect such relief would have on third parties.
    The CFI Claimants likewise appealed to the District Court from the Bankruptcy
    Court’s order granting the Responsible Officer’s motion to approve the settlement. On
    April 2, 2014, the District Court dismissed their appeal and affirmed the order of the
    Bankruptcy Court. According to the District Court, the Bankruptcy Court properly
    applied the Martin factors to determine that the settlement at issue here was fair and
    equitable and adequately addressed the CFI Claimants’ allegations of collusion as well as
    the appellate proceedings before both the District Court and this Court).
    8
    their theory that “‘NCG began a multi-forum strategy to use the anticipated litigation and
    plan provisions concerning offsets as weapons to drive a wedge between the CFI
    consumers and their counsel.’” In re: SCH Corp., Bank. No. 09-10198 (BLS), Civ. Nos.
    12-1576-SLR, 
    2014 WL 1340234
    , at *4 (D. Del. Apr. 2, 2014) (citation omitted). In a
    footnote, the District Court disposed of the CFI Claimants’ argument that the settlement
    was actually a plan modification subject to § 1127. According to the District Court, the
    CFI Claimants offered little support for this argument, which “does not appear to have
    been raised before.” Id. at *4 n.5. “[The Responsible Officer’s] response that the
    settlement resolves a funding dispute and does not modify the amended plan is consistent
    with the bankruptcy court’s statement that, ‘[t]rying the issue would therefore likely
    involve witnesses’ recollections as to the parties’ intentions and expectations in
    negotiations and a deal that is now three years past.’”3 Id. (quoting A110-A111).
    II.
    Under § 1127(b), the plan proponent or reorganized debtor may at any time modify
    a confirmed plan “before substantial consummation of such plan.”4 However, “[s]uch
    3
    The CFI Claimants filed a motion for rehearing with the District Court. The
    District Court denied their motion in a May 7, 2014 order, explaining that it addressed
    “the CFI claimants’ argument that the bankruptcy court’s extension of the term of the
    confirmed plan violated 
    11 U.S.C. § 1127
    (d).” (A59 (citing SCH Corp., 
    2014 WL 1340234
    , at *4).)
    4
    The District Court had jurisdiction over the CFI Claimants’ appeal from the
    Bankruptcy Court’s order granting the Responsible Officer’s motion to approve the
    settlement pursuant to 
    28 U.S.C. § 158
    (a)(1). We possess appellate jurisdiction over their
    appeal from the District Court’s order under § 158(d)(1) and 
    28 U.S.C. § 1291
    . It is
    uncontested that bankruptcy court orders are generally reviewed under an abuse of
    discretion standard. “Our review of the District Court’s decision effectively amounts to
    9
    plan as modified under this subsection becomes the plan only if circumstances warrant
    such modification and the court, after notice and a hearing, confirms such plan as
    modified, under section 1129 of this title.” Although “‘modification’ is not defined in the
    Bankruptcy Code, courts that have analyzed the issue of whether a subsequent change to a
    confirmed plan of reorganization constitutes a ‘modification’ distinguish between the
    courts’ inability to ‘modify’ a plan and their ability to ‘clarify a plan where it is silent or
    ambiguous’; and/or ‘interpret’ plan provisions to further equitable concerns.’” 5 In re
    review of the bankruptcy court’s opinion in the first instance.” In re Hechinger Inv. Co. of
    Del., 
    298 F.3d 219
    , 224 (3d Cir. 2002) (citing In re Telegroup, Inc., 
    281 F.3d 133
    , 136 (3d
    Cir. 133, 136 (3d Cir. 2002)). An abuse of discretion is committed if the bankruptcy
    court’s ruling “‘rests upon a clearly erroneous finding of fact, an errant conclusion of law,
    or an improper application of law to fact.’” In re 15375 Mem’l Corp., 
    589 F.3d 605
    , 616
    (3d Cir. 2009) (citing In re SGL Carbon Corp., 
    200 F.3d 154
    , 159 (3d Cir. 1999)).
    Evidently suggesting that this case is now moot, the Responsible Officer claims
    that “the ‘CFI’ acronym is no longer applicable” and that it is unclear what will happen to
    any funds that may be distributable to those purported CFI Claimants. (Appellee’s Brief
    at 16.) He notes that a final report was filed in the bankruptcy cases and that, on October
    16, 2013, a final decree and order was entered administratively closing these cases.
    According to the Responsible Officer, the California pre-bankruptcy proceeding was
    dismissed with prejudice (and the class itself was de-certified), the Florida case was
    settled prior to class certification, and “the lone remaining class members are those in the
    class certified in [Indiana], which is currently dismissed pending re-opening.” (Id. at 17.)
    It appears that a settlement was approved in the post-bankruptcy lawsuit filed in California
    against NCG and LLCP (and that this settlement disposed of the Pennsylvania proceeding
    against these two entities). However, we agree with the CFI Claimants that such
    circumstances have not mooted their current appeal. The terms “CFI Class Actions,”
    “CFI Class Action Claimants,” and “CFI Action Monetary Claims” were expressly
    defined in the confirmed plan itself, and it appears that these categories were not made
    contingent on the outcome of the various class action proceedings. After all, any claims
    against the Debtors in the California, Florida, and Indiana cases were stayed as a result of
    their Chapter 11 filings, and these class action cases then went forward against the
    remaining co-defendants.
    5
    The District Court suggested that the CFI Claimants failed to raise their plan
    10
    Ampace Corp., 
    279 B.R. 145
    , 152-53 (Bankr. D. Del. 2002) (citing In re Beal Bank,
    S.S.B., 
    201 B.R. 376
    , 380 (E.D. Pa. 1996); In re Harness, 
    218 B.R. 163
    , 166 (D. Kan.
    1998)).
    The Bankruptcy Court abused its discretion by failing to consider the purported
    settlement as a modification of a confirmed plan governed by § 1127. According to the
    Responsible Officer and the District Court, the proposed settlement simply resolved a
    dispute concerning the interpretation of the plan confirmed by the Bankruptcy Court,
    which was silent on the specific issue of whether insurance coverage would negate NCG’s
    offset rights. The CFI Claimants acknowledge that, if the settlement merely provided for
    compromised payments within the five-year time period specified in the confirmed plan,
    such an agreement would not rise to the level of an impermissible plan modification.
    However, the Responsible Officer and NCG actually negotiated what the Responsible
    Officer calls an “extension of the plan funding period.” (Appellee’s Brief at 41.) In short,
    the confirmed plan required NCG to make five annual payments, subject to offsets for
    modification argument before the Bankruptcy Court, and the Responsible Officer likewise
    indicates that it was addressed only in passing at the District Court level. However, it is
    uncontested that (as the Responsible Officer put it), “the Appellant’s initial Objection
    contained a five-line single paragraph concerning this issue” and, “[i]n the 57 pages of
    briefing in the District Court, the Appellant addressed this issue in 3 paragraphs, which
    amount to approximately 2 pages.” (Appellee’s Brief at 39 n.12 (citing A77).) For his
    part, the Responsible Officer has addressed the merits of this plan modification issue
    before the Bankruptcy Court, the District Court, and this Court itself (and, in fact, the
    Responsible Officer does not expressly claim in the appellate brief he filed with this Court
    that it has been waived). The District Court disposed of the issue on its merits. Although
    the CFI Claimants could (and should) have addressed this plan modification issue in more
    detail before the Bankruptcy and District Courts, we follow the District Court’s example
    and address the merits of the CFI Claimants’ theory that the settlement constituted a plan
    11
    litigation expenses, by April 2014, while the purported settlement approved by the
    Bankruptcy Court provided for three additional payments subject to the same basic offset
    mechanism in 2015, 2016, and 2017. According to the Responsible Officer, this
    arrangement did not modify any terms of the confirmed plan because it left unchanged the
    basic nature of the economic relationship with NCG and allegedly provided the estate the
    benefit of up to $300,000 that would have been otherwise offset by NCG under the
    confirmed plan. However, a plan modification that allegedly provides greater economic
    benefits for the estate and its creditors remains a plan modification governed by § 1127—
    not a settlement to be reviewed under Rule 9109. According to the CFI Claimants, this
    three-year extension of the plan funding period actually had the practical effect of
    preventing CFI Counsel from litigating class action consumer claims against LLCP and
    NCG for an additional three years. Given the circumstances, we believe that the extension
    of (what the Bankruptcy Court at the evidentiary hearing called) “the life of the economic
    relationships that we have” (A515) rises to the level of a plan modification subject to §
    1127. In other words, turning a five-year plan into an eight-year plan constitutes a
    modification of the plan itself.
    Furthermore, the case law generally weighs in support of our determination that the
    purported settlement at issue in this case really constituted a plan modification. See, e.g.,
    In re Braniff Airways, Inc., 
    700 F.2d 935
    , 940 (5th Cir. 1983) (“This provision [of the
    PSA agreement] not only changed the composition of Braniff’s assets, the contemplated
    modification subject to § 1127.
    12
    result under [11 U.S.C.] § 363(b), it also had the practical effect of dictating some of the
    terms of any future reorganization plan. The reorganization plan would have to allocate
    the scrip according to the terms of the PSA agreement or forfeit a valuable asset. The
    debtor and the Bankruptcy Court should not be able to short circuit the requirements of
    Chapter 11 for confirmation of a reorganization plan by establishing the terms of the plan
    sub rosa in connection with the sale of assets.”); Enterprise Fin. Group, Inc. v. Curtis
    Mathes Corp., 
    197 B.R. 40
    , 45 (E.D. Tex. 1996) (concluding that, even if proposed
    change more accurately reflected intent of plan, change that allowed reorganized debtor to
    pursue some third-party claims modified material and unambiguous term of confirmed
    plan that provided that all claims were retained by liquidating trust, and could not be
    considered as mere clarification); In re Reserve Capital Corp., Nos. 03-60071 to 03-
    60078, 
    2007 WL 1989285
    , at *2 (Bankr. N.D.N.Y. Jul. 6, 2007) (summarizing remand
    order that directed bankruptcy court to evaluate whether approved settlement, although
    found to be fair, reasonable, and in best interest of estate under Rule 9019, nevertheless
    constituted improper post-confirmation modification of confirmed plan), aff’d sub nom.
    Hawkins v. Chapter 11 Tr,, Dist. Ct. Civil Action No. 6:07-CV-0766 (LEK), 
    2009 WL 701115
     (N.D.N.Y. Mar. 13, 2009); Ampace Corp., 
    279 B.R. at 151-54
     (concluding that
    extension of deadline for claim objections constituted plan modification under § 1127); In
    re Concrete Designers, Inc., 
    173 B.R. 354
    , 355-59 (Bankr. S.D. Ohio 1994) (refusing to
    confirm proposed second amended plan because second amended disclosure statement
    provided for dividend to unsecured creditors of 100% over five years or lump sum
    13
    payment of 40% but second amended proposed plan provided for either dividend of 80%
    over four years or lump sum payment of 50%).
    The Responsible Officer turns for support to an unpublished ruling by the Ninth
    Circuit as well as an Eastern District of Pennsylvania decision. Both opinions are
    distinguishable, and, in any event, they are not binding on this Court (or, for that matter,
    the Ninth Circuit). In in re Acequia, Inc., 
    996 F.2d 1223
    , 
    1993 WL 219865
     (9th Cir.
    1993) (memorandum) (unpublished opinion), the confirmed plan required the debtor to
    execute an amended note with an eight-year maturity date in favor of its largest creditor,
    but, due to state court litigation regarding the terms of the note, execution was delayed for
    five years, 
    id.
     at *1-*2. The debtor and the creditor entered a settlement agreement that
    extended the maturity date. 
    Id. at *1
    . The Ninth Circuit determined that the second
    amended note executed pursuant to the settlement agreement did not constitute an
    impermissible plan modification. 
    Id.
     at *1-*3. According to the Acequia court, “‘the
    Amended Note is of the same duration as called for in the Plan, and that since its creation
    was anticipated in the Plan, it does not alter any material terms of the Plan and is not
    subject to the provisions of § 1127.’” Id. at *2 (quoting district court opinion). Likewise,
    the district court in In re Beal Bank, S.S.B., 
    201 B.R. 376
     (E.D. Pa. 1996), upheld the
    bankruptcy court’s exercise of its equitable powers to extend a payment deadline by a
    relatively short period of time (i.e., for sixty days), noting that this extension did not alter
    substantive rights or frustrate legitimate claims and that the objecting party shared some
    responsibility for the delay, 
    id. at 380
    . In contrast to the note with the same duration at
    14
    issue in Acequia as well as the brief extension of a payment deadline addressed in Beal
    Bank, the purported settlement at issue in this case added three years to a five-year plan.
    Such a drastic step should not be taken under the guise of either a plan interpretation, the
    exercise of equitable powers, or a Rule 9019 settlement.
    Because the purported settlement constituted a plan modification, we will remand
    this matter to the Bankruptcy Court to consider this purported settlement as a modification
    request pursuant to § 1127. The CFI Claimants question whether, “in the third year of a
    five-year plan, with the plan funder (NCG) taking the position with Appellee that it had
    fully complied with its payment obligations under the plan, that Appellee would argue that
    the plan had not been ‘substantially consummated.’” (Appellants’ Brief at 38 (footnote
    omitted).) They further observe that the Responsible Officer asked the District Court to
    dismiss the CFI Claimants’ appeal from the order denying the motion to dismiss the
    bankruptcy cases on the grounds that the plan had been consummated (and that the
    District Court did dismiss the appeal as equitably moot). In addition to noting that the
    substantial consummation determination would be made “as of the time of the
    modification (i.e., the Settlement),” the Responsible Officer suggests in passing that this
    Court “can determine that the requirements of Section 1127 of the Bankruptcy Code were
    satisfied through the hearing before the Bankruptcy Court on the Settlement.” (Appellee’s
    Brief at 40 n.13 (citing Beal Bank, 
    201 B.R. at
    380 n.4).) However, we believe that it is
    appropriate for the Bankruptcy Court to conduct the requisite inquiry under § 1127.
    III.
    15
    We will vacate the District Court’s order and remand with instructions for the
    District Court to vacate the Bankruptcy Court’s order and to direct the Bankruptcy Court
    to consider the purported settlement as a request for a plan modification pursuant to §
    1127.
    16