New Cingular Wireless Services, Inc. v. McCormick (In Re Wire Comm Wireless, Inc.) ( 2010 )

FILED
NOT FOR PUBLICATION APR 05 2010
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U .S. C O U R T OF APPE ALS
FOR THE NINTH CIRCUIT
In the Matter of: WIRE COMM No. 08-17061
WIRELESS, INC.,
D.C. No. 2:07-cv-02213-MCE
Debtor.
MEMORANDUM *
NEW CINGULAR WIRELESS
SERVICES, INC.,
Appellant,
v.
RICHARD MCCORMICK; SHIRLEY
MCCORMICK; TIMOTHY
MCCORMICK; RENEE MCCORMICK,
Appellees,
and
MICHAEL F. BURKART,
Trustee.
Appeal from the United States District Court
for the Eastern District of California
Morrison C. England, District Judge, Presiding
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
Argued and Submitted November 4, 2009
San Francisco, California
Before: B. FLETCHER, CANBY, and GRABER, Circuit Judges.
In October 2007, the Bankruptcy Court for the Eastern District of California
issued an order granting approval of a compromise between the Trustee for
now-defunct Wire Comm Wireless, Inc. (“Wire Comm”), and Wire Comm’s
principal shareholders Timothy, Renee, Richard, and Shirley McCormick
(“McCormicks”). As part of the compromise, the Trustee agreed to dismiss a
state-court action New Cingular Wireless Services, Inc. (“New Cingular”) had
brought against the McCormicks, in which the state court had substituted the
Trustee as plaintiff. New Cingular appealed the bankruptcy court’s order
approving the compromise to the District Court for the Eastern District of
California, arguing that the bankruptcy court had failed to provide adequate factual
support for its approval of the compromise. The district court affirmed. New
Cingular now appeals.
Because the order at issue determined and affected the substantive rights of
the parties, it was, for purposes of appeal, a final order. J.P. Morgan Inv. Mgmt.,
Inc. v. U.S. Tr. (In re Martech USA, Inc.), 188 B.R. 847, 849 (B.A.P. 9th Cir.
1995). We have jurisdiction to hear an appeal from a final order pursuant to
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28 U.S.C. § 158(d). In an appeal from an order affirming the decision of a
bankruptcy court, “our role is essentially the same as that of the district court, and
we are, in essence, reviewing the final order of the bankruptcy court.” Martin v.
Kane (In re A&C Props.), 784 F.2d 1377, 1380 (9th Cir. 1986). “We review the
bankruptcy court’s findings of fact under the ‘clearly erroneous’ standard and its
conclusions of law de novo.” Id. Absent a clear abuse of discretion, we will not
disturb an order granting or denying approval of a compromise. United States v.
Alaska Nat’l Bank of N. (In re Walsh Constr., Inc.), 669 F.2d 1325, 1328 (9th Cir.
1982).
In considering the proposed compromise, the bankruptcy court found that
one factor weighed most heavily in favor of granting approval, namely, that New
Cingular so lacked confidence in the supposedly meritorious state-court claims that
it repeatedly declined offers to purchase the action at a one-dollar premium. The
only explanation New Cingular gives for its obvious lack of interest is its “belie[f]
[that] the bankruptcy court should, and would, reject the compromise.”
Appellant’s Op. Br. 40. Unfortunately for New Cingular, this explanation
overlooks the reality that the purpose of a compromise is, among other things, “to
avoid the expenses and burdens associated with litigating sharply contested and
dubious claims.” In re A&C Props., 784 F.2d at 1380–81. We think it safe to
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assume that New Cingular, like the Trustee, regarded the state-court claims as
“sharply contested and dubious” and, therefore, less valuable to the estate, in
monetary terms, than the proposed compromise.
The foremost obligation of a bankruptcy trustee is to “proceed in settling [an
estate’s] accounts on whatever grounds he, in his informed discretion, believes will
net the maximum return for the creditors.” LeBlanc v. Salem (In re Mailman
Steam Carpet Cleaning Corp.), 212 F.3d 632, 635 (1st Cir. 2000). In view of that
obligation, a bankruptcy court enjoys great latitude in approving a proposed
compromise, and a fruitful settlement is always favored over needless litigation. In
re A&C Props., 784 F.2d at 1381–82. Here, the record shows that the bankruptcy
court, in judging the merits of the proposed compromise, carefully considered the
requisite factors, see id. at 1381, and provided ample factual support for its
conclusions. “[A]s long as the bankruptcy court amply considered the various
factors that determined the reasonableness of the compromise, the court’s decision
must be affirmed.” Id. The order of the bankruptcy court is, therefore,
AFFIRMED
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