In Re: 22 Fiske Place, LLC

Background

Nicholas Gordon, the sole member of 22 Fiske Place, LLC, appealed a Bankruptcy Court order concerning his attempt to intervene in a state-court action involving the bankruptcy estate’s disputed claim to foreclosure-surplus funds. The Bankruptcy Court had ruled that Gordon’s attempted intervention violated the automatic stay under 11 U.S.C. § 362(a) and a provision of the confirmed Chapter 11 plan.

Gordon had sought to intervene to oppose the trustee’s effort to vacate a default judgment in the state-court action. After the Bankruptcy Court issued its order, Gordon withdrew his motion to intervene. At a state-court hearing, however, he continued to argue that he had a right to appear. The state court ruled that he lacked standing to intervene even apart from the Bankruptcy Court’s order. It also dismissed the underlying action with prejudice and entered a written order vacating the default judgment and denying Gordon’s motion to intervene.

Arguments on Appeal

Gordon asked the District Court to reverse the Bankruptcy Court’s ruling and argued that 11 U.S.C. § 1109(b) gave him a right to appear and be heard in the state-court action. The District Court explained that this statute concerns participation in bankruptcy cases under Chapter 11, not a separate state-court case.

The trustee argued that the appeal was moot because the state court’s independent standing ruling and dismissal meant that the District Court could not provide Gordon with the opportunity to participate that he sought.

Court’s Analysis

The District Court held that the appeal was moot. An appeal is moot when later events prevent the court from providing effective relief. Even if the District Court concluded that Gordon’s attempted intervention had not violated the bankruptcy stay, it could not give him a right to appear in the state-court action because that court had independently ruled that he lacked standing and had dismissed the action with prejudice.

The court also stated that Gordon waived his challenge to the Bankruptcy Court’s automatic-stay ruling by failing to raise that argument in Bankruptcy Court. The opinion refers to this issue as involving section 326(a) in one heading and paragraph, while the Bankruptcy Court’s order and the rest of the discussion identify section 362(a).

Disposition

Judge Mary Kay Vyskocil dismissed the bankruptcy appeal as moot and directed the Clerk of Court to close the case. The court also denied Gordon’s request for oral argument because the briefs and record adequately presented the issues.