In re Kaiser Steel Corp.
| Decision Date | 20 October 1989 |
| Docket Number | 87-E-437.,Bankruptcy No. 87-B-1552-E,89-K-571,Adv. No. 87-E-135,No. 89-K-570,89-K-570 |
| Citation | 105 BR 971 |
| Parties | In re KAISER STEEL CORP., et al., Debtors. KAISER STEEL CORP., et al., Plaintiffs/Appellees, v. Joseph A. FRATES, et al., Defendants/Appellants. KAISER STEEL CORP., et al., Plaintiffs/Appellees, v. Monty RIAL, et al., Defendants/Appellants. |
| Court | U.S. District Court — District of Colorado |
COPYRIGHT MATERIAL OMITTED
Theresa J. Collier, Holland & Hart, Denver, Colo., for Clifford V. Brokaw, III.
Daniel N. Larson, Litigation Manager, Kaiser Steel Corp., Rancho Cucamonga, Cal., James P. McCarthy, Lindquist & Vennum, Minneapolis, Minn., H. Thomas Coghill, Coghill & Goodspeed, P.C., Denver, Colo., for Kaiser Steel Corp.
Leon C. Marcus, Booth, Marcus & Pierce, New York City, Michael E. Katch, Katch, Anderson & Wasserman, Denver, Colo., for Unsecured Creditors' Committee.
Ronald G. Rossi, Rossi & Judd, Denver, Colo., Robert E. Darby, Fulbright Jaworski & Reavis McGrath, Los Angeles, Cal., for Howard P. Allen, William R. Gould.
Paul F. Hultin, Parcel, Mauro, Hultin & Spaanstra, Denver, Colo., Thomas E. English, English, Jones & Faulkner, Tulsa, Okl., for Stan P. Doyle, Joseph A. Frates, Charles S. Holmes, Robert E. Merrick, Equivest Associates, J. Anthony Frates, Stephen I. Frates, P. Peter Prudden III, Estate of Howard Samuels.
J. Michael Morgan, Lohf, Shaiman & Ross, Denver, Colo., for Sierra Gateway Development, Inc., State Federal Saving and Loan Ass'n.
Richard P. Slivka, Vinton, Slivka & Panaci, Denver, Colo., C. Joseph Girior, Giroir Law Firm, Little Rock, Ark., for Monty H. Rial.
Julia T. Waggener, Denver, Colo., for Charles S. McNeil.
Robert M. Duitch, Duitch & Johnson, Colorado Springs, Colo., I. Thomas Bieging, Morrato, Bieging, Burrus & Colanto, P.C., Englewood, Colo., for Miles B. Yeagley.
Alan L. Bugg, Colorado Springs, Colo., for Calder & Co., Chimney Rock Coal Co., Colorado Coal Mining Co., Colorado Coal Resources Co., Aztec, Ltd. a/k/a Colorado Pacific Aztec, Energy Capital Ltd. a/k/a Colorado Pacific Energy, Perma Mining Corp., Perma Pacific, Inc., Perma Pacific Properties, Perma Resources Corp.
Joseph N. Mole, Lemle, Kelleher, Kohlmeyer, Dennery, Hunley, Moss & Frilot, New Orleans, La., Jeffrey L. Beattie, Denver, Colo., for Dr. Eustace H. Winn, Jr.
William H. Haring, Bostrom, Haring & Hitt, P.C., Denver, Colo., William D. Treeby, Stone, Pigman, Walther, Wittmann and Hutchinson, New Orleans, La., for Lloyd G. Hansen.
Darrell G. Waas, Otten, Johnson, Robinson, Ness & Ragonetti, P.C., Denver, Colo., Douglas M. Schwab, Joseph A. Gross, Heller, Ehrman, White & McAuliffe, San Francisco, Cal., for Richard N. Gary, Stephen A. Girard.
Douglas M. Tisdale, Brownstein Hyatt Farber & Madden, Denver, Colo., Frank S. Moseley, Robert M. Buschmann, Davis, Polk & Wardwell, New York City, Jerome G. Snider, Davis, Polk & Wardwell, Washington, D.C., for Donaldson, Lufkin & Jenrette Securities Corp.
Todd E. Gordiner, Paul, Hastings, Janofsky & Walker, Los Angeles, Cal., William G. Imig, Ireland, Stapleton, Pryor & Pascoe, P.C., Denver, Colo., for Dean Witter Reynolds, Inc.
Morton G. Rosen, Steven L. Hoch, Haight, Dickson, Brown & Bonesteel, Santa Monica, Cal., John D. Phillips, Hall & Evans, Denver, Colo., for Charles H. Black.
On March 9, 1989, the bankruptcy court entered a series of orders approving four separate settlement agreements between Kaiser and certain defendants in the Frates, Rial and Jacobs litigation. These defendants are (1) Dean Witter Reynolds, Inc., (2) Donaldson, Lufkin & Jenrette (DLJ), (3) certain former officers and directors of Kaiser,1 and (4) Clifford V. Brokaw, a former advisory director of Kaiser. In its findings of fact and conclusions of law entered after a hearing on the agreements, the bankruptcy court found, among other things, that with respect to each settling defendant, the settlements were reached in good faith and the amount of the settlements fell within a reasonable range of the defendant's proportional share of comparative liability. In addition, in a separate memorandum opinion and order filed the same day, the bankruptcy court addressed the contention of the non-settling defendants that it had no jurisdiction to enter the above findings, holding that they were integral to its approval of the settlements under Bankr.R. 9019.
The non-settling defendants (members of the Perma and Frates Groups) now appeal the orders approving the settlements. Although they do not challenge the fact or the amount of the settlements, they contend that the bankruptcy court had no jurisdiction to make extraneous findings that the settlements were reached in good faith and that they represented each settling defendant's comparative liability for damages. The appellants are particularly concerned with these findings because they have alleged cross- and counter-claims for indemnity and contribution by certain of the settling defendants. They note that, under California law, they may be precluded from asserting their indemnity and contribution claims because of the good faith and comparative liability findings.2 They request, therefore, that I modify the bankruptcy court's orders approving the settlement agreements by deleting these disputed findings.
Kaiser has responded to this challenge in two ways. First, it has filed a motion to dismiss the appeal, arguing that it is moot because the appellants did not obtain a stay of the orders approving the settlements. Second, in the event that the appeal is not moot, Kaiser argues that the bankruptcy court's findings were not only within its jurisdiction, but a necessary prerequisite to its approval of the settlement agreements. Thus, there are two issues raised: (1) whether the appeal is moot because the appellants have not obtained a stay, and (2) whether, on the record before it, the bankruptcy court properly entered the findings that the settlements were entered in good faith and represented each defendant's proportional liability for the damages claimed against it. I conclude that the appeal is not moot, and that the bankruptcy court's findings should be upheld.
On June 7, 1989, Kaiser filed its motion to dismiss these appeals on the grounds of mootness. Kaiser argues that, since the appellants did not obtain a stay of the bankruptcy court's orders approving the settlements and that certain aspects of the settlement agreements have already been consummated, these appeals are moot because the court is precluded from granting effective relief.3 Specifically, Kaiser notes that orders have already been entered, pursuant to a settlement agreement, dismissing with prejudice Kaiser's claims against DLJ and DLJ's counterclaims against Kaiser. In addition, certain settlement payments have already been made.
The appellants have responded that the appeal is not moot because the appellants do not seek to "undo" anything that has already been done, or to otherwise alter the terms of the underlying settlement agreements. Instead, they only request that certain portions of the bankruptcy court's orders approving the settlements be vacated. Additionally, they contend that Kaiser and DLJ cannot block the effective appeal of the bankruptcy court's orders by having "rushed to dismiss their claims against each other before this Court has had the opportunity to rule on the issues on appeal." Frates Defendants' Response to Motion to Dismiss at 3.
"In general a case becomes moot `when the issues presented are no longer `live' or the parties lack a legally cognizable interest in the outcome.'" Murphy v. Hunt, 455 U.S. 478, 481, 102 S.Ct. 1181, 1183, 71 L.Ed.2d 353 (1982) (citations omitted). In the bankruptcy context, the application of the mootness doctrine most commonly involves the appeal of a bankruptcy court order authorizing the sale or distribution of property or the extension of credit, oftentimes as part of the bankruptcy court's approval of a reorganization plan. Once the sale or distribution is consummated or the implementation of the plan substantially underway, there is little the district court can do to grant effective relief. Consequently, the appeal is considered moot. See, e.g., Kaonohi Ohana, Ltd. v. Sutherland, 873 F.2d 1302, 1306 (9th Cir.1989) (); Central States, Southeast & Southwest Areas Pension Fund v. Central Transport, Inc., 841 F.2d 92, 96 (4th Cir. 1988) (); Miami Center Ltd. Partnership v. Bank of New York, 838 F.2d 1547, 1557 (11th Cir.1988) (). The application of the mootness doctrine under these circumstances furthers two important goals: it guarantees that the court adjudicates only live controversies and it promotes the finality of bankruptcy court orders. See Onouli-Kona Land Co. v. Richards, 846 F.2d 1170, 1172 (9th Cir.1988) ().
In considering whether a particular appeal is moot, however, "the court should reach a determination upon close consideration of the relief sought in light of the facts of the particular case." Central States, 841 F.2d at 96. Where it appears that effective relief can be granted on appeal, courts have reached the merits of an appeal even though the complaining party has not obtained a stay of the underlying order. See, e.g. Phoenix Bond & Indem. Co. v. Shamblin (In re Shamblin), 878 F.2d 324 (9th Cir.1989) (); Spacek v....
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