In re: The Marshall Group, LLC

FILED NOV 08 2011 1 SUSAN M SPRAUL, CLERK U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT 2 3 UNITED STATES BANKRUPTCY APPELLATE PANEL 4 OF THE NINTH CIRCUIT 5 In re: ) BAP No. OR-10-1523-JuClPa ) 6 THE MARSHALL GROUP, LLC, ) Bk. No. 08-34585 ) 7 Debtor. ) ______________________________) 8 MARK R. MARSHALL; CATHY JO ) MARSHALL, ) 9 ) Appellants, ) 10 ) v. ) M E M O R A N D U M* 11 ) THE MARSHALL GROUP, LLC; ) 12 CONRAD MYERS, Trustee; UNITED ) STATES TRUSTEE, ) 13 ) Appellees. ) 14 ______________________________) 15 Argued and Submitted on October 20, 2011 at Portland, Oregon 16 Filed - November 8, 2011 17 Appeal from the United States Bankruptcy Court 18 for the District of Oregon 19 Honorable Randall L. Dunn, Bankruptcy Judge, Presiding ____________________________ 20 Appearances: Appellant Mark R. Marshall argued for himself 21 and Cathy Jo Marshall pro se; Peter C. McKittrick, Esq., of Farleigh, Wada & 22 Witt argued for Appellee Conrad Myers, Trustee. ______________________________ 23 24 25 26 * This disposition is not appropriate for publication. 27 Although it may be cited for whatever persuasive value it may have (see Fed. R. App. P. 32.1), it has no precedential value. 28 See 9th Cir. BAP Rule 8013-1.

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1 Before: JURY, CLARKSON,** and PAPPAS Bankruptcy Judges. 2 3 At issue in this appeal is the revocation of a confirmation 4 order. The order confirming the second amended plan of 5 reorganization dated June 21, 2010 (as modified September 7, 6 2010) (the “Plan”) filed by appellee, Conrad Myers, the 7 chapter 111 trustee, was entered on September 30, 2010. 8 Appellants, Mark R. Marshall and Cathy Jo Marshall (the 9 “Marshalls”), did not appeal that order or move to stay 10 implementation of the Plan. They subsequently moved for 11 revocation of the order confirming the Plan under § 1144, which 12 the bankruptcy court denied. The Marshalls now appeal that 13 decision. 14 The effective date of the Plan was October 15, 2010 (the 15 “Effective Date”). Since then, numerous transactions have been 16 completed or implemented according to the Plan and distributions 17 have commenced. As a result, we conclude that the Plan has been 18 substantially consummated within the meaning of § 1101(2). We 19 further conclude that we cannot fashion effective relief for the 20 Marshalls on appeal and, even if we could, it would be 21 inequitable to do so under these circumstances. Accordingly, we 22 DISMISS this appeal as moot. 23 24 ** Hon. Scott C. Clarkson, Bankruptcy Judge for the Central District of California, sitting by designation. 25 1 26 Unless otherwise indicated, all chapter, section and rule references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532. 27 “Rule” references are to the Federal Rules of Bankruptcy Procedure and “Civil Rule” references are to the Federal Rules of 28 Civil Procedure.

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1 Alternatively, even if this appeal were not moot, we would 2 AFFIRM the bankruptcy court’s decision. 3 I. FACTS 4 The facts leading up to the bankruptcy of The Marshall 5 Group, LLC are not fully developed in the record, but are 6 lengthy and complex. The Marshalls were the sole members of the 7 Marshall Group, LLC. The Marshall Group, LLC was the surviving 8 entity under a roll up consolidation agreement entered into on 9 July 31, 2008, in contemplation of the filing of bankruptcy. 10 The parties to that agreement were: (1) The Marshall Group, 11 LLC; (2) Marshall Medical, LLC; (3) Lincoln City Immediate 12 Health Care, LLC; (3) Redmond Immediate Health Care, LLC; 13 (4) McMinnville Immediate Health Care, LLC; (5) Marshall 14 McMinnville, LLC; and (6) M&CJ, LLC. 15 Through some of these entities, the Marshalls owned and 16 developed commercial property, including several parcels which 17 were located in the business district of McMinnville, Oregon 18 (the “McMinnville Property”). At some point, the Marshalls 19 hired Keeton-King Construction, Inc. (“KKC”) to perform 20 demolition and construction work on their various properties. 21 The record shows that the Marshalls also entered into several 22 transactions with Arland and Ima Jean Keeton (the “Keetons”) 23 which we describe below. 24 The Marshalls were also engaged in the health care business 25 through their health care-named limited liability companies. 26 // 27 // 28 //

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1 They operated urgent care clinics in Lincoln City,2 McMinnville 2 and Redmond, Oregon. The Marshalls apparently became involved 3 in the health care business after they obtained a $5 million 4 business and industry conditional commitment from the United 5 States Department of Agriculture to build two medical buildings 6 in 2002. Under the terms of the commitment, one of the 7 buildings had to be located in a rural area. Because the 8 Marshalls’ McMinnville Property did not meet that requirement, 9 with the assistance of KKC, the Marshalls located property in 10 Redmond, Oregon. In addition, construction of the buildings had 11 to be completed within 540 days. Otherwise, the Marshalls would 12 lose the loan guarantee which was a critical part of the project 13 plan. 14 KKC was involved with the construction of the health care 15 buildings on the McMinnville and Redmond properties. Numerous 16 disputes arose between the Marshalls and KKC in connection with 17 the development of the McMinnville Property. In late 2007, KKC 18 filed a $1.7 million construction lien claim against the 19 McMinnville Property. Thereafter, KKC commenced an arbitration 20 proceeding regarding construction related claims between the 21 parties with respect to the lien. KKC made claims for unpaid 22 work while the Marshalls alleged that the project took 23 substantially longer than expected and far exceeded the 24 contractually agreed upon construction costs. Presumably 25 because of the extra costs and delays, the McMinnville Property 26 27 2 The Lincoln City clinic was closed prior to debtor’s 28 bankruptcy filing.

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1 was at risk. The Marshalls’ opening brief suggests foreclosure 2 of the McMinnville Property by the Keetons was imminent.3 3 In addition to the arbitration proceeding, the Keetons and 4 KKC as plaintiffs, and the Marshalls, Marshall McMinnville, LLC, 5 M&CJ, LLC, Endeavors Inc., Marshall Properties, LLC, The 6 Marshall Group, LLC, and Lake Plaza, LLC, as defendants, were 7 parties in a Yamhill County Circuit Court proceeding. The 8 parties’ dispute in the circuit court proceeding involved, among 9 other things, breach of contract and foreclosure of trust 10 deeds.4 11 Bankruptcy Events 12 On September 4, 2008, The Marshall Group, LLC (which 13 included Marshall McMinnville, LLC, M&CJ, LLC, McMinnville 14 Immediate Health Care, LLC and Redmond Immediate Health Care, 15 LLC) filed a chapter 11 petition. Schedule A showed that debtor 16 owned real property valued at $8,970,000 which consisted of 17 commercial office buildings in McMinnville. On Schedule D, 18 debtor listed secured debt of $7,405,419, of which $6,399,162 19 was unsecured. Debtor listed $490,528 in priority debt on 20 Schedule E representing unpaid employment taxes. On Schedule F, 21 3 22 The Marshalls state in their opening brief that they were in default with PremierWest Bank which had a consensual lien on 23 the McMinnville Property. They then allege that the bank sold its interests in the loans collateralized by the McMinnville 24 Property to the Keetons and then that the Keetons formed a new company, AJK, LLC to harbor that loan. There is no evidence in 25 the record that supports these facts. 26 4 We take judicial notice of the Keetons’ motion for relief 27 from stay at Dkt. No. 105 which contains this information. See Atwood v. Chase Manhattan Mortg. Co. (In re Atwood), 293 B.R. 28 227, 233 n.9 (9th Cir. BAP 2003).

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1 debtor listed $4,738,683 in unsecured debt.5 At the time of 2 debtor’s filing, it was operating the two urgent care clinics 3 located in McMinnville and Redmond. The clinics were suffering 4 from issues with accounts receivable and cash flow. In 5 addition, debtor was still involved in the arbitration 6 proceeding with KKC over the construction costs associated with 7 the McMinnville Property and the state court case was pending. 8 On September 23, 2008, the United States Trustee (“UST”) 9 appointed a committee of unsecured creditors (the “Committee”). 10 A. The KKC Adversary Proceeding 11 On January 13, 2009, the Keetons, KKC and AJK Properties, 12 LLC6 (hereinafter we refer to these parties as “Keeton-King”) 13 filed an adversary proceeding against the Marshalls 14 individually, debtor and other Marshall related entities. The 15 complaint, which was over sixty pages long, alleged several 16 claims for relief, including breach of contract, foreclosure of 17 trust deeds, and foreclosure of assignment of rents.7 18 The background facts alleged in the complaint show that 19 the Marshalls had personally executed two promissory notes in 20 favor of Keeton-King for $980,000 and that Keeton-King was owed 21 for construction work performed on numerous properties, 22 5 23 A significant number of the unsecured creditors were patients who were owed refunds in small amounts. 24 6 AJK Properties, LLC was evidently owned by the Keetons. 25 7 26 We take judicial notice of the adversary complaint because it is relevant to this appeal. In re Atwood, 293 B.R. at 233 27 n.9. It is unclear whether the Keeton-King adversary complaint was identical to the complaint that was filed prepetition in the 28 Yamill County Circuit Court.

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1 including on the McMinnville project (collectively, these debts 2 are referred to in the complaint as the “Global Debt”). 3 Further, Keeton-King had loaned another Marshall related entity, 4 M&CJ, LLC, $1 million dollars (the “Million Dollar Loan”). When 5 none of these debts were paid, the Keeton-King parties and the 6 Marshalls and their related entities entered into an agreement 7 in April 2007.8 That agreement extended the due date for the 8 Global Debt and the Million Dollar Loan to 120 days after the 9 completion of the McMinnville project. In return, the Marshalls 10 and their LLCs agreed to be jointly and severally liable to the 11 Keeton-King parties. Finally, the complaint states that after 12 the April 2007 agreement, the Keetons loaned the Marshalls and 13 their LLCs additional sums which included making their interest 14 payments to PremierWest Bank for the $3.2 million loan obtained 15 by debtor that had been increased to $3.725 million. 16 All together, Keeton-King asserted claims which were 17 secured by debtor’s real property in excess of $5 million and 18 claimed to hold unsecured debts in the amount of $6 million. 19 Debtor and its co-defendants asserted counterclaims seeking 20 $1 million and attorney’s fees. 21 // 22 23 8 In the Marshalls’ opening brief, they maintain that they 24 were “forced” into this new agreement which was written by the Keeton’s CPA, Michael W. Holland, who actually had his license 25 revoked at the time. The Marshalls state that Holland is now a 26 convicted felon and has been reprimanded by the Oregon State Bar for generating the April 2 “agreement” and practicing law without 27 a license. There is no evidence in the record that supports these statements. In any event, whether or not these alleged 28 facts are true does not matter for purposes of this appeal.

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1 B. The Arbitration Proceeding Concludes 2 On February 24, 2009, the bankruptcy court granted KKC 3 relief from stay to continue with the arbitration proceedings. 4 In September 2009, KKC obtained an arbitration award 5 against the Marshalls for $2.7 million plus interest and 6 attorney’s fees. The final award was entered on October 6, 7 2009. The Marshalls moved to vacate the award, arguing that KKC 8 procured the award by fraud, corruption, or other undue means. 9 The factual basis for the Marshalls’ allegation was that KKC had 10 assisted them in locating the property upon which to build their 11 Redmond clinic. According to the Marshalls, it came to light 12 that the Keetons were co-owners of other properties in the 13 Redmond development where the clinic was eventually located. 14 The Marshalls maintained that KKC had performed the construction 15 work on the Redmond property first for the benefit of the 16 Keetons and used construction loan proceeds from the Marshalls 17 to make capital improvements to their properties. 18 The state court directed the arbitrators to reopen the case 19 and hear the Marshalls’ fraud arguments. After doing so, the 20 arbitrators dismissed the Marshalls’ motion to vacate and the 21 state court entered a final order confirming the arbitration 22 award in June 2010. 23 C. The Appointment Of The Trustee 24 On March 27, 2009, the UST filed a motion to dismiss or 25 convert the bankruptcy case to one under chapter 7. The motion 26 was mostly based on debtor’s failure to pay taxes, including 27 employment tax obligations, and alleged unauthorized payments 28 going from debtor to Mr. Marshall and vice versa. Prior to the

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1 hearing on that motion, the UST filed a motion to appoint a 2 chapter 11 trustee in the event the court found dismissal or 3 conversion inappropriate. 4 Numerous parties, including debtor’s attorney, appeared at 5 the April 28, 2009 preliminary hearing on the UST’s two motions. 6 After the preliminary hearing, and before the final hearing, the 7 parties stipulated that (1) the UST’s motion to dismiss would be 8 denied, (2) the motion to convert was reserved pending the 9 chapter 11 trustee’s report, and (3) the UST’s alternative 10 motion to appoint a chapter 11 trustee was granted. The 11 stipulation further provided that the chapter 11 trustee would 12 promptly investigate the financial circumstances of debtor and 13 file an initial report not later than four weeks after the date 14 of acceptance of appointment. The court approved the 15 stipulation and on May 8, 2009, Conrad Myers was appointed the 16 trustee. 17 The trustee took several months to investigate the 18 operations and cash flow from the urgent care clinics. In a 19 July 31, 2009 report, the trustee concluded that the clinics 20 could be turned around and eventually sold for the benefit of 21 the creditors.9 In addition, the trustee elected not to commit 22 the limited cash flow of the estate to engage in costly 23 litigation with KKC. Accordingly, the trustee engaged in 24 negotiations with the Keeton-King parties to settle their 25 secured and unsecured claims asserted in the adversary 26 27 9 We take judicial notice of the trustee’s report which is 28 at Dkt. No. 209. In re Atwood, 293 B.R. at 233 n.9.

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1 proceeding. 2 In March 2010, the trustee filed a notice of intent to 3 compromise the Keeton-King claims. At the same time, the 4 trustee filed a notice of intent to sell the McMinnville 5 Property to Keeton-King by credit bid, free and clear of liens. 6 The trustee also filed a motion for an order authorizing debtor 7 to enter into a lease agreement with Keeton-King so that it 8 could continue to operate the McMinnville urgent care clinic on 9 the property. Finally, the trustee filed a motion for a 10 determination that the Keeton-King parties were good faith 11 purchasers within the meaning of § 363(m). 12 The basic structure of the proposed settlement was as 13 follows: Keeton-King would be allowed a $4.5 million secured 14 claim; the trustee would convey the McMinnville Property to 15 Keeton-King free and clear of all liens; the trustee and Keeton- 16 King would enter into a lease agreement for the McMinnville 17 Property with Keeton-King as landlord and debtor as tenant; 18 Keeton-King would be allowed an unsecured claim in an amount 19 determined by the parties or the court; and the estate and 20 Keeton-King would enter into a settlement agreement and mutual 21 release. 22 The Marshalls filed an objection to the trustee’s proposed 23 sale and compromise, asserting that (1) there was a substantial 24 basis for overturning the arbitration award; (2) the settlement 25 improperly resolved the claims without adequate information; 26 (3) the settlement included property that was not part of the 27 estate; and (4) the value of the McMinnville Property exceeded 28 the amount of any asserted claims by the Keeton-King parties.

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1 Although they filed this objection, the Marshalls did not appear 2 at the June 14, 2010 hearing, produce any witnesses or offer any 3 evidence in support of their alleged value of the McMinnville 4 Property. 5 The bankruptcy court approved the compromise, the lease 6 arrangement, and the sale free and clear of liens and made a 7 good faith determination by separate orders entered on June 28, 8 2010. Those orders were not appealed and became final orders in 9 the case. 10 D. The Confirmation Of The Chapter 11 Trustee’s Plan 11 A week before entry of these orders, on June 21, 2010, the 12 trustee filed the Second Amended Disclosure Statement and Plan 13 of Reorganization. Generally, the Plan provided for the 14 continued operation of the urgent care clinics so that they 15 could eventually be sold for the benefit of the creditors. 16 Through the Plan, the chapter 11 trustee was appointed as the 17 Liquidating Trustee and was given the flexibility to exercise 18 reasonable business judgment to determine when to sell the 19 clinics. 20 Under the Plan, the Marshalls comprised the interest 21 holders class (Class 7) - each held a 50% membership interest in 22 debtor. They received no payment for their membership interests 23 and, therefore, they were impaired under § 1124 and deemed to 24 reject the plan under § 1126(g). Consequently, the Marshalls 25 were not entitled to vote on the Plan. 26 Objections to the Plan were due on August 31, 2010. The 27 Marshalls did not file an objection to the Plan or appear at the 28 confirmation hearing. No testimony was taken during the

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1 confirmation hearing and the bankruptcy court placed its 2 findings and conclusions on the record, deciding that all the 3 statutory requirements for confirmation of the Plan were met. 4 On September 30, 2010, the court entered the order confirming 5 the Plan. The Marshalls did not appeal the confirmation order 6 or request a stay of implementation of the Plan. 7 On the Effective Date of the Plan (October 15, 2010), 8 debtor became the reorganized debtor and the Marshalls’ 9 membership interests were canceled and reissued to the Marshall 10 Group, LLC Liquidating Trust (the “Liquidating Trust”). The 11 membership interests are currently held for the benefit of 12 priority and unsecured creditors. Meanwhile, the clinics have 13 been operating and payments have been made to administrative and 14 priority claimants. In addition, the Plan vested certain 15 secured and unsecured creditors (or creditor representatives) 16 with the right to be on an advisory committee (the “Advisory 17 Committee”). The Advisory Committee’s role was to act in the 18 capacity of a board of directors and oversee the Liquidating 19 Trustee and manager of the day-to-day operations, Performance 20 Improvement Resources. At the time of this appeal, the 21 creditors, Liquidating Trustee, and Advisory Committee have been 22 following the provisions of the Plan for over a year. 23 E. The Marshalls’ Motion To Deny And Revoke The Confirmation Order 24 25 On October 15, 2010, the Marshalls filed their motion to 26 deny and revoke the confirmation order confirming the trustee’s 27 Plan. In their motion, the Marshalls requested entry of an 28 order that provided for (1) the immediate stay of the Plan

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1 confirmation; (2) a hearing as provided under § 1144; and 2 (3) restoration of the Marshalls’ debtor-in-possession status or 3 an immediate appointment of a new trustee. 4 The Marshalls alleged that the proper procedures were not 5 used for their removal as debtors-in-possession;10 that the 6 trustee had not carried out his fiduciary responsibilities and 7 had grossly mismanaged the businesses; and that the Plan had not 8 been offered in good faith. Finally, the Marshalls alleged that 9 the arbitration award was obtained by fraud and that there was 10 an ongoing RICO criminal investigation concerning the actions of 11 KKC and the Keetons during the arbitration proceedings. 12 The trustee filed an opposition, asserting that the 13 Marshalls had to show that the trustee procured the confirmation 14 order by actual fraud to succeed on their motion under § 1144. 15 The trustee argued that the court should be “very cautious” in 16 revoking the Plan when the Marshalls did not have a right to 17 vote and none of the voting creditors who were allegedly 18 defrauded joined or supported their motion. 19 At the December 1, 2010 hearing on the Marshalls’ 20 attorney’s motion to withdraw, the court conducted a 21 “preliminary hearing” on the Marshalls’ motion to deny or revoke 22 the Plan. The bankruptcy court clarified the issues and the 23 corresponding evidence that was to be presented at the final 24 evidentiary hearing scheduled for December 14, 2010. First, the 25 bankruptcy court made clear that the arbitration award was a 26 10 27 The Marshalls refer to themselves as debtors-in- possession, however, the Marshalls were not in bankruptcy 28 themselves.

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1 final judgment and any issues related to that award would not be 2 considered. Mr. Marshall acknowledged to the court that the 3 arbitration award was final and that they would not have another 4 opportunity to present evidence to the bankruptcy court so that 5 it could be overturned. 6 In addition, the bankruptcy court stated that it was 7 treating the Marshalls’ motion to revoke the plan as a motion 8 under Civil Rule 60(b) because there was no testimony at the 9 confirmation hearing.11 The court further explained that the 10 Marshalls had to show that the court was wrong in confirming the 11 Plan under § 1129(a). 12 At the December 14, 2010 final evidentiary hearing,12 the 13 court reiterated that it would not take evidence regarding the 14 Keeton-King transactions, whether related to the settlement of 15 16 11 It is unclear what subsection of Civil Rule 60(b) the 17 court was referring to. 18 12 Three days after the Marshalls filed their motion seeking 19 revocation of the confirmation order, the trustee filed a motion to settle and compromise Keeton-King’s unsecured claims which was 20 also scheduled for hearing on December 14, 2010. The Marshalls objected to the trustee’s proposed settlement. The bankruptcy 21 court overruled the Marshalls’ objection to the settlement at the December 14, 2010 hearing. The court advised the Marshalls that 22 if they ever had specific documentation after the criminal 23 proceedings were finished, they could move for reconsideration of the order at that time. 24 In their opening brief, the Marshalls state that an issue on appeal is whether the bankruptcy court erred in denying their 25 objection to the trustee’s motion to compromise Keeton-King’s 26 unsecured claims. However, they did not designate this order in their notice of appeal and that order has become a final order in 27 the case. Evidently, in an abundance of caution (or oversight), the trustee’s brief addresses the merits of this order. It is 28 unnecessary for us to consider these arguments.

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1 the adversary proceeding or in relation to the arbitration 2 proceeding. The court then focused on whether the confirmation 3 order was procured by fraud under § 1144.13 Mr. Marshall was 4 sworn in and testified, but the record reflects that his 5 testimony was about the alleged fraud of Keeton-King. The court 6 denied the Marshalls’ motion by order entered December 15, 2010. 7 The Marshalls timely appealed. 8 II. JURISDICTION 9 The bankruptcy court had jurisdiction over this proceeding 10 under 28 U.S.C. §§ 1334 and 157(b)(2)(A) and (L). As set forth 11 below, we conclude that this appeal is moot. Therefore, we do 12 not have jurisdiction over the moot appeal. I.R.S. v. Pattullo 13 (In re Pattullo), 271 F.3d 898, 900 (9th Cir. 2001). If this 14 appeal were not moot, we have jurisdiction under 28 U.S.C. 15 § 158. 16 III. ISSUES 17 A. Whether this appeal is moot; and 18 B. Whether the bankruptcy court erred by denying the 19 13 20 This focus was inconsistent with the bankruptcy court’s earlier directive to Mr. Marshall that it was treating the 21 Marshalls’ motion for revocation of the confirmation order under Civil Rule 60(b). In that regard, the court stated that 22 Mr. Marshall had to demonstrate how the court’s ruling was 23 “wrong” rather than how the confirmation was “procured by fraud” within the meaning of § 1144. However, reliance on Civil Rule 24 60(b) or § 1129(a) to revoke a confirmation order is contrary to Ninth Circuit law. Dale C. Eckert Corp. v. Orange Tree Assocs., 25 Ltd. (In re Orange Tree Assocs., Ltd.), 961 F.2d 1445, 1447 26 (9th Cir. 1992). In any event, the court’s error was harmless in light of our decision to dismiss this appeal as moot. See Rule 27 9005 (incorporating Civil Rule 61 which states “At every stage of the proceeding, the court must disregard all errors or defects 28 that do not affect any party’s substantial rights.”).

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1 Marshalls’ motion for revocation of the order confirming the 2 Plan. 3 IV. STANDARD OF REVIEW 4 Mootness is a question of law reviewed de novo. S. Or. 5 Barter Fair v. Jackson Cnty., Or., 372 F.3d 1128, 1133 (9th Cir. 6 2004); Arnold & Baker Farms v. United States (In re Arnold & 7 Baker Farms), 85 F.3d 1415, 1418 (9th Cir. 1996). 8 We review the bankruptcy court’s decision to deny a motion 9 to revoke an order of confirmation for an abuse of discretion. 10 Vicenty v. San Miguel Sandoval (In re San Miguel Sandoval), 11 327 B.R. 493, 511 (1st Cir. BAP 2005); Varde Inv. Partners, L.P. 12 v. Comair, Inc. (In re Delta Air Lines, Inc.), 386 B.R. 518 13 (Bankr. S.D.N.Y. 2008). We follow a two-part test to determine 14 objectively whether the bankruptcy court abused its discretion. 15 United States v. Hinkson, 585 F.3d 1247, 1261-62 (9th Cir. 16 2009). First, we “determine de novo whether the bankruptcy 17 court identified the correct legal rule to apply to the relief 18 requested.” Id. Second, we examine the bankruptcy court’s 19 factual findings under the clearly erroneous standard. Id. at 20 1262 n.20. We affirm the court’s factual findings unless those 21 findings are “(1) ‘illogical,’ (2) ‘implausible,’ or (3) without 22 ‘support in inferences that may be drawn from the facts in the 23 record.’” Id. (internal quotation marks omitted). If the 24 bankruptcy court did not identify the correct legal rule, or its 25 application of the correct legal standard to the facts was 26 illogical, implausible, or without support in the record, then 27 the bankruptcy court abused its discretion. Id. 28

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1 V. DISCUSSION 2 A. Mootness 3 We consider first whether we have jurisdiction to entertain 4 the Marshalls’ appeal. The trustee asserts that this appeal is 5 both constitutionally and equitably moot. As the party 6 advocating mootness, the trustee bears the burden of proving 7 that there is no effective relief for us to provide. Palmdale 8 Hills Prop., LLC v. Lehman Comm. Paper, Inc. (In re Palmdale 9 Hills Prop., LLC), 654 F.3d 868, 2011 WL 3320429, at *4 (9th 10 Cir. 2011). 11 We have previously described the constitutional and 12 equitable mootness rules in United States v. Gould (In re 13 Gould), 401 B.R. 415, 421 (9th Cir. BAP 2009), aff’d, 603 F.3d 14 1100 (9th Cir. 2010): 15 Constitutional mootness derives from Article III of the United States Constitution, which provides that 16 the exercise of judicial power depends on the existence of a case or controversy. The doctrine of 17 constitutional mootness is essentially a recognition of Article III’s prohibition against federal courts’ 18 issuing advisory opinions. While the Article III mootness doctrine has a ‘flexible character,’ it 19 applies when events occur during the pendency of the appeal that make it impossible for the appellate court 20 to grant effective relief. If no effective relief is possible, we must dismiss for lack of jurisdiction. 21 A variation of the mootness rule, the equitable 22 mootness doctrine, applies when appellants ‘have failed and neglected diligently to pursue their 23 available remedies to obtain a stay’ and circumstances have changed so as to ‘render it inequitable to 24 consider the merits of the appeal.’ 25 These rules, which affect our jurisdiction, apply in a § 1144 26 proceeding. See In re Delta Air Lines, 386 B.R. at 537 n.15 27 citing Chang v. Servico, Inc. (In re Servico, Inc.), 161 B.R. 28 297, 300–01 (S.D. Fla. 1993); Almeroth v. Innovative Clinical

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1 Solutions, Ltd. (In re Innovative Clinical Solutions, Ltd.), 2 302 B.R. 136, 141 (Bankr. D. Del. 2003) (applying equitable 3 mootness to dismiss a case brought under § 1144); S.N. Phelps & 4 Co. v. Circle K Corp. (In re Circle K Corp.), 171 B.R. 666, 5 669–70 (Bankr. D. Ariz. 1994) (dismissing § 1144 complaint on 6 grounds of mootness). 7 1. This Appeal Is Constitutionally Moot 8 We may dismiss an appeal based on mootness when a 9 reorganization plan has been so substantially consummated that 10 effective relief is no longer available. See Arnold & Baker 11 Farms, 85 F.3d at 1419-20. “‘[S]ubstantial consummation means — 12 (A) transfer of all or substantially all of the property 13 proposed by the plan to be transferred has been transferred; 14 (B) assumption by the debtor or by the successor to the debtor 15 under the plan of the business or of the management of all or 16 substantially all of the property dealt with by the plan; and 17 (C) commencement of distribution under the plan.” § 1101(2). 18 Here, numerous critical transactions have been completed or 19 implemented in accordance with the confirmed Plan: 20 • Prior to confirmation, the McMinnville Property was 21 sold to Keeton-King in satisfaction of its secured claims 22 pursuant to a court-approved compromise. The order approving 23 that sale was entered by a separate order which long ago became 24 a final order in this case. Part and parcel of that sale was 25 Keeton-King’s agreement to lease the McMinnville Property to 26 debtor so that it could continue to operate the McMinnville 27 urgent care clinic on the property. That order also is final 28 and cannot be undone. The sale and lease are critical to the

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1 continued operation of the McMinnville urgent care clinic which 2 itself is a crucial component of the Plan. 3 • On the Effective Date, the Marshalls’ equity interests 4 in debtor were extinguished and new membership interests were 5 issued in the name of the Liquidating Trust for the benefit of 6 the unsecured creditors. 7 • On the Effective Date, all assets of debtor revested 8 in the reorganized debtor. 9 • On the Effective Date, the Liquidating Trustee 10 implemented the Plan provisions for the post-confirmation 11 operation of the clinics to increase their profitability and 12 enhance their value in preparation for an eventual sale. The 13 proceeds of the sale will be used to partially satisfy the 14 claims of unsecured creditors in accordance with the Plan.14 The 15 day-to-day operations of the clinics continue to be performed by 16 Performance Improvement Resources. 17 • On the Effective Date, an Advisory Committee was 18 appointed. That committee has the authority to act as an 19 advisory board of directors and has the power of oversight of 20 the Liquidating Trustee and the manager of the reorganization 21 debtor. 22 • Distributions have commenced. A distribution has been 23 made to administrative and priority claims, including that of 24 the Internal Revenue Service (“IRS”). There is approximately 25 $3,666 remaining on the IRS’s secured claim. 26 27 14 The trustee had estimated that unsecured creditors would 28 receive a return of approximately ten to twenty percent.

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1 These transactions and the disbursements to administrative 2 and priority creditors compel us to conclude that the Plan has 3 been substantially consummated. However, substantial 4 consummation by itself does not resolve the issue. We still 5 must consider whether we could grant effective relief. First 6 Fed. Bank of Cal. v. Weinstein (In re Weinstein), 227 B.R. 284, 7 289 (9th Cir. BAP 1998). 8 The Marshalls have requested a myriad of novel forms of 9 relief given the order on appeal. They “suggest” that (1) the 10 chapter 11 bankruptcy was improper because the Keetons declared 11 themselves managing members of debtor; (2) the Keetons had no 12 standing in the case to join in the UST’s motion for the 13 appointment of a trustee; (3) the Keetons are not good faith 14 purchasers and any such finding should be “revoked”; (4) the 15 Keetons should be excluded from having any input into the 16 chapter 11 case; (5) no payments are due to the Keetons from 17 debtor; and (6) the trustee should be removed from the status as 18 a trustee for debtor and another trustee should be appointed to 19 review his activities. 20 In essence, the Marshalls seek a “do over” of the entire 21 bankruptcy proceeding which they themselves commenced over three 22 years ago. The orders appointing the trustee and granting the 23 Keetons good faith purchaser status are final orders and, as 24 such, we do not revisit the merits of those orders in this 25 appeal. In addition, were we to grant the Marshalls’ remaining 26 “suggestions,” an unraveling of the underlying bankruptcy case 27 would occur and innocent third parties would be affected. Even 28 if there were some merit to the Marshalls’ argument — which

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1 there is not — an unraveling of the case would produce 2 unacceptable and inequitable results. 3 Absent the negotiated agreements with Keeton-King, debtor 4 would once again become enmeshed in costly and protracted 5 litigation. Further, absent the lease agreement with Keeton- 6 King for the McMinnville Property, the operations of the 7 McMinnville clinic would be put at risk. Without the 8 McMinnville clinic operations, the modest return to unsecured 9 creditors would further be reduced. 10 In short, under these circumstances, the substantial 11 consummation of the Plan is the “event” that has occurred during 12 the pendency of this appeal that makes it impossible for us to 13 grant effective relief to the Marshalls. If no effective relief 14 is possible, we must dismiss this appeal for lack of 15 jurisdiction. 16 2. The Appeal Is Equitably Moot 17 Even if we could fashion some effective relief, we conclude 18 that the Marshalls’ appeal is also equitably moot for several 19 reasons. First, there was only one objection to the Plan — 20 which was later withdrawn — and the Marshalls themselves never 21 objected to the Plan or even appeared at the confirmation 22 hearing. Second, it is undisputed that the Marshalls did not 23 appeal the confirmation order or seek a stay of the 24 implementation of the Plan. Next, as discussed above, the Plan 25 has been substantially consummated and the Marshalls’ requested 26 relief would affect both the rights of parties not before us in 27 this appeal and the success of the confirmed Plan. Finally, any 28 relief at this late date would undermine the strong policy

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1 favoring the finality of confirmation orders that is recognized 2 in this circuit. See Great Lakes Higher Educ. Corp. v. Pardee 3 (In re Pardee), 193 F.3d 1083, 1087 (9th Cir. 1999). Therefore, 4 even if we could fashion effective relief, it would be 5 inequitable to do so under these circumstances. 6 In sum, upon consideration of the principles of both 7 constitutional and equitable mootness, we conclude that this 8 appeal is moot and should be dismissed for lack of jurisdiction. 9 B. The Merits 10 Even if this appeal were not moot, we affirm the bankruptcy 11 court’s decision on the merits. 12 Absent an appeal, the parameters for revocation of a plan 13 are circumscribed by § 1144 which provides: 14 On request of a party in interest at any time before 180 days after the date of the entry of the order of 15 confirmation, and after notice and a hearing, the court may revoke such order if and only if such order 16 was procured by fraud. An order under this section revoking an order of confirmation shall- 17 (1) contain such provisions as are necessary to 18 protect any entity acquiring rights in good faith reliance on the order of confirmation; and 19 (2) revoke the discharge of the debtor. 20 Section 1144 makes clear that “[t]he sole permissible basis [for 21 revocation] is fraud that is complained of within 180 days. If 22 there is no fraud, the order cannot be revoked.”15 Official 23 Comm. of Unsecured Creditors v. Michelson (In re Michelson), 24 141 B.R. 715, 723 (Bankr. E.D. Cal. 1992). 25 Here, the record does not show that the order confirming 26 27 15 The Marshalls’ motion was filed well within the 180-day 28 period.

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1 the plan was “procured by fraud.” The Marshalls simply 2 reiterate the fraud of the Keetons and Keeton-King in their 3 opening brief, but then ask this Panel to conclude that the 4 trustee must have participated in the fraud because he turned a 5 “blind eye” to obvious questions raised by the Marshalls’ 6 unsubstantiated allegations especially when: the trustee 7 (1) declared the Keetons a “good faith purchaser”; (2) testified 8 falsely about the Committee’s involvement in the settlement of 9 the Keeton-King unsecured claims; and (3) ignored that KKC was a 10 partner in ABC Partners, LLC; that ABC Partners, LLC had 11 collateralized Marshall McMinnville, LLC properties on March 23, 12 2006 and that the Marshall McMinnville, LLC was “missing” 13 monies. 14 The record does not support the conclusion the Marshalls’ 15 advocate. It was the bankruptcy court, not the trustee, that 16 determined that Keeton-King was a good faith purchaser after a 17 lengthy hearing. The Marshalls did not appear at the hearing 18 for this determination or appeal the ruling. Further, there is 19 nothing in the record that supports the Marshalls’ allegation 20 that the trustee testified falsely about the Committee’s 21 involvement in the proposed settlement of the Keetons and 22 Keeton-Kings unsecured claims. The Committee’s counsel 23 represented at the December 14, 2010 hearing that the Committee 24 withdrew its letter objection to the settlement. Counsel also 25 acknowledged that the Committee had gone over the facts and all 26 of the issues and did not object to the settlement. 27 The Marshalls also provided no support for their assertion 28 that the trustee knew or should have known about the

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1 transactions between Keeton-King and ABC Partners, LLC or the 2 alleged “missing monies.” We found no evidence in the record 3 that even comes close to suggesting that the trustee somehow 4 used this information to perpetuate a fraud upon the creditors 5 or the court when he proposed the Plan. 6 In short, bald assertions and conclusory statements do not 7 prove that the confirmation order was “procured by fraud.” 8 There is simply no evidence in the record that the trustee 9 engaged in a fraudulent plan or scheme or that the creditors or 10 bankruptcy court were actually deceived by any fraudulent 11 misrepresentations, false statements, or omissions in connection 12 with the confirmation of the Plan. Accordingly, the bankruptcy 13 court properly denied the Marshalls’ motion to revoke the Plan. 14 Because the Marshalls also seek relief from the Plan in 15 their opening brief under § 1129(a) and Civil Rule 60(b) and 16 (d), we reiterate that an order confirming a plan can only be 17 revoked under § 1144. In re Orange Tree Assocs., Ltd., 961 F.2d 18 at 1447. Thus, neither § 1129(a) nor Civil Rule 60(b) provides 19 an alternative basis for revocation of the Plan. In any event, 20 the Marshalls offered no coherent basis for the reversal of the 21 confirmation order under § 1129 or Civil Rule 60(b) or (d). 22 VI. CONCLUSION 23 For the reasons discussed, we DISMISS this appeal as moot. 24 Even if this appeal were not moot, we would AFFIRM the 25 bankruptcy court’s decision on the merits. 26 27 28

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