Hope 7 Monroe Street Ltd. Partnership v. Riaso, LLC (In Re Hope 7 Monroe Street Ltd. Partnership), 408 U.S. App. D.C. 347

Background

Hope 7 Monroe Street LP obtained a $1.6M bridge loan arranged by Musse Leakemariam; Leakemariam formed RIASO and acted as both broker and lender.
Hope 7 filed Chapter 11 in 2009; case converted to Chapter 7. RIASO filed a proof of claim (~$3M); Hope 7 objected alleging fraud and breach of fiduciary duty.
The bankruptcy court overruled Hope 7’s objection, approved sale/settlement of estate claims related to RIASO, and ordered distribution of sale proceeds to RIASO; trustee’s report showed estate assets roughly $3.2M and total claims about $3.89M (RIASO ~$3.04M).
In 2010 Hope 7 learned additional evidence (via discovery in a related Superior Court action and Leakemariam’s deposition) it claimed showed RIASO was a sham and that prior orders resulted from fraud; Hope 7 moved under Fed. R. Civ. P. 60(b).
The bankruptcy court denied relief under Rules 60(b)(2), (3), and (6); the district court affirmed. On appeal, this court considered standing, mootness (§ 363(m)), and whether the bankruptcy court abused its discretion in denying Rule 60(b) relief.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Standing to appeal bankruptcy settlement order and claim/distribution orders	Hope 7: success could produce estate surplus that would revest in debtor; thus it has prudential standing as a "person aggrieved."	RIASO: Hope 7 is a debtor and generally lacks standing; appeal may be moot or nonjusticiable.	Court: Hope 7 failed to show standing to challenge the settlement order (no briefing/evidence that reopening it would create a surplus); but has standing to challenge the proof-of-claim and distribution orders.
Mootness / § 363(m) re: sale proceeds/distribution	Hope 7: asks only to reopen claim and distribution orders, not to rescind sale.	RIASO: § 363(m) bars appellate relief because sale to good-faith purchaser was not stayed.	Court: § 363(m) inapplicable to proof-of-claim or distribution orders; sale-restoration rule does not bar review of claim/distribution orders here.
Rule 60(b)(2) — newly discovered evidence	Hope 7: discovery in Aug–Sept 2010 revealed RIASO’s sham structure and banking absence; evidence could not have been found earlier.	RIASO: Evidence could have been discovered earlier with due diligence (bankruptcy Rule 2004 or other discovery).	Court: Abuse of discretion not shown — evidence was discoverable earlier and Hope 7 failed to exercise reasonable diligence; denial affirmed.
Rule 60(b)(3) — fraud/misconduct in litigation	Hope 7: RIASO committed fraud on the court by concealing sham status and filing a false proof of claim.	RIASO: Alleged wrongdoing relates to the underlying transaction, not litigation misconduct; no clear-and-convincing proof of litigation fraud or prejudice.	Court: Denial affirmed — Rule 60(b)(3) targets fraud in litigation (perjury, concealment in discovery); Hope 7 lacked clear-and-convincing proof and was not prevented from presenting its case.
Rule 60(b)(6) — extraordinary circumstances	Hope 7: equitable relief warranted based on newly discovered evidence and alleged fraud.	RIASO: No independent basis beyond (2) and (3); cannot use (6) to evade their limits.	Court: Denial affirmed — (6) cannot be used to bypass requirements of (2)/(3); no separate extraordinary circumstance shown.

Key Cases Cited

McGuirl v. White, 86 F.3d 1232 (D.C. Cir. 1996) (prudential "person aggrieved" standing rule in bankruptcy appeals)
Liljeberg v. Health Servs. Acquisition Corp., 486 U.S. 847 (1988) (Rule 60(b)(6) cannot be premised on grounds covered by clauses (b)(1)–(5))
Summers v. Howard Univ., 374 F.3d 1188 (D.C. Cir. 2004) (Rule 60(b)(3) requires showing fraud/misconduct that prevented full and fair presentation)
In re Greater Se. Cmty. Hosp. Found., Inc., 586 F.3d 1 (D.C. Cir. 2009) (appellate review standards for bankruptcy appeals)
Murray v. District of Columbia, 52 F.3d 353 (D.C. Cir. 1995) (standard of review for denial of Rule 60(b) motion)