In re: Keystone Mine Management II, EC-15-1202-KuMaJu

Background

Chapter 7 trustee Vincent Gorski sought to sell all assets of debtor Keystone Mine Management II (KMM II) to Bush Management Company (Bush), which acquired Weyerhaeuser trust’s secured loan and lien rights and filed an $8.1 million secured claim.
Trustee negotiated a combined sale-and-compromise with Bush that (a) allowed Bush to credit-bid subject to caps, (b) split assets into liened (Group A) and unliened (Group B) groups, and (c) limited Bush’s opening credit bid to preserve potential overbids.
Trustee marketed the assets via multiple industry listings over many months; no competing bids were received at the auction.
Bankruptcy court approved bidding procedures, the sale to Bush, and the trustee’s compromise; court found the sale arm’s-length, adequately marketed, in the estate’s best interests, and that Bush was a good-faith purchaser under 11 U.S.C. § 363(m).
Appellants (manager DuShane and others) appealed the bidding procedures order, the sale order, and the compromise order but did not obtain a stay or challenge Bush’s proof of claim or commence adversary proceedings to invalidate Bush’s liens.
Panel: appeals from bidding procedures and sale orders dismissed as moot under § 363(m); compromise order affirmed because appellants failed to provide the hearing transcript and raised no distinct argument attacking the compromise.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Appellate standing	Appellants argue they have standing to challenge sale and compromise affecting their pecuniary interests.	Trustee/Bush argue appellants are hopelessly unlikely to receive distribution so lack "person aggrieved" standing.	Panel declined to dismiss for lack of standing; allowed merits consideration.
Application of § 363(m) / mootness of sale and bidding appeals	Appellants contend sale procedures and allowance of Bush’s claim were improper and sale should be unwindable.	Trustee/Bush say Bush acted in good faith and § 363(m) protects the sale; without a stay the sale cannot be undone, so appeals are moot.	Court found findings of good faith not clearly erroneous; § 363(m) renders appeals of bidding procedures and sale orders moot and dismissed them.
Validity of Bush’s lien/credit bid strategy	Appellants assert Bush’s loan/lien was unenforceable (statute of limitations and choice-of-law issues) and trustee acted collusively by not litigating them.	Trustee and Bush argue appellants never timely objected to claim or brought adversary proceedings; trustee reasonably concluded challenges lacked merit.	Court held appellants failed to place lien validity squarely before bankruptcy court; trustee’s findings credible; no relief available under § 363(m).
Reviewability of compromise (Rule 9019) order	Appellants argue the compromise was improper and should be reversed.	Trustee/Bush argue compromise either protected by § 363(m) or was properly approved under Rule 9019.	Panel declined to extend § 363(m) to compromise here, but affirmed because appellants failed to order hearing transcript and raised no distinct arguments on appeal.

Key Cases Cited

Paulman v. Gateway Venture Partners III, L.P. (In re Filtercorp, Inc.), 163 F.3d 570 (9th Cir.) (lack of good faith shown by fraud, collusion, or grossly unfair advantage)
Retz v. Samson (In re Retz), 606 F.3d 1189 (9th Cir.) (clear error standard for bankruptcy factual findings)
Ewell v. Diebert (In re Ewell), 958 F.2d 276 (9th Cir.) (good-faith purchaser buys in good faith and for value)
Mann v. ADI Invs., Inc. (In re Mann), 907 F.2d 923 (9th Cir.) (redemption-right exception in appeals involving foreclosure sales)
Onouli-Kona Land Co. v. Estate of Richards (In re Onouli-Kona Land Co.), 846 F.2d 1170 (9th Cir.) (same)
Thorpe Insulation Co. v. Motor Vehicle Cas. Co. (In re Thorpe Insulation Co.), 677 F.3d 869 (9th Cir.) (mootness where appeal cannot provide effective relief)
Fondiller v. Robertson (In re Fondiller), 707 F.2d 441 (9th Cir.) (standing as person aggrieved in bankruptcy appeals)