667 B.R. 147
10th Cir. BAP2025Background
- Roberts, Flaherty, and Kneen collaborated in a real estate venture, forming PdC, LLC for investing in Mexican beachfront property, using a Mexican entity (RCC) for local ownership.
- Roberts was found by a Colorado state court to have breached fiduciary duties by acquiring valuable property interests for himself, defying injunctions, and engaging in litigation misconduct, resulting in over $21 million in damages and his incarceration for contempt.
- After significant adverse rulings and substantial damages were awarded against him in state court, Roberts filed for Chapter 11 bankruptcy, which was later converted to Chapter 7 due to a finding of bad faith.
- The Chapter 7 trustee and PdC creditors negotiated a settlement under which the PdC claim was allowed in a reduced amount, with certain rights and appeals withdrawn. Roberts objected, contending that the agreement overlooked defenses such as setoff and failed to address his claim objections.
- The bankruptcy court approved the settlement based on a lengthy evidentiary hearing, finding the likelihood of overturning state court rulings on appeal to be negligible, and dismissed Roberts’s objections as lacking merit.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Approval of settlement without resolving setoff/claim objections | Roberts argued court must first adjudicate setoff and claim objections before approving settlement. | PdC Creditors maintained settlement was fair; setoff and objections were moot due to state court rulings. | Bankruptcy court not required to resolve claim/setoff before approval. |
| Application of Kopexa factors (likelihood of success on appeal) | Roberts argued bankruptcy court understated chances of success on appeal of state court's rulings. | PdC Creditors (and Trustee) presented expert evidence that appeal had little chance of success. | Court credited Trustee’s and expert’s evidence; found negligible chance. |
| Fairness of the settlement to the debtor and estate | Roberts claimed settlement was unfair as it unjustly enriched PdC over other creditors. | PdC argued settlement was reasonable, with benefit to estate after expert analysis. | Settlement was found fair and within range of reasonableness. |
| Credibility and methodology of expert testimony | Roberts' expert presented arguments for his chance on appeal and setoff rights. | Trustee’s expert, Fairless, methodically rebutted all potential appellate issues. | Bankruptcy court credited Trustee’s expert; rejected Roberts’s. |
Key Cases Cited
- Kearney v. Unsecured Creditors Comm., 987 F.3d 1284 (10th Cir. 2021) (standard for bankruptcy court approval of settlements; abuse of discretion review)
- In re Kopexa Realty Venture Co., 213 B.R. 1020 (10th Cir. BAP 1997) (four-factor test for evaluating bankruptcy settlements)
- Citizens Bank of Md. v. Strumpf, 516 U.S. 16 (1995) (definition and rationale for setoff in bankruptcy)
- In re Myers, 362 F.3d 667 (10th Cir. 2004) (mutuality requirement for setoff in bankruptcy)
- In re Davidovich, 901 F.2d 1533 (10th Cir. 1990) (setoff in bankruptcy requires mutual and enforceable debts outside of bankruptcy)