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Raborn v. Schott

United States District Court, M.D. Louisiana

January 28, 2019




         Before the Court are Respondent's Motions to Dismiss Petitioner's Appeals for Mootness and Lack of Standing.[1] For the reasons stated below, the court GRANTS Respondent's motions.


         On August 10, 2015 Susan M. Raborn ("Petitioner") filed a voluntary Chapter 11 bankruptcy. (Doc. 7 at p. 8). On August 31, 2016, it was converted to a Chapter 7 bankruptcy. (Id.). Martin Schott ("Respondent") was appointed trustee of the bankruptcy estate. In Re Raborn, No. 15-10938, 12017 WL 1417204, at *2 (Bankr. M.D. La Apr. 20, 2017)(Doc. 644). Petitioner alleges that the Bankruptcy Court for the Middle District of Louisiana improperly approved a fraudulent and faulty accounting ("Final Report") filed by Respondent in his capacity as trustee of Petitioner's bankruptcy state. (3:18-CV-00175 Doc. 7 at p. 1.). The Court gleans Petitioner's allegations to be that Respondent failed to object to exemptions of certain property from the bankruptcy proceedings within the 30 days required under Fed.R.Bankr.P. 4003(a)(b), but listed the exempted property in the Final Report anyway. (Id. at p. 9). Petitioner further alleges that Respondent's accounting shows that he collected $405, 000.00[2] from Petitioner's estate, but upon realizing that he failed to properly object to Petitioner's exemption of what seems to be the entire settlement amount, Respondent "devalued the price of the settlement" from $405, 000.00 to $207, 000.00 and claimed that only $198, 000.00 was attributable to certain stock dividends from Pedicon, Inc. that Petitioner allegedly exempted. (Id.).

         Respondent argues that the Bankruptcy Court entered an order approving the Final Report on May 31, 2018. (3:18-CV-00175 Doc. 9 at ¶ 2). Petitioner filed a motion for reconsideration of that Order, which was denied on June 22, 2018 with written reasons. (Id.). Pursuant to the terms of the Final Report, Respondent distributed all of the funds. (Id. at ¶ 4). One of the creditors was overpaid, and returned the sum of $887.03. (Id.). Petitioner filed a motion for supplemental distribution to distribute the returned money to other creditors, which was granted. ("Supplemental Distribution")(Id. at ¶ 5). Petitioner moved for reconsideration of the supplemental distribution, and was denied relief on September 20, 2018. Now, petitioner appeals the order approving the Final Accounting and the order denying reconsideration (3:18-CV-00175 Doc. 1). Petitioner also appeals the order approving the Supplemental Distribution made by the Respondent, and the order denying her motion to reconsideration. (3:18-CV-00904 Doc. 1).

         II. ARGUMENTS

         Respondent argues that Appellant's appeals in this matter are moot, because the Orders issued by the Bankruptcy Court were not stayed. Respondent also argues that the distribution has been completed and that under the theory of equitable mootness, both appeals should be dismissed. (3:18-CV-00904 Doc. 7, 3:18-CV-00175 Doc. 9).

         Respondent further argues that Petitioner does not have standing to appeal either of the the Bankruptcy Court's ruling on the Final Report or the Supplemental Distributions. (Id.). Respondent claims that this is not a surplus case, as granting Petitioner's requested relief would not result in recovery of more than the value of the estate. (Id.). Respondent also asserts that Petitioner is not "a person aggrieved" as Petitioner would not receive any distribution should she be victorious in her appeal, and therefore does not have standing to file this appeal. (Id.). Further, Respondent argues that the funds distributed in the Final Report were generated by a settlement agreement, which ultimately was approved by the Bankruptcy Court. (Id.). Respondent contends that contrary to Petitioner's arguments, the funds listed in the Final Report had nothing to do with Petitioner's exempted Pedicon, Inc. dividends, which were addressed in a secondary agreement between Petitioner and Respondent. (Id.).

         Petitioner's arguments are often confusing and difficult to follow, however he court gleans Petitioner's argument to be that the Pedicon, Inc., dividends should not have been included in the Final Report for distributions, as she filed an exception to the use of those dividends, to which Respondent did not respond. Petitioner cites various cases to establish that any exempted funds not addressed by the trustee within a 30-day window cannot be listed in the Final Report. Petitioner did not provide an Appellate Brief for arguments pertaining to the Supplemental Distribution.


         A. Bankruptcy Appeal

         In bankruptcy appeals, district courts review Bankruptcy Court rulings and decisions under the same standards employed by federal courts of appeal. Carrieri v. Inc., 393 F.3d 508, 517 (5th Cir. 2004). Under the "clearly erroneous" standard, this Court will reverse "only if, on the entire evidence, we are left with the definite and firm conviction that a mistake has been made." Walker v. Cadle Co., 51 F.3d 562, 565 (5th Cir. 1995). A bankruptcy court's dismissal for lack of standing is reviewed de novo. Joffroin v. Tufaro, 606 F.3d 235, 238 (5th Cir. 2010).

         Therefore, in addressing Respondent's motion to dismiss Petitioner's appeal, the question the Court must answer is whether Petitioner has pleaded sufficient facts to create the reasonable inference that the Bankruptcy Court's ruling was "clearly erroneous." The Court finds that Petitioner has not met that burden for the reasons set forth below.

         IV. ...

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