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In re 800 Bourbon Street, LLC

United States District Court, E.D. Louisiana

October 18, 2019


          ORDER & REASONS


         Before the Court is a Notice of Appeal from Bankruptcy Court (Rec. Doc. 1) filed by Appellant 800 Bourbon Street, LLC (“Appellant”). Having considered the briefs, the record, and the applicable law, the Court finds, for the reasons expressed below, that the Bankruptcy Court's decision should be AFFIRMED.


         Appellant is an LLC and owner of the building located at 800 Bourbon Street (“the Property”).[1] In 2005, Appellant consisted of two members, Johnny Chisholm and Doyle Yeager. Mr. Chisholm plays a crucial role in the history of this litigation. Mr. Chisholm was also the owner and sole member of Chisholm Properties Circuit Events L.L.C. (“Circuit Events”). In April of 2005, Chisholm decided he wanted to purchase the name and production rights to a series of parties held annually in Orlando, Florida known as “Gay Days, ” to be owned and operated by Circuit Events.

         To secure funding for the investment, Chisholm sought a loan from Bay Bridge. Bay Bridge's owner and sole member was Chisholm's associate Julian MacQueen. Macqueen agreed to loan the $1, 200, 000 required to purchase the rights to “Gay Days.” Due to the lack of assets owned by Circuit Events and Chisholm, Chisholm and MacQueen structured the transaction so that Appellant was the borrower, and the Property was the collateral.

         Over the next few years, Bay Bridge made several additional operating loans to Appellant, while Appellant simultaneously paid back some of the original $12, 000, 000 loan. Eventually, Appellant filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code (“2008 Bankruptcy”). Taking into account the subsequent loans, interest, and some repayment, Bay Bridge made a secured claim for $1, 360, 571.01 in the 2008 Bankruptcy. In 2009, the Bankruptcy Court confirmed Appellant's Plan of Reorganization in 2009 (“2009 Plan”). The Plan provided for a treatment of Bay Bridge's claim. The interpretation of the 2009 Plan and how it treats Bay Bridge's claim is one the main issues on appeal to this Court.

         On October 15, 2014, Appellant again filed for Chapter 11 Bankruptcy (“2014 Bankruptcy”). Bay Bridge believed its claim from the 2009 Plan had not yet been paid. Thus, Bay Bridge placed a claim in 2014 Bankruptcy for $1, 979, 886.47, which it alleged was secured by an interest in the Property. The real estate was then sold at auction for $8, 175, 000. After an agreement between Bay Bridge and Appellant, the claim by Bay Bridge was lowered to $1, 649, 000 because Bay Bridge dropped its claim for attorneys' fees. $1, 649, 000 of the auction price was then set aside and placed in escrow, subject to Bay Bridge's lien and the ultimate outcome of this dispute.

         On July 21, 2015, Appellant filed an adversary proceeding in the Eastern District of Louisiana objecting to Bay Bridge's Proof of Claim. Appellant claimed, inter alia, that the 2009 Plan disposed of Bay Bridge's claim in a way that renders its 2015 claim for a portion of the proceeds from the sale of the Property much lower than stated.

         On September 1, 2015, Appellant filed a motion for summary judgement (“MSJ”) on this issue and others that have since been dropped by Appellant. Bay Bridge then filed a cross motion for summary judgement (“Cross Motion”), seeking judgement that it possessed a valid lien on the Property for its stated claim. A hearing on the motions was set for October 15, 2015.

         According to the Bankruptcy Court, Appellant initially represented that very little discovery would be needed on the cross motions for summary judgment. As a result, the Bankruptcy Court barred any discovery pending the result of the hearing on the motions for summary judgment and set an October 12, 2015 deadline for Appellant to submit a Motion to Conduct Discovery. On October 12, 2015 Appellant apparently had a change of heart and filed a Motion to Conduct Discovery. The Bankruptcy Court deferred ruling on the Motion to Conduct Discovery until after ruling on the MSJ and Cross Motion but gave no reasons for deferring ruling on that motion. On November 15, 2019 the Bankruptcy Court entered a ruling denying Appellant's MSJ and granting Bay Bridge's Cross Motion after finding that Appellant failed to properly object to Bay Bridge's Proof Claim within 60-Days of the 2009 Plan's confirmation.

         On December 4, 2015, Appellant filed a Motion to Reconsider (“First Motion to Reconsider”) alleging new evidence had been discovered after the hearing on October 15 that indicated Chisholm, the signor of Appellant's notes and collateral mortgage giving rise to Bay Bridge's claim, had reach a settlement with Bay Bridge reducing the debt to $750, 000. The Bankruptcy Court granted the motion due to the truncated nature of the initial discovery.

         Following the Bankruptcy Court's grant of Appellant's First Motion to Reconsider, counsel for Appellant withdrew under threat of a malpractice suit. On January 26, current counsel for Appellant filed a Motion to Enroll as Counsel accompanied by a Second Motion to Reconsider. The Second Motion to Reconsider alleged that Chisholm and Julian MacQueen conspired to commit fraud by using their LLCs as signatories for personal loans. The Bankruptcy Court denied the Second Motion to Reconsider because “new counsel [thinking] of a new legal theory is not grounds for reconsideration.”[2]

         Immediately prior to the trial based on the grant of the First Motion to Reconsider, Appellant submitted a Motion to Designate Issues for Trial that contained all new issues. The Bankruptcy Court construed the motion as a Third Motion to Reconsider and permitted two of the issues raised by Appellant to be added as issues for trial. The court ruled in favor of Bay Bridge on all three trial issues, none of which were contested by Appellant on appeal.

         Following the trial judgment, Appellant filed a timely notice of appeal. Appellant raises four issues on appeal:

1) Whether the Bankruptcy Court erred in granting summary judgement in favor of Bay Bridge on the basis that Bay Bridge had a “fully secured” claim under the 2009 plan;
2) Whether the Bankruptcy Court erred in granting summary judgement allowing Bay Bridge's claims despite facts in the record that could establish Appellant's ability to offset Bay Bridge's claim through Appellant's own fraudulent conveyance claim;
3) Whether the Bankruptcy Court's failure to provide reasons for deferring judgement on Appellant's Motion for Expedited Discovery was an abuse of discretion or in the alternative, deprived this Court of the ability to meaningfully review the order; and
4) Whether the Bankruptcy Court abused its discretion under Rule 59(e) after receiving evidence of Bay Bridge's discovery misconduct.


         This Court has jurisdiction over this case pursuant to Title 28, United States Code, section 158(a) and Federal Rule of Bankruptcy Procedure 8001. See 28 U.S.C. § 158(a); Fed.R.Bankr.P. 8001. The standard of review for a bankruptcy appeal by a district court is the same as when a court of appeals reviews a district court proceeding. See 28 U.S.C. § 158(c)(2). Accordingly, the Court reviews a bankruptcy court's conclusions of law de novo and its findings of fact for clear error. See In re Nat'l Gypsum Co., 208 F.3d 498, 504 (5th Cir. 2000). Mixed questions of law and fact are reviewed de novo if the bankruptcy court is developing “auxiliary legal principles” to use in future cases, but if the mixed question primarily deals with case-specific factual issues then the standard of review is clear error. U.S. Bank N.A. v. Village At Lakeridge, LLC, 583 U.S. 138 (2018). The Court reviews discretionary decisions for abuse of discretion. Matter of Mendoza, 111 F.3d 1264, 1270 (5th Cir. 1997). A bankruptcy court abuses its discretion when its ruling is based on “an erroneous review of the law or on a clearly erroneous assessment of the evidence.” In re Yorkshire, LLC, 540 F.3d 328, 331 (5th Cir. 2008) (quoting Chaves v. M/V Medina Star, 47 F.3d 153, 156 (5th Cir. 1995)).

         Finally, an appellate court interprets the terms of a bankruptcy reorganization plan and confirmation order de novo and holistically. See In re Nat'l Gypsum Co., 208 F.3d 478, 474 (5th. Cir. 2000). Deference is owed “to a bankruptcy court's reasonable interpretation of ambiguous terms in the plan, however, if real ambiguity exists.” In re Davis Offshore, L.P., 644 F.3d 259, 263 (5th. Cir. 2011).


         Next, the Court turns to the merits of the issues raised on appeal.

         I. The Treatment of Bay Bridge's Proof of ...

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