                                                          FILED
                                                           AUG 20 2013
                                                       SUSAN M SPRAUL, CLERK
 1                                                       U.S. BKCY. APP. PANEL
                                                         OF THE NINTH CIRCUIT

 2
 3                  UNITED STATES BANKRUPTCY APPELLATE PANEL
 4                            OF THE NINTH CIRCUIT
 5   In re:                        )     BAP Nos.     NV-12-1346-KiCoD
                                   )                  NV-12-1347-KiCoD
 6   COMMUNITY BANCORP,            )                  (Related appeals)
                                   )
 7                  Debtor.        )     Bk. No.      10-20038
                                   )
 8   WILMINGTON TRUST COMPANY;     )
     HOLDCO ADVISORS, L.P.,        )
 9                                 )
                    Appellants,    )
10                                 )
     v.                            )     M E M O R A N D U M1
11                                 )
     YVETTE WEINSTEIN, Chapter 7   )
12   Trustee; FEDERAL DEPOSIT      )
     INSURANCE CORPORATION, as     )
13   Receiver of Community Bank of )
     Nevada; PACIFIC COAST BANKERS )
14   BANK,                         )
                                   )
15                  Appellees.     )
     ______________________________)
16
                    Argued and Submitted on July 19, 2013,
17                            at Las Vegas, Nevada
18                          Filed - August 20, 2013
19             Appeal from the United States Bankruptcy Court
                         for the District of Nevada
20
           Honorable Bruce A. Markell, Bankruptcy Judge, Presiding
21
     Appearances:    Christopher Celentino, Esq. of Foley & Lardner LLP
22                   argued for appellant, Wilmington Trust Company;
                     Seth B. McCormick, Esq. of Brown Legal Advisors,
23                   LLC argued for appellant, HoldCo Advisors, L.P.;
                     Jeffrey Eric Schmitt, Esq. argued for appellee,
24                   FDIC Receiver; and Elizabeth E. Stephens, Esq. of
                     Sullivan Hill Lewin Rez & Engel argued for
25                   appellee, Yvette Weinstein, Chapter 7 trustee.
26
27        1
            This disposition is not appropriate for publication.
     Although it may be cited for whatever persuasive value it may have
28   (see Fed. R. App. P. 32.1), it has no precedential value. See 9th
     Cir. BAP Rule 8013-1.
 1   Before: KIRSCHER, COLLINS2 and DUNN, Bankruptcy Judges.
 2           Appellants, Wilmington Trust Company, as Indenture Trustee
 3   ("Wilmington"), and HoldCo Advisors, L.P. ("Holdco"), as manager
 4   for Financials Restructuring Partners, Ltd. and Financials
 5   Restructuring Partners III, Ltd. (collectively, "Appellants"),
 6   appeal an order from the bankruptcy court approving the chapter 73
 7   trustee's motion to approve a settlement with appellee, the
 8   Federal Deposit Insurance Corporation, as Receiver ("FDIC-R"), for
 9   certain tax refunds.      We AFFIRM.
10                   I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY
11   A.      The chapter 7 filing
12           Community Bancorp, Inc. ("Debtor" or "holding company"), a
13   Nevada corporation, filed a chapter 7 bankruptcy case on May 28,
14   2010.       Yvette Weinstein was appointed as trustee ("Trustee").
15   Immediately upon her appointment, she employed Larry L. Bertsch, a
16   certified public accountant and former chapter 7 panel trustee
17   ("CPA"), to assist her with the case, as well as attorneys.       She
18   also sought under Rule 2004 to examine Debtor's attorneys.
19           Debtor was the holding company for two failed banks —
20   Community Bank of Nevada, a bank chartered by the State of Nevada
21   ("CBON"), and Community Bank of Arizona, a bank chartered by the
22   State of Arizona ("CBOA")(collectively, the "Banks").      Debtor is
23   the parent corporation; the Banks are its subsidiaries.        Prior to
24
25
             2
            Hon. Daniel P. Collins, Bankruptcy Judge for the District
26   of Arizona, sitting by designation.
27           3
            Unless specified otherwise, all chapter, code and rule
     references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and
28   the Federal Rules of Bankruptcy Procedure, Rules 1001-9037.

                                         -2-
 1   the petition date, the Nevada Department of Business & Industry,
 2   Financial Institutions Division, closed CBON, and the Arizona
 3   Department of Financial Institutions closed CBOA.     The FDIC-R was
 4   appointed receiver, succeeding to "all rights, titles, powers, and
 5   privileges" of those institutions.    See 12 U.S.C.
 6   § 1821(d)(2)(A)(I).   Wilmington, as Indenture Trustee, is Debtor's
 7   largest undisputed, unsecured creditor with a claim for $50
 8   million in bonds, which were issued by Debtor pursuant to an
 9   Indenture, and represents the individual holders of those trust
10   preferred securities.   Holdco represents a similar group of
11   individuals holding Debtor-issued trust preferred securities.
12        Prior to the petition date, Debtor routinely filed
13   consolidated tax returns on its own behalf and on behalf of its
14   subsidiaries, including the Banks, which is a common practice
15   amongst parent and subsidiary corporations that can provide
16   substantial tax-saving benefits.   In its Schedule B, Debtor listed
17   potential tax refunds of approximately $27 million ("Tax
18   Refunds").   An approximate $12 million refund was estimated for
19   NOL (net operating loss) carrybacks from tax year 2008, and an
20   approximate $15 million refund was estimated for NOL carrybacks
21   from tax year 2009.   In its Schedule F, Debtor listed the FDIC-R
22   as holding two unsecured, unliquidated and disputed claims of
23   $780,000,000 and $25,500,000; Wilmington was listed as holding an
24   unsecured, contingent and liquidated claim for $50,000,000, which
25   Debtor described as "Subordinate Debt."   Holdco was not listed as
26   a creditor but is affiliated with U.S. Bank, who filed a proof of
27   claim in this case.
28        On August 18, 2010, the FDIC-R filed an emergency motion for

                                     -3-
 1   relief from stay seeking to file the necessary federal tax return
 2   on behalf of the Banks to obtain the scheduled Tax Refunds.
 3   However, before the matter was decided, on September 2, 2010,
 4   Trustee and the FDIC-R filed a stipulation agreeing to file a
 5   consolidated return on behalf of Debtor and the Banks.   Trustee
 6   believed that the Tax Refunds, at least in part, belonged to
 7   Debtor and were property of the estate; the FDIC-R contended that
 8   all, or substantially all, of the Tax Refunds belonged to it and
 9   were not property of Debtor's estate.   The parties agreed to
10   disagree on the ownership issue, but, in the meantime, agreed that
11   it was in the best interest of all parties to file the
12   consolidated return by the September 15, 2010 deadline or lose the
13   $27 million in Tax Refunds forever.   Further, a consolidated
14   return was expected to result in a larger refund.    Any monies
15   received were to be placed into an escrow account while ownership
16   of the Tax Refunds was determined.
17        The parties' stipulation was approved, and the consolidated
18   return resulted in a tax refund of $15,172,962.00.   The remaining
19   $12 million refund was subject to an earlier tax return filed by
20   the FDIC-R and was still pending with the IRS.4
21   B.   The settlement motion for the Tax Refunds
22        In October 2010, Trustee filed a motion to approve settlement
23   of the Tax Refunds ("Settlement Motion").   In support, Trustee
24   offered a copy of the Settlement Agreement, her declaration and a
25   declaration from her CPA.   Trustee contended that she and her
26   professionals had engaged in lengthy settlement negotiations with
27
          4
            The FDIC-R has since received the remaining $12 million
28   refund.

                                     -4-
 1   the FDIC-R, its tax advisors and attorneys, including discussions
 2   of the accountants' different analyses of what portions of the Tax
 3   Refunds belonged to the estate.    Trustee's CPA concluded, based on
 4   prior tax returns, the "Agreement to Join in the Filing of
 5   Consolidated Federal and State Income Tax Returns" executed by
 6   Debtor and the Banks (the "TFA") prior to the bankruptcy, and the
 7   consolidated tax return, which included Debtor's losses and
 8   enhanced the refund by $3.1 million, that $3.1 million of the Tax
 9   Refunds should be allocated to the estate.   Under an alternative
10   theory, the CPA concluded that the estate should receive about
11   $8 million of the Tax Refunds.    Although the FDIC-R conceded that
12   it could understand the CPA's $3.1 million analysis in Debtor's
13   favor, it did not concede the validity of that analysis.   The
14   FDIC-R claimed it owned the Tax Refunds because the Banks had
15   suffered sufficient losses over the carryback period entitling it
16   to the entire refund.
17        To settle the matter, the parties agreed the estate would
18   receive $3 million of the Tax Refunds, and the FDIC-R would
19   receive $24 million.    The FDIC-R agreed to waive any claim to the
20   $3 million received by the estate and was responsible for any fees
21   incurred with future IRS audits respecting the consolidated tax
22   return.   The parties were still negotiating their dispute over the
23   estate's other major asset — its director and officer insurance
24   policies ("D & O Policies").   Despite settling the Tax Refunds
25   issue, the FDIC-R was not waiving any claims to the D & O Policies
26   or any other assets Trustee recovered.
27        To satisfy her burden under Martin v. Kane (In re A & C
28   Props.), 784 F.2d 1377, 1381 (9th Cir. 1986)("A & C"), Trustee

                                       -5-
 1   asserted that three of the four factors favored settlement.    As
 2   for the probability of success in litigation, Trustee conceded
 3   that while she could recover additional portions of the Tax
 4   Refunds if she were to litigate the issue, she believed the risk
 5   factor involved in litigation indicated that the settlement was
 6   fair and reasonable and in the best interest of creditors and the
 7   estate.   Because of the FDIC-R's position that the estate should
 8   receive no portion of the Tax Refunds, litigation would be
 9   necessary, which would only incur further expenses and fees.
10   Collection was not an issue because the Tax Refunds had been
11   received and were being held in escrow.   As for the complexity of
12   the litigation and the expense, inconvenience and delay associated
13   with it, Trustee contended that litigation would consume much time
14   and expense for the estate — scant case law existed, and
15   potentially numerous witnesses, exhibits and documents would be
16   necessary for trial, drawing out the case and adding to its
17   expense, inconvenience to witnesses and resultant delay.   The
18   estate would also incur significant administrative expenses.
19   Therefore, $3 million in hand was superior to expensive litigation
20   that offered no guarantee of a favorable outcome.   Finally,
21   Trustee contended that settlement was in the paramount interest of
22   creditors, because successful litigation was not guaranteed and
23   could result in no benefit for the estate.   Trustee also believed
24   that creditor Pacific Coast Banker's Bank ("PCBB") would support
25   the settlement.5   Accordingly, contended Trustee, the settlement
26   was fair and equitable and in the best interest of creditors.
27
          5
            PCBB did file a limited objection to the Settlement Motion,
28   but later withdrew it.

                                      -6-
 1   Trustee's CPA also opined that settlement was in the best interest
 2   of creditors and the estate.    A hearing was set for November 22,
 3   2010.
 4           In support of its objection to the Settlement Motion, Holdco
 5   offered copies of various unpublished, out-of-district decisions
 6   it contended supported Debtor's rights to the Tax Refunds and a
 7   copy of the TFA.    In short, Holdco opposed Trustee surrendering
 8   the most valuable asset of the estate at too much of a discount,
 9   receiving only approximately 11% of the Tax Refunds.    Holdco
10   argued that Trustee had failed to show any support for her
11   contention that she would have a low probability of success in
12   litigation, offering only a conclusory statement to that effect.
13   In Holdco's opinion, Trustee's position was strong, as courts
14   across the nation were holding that when a tax sharing agreement
15   exists between a bank subsidiary and the bank holding company,
16   then that agreement controls the ownership rights to the tax
17   refund.    Citing W. Dealer Mgmt., Inc. v. England (In re Bob
18   Richards Chrysler-Plymouth Corp.), 473 F.2d 262, 265 (9th Cir.
19   1973), Holdco argued that while Bob Richards held that a tax
20   refund attributable to the business losses of a subsidiary in a
21   consolidated group is owned by the subsidiary, even though it was
22   received by the agent parent, the Ninth Circuit further held that
23   parties within a consolidated group were free to draft a
24   "differing agreement" with respect to the ultimate disposition of
25   tax refunds.    Here, argued Holdco, the language of the TFA created
26   a debtor-creditor relationship, as opposed to a principle-agent
27   relationship, and thus Debtor as the parent holding company owned
28   the Tax Refunds.

                                       -7-
 1        Second, as for the complexity, expense, inconvenience and
 2   delay associated with litigation, Holdco argued that Trustee's
 3   conclusory statements regarding the expense of litigation failed
 4   to satisfy her burden.   According to Holdco, based on its
 5   involvement in similar tax refund ownership cases against the
 6   FDIC-R, the case most likely did not involve a factual inquiry
 7   beyond the controlling documents, namely, the TFA, it could be
 8   decided on summary judgment, and ample case law in Trustee's favor
 9   existed.
10        Finally, Holdco argued that Trustee's proposed settlement
11   amounted to creditors receiving a $24 million haircut.   Holdco
12   contended that Trustee had failed to give any deference to the
13   paramount interest of Debtor's unsecured creditors whose rights
14   would be so drastically affected by it.   The settlement preferred
15   the FDIC-R's contingent, disputed claim by paying it nearly
16   100 cents on the dollar, while leaving the remaining creditors
17   with crumbs.
18        Wilmington also objected to the Settlement Motion, asserting
19   that Trustee had failed to establish the settlement was fair and
20   equitable.   First, the Settlement Motion did not provide adequate
21   information about the negotiation process, or provide the legal
22   basis for the FDIC-R's ownership claim over the Tax Refunds or
23   Trustee's decision to settle such claims.   Further, the proposed
24   settlement was not a global settlement resolving the FDIC-R's and
25   Trustee's competing claims to the D & O Policies or any other
26   assets Trustee may collect.   Third, it provided little benefit to
27   creditors, giving a windfall to the FDIC-R and leaving nothing
28   meaningful for the estate.    Fourth, recent case law and the

                                      -8-
 1   language in the TFA supported the estate's ownership claim — it
 2   created a debtor-creditor relationship between the parties, not a
 3   trust.   As a result, argued Wilmington, Bob Richards was
 4   inapplicable, the Tax Refunds were property of the estate, and the
 5   FDIC-R merely held an unsecured claim.    Accordingly, in
 6   Wilmington's opinion, the potential for success in litigation
 7   seemed high, or at least high enough to give Trustee leverage to
 8   negotiate a better settlement.   Finally, Wilmington argued that
 9   Trustee had failed to demonstrate that litigation with the FDIC-R
10   would be overly complex or expensive, contending that the facts
11   and issues were not necessarily numerous or complicated.
12        In its reply to the objections, the FDIC-R contended that it
13   had reached a settlement with Trustee after fifteen months of
14   investigation and negotiation, and that only two creditors had
15   objected to the Settlement Motion among fifteen creditors who had
16   filed proofs of claim — PCBB, which would likely withdraw its
17   limited objection, and Wilmington.     The FDIC-R contended that
18   Holdco lacked standing to object.
19        In short, the FDIC-R argued that the settlement satisfied the
20   "lowest point in the range of reasonableness" under Rule 9019, and
21   that the objecting creditors' arguments relied exclusively on the
22   TFA, which the FDIC-R contended was unenforceable under 12 U.S.C.
23   § 1823(e) because the TFA was never approved by CBON's board of
24   directors.   Even if it were approved, argued the FDIC-R, extensive
25   case law favored its position and many other cases involved
26   similar 90%/10% settlement ratios in favor of the FDIC-R.    The TFA
27   at issue, in the FDIC-R's opinion, addressed only the "filing" of
28   consolidated federal tax returns and tax payments, not the

                                      -9-
 1   "ownership" of refunds, so it was not the "differing agreement"
 2   exception carved out in Bob Richards.   Thus, Trustee's probability
 3   of success in litigation was low because the refunds were from
 4   taxes paid by CBON, and therefore belonged to the FDIC-R under Bob
 5   Richards.   Accordingly, argued the FDIC-R, Trustee reasonably
 6   determined that the risks, delays and expense of litigation were
 7   not justified.   Finally, the FDIC-R contended that litigation over
 8   the ownership of the Tax Refunds would be extremely complicated,
 9   time consuming and expensive, which supported approval of the
10   Settlement Motion.   Numerous depositions and other discovery would
11   be necessary to determine the parties' intent regarding the TFA
12   and how the parties treated and booked tax refunds in the past.
13        In her reply and supporting declaration, Trustee contended
14   that even though all parties knew about the tax refund issue over
15   a year ago, Holdco and Wilmington never contacted her or her
16   attorneys prior to her filing the Settlement Motion, and neither
17   had taken any formal discovery with regard to how or why the
18   settlement was reached.   Trustee said she was aware of the tax
19   refund issue from the start, and that she and her professionals
20   spent considerable time analyzing it.   Overall, she believed
21   settlement was justified in light of the risk of litigation, and
22   the vastly different positions articulated by the FDIC-R and the
23   objectors only highlighted the case's complexity.   Favorable cases
24   cited by the objecting creditors were unpublished and not Ninth
25   Circuit cases.   In any event, the issue turned on the
26   interpretation of the TFA, and Trustee disagreed with their
27   position that it created a debtor-creditor relationship.   She and
28   her CPA believed that more likely the Banks owned the Tax Refunds;

                                     -10-
 1   Debtor was merely holding the funds as agent.   Further, because
 2   litigation could result in no benefit to the estate, Trustee
 3   argued that the settlement, which she based on the advice from her
 4   professionals and her own business judgment, was in the best
 5   interest of creditors.    Attached to Trustee's reply was a copy of
 6   minutes from one of Debtor's board meetings held just prior to the
 7   bankruptcy filing.   There, chairman Ed Jamison noted that Debtor
 8   was entitled to $200,000 to $2 million of the $27 million refund.
 9        On November 21, 2011, one day prior to the hearing on the
10   Settlement Motion, Holdco and Wilmington filed lengthy replies to
11   the replies of the FDIC-R and Trustee.   Both contended that
12   Trustee had still not met her burden under A & C.    Holdco
13   contended that it was "exceptionally confident" that, given 45-60
14   days, it could submit to Trustee an offer to purchase the estate's
15   rights to the Tax Refunds for a lump sum of cash "far in excess of
16   the $3 million" Trustee would receive under the settlement.
17        The bankruptcy court held a hearing on the Settlement Motion
18   on November 22, 2011.    Because the objecting creditors had not
19   been given a copy of the most recent TFA from 2007, which
20   Trustee's counsel argued was identical to the 2003 version they
21   had been provided, the court denied the Settlement Motion without
22   prejudice so that creditors could have an opportunity to review
23   the 2007 TFA, a document it considered to be "essential and
24   critical" to the issue.
25   C.   Wilmington's motion to compel mediation and motion to
          prosecute
26
27        On February 27, 2012, Wilmington filed a motion to compel
28   mediation, contending that it had been trying since November 2011

                                      -11-
 1   to facilitate settlement discussions regarding the Tax Refunds and
 2   the D & O Policies with Trustee, to no avail.      It now sought a
 3   court-imposed mediation in hopes that a better settlement could be
 4   reached amongst the parties.    A hearing was set for March 27,
 5   2012.
 6           Trustee and the FDIC-R opposed the motion.    The FDIC-R noted
 7   that three months had passed since Wilmington received a copy of
 8   the 2007 TFA, yet it had still not conducted any of the discovery
 9   it requested or claimed was necessary before the court considered
10   the settlement.    Trustee confirmed this contention, and further
11   noted that Holdco had yet to make an offer to purchase the
12   estate's rights and/or claims to the Tax Refunds as promised,
13   which Trustee would "seriously" consider.      Trustee believed that
14   mediation would not be beneficial.       Trustee further believed the
15   motion was premature and should be considered only after she filed
16   her renewed settlement motion, which she was filing momentarily.
17           Wilmington then moved for an order authorizing it to
18   prosecute an adversary proceeding against the FDIC-R to determine
19   ownership of the Tax Refunds.    A hearing was set for April 24,
20   2012.
21   D.      Trustee's renewed settlement motion
22           Trustee filed her renewed motion to approve settlement of the
23   Tax Refunds on March 14, 2012 ("Renewed Settlement Motion").      In
24   support, she offered her declaration and a declaration from her
25   CPA.    The terms were the same, but Trustee provided more
26   information about how the settlement was reached.      Trustee
27   reiterated that she knew of the tax refund issue once she was
28   assigned to the case, and that after analyzing the relevant case

                                       -12-
 1   law, it became clear to her that this was an unsettled and complex
 2   issue.   Although the objecting creditors had taken a contrary
 3   position, Trustee still believed that the FDIC-R had the better
 4   case for ownership of the Tax Refunds.   The differences in the
 5   parties' positions indicated that litigation posed a substantial
 6   risk; she could end up with zero recovery.   Trustee further noted
 7   that even Debtor's chairman had concluded Debtor was entitled to
 8   only $200,000 to $2 million of the Tax Refunds.    Accordingly, upon
 9   the advice of her professionals and her own business judgment,
10   Trustee believed that the settlement was fair and in the best
11   interest of creditors.   The FDIC-R filed its brief in support of
12   the Renewed Settlement Motion on March 14, 2012.   The Renewed
13   Settlement Motion was set for hearing on April 24, 2012.
14        On March 27, 2012, the bankruptcy court held a hearing on
15   Wilmington's motion to compel mediation.   On the court's own
16   motion, it continued the hearing on that motion, along with
17   Wilmington's motion to prosecute and Trustee's Renewed Settlement
18   Motion, so it could hear all three matters concurrently.    All
19   three motions were continued to April 24, 2012, and again to
20   June 12, 2012.
21   E.   Supplemental briefing on the Renewed Settlement Motion and
          the continued hearing
22
23        The FDIC-R filed its supplemental brief in support of the
24   Renewed Settlement Motion, contending that certain recent
25   developments further supported settlement.   Despite Holdco's offer
26   to buy the claim within 45-60 days for more than $3 million, after
27   four months Holdco had proposed only a contingency arrangement
28   with Trustee that guaranteed no money to the estate, which Trustee

                                     -13-
 1   rejected.   Wilmington had made a similar offer, also rejected by
 2   Trustee.    Next, the law firm representing Holdco had recently
 3   represented a chapter 7 Trustee and successfully obtained approval
 4   of a tax refund settlement with the FDIC that split the refund 90%
 5   to the FDIC and 10% to the trustee.     In re Tamalpais Bank, case
 6   no. 10-13707, dkt. no. 70 (Bankr. N.D. Cal. Apr. 13, 2012)
 7   (settlement approved where trustee received $950,000 of a
 8   $10.35 million tax refund, with the FDIC getting the remainder).
 9   Third, the FDIC-R had now filed its proof of claim for
10   approximately $47 million.6   Finally, the FDIC-R asserted, for the
11   first time, that Wilmington and Holdco's opposition should be
12   given less weight because their claims were subordinate to the
13   claims of the FDIC-R and PCBB and unlikely to receive a
14   distribution from the estate, even if Debtor were adjudicated
15   owner of the Tax Refunds.
16        Trustee filed her supplemental brief and declarations in
17   support of the Renewed Settlement Motion on May 11, 2012, which
18   attempted to "beef up" her prior pleadings.    As for the
19   probability of success in litigation, Trustee asserted several
20   reasons why settlement was preferable to litigation.    First, she
21   argued that the TFA did not determine "ownership" of the Tax
22   Refunds, and the record reflected that the Banks suffered
23   sufficient losses entitling them to the entire refund.      Therefore,
24   under Bob Richards, the FDIC-R likely owned the Tax Refunds.
25   Trustee was further persuaded by additional facts for why the
26   Banks were entitled to the Tax Refunds including, inter alia, the
27
          6
            This was far less than the approximate $800 million Debtor
28   had listed owing the FDIC-R in its Schedule F.

                                      -14-
 1   Banks had carried the refunds on their books and Debtor had not,
 2   and Debtor's corporate minutes provided that the refunds were
 3   owned by the Banks.   Therefore, in Trustee's opinion, the FDIC-R
 4   would more likely prevail on this issue if litigated.   Further,
 5   Trustee contended that, in her best business judgment, settlement
 6   was preferable to the risk and uncertainty of litigation; a
 7   $3 million "bird in the hand" was superior to wading "into the
 8   murky waters of what [was] at best an evolving area of the law."
 9   It was clear to her that the FDIC-R would vigorously contest the
10   estate's claims of ownership, and she predicted that litigation
11   would take approximately two to three years, including an
12   inevitable appeal, which would burden the estate with substantial
13   legal fees and no guarantee of success.   Finally, Trustee
14   contended that the settlement was reasonable, appropriate under
15   the circumstances, and in the best interest of the estate and the
16   creditor body as a whole.   She agreed with the FDIC-R that
17   Wilmington and Holdco were likely "far out of the money" with
18   their subordinated claims and that their arguments should be given
19   minimal weight.   Trustee asserted that she had always assumed
20   these two creditors held subordinated claims, which perhaps
21   explained why they were not involved in the case until after she
22   filed the Settlement Motion.   Nonetheless, to take their position
23   and gamble with other people's money was unfair and not a proper
24   exercise of her business judgment.
25        In its supplemental objection to the Renewed Settlement
26   Motion, Holdco contended that the settlement still failed to
27   satisfy A & C and was not fair and equitable to creditors.     Holdco
28   disputed the FDIC-R's and Trustee's latest position that its claim

                                     -15-
 1   was subordinated and out of the money.    Holdco argued that for
 2   Trustee to take this position only showed her ignorance of the
 3   nature of its claims and exposed that she was proceeding with a
 4   settlement without knowing all of the facts and circumstances.
 5   Finally, Holdco noted a recent decision, Siegel v. FDIC
 6   (In re Indymac Bancorp, Inc.), 2012 WL 1037481 (Bankr. C.D. Cal.
 7   Mar. 29, 2012), another case it contended favored Trustee, in
 8   which Judge Bluebond rejected each of the arguments the FDIC-R had
 9   asserted here and determined that the tax refunds at issue were
10   property of the estate.   Attached to Holdco's brief was a copy of
11   the Indymac decision, a tentative ruling from the Southern
12   District of California, In re Imperial Capital Bancorp, Inc.
13   (09-19431), and the Indenture agreement dated September 21, 2006.
14        Wilmington filed its supplemental objection to the Renewed
15   Settlement Motion, reiterating its prior arguments and contending
16   that the proposed settlement still did not satisfy A & C.
17   Wilmington argued that Trustee had failed to offer any factual or
18   legal basis for her conclusory statements that the TFA did not
19   create a debtor-creditor relationship, and that Debtor was holding
20   the Tax Refunds as "agent" for the Banks.    Wilmington also
21   speculated that because Trustee was not settling the issue of the
22   D & O Policies, she could end up depleting the $3 million she
23   would receive from the settlement litigating that unresolved issue
24   with the FDIC-R.   Wilmington disputed that its claim was
25   subordinated and out of the money.     In a separate response to the
26   FDIC-R's supplemental brief in support of the Renewed Settlement
27   Motion, Wilmington provided a more detailed analysis as to why its
28   claim was not subordinate to, but rather was in pari passu with,

                                     -16-
 1   the FDIC-R's.
 2        Trustee filed a reply brief and declaration in support of the
 3   Renewed Settlement Motion on June 5, 2012.   She had assumed the
 4   claims of Wilmington and Holdco were subordinated from the
 5   beginning of the case, particularly in light of their silence,
 6   which is why she focused more on the FDIC-R and PCBB, the active
 7   creditors in the case.   However, she now conceded that perhaps
 8   they may not be subordinated.   In any event, argued Trustee, while
 9   the objecting creditors were lamenting that the estate's claim to
10   the Tax Refunds was worth more than what Trustee was receiving,
11   neither of them had offered to buy the claim or guarantee the
12   estate a recovery, which implied that maybe the issue of the
13   estate's ownership of the Tax Refunds was not such a "slam dunk"
14   as they had argued.   The recent Imperial and Indymac cases, which
15   Trustee noted were unpublished and not binding, only represented
16   yet more examples of the shifting and uncertain legal landscape on
17   which she had to make decisions here.   Regarding her conclusion on
18   the TFA, Trustee determined that the parties had not made a
19   "differing agreement" as to "ownership" of the Tax Refunds, so
20   Bob Richards controlled, and the language of the TFA favored the
21   FDIC-R.   Wilmington and Holdco were wrong in asserting that
22   Bob Richards did not apply if any tax agreement existed between
23   the parties, even if it was silent as to ownership of tax refunds.
24        The FDIC-R filed a reply to the supplemental objections to
25   the Renewed Settlement Motion on June 5, 2012, to which Trustee
26   filed a response on June 6, 2012.   In short, Trustee argued that
27   the settlement was a reasonable exercise of her business judgment.
28   Each party had vigorously advocated its position describing

                                     -17-
 1   different but reasonable outcomes, but each depended heavily on
 2   factual and legal determinations not yet made in this case, that
 3   would only be made after years of litigation effort and expense.
 4   The parties' briefs clearly showed that reasonable minds could
 5   differ and only illustrated the shifting and uncertain backdrop
 6   against which she negotiated the Settlement Agreement.
 7        Holdco filed a second supplemental objection to the Renewed
 8   Settlement Motion and offered a copy of the district court's
 9   recent decision in Indymac, which adopted Judge Bluebond's
10   proposed findings and conclusions.      Holdco argued that this
11   further demonstrated Trustee's high probability of success in
12   litigation over the ownership of the Tax Refunds, and that handing
13   over 90% of the Tax Refunds to the FDIC-R was not reasonable or a
14   fair and equitable settlement.   Holdco further opposed the
15   settlement as unreasonable because Trustee had now admitted that
16   she failed to conclude on her own that Holdco's claim was
17   subordinate to the FDIC-R's; she had merely accepted the FDIC-R's
18   wrongful assertion.
19        The FDIC-R filed a response to Holdco's second supplemental
20   objection on June 11, 2012, still contesting Holdco's standing and
21   ability to object to the settlement.7
22   F.   The bankruptcy court's decision to approve the Renewed
          Settlement Motion
23
24        The bankruptcy court held a hearing on the Renewed Settlement
25
26        7
            Appellees also contest Holdco's standing in its appeal.
     However, Wilmington, whose standing appellees do not contest, has
27   also appealed the Settlement Order and has raised essentially the
     same arguments as Holdco. Therefore, we do not reach the issue of
28   Holdco's standing.

                                      -18-
 1   Motion on June 12, 2012.   Counsel for the FDIC-R began by noting
 2   that no settlements of this nature involving the FDIC-R had been
 3   denied despite the "modern trend" in the case law, to which the
 4   court responded:
 5        But that has less to do, much less to do, with the nature
          of the legal issues involved and much more to do with the
 6        nature of the standard for approval of a settlement.
          I mean, the trustee comes in with incredible deference
 7        due to her with respect to these matters, and it's
          difficult. . . .
 8
          It's very difficult to prove because that's the issue on
 9        a 9019 motion that she didn't follow her discretion.
          . . . [B]ut the question is whether or not those typical
10        standards have been met here.
11        It has very little in one sense to do — I mean, once you
          decide that the state of the law is not uniform, you
12        basically have to move on.
13        I mean, you can argue the individual points, but to argue
          them only kind of reinforces the point that she's
14        exercising her discretion appropriately in an area in
          which there is no one true answer.
15
          So I'm not real sure that it makes a lot of sense or we
16        gain a lot by arguing who's right and who's wrong about
          Bob Richards. The fact that we're having the argument at
17        all is a point in favor of the trustee.
18   Hr'g Tr. (June 12, 2012) 16:20-25; 17:3-17.     Counsel for Holdco
19   and Wilmington then presented their arguments.    Holdco argued that
20   Trustee had entered into a settlement without knowing all of the
21   facts and had simply accepted without challenge the FDIC-R's
22   self-serving versions of them, which prompted the following
23   colloquy:
24        THE COURT: I mean, how do you know that?   Did anyone take
          the trustee's deposition?
25
          COUNSEL: No, your Honor.
26
          THE COURT: I mean --- all we know is what she has
27        provided by the way of multiple declarations, correct?
28        COUNSEL: Yes, your Honor.     Well, and in the pleadings

                                      -19-
 1           itself, the trustee defers to the FDIC's subordination
             arguments as opposed to raising it itself [sic].
 2
             THE COURT: Well, I mean, I do the same thing.         For
 3           example, if I were to do what you suggest, I would rely
             on Judge Nakagawa's reasoning, not my own, and that's the
 4           same thing.     I'm just incorporating someone else's
             reasoning. That's not necessarily nefarious.
 5
 6   Id. at 49:9-23.     Upon counsel's argument that Bob Richards "has
 7   been struck down as being controlling in a number of cases" the
 8   court stated:
 9           THE COURT: Well, no.     I mean, it's still controlling
             because it's still Ninth Circuit.      What they (other
10           recent cases) find is that the prepetition contractual
             arrangements take it outside of the general equitable
11           holding that the person who generated the losses that led
             to the refund should get the refund.
12
             COUNSEL: Yes, your Honor.
13
14   Id. at 50:16-24.     After hearing further argument from the parties,
15   the bankruptcy court entered its oral ruling approving the Renewed
16   Settlement Motion.     In applying the A & C factors, the court
17   determined that the settlement was fair, equitable and reasonable.
18           The bankruptcy court entered an order approving the Renewed
19   Settlement Motion on June 20, 2012 ("Settlement Order").      The
20   motion to compel mediation and motion to prosecute were denied as
21   moot.     Both Wilmington and Holdco timely appealed the Settlement
22   Order.     Neither Appellant sought a stay of the challenged order
23   during the pendency of this appeal.
24                               II. JURISDICTION
25           The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334
26   and 157(b)(2)(A).     We have jurisdiction under 28 U.S.C. § 158,
27   subject to the jurisdictional issue below.
28

                                         -20-
 1                               III. ISSUES
 2         Are these appeals moot?   If not, did the bankruptcy court
 3   abuse its discretion in entering the Settlement Order?
 4                         IV. STANDARDS OF REVIEW
 5         We review de novo issues of mootness.   Foster v. Carson,
 6   347 F.3d 742, 745 (9th Cir. 2004).
 7         We review the bankruptcy court's decision to approve a
 8   settlement for an abuse of discretion.    In re A & C Props.,
 9   784 F.2d at 1380.   The court abuses its discretion if it applied
10   the wrong legal standard or its findings were illogical,
11   implausible or without support in the record.   TrafficSchool.com,
12   Inc. v. Edriver Inc., 653 F.3d 820, 832 (9th Cir. 2011).
13         Because the bankruptcy court identified and applied the
14   correct legal standard, the only question left on appeal is
15   whether its determinations that the settlement was fair and
16   equitable and in the best interest of the estate were clearly
17   erroneous.   To that end, we note that "when a trial judge’s
18   finding is based on his decision to credit the testimony of one of
19   two or more witnesses, each of whom has told a coherent and
20   facially plausible story that is not contradicted by extrinsic
21   evidence, that finding, if not internally inconsistent, can
22   virtually never be clear error.”   Anderson v. City of Bessemer
23   City, N.C., 470 U.S. 564, 575 (1985)(citations omitted).    We may
24   affirm on any ground supported by the record.   Shanks v. Dressel,
25   540 F.3d 1082, 1086 (9th Cir. 2008).
26   ///
27   ///
28   ///

                                      -21-
 1                              V. DISCUSSION
 2   A.   The appeals may be moot.
 3        1.   Parties' contentions
 4        The FDIC-R moved to dismiss these appeals as constitutionally
 5   and equitably moot.   Trustee joined in that motion.    Wilmington
 6   opposed it.
 7        In a January 2, 2013 order, the motions panel denied the
 8   motion to dismiss without prejudice, leaving the matter for the
 9   merits panel to consider, and ordered supplemental briefing on the
10   following two issues: (1) explaining exactly how the FDIC-R works,
11   what its assets are; and (2) explaining how much money the FDIC-R
12   paid to the FDIC and whether that was reimbursement for money the
13   FDIC had already paid out on insured funds.
14        In its supplemental brief, the FDIC-R explained how it and
15   the FDIC in its corporate capacity ("FDIC-C") are separate legal
16   entities having separate functions.      Specifically, the FDIC is a
17   corporation that carries out its statutory duties in two distinct
18   capacities: in its corporate capacity and in its capacity as
19   receiver for a failed depository institution.     Much like Title 11,
20   Title 12 provides a priority payment scheme for the payment of
21   claims made against the FDIC-R.    The FDIC-R is obligated to pay
22   all valid claims against the insured depository institution in
23   accordance with the limitations of the FDI Act.     The FDIC-C's
24   subrogated claim against the FDIC-R, which the FDIC-C obtained
25   once it made insurance payments to CBON's depositors upon that
26   bank's failure, had second priority of payment, junior only to the
27   FDIC-R's administrative expenses.
28        The FDIC-R explained that it had distributed the $24 million

                                       -22-
 1   it received in settlement proceeds by declaring and paying a
 2   4% distribution from its cash balance to the FDIC-C and the
 3   seventy-seven depositors on November 1, 2012.     The money paid
 4   consisted of funds generated from the liquidation of CBON's
 5   assets, the FDIC-R's portion of the settlement proceeds, and other
 6   miscellaneous receipts.    From this distribution, the FDIC-C
 7   received $56,118,542.96, and the seventy-seven depositors
 8   collectively received $189,999.62.      The FDIC-R asserted that this
 9   distribution represented a comprehensive change in circumstances
10   that would be extremely difficult and inequitable to unwind.
11        As for its assets, the FDIC-R claimed that it held
12   $383,560,000 in assets and $991,768,000 in liabilities, which
13   included the FDIC-C's subrogated claim of $980,306,536 and
14   seventy-seven uninsured depositors' claims collectively totaling
15   $3,320,353.    Nonetheless, the FDIC-R asserted that the Panel
16   lacked jurisdiction under 12 U.S.C. § 1821(d)(13)(D)8 to order it
17   to pay back the settlement funds to Debtor's estate.
18        Wilmington contended that the FDIC had not paid "third
19   parties," but rather paid itself with more than 99.7% of the
20   settlement funds received.    As both transferee and transferor of
21   the distribution, argued Wilmington, the FDIC had full knowledge
22
          8
              Title 12 U.S.C. § 1821(d)(13)(D) provides:
23
          Except as otherwise provided in this subsection, no court
24        shall have jurisdiction over —
               (I) any claim or action for payment from, or any action
25             seeking a determination of rights with respect to, the
               assets of any depository institution for which the
26             Corporation has been appointed receiver, including
               assets which the Corporation may acquire from itself as
27             such receiver; or
               (ii) any claim relating to any act or omission of such
28             institution or the Corporation as receiver.

                                      -23-
 1   of the appeal and the potential for a disgorgement or repayment
 2   order.    As such, it could not contrive self-serving facts to
 3   achieve the equitable protection of the mootness doctrine.    In
 4   short, argued Wilmington, regardless of who the FDIC paid, because
 5   the FDIC is a party to the appeal and the court could fashion
 6   effective relief through a disgorgement order, mootness did not
 7   apply.    Wilmington further argued that the FDIC-R held sufficient
 8   cash and other investments, giving it the ability to repay the
 9   $24 million to Debtor's estate.
10        2.     Analysis
11        As the party advocating mootness, the FDIC-R bears a heavy
12   burden of establishing that we cannot provide any effective relief
13   to Appellants.   United States v. Gould (In re Gould), 401 B.R.
14   415, 421 (9th Cir. BAP 2009), aff'd on other grounds, Gould v.
15   United States, 603 F.3d 1100 (9th Cir. 2010), cert. denied,
16   131 S.Ct. 557 (2010)(citing Suter v. Goedert, 504 F.3d 982, 986
17   (9th Cir. 2007)).
18        Constitutional mootness is derived from Article III of the
19   U.S. Constitution, which provides that the exercise of judicial
20   power depends on the existence of a case or controversy.    DeFunis
21   v. Odegaard, 416 U.S. 312, 316 (1974); Clear Channel Outdoor, Inc.
22   v. Knupfer (In re PW, LLC), 391 B.R. 25, 33 (9th Cir. BAP 2008).
23   The mootness doctrine applies when events occur during the
24   pendency of the appeal that make it impossible for the appellate
25   court to grant effective relief.    Id.   The determining issue is
26   "whether there exists a 'present controversy as to which effective
27   relief can be granted.'"   Vill. of Gambell v. Babbitt, 999 F.2d
28   403, 406 (9th Cir. 1993)(quoting Nw. Envtl. v. Gordon, 849 F.2d

                                       -24-
 1   1241, 1244 (9th Cir. 1988)).   If no effective relief is possible,
 2   we must dismiss for lack of jurisdiction.   United States v.
 3   Arkison (In re Cascade Rds., Inc.), 34 F.3d 756, 759 (9th Cir.
 4   1994).
 5        We conclude that these appeals are not constitutionally moot
 6   because it is possible to grant relief to Appellants by reversing
 7   or modifying the Settlement Order and ordering the FDIC-R to
 8   disgorge its portion of the settlement proceeds.   Although the
 9   FDIC-R has distributed the $24 million proceeds to the FDIC-C and
10   seventy-seven depositors, the FDIC-R has sufficient assets to
11   satisfy a disgorgement order were one issued, whether or not we
12   agree that the FDIC-C is a separate legal entity and not a party
13   to this appeal.   We are not persuaded by the FDIC-R's argument
14   that we are deprived of jurisdiction to order disgorgement of the
15   settlement funds under 12 U.S.C. § 1821(d)(13)(D).   That statute
16   divests courts of subject matter jurisdiction over claims
17   presented to the FDIC until the claimant has exhausted all
18   administrative remedies.   Henderson v. Bank of New Eng., 986 F.2d
19   319, 320-21 (9th Cir.), cert. denied, 510 U.S. 995 (1993); Freeman
20   v. FDIC, 56 F.3d 1394, 1398-1400 (D.C. Cir. 1995).   We fail to see
21   how that statute is applicable here.
22        Equitable mootness, on the other hand, is not so clear.      It
23   applies when an appellant has "'failed and neglected diligently to
24   pursue their available remedies to obtain a stay'" and changes in
25   circumstances "'render it inequitable to consider the merits of
26   the appeal.'"   Darby v. Zimmerman (In re Popp), 323 B.R. 260, 271
27   (9th Cir. BAP 2005)(quoting Focus Media, Inc. v. Nat’l Broad. Co.
28   (In re Focus Media, Inc.), 378 F.3d 916, 923 (9th Cir. 2004)).

                                     -25-
 1   See also Motor Vehicle Cas. Co. v. Thorpe Insulation Co.
 2   (In re Thorpe Insulation Co.), 677 F.3d 869, 880 (9th Cir. 2012).
 3   For a case to be equitably moot, "[t]he question is whether the
 4   case 'presents transactions that are so complex or difficult to
 5   unwind that the doctrine of equitable mootness would apply.'"      Id.
 6   (quoting Lowenschuss v. Selnick (In re Lowenschuss), 170 F.3d 923,
 7   933 (9th Cir. 1999)).     "Ultimately, the decision whether or not to
 8   unscramble the eggs turns on what is practical and equitable."
 9   Baker & Drake, Inc. v. Public Serv. Comm'n of Nev. (In re Baker &
10   Drake, Inc.), 35 F.3d 1348, 1352 (citations omitted).
11           It is undisputed that Appellants did not seek a stay of the
12   Settlement Order.     In Platinum Capital Inc. v. Sylmar Plaza, L.P.
13   (In re Sylmar Plaza, L.P.), 314 F.3d 1070, 1074 (9th Cir. 2002),
14   the Ninth Circuit held that even if debtor's plan had been
15   substantially consummated, the creditor's appeal was not equitably
16   moot for failing to seek a stay because its claim was strictly for
17   monetary damages and debtor was solvent.     However, more recently
18   in In re Thorpe Insulation Co., the Ninth Circuit implemented a
19   two-step process for determining whether an appeal is equitably
20   moot:
21           We will look first at whether a stay was sought, for
             absent that a party has not fully pursued its rights. If
22           a stay was sought and not gained, we then will look to
             whether substantial consummation of the plan has
23           occurred. Next, we will look to the effect a remedy may
             have on third parties not before the court. Finally, we
24           will look at whether the bankruptcy court can fashion
             effective and equitable relief without completely
25           knocking the props out from under the plan and thereby
             creating an uncontrollable situation for the bankruptcy
26           court.
27   677 F.3d at 881.     Thus, Thorpe implies that if a party fails to
28   seek a stay of the challenged order or judgment on appeal, then

                                       -26-
 1   the court does not even get to step two.     In other words, failure
 2   to seek a stay may alone be enough to render these appeals
 3   equitably moot.    See also Stokes v. Gardner, 2012 WL 1944552, at
 4   *1 (9th Cir. May 30, 2012)(citing Thorpe and holding that failure
 5   to seek a stay may, "by itself," render a party's claim equitably
 6   moot).
 7           Clearly, an inconsistency exists between Sylmar and Thorpe,
 8   and, one that could determine the ultimate outcome here.     However,
 9   without addressing this inconsistency and deciding whether these
10   appeals are equitably moot, we instead turn to the merits.
11   B.      The bankruptcy court did not abuse its discretion when it
             approved the Renewed Settlement Motion.
12
13           The impetus for this appeal originates in Appellants' clear
14   dissatisfaction with the amount Trustee received from the Tax
15   Refunds.     They believe $3 million is too low, based on their
16   interpretation of the TFA and how trustees in similarly situated
17   cases have faired in bankruptcy courts across the country as of
18   late.    Based on the record before us, however, we conclude that
19   the bankruptcy court properly exercised its discretion in
20   approving the settlement.
21           1.   Governing law
22           Rule 9019(a) authorizes the bankruptcy court to approve a
23   settlement on motion by the trustee and after notice and a
24   hearing.     As the party proposing the compromise, the trustee bears
25   the burden in proving that the settlement is fair and equitable
26   and should be approved.      In re A & C Props., 784 F.2d at 1382.
27           The bankruptcy court must conduct an inquiry into all
28   "factors relevant to a full and fair assessment of the wisdom of

                                        -27-
 1   the proposed compromise."    Protective Comm. for Indep.
 2   Stockholders of TMT Trailer Ferry, Inc. v. Anderson, 390 U.S. 414,
 3   424 (1968).    That is, the bankruptcy court must find that the
 4   settlement is fair and equitable in order to approve it.
 5   In re A & C Props., 784 F.2d at 1381.     In conducting this inquiry,
 6   the bankruptcy court must consider the following factors: (a) the
 7   probability of success in the litigation; (b) the difficulties, if
 8   any, to be encountered in the matter of collection; (c) the
 9   complexity of the litigation involved, and the expense,
10   inconvenience and delay necessarily attending it; and (d) the
11   paramount interest of the creditors and a proper deference to
12   their reasonable views in the premises.    Id.
13        The bankruptcy court has considerable discretion in
14   evaluating a proposed settlement because it "is uniquely situated
15   to consider the equities and reasonableness [of it] . . . ."
16   United States v. Alaska Nat'l Bank (In re Walsh Constr., Inc.),
17   669 F.2d 1325, 1328 (9th Cir. 1982).     "[A]s long as the bankruptcy
18   court amply considered the various factors that determined the
19   reasonableness of the compromise, the court's decision must be
20   affirmed."    In re A & C Props., 784 F.2d at 1381.
21        2.      Appellants' contentions
22        Wilmington complains, generally, that the bankruptcy court
23   failed to set forth adequate findings to support approval of the
24   settlement.    Wilmington further argues that the record does not
25   contain facts to support the bankruptcy court's decision to
26   approve the settlement.    Finally, Wilmington argues that the
27   bankruptcy court abused its discretion by approving a settlement
28   that was not fair and equitable or in the best interest of the

                                       -28-
 1   estate and creditors.   Holdco asserts similar arguments.   We
 2   address the parties' arguments in turn.
 3        3.   Analysis
 4             a.   Probability of success in litigation
 5        The bankruptcy court found that the probability of Trustee's
 6   success in litigation was uncertain, and therefore this factor
 7   favored settlement:
 8        What I have before me are several declarations which have
          been argued at length of the trustee and of the trustee's
 9        CPA, various other documents as has been mentioned, over
          1,000 pages of various documents.
10
          And to go through these factors . . . the probability of
11        success in litigation . . . one sparrow does not a spring
          make. One case or one series of cases does not absolute
12        precedent make.
13        From my understanding and my reading and my research, the
          issues that are involved here with respect to the ability
14        to monetize and to collect a tax refund in this
          circumstance is both fact dependent. But even if all of
15        the facts were agreed upon, the law is certainly in flux.
16        I'll grant the trend may be in favor of holding companies
          versus FDIC, but, again, trends don't make the type of
17        decisions that would make a trustee's decision improper.
          Rather, it's simply the background against which this
18        trustee has to assess it, and, you know, trustees can
          even settle things for which they think there's a
19        probability of success.
20   Hr'g Tr. (June 12, 2012) 60:3-23.
21        Contrary to Appellants' contentions, we conclude that the
22   bankruptcy court set forth sufficient findings for this factor and
23   that the record contained facts to support such findings.
24   Trustee stated in her supplemental declarations of March 14,
25   May 11 and June 5, (1) she was aware of the tax refund issue from
26   the start of the case, (2) that the case law on this issue was
27   unsettled, (3) that the TFA did not determine for certain whether
28   Debtor owned the Tax Refunds as the objecting creditors had

                                     -29-
 1   asserted, (4) that the FDIC-R would likely prevail under
 2   Bob Richards, (5) that the Banks had suffered sufficient losses
 3   entitling them to the refunds, and (6) that the parties' vastly
 4   different positions on the issue only illustrated the shifting and
 5   uncertain backdrop against which she negotiated the settlement.
 6   She also noted that Appellants never made her any better offers as
 7   promised.   Therefore, based upon her business judgment, Trustee
 8   determined that settlement was favored over the risk and
 9   uncertainty of litigation.
10        The bankruptcy court considered Trustee's declarations and
11   conducted its own reading and research on the matter at hand.    In
12   deferring to Trustee's business judgment, the court noted that
13   case law on this issue was not settled, that this case was
14   factually dependent, not turning only on the TFA but also other
15   facts, and that it would not be improper for a trustee to consider
16   these things when deciding that settlement may be the better
17   option.   The court further noted at the hearing that the parties'
18   extensive and contrary arguments only reinforced "the point that
19   [Trustee was] exercising her discretion appropriately in an area
20   in which there is no one true answer."   The court also found that
21   Trustee was aware of and had considered the tax refund issue prior
22   to entering into the settlement, and that she had involved not
23   only the FDIC-R and its professionals in those negotiations, but
24   also her CPA and attorneys.
25        We reject Wilmington's argument that the bankruptcy court
26   erred in deferring to Trustee's business judgment because she
27   entered into the settlement before conducting her own diligent
28   investigation about the relevant issues, and because she had

                                     -30-
 1   merely accepted the FDIC-R's position as to ownership of the
 2   refunds, ignoring or not investigating the cases ruling in favor
 3   of debtor holding companies.   First, as the bankruptcy court
 4   elicited from Appellants, no one had deposed Trustee to establish
 5   her alleged lack of diligence.   Second, Trustee's declaratory
 6   testimony was to the contrary.   Finally, even if she agreed with
 7   and adopted the FDIC-R's position or reasoning as to ownership of
 8   the Tax Refunds, we agree with the bankruptcy court that this was
 9   not necessarily nefarious.
10        We also reject Appellants' argument that the bankruptcy court
11   erred by not analyzing the terms of the TFA and recent case law
12   when ruling on the estate's probability of success in litigation.
13   In other words, Appellants wanted the bankruptcy court to
14   determine that their interpretation of the TFA prevailed over that
15   of Trustee's and that Debtor was entitled to the Tax Refunds.     The
16   bankruptcy court is not required to conduct such an analysis when
17   reviewing a settlement under Rule 9019.   When assessing a
18   compromise, courts need not rule upon disputed facts and questions
19   of law, but rather need only canvass the issues.   Burton v. Ulrich
20   (In re Schmitt), 215 B.R. 417, 423 (9th Cir. BAP 1997).      As the
21   bankruptcy court correctly noted, a mini-trial on the merits is
22   not required.   Id.   See also In re Walsh Constr., Inc., 669 F.2d
23   at 1328 (in approving a compromise agreement, “[t]he bankruptcy
24   court need not conduct an exhaustive investigation into the
25   validity of the asserted claim”); In re Hydronic Enter., Inc.,
26   58 B.R. 363, 366 (Bankr. D.R.I. 1986)(rather than conducting a
27   detailed evaluation of the underlying merits, the bankruptcy
28   court's function is "to examine the proposed settlement to

                                      -31-
 1   determine if it falls below the lowest point in the range of
 2   reasonableness.").   Nonetheless, it appears the bankruptcy court
 3   did consider the TFA to an extent, as evidenced by its statement:
 4   "I'm aware of the fact that although each side is convinced that
 5   it's right, and its precedence [sic] are clear and unwavering, I'm
 6   also convinced that each side is reading entirely different pieces
 7   of paper."   Hr'g Tr. at 61:6-9.
 8        Appellants also take issue with the bankruptcy court's
 9   finding that the range of recovery for Trustee was from $0 to $27
10   million, contending that the CPA's testimony established Debtor
11   was entitled to at least $3.1 million.       The CPA determined that
12   because Debtor's losses included in the consolidated tax return
13   resulted in a $3.1 million increase in the refund, the estate was
14   entitled to at least $3.1 million.        He also determined that the
15   estate may be entitled to $8 million.       The FDIC-R acknowledged the
16   CPA's theory but did not accept it.       Trustee opined that if she
17   pursued litigation the estate could end up with nothing.       On this
18   issue, the bankruptcy court stated:
19        [Trustee] looked at and negotiated with the FDIC over
          their claim.   She looked to and had involved in those
20        negotiations not only her CPA, but her lawyers.
21        It is a fair inference although an inference based on the
          declarations, but a fair inference that much if not all
22        of the issues that we have discussed and have been
          briefed today were on the mind at the time.
23
          Ultimately, the A & C Properties factors comes down to
24        whether or not the settlement is within the range of
          reasonableness, and I hold that it is.
25
          I think, actually, the range here is not 8- to
26        27,000,000. It's not 3- to 8,000,000. I think it's zero
          to 27,000,000.    The trustee clearly states in the
27        declaration that it's possible to get zero. They have
          3,000,000 in hand. . . .
28

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 1        One could endlessly pick at the decisions made by the
          trustee as to why 3 and not 3.1, why not 3.5.      Well,
 2        that's just the type of analysis I think that A & C and
          9019 are intended to deflect in the sense that a
 3        settlement and compromise under 9019 is not a mini-trial
          in the sense that we're trying to flesh out and decide
 4        all the issues.
 5        It's, rather, the trustee asking the Court to find that
          a settlement that she has negotiated is within the range
 6        of reasonableness as shaped by the A & C Properties
          factors.
 7
 8   Hr'g Tr. at 64:1-14, 16-24.
 9        In Trustee's declaration dated March 14, 2012, she stated
10   that she relied on her CPA's belief that the estate could recover
11   nothing if she litigated the ownership issue against the FDIC-R.
12   The CPA stated the same in his March 14 declaration.     Although
13   Mr. Bertsch is a CPA, he is also a former chapter 7 trustee.
14   Regardless, it was not improper for Trustee to rely on his
15   professional opinion.    With this evidence before it, we cannot
16   conclude the bankruptcy court clearly erred in deciding that the
17   recovery range was from $0 to $27 million.
18             b.   The difficulties of collection
19        The bankruptcy court agreed with the parties that no
20   difficulties existed in the matter of collection, so this factor
21   disfavored settlement.   This finding is not disputed.
22             c.   The complexity of the litigation involved, and the
                    expense, inconvenience and delay necessarily
23                  attending it
24        The bankruptcy court found that litigation was certain and
25   would be complex.   Therefore, this factor also favored settlement:
26        . . . I think it would be complex litigation.
27        . . . I have more than one bank-holding company case.
          I'm aware of the fact that although each side is
28        convinced that it's right, and its [precedents] are clear

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 1        and unwavering, I'm also convinced that each side is
          reading entirely different pieces of paper.
 2
          There is always good advocacy involved here. But when,
 3        in fact, it's pared down, there's going to be a lot of
          significant fighting, and I factor out and don't consider
 4        the subordination issue.
          . . . .
 5
          But the basic issue in terms of the ownership and
 6        enjoyment of the tax refund would be - although it does
          come down to a tax-filing agreement in many respects,
 7        there are also many other factors that would be involved.
 8        And I think the 1,000 pages at least up to now indicates
          that these parties would, in fact, litigate it, and I
 9        think that that is something that the trustee could take
          into account very easily in terms of adopting a position
10        that would take a settlement now.
11   Hr'g Tr. at 61:3-4, 5-13, 17-25.
12        We conclude that the bankruptcy court articulated sufficient
13   findings for this factor and that the record supports its
14   findings.    Trustee opined that litigation over ownership of the
15   Tax Refunds was inevitable and would consume much time and expense
16   for the estate, because of the scant case law on the matter and
17   the potential need for numerous witnesses, exhibits and documents
18   for trial.   She further predicted that litigating the matter would
19   take two to three years, including the inevitable appeal, which
20   would burden the estate with substantial legal fees and no
21   guarantee of success.
22        The bankruptcy court found that litigation was inevitable and
23   would be complex, involving a significant amount of fighting
24   between the parties.    This is certainly a reasonable inference,
25   considering that settling this matter took three hearings,
26   multiple motions, dozens of pleadings, and over one thousand pages
27   of documents.   And, here we are with the appeal.   Although
28   Appellants had argued that the matter could be decided on summary

                                      -34-
 1   judgment, the bankruptcy court apparently disagreed.   While
 2   acknowledging that the TFA was a key factor, the court found that
 3   many other factors would be involved.    Granted, the court did not
 4   provide a laundry list of what these factors were, about which
 5   Appellants complain, but, as noted above, Trustee set forth what
 6   factors she thought would be at issue.   As such, the record
 7   supports the bankruptcy court's finding.
 8        Wilmington contends that the bankruptcy court erred by not
 9   considering its offer to prosecute the ownership claim on a
10   contingency fee basis when analyzing this factor.   True, the
11   bankruptcy court did not articulate anything on the record about
12   Wilmington's offer.   However, Trustee did, noting that neither
13   Appellant had made her an offer any better than the $3 million
14   offered by the FDIC-R.   It would be a reasonable inference that
15   the bankruptcy court did not mention or consider Wilmington's
16   offer because it was not worth considering or mentioning.
17   Wilmington's offer could have placed the estate in a worse
18   position, ultimately recovering nothing.
19             d.   The paramount interest of the creditors and a
                    proper deference to their reasonable views in the
20                  premises
21        Finally, the bankruptcy court found that the settlement was
22   in the paramount interest of creditors and that Trustee had given
23   proper deference to their views:
24        Based on my view of the record, I think the trustee has
          been continually educated in this process, but,
25        certainly, at the time of the entry into the settlement
          agreement in October knew about the other creditors, may
26        not have known as much as she knows now.
27        I'm not even sure the creditors themselves know as much
          then as they do now about their own claims, but the point
28        being is that she had enough knowledge of the creditor

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 1        body to give proper deference to their reasonable views.
 2
          Much has been made from the fact that they were never
 3        contacted. I think there's been a lot of communication
          since then which has justified what she has done.
 4        . . . .
 5        A lot has been made about the trustee's business judgment
          in terms of adopting the settlement. And, in particular,
 6        I look at her declaration of March 14th supplemented by
          the May 11th.
 7
          And, again, looking into what she knew at the time she
 8        entered into this, I think there is some deference due to
          her judgment.
 9
          Her declaration never says she exercises her business
10        judgment. She simply says it's a fair settlement, and
          it's good for the estate.        I think that that
11        determination is due deference.
12   Hr'g Tr. at 62:5-17; 63:6-16.
13        We conclude that the bankruptcy court set forth sufficient
14   findings for this factor and that the record supports its
15   findings.   Trustee believed that settlement was in the paramount
16   interest of creditors, because successful litigation was not
17   guaranteed and could result in no benefit to the estate.    She
18   opined that the settlement was reasonable, appropriate under the
19   circumstances, and in the best interest of the estate and the
20   creditor body as a whole.   PCBB, the only other creditor to
21   surface, also supported the settlement.
22        The bankruptcy court, factoring out the subordination issue,
23   found that Trustee was cognizant of the creditor body from the
24   start, but that she had gained further knowledge about them over
25   the course of the case to give proper deference to their
26   reasonable views.   Moreover, any initial lack of communication
27   between her and Appellants had been cured during the settlement
28   approval process.

                                     -36-
 1           Holdco argues that the bankruptcy court failed to give proper
 2   deference to the views of the objecting creditors because it
 3   simply assumed that their claims were subordinated.     Wilmington
 4   makes a similar argument.     Although the court did comment that
 5   "people who are out of the money want to take larger risks to
 6   recover" (Hr'g Tr. at 62:24-25), a fair reading of the record
 7   indicates that the court never made any such assumption.       In fact,
 8   the court explicitly stated that it was factoring out and not
 9   considering the subordination issue.9     Further, while creditors'
10   objections to a compromise must be afforded due deference, such
11   objections are not controlling.     In re A & C Props., 784 F.2d at
12   1382.
13           Although the settlement may be at the low end of the
14   spectrum, in reviewing each of the factors examined by the
15   bankruptcy court, we conclude that it did not clearly err in this
16   regard.      The court made sufficient factual findings to support its
17   conclusion that the Settlement Agreement was fair, equitable,
18   within the range of reasonableness and should be approved.10
19                                 VI. CONCLUSION
20           For the foregoing reasons, we AFFIRM.
21
          9
22          We note that Debtor's Schedule F identified Wilmington's
     claim as a "Subordinate Debt." Thus, even if the court had made
23   such an assumption, it (and Trustee and the FDIC-R) may not have
     been wrong.
24           10
            Although not raised by the parties, we make two further
25   observations supporting the bankruptcy court's decision to approve
     the settlement. The FDIC-R had agreed to bear the risk of future
26   audits regarding the $12 million tax refund pending with the IRS,
     potentially not receiving any of it, while Trustee received
27   $3 million for the estate without risk. Further, if Debtor's
     board of directors had not in fact approved the TFA's, but were
28   required to do so to be enforceable, then Bob Richards would apply
     and Trustee's legal position would have faced serious challenge.

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