600 Alabama LLC

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UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re 	) Bankruptcy Case
) No. 08-31434DM
600 ALABAMA LLC, A CORPORATION, 	)
)
Debtor. 	) Chapter 7
___________________________________)
MEMORANDUM DECISION ON MOTION TO DISQUALIFY TRUSTEE
On December 10, 2010, the court converted this case to
chapter 7 and appointed Andrea Wirum as trustee. 	At a hearing on
that date, the court informed counsel for Marin Mortgage Bankers
Corporation (“MMB”) that its motion to disqualify Mr. Bradlow, the
former chapter 11 trustee, was rendered moot by the conversion.
MMB did not seek appellate review of the conversion order or the
court’s decision that its motion to disqualify was moot.
On April 1, 2011, MMB filed a motion asking the court to
reconsider its prior ruling denying the motion to disqualify Mr.
Bradlow in light of a September 2010 reversal and remand by the
district court. 	The court will not reconsider its ruling because
the underlying motion is moot; even if it were not, grounds did
not exist to disqualify Mr. Bradlow.
As Mr. Bradlow is no longer the trustee, the court cannot
grant the relief which MMB seeks (his removal). 	Yet, MMB says
that the court should remove him anyway as a symbolic gesture.
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Signed and Filed: June 14, 2011
________________________________________
DENNIS MONTALI
U.S. Bankruptcy Judge
________________________________________
Entered on Docket
June 15, 2011
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 08-31434 Doc# 346 Filed: 06/14/11 Entered: 06/15/11 11:18:20 Page 1 of
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The court lacks jurisdiction to issue “symbolic” or advisory
rulings. 	The court has jurisdiction only to adjudicate a “real,
earnest and vital controversy. ” Chicago & Grand Trunk R. Co. v.
Wellman, 143 U.S. 339, 345 (1892). 	The case or controversy
requirement demands dismissal when the issues presented are no
longer “live” or the parties lack a cognizable interest in the
outcome. 	Murphy v. Hunt, 455 U.S. 478, 481 (1982). 	A case
becomes moot when it “loses its character as a present, live
controversy of the kind that must exist” in order to avoid
“advisory opinions on abstract questions of law.” Cantrell v. City
of Long Beach, 241 F.3d 674, 678 (9th Cir. 2001). 	As this court
cannot grant the relief sought by MMB, the matter is moot and the
court denies the motion for lack of jurisdiction. 1
Even if the matter were not moot, grounds do not exist to
grant the motion. 	MMB held the second lien on Debtor’s property.
(As this court observed early in the case in a ruling on a motion
for preliminary injunction, MMB’s lien appeared avoidable as a
fraudulent conveyance.) 	When Debtor moved to dismiss the case in
2008, certain junior lienholders opposed dismissal and requested
appointment of a chapter 11 trustee to pursue an avoidance action
against MMB. 	They also opposed a motion for relief from stay
filed by MMB. 	The court granted the request to appoint a chapter
11 trustee, and after consulting with all parties, including MMB,
the United States Trustee appointed Mr. Bradlow.
After Mr. Bradlow was appointed the chapter 11 trustee, he
1Jurisdictional issues may be raised by the court sua sponte.
See In re Vylene Enters., Inc., 968 F.2d 887, 889 (9th Cir. 1992).
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negotiated a lease agreement with the debtor’s tenant (following
significant disputes between debtor and the tenant). 	As no equity
existed in the estate, the trustee did not want the estate to
incur the costs of litigating potentially unsuccessful avoidance
claims. 	Multiple liens existed against the property, and the
trustee would have had to avoid most (if not all) of them for the
estate for the estate to recover any amounts.
Ms. Chiang and her spouse, John Sullivan, an attorney, offered
to “buy” the estate’s potential avoidance actions by paying the
costs of litigation and prosecuting the actions. 	The trustee
moved for approval of a litigation agreement with Mr. Sullivan,
over the vigorous objections of Loanvest V, LLC and MMB. 	The
court approved the litigation agreement.
Thereafter, MMB filed a motion to vacate the litigation
agreement based on previously undisclosed e-mails revealing that
while an employee of a lawfirm representing 2712 Mission (a 	party
against which the debtor held a claim), Mr. Sullivan drafted
pleadings adverse to that client. 	MMB also observed that Mr.
Sullivan did not disclose his connections to Loanvest and MMB when
the motion to approve the litigation agreement was filed.
On July 20, 2009, MMB filed a motion to disqualify Mr.
Bradlow, arguing that his affiliations and relationships with Mr.
Sullivan and his counsel resulted in a conflict of interest or a
lack of disinterestedness. 	Following extensive briefing and
several hearings, the court entered an order denying the motion on
August 26, 2009. 	MMB appealed, contending that the court had
applied the wrong standard; specifically, MMB argued that this
court based its decision to deny the motion on its conclusion that
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no actual harm had resulted from Mr. Bradlow’s decisions regarding
case administration.
On September 28, 2010, the district court issued an order
reversing and remanding the order denying the motion to
disqualify. 	The district court stated that removal of a trustee
under section 324 of the Bankruptcy Code does not require “actual
harm;” rather, the court should consider the “totality of
circumstances” to determine if the trustee has a materially
adverse interest as set forth in In re AFI Holding, Inc., 355 B.R.
139, 147 (9th Cir. 2006); aff’d, 530 F.3d 832 (9th Cir. 2008) (“We
also generally agree that a court should apply a
totality-of-circumstances analysis in determining other “causes”
for removal under § 324. 	We do not subscribe to a rigid
application of factors, however, but view them as aids for the
court’s discretionary review.”).
In determining whether to disqualify a trustee, a court may
consider a trustee’s past affiliations with insiders and an
appearance of impropriety that may create a potential for a
materially adverse effect on the estate. 	530 F.3d at 838. 	MMB
simply has not presented evidence of affiliations between and
among Mr. Bradlow and Mr. Sullivan (and their respective counsel)
that would support a finding of appearance of impropriety.
MMB emphasizes that Mr. Bradlow signed a settlement agreement
converting the purportedly secured claim of Loanvest to an
unsecured claim. 	MMB has not, however, provided any evidence that
Mr. Bradlow was acting inconsistetnly with the litigation
agreement when he signed that settlement agreement, nor has he
shown that Mr. Bradlow would have omitted material and known
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conflicts if the settlement had reached the point of requiring
court approval under Federal Rule of Bankruptcy Procedure 9019.
MMB has not demonstrated that Mr. Bradlow was aware of the
connections of Mr. Sullivan to Loanvest at the time he executed
the litigation agreement or that Mr. Bradlow was acting outside
the scope of that agreement. 	That the court eventually vacated
its order approving the settlement agreement because of Mr.
Sullivan’s nondisclosures does not mean that Mr. Bradlow was
complicit in, or even aware of, Mr. Sullivan’s conflicts.
In AFI, the trustee formerly represented an insider of the
debtor and formerly represented the former insider’s domestic
partner in his capacity as an investor and limited partner in
entities related to the debtor. 	Here, however, Mr. Bradlow –
unlike the trustee in AFI – did not engage in conduct that gave
rise to an appearance of impropriety that may have created a
potential for a materially adverse effect on the estate.
For the foregoing reasons, the court will deny the motion to
reconsider. 	Counsel for Mr. Bradlow should upload an order
consistent with this memorandum decision and should comply with
B.L.R. 9021-1.
**END OF MEMORANDUM DECISION**
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