Bankruptcy No. 10-14198-MM-11
The opinion of the court was delivered by: M. James LorenzUnited States District Court Judge
CONSOLIDATED ORDER GRANTING MOTION TO DISMISS THE BANKRUPTCY APPEALS [doc. #25]
ISE Corporation ["debtor"] and the Official Committee of Unsecured Creditors of ISE Corporation move to dismiss the two bankruptcy appeals that Maxwell Technologies, Inc. has filed in this Court. The motion has been fully briefed and is considered on the papers submitted and without oral argument under Civil Local Rule 7.1(d)(1).
Debtor ISE and Maxwell had a business relationship for many years with respect to the development of a product that would be a component of Debtor ISE's clean energy hybrid bus technology. On August 10, 2010, ISE filed a Chapter 11 bankruptcy petition by which time ISE had claimed that Maxwell had misappropriated debtor's intellectual property ("disputed patents").
ISE sold substantially all of its assets to several purchasers with Bluways USA, Inc. acquiring the majority of ISE's assets at auction. Maxwell also put in a bid at the debtor's auction of assets that included a limited licensing agreement and a mutual general release. ISE accepted Maxwell's bid which was included in the order authorizing the sale of assets in the bankruptcy court.
Prior to the bankruptcy court's further approval of the sale order, Bluways filed a complaint against ISE that asserted that ISE possessed claims against Maxwell for patent infringement and those claims should have been sold to Bluways under the sale order.
Maxwell moved to enforce the amended order which included approving the sale of assets; authorizing the assumption and assignment of certain executory contracts; and approving the sale transaction and the transaction documents filed by Maxwell; and to enforce the sale order. As the bankruptcy court noted: "Maxwell appears to seek a ruling that 1) the Settlement [between Maxwell and ISE] was approved by this Court, and 2) the Debtor must bring the 9019 motion."*fn1 (Appellees' Request for Judicial Notice, Exh. 1.)*fn2
In its ruling denying Maxwell's motion, the bankruptcy court found and concluded that the parties had not reached a final and complete settlement and therefore, the court had not approved the settlement agreement. The court also recognized that by its motion, Maxwell sought to have the 9019 motion brought before the bankruptcy court. But the court noted that the factors to be considered in approving the settlement, if it were to be brought in a proper 9019 motion, had already been considered and requiring the debtor to file the motion would be a useless act. The bankruptcy court's denial of Maxwell's motion ("Maxwell Order") lead to the filing of the first Maxwell appeal in this action.
Thereafter, Bluways and ISE agreed to resolve Bluway's complaint concerning its purchase of ISE's assets in a settlement agreement. The bankruptcy court entered an order approving ISE's and Bluway's joint motion for order approving compromise of controversy with Bluways, USA, Inc. ("Bluway Order"). The settlement agreement and approval order included ISE's assignment to Bluways of the disputed patent claims against Maxwell. Again, Maxwell appealed the decision of the bankruptcy court ("Bluways Appeal").
Although Maxwell's two appeals were timely brought, in neither instance did Maxwell seek a stay of the bankruptcy court orders pending their appeal. Appellees contend in the present motion that both appeals*fn3 are mooted by events that have occurred since entry of the Maxwell and Bluways Orders.
LACK OF APPELLATE JURISDICTION DUE TO MOOTNESS
Appellees contend that the appeal is moot because Maxwell failed to seek stays pending the appeals and there has been substantial consummation of the plan. As the Ninth Circuit has recently held in an appeal in the bankruptcy context, "we will not entertain an appeal if the case is moot." In re Thorpe, 677 F.3d 869, 879-80 (9th Cir. 2012). But the "party moving for dismissal on mootness grounds bears a heavy burden." Id. at 880 (quoting Jacobus v. Alaska, 338 F.3d 1095, 1103 (9th Cir. 2003)).
The Thorpe court noted that there are two mootness doctrines: one based on the United States Constitution, Article III, the other based in equity. Id. In the case of constitutional mootness, the focus is on whether there is an ability to alter the outcome in a manner that appellant can obtain effective relief. If [the appellate court] can grant such relief, the matter is not moot." Id. (quoting Felster Publi'g v. Burrell (In re Burrell), 415 F.3d 994, 998 (9th Cir. 2005)(quoting Garcia v. Lawn, 805 F.2d 1400, 1402 (9th Cir. 1986)). Under the facts of the Thorpe case, the Court found that the ...