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In re Community Translator Network LLC

United States District Court, D. Utah

February 6, 2018

In re COMMUNITY TRANSLATOR NETWORK LLC, Debtor.
v.
UNITED STATES TRUSTEE, POWELL MEREDITH COMMUNICATIONS COMPANY, and AMY MEREDITH, Appellees. COMMUNITY TRANSLATOR NETWORK LLC, Appellant,

          MEMORANDUM DECISION AND ORDER GRANTING MOTION TO DISMISS

          JILL N. PARRISH UNITED STATES DISTRICT COURT JUDGE

         Community Translator Network LLC purports to appeal from a bankruptcy court order that converted its bankruptcy case from Chapter 11 to Chapter 7. Appellees Powell Meredith Communications Company and Amy Meredith move to dismiss the appeal. [Docket 24]. The court GRANTS the motion and dismisses the appeal.

         BACKGROUND

         Community Translator Network filed a voluntary bankruptcy petition under Chapter 11 of the Bankruptcy Code. The bankruptcy court authorized the retention of attorney Knute Rife to represent Community Translator Network. Powell Meredith Communications Company and Amy Meredith (collectively, Powell Meredith) appeared as creditors in the bankruptcy proceedings.

         The United States Trustee moved to convert the case to a Chapter 7 liquidation proceeding or, alternatively, to dismiss the case. Rife opposed the portion of the motion requesting conversion to Chapter 7 liquidation on behalf of Community Translator Network. On June 19, 2017, the bankruptcy court ordered that the case be converted to a Chapter 7 proceeding. On June 20, 2017, the court appointed a trustee to take possession of Community Translator Network.

         Before the trustee took possession of Community Translator Network, attorney John Barlow was its managing member. On July 1, 2017, Barlow purported to represent Community Translator Network when it filed a notice of appeal from the June 19, 2017 bankruptcy court order on behalf of the company.

         Powell Meredith filed a motion to dismiss the appeal in this court. It argued that the bankruptcy court ousted Barlow from his management position and that he had no authority to appeal on behalf of Community Translator Network. The court held oral argument on the motion. At the hearing, the trustee for Community Translator Network indicated that he took no position on the motion to dismiss.

         ANALYSIS

         The Tenth Circuit's opinion in C.W. Mining Co. v. Aquila, Inc. (In re C.W. Mining Co.), 636 F.3d 1257 (10th Cir. 2011) is dispositive of Powell Meredith's motion to dismiss. In that case, the bankruptcy court granted a creditor's motion to convert an involuntary Chapter 11 bankruptcy case to Chapter 7. Id. at 1259. Six days later, the court appointed a trustee to take possession of the debtor, C.W. Mining Company. Former counsel for C.W. Mining subsequently appealed from the bankruptcy court's ruling that the entities that initiated the involuntary Chapter 11 proceedings were bona fide creditors with standing to file the involuntary petition. Id. The trustee appointed by the bankruptcy court moved to dismiss the appeal, arguing that the ousted managers of C.W. Mining had no authority to file the notice of appeal. Id. The Bankruptcy Appellate Panel (BAP) denied the motion to dismiss.

         The Tenth Circuit reversed the BAP. It reasoned that, as a corporation, C.W. Mining could “act only through its authorized agents.” Id. at 1261. It further held that once the bankruptcy court ousts a corporation's management by appointing a trustee, “[t]he only person with standing or legal capacity to represent [the Debtor] in any litigation, including these appeals, is its Trustee.Id. at 1263 (second alteration in original) (citation omitted). Thus, former management “may not usurp the corporation's right to appeal, which may be exercised by the trustee alone.” Id. Accordingly, the Tenth Circuit held that

following the appointment of a trustee in a corporate Chapter 7 bankruptcy, the corporation's former managers are not authorized to bring the corporation's appeal-even if that appeal contests the very initiation of the bankruptcy itself. There is no equitable exception to this rule, nor is there a distinction between voluntary and involuntary debtors.

Id. at 1265.

         The holding of C.W. Mining requires this court to dismiss the appeal filed by Barlow. As was the case in C.W. Mining, the bankruptcy court converted the bankruptcy proceeding in this case to a Chapter 7 bankruptcy and appointed a trustee to take control of the debtor, Community Translator Network. Later, Community Translator Network's former manager, Barlow, filed a notice of appeal, purporting to act on behalf of the company. But former managers have no authority to take official actions on behalf of the corporation or limited liability company they formerly controlled. Because artificial business entities may only act through their proper legal representatives, and because “there is no ‘separate interest' for the [former managers] to represent, ” id. at 1264, a bankruptcy appeal filed by former managers on behalf of a business entity must be dismissed.

         Barlow attempts to distinguish C.W. Mining. First he argues that the debtor in that case did not oppose the motion to convert Chapter 11 proceedings to Chapter 7. But the Tenth Circuit did not reference this fact in its analysis of whether the former managers of C.W. Mining had the authority to appeal. The Tenth Circuit's analysis was based solely upon the fact that the former managers had no authority to act on behalf of the debtor at the point in time when they filed the notice of appeal. Whether the Chapter 7 trustee was voluntarily or involuntarily appointed ...


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