FILED
JAN 29 2021
NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK
U.S. BKCY. APP. PANEL
OF THE NINTH CIRCUIT
UNITED STATES BANKRUPTCY APPELLATE PANEL
OF THE NINTH CIRCUIT
In re: BAP No. EW-20-1156-FBG
GIGA WATT, INC.,
Debtor. Bk. No. 2:18-bk-03197
JUN DAM,
Appellant,
v. MEMORANDUM*
MARK D. WALDRON, Chapter 11
Trustee,
Appellee.
Appeal from the United States Bankruptcy Court
for the Eastern District of Washington
Frederick P. Corbit, Bankruptcy Judge, Presiding
Before: FARIS, BRAND, and GAN, Bankruptcy Judges.
INTRODUCTION
Creditor Jun Dam challenges chapter 111 trustee Mark D. Waldron’s
(“Trustee”) sale of certain assets to a third party. This appeal is limited to
*
This disposition is not appropriate for publication. Although it may be cited for
whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential
value, see 9th Cir. BAP Rule 8024-1.
1
Unless specified otherwise, all chapter and section references are to the
Bankruptcy Code,
11 U.S.C. §§ 101-1532, all “Rule” references are to the Federal Rules
of Bankruptcy Procedure, and all “Civil Rule” references are to the Federal Rules of
Civil Procedure.
the order denying Mr. Dam’s motion for reconsideration of the sale order.
We AFFIRM.
FACTUAL BACKGROUND
Giga Watt Inc. owned the “Giga Watt Project,” which consisted of
facilities built (and yet to be built) in eastern Washington. The facilities
included small buildings, called “pods,” that are equipped to house and
provide electricity to powerful computers called “cryptocurrency miners”
or just “miners.” “Cryptocurrency mining” is “the complex process in
which computers solve a complicated math puzzle to win a stack of virtual
currency . . . .” Paul Roberts, This is What Happens When Bitcoin Miners Take
Over Your Town, Politico Magazine, Mar./Apr. 2018,
https://www.politico.com/magazine/story/2018/03/09/bitcoin-mining-energ
y-prices-smalltown-feature-217230 (last visited October 14, 2020). The
miners also maintain the distributed ledgers that keep track of ownership
of cryptocurrency. See Darren J. Sandler, Citrus Groves in the Cloud: Is
Cryptocurrency Cloud Mining A Security?, 34 Santa Clara High Tech. L.J. 250,
253-55 (2018).
Giga Watt raised funds by selling “WTT tokens” in what it referred to
as an “initial coin offering.” Giga Watt told investors that a “WTT Token is
an Ethereum token representing the right to use the Giga Watt processing
center’s capacity, rent-free for 50 years, to accommodate 1 Watt’s worth of
mining equipment power consumption.” Basically, Giga Watt promised to
2
provide space, electrical power, cooling, and maintenance for miners that
(at least nominally) belonged to the token holders. Token holders could
provide their own miners or they could buy miners from Giga Watt’s
Singapore-based partner.
Mr. Dam purchased 1,025,660 WTT tokens for approximately $1.03
million. At oral argument, he acknowledged that he did not purchase or
provide any miners for installation in any of Giga Watt’s facilities.
About a year later, the value of digital currencies dropped
dramatically and the cost of electricity increased in eastern Washington,
diminishing the profitability of cryptocurrency mining. Giga Watt’s
business collapsed, and it filed a chapter 11 petition. Later, the Trustee was
appointed.
Mr. Dam filed a proof of claim for $5,391,720.37, based on his
projection of his lost profits over the fifty-year token period.
The Trustee filed a motion (“Sale Motion”) to sell the so-called TNT
Facility, including certain miners located there. The proposed buyer was
EcoChain, Inc. The sale was to be free and clear of liens. The purchase price
was $200,000, subject to overbidding.
The Non-Profit Creditors’ Committee of WTT Token Holders and
Miners, of which Mr. Dam was a member, objected to the proposed sale on
multiple grounds.
After a hearing, the bankruptcy court approved the sale agreement
3
between the Trustee and EcoChain by order entered May 19, 2020 (“Sale
Order”). It found that “EcoChain is purchasing the Purchased Assets in
good faith within the meaning of
11 USC § 363(m) and EcoChain is entitled
to the protections of
11 USC § 363(m).”
No one sought or obtained a stay of the Sale Order. The sale closed
shortly after the court entered the Sale Order.
Seventeen days after the court entered the Sale Order, Mr. Dam filed
a motion for reconsideration under Rule 9024 (“Motion for
Reconsideration”) and an adversary complaint2 against the Trustee. The
court denied the Motion for Reconsideration by order entered on June 18,
2020 (“Reconsideration Order”).
Mr. Dam filed a notice of appeal on June 25, 2020, thirty-seven days
after entry of the Sale Order and seven days after entry of the
Reconsideration Order. The notice of appeal identified only the Sale Order
as the order on appeal.
The Trustee has moved this Panel to dismiss the appeal, arguing that
we lack jurisdiction to review the Sale Order because neither the notice of
appeal nor the Motion for Reconsideration was filed within fourteen days
of the order.
2
The complaint against the Trustee and his attorneys asserted breach of fiduciary
duty, negligence, and unjust enrichment in the sale of the TNT Facility. The bankruptcy
court dismissed the adversary proceeding. Mr. Dam appealed the dismissal order to the
district court, where it is pending.
4
JURISDICTION
The bankruptcy court had jurisdiction pursuant to
28 U.S.C. §§ 1334
and 157(b)(2)(N). We have jurisdiction under
28 U.S.C. § 158 to review the
Reconsideration Order.
A. Timeliness
The Trustee’s Motion to Dismiss asserts that Mr. Dam’s appeal was
untimely. We agree in part.
An appeal from a final bankruptcy court order must be filed within
fourteen days of entry of the order. See Rule 8002(a). The deadline for filing
an appeal is mandatory and jurisdictional. See Browder v. Dir., Dep't of
Corrs.,
434 U.S. 257, 264 (1978); Slimick v. Silva (In re Slimick),
928 F.2d 304,
306 (9th Cir. 1990).
Rule 8002(b) tolls the time for filing an appeal if a party files a motion
to alter or amend the judgment under Rule 9023 or a motion for relief
under Rule 9024 within fourteen days after the judgment is entered. Rule
8002(b)(1)(B), (D). An untimely motion for reconsideration does not extend
the time to file a notice of appeal. Preblich v. Battley,
181 F.3d 1048, 1057 (9th
Cir. 1999).
The Sale Order was a final, appealable order. See In re Douglas J.
Roger, M.D., Inc., APC,
393 F. Supp. 3d 940, 956 (C.D. Cal. 2019) (“[O]rders
approving a sale of a debtor’s property . . . are considered final decisions
and immediately appealable.” (citation and quotation marks omitted)).
5
Mr. Dam did not file a notice of appeal or tolling motion within fourteen
days. Rather, he filed the Motion for Reconsideration seventeen days after
the court entered the Sale Order. Thus, the Motion for Reconsideration did
not toll the time for Mr. Dam to file an appeal from the Sale Order, and he
was too late to appeal the Sale Order. See Rule 8002(a).3
The notice of appeal was filed within fourteen days of the
Reconsideration Order. But Mr. Dam did not designate the Reconsideration
Order in his notice of appeal, contrary to Rule 8003(a)(3)(B). Nevertheless,
we will construe the notice of appeal as encompassing the Reconsideration
Order. Even if an order “does not appear on the face of the notice of
appeal,” we are to consider: “(1) whether the intent to appeal a specific
judgment can be fairly inferred and (2) whether the appellee was
prejudiced by the mistake.” Le v. Astrue,
558 F.3d 1019, 1022-23 (9th Cir.
2009) (quoting Lolli v. Cty. of Orange,
351 F.3d 410, 414 (9th Cir. 2003)). “In
determining whether intent and prejudice are present, we consider first,
whether the affected party had notice of the issue on appeal; and, second,
whether the affected party had an opportunity to fully brief the issue.” Id.
at 1023 (quoting Meehan v. Cty. of L.A.,
856 F.2d 102, 105 (9th Cir. 1988)
(quotation marks omitted)).
3
Mr. Dam argues on appeal that the Motion for Reconsideration was timely
under Civil Rule 60(b)(2) for excusable neglect because the postal service delivered his
filing late. But neglect cannot excuse his untimely notice of appeal. See Rule
8002(d)(2)(B).
6
Mr. Dam has briefed the issues concerning the denial of the Motion
for Reconsideration, and the Trustee had a fair opportunity to respond.
Because it is clear that Mr. Dam intended to appeal the Reconsideration
Order, we exercise our discretion to review it.
In short, we lack jurisdiction to review the Sale Order and will review
only the Reconsideration Order.
B. Statutory mootness
The Trustee argues that this appeal is statutorily moot under
§ 363(m). “We cannot exercise jurisdiction over a moot appeal.” Ellis v. Yu
(In re Ellis),
523 B.R. 673, 677 (9th Cir. BAP 2014).
Section § 363(m) provides:
reversal or modification on appeal of an authorization under
[§ 363(b) or (c)] of a sale or lease of property does not affect the
validity of a sale or lease under such authorization to an entity
that purchased or leased such property in good faith . . . unless
such authorization and such sale or lease were stayed pending
appeal.
See Paulman v. Gateway Venture Partners III, LP (In re Filtercorp, Inc.),
163
F.3d 570, 576 (9th Cir. 1998) (When a “sale of assets is made to a good faith
purchaser, it may not be modified or set aside unless the sale was stayed
pending appeal.”).
Mr. Dam did not seek a stay pending appeal. The bankruptcy court
found that “EcoChain is purchasing the Purchased Assets in good faith
within the meaning of
11 USC § 363(m) and EcoChain is entitled to the
7
protections of
11 USC § 363(m).” Mr. Dam does not challenge the finding of
good faith.4
Rather, Mr. Dam argues that the appeal is not statutorily moot
because the sale was made free and clear of his possessory rights as a lessee
under § 365(h). He relies on Clear Channel Outdoor, Inc. v. Knupfer (In re PW,
LLC),
391 B.R. 25 (9th Cir. BAP 2008), where we “conclude[d] that § 363(m)
does not apply to lien-stripping under § 363(f).” Id. at 35.
We are bound to follow our precedent in PW, LLC. Therefore, this
appeal is not statutorily moot.5
ISSUE
Whether the bankruptcy court abused its discretion in denying the
Motion for Reconsideration.
STANDARD OF REVIEW
We review for an abuse of discretion the bankruptcy court’s ruling
4
At oral argument, Mr. Dam argued that EcoChain knew of the token holders’
asserted rights. EcoChain’s mere knowledge of a dispute of ownership does not
establish its lack of good faith. See Thomas v. Namba (In re Thomas),
287 B.R. 782, 785 (9th
Cir. BAP 2002) (“‘Good faith’ is a factual determination to be reviewed for clear error
and can be defeated by ‘fraud, collusion between the purchaser and other bidders or the
trustee, or an attempt to take grossly unfair advantage of other bidders.’” (quoting Ewell
v. Diebert (In re Ewell),
958 F.2d 276, 281 (9th Cir. 1992))).
5
At oral argument, the Trustee asserted that this appeal is equitably moot. But
equitable mootness only applies if (among other factors) the bankruptcy court could not
grant “effective and equitable relief” from an “uncontrollable situation” upon reversal
of the order. Motor Vehicle Cas. Co. v. Thorpe Insulation Co. (In re Thorpe Insulation Co.),
677 F.3d 869, 880 (9th Cir. 2012). We are not persuaded that these conditions exist here.
8
regarding a motion for reconsideration. Carruth v. Eutsler (In re Eutsler),
585
B.R. 231, 235 (9th Cir. BAP 2017) (citations omitted). To determine whether
the bankruptcy court has abused its discretion, we conduct a two-step
inquiry: (1) we review de novo whether the bankruptcy court “identified
the correct legal rule to apply to the relief requested” and (2) if it did, we
consider whether the bankruptcy court’s application of the legal standard
was illogical, implausible, or without support in inferences that may be
drawn from the facts in the record. United States v. Hinkson,
585 F.3d 1247,
1262-63 & n.21 (9th Cir. 2009) (en banc).
DISCUSSION
We review the Reconsideration Order under Civil Rule 60, made
applicable in bankruptcy by Rule 9024, because Mr. Dam filed the Motion
for Reconsideration after the fourteen-day period following the entry of the
Sale Order. See Am. Ironworks & Erectors, Inc. v. N. Am. Constr. Corp.,
248
F.3d 892, 898-99 (9th Cir. 2001) (“A ‘motion for reconsideration’ is treated
as a motion to alter or amend judgment under [Civil Rule] 59(e) if it is filed
within [fourteen] days of entry of judgment. Otherwise, it is treated as a
[Civil] Rule 60(b) motion for relief from a judgment or order.” (citation
omitted)).
To obtain relief under Rule 9024(b), the movant must show
entitlement to one of the specified grounds for relief in Civil Rule 60(b):
(1) mistake, inadvertence, surprise, or excusable neglect;
9
(2) newly discovered evidence that, with reasonable diligence,
could not have been discovered in time to move for a new trial
under Rule 59(b);
(3) fraud (whether previously called intrinsic or extrinsic),
misrepresentation, or misconduct by an opposing party;
(4) the judgment is void;
(5) the judgment has been satisfied, released, or discharged; it is
based on an earlier judgment that has been reversed or vacated;
or applying it prospectively is no longer equitable; or
(6) any other reason that justifies relief.
Civil Rule 60(b). Mr. Dam’s burden is a heavy one. See Casey v. Albertson’s
Inc.,
362 F.3d 1254, 1260 (9th Cir. 2004) (movant must prove fraud under
Civil Rule 60(b)(3) by clear and convincing evidence); Harvest v. Castro,
531
F.3d 737, 749 (9th Cir. 2008) (Civil Rule 60(b)(6) “is to be used sparingly as
an equitable remedy to prevent manifest injustice and is to be utilized only
where extraordinary circumstances prevented a party from taking timely
action to prevent or correct an erroneous judgment.” (internal quotation
marks omitted)).
“Ninth Circuit decisions have settled that Rule 60(b) is not a
substitute avenue for appeal[.]” Atkins v. Fiberglass Representatives, Inc. (In re
Atkins),
134 B.R. 936, 939 (9th Cir. BAP 1992). A movant seeking relief
under Civil Rule 60(b) after the appeal period has expired “is not permitted
to revisit the merits of the underlying judgment or argue that the trial court
committed some legal error in arriving at that judgment.” United Student
10
Funds, Inc. v. Wylie (In re Wylie),
349 B.R. 204, 209 (9th Cir. BAP 2006). The
movant cannot use a Civil Rule 60(b) motion to reargue points already
made, or that could have been made, in dispute of the underlying motion.
Branam v. Crowder (In re Branam),
226 B.R. 45, 55 (9th Cir. BAP 1998), aff'd,
205 F.3d 1350 (9th Cir. 1999).
Instead, the movant is limited to the narrow grounds enumerated in
Civil Rule 60(b). “These grounds generally require a showing that events
subsequent to the entry of the judgment make its enforcement unfair or
inappropriate, or that the party was deprived of a fair opportunity to
appear and be heard in connection with the underlying dispute.” In re
Wylie,
349 B.R. at 209.
On an appeal from a Civil Rule 60(b) order, we review an appellant’s
arguments “solely as they bear on the [bankruptcy court’s] exercise of
discretion on the Rule 60(b) motion. [Appellant] cannot prevail merely by
showing that the [underlying judgment] . . . was erroneous.” Sec. & Exch.
Comm’n v. Seaboard Corp.,
666 F.2d 414, 415-16 (9th Cir. 1982).
Nearly all of Mr. Dam’s arguments on appeal are ones that he could
have made, or that the committee he chaired did make, in opposition to the
Sale Motion. The bankruptcy court correctly refused to allow Mr. Dam to
relitigate the Sale Order.
Mr. Dam argues that he was entitled to reconsideration under Civil
Rule 60(b)(3) because the Trustee and his counsel had engaged in
11
misconduct and made misrepresentations to the court.
In order to prevail under Civil Rule 60(b)(3), Mr. Dam had to “prove
by clear and convincing evidence that the verdict was obtained through
fraud, misrepresentation, or other misconduct and the conduct complained
of prevented the losing party from fully and fairly presenting the defense.”
De Saracho v. Custom Food Mach., Inc.,
206 F.3d 874, 880 (9th Cir. 2000).
“[Civil Rule] 60(b)(3) require[s] that fraud . . . not be discoverable by due
diligence before or during the proceedings.” Casey,
362 F.3d at 1260
(quoting Pac. & Arctic Ry. & Navigation Co. v. United Transp. Union,
952 F.2d
1144, 1148 (9th Cir. 1991)).
The bankruptcy court properly rejected this argument because
Mr. Dam offered only allegations, and no evidence, of misconduct. Based
on this complete failure of proof, the court did not abuse its discretion in
rejecting Mr. Dam’s arguments concerning misconduct and fraud.
Mr. Dam also argues that the bankruptcy court violated his
contractual rights because the Trustee could not sell the TNT Facility free of
his rights as a lessee under § 365(h). Mr. Dam apparently thinks that this
supposed error is a reason justifying relief under Civil Rule 60(b)(6). The
argument fails, however, because there was no error. The Ninth Circuit has
held that a lessor’s trustee may sell property free and clear of a tenant’s
rights notwithstanding § 365(h), where § 363(f) permits a sale free and clear
of the particular tenant’s interest and the court provides adequate
12
protection for the tenant’s interest. Pinnacle Restaurant at Big Sky, LLC v. CH
SP Acquisitions, LLC (In re Spanish Peaks Holdings II, LLC),
872 F.3d 892, 900
(9th Cir. 2017). In its oral ruling, the court made clear that the sale proceeds
would not be distributed until the court decided the token holders’
administrative and ownership claims. Transferring interests from property
to sale proceeds is a standard method of providing adequate protection, see
Moldo v. Clark (In re Clark),
266 B.R. 163, 171 (9th Cir. BAP 2001) (“Typically,
the proceeds of sale are held subject to the disputed interest and then
distributed as dictated by the resolution of the dispute; such procedure
preserves all parties’ rights by simply transferring interests from property
to dollars that represent its value.”), and the court did not abuse its
discretion in applying that method to Mr. Dam’s interest.
Thus, Mr. Dam has not shown that the bankruptcy court abused its
discretion when it denied his Motion for Reconsideration.
CONCLUSION
For the foregoing reasons, we AFFIRM.
13
