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In re Wigley

United States Court of Appeals, Eighth Circuit

March 29, 2018

In re: Michael Robert Wigley, Debtor.
Michael Robert Wigley, Debtor - Appellee, Barbara Wigley, Interested Party - Appellant,

          Submitted: October 16, 2017

          Appeal from the United States Bankruptcy Appellate Panel for the Eighth Circuit

          Before SMITH, Chief Judge, MURPHY and COLLOTON, Circuit Judges.


         Barbara Wigley is the wife of Michael Wigley, a debtor in Chapter 11 bankruptcy proceedings. Barbara, who was not a party to the bankruptcy proceedings, seeks to appeal several orders of the bankruptcy court: (1) an order denying confirmation of Michael's plan of reorganization, (2) an order confirming Michael's subsequent plan of reorganization, and (3) an order granting stay relief to Lariat, one of Michael's creditors. The Eighth Circuit Bankruptcy Appellate Panel dismissed Barbara Wigley's appeal, holding that she was not a "person aggrieved" by the orders and therefore lacked standing. We agree and dismiss the appeal.


         On or about October 8, 2008, Baja Sol Cantina EP, LLC-a limited liability company that operated a Mexican restaurant in Eden Prairie, Minnesota-entered into a lease agreement with Lariat Companies, Inc. Michael Wigley, as the ninety percent member and chief manager of Baja Sol, personally guaranteed the company's obligations under the Lariat lease.

         The Mexican restaurant was not profitable, and Baja Sol developed financial problems. On October 28, 2010, Lariat sued Baja Sol and Michael Wigley as guarantor in Minnesota state court. Lariat sought recovery of $245, 975 in allegedly past-due rent plus approximately $2 million for future accruing rent. In July 2011, the state court entered summary judgment for Lariat against Baja Sol and Michael in the amount of $2.238 million.

         While Lariat's action was underway but before the court had granted summary judgment, Michael transferred some of his assets to his wife, Barbara Wigley. After Lariat had obtained the $2.238 million judgment in its lease action, Lariat and several other creditors sued Barbara Wigley in state court for fraudulent transfer of funds under the Minnesota Uniform Fraudulent Transfer Act, Minn. Stat. § 513.41 et seq. The creditors added Michael as a defendant in the fraudulent transfer action. The state court found the Wigleys jointly and severally liable for $795, 098 of fraudulently transferred funds, plus interest, costs, and disbursements. Shortly thereafter, the Wigleys moved for amended findings in the state court action; the motion was pending when this appeal was filed.

         In February 2014, Michael filed for Chapter 11 bankruptcy. Because Lariat's claim against Michael arises from a real property lease termination, the Bankruptcy Code, 11 U.S.C. § 502(b)(6), caps Lariat's recovery in these bankruptcy proceedings. Lariat may recover only a limited amount of future rent losses in bankruptcy. See In re Wigley, 533 B.R. 267 (B.A.P. 8th Cir. 2015).

         Michael filed a Plan of Reorganization with the bankruptcy court. Under this plan, Michael proposed to pay unsecured creditors their allowed claims in full. The plan also contained a section entitled "Settlement and Release of Claims Against Barbara Wigley." This section provided:

Confirmation of the Plan shall constitute approval of a settlement agreement under which all claims that the Debtor or any other representative of the estate could have asserted against Barbara Wigley as of the Confirmation Date, including but not limited to Avoidance Actions, shall be released in exchange for payment of the Barbara Wigley Settlement Payment, which shall be due no later than the Effective Date. The settlement and release provided for herein shall be binding on all creditors and other parties interest, whether or not entitled to receive payments or other distributions under the Plan.

         The Plan defined "Barbara Wigley Settlement Payment" as a sum of $350, 000. The plan, then, would settle the fraudulent transfer action in which the state court had entered a judgment of $795, 098 against the Wigleys for a $350, 000 payment from Barbara.

         Lariat objected, and the bankruptcy court denied confirmation of the Plan. The court concluded that although 11 U.S.C. § 1123(b)(3)(A) allows for settlements in a plan, the proposed settlement must be "fair and equitable." See Protective Comm. for Indep. Stockholders of TMT Trailer Ferry, Inc. v. Anderson, 390 U.S. 414, 424 (1968). Drawing on factors identified by this court in evaluating a settlement under Federal Rule of Civil Procedure 23(e), see In re Flight Transp. Corp. Sec. Litig., 730 F.2d ...

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