Dam v. Waldron (In re Giga Watt Inc.)

In re: GIGA WATT, INC., Debtor.

JUN DAM, Appellant, v. MARK D. WALDRON, Chapter 11 Trustee, Appellee.

BAP No. EW-20-1156-FBG

UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT

January 29, 2021

NOT FOR PUBLICATION

Bk. No. 2:18-bk-03197

MEMORANDUM^*

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 tothe 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-energy-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 toprovide 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 agreementbetween 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.

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)).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)).

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 theprotections 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 rulingregarding 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...