Rev Op Group v. ML Manager LLC (In re Mortgs. Ltd.)

Rev Op Group v. ML Manager LLC (In re Mortgs. Ltd.)

Opinion

 [*1213]  WALLACE, Senior Circuit Judge:

Mortgages Ltd. was a private lender for certain real estate investments in Arizona. Mortgages Ltd. raised money from investors to extend loans to real estate purchasers, secured by the purchased real estate, and acted as servicing agent for the loans and properties. The investors received "pass-through" fractional interests in the real estate that secured the loans and the resulting loan payments. The pass-through investors acquired an actual interest in each underlying loan.

On June 24, 2008, Mortgages Ltd. filed for Chapter 11 bankruptcy. The company was restructured through a confirmed bankruptcy plan. Pursuant to that plan, the entity ML Manager LLC (ML Manager), the appellee here, manages and operates the loans left in Mortgages Ltd.'s portfolio. ML Manager took a $20 million loan in "exit financing" to pay for expenses related to the completed bankruptcy. The bankruptcy plan was confirmed by the bankruptcy court in May 2009.

After confirmation, [**4]  a group of the pass-through investors (Rev Op Group) moved for an order in the bankruptcy court ruling that ML Manager could not act as agent for their interests, and that objecting investors like the Rev Op Group should not be obligated to pay any share of the exit financing loan. The bankruptcy court rejected both arguments in its "Clarification Order," issued on October 21, 2009. Rev Op Group appealed to the district court, which affirmed on January 31, 2012.

Relying on the confirmed plan, the Clarification Order and other decisions of the bankruptcy court, ML Manager began liquidating the loan portfolio. As liquidation proceeds became available, ML Manager filed an "Allocation Model" on September 1, 2010, to allocate costs and distribute the proceeds to investors. Rev Op Group objected to the model and the proposed distributions of funds, but the bankruptcy court provisionally overruled these objections. ML Manager filed a notice of its intent to distribute proceeds according to the allocation model and a motion to approve the distributions. R objected to the motion. On January 20, 2011, the bankruptcy court issued its "Distribution Order" overruling the objections and granting [**5]  ML Manager's motion to approve the distributions. Rev Op Group appealed to the district court, which affirmed the order on November 4, 2011.

Rev Op Group timely appealed from the district court's affirmances of the Clarification and Distribution Orders to this court.³  [*1214]  We have appellate jurisdiction under 28 U.S.C. § 158(d)(1).

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