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Clark v. Council of Unit Owners of The 100 Harborview Drive Condominium

United States District Court, D. Maryland

September 25, 2019

PAUL C. CLARK, SR., et al, Appellants,


          Stephanie A. Gallagher United States District Judge

         This appeal results from the reorganization of the Council of Unit Owners of The 100 Harborview Drive Condominium ("Appellee") in Chapter 11 bankruptcy proceedings before the United States Bankruptcy Court for the District of Maryland ("Bankruptcy Court"). Dr. Paul C. Clark, Sr., Rebecca Delorme, and Paul C. Clark, Jr. ("Appellants") appeal several orders of the Bankruptcy Court. Now pending is Appellee's motion to dismiss the appeal on the grounds of equitable mootness ("the Motion"). ECF 15.1 have reviewed the Motion, Appellants' Opposition, ECF 18, and Appellees' reply, ECF 20. No hearing is necessary. See Local Rule 105.6 (D. Md. 2018). For the reasons set forth below, Appellee's motion to dismiss is GRANTED, and the appeal is DISMISSED as equitably moot.

         I. Factual Background

         Appellee is an unincorporated condominium association comprised of "any person, firm, corporation, trust, or other legal entity ... holding title to a condominium unit" located at 100 Harborview Drive, a 29-story luxury residential high rise at Baltimore's Inner Harbor. Order Confirming Debtor's Fifth Amended Plan of Reorganization, ECF 6-34 at 2. Appellee filed a petition for Chapter 11 bankruptcy on March 9, 2016. Id. Appellee sought Chapter 11 reorganization in part to resolve years of litigation involving two units in the building. Id. Appellant Paul C. Clark is the owner of one of those units, a penthouse ("Unit PH4A"), located in the high rise. Id. Appellee and Appellants have an extensive, decade-long litigation history concerning Unit PH4A. Indeed, the Bankruptcy Court noted the extensive tension between the two parties. See Preliminary Order Regarding Creditors' Damages Claim, ECF 6-35 at 11 (explaining that past lawsuits have concerned the parties' "truthfulness, trustworthiness, and civility").

         Relevant here, Appellants filed several claims against Appellee as part of the Chapter 11 process, collectively asserting more than $25 million in damages. ECF 6-34 at 4-5. The claims related to pre-petition litigation between the parties, alleging violations of the Fair Housing Act ("FHA"), property damage to Unit PH4A, and consequential and other damages allegedly resulting from these claims. Id. Appellee filed objections to these claims, id. at 5, and Appellants, correspondingly, filed an opposition to the objections. ECF 6-35 at 3. The Bankruptcy Court granted Appellee's motion for partial summary judgment with respect to the FHA Claims. Id. at 4.[1] After a multi-day trial on the remaining issues, the Bankruptcy Court issued its Preliminary Order on April 10, 2018. ECF 6-35. On the same day, the Bankruptcy Court issued its order ("Confirmation Order") confirming Appellee's Fifth Amended Plan of Reorganization ("Confirmed Plan"). ECF 6-34. The Bankruptcy Court promptly issued a notice setting May 1, 2018 as the "Effective Date" for the Confirmed Plan. ECF 6-37.

         The Confirmed Plan established Appellee's obligations with respect to several classes of creditors. Since the Effective Date, Appellee has engaged in numerous transactions with these parties, totaling more than $2.8 million. ECF 15 at 7. For instance, Appellee was required to make several lump-sum payments to creditors in Class 1, including an interest only payment in the amount of $27, 595.23, on or before May 1, 2018. Affidavit of Michael A. Feltenberger, ECF 15-1 at 2. Appellee made this payment on April 19, 2018. Id. Additionally, the Confirmed Plan established payment schedules with respect to several groups of creditors, including: three equal monthly installments to Class 3 creditors on May 31, 2018, June 29, 2018, and July 30, 2018, respectively. Id. at 3-4. Appellee completed all of these payments, in an amount totaling approximately $448, 345.77. Id. at 4. The Confirmed Plan also codified the settlement of claims with Class 4 creditors involving a second unit in the building: Unit PH4C. Appellee paid approximately $1.1 million to the Class 4 creditors, including a lump-sum payment and several escrowed monthly payments in 2017 and 2018. Id. at 4. In accordance with the agreement, the Class 4 creditors transferred title for Unit PH4C to Appellee's designee. Id.

         The Confirmed Plan identified Appellants as Class 7 creditors, and it expressly stated that damages relating to Appellants' FHA claims had been denied and were excluded from the Plan. ECF 6-31 at 30 n.4 ("Class 7 claims exclude damages denied by the Court pursuant to the Order and Memorandum Granting Debtor's Second Motion for Partial Summary Judgment... and Order and Memorandum Granting in Part, and Denying in Part, Debtor's Third Motion for Partial Summary Judgment and Creditor's Motion for Partial Summary Judgment"). Since Appellants' claims involved ongoing damage caused by leakage in Unit PH4A, the Confirmation Order explained that the amount of Appellants' claims "are governed by the Preliminary Damages Order and any further order of the Court finalizing the matters addressed by the Preliminary Damages Order." ECF 6-34 at 36 n.33. In the Preliminary Damages Order, the Bankruptcy Court found that Appellee had breached its contract with Appellants, and awarded Appellants $731, 000 as "set damages" plus $6, 000 per month in "ongoing damages." ECF 6-35 at 33. This amount was significantly below Appellants' request, because the court found that Appellants had failed to mitigate damages, and it decreased their award accordingly. See Id . at 22-25. However, "[b]ecause of the potential adjustments to the future damages award, the Court issue[d] this Order as a preliminary ruling, subject to a final Order once all damages are ascertained." Id. at 33. After an evidentiary hearing to assess "substantial remediation" of damage in Unit PH4A, the Bankruptcy Court issued its Final Order regarding Appellants' damages claim on October 16, 2018. ECF 6-51. The Court maintained the set damages amount at $731, 000, and finalized the ongoing damages at $19, 552, for a total aggregate amount of $750, 552.00. Id. at 12-13. Appellants filed their notice of appeal to this Court on October 30, 2018. ECF 1. Appellee moved to dismiss the appeal on the grounds of equitable mootness. See Fed. R. Bankr. P. 8013.

         II. Appellee's Motion to Dismiss

         A. Legal Standard

         This court has jurisdiction to hear appeals from final orders of the bankruptcy court. 28 U.S.C. § 158. On appeal from the bankruptcy court, the district court acts as an appellate court and reviews the bankruptcy court's findings of fact for clear error and conclusions of law de novo. In re Johnson, 960 F.2d 396, 399 (4th Cir. 1992).

         B. Equitable Mootness

         Equitable mootness "is a pragmatic doctrine 'grounded in the notion that, with the passage of time after a judgment in equity and implementation of that judgment, effective relief on appeal becomes impractical, imprudent, and therefore inequitable.'" In re Bate Land & Timber LLC, 877 F.3d 188, 195 (4th Cir. 2017) (quotingMac Panel Co. v. Va. Panel Corp., 283 F.3d 622, 625 (4th Cir. 2002)). The Fourth Circuit has identified four factors that courts should evaluate to determine whether an appeal should be dismissed as equitably moot:

(1) whether the appellant sought and obtained a stay; (2) whether the reorganization plan or other equitable relief ordered has been substantially consummated; (3) the extent to which the relief requested on appeal would affect the success of the reorganization plan or other equitable relief granted; and (4) the extent to ...

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