Hughes v. Tower Park Properties, LLC (In Re Tower Park Properties, LLC)

The Bankruptcy Code confers a “right to be heard” with respect to “any issue in a case under [Chapter 11]” on any “party in interest.” 11 U.S.C. § 1109 (b). We have previously held that party-in-interest sta-i tus is a necessary prerequisite to bankruptcy standing. In re Thorpe Insulation Co., 677 F.3d 869, 884 (9th Cir.2012). In this case, we consider whether a beneficiary of a trust who disagrees with the way the trust was administered by former trustees is a “party in interest” with standing to object to the bankruptcy court’s approval of a settlement agreement between a debtor, creditor entities held by the trust, and the former trustees. We hold that the trust beneficiary does not have party-in-interest standing under § 1109(a) to object to the settlement, at least where his interests are adequately represented by a party-in-interest trustee. We thus affirm the judgment of the district court dismissing this case for lack of standing.

I

A. The Facts

Appellant Alexander Hughes (“Hughes”) is the only son of Mark Hughes, the founder of Herbalife who passed away in 2000, and is the sole, non-contingent beneficiary of the Mark Hughes Family Trust (“Trust”). Mark Hughes’…