Sherman

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

In re: JOHN ALAN HARBIN,  Debtor.

JEFFREY SHERMAN,

Plaintiff-Appellee, No. 04-56799 v.  D.C. No.

JOHN ALAN HARBIN, 04-CV-0209-BTM

Defendant-Appellant, and

INDYMAC BANK FSB,

Defendant. 

In re: JOHN ALAN HARBIN,  Debtor.

No. 04-56865

JEFFREY SHERMAN,

Plaintiff-Appellant,  D.C. No. 04-CV-0209-BTM v.

OPINION

JOHN ALAN HARBIN; INDYMAC

BANK FSB,

Defendants-Appellees.  Appeals from the United States District Court for the Southern District of California Barry T. Moskowitz, District Judge, Presiding

Argued and Submitted November 17, 2006—Pasadena, California

4551 4552 IN RE: HARBIN Filed April 25, 2007

Before: Richard D. Cudahy,* Susan P. Graber, and Sandra S. Ikuta, Circuit Judges.

Opinion by Judge Ikuta; Partial Concurrence and Partial Dissent by Judge Cudahy

*The Honorable Richard D. Cudahy, Senior United States Circuit Judge for the Seventh Circuit, sitting by designation.

IN RE: HARBIN 4555

COUNSEL

John L. Morrell and Paul J. Leeds, Higgs, Fletcher & Mack…

concurring in part, dissenting in part:

I concur in Part B of the majority’s opinion which affirms the district court’s determination that the bankruptcy court did not abuse its discretion in granting nunc pro tunc approval. I respectfully dissent, however, as to Part A of the majority opinion. I believe this court should reverse the district court’s decision to vacate the bankruptcy court’s order confirming Harbin’s plan and that the discretion of the bankruptcy court should be sustained in its finding of feasibility.

Although the issue of feasibility is certainly close under the circumstances, I do not agree that the bankruptcy court’s judgment of the matter here was clearly erroneous. There is an important element of discretion in reaching a practical judgment here, and the majority seems to be announcing a rule that the bankruptcy court must always wait, no matter how long, for the resolution of an appeal to be decided before confirming a plan. 1 Depending on how long the matter has already been left open for a decision on appeal and on the bankruptcy court’s estimate of the chances of reversal on appeal (and other factors), the totality of the circumstances may favor an…

Opinion by Judge IKUTA; Partial Concurrence and Partial Dissent by Judge CUDAHY.

AMENDED OPINION

In this case we resolve two questions of first impression in our bankruptcy juris *514 prudence. First, we hold that a bankruptcy court considering the feasibility of a plan of reorganization under 11 U.S.C. § 1129 (a)(ll) must evaluate the possible effect of a debtor’s ongoing civil case with a potential creditor, whether that litigation is pending at the trial level or on appeal. Second, we conclude that under limited circumstances, a bankruptcy court may exercise its equitable powers to grant retroactive approval of a post-petition financing transaction pursuant to 11 U.S.C. § 364 (c)(2).

FACTUAL AND PROCEDURAL BACKGROUND

In 1996, Jeffrey Sherman sold his law practice to Harbin APC (the professional corporation of John Harbin) through an asset purchase and consulting agreement. The terms of the agreement are not part of the record on this appeal. However, it is undisputed that as part of the deal, Harbin APC agreed to pay Sherman $5,000 a month for ten years in exchange for his consulting services. In 2000, Harbin APC stopped making the consulting payments to…