Drivetrain v. Kozel

• Court: Court of Appeals for the Tenth Circuit
• Decided: May 5, 2020
• Docket: 18-3120
• Status: Published

Opinion

FILED United States Court of Appeals Tenth Circuit

PUBLISH May 5, 2020 Christopher M. Wolpert UNITED STATES COURT OF APPEALS Clerk of Court

TENTH CIRCUIT

ABENGOA BIOENERGY BIOMASS OF KANSAS, LLC,

Debtor. -----------------------------------------

DRIVETRAIN, LLC, as Liquidating Trustee for Abengoa Bioenergy US Holding, LLC,

Appellant, v. Nos. 18-3120 and 18-3128 MARK D. KOZEL, as Liquidating Trustee of the ABBK Liquidating Trust,

Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF KANSAS (D.C. NO. 6:18-CV-01055-EFM)

David Dunn (Ronald J. Silverman, Hogan Lovells US LLP, New York, New York, and Mark V. Bossi, Thompson Coburn LLP, St. Louis, Missouri, with him on the briefs), Hogan Lovells US LLP, New York, New York, for Appellant.

Michael A. VanNiel (Kelly S. Burgan and Adam L. Fletcher with him on the brief), Baker & Hostetler LLP, Cleveland, Ohio, for Appellee. Before TYMKOVICH, Chief Judge, BALDOCK, and HOLMES, Circuit Judges.

TYMKOVICH, Chief Judge.

This consolidated bankruptcy appeal arises from transactions related to the

construction of an ethanol conversion facility in Hugoton, Kansas. Debtor

Abengoa Bioenergy Biomass of Kansas (ABBK), an American subsidiary of the

Spanish engineering conglomerate, Abengoa, S.A., financed the construction and

operation of this facility through inter-company loans from other American

subsidiaries of Abengoa, S.A.

Significant financial difficulties hurt ABBK, as well as many other

subsidiaries of Abengoa, S.A. ABBK eventually filed for bankruptcy protection

in Kansas. Four other Abengoa subsidiaries filed for bankruptcy protection in

Missouri. The ABBK trustee pursued a plan of liquidation, which classified the

inter-company loans ABBK had received beneath claims of general unsecured

creditors, effectively ensuring no recovery for inter-company creditors.

Acting as liquidating trustee in the Missouri bankruptcy, Drivetrain LLC

objected to this plan of liquidation. The bankruptcy court nevertheless confirmed

the plan. Drivetrain sought a stay of enforcement and implementation of the plan

of liquidation, pending appeal to the district court. But both the bankruptcy court

and the district court, on appeal, denied Drivetrain’s motion for a stay.

-2- At this juncture, the ABBK trustee began to implement the plan, paying

priority claims and distributing settled unsecured claims. After substantially

consummating the plan, the ABBK trustee moved to dismiss Drivetrain’s appeal

of the confirmed plan as equitably moot. The district court granted that motion,

citing the potential harm that innocent third-party creditors would face from

unwinding the plan at this juncture.

We AFFIRM the district court’s decision to dismiss Drivetrain’s appeal as

equitably moot. The district court did not abuse its discretion in concluding the

potential harm to innocent third-party creditors justified this dismissal. We also

DISMISS Drivetrain’s related appeal from the district court’s denial of its motion

for a stay of enforcement and implementation for lack of any live controversy. 1

I. Background

One of several American subsidiaries among Abengoa, S.A.’s bioenergy

group, ABBK oversaw the construction of an ethanol conversion facility in

Hugoton, Kansas. Other subsidiaries of Abengoa, S.A. included Abengoa

Bioenergy Company, LLC (ABC), Abengoa Bioenergy Engineering &

Construction, LLC (ABEC), Abengoa Bioenergy Trading, LLC (ABT), and

1 Because we dismiss for reasons of justiciability, we do not address the parties’ arguments on the question whether 28 U.S.C. § 1292(a)(1) would otherwise confer appellate jurisdiction over the denial of a stay of enforcement and implementation of a confirmed plan.

-3- Abengoa Bioenergy Outsourcing, LLC (ABO). These four subsidiaries shared the

same directors, officers, and general counsel as ABBK. They likewise shared

back-office operations, including accounting, administrative, information

technology, legal, and other services.

ABBK frequently conducted business with these subsidiaries, and—after

ABBK exhausted its grant funds from the U.S. Department of Energy—they

financed the completion of the Hugoton plant with significant loans and logistical

support. The most significant example was a $55 million loan from ABC. ABBK

only made one payment—without any interest—on this loan. ABT delivered more

than $10 million in biomass supplies to ABBK. And both ABEC and ABO

provided several million dollars in administrative services. Although ABEC and

ABT regularly invoiced ABBK—and ABO secured its own fixed-fee

arrangement—no meaningful pre-petition payments appear to have occurred

among these entities.

These generous financial arrangements helped ABBK overcome massive

cost overruns associated with construction of the Hugoton plant, which eventually

achieved substantial completion in late 2014. But operational problems limited

ethanol production at the plant, and—although the facility was primarily intended

as a demonstration project, rather than a revenue generator—ABBK never saw

significant cash flow as a result of its completion. As Abengoa, S.A. began to

-4- experience significant financial difficulties, ABBK faced mounting outside

pressure. In March 2016, several creditors filed a petition for involuntary

bankruptcy against ABBK pursuant to Chapter 7 of the Bankruptcy Code. ABBK

eventually converted this proceeding into a voluntary petition for reorganization

pursuant to Chapter 11. During this same timeframe, ABC, ABEC, ABO, and

ABT filed for bankruptcy protection in a consolidated proceeding in Missouri.

Although ABBK had sought to transfer venue for its bankruptcy from

Kansas to a related consolidated proceeding in Delaware, the bankruptcy court

denied that motion. Accordingly, in November 2016—with an eye toward

satisfying its creditors—ABBK auctioned the Hugoton facility for nearly $50

million. After resolving priority expenses, the ABBK trustee pursued a plan of

liquidation that made distributions first to secured creditors and other lienholders;

then to general unsecured creditors; and, finally, to inter-company claims from the

other Abengoa subsidiaries. In effect, this plan subordinated all inter-company

claims—nearly $70 million in loans—such that inter-company creditors would see

no recovery. 2

Drivetrain objected to this plan and proposed a competing plan, which

sought to place inter-company claims on par with all claims filed by general

2 In both the Delaware and Missouri bankruptcies, the courts also confirmed plans that treated inter-company claims in a similar fashion.

-5- unsecured creditors. But the bankruptcy court confirmed the ABBK trustee’s plan

over Drivetrain’s objection. After the plan was confirmed, Drivetrain sought to

stay its enforcement and implementation, pending appeal to the district court.

The bankruptcy court denied this motion, concluding that Drivetrain had failed to

demonstrate it was likely to succeed in overturning the confirmed plan.

Drivetrain appealed the stay denial to the district court, which likewise concluded

the equities favored implementation of the plan of liquidation. Drivetrain sought

to appeal the district court’s denial of a stay on an expedited basis, but we denied

expedited briefing on account of a potential jurisdictional defect.

In the meantime, the ABBK trustee had begun to implement the plan of

liquidation. After substantially consummating the plan by distributing most of the

estate’s assets, the ABBK trustee moved before the district court to dismiss

Drivetrain’s appeal of the plan confirmation as equitably moot. The district court

eventually granted that motion, concluding a successful appeal of the plan

confirmation could harm innocent third-party creditors. Drivetrain also appeals

from that decision. Because we had yet to consider the merits of Drivetrain’s

appeal from the denial of the stay, we consolidated both matters.

II. Analysis

Drivetrain contends the district court erred as a matter of law in applying

the doctrine of equitable mootness to a Chapter 11 cash-only liquidation.

-6- Drivetrain also argues the district court abused its discretion in dismissing as

equitably moot its appeal from the confirmation of the plan of liquidation. As we

explain, the district court did not err in its application of the equitable-mootness

doctrine to the circumstances of this case.

We review the district court’s determination of equitable mootness for

abuse of discretion. Search Market Direct, Inc. v. Paige (In re Paige), 584 F.3d

1327, 1335 (10th Cir. 2009). 3 A district court abuses its discretion only when that

court “bases its decision on an erroneous conclusion of law or where there is no

rational basis in the evidence for the ruling.” Utah Licensed Beverage Ass’n v.

Leavitt, 256 F.3d 1061, 1065 (10th Cir. 2001) (quoting Hawkins v. City and Cty.

of Denver, 170 F.3d 1281, 1292 (10th Cir. 1999)).

In applying the abuse-of-discretion standard to determinations of equitable

mootness, “the question is not whether this court would have reached a different

determination on the facts presented.” Sutton v. Weinman (In re Centrix Fin.

3 Drivetrain contends the threshold applicability of equitable mootness to a cash-only liquidation—as distinct from the district court’s application of the equitable-mootness inquiry in this instance—presents a pure question of law, such that we should engage in de novo review. Whatever the merits of this argument, the six-factor inquiry we adopted in Paige—which explicitly weighs the costs created by ongoing litigation against the benefits provided by a successful reorganization—offers ample opportunity to evaluate the propriety of equitable mootness within the context of a cash-only liquidation. See Paige, 584 F.3d at 1348. In any event, the standard of review does not affect our disposition of the case.

-7- LLC), 394 F. App’x 485, 486 (10th Cir. 2010). Indeed, we will disturb the

decision of the district court only to the extent that “it finds no support in the

record, deviates from the appropriate legal standard, or follows from a plainly

implausible, irrational, or erroneous reading of the record.” Id. at 487.

A. Equitable Mootness

Equitable mootness is a judicially-created doctrine of abstention that

permits the dismissal of bankruptcy appeals where confirmed plans have been

substantially completed and reversal would prove inequitable or impracticable.

E.g., Castaic Partners II, LLC v. Daca-Castaic, LLC (In re Castaic Partners II,

LLC), 823 F.3d 966, 968 (9th Cir. 2016) (“Equitable mootness concerns whether

changes to the status quo following the order being appealed make it impractical

or inequitable to unscramble the eggs.”).

Although the text of the Bankruptcy Code makes no mention of equitable

mootness, courts have invoked this abstention doctrine on account of the practical

concern that appeals from already-confirmed plans of reorganization might

disrupt the confirmed plan or otherwise harm the interests of third parties who

have justifiably relied upon plan confirmation. E.g., In re Tribune Media Co.,

799 F.3d 272, 277–78 (3d Cir. 2015) (Ambro, J.). Every circuit has adopted some

variation of the equitable-mootness doctrine, and we did so a decade ago in

-8- Paige. See also 7 Collier on Bankruptcy ¶ 1129.09 n.6 (16th ed. 2020) (observing

that “the equitable mootness doctrine is embraced in every circuit”).

As we observed in Paige, courts should decline to consider appeals from

decisions rendered by the bankruptcy court when doing so would prove either

inequitable or impracticable. 584 F.3d at 1339. This accords with the

commonsense understanding that—upon substantial consummation of a plan,

either through conventional reorganization or disposition of the assets of the

estate—courts must examine whether the “relief requested in the appeal will (a)

fatally scramble the plan and/or (b) significantly harm third parties who have

justifiably relied on plan confirmation.” Samson Energy Res. Co. v. Semcrude,

L.P. (In re Semcrude, L.P.), 728 F.3d 314, 321 (3d Cir. 2013) (Ambro, J.).

Our decision in Paige instructs that we assess the propriety of dismissal

premised on equitable mootness around six overlapping inquiries. (1) Has the

appellant sought and/or obtained a stay pending appeal? (2) Has the appealed plan

been substantially consummated? (3) Will the rights of innocent third parties be

adversely affected by reversal of the confirmed plan? (4) Will the public-policy

need for reliance on the confirmed bankruptcy plan—and the need for creditors

generally to be able to rely upon decisions of the bankruptcy court—be

undermined by reversal of the plan? (5) If the appellant’s challenge were upheld,

what would be the likely impact upon a successful reorganization of the debtor?

-9- And (6) based upon a quick look at the merits of the appellant’s challenge to the

plan, is it legally meritorious or equitably compelling? Paige, 584 F.3d at 1339. 4

Although this assessment must be holistic, the third question—what effects

reversal would impose on third-party creditors—represents our “foremost

concern.” Id. at 1343. Other courts have likewise emphasized the significance of

this inquiry, as well as the related question of substantial consummation of the

confirmed plan. See, e.g., Wooley v. Faulkner (In re SI Restructuring, Inc.), 542

F.3d 131, 136 (5th Cir. 2008). Different courts have afforded disparate

significance to roughly comparable underlying inquiries, but many prioritize

effects to non-party creditors, substantial consummation, and, sometimes, the

appellant’s success in obtaining a stay pending appeal to the exclusion of other

questions. See Paige, 584 F.3d at 1338–39 (collecting cases); see also Bruce A.

Markell, The Needs of the Many: Equitable Mootness’ Pernicious Effects, 93 Am.

Bankr. L.J. 377, 393–96 (2019) (addressing differences between circuits).

* * *

Notwithstanding its widespread adoption, the equitable-mootness doctrine

is not without judicial and academic critics. See, e.g., In re One2One Commc’ns,

4 We have likewise emphasized that the party seeking to prevent the court from reaching the merits of an appeal from plan confirmation must bear the burden of persuasion in demonstrating that we should abstain from our ordinary practice of hearing and resolving cases. Paige, 584 F.3d at 1339–40.

-10- LLC, 805 F.3d 428, 439 (3d Cir. 2015) (Krause, J., concurring) (“So what is the

constitutional or statutory anchor for declining to exercise jurisdiction over

bankruptcy appeals dubbed ‘equitably moot?’ Simply put, there is none.”). These

critics argue the doctrine undercuts the principles of ordinary appellate

jurisdiction, creates an inequitable burden on the right to appeal, dilutes sources

for interpretation of the Bankruptcy Code, and facilitates undue deference by

Article III courts to those courts not entrusted with the judicial power of the

United States. See, e.g., Markell, supra, at 397–413. But see Tribune Media, 799

F.3d at 286–88 (Ambro, J., concurring) (articulating the statutory and

jurisdictional bases for equitable mootness). As the Supreme Court has yet to

weigh in on this important legal debate, we continue to apply Paige as our

binding precedent.

B. Equitable Mootness as Applied to a Chapter 11 Liquidation

Before turning to the application of the equitable-mootness doctrine in this

appeal, we first consider Drivetrain’s threshold argument that courts may not—as

a matter of law—invoke equitable mootness where a “reorganization” in form

nonetheless functions as a liquidation. Drivetrain asks that we erect a categorical

bar to determinations of equitable mootness under such circumstances because a

liquidation will necessarily not implicate most of the concerns that motivate our

equitable-mootness inquiry.

-11- We see no reason to treat a plan of liquidation pursued under Chapter 11

any differently than a more conventional plan of reorganization. Moreover, the

flexible inquiry we articulated in Paige affords ample consideration to the

concerns raised by Drivetrain. To varying degrees, the third (effect on innocent

third parties), fourth (public-policy needs), and—most especially—fifth (impact

on reorganization) inquiries permit courts to consider the specific attributes of a

confirmed plan of liquidation. See 584 F.3d at 1338–39.

We note, as well, that other circuits have affirmed determinations of

equitable mootness within the context of liquidations pursuant to Chapter 11.

See, e.g., Beeman v. BGI Creditors’ Liquidating Trust (In re BGI, Inc.), 772 F.3d

102, 107–09 (2d Cir. 2014) (expressly approving the application of the equitable-

mootness doctrine to an appeal from a plan of liquidation pursuant to Chapter 11);

see also Schaefer v. Superior Offshore Int’l, Inc. (In re Superior Offshore Int’l,

Inc.), 591 F.3d 350, 353–54 (5th Cir. 2009) (applying the equitable-mootness

inquiry to a plan of liquidation pursuant to Chapter 11). And we have likewise

affirmed a district court’s determination of equitable mootness in the case of a

Chapter 11 cash-only liquidation. Sutton v. Weinman (In re Centrix Fin. LLC),

394 F. App’x 485, 494 (10th Cir. 2010).

-12- In short, we reject Drivetrain’s invitation to erect a categorical bar to

equitable mootness in the context of a Chapter 11 liquidation. We accordingly

turn to the equitable-mootness inquiry we outlined in Paige.

C. Equitable Mootness as Applied to this Case

Drivetrain contends the district court abused its discretion in determining

the multi-factor inquiry set forth in Paige militated in favor of dismissal. We

review each factor in turn and conclude the district court did not abuse its

discretion in dismissing Drivetrain’s appeal of the confirmed plan of liquidation

as equitably moot. 5

5 This table summarizes both the district court’s conclusions and our analysis of the six equitable-mootness factors identified in Paige:

District Court Tenth Circuit Stay Pending Appeal Neutral Against Substantial Favors Favors Consummation Innocent Third Parties Strongly Favors Strongly Favors Public-Policy Needs Favors Favors Impact on Against Against Reorganization Quick Look at Merits Favors Favors

-13- 1. Stay Pending Appeal

We begin by asking whether: (1) the party seeking reversal sought to obtain

a stay; and (2) these efforts met with success. Paige, 584 F.3d at 1340. Different

courts have placed different emphases on these questions, which we have

acknowledged “will also generally be dispositive of other relevant factors” to the

extent reorganization or liquidation has taken place. Id. at 1340–41. Our

precedent seeks “to accommodate” parties who have “diligently” pursued a stay

without success. Id. at 1341. Because Drivetrain appealed the bankruptcy court’s

denial of a stay, the district court concluded this factor militated neither in favor

nor against a determination of equitable mootness.

As both parties acknowledge, Drivetrain has sought diligently to protect its

appellate rights by pursuing a stay from both the bankruptcy and district courts.

Drivetrain also appealed the district court’s denial of a stay to this court and

asked that we expedite briefing. The only additional step that Drivetrain could

have taken would have been to seek a stay of the district court’s denial of a stay

directly from this court. It is true that none of Drivetrain’s efforts met with

success, but we remain mindful of Paige’s observation that we should seek to

“accommodate an appellant who has diligently but unsuccessfully pursued a stay

pending appeal” to the extent possible. See id. Although Drivetrain could have

-14- sought a stay of the district court’s denial of a stay directly from this court, we

cannot reasonably conclude these efforts lacked diligence.

We accordingly conclude this factor militates against a determination of

equitable mootness.

2. Substantial Consummation

We next ask whether the relevant stakeholders have “substantially

consummated” the confirmed plan. Id. at 1341. Although not dispositive of

mootness alone, this “yardstick . . . informs our judgment as to when finality

concerns and the reliance interests of third parties upon the plan as effectuated

have become paramount to a resolution of the dispute between the parties on

appeal.” Id.

The Bankruptcy Code defines “substantial consummation” as: (1) the

transfer of all or substantially all of the property proposed by the plan to be

transferred; (2) the assumption by the debtor or by the successor to the debtor

under the plan of the business or the management of all or substantially all of the

property dealt with by the plan; and (3) the commencement of distribution under

the plan. 11 U.S.C. § 1101(2).

Because the parties acknowledge substantial consummation has transpired,

the district court focused primarily on what, if any, weight to afford this factor.

Drivetrain argued that cash-only distributions do not implicate the values of

-15- finality and reliance that typically underscore determinations of equitable

mootness. The district court rejected this argument, concluding substantial

consummation militated in favor of its determination of equitable mootness.

We conclude the district court appropriately found that the plan of

liquidation implicated multiple transactions that could not be unwound without

substantial cost and delay. These include: millions of dollars in distributions and

payments to more than 100 creditors, administrative and priority claimants, and

others; formal settlements with several unsecured creditors, whose asserted claims

exceeded $10 million; and the withdrawal, with prejudice, of millions of dollars

in inter-company claims that ABBK had asserted in the Missouri bankruptcy.

Accordingly, this inquiry favors the district court’s determination of

3. Innocent Third Parties

We also examine “the effects that reversal will have on non-party

creditors.” Paige, 584 F.3d at 1343 (citing SI Restructuring, 542 F.3d at 136).

We have described this question as “probably the foremost concern in our

analysis.” Id. (citing same). Indeed, we have observed “[t]his factor may even

implicate the court’s jurisdiction, since a court may lack jurisdiction over an

appeal where the impact of reversal would fall most heavily on parties not before

the court.” Id. (citing Rochman v. Ne. Utils. Serv. Grp. (In re Publ. Serv. Co.),

-16- 963 F.2d 469, 475–76 (1st Cir. 1992)). The precedence we afford this inquiry

reflects the commonsense principle that equity favors innocent non-parties who

have relied upon a confirmed plan.

Drivetrain argues the most significant unsecured creditors in this case

accepted distributions with knowledge of its objections and pending appeal, and

that—for this reason—they cannot be considered “innocent” third parties. The

district court rejected this argument, instead concluding the third-party inquiry

militated strongly in favor of equitable mootness. We endorse the carefully-

reasoned analysis of the district court. 6

Our precedent tells us third-party creditors who play a “pivotal role” in

bankruptcy proceedings—perhaps by proposing their own plans or otherwise

acting as a “main antagonist”—need not be considered innocent. See id. at

1343–44. But the district court appropriately concluded Drivetrain did not

present evidence sufficient to establish that any creditor substantially participated

6 Drivetrain likewise contends we should focus less upon the interests of existing creditors than third parties with an interest in a reorganized going concern. Other courts have described the values that underscore this inquiry similarly. See, e.g., In re Tribune Media Co., 799 F.3d 272, 280 (3d Cir. 2015) (Ambro, J.) (“The theme is that the third parties with interests protected by equitable mootness generally rely on the emergence of a reorganized entity from court supervision.”) Although we recognize that formulation may well prove the better policy, our precedent expressly requires that we account for the interests of creditors. Paige, 584 F.3d at 1343 (“The effects that reversal will have on non- party creditors is probably the foremost concern in our analysis of equitable mootness.” (emphasis added)).

-17- in these proceedings beyond the involvement one might ordinarily expect of an

interested third-party creditor. In the absence of such evidence, our precedent

requires that we prioritize the interests of third-party creditors. See id.

We accordingly conclude this crucial inquiry likewise favors the district

court’s determination of equitable mootness.

4. Public-Policy Needs

We next consider “the proper balance between the equitable considerations

of finality and good-faith reliance on a judgment and the competing interests that

underlie the right of a party to seek review of an adverse bankruptcy-court order.”

Id. at 1347 (cleaned up) (quoting First Union Real Estate Equity & Mortg. Inv. v.

Club Assocs. (In re Club Assocs.), 956 F.2d 1065, 1069 (11th Cir. 1992)). We

have observed that “completed acts in accordance with an unstayed order of the

bankruptcy court must not thereafter be routinely vulnerable to nullification if a

plan of reorganization is to succeed.” Id. (quoting LTV Aerospace v. Reomar, Inc.

(In re Chateaugay Corp.), 988 F.2d 322, 326 (2d Cir. 1993)). Against this de

facto presumption in favor of mootness, we have cited credible allegations of

“bad-faith dealings” between debtor and creditors or “a lack of disinterestedness

on the part of the trustee” as potential countervailing concerns. Id.

The district court concluded that Drivetrain—in seeking to undermine the

good faith of ABBK’s principal creditors—did not raise any allegations that

-18- would implicate either concern. Moreover, the ABBK trustee has, with prejudice,

withdrawn millions of dollars in inter-company claims from the Missouri

bankruptcy. The prospect of cannibalizing one related proceeding for the benefit

of another implicates serious questions relating to both finality and reliance. To

the extent this inquiry requires that we weigh the various equities associated with

the values of finality and reliance, we believe that balance decisively favors the

ABBK trustee.

Although not dispositive, this inquiry also favors the district court’s

determination of equitable mootness.

5. Impact on Reorganization

We also examine “the likely impact upon a successful reorganization of the

debtor” in the event an appellant’s challenge is upheld. Id. at 1339. Drivetrain

understandably protests that no reorganization has taken place, and that none will.

The district court accepted this contention for the sake of argument and assumed

this inquiry therefore militated against its determination of equitable mootness.

For reasons already described, we are not prepared to erect the categorical bar

that Drivetrain seeks in cases of a Chapter 11 liquidation. But we recognize that

a liquidation masquerading as a reorganization likely will not implicate the same

concerns that animate determinations of equitable mootness in cases where a

going concern emerges from the bankruptcy process.

-19- We accordingly conclude this inquiry militates against a determination of

6. Quick Look at Merits

We lastly ask whether—upon a “quick look” at its merits—an appeal from

plan confirmation presents any legally meritorious or equitably compelling

challenge. Id. Both the bankruptcy court and the district court repeatedly

rejected Drivetrain’s legal and equitable arguments. We see no reason to disturb

the careful work of the district court.

Drivetrain contends the bankruptcy court abridged its due-process rights in

the way it considered objections, and that the bankruptcy court erred as a matter

of law in permitting an oral modification to underlying agreements that contained

“no modification” provisions. We disagree. In fact, the bankruptcy court held an

adversary proceeding where witnesses were heard and evidence submitted. It then

submitted detailed findings of fact and conclusions of law, which the district

court endorsed. Given that related bankruptcies in both Delaware and Missouri

also saw inter-company claims subordinated, we see no legal or equitable basis

for reversal on this record.

Indeed, the bankruptcy court appropriately concluded the available

evidence supported separate classification of the inter-company claims, as well as

their subordination to claims of general unsecured creditors. The bankruptcy

-20- court credited testimony that the Abengoa subsidiaries did not expect to be repaid

for the services they provided, and we doubt any third party operating at arm’s

length would have extended ABBK credit in this manner.

Moreover, we note the district court appropriately endorsed the bankruptcy

court’s alternative speculation that—in the case of a hypothetical Chapter 7

liquidation—the inter-company claims would be treated no differently. When

compared to general unsecured creditors, the inter-company creditors possessed

unique access and knowledge by virtue of shared ownership, management, and

objectives. These differences support the subordination of the inter-company

claims beneath those of the general unsecured creditors. See, e.g., In re Greate

Bay Hotel & Casino, Inc., 251 B.R. 213, 226 (Bankr. D.N.J. 2000).

This inquiry accordingly favors the district court’s determination of

For the foregoing reasons, we conclude the district court did not abuse its

discretion in dismissing Drivetrain’s appeal of the confirmed plan of liquidation

as equitably moot. 7

7 Drivetrain also challenges the district court’s refusal to bar the ABBK trustee from seeking equitable relief on the basis of unclean hands. Under Delaware law—which governs the liquidating trust agreement—courts may invoke the doctrine of unclean hands where the party seeking equitable relief has (continued...)

-21- III. Conclusion

We accordingly AFFIRM the judgment of the district court in dismissing

Drivetrain’s appeal of the confirmed plan of liquidation as equitably moot.

Because this disposition extinguishes whatever live controversy may have

sustained Drivetrain’s appeal of the district court’s denial of a stay of

enforcement and implementation of the plan of liquidation, we likewise DISMISS

that action as moot.

7 (...continued) engaged in conduct involving fraud, deceit, unconscionability, or bad faith. E.g., Sun Microsystems, Inc. v. Versata Ents., Inc., 630 F. Supp. 2d 395, 410 (D. Del. 2009). Because Drivetrain has developed no evidence to support a requisite inference of fraud, deceit, unconscionability, or bad faith, we accordingly conclude the district court did not abuse its discretion in refusing to bar the ABBK trustee from seeking equitable relief. See Castle v. Cohen, 676 F. Supp. 620, 627–28 (E.D. Pa. 1987) (concluding the failure to establish fraud, deceit, unconscionability, or bad faith will preclude the invocation of the doctrine of unclean hands), aff’d 840 F.2d 173, 178 (3d Cir. 1988).

-22-