FILED AUG 20 2024 NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT
In re: BAP No. NV-23-1196-FCL SILVER STATE BROADCASTING, LLC; GOLDEN STATE BROADCASTING, Bk. No. 21-14978-abl LLC; MAJOR MARKET RADIO LLC, Debtors. SILVER STATE BROADCASTING, LLC; GOLDEN STATE BROADCASTING, LLC; MAJOR MARKET RADIO LLC, Appellants, v. MEMORANDUM* MICHAEL WARREN CARMEL, Chapter 11 Trustee, Appellee.
Appeal from the United States Bankruptcy Court for the District of Nevada August Burdette Landis, Chief Bankruptcy Judge, Presiding
Before: FARIS, CORBIT, and LAFFERTY, Bankruptcy Judges.
* This disposition is not appropriate for publication. Although it may be cited for whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential value, see 9th Cir. BAP Rule 8024-1. INTRODUCTION
Chapter 111 debtors Silver State Broadcasting, LLC (“Silver State”),
Golden State Broadcasting, LLC (“Golden State”), and Major Market Radio,
LLC (“Major Market”) (collectively, “Debtors”) appeal the bankruptcy
court’s order approving the sale of the Debtors’ radio stations and
associated equipment. They contend that the court failed to first determine
that the equipment was estate property. They also argue that the sale
included a compromise that required a separate motion and that one of the
buyers was not a good-faith purchaser.
Section 363(m) precludes the Debtors from challenging the validity of
the sale. The Debtors did not seek a stay of the sale order, the sale has
closed, the bankruptcy court found that the buyers were good-faith
purchasers, and that finding was not clearly erroneous.
Even if the Debtors sought relief other than invalidation of the sale,
the bankruptcy court did not abuse its discretion in approving the sale. We
AFFIRM.
FACTS
A. Prepetition events
The Debtors owned and operated seven radio stations. Royce
International Broadcasting Corporation (“Royce”) owns the Debtors.
1 Unless specified otherwise, all chapter and section references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and all “Rule” references are to the Federal Rules of Bankruptcy Procedure.
2 Edward Stolz owns Royce.
In August 2018, the United States District Court for the Central
District of California entered judgment for approximately $1.2 million
against Silver State, Golden State, Royce, Mr. Stolz, and others for violation
of the Federal Copyright Act. In July 2020, the district court appointed a
receiver in aid of collection of the judgment.
The Debtors allege that the receiver terminated the Debtors’ regular
commercial radio broadcasting and allowed VCY America, Inc. (“VCY”) to
broadcast nonprofit religious programming. They claim that VCY operated
the radio stations at a loss at the expense of the receivership estate.
The judgment debtors purportedly satisfied the original judgment
but did not pay other creditors or the court-approved expenses of the
receivership. Citing its inability to “trust [Mr.] Stolz’s representations that
he will satisfy amounts due in the future[,]” the district court refused to
terminate the receivership. The Ninth Circuit affirmed. WB Music Corp. v.
Royce Int’l Broad. Corp., 47 F.4th 944, 953-54 (9th Cir. 2022).
B. The Debtors’ chapter 11 bankruptcy cases
While the receivership was pending, the Debtors filed chapter 11
bankruptcy petitions. The bankruptcy court ordered joint administration of
the three cases. Their scheduled assets consisted primarily of Federal
Communications Commission (“FCC”) licenses; they represented that they
did not own any machinery, equipment, vehicles, furniture, or fixtures.
The Debtors successfully compelled the receiver to turn over the
3 Debtors’ property and provide an accounting. They alleged that, when they
regained control of the radio stations, the stations had no revenue, the
receiver had operated them at a significant loss, and the Debtors had to
restart commercial operations with funds provided by Royce or Mr. Stolz.
They also objected to VCY’s proofs of claim totaling $627,366.06 for
reimbursement of operating expenses and attorneys’ fees and costs.
In March 2023, Michael Carmel (“Trustee”) was appointed chapter 11
trustee of the Debtors’ estates.
Two months later, the Debtors filed an emergency motion asserting
that the receiver could not levy on certain assets and that the automatic
stay extended to non-debtors Royce and Mr. Stolz. Mr. Stolz filed a
declaration asserting that he owned the equipment that the Debtors’ radio
stations were using with his consent. The bankruptcy court determined
that the automatic stay applied to the equipment and personal property
used by the Debtors in the operation of the radio stations but did not
extend to Royce and Mr. Stolz. We affirmed. See Silver State Broad., LLC v.
Carmel (In re Silver State Broad., LLC), BAP No. NV-23-1111-NFB, 2024 WL
583088 (9th Cir. BAP Feb. 13, 2024).
C. The sale of the station assets
1. Approval of bid procedures
Meanwhile, the Trustee took steps to sell the seven stations,
including the FCC licenses and the equipment used to operate the stations.
He filed a motion seeking approval of bid procedures, authorization of the
4 sale of the station assets outside of the ordinary course of business, and
other related relief. The “Station Assets” for sale encompassed all of the
Debtors’ interests in tangible and intangible assets used in the operation of
the radio stations, including “all of Seller’s equipment, transmitters,
antennas, cables, towers, and other tangible personal property of every
kind and description that are used or held for use in the transmission
systems of the Stations[.]” The attached asset purchase agreements
included a list of the “Tangible Personal Property” for each station.
The Trustee proposed bid procedures that identified VCY as a
stalking horse bidder for five of the seven stations. The proposed purchase
price for the five stations was $4.5 million. VCY agreed to discount its filed
unsecured claims, and the Trustee agreed to withdraw the Debtors’
objection to those claims.
The Trustee requested a determination that the prevailing bidders
purchased the Station Assets in good faith and were entitled to the
protections of § 363(m). The Debtors sought a continuance of the hearing
on the Trustee’s motion but did not substantively object to the requested
relief or VCY’s stalking horse bid. After a hearing, the bankruptcy court
approved the bid procedures.
2. The auction sale
The Trustee held an in-court auction of the Station Assets. At the end
of the auction, VCY offered the highest bid for four of the five stations for
which it had initially bid, a second bidder offered a higher price for one of
5 those five stations, and a third party bid for the sixth and seventh stations.
When VCY was outbid for one of the five stations for which it had initially
bid, it withdrew its offer to reduce its claim, and the Trustee stated that
VCY’s claim would be allowed in full.
At the conclusion of the auction, the bankruptcy court questioned
representatives for the prevailing bidders and approved the bids totaling
approximately $6.346 million.
3. The Trustee’s motion to approve the sale
A few weeks later, the court held a hearing on the Trustee’s request
for authorization of the sale of the Station Assets (“Sale Motion”). The
Trustee filed a supporting declaration in which he stated that the sale
“constitutes the highest or otherwise best offers for the Station Assets and
provides fair and reasonable consideration for the Station Assets” and
“provide[s] Debtors’ estates with reasonably equivalent value and fair
consideration . . . .”
As to the Tangible Personal Property, the Trustee stated that
Mr. Stolz “has contended that he or Royce . . . has an ownership interest in
some of the Stations’ equipment while admitting that the Debtors have a
possessory interest.” The Trustee rejected this position and stated that his
investigation indicated that the Debtors solely owned the station
equipment. He detailed Mr. Stolz’s failure to produce any evidence to
corroborate his claim that he owned the equipment and concluded that the
“Debtors have always utilized the Stations’ equipment (a point Mr. Stolz
6 and Royce appear to concede) and that the Stations’ equipment belongs to
the Debtors.”
Harris Law Practice, LLC (“Harris Law”), which had previously
represented the Debtors and asserted an administrative claim, opposed the
proposed sale. It argued that the bankruptcy court could not approve a sale
of the Tangible Personal Property without first determining that it is
property of the estate. It also challenged what it described as the full
allowance of VCY’s $627,366.06 claim without prior adjudication and
liquidation by the court. Finally, Harris Law argued that the bankruptcy
court should not confirm VCY as a good-faith purchaser without subjecting
VCY to scrutiny. The Debtors joined in Harris Law’s opposition and filed
their own opposition, arguing that the Trustee had “made no effort to
reorganize the Debtors.”
In his reply, the Trustee emphasized that the Trustee could sell the
Tangible Personal Property pursuant to § 363(f)(4): Mr. Stolz’s claim to the
Tangible Personal Property was subject to a bona fide dispute.
The Trustee offered evidence that the Debtors owned the Tangible
Personal Property, including: (1) an asset purchase agreement
documenting Golden State’s acquisition of one of the stations, which
included “all assets owned or held by Sellers that are used or useful in the
operation of the Station,” including all “Tangible Personal Property,” (2) an
application to assign the FCC licenses and “all of the broadcasting assets”
of another of the stations and its translators to Major Market, (3) an asset
7 purchase agreement whereby Silver State acquired two of the stations and
associated “Tangible Personal Property,” and (4) a verified complaint
signed by Mr. Stolz in Nevada district court in which Silver State alleged
that certain equipment is Silver State’s property.
The Trustee argued that the bankruptcy court could approve the sale
without commencing an adversary proceeding. He contended that Rule
7001(2) is only implicated in the determination of the validity, priority, or
extent of an interest in property, and he was seeking no such relief.
4. The order approving the sale
At the conclusion of the hearing, the bankruptcy court made a
detailed oral ruling granting the Sale Motion and approving the sale.
The bankruptcy court stated that it was satisfied that the Trustee had
established that Mr. Stolz’s alleged ownership of the Tangible Personal
Property was subject to a bona fide dispute.
The bankruptcy court held that the Trustee had satisfied the standard
for approval of a sale under § 363(b)(1). It determined that the Trustee had
articulated a sound business justification for the sale because the sale
would allow the Trustee to make significant distributions to creditors.
Next, the bankruptcy court found that the sale price – which was
nearly $1.6 million greater than the original stalking horse bid – was fair
and reasonable. It also found that the bid procedures were fair and
reasonable and that the Trustee had adequately marketed the assets for
sale.
8 The court further held that the sale would be free and clear of claims
and interests under § 363(f)(4) and that the sale protected Mr. Stolz’s
interests because any interest he might have would attach to the sale
proceeds.
The bankruptcy court found that the buyers acted in good faith under
§ 363(m). It recounted that the successful bidders had satisfactorily
answered the court’s questions at the conclusion of the auction. It found
that the sale process resulted in obtaining a fair value of the assets for the
benefit of the estate, that there was no evidence that any of the successful
bidders had engaged in fraud or collusion, and that no bidder gained a
grossly unfair advantage over other bidders.
The bankruptcy court entered a written order (“Sale Order”)
incorporating its findings and conclusions stated on the record at the
hearing. It specifically found that the prevailing bidders had “proceeded in
good faith in all respects in connection with this proceeding, and each
Prevailing Bidder is a ‘good faith purchaser’ within the meaning of Section
363(m) of the Bankruptcy Code and, as such, is entitled to all the
protections afforded thereby.”
A few days later, the Trustee filed a stipulation withdrawing the
Debtors’ objection to VCY’s proofs of claim.
The Debtors appealed from the Sale Order. They did not seek a stay
of the Sale Order pending appeal.
9 D. Post-appeal events
The sales of the Station Assets closed on various dates between
February 1 and May 8, 2024. The bankruptcy court confirmed the Debtors’
chapter 11 plans in late July 2024.
JURISDICTION
The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and
157(b)(2)(N). We have jurisdiction under 28 U.S.C. § 158.
ISSUES 2
(1) Whether the prevailing bidders were good-faith purchasers
protected by § 363(m).
(2) Whether the bankruptcy court abused its discretion in approving
the sale without adjudicating ownership of the Tangible Personal Property.
(3) Whether the bankruptcy court abused its discretion in approving
the sale without requiring a motion to compromise under Rule 9019.
STANDARDS OF REVIEW
We review for an abuse of discretion the bankruptcy court’s decision
to approve a sale of estate property under § 363. Simantob v. Claims
Prosecutor, LLC (In re Lahijani), 325 B.R. 282, 287 (9th Cir. BAP 2005). To
determine whether the bankruptcy court has abused its discretion, we
2 In their opening brief, the Debtors identify three additional issues on appeal. But the Debtors did not substantively argue any of these issues in their opening brief, so they have abandoned those issues. See Smith v. Marsh, 194 F.3d 1045, 1052 (9th Cir. 1999) (“[O]n appeal, arguments not raised by a party in its opening brief are deemed waived.”). 10 conduct a two-step inquiry: (1) we review de novo whether the bankruptcy
court “identified the correct legal rule to apply to the relief requested” and
(2) if it did, we consider whether the bankruptcy court’s application of the
legal standard was illogical, implausible, or without support in inferences
that may be drawn from the facts in the record. United States v. Hinkson, 585
F.3d 1247, 1262-63 (9th Cir. 2009) (en banc).
We review for clear error the bankruptcy court’s finding of good
faith. Thomas v. Namba (In re Thomas), 287 B.R. 782, 785 (9th Cir. BAP 2002).
Similarly, the question “whether there is a ‘bona fide dispute’ . . . is
essentially a factual inquiry” requiring the “clearly erroneous standard of
review.” Liberty Tool, & Mfg. v. Vortex Fishing Sys., Inc. (In re Vortex Fishing
Sys., Inc.), 277 F.3d 1057, 1064 (9th Cir. 2002). Factual findings are clearly
erroneous if they are illogical, implausible, or without support in the
record. Retz v. Samson (In re Retz), 606 F.3d 1189, 1196 (9th Cir. 2010). If two
views of the evidence are possible, the court’s choice between them cannot
be clearly erroneous. Anderson v. City of Bessemer City, 470 U.S. 564, 573-74
(1985).
DISCUSSION
A. The prevailing bidders are entitled to the protections of § 363(m).
The Trustee asserts that this appeal is statutorily moot under
§ 363(m) because the bankruptcy court determined that the successful
bidders were good-faith purchasers, the Debtors did not seek a stay of the
Sale Order pending appeal, and the sale has closed. Conversely, the 11 Debtors argue that VCY was not a good-faith purchaser. We hold that the
record supported the bankruptcy court’s findings regarding VCY’s good
faith, so we cannot undo the sale.
Section 363(b)(1) permits a bankruptcy trustee, after notice and a
hearing, to “use, sell, or lease, other than in the ordinary course of business,
property of the estate.” Section § 363(m) provides:
reversal or modification on appeal of an authorization under [§ 363(b) or (c)] of a sale or lease of property does not affect the validity of a sale or lease under such authorization to an entity that purchased or leased such property in good faith . . . unless such authorization and such sale or lease were stayed pending appeal.
See Paulman v. Gateway Venture Partners III, LP (In re Filtercorp, Inc.), 163
F.3d 570, 576 (9th Cir. 1998) (“When a sale of assets is made to a good faith
purchaser, it may not be modified or set aside unless the sale was stayed
pending appeal.”).
The Debtors did not obtain a stay of the Sale Order pending appeal,
and the sale of the Station Assets has closed. The only disputed issue is
whether VCY is a good-faith purchaser. (The Debtors have never
challenged the good faith of the other two bidders.)
The Debtors contend that the bankruptcy court and the Trustee
needed to subject VCY to “some reasonable scrutiny.” They recount VCY’s
business dealings with the receiver and Trustee, which they claim are
“relevant here because they establish a relationship that does not show a
12 good faith bargaining process entitling VCY to protections under Section
363(m).”
A good faith purchaser is “one who buys ‘in good faith’ and ‘for
value.’” Ewell v. Diebert (In re Ewell), 958 F.2d 276, 281 (9th Cir. 1992).
“Although the Bankruptcy Code and rules do not define good faith, courts
have indicated that a lack of good faith is shown by ‘fraud, collusion
between the purchaser and other bidders or the trustee, or an attempt to
take grossly unfair advantage of other bidders.’” Sw. Prods., Inc. v. Durkin
(In re Sw. Prods., Inc.), 144 B.R. 100, 103 (9th Cir. BAP 1992) (citation
omitted); see also In re Thomas, 287 B.R. at 785. We must look past a
“boilerplate ‘good faith’ finding” and ascertain whether the finding has “an
evidentiary foundation.” Fitzgerald v. Ninn Worx Sr, Inc. (In re Fitzgerald),
428 B.R. 872, 881 (9th Cir. BAP 2010).
Here, the bankruptcy court made extensive findings of VCY’s good
faith after carefully inquiring about the circumstances of the sale. It found
that VCY “did offer value, there was no fraud, there was no collusion, that
they did not take gross[ly] unfair advantage of other bidders, [and] they’re
entitled to a finding under Section 363(m) . . . .” It specifically found that
“[t]here was no single bidder that controlled the process in connection with
these auctions” and that VCY’s role as a stalking horse bidder led to a
significant increase in the final sale price. It found that the allegations of
VCY’s collusion with the receiver related to events that occurred during the
receivership and did not impact the sale process. Moreover, the Debtors
13 did not object to VCY’s stalking horse bid when they had the opportunity
to do so in conjunction with approval of the bid procedures.
The evidence supports the bankruptcy court’s findings. Regardless of
what may have occurred during the receivership, the Trustee offered
evidence that: he and VCY negotiated the proposed sale at arm’s length
and in good faith, absent any fraud and collusion; the Trustee sought
competitive bids and used VCY’s stalking horse bid to that end; VCY was
not entirely successful in its proposed bid to purchase five stations and
ultimately was the prevailing bidder for four stations; and the Trustee had
taken steps to obtain the highest price possible.
Conversely, the Debtors’ allegations are based on speculation and are
devoid of evidentiary support. Most of their allegations concern the
receivership and, in any event, the Debtors never even bestirred
themselves to provide a declaration supporting their contention that VCY
did not properly operate the stations during the receivership.
The Debtors cite MOAC Mall Holdings LLC v. Transform Holdco LLC,
598 U.S. 288 (2023), and briefly argue that the Supreme Court instructed
that an appeal is only moot if there is absolutely no relief available,
regardless of the purchaser’s good faith. However, although MOAC stated
that § 363(m) does not “gover[n] a court’s adjudicatory capacity” or divest
an appellate court of jurisdiction, it acknowledged that § 363(m) “cloak[s]
certain good-faith purchasers or lessees with a targeted protection of their
newly acquired property interest, applicable even when an appellate court
14 properly exercises jurisdiction.” Id. at 299-300. In other words, MOAC
stands for the proposition that § 363(m) is not “jurisdictional,” but it still
limits the relief that an appellate court can grant. Thus, § 363(m) plainly
prevents us from undoing the sale – the only relief that the Debtors even
mention.
The bankruptcy court’s finding of good faith was not clearly
erroneous. Therefore, § 363(m) protects VCY and the other prevailing
bidders and precludes the Debtors’ challenge to the validity of the sale.
B. The bankruptcy court did not err in approving the sale.
Even if the Debtors sought some relief on appeal other than
invalidating the sale, we would affirm. The Debtors argue that the
bankruptcy court failed to determine that the Tangible Personal Property
was property of the bankruptcy estate and failed to evaluate the sale as a
compromise under Rule 9019. Neither of these arguments is persuasive.
1. The bankruptcy court did not need to determine ownership of the Tangible Personal Property prior to sale.
The Debtors contend that § 363(b) requires that the bankruptcy court
determine the ownership of the Tangible Personal Property in an adversary
proceeding prior to approving the sale. Although they acknowledge that
§ 363(f)(4) permits a sale free of an interest that is subject to a bona fide
dispute, they argue that no bona fide dispute exists.
Under § 363(b)(1), after notice and a hearing, the bankruptcy court
may authorize a trustee or debtor-in-possession to sell property of the
15 estate outside of the ordinary course of business. If the trustee wishes to
sell property free and clear of a competing interest, the trustee must show
that one of the subsections of § 363(f) applies. Section 363(f)(4) provides
that “[t]he trustee may sell property under subsection (b) or (c) of this
section free and clear of any interest in such property of an entity other
than the estate, only if – . . . (4) such interest is in bona fide dispute[.]” We
have previously explained:
The purpose of § 363(f)(4) is to permit property of the estate to be sold free and clear of interests that are disputed by the representative of the estate so that liquidation of the estate’s assets need not be delayed while such disputes are being litigated. Typically, the proceeds of sale are held subject to the disputed interest and then distributed as dictated by the resolution of the dispute; such procedure preserves all parties’ rights by simply transferring interests from property to dollars that represent its value.
Moldo v. Clark (In re Clark), 266 B.R. 163, 171 (9th Cir. BAP 2001) (citation
omitted). Although § 363(f)(4) does not define “bona fide dispute,” the
Ninth Circuit has defined “bona fide dispute” in the context of § 303 as
requiring the bankruptcy court to “determine whether there is an objective
basis for either a factual or a legal dispute as to the validity of the debt.” In
re Vortex Fishing Sys., Inc., 277 F.3d at 1064 (quoting In re Busick, 831 F.2d
745, 750 (7th Cir. 1987)).
To approve a sale free and clear under § 363(f)(4), the bankruptcy
court must only determine that the estate had an interest in the property to
16 be sold and that any competing interest is subject to a bona fide dispute.
This is exactly what the bankruptcy court did: it found that the Debtors
either owned or had an enforceable property interest in the Tangible
Personal Property, and it approved the sale free and clear “with all such
Claims to attach to the cash proceeds received by the Debtors’ estates that
are ultimately attributable to the property against or in which such Claims
are asserted . . . .”
The Trustee was also not required to conduct an adversary
proceeding, since he did not ask the court to “determine the validity,
priority, or extent of a lien or other interest in property . . . .” Rule 7001(2);
see, e.g., Federico v. McGranahan (In re Federico), Case No. 07-21245-B-7, 2009
WL 2905855, at *3 (E.D. Cal. Sept. 8, 2009) (rejecting the appellants’
argument that Rule 7001 requires an adversary proceeding and stating that,
“[i]n authorizing the sale, the Bankruptcy Court was not determining the
issue of Appellants[’] interest in the Property. . . . Rather, the Bankruptcy
Court, based on substantial evidence, found that the Debtor shared an
interest in the Property with his creditors, including Appellants”).
This Panel has held that, in some circumstances, the bankruptcy court
must decide ownership disputes before it authorizes a sale. In the leading
case on this topic, Darby v. Zimmerman (In re Popp), 323 B.R. 260 (9th Cir.
BAP 2005), Mr. Popp’s bankruptcy trustee filed an adversary proceeding
alleging that a company that owned a piece of land was an alter ego of the
debtor and that the land was property of Mr. Popp’s bankruptcy estate.
17 Before the court decided the adversary proceeding, the trustee moved for
approval of a sale of the land. That motion assumed that the land was
property of the estate, even though the court had not yet decided that very
issue in the pending adversary proceeding. The bankruptcy court
approved the sale, but this Panel reversed because the bankruptcy court
had “permitted parallel and piecemeal proceedings to continue without
regard to the initial finding of ownership. This was duplicative and could
promote inconsistent and ultimately inconclusive litigation as to the true
ownership of the Property.” Id. at 269. “To avoid pernicious piecemeal
litigation, the bankruptcy court should have insisted that the Trustee finish
determining ownership before stepping outside the Alter Ego Adversary to
sell the Property.” Id. at 270.
Popp is inapplicable here. There was not and is not any parallel
proceeding to adjudicate ownership of the Tangible Personal Property.
There is no risk that the court’s determination in the Sale Order that the
Debtors owned the Tangible Personal Property could be inconsistent with a
decision of the same issue in a parallel proceeding.
Further, the bankruptcy court determined that the Debtors owned the
Tangible Personal Property or at least had a valid, enforceable interest in
those assets. The bankruptcy court properly found, based on evidence
provided by the Trustee, that when the Debtors acquired their respective
radio stations, the sales included equipment to operate the stations and
other Tangible Personal Property. The bankruptcy court also discounted
18 Mr. Stolz’s conclusory and uncorroborated declaration submitted earlier in
the case. These findings are not clearly erroneous. See Richards v. Marshack
(In re Richards), BAP Nos. CC-21-1262-SGL, CC-21-1266-SGL, 2022 WL
16754394, at *4 (9th Cir. BAP Nov. 7, 2022) (holding that Popp applies only
when there are “pending” adversary proceedings challenging the estate’s
ownership interest and there is a “genuine” dispute about the estate’s
ownership of the property), aff’d, No. 22-60057, 2024 WL 2816482 (9th Cir.
June 3, 2024).
Therefore, the bankruptcy court properly found that a sale was
warranted under §§ 363(b)(1) and (f)(4).
2. The Trustee was not required to seek approval of a compromise under Rule 9019.
The Debtors also contend that the Trustee’s agreement to withdraw
the Debtors’ objection to VCY’s claims necessarily required the Trustee to
seek approval of a settlement and compromise by filing a motion under
Rule 9019. They further speculate that the offer to reduce the “illusory”
claim discouraged other potential buyers from bidding.
It is true that the Trustee agreed to withdraw the Debtors’ objection
to VCY’s proofs of claim. But it is also true that the Trustee determined that
the objection was unsupported by any credible evidence and exercised his
business judgment to withdraw the meritless objection as part of a sale
transaction that benefitted the estates and their creditors. Nothing in the
Code, the Rules, or common sense requires a trustee to (1) file a claim
19 objection that he thinks is meritless, (2) prosecute a claim objection filed by
the debtor that the trustee thinks is meritless, or (3) file a separate Rule 9019
motion before dropping such a claim objection in connection with a court-
approved sale.
Moreover, although the bankruptcy court did not separately analyze
the withdrawal of the claim objection under the Rule 9019 standard, the
court emphatically found that the overall transaction benefitted the estate.
The bankruptcy court recognized that the Trustee’s strategy enhanced the
competitive bidding that resulted in an increase of nearly $1.6 million over
VCY’s stalking horse bid. It found that the bid procedures were fair and
reasonable and that no one had objected to the procedures. Even if the Rule
9019 standard were applicable, the court’s findings are sufficient.
The Debtors assert that the allowance of VCY’s claim chilled the
bidding at the auction because other bidders could not determine how to
exceed VCY’s bid. This is meritless speculation. All of the bidders,
including VCY, were treated as cash bidders at all relevant times: the court
did not mention the allowance of VCY’s claim when it evaluated the
various bids, and VCY paid its entire bid in cash and was not allowed to
“credit bid” its unsecured claim. There is no evidence that the bidding was
chilled; in fact, several new bidders emerged at the auction, and one of
those bidders outbid VCY on one of the stations.
CONCLUSION
The bankruptcy court did not abuse its discretion in approving the
20 Sale Motion. We AFFIRM.