In re New Energy Corp.

Citation739 F.3d 1077
Decision Date11 February 2014
Docket NumberNo. 13–2501.,13–2501.
PartiesIn the Matter of NEW ENERGY CORPORATION. Appeal of Natural Chem Holdings, LLC.
CourtUnited States Courts of Appeals. United States Court of Appeals (7th Circuit)

OPINION TEXT STARTS HERE

Jeffrey J. Graham, Taft Stettinius & Hollister LLP, Indianapolis, IN, for New Energy Corporation.

James A. Masters, Nemeth, Feeney, Masters & Campiti, South Bend, IN, for Natural Chem Holdings, LLC.

Margaret Morgan Newell, Department of Justice, Washington, DC, for United States Department Of Energy.

John Wesley Crowe, Jr., Williams Williams Rattner & Plunkett, P.C., Birmingham, MI, for Biditup Auctions Worldwide, Incorporated.

John Wesley Crowe, Jr., Williams Williams Rattner & Plunkett, P.C., Birmingham, MI, for Maynards Industries (1991) Incorporated.

Before FLAUM and EASTERBROOK, Circuit Judges, and GRIESBACH, District Judge.*

EASTERBROOK, Circuit Judge.

New Energy Corp. operated an ethanol plant in South Bend, Indiana. After entering bankruptcy, it proposed to sell most of its assets by auction. One was held on January 31, 2013. The winning bid of $2.5 million came from a joint venture of Maynards Industries (1991) Inc. and Biditup Auctions Worldwide, Inc. New Energy asked the bankruptcy court to confirm this result; so did the United States Trustee, as representative of all creditors, and the Department of Energy, the largest single creditor. Only Natural Chem Holdings opposed confirmation of the sale, contending that establishment of the joint venture amounted to collusion that spoiled the auction.

Bankruptcy Judge Dees confirmed the sale and denied a motion to reconsider that order because, among other things, Natural Chem had not participated in the auction and thus could not have been harmed. 2013 Bankr. LEXIS 3665 (Bankr.N.D.Ind. Feb. 26, 2013). Natural Chem did not ask for a stay in the bankruptcy court, and the sale closed. A district judge affirmed the bankruptcy court's conclusion, observing among other things that after the closing only a protest by the trustee permits a sale to be undone on the ground that “the sale price was controlled by an agreement among potential bidders at such sale”. 11 U.S.C. § 363(n). The trustee is satisfied with the outcome.

Natural Chem's appellate brief wants us to proceed as ombudsmen, fixing problems brought to our attention by a public-spirited observer. That is not how § 363 of the Bankruptcy Code works, however, nor is it an approach that Article III of the Constitution permits. The first question is standing: has Natural Chem suffered a redressable injury as a result of the conduct about which it complains? The bankruptcy and district judges thought not, concluding that Natural Chem had not suffered an injury and that, because of § 363, any injury is not redressable.

To qualify for the auction, a potential bidder had to post a bond of $250,000. Natural Chem did not do so. As a result, it cannot have been injured as a bidder by the auction's outcome; it was not going to prevail no matter what the other bidders did. Nor could it have been injured as a creditor that stood to receive a reduced payout: Natural Chem is not among New Energy's creditors.

Natural Chem says that it did not post the bond because, under the auction's terms, if it had been the high bidder and not come up with at least $3 million (or the value of the winning bid, if lower) as soon as the sale was approved, the bond would have been forfeited as partial compensation for the creditors' losses from delay (New Energy was losing money) and the need to rerun the auction. Natural Chem wanted to propose leasing the plant for a year with an option to buy it for $4 million or more. The structure of its proposed offer was incompatible with a requirement of cash up front. Yet bankruptcy courts are entitled to require cash bids, rather than complex and hard-to-value bids including leases and options. Cash bids are comparable; the sort of bid Natural Chem wanted to make could not easily have been compared against others. Natural Chem chose not to play by the auction's rules. That was its right—but, because it did not bid, it also was not harmed by the outcome. Thus In re Colony Hill Associates, 111 F.3d 269 (2d Cir.1997), does not assist Natural Chem. Colony Hill dealt with a situation in which lack of...

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