784 F.3d 978
5th Cir.2015Background
- Baker Hughes was an undersecured creditor with liens on four leases and one well (Teeter #1H) in R.L. Adkins Corp.’s bankruptcy.
- Debtors proposed a Chapter 11 plan selling substantial mineral assets (≈90 leases, several wells) to Scott Oils pursuant to 11 U.S.C. § 363 for ~$3.4 million.
- Baker Hughes filed an election under 11 U.S.C. § 1111(b) to have its claim treated as fully secured; debtor/plan asserted § 1111(b)(1)(B)(ii) bars the election where property is sold under § 363 or under the plan.
- The bankruptcy court held confirmation hearings in April 2013, confirmed the Plan on May 10, 2013, and the confirmation order expressly stated the sale was subject to § 363(k); Baker Hughes did not appear at confirmation, object, or appeal the confirmation order.
- After confirmation, Baker Hughes continued to press its § 1111(b) election and argued it had been denied the statutory right to credit-bid at the § 363 sale; lower courts denied the election.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Baker Hughes could make a § 1111(b)(2) election when collateral was sold “under § 363” or “under the plan” | § 1111(b) election should be allowed; denial prevents Baker Hughes from receiving full secured treatment | § 1111(b)(1)(B)(ii) bars the election where property is sold under § 363 or under the plan; § 363(k) preserves credit-bid right | Election denied: sale was subject to § 363(k) and Baker Hughes waived credit-bid by failing to assert/exercise it at confirmation |
| Whether Baker Hughes was denied the statutory right to credit-bid under § 363(k) | The Plan and sale effectively prevented credit-bidding for Baker Hughes’ collateral | Plan and confirmation order expressly subjected sale to § 363(k); Baker Hughes failed to seek credit-bid or object at confirmation | No denial of credit-bid right as to which Baker Hughes preserved/raised timely objection; waiver applies |
| Whether failure to object/appear at confirmation forfeited § 1111(b) claim | Post-confirmation challenge should still be allowed to vindicate secured rights | Failure to object/appeal confirmation constituted waiver and binding final judgment | Court enforces waiver; confirmation order binding and unappealed |
| Whether broader rule: labeling a sale “under § 363” always forecloses § 1111(b) election | § 1111(b) should apply if practical credit-bid protections are ineffective | Labeling the sale under § 363 suffices to trigger § 1111(b)(1)(B)(ii) bar | Majority applies bar here but concurrence warns courts must examine whether sale truly preserved credit-bid rights in practice |
Key Cases Cited
- RadLAX Gateway Hotel, LLC v. Amalgamated Bank, 132 S. Ct. 2065 (2012) (Supreme Court holding secured creditor must be able to credit-bid to permit sale free and clear in cramdown)
- Republic Supply Co. v. Shoaf, 815 F.2d 1046 (5th Cir. 1987) (confirmation order is a final, binding judgment when not appealed)
- Dewsnup v. Timm, 502 U.S. 410 (1992) (secured creditor’s property rights may ‘ride through’ bankruptcy absent participation)
- Long v. Bullard, 117 U.S. 617 (1886) (historical precedent on lien rights surviving bankruptcy)
- In re Ahem Enter., Inc., 507 F.3d 817 (5th Cir. 2007) (discussion of secured creditors’ participation and protections in bankruptcy)