453 B.R. 477
Bankr. S.D.N.Y.2011Background
- Borders Group, Inc. and affiliated debtors seek procedures to sell de minimis assets (aggregate ≤ $1,000,000) free and clear of liens without court approval for each sale; assets include distribution center equipment, IT and office equipment; sales to a single buyer or related buyers; threshold for individual transactions: ≤ $300,000 or > $300,000 and ≤ $1,000,000; notice and conditions differ by threshold; motion includes request to pay sale costs; Verizon objected but resolved
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether de minimis asset sale procedures meet the business judgment standard under §363(b) | Borders argues procedures are sound business judgment to streamline sales | Court should defer to Debtors' business judgment | Procedures satisfy business judgment under §363(b) |
| Whether notice for sales ≤ $300,000 is adequate | Debtors treat as minimal notice, primarily to DIP agents | Notice to only DIP agents risks liens and objections | Notice inadequate; must provide broader notice for those sales |
| Whether assets can be sold free and clear under §363(f) with proper notice | Consent via DIP lenders plus notice supports free and clear sale | Consent alone is insufficient without proper lienholder notice | Free and clear possible with proper lienholder notice and potential deemed consent |
| Whether §363(m) protections apply and require good faith findings | Proponent seeks 363(m) protection for good faith sales | Need evidence of good faith; without proper process protection, not guaranteed | Good faith protection possible with timely declarations and presentment order |
| Whether retention of professionals and shortened Rule 2002 notice are appropriate | Use of brokers/auditors outside ordinary course is permissible; shortened notice ok | Retention must follow §327/328 procedures; notice must be adequate | Retention processes and shortened notice require revision to comply with rules |
Key Cases Cited
- In re Chateaugay Corp., 973 F.2d 141 (2d Cir. 1992) (necessity of articulated business justification for §363(b))
- In re Lionel Corp., 722 F.2d 1063 (2d Cir. 1983) (court must require a good business reason for sale)
- In re Global Crossing Ltd., 295 B.R. 726 (Bankr.S.D.N.Y. 2003) (deference to debtor's business judgment in asset sales)
- In re Integrated Res., Inc., 147 B.R. 650 (Bankr.S.D.N.Y. 1992) (sound business judgment standard; deference to decisions)
- In re Gulf States Steel, Inc. of Ala., 285 B.R. 497 (Bankr.N.D. Ala. 2002) (focus on highest and best bid; deference to DIP)
- In re Castre, Inc., 312 B.R. 426 (Bankr.D. Colo. 2004) (auction procedures and business judgment relevance)
- In re Elliot, 94 B.R. 343 (E.D. Pa. 1988) (section 363(f) consent and sale free of liens)
- After Six, Inc., 154 B.R. 876 (Bankr.E.D. Pa. 1993) (good faith purchaser considerations under §363(m))