453 B.R. 477
Bankr. S.D.N.Y.2011Background
- Borders Group, Inc. and affiliated debtors filed Chapter 11 in the Southern District of New York and are jointly administered.
- Debtors moved to implement procedures to sell de minimis assets for aggregate proceeds up to $1,000,000 free and clear of liens.
- De minimis assets include fixed assets at distribution centers, corporate offices, and IT/supply chain assets remaining after store closures.
- Procedures bifurcate sales into two thresholds: up to $300,000 and $300,000 to $1,000,000, with different notice and court-approval requirements.
- Debtors seek authority to pay sale-related costs and to have liens attach to sale proceeds with the same priority as to the assets pre-sale.
- CourtUnauthorized deviations would require a revised proposed order consistent with the opinion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the 363(b) procedures are appropriate under business judgment. | Borders argues streamlined de minimis sales are justified to maximize estate value. | Court should defer to debtors’ business judgment for efficient disposition. | Yes, with modifications to notice and protections. |
| Whether notice procedures are adequate to protect lienholders and satisfy 363(f) free-and-clear requirements. | Procedures insufficient for notices to lienholders on smaller transactions. | Notice limited for ≤$300k but broader for higher amounts. | Not adequate as written; must enhance notice for all proposed sales under threshold. |
| Whether assets can be sold free and clear under 363(f) given notice provisions. | Consent or lack of objection should be presumed with proper notice. | Explicit notice to lienholders is required for effective §363(f) sale free and clear. | Sale free and clear permitted only if proper notice is given and objections resolved or deemed consent. |
| Whether 363(m) protections apply to de minimis sales and what evidence is required. | Good-faith designation should shield purchasers from appellate reversals. | Need evidence of good faith; possible impact of insider status must be considered. | Good-faith protections may apply if a proper record and declaration are provided. |
| Whether the court should require retention applications and shortened notice for brokers, auctioneers, or liquidators. | Such professionals are necessary for de minimis sales. | No formal retention applications are needed due to limited value. | Retention applications and related procedures required; shorten notice approved with conditions. |
Key Cases Cited
- In re Chateaugay Corp., 973 F.2d 141 (2d Cir. 1992) (business judgment standard for § 363(b) sales)
- In re Lionel Corp., 722 F.2d 1063 (2d Cir. 1983) (articulated requirement of a business justification for § 363(b) orders)
- In re Integrated Res., Inc., 147 B.R. 650 (Bankr. S.D.N.Y. 1992) (deference to business judgment in asset dispositions)
- In re Gulf States Steel, Inc. of Ala., 285 B.R. 497 (Bankr. N.D. Ala. 2002) (deference in selecting highest bid; auctions context)
- In re Castre, Inc., 312 B.R. 426 (Bankr. D. Colo. 2004) (judicial deference in bid selection; role of good faith)
- In re Elliot, 94 B.R. 343 (E.D. Pa. 1988) (§ 363(f) free and clear and consent/notice framework)
- In re Gabel, 61 B.R. 661 (Bankr. W.D. La. 1985) (implied consent under § 363(f)(2) through notice and lack of objection)