In re 160 Royal Palm, LLC
600 B.R. 119
S.D. Fla.2019Background
- Debtor 160 Royal Palm LLC (owner of the Palm House Hotel) filed Chapter 11; KK-PB Financial LLC (KKPB) is a creditor and owner-controlled by Glenn Straub.
- Debtor initially pursued a public auction with a $32M stalking-horse bid (RREF); prolonged litigation over KKPB’s credit-bidding and claim-estimation delayed the sale process.
- Debtor negotiated a private asset purchase agreement (APA) with LR U.S. Hotels Holdings, LLC for $39.6M (conditional on withdrawing public-sale procedures), which the Bankruptcy Court approved as private sale procedures and later approved the sale free and clear.
- KKPB contends the Bankruptcy Court abused its discretion by allowing withdrawal of public-sale procedures, approving the private sale, and approving the LR sale (KKPB claims it had a higher, better offer); KKPB also sought a stay which was denied.
- District Court consolidated and expedited appeals of three Bankruptcy Court orders (Private Sale Procedures Order; Sale Order; Deny Stay Order) and, after briefing and oral argument, affirmed all three orders.
Issues
| Issue | KKPB's Argument | Debtor/LR's Argument | Held |
|---|---|---|---|
| Whether Bankruptcy Court abused discretion in withdrawing public-sale procedures and approving private-sale procedures | Court improperly cut off public bidding and eliminated potential bidders, including KKPB | Debtor had business-judgment discretion to change sale procedure to secure LR’s certain, higher (than stalking-horse) offer | Affirmed — no abuse; debtor’s business judgment entitled to deference |
| Whether sale to LR satisfied §363(b) (business justification; highest-and-best) | KKPB argued its bid (~$40.6M) was higher and was the best way to maximize estate value | Debtor favored LR’s $39.6M offer for finality, certainty, and to preserve a separate Town settlement; concerns about KKPB’s reliability and litigation risk justified choice | Affirmed — debtor provided adequate business justification; highest bid not necessarily "highest and best" |
| Whether interested parties received adequate notice and whether sale price was fair/reasonable | KKPB argued insufficient notice and price considerations favored its offer | Debtor pointed to months of marketing and notice; LR’s price materially exceeded stalking-horse and offered certainty | Affirmed — notice, fairness, and reasonableness findings not clearly erroneous |
| Denial of emergency stay of sale pending appeal | KKPB sought stay to preserve status quo and protect appeal | Debtor and Bankruptcy Court opposed; KKPB later abandoned stay arguments in district-court brief | Affirmed — stay denial upheld; appeal of stay abandoned by KKPB |
Key Cases Cited
- In re Chateaugay, 973 F.2d 141 (2d Cir.) (business-judgment standard for out-of-the-ordinary-course §363 sales)
- Lionel Corp. v. Colonial Bankcorp, 722 F.2d 1063 (2d Cir.) (bankruptcy courts should not be shackled by rigid rules when structuring sales)
- In re Financial News Network, 980 F.2d 165 (2d Cir.) (broad discretionary power in conducting sales; substance over form)
- In re Bakalis, 220 B.R. 525 (Bankr. E.D.N.Y.) (highest monetary bid may not be the highest-and-best bid)
- In re Moore, 608 F.3d 253 (5th Cir.) (debtor’s business judgment can justify accepting lower monetary offers)
- Int'l Yacht & Tennis, Inc. v. Wasserman, 922 F.2d 659 (11th Cir.) (debtor-in-possession has duties and rights of a trustee)