Mountain States Rosen LLC, 619 B.R. 750

Background

Mountain States Rosen, LLC (Debtor) filed Chapter 11 as a liquidating debtor and ran a court‑approved auction under bid procedures to sell substantially all assets.
Auction winner: Swift Beef Company (owned by JBS) with a cash bid of $14,250,000; stalking‑horse/back‑up bidder: Greeley Fab LLC (FAB) with a $10,000,000 bid plus assumption of a PPP loan (~$3.595M).
FAB is an insider (organized/managed by longtime board chair Frank Moore) and objected after being outbid, arguing Debtor undervalued the PPP loan assumption and failed to credit FAB’s going‑concern/job‑preservation advantage.
Debtor (after consulting CoBank and the Committee) announced it valued the PPP‑loan assumption at $1.25M (cash equivalent) and ran the auction accordingly; FAB did not attribute that value in its stalking‑horse bid or earlier rounds.
The court applied the §363(b) business‑judgment standard and fiduciary duty to maximize estate value, found unresolved contingencies regarding PPP forgiveness and lack of evidence that assumption would release the estate, and concluded Debtor did not abuse its discretion in selecting Swift.
Result: Court approved the sale to Swift and denied FAB’s challenge (no separate evidentiary hearing on PPP valuation).

Issues

Issue	FAB's Argument	Debtor's Argument	Held
Whether the sale process and selection of Swift satisfied §363(b) business‑judgment test	Debtor abused discretion by not treating FAB's bid (with PPP assumption and going‑concern preservation) as highest and best	Debtor followed bid procedures, consulted advisors/creditor(s), and reasonably exercised business judgment	Court upheld Debtor’s decision; no abuse of discretion; sale approved
Proper valuation of PPP loan assumption	PPP assumption should be valued at full principal (~$3.595M–$3.95M) to FAB's benefit	Debtor reasonably valued assumption at $1.25M (40% risk adjustment then cash equivalent) under bid procedures	Court accepted Debtor’s valuation as reasonable and declined to substitute its own judgment
Whether going‑concern/job preservation should override higher monetary bid	FAB urged value for continued lamb operations and job retention, making its bid superior	Debtor noted liquidation posture, FAB gave no going‑concern value in stalking‑horse bid, and no reliable evidence of operational viability was presented	Court declined to override Debtor’s discretion; going‑concern claims insufficient to change result
Whether a separate evidentiary hearing on PPP valuation was required	FAB requested separate hearing to establish higher value and release of Debtor’s liability	Debtor argued auction record and parties’ conduct (FAB’s earlier bidding choices) made separate hearing unnecessary	Court denied separate hearing; noted lack of evidence that assumption would release the estate or increase recovery

Key Cases Cited

In re Med. Software Sols., 286 B.R. 431 (Bankr. D. Utah 2002) (§363 sale approval factors and business justification)
In re Family Christian, LLC, 533 B.R. 600 (Bankr. W.D. Mich. 2015) (debtor must show sale is highest and best offer; fiduciary duty to maximize estate)
In re Castre, Inc., 312 B.R. 426 (Bankr. D. Colo. 2004) (deference to debtor's business judgment in §363 sales)
In re After Six, Inc., 154 B.R. 876 (Bankr. E.D. Pa. 1993) (lower monetary bid may be favored for non‑economic factors only when supported by strong evidence)
In re Broadmoor Place Investments, L.P., 994 F.2d 744 (10th Cir. 1993) (debtor’s business judgment entitled to great judicial deference)
NLRB v. Bildisco & Bildisco, 465 U.S. 513 (1984) (Chapter 11 objective to preserve going concerns and consideration of collective bargaining obligations)