490 B.R. 470
S.D.N.Y.2013Background
- American issued $1,000,000,000 Senior Secured Notes due 2016 secured by a first-priority lien on the Collateral under multiple Note Documents; Trustees hold collateral security interests as collateral and indenture trustees.
- Collateral includes Route Authorities, Slots, Gate Leaseholds, collateral proceeds accounts and related proceeds, and is used to provide international Scheduled Services.
- November 29, 2011 was the Commencement Date for the Debtors’ Chapter 11 cases; MBA appraisals updated the Collateral value from $2.37B (Feb. 2011) to $1.53B (Nov. 2011).
- Trustees moved on Feb. 8, 2012 for adequate protection under § 363(e) or, alternatively, relief from the automatic stay under § 362(d).
- Bankruptcy Court denied the motion at the omnibus hearing on Feb. 29, 2012, noting lack of post-petition decline and presence of an equity cushion; Order denying relief entered March 12, 2012; Trustees appealed on March 26, 2012.
- Court reviews the appeal on standard of review and determines finality and jurisdiction under 28 U.S.C. § 158.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the order denying § 363(e) adequate protection is final and appealable. | Trustees contend the denial is final under § 158(a)(1). | Debtors argue the denial is final and appealable, consistent with circuit precedent. | Final appealable order under § 158(a)(1). |
| Whether the Bankruptcy Court erred in burden-of-proof analysis for § 362(d) and § 363(e). | Trustees claim proper burden on § 363(e) and argue error misapplied. | Debtors contend proper burden allocation for each statute; § 363(e) burden on debtor to prove adequate protection. | Harmless error; correct result despite misallocation. |
| Whether an evidentiary hearing was required for the contested motion. | Trustees requested an evidentiary hearing. | No genuine factual disputes; hearing unnecessary. | No evidentiary hearing required; ruled on record. |
| Whether the equity cushion alone can provide adequate protection and defeat § 363(e) relief. | Trustees rely on cushions to protect value. | Equity cushion recognized; cushion north of 20% suffices. | Equity cushion of at least ~20% suffices to deny § 363(e) relief. |
| Whether the existence of an equity cushion suffices to deny relief without prejudice to future motions. | Trustees argue need for preservation of rights; order should expressly protect them. | Court noted possibility to file future motion without prejudice. | Order denied without prejudice; further motions available. |
Key Cases Cited
- In re Chateaugay Corp., 880 F.2d 1509 (2d Cir.1989) (final, appealable under § 158(a)(3) and related standards for stay relief)
- Elmira Litho, Inc., 174 B.R. 892 (Bankr.S.D.N.Y.1994) (equity cushion can provide adequate protection; burden framework under § 363(p))
- In re Balco Equities Ltd., 312 B.R. 734 (Bankr.S.D.N.Y.2004) (burden-shifting framework for § 362(d) motions in collateral decline analysis)
- In re Best Prods. Co., 149 B.R. 346 (S.D.N.Y.1992) (final, appealable denial of stay/adequate protection orders)
- In re O’Connor, 808 F.2d 1393 (10th Cir.1987) (discusses burden and finality considerations in appealability)
- In re Village Green I, GP, 435 B.R. 525 (Bankr.W.D. Tenn.2010) (burden on movant for § 363(e) motions)