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FEATURE BANKRUPTCY & COMMERCIAL LAW
a limitation on the creditor.” The court will be easier, more efficient, or more fruitful affiliates, and generally avoid any type of
also observed that it was “unaware of any without one party bidding is simply not misconduct, including designing the sale
cases where the chilling of bidding alone is enough [to show cause]”); In re CS Mining, process to prevent the participation of other
sufficient to justify a limit on a credit bid.” 574 B.R. at 285 (finding the lack of an allowed potential bidders.
Id. at 417. As an example of a court limiting secured claim, bid freezing, and benefit to
credit-bidding rights for multiple reasons, an “insider” to be cause to deny requested This article was prepared with the assistance of
not just bid chilling, the court cited to credit-bid rights); Free Lance-Star, 512 B.R. Alexander W. Prunka.
Fisker. Id. The court also relied on the at 807 (limiting credit bidding for a creditor
2014 Final Report and Recommendations with “less than fully-secured lien status,” an
of the American Bankruptcy Institute “overly zealous loan-to-own strategy,” and T. Daniel Reynolds is a corporate
Commission to Study the Reform of “misconduct” that negatively impacted the restructuring attorney who
Chapter 11 (the “ABI Report) (available at auction process). represents major constituencies
http://commission.abi.org/full-report), in involved in distressed transactions.
which the commissioners stated that they Outlook This includes companies both in and
“did not believe that the chilling effect of The lessons from Fisker are becoming clearer out of bankruptcy, as well as unsecured creditors’
credit bids alone should suffice as cause as time passes. Although the bid-chilling committees and other major stakeholders. Mr.
under section 363(k).” Aéropostale, 555 B.R. effect of credit bidding alone is unlikely to Reynolds has been a member of the CMBA since
at 418 (citing ABI Report at 147). constitute cause under section 363(k), an 2012. He can be reached at (216) 586-7148 or
Importantly, courts that have modified acquirer that wishes to purchase a target’s tdreynolds@jonesday.com.
credit bidding rights for cause after Fisker have assets by means of credit bidding should be
done so only when numerous causes for such diligent to avoid providing any basis for a Marissa Alfano joined Jones Day’s
a limitation existed. See e.g., In re 160 Royal finding of cause. For example, an acquirer New Lawyers Group in 2018 and
Palm, LLC, No. 18-19441, 2019 WL 989829, should ensure that the extent, validity, and joined the CMBA in 2019. She can
at *12 (Bankr. S.D. Fla. Feb. 26, 2019) (stating priority of its liens are beyond dispute, avoid be reached at (216) 586-7020 or
in dicta that “[t]o suggest that a sale process
using credit bidding to acquire assets of its
malfano@jonesday.com.
CONGRATULATIONS!
CONGRATULATIONS!
CONGRATULATIONS!
CONGRATULATIONS!
CONGRATULATIONS!
CONGRATULATIONS!
CONGRATULATIONS!
Congratulations to our very own Mary Groth, CMBA Director of Member & Donor Engagement,
who has just become the 2019–2020 President of the National Conference of Bar Foundations . Mary
accepted the gavel during the organization’s annual meeting in San Francisco, succeeding outgoing
President, Andrea Stone, Executive Director of the Texas Bar Foundation . Way to go, Mary!
22 | CLEVELAND METROPOLITAN BAR JOURNAL CLEMETROBAR.ORG
