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Keywords

motionsummary judgmentwillbankruptcychapter 11 bankruptcyliensmotion for summary judgment
motionsummary judgmentwillliensmotion for summary judgment

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In re The Free Lance-Star Publishing Co. of Fredericksburg, VA, 512 B.R. 798

Facts

On January 23, 2014, The Free Lance–Star Publishing Company and William Douglas Properties filed for Chapter 11 bankruptcy. The debtors sought to sell their business assets, while DSP Acquisition, LLC, claimed valid liens on those assets and sought to credit bid its claim. The court found that DSP did not have valid liens on the Tower Assets and that its conduct had depressed the auction process, necessitating limits on its credit bid rights.

On January 23, 2014 (the 'Petition Date'), The Free Lance–Star Publishing Company of Fredericksburg, VA ('The Free Lance–Star') and William Douglas Properties, LLC ('William Douglas' and, together with The Free Lance–Star, the 'Debtors') filed voluntary petitions for relief under Chapter 11 of Title 11 of the United States Code.

Issue

Did DSP Acquisition, LLC have the right to credit bid at the auction sale of the debtors' assets, and should the court limit that right?

Did DSP Acquisition, LLC have the right to credit bid at the auction sale of the debtors' assets, and should the court limit that right?

Rule

Under 11 U.S.C. § 363(k), a secured creditor may credit bid at a sale of property subject to a lien that secures an allowed claim, unless the court orders otherwise for cause.

Under 11 U.S.C. § 363(k), a secured creditor may credit bid at a sale of property subject to a lien that secures an allowed claim, unless the court orders otherwise for cause.

Analysis

The court determined that DSP did not have valid, properly perfected liens on the Tower Assets and that its conduct constituted inequitable behavior that chilled the bidding process. The court applied the rule that allows for the limitation of credit bidding rights when there is cause, concluding that DSP's actions had depressed the auction's competitive nature.

The court determined that DSP did not have valid, properly perfected liens on the Tower Assets and that its conduct constituted inequitable behavior that chilled the bidding process. The court applied the rule that allows for the limitation of credit bidding rights when there is cause, concluding that DSP's actions had depressed the auction's competitive nature.

Conclusion

The court denied DSP's motion for summary judgment and granted partial summary judgment in favor of the debtors, limiting DSP's credit bid to $1,200,000 for certain assets related to the radio business and $12,700,000 for assets related to the newspaper and printing business.

The court denied DSP's motion for summary judgment and granted partial summary judgment in favor of the debtors, limiting DSP's credit bid to $1,200,000 for certain assets related to the radio business and $12,700,000 for assets related to the newspaper and printing business.

Who won?

The Debtors prevailed in the case because the court found that DSP did not have valid liens on the assets and that its conduct warranted limitations on its credit bid rights.

The Debtors prevailed in the case because the court found that DSP did not have valid liens on the assets and that its conduct warranted limitations on its credit bid rights.

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