denied a motion that was unopposed by all the stakeholders the economic stakeholders in this case something i've never seen in my career as a bankruptcy lawyer did was opposed by  e other would be bitter had previous bitter and hope to be bitter for starr it was that was the sole objector i said there was no economic stakeholder who it the competing better did and i would note that one of the key issues in this case your honor is that that competing better did not come to the table until after our client signed on the dotted line and submitted its  i realize a lot happened after or during that as well yes but what are we to take from that tom from that statement in that you know looking at the o'brien case the questions that the indicated in our papers is that the we understood what that meant was that they would get approval of the big break up fee there was not even supposed to be an option in this case because the bid satisfied every creditor claim and we were dealing with a one on one  n with the only affected party the sole shareholder of that or isn't but isn't that the obligation of the bankruptcy court to look and see whether or not there's an indication is there something else that could happen here what is it in what the bankruptcy judge did at that point in saying when you say there wasn't supposed to be an option isn't there supposed to be whatever the bankruptcy judge thinks there ought to be to maximize your honor the bankruptcy judge is the ultimate authority over what happens in bankruptcy court but i would say however is that the bankruptcy court should not take a paternalistic o'brien case you should look at this differently because this is a deal between two economic stakeholders us and kelson the better we don't want you have an option we think you should pay this so i understand the theory that  bankruptcy court does serve a supervisory function and it's important when their parties were not at the table were not sophisticated where there are a multitude of creditors who are not being paid in a publicly traded corporation where there might be a majority shareholder says yes this is good but there's a thousand other minority shareholders who want their i think the facts of this case are unique for that very reason if this case a solvent bankruptcy estate was out of bankruptcy for whatever reason we were in delaware chance record we would be absolutely subject to the business judgment rule there's no dispute about that eight but we're not and we're dealing with a brian which is binding precedent on us which says you have got to meet the five three one a standard right it does say that but i also think that it doesn't say what is necessary and what is beneficial in every single case i think you have to look at it flexibly and connection and you can't do it divorced from the facts of the case and in this case the economic stakeholder did not want to take the risk of a further auction process they didn't want to take the risk notwithstanding the contractual language that your honor cited they didn't want to take the risk that we would walk away and we cite new york law for the proposition that if you  it the way the appellee wants it to be interpreted that it's meaningless that we never were going to get that paid that the whole exercise the motion that they filed in the bankruptcy court asking for permission to pay us this was a lark submit it's a new york law contract we cite this case in our brief which is very very similar certainly equitably similar here for the proposition that if you promise something you shouldn't promise it on a loser basis and there are enough statements in the record that they believed it was necessary they filed the motion represent doing that met the o'brien standards that in this case there's no one else to oppose it and they're taking an inconsistent position on this appeal when you you keep saying there was no one else to oppose it there was somebody who opposes they showed up and they said don't don't approve this  and the record seems to indicate that the bankruptcy court well in auction will will promote a higher bid and the facts bear that out that's in fact what happened so how can we only ask you in the bidding before and then lost funding it came back later i mean that's the record when the when the bankruptcy judge looks at this it's not like your client's the only one that's been around they've been around and they show up and they  why is it an abuse of discretion by the bankruptcy judge to think you know what i think there's more in this for the estate if i don't commit to this breakup the right to responses to that your honor first under o'brian the competing better didn't have standing as as an on creditor and non shareholder of the estate so the fact that the court took that into consideration is in my view inappropriate in and of itself w the state means the assets of the estate if it were dealing in a case where the plan of the organization and the parties get to vote and say this is how we want to divide up the assets of the estate which is effectively what this was about the bankruptcy judge is obligated to follow what the economic stakeholders want to do so why is it that in situation where a party comes and makes a preemptive bit ok a bid that takes everyone out of the equation except for one party why is it that that person's view of what is necessary and beneficial to the state is not deferred to by the bankruptcy court the bankruptcy courts job is not to substitute its judgment for the economic realities of sophisticated parties who are represented by counsel and who are telling the court that she should do this now i fully appreciate your honor that a higher and better bid was alternately rendered as a result of this and you know we have the maybe i misheard you but i think you said that bankruptcy judge should not substitute her judgment in a case like this it seems to me that's an improper standard it seems to me the bankruptcy judge always has to exercise her judgment on something like you're saying she had used her discretion in this case and that am i correct and citing and you're correct your honor i mean i think that it would be different in cases where you're dealing with attorneys that my question is how dispositive or how important it is is the testimony as are these history take us through some of these matters well i think that if you're looking at the benefit to the sta there is ample very positive testimony about about why the breakup the should be approved through mr hardy of the person who ran the sale process it set a floor bid that paid everyone one off and fall they were negotiating for months with four to start the competing better and four to star couldn't come up with a binding that coincidentally that happens when my client comes to the table and does put forward a competing bit but the economic stake time we came forward were concerned that for the store never would and the fact that we came to the table and it did we believe demonstrates that they could strong the state a state along they could have paid a lower amount at an auction where there was no floor bad and everyone benefited as a result of our involvement the company was having disputes with its lenders the lenders were dying to be paid they said we won't wait any longer for the sale process to go forward the financial advisor testified in a conflicting way on the one hand he said we required the bid protections which included the break of fee he said that he later said that they have an out if the judge doesn't approve it he said i believe i don't believe they have an out he's not a lawyer he's not competent to testify about matters of law the lawyers who stood up and made the legal argument said that they didn't want to take the risk however minute it might be that we could walk away from this arrangement and they as the economic stakeholder believe that we should be paid because it was basically a contract between us and them and i believe if this is the bankruptcy judge has a significant  source of authority and a role to supervise the integrity of a bankruptcy auction there's absolutely no doubt about that but when the sole issue is where does the money go where does the money go and those that party want to risk the time and expense of a longer process to get along a higher bed what reason is there for the bankruptcy court to delve into that analysis that is in possession are entitled to operate their good afternoon your honour's may please the court my name is bob stern i'm from richard layton finger in wilmington delaware i'm here on behalf of the pelleas debtors reliant energy channel view lp as well as its affiliates who also we refer to today as the debtors your honour's in my few moments before the court today i will try to touch upon the three primary issues before your honor's to the extent of time o'brian the stoppel and fundamental fairness i would however like to start with this court's seminal decision in o'brien because in our view although the opponent has raised a large number of issues on appeal today this matter really is disposed of by a simple application of a brian your honour's no a brian has been the law the circuit since one thousand nine hundred nine ten years i think it may have been the first circuit court decision to actually address breakup fees in bankruptcy and it's been well respected and well followed its requirements are crystal clear the party seeking a breakup fee must show essentially that it benefited the estate and it also must show that the break up fee was necessary to obtain that benefit i sense a question well mike my question to you is why is it not an abuse of discretion  as mr glenn asserts for the bankruptcy court to ignore the requests of all the economic stakeholders there's a there's a bid it takes everybody i'm not going to go through it again he's been through the litany it's in the briefing and it's presented to her and and it's ready to be done and your client stands up and says please do this it's in our best interest please let's get this done even though the business judgment rule doesn't apply and real brian brian says that the principals can inform the judge in the exercise of her discretion why would it have been consistent with those principles of business judgment principles of business judgment rule for the for the bankruptcy court to say here what all you say are saying but i'm not buying it your honor i would respectfully submit that such a decision by the bankruptcy judge in this case would not only have been an abuse of discretion it would have been an error of law and the reason it would have been an error of law is directly can be directly found in o'brien and in section five zero three b it can be found in o'brien for the reason your honor looted too that the business judgment will does not control so the debtors business judgment is not as of itself dispositive although it is informative and the second reason is the statute expressly states on its face that it must be a necessary expense and the way that this court interpreted that language in o'brien was that the break up fee had to be necessary to obtain the benefits that are discussed and you heard the admission today for the frankly for the first time because this appellant has not been willing to admit it through any other layer of this appeal run any brief that the a p a itself did not condition kelson did on court approval of a break a fee it require the debtors best efforts we tried really hard in fact we tried so hard that the appellant is willing to rely on the record we created we simply fell short in the hope that answers your honest question but turning back to a brian what is important for today's purposes is that it does express the provide and it does so that if a potential purchaser is willing to bid without the guarantee of a break of faith the word of the break of three simply cannot cannot be characterized as necessary to preserve the value of the estate and accordingly cannot be awarded under section to as we read o'brien among other things it says and this is on page pages five thirty seven five thirty eight and its conclusion the record thus adequately supports the conclusion that awarding break of fees and expenses to calpine was not actually necessary to preserve the value of a bryant estate and because this is the dispositive inquiry in a bankruptcy case we find no error or abuse of discretion so holding on to these facts how do you convert that into the rule of law and i this is not i'm sorry your honor i hope i didn't say that but in any event what you had before the bankruptcy judge was the judge heard testimony and argument where the witnesses and the lawyers had to admit both in ruling from the bench and set forth in the transcript that where the break up fee was not necessary to bring any bidders to the table it was not appropriate to award the breakup fee why should you be heard to make that argument when you made the argument before the bankruptcy court that this was just essential sounds like it's time for me to move on to stop your honor and i'll address that next i found this to be sort of an interesting argument ruth respect to my colleagues we thought it was sort of a throw away argument below it first appeared an emotional appeal as opposed to satisfying the legal requirements because the question with respect to the application of quasi injured ishall stoppel is not did that or stake it's one of the questions but do that or stake in a consistent position in the bankruptcy where we did we clearly did and we have met that we did in the bankruptcy court we unsuccessfully supported approval of the breakup the we now oppose payment of the breakup fee on appeal clearly inconsistent positions we fully admit the issue is whether that inconsistency leads to a stop under the a political legal principles and we would respectfully submit is not for at least the following reasons first there are reasons for or change in position remember the two different standards talk about either unconscionable italy or bad faith a sense of the question from here on it's are we changed our position in direct response to the bankruptcy court's rulings below keep in mind that our sole contractual obligation with respect to the break a fee was to use our best efforts in the bankruptcy court to obtain it and we did use our best efforts no one has said that we failed in that regard but we did fail now in the asset purchase agreement itself kelson agreed first that any debtor obligations there in any were subject to bankruptcy court approval and be that the debtors had to comply with bankruptcy court orders the bankruptcy court ordered that the break up fee was not payable we changed our position in direct response to the bankruptcy court's rulings i'm reminded in fact your honor i saw that just last week i think there's an opinion called the g h holdings that your honor issued which  and the court found that there was no a stoppel in that case because there was a reason for the parties change in position an insurance company basically essentially flip flopped on its defenses in response to an amended complaint and the court ruled that because the circumstances had changed it was appropriate for the litigant to change its position as well that's what happened in this case that's why we changed our position that i understand but to what extent does your position before the bankruptcy court address your honor's question directly there was no evidence before the court that this expense would benefit the estate and the reason there was no evidence that it would benefit the up to fifty million dollars a benefit the estate was because the benefit is that a rose that even the debtor said i mean i think we we agreed with two benefits we said there was a floor that could be helpful and we said that it helped to resolve a dispute with the pretty much yes flatow you know i think it isn't yeah and you put forth expert testimony when you say  there's no evidence you guys put an expert stand right but the question isn't was there was there evidence of a benefit there was because we said there was we disagree with the extent of the benefit and we're late play that out in the briefing but my point is if i  the bankruptcy court concluded that having the state a fifty million dollars was not necessary to obtain that benefit and what the banks were did say was it was willing to award some expense to keelson for providing benefits the two million dollar expense reimbursement will not think it was in this way if the only testimony and evidence before the bankruptcy court is that this is important to get the deal done that it's got benefit and and it's it's significant for getting this deal if that's the only testimony in evidence and and i think your colleague will stand up and say it was because there wasn't anybody except in there putting other evidence on how is it consistent with the proper exercise of discretion for the court to say no but what the court heard ultimately and again we may have been the only ones to put on affirmative testimony there was also cross examination and even questioning from the court of the lawyers and what the court heard was that it was helpful but not necessary to pay the expense in order to obtain these benefits particularly in light of the fact the court was focused on what was for the in the best interest of the state was that you had to live betters in the courtroom one of which came in and said not only did i said two things i've been here throughout this process i lost my financing to this location the markets but now i'm back to replace that literally within a couple of weeks because they're been faulted in the record is mid february they were back in early march and they said not only my willing to bid without a break up fee i'm willing to bid more than kelson is so how in that circumstance could the court have abused its discretion to conclude that it was not appropriate for the estate that they may have gotten the first bid i agree with you on the second on the increase i'm sorry i didn't hear that i say i think you have a good point on the increase to five hundred million but the it doesn't necessarily follow that and that coulson's action had no effect on the first well the record before the court was that for the store the second bidder again was was in the mix the entire time and said directly in the moves that in a now yes because of that but but back in quickly but said to the court that it was there and remember the record also was that four star actually bid even more than kelson they've been there their agreement they were negotiating at the time when it's fine it's evil apart was it was even higher how should we take the statement of judge walrus and  it's hard generally to consider how big protections or break up fees protect these days is that i can tell you how i read it and and i said is that an indication that  things are stacked against you when you know when an ass from a well i mean i think in general section five zero three b one a stacks things against you any time you ask for the ministry of claim against the estate you have a heavy burden you need to prove both benefit and that it was necessary and and for you know with apologies to keelson because we did support a below we were unable to prove that and that's why we're here before your honor today it's just not provable on that record and we feel compelled under the circumstances say two things first of all it's suggested in the reply brief that the debtor is playing the fundamental fairness is not viable after o'brien of course that's as now we're saying what we're saying is that fundamental fairness doesn't resurrect were save a claim for a break of the d that argument that they preserve yeah i would respectfully submit not i mean we've said at every level of this appeal that it was not properly raised below and accordingly it can't be addressed on appeal so we think for the reasons expressly stated in our papers that it that it shouldn't be and i'm comfortable with what we've said in our papers on that but the last thing i would say on fundamental fairness is this appellant cites no case we're not aware of any that says you can use fundamental fairness to award a break up  section five zero three b want to or o'brien but failing to meet section five zero three b and o'bryant is not an option in the third circuit if you want break up fees and the last thing i would say as i see my time winding down is that we consider the reason for fundamental fairness that the supreme court relied on in reading vs brown the problem was that the tort claimants really couldn't provide her demonstrate a benefit to the state and the supreme court said that under the circumstances because certainly a tort claim is not of benefit to the state under these circumstances for reasons of fairness we're going the sort of look beyond that here what the what the appellant is suggesting is look assume we can't meet any of these requirements we want you to remedy the unjust enrichment of the shareholder reliance but that's not what fundamental fairness is about your honor as i see my time is up i thank you for your patience i would simply conclude with this i finish my started at the end of the day we would respectfully submit this is a straightforward circuit case stand for that proposition i think that you have to limit those cases to the ones that go to the integrity of the court the attorney's fees is exactly that category because attorneys are officers of the court words following up on that isn't isn't the fact that the banks the court has a responsibility to administer the you know manner that maximizes the value of the estate doesn't that mean that  as greenberg has indicated that even if there really were an empty chair here and there were an empty chair before the bankruptcy judge said well i'm just not i'm not hearing you on this because you took the other side before that should here where it's a one on one negotiation the answer which actually is now because bankruptcy is not german cancer it's not about patients and hospital it's about dividing up a pile and when someone who owns a piece of pie says i want to give it to that person over there what policy reason is there to stop that from happening as i said earlier if we were on the continental shelf legal reason that that five o three  you have to you can only awarded in ministry of expense when those are actual and necessary i mean there's a there's a duty to indicate that the code itself right i mean she has a standard in the code is a standard in o'brian and if she doesn't think no matter what the parties in front of are telling her if she in her exercise of discretion doesn't think it's meet that standard doesn't that judge have the responsibly ply the standard whether everybody that we're to say and yeah we think it's good enough respectfully now because bankruptcy judges allow deals all the time that's when the focus is of bankruptcy to not get in the way of economic stakeholders cutting those deals making arrangements to get the company out of bankruptcy as i said earlier the better in possession runs the company it's not a trustee the debtor in possession is the one who gets to call the shots and unless there a a business reason why not the bankruptcy judge approves it me such cases that say courts will not substitute their business judgment for the economic stakeholders and in fact if you do that it invites a whole other host of problems that  are not presented by this case frankly but could be presented in other cases where a judge gets in the way of a business deal and then things go wrong there after because the judge did it and that things went better in this case should not drive the outcome when you have a multi billion dollar company who made these representations in court who was prepared to give us that piece of pie thank you thank you the case was very well are you will take the matter under a