the honorable united states court of appeals for the st circuit is now in session all persons having any business or this honorable court they draw near and be heard and they shall be heard god save the united states of america and this honorable court order is in session today's cases will be called as previously announced and the times will be as a lot of to counsel the st case today is mission product holdings incorporated versus schleicher versus stebbins hotels l l c at with the timekeeping if you would like to reserve any rebuttal time please let me know before you begin your argument so that i can help you keep track of that and you may proceed with your argument mr keach thank your own this court recently stated in wheeling in lake erie railway kovi keech a case i have some familiarity with that the phrase burden of proof is not merely a rhetorical flourish it signifies that the party to whom the burden is assigned must offer evidence either direct or circumstantial sufficient to persuade the fact finder of some fact or proposition to a certain quantum of proof here a preponderance of the evidence distinction your honor but i would argue in this case it's a distinction without a difference because of the specific text of rule nine hundred and fourteen dollars as it relates to contested matters and there's no question that this motion for relief was a contested matter we any contested motion that involves contested issues of material fact your honor if we were talking only about issues of law the court could certainly proceed without taking evidence but that wasn't this case and can you point out specifically the federal decision and the m f global decision m f global in particular so as it was with respect to a state pursuing a bankruptcy court abuses its discretion where in the face of contested issues of material fact it failed to conduct an evidentiary hearing and fails to allow the parties so efficient discovery to reduce evidence for that hearing in farrel the court found it in the presence of contested issues of material fact move on who fails to introduce evidence will fail to meet their burden of proof nine thousand and fourteen applies in motions for relief from stay and in fact in all motion practice the command here it's mandatory and there's no question here that we put the question of whether or not as a method waived it's leaning into issue as a matter of fact and in fact now honor i would i would argue the even under the cover of a claim test it would fail let me ask you about that because i had some trouble understanding what you waiver theory was as i understand it during the auctioning your client's offer happened we bid on that basis that bidding methodology was accepted but then there was an actual agreement among the parties at the auction that not only were we going to go forward on that basis but that s n s was going to go forward on was proposing by it were leaving estates behind shorthand with that mission would acquire the assets free and clear of of s n s is liens and re contribute those assets to the estate for that they could be distributed to other debtor agreed specifically on the record at the auction that they were going to adopt missions methodology the thing we sought to clarify specifically sought to clarify was that when they were that the ass that wouldn't be the proceeds of the sale of the collateral of the proceeds of the film the collateral would have been the cash consideration we pay but not the assets we acquired as assets we could wreak contribute them without their lien the other important aspect of this your honor is that as an ass actually agreed that not only would our assets go back in and be available for other creditors to be paid from but they agreed that the assets they left then the estate actually achieved no benefit whatsoever as a consequence of the consideration by virtue of quote leaving assets behind it would have been a false bid it would have been a no bi bid in fact what you would have allowed s n s to do in that circumstance is better than a credit when a secured party credit it is least waves its lean and waves its debt with each credited that it makes it's basically saying i am retiring the debt i am for giving the debt to you debtor and i therefore losing my leant to the extent unforgiving the debt and both go away if you if you construe their quote leaving assets behind as unlike what we were doing providing an incumbent assets to the estate as simply returning encumbered assets to the estate that they could just take back when the auction was done then they provided effect destroy some of that security interest in assets left behind with the estate it's not it's not that we get to destroy anything your honor it's the essence of a three hundred and sixty three f sale that the assets are free of the lien when they're purchased and i ask my question again can you cite just any case that so holds i'm not aware of any other i'm not aware of any published case that deals with the precise facts of this case where the parties mutually agreed to leave assets only that's not my questions help us here thank this leave behind it the way of describing it to us it is a mechanism whereby some assets in the state that are subject to security interests get left behind their left behind rican trip so that they're no longer subject to the security workers and i'm asking any case that says yes that's what happens i'm not aware of any case involving re contributed acid to your honor i think this was a unique bidding methodology adopted by both of the parties to this case it's not uncommon however for purchasers and three  f sales to take assets that they have purchased and redirect them to parties outside of the bankruptcy priorities such as pools of employees for example so it in practice is quite common i can't point you to it just a of decision whether we contributed assets methodology has been blessed or not blessed by a court counsel your time has expired but i do have one question for you and then i'm going to ask the other members of the piano whether they have additional questions for you at this point in time what i want to do is take you back to where you open the argument on both the standard for decision and the standard for or foreclosed or the the action begins to do that there are standards at that point in time to determine whether the lien can be foreclosed or otherwise enforced and if if your standard preponderance applies to the motion for relief from state what's really left in a case wouldn't wouldn't the preponderance standard tend to come into play at the merits and isn't that the point of our prior cases that talk about you only have to show a colorable claim at this at this stage of color mylene well i don't think so your honor and this case in particular remember we're dealing with cash in an account right so to unwind there are opportunities for us to and one of the reasons this was not moot although by the way the debtor did argue that this very ruling rendered the case moot and they got one justice to agree with them fortunately only actually cause other administrative claimants like professionals to disgorge assets back into the estate that would clearly not be subject to the ling enough to still have that opportunity we do but that doesn't mean that they haven't seen by would so why run well why would the preponderance standard apply at this stage which seems to be counter to our law i think the caller will claim test merely says that in order to get relief  factual issues put into linen into question and then i think the the bankruptcy code burden of proof is clear just as in wheeling the burden of proof with with a secured party state with a secured party the whole time to establish by think it's important that we're not distracted by missions efforts to rewrite the record and collaterally attack final orders this matter is straight forward and the record fully supports the bankruptcy court's decision to grant s n s relief from the automatic stay for the past four plus years mission has employed a litigation strategy to impose market uncertainty on a competitor and maximum cost on the estate and s n s this matter and disappeared may be the most obvious an egregious example of the strategy yet the premise upon much the entire appeal rests that ason is no longer holds a valid lien on the debtors remaining asset is contrived and it's not supported by the record and is actually inconsistent with missions on prior statements moreover it's held together by arguments that have been w otherwise barred by final orders example that just occurred we were just talking about the bit values which were already approved and before this court as a final order on the sale process to which this court determined s nest was a good day purchaser and missions objections t process were otherwise moot because we were good bait purchaser it should not be lost on this court all of the pleadings orders and cases that mission must overlook to support its position today i want to raise one issue that just got very brief overview and that st let me discussion which is the movement's issue we've argued that this case is actually moot and we filed a motion for that determination in source v brockton credit union this court has already held an appeal seeking to moot once the property subject to this day has been foreclosed upon or transferred to a good faith purchaser it's well established that an appeal be dismissed as if a state pending appeal is not obtained and the moving creditor subsequently conduct a foreclosure found that even when the purchaser of the foreclosed real estate property was the creditor and a party to the appeal that case was still found to be moot and so what's the difference between the secured party appearing at the foreclosure sale buying the real estate on its own and having that property and still being a party to the appeal going forward if you can just discord why couldn't the court order disgorgement of the real property in that case or return the real property in that instance instead t analogous to the situation i think the court found this court found that even though it was real estate that the the appeal was moot the secured party was still holding the assets why couldn't why couldn't the court order the return of the real estate in the same way manner that the mr kids are going to the mission is arguing that the bankruptcy court can read or do the return of the  was a party to the case and could easily be ordered to return the properties in same way that st discussing now could be discoursed still this court found movements in graylock and other courts from around the country ruled similarly in similar circumstances as a health code doesn't our case in health co international circuit lean the other way where there spend no showing that any portion of the funds dispersed could not be recovered with relative ease i think in health i don't have a case for a million right in front of me your honor my understanding though from health go and it being consistent with grey locke is that there's this bankruptcy mootness issue where if you're not just talking about inability to unwind a transaction instead you're talking about the special need for finality in bankruptcy court orders and that is in the context of what we're talking about in the motion for relief from state contest no the stay was granted pending the appeal and so now that the asset has been were closed upon and the party argument can you distinguish what was said there with what we're dealing with here and at that time they were talking about the scores in bonds from the debtors estate in terms of professional fees in the debtor in terms of whether or not they that appeal and whether or not the claim at the supreme court level the speculative administrative claim that was being suggested could have any merit i think that mr teacher's pointing to the dissenting opinion justice course which would claim that there was no reason to even be holding that appeal because there were no assets left in the estate and that there was no reason to even go down this path proving their speculative mistreated claim because there was concern on his part that they would never be able to do that frankly i find the description of the auction and the subsequent proceedings that occurred after the auction to be totally inconsistent with that argument that there was even a re contribution or waiver in st instance i mean i want to take a step back i think the standard is abuse of discretion and you not think that the bankruptcy court shifted any burden upon mission the burden was on s and s to prove that there was no equity in the property and we did that by showing all the records but that's important for this reason and i'm going to talk about right now which is after the auction occurred which established the winning bid which was dollars and assumption of liabilities there was numerous pleadings and challenge deadlines for the liens and the sale order was entered and there was a subsequent inventory sale that was subject to s and s is leaning there were modifications to the financing orders that required an additional professional none of these things were ever raised by mission as a waiver or contribution and in fact when judge pianist was assign to the case we have status conference and his questions were direct is there a challenge to these liens and do they still extend to the debtors assets the answer of my missions counsel was yes they did and so the process was for the court to understand is that period if on the motion early from stay we were anticipating based upon these hearings that mission to the court with some opposition to the motion for relief from stay to demonstrate that it's administrative claim somehow magically would have priority and and it's important because it deals with this recount mission showed up at the hearing before the bankruptcy judge with their contribution theory and after a judge panel us recognize that there was no support whatsoever on the record he suggested to missions counsel maybe you're making an argument that there was some sort of waiver that was never brought by mission in the st instance but now we see in the brief that it was the bankruptcy court improperly put the burden on mission to prove would you please at this time you your audio and video and attorney teach you should please on mute your audio and video and i need to once again ask judge shirley and chaotic to test their microphones again  teach thank you your honor st let me address some specific points raised by counsel st and foremost we are in no way collaterally attacking any preexisting order of any bankruptcy court or for that matter any other court as judge panel specifically ruled below judge disease sale order was entirely final and with respect to the issue of the disposition of the assets and whether or not there was a l on the assets with the exception of the manner in which he calculated the bid amounts let me make it very clear we're not challenging that mathematics at whatsoever we support it because if you look at the math it means that the the bankruptcy court judge d z understood perfectly well that the parties had agreed that the quote left behind assets would be an income or he understood that perfectly and that's how it why you calculated the the way he did we're not challenging his order we're supporting it it's also important to note the judge panels in his ruling did not say that we had waived anything any argument of any kind and in fact we had been consistent in saying that there was no security interest in the five hundred and thirty seven thousand dollars worth of proceed to this you hear we have been unwavering in that position and in fact had asked for discovery and for evidence  to be put in with respect to that position there was never any frankly confusion over the country in the recount contribution theory versus a waiver of theory it simply reflects what each party had to do in order to accomplish the agreement that have been reached at auction we had to rican tribute that's the way it happened for mission as an ass could accomplish the same thing by waving its lean there was no just  methodology and the court adopted in doing its calculation it didn't say that we had agreed to rican tributed either but if you look at the manner in which it calculated the values it is absolutely inexplicable in any other way i think it's also important to note your honor that the parties there after including judge d z acted entirely consistently with the idea that the lean had been waived mr condon pointed to the so called inventory sale motion where they asserted in a footnote that they might still have a lien on the debt or didn't agree by the way with that but now and judge d z actually disavowed it judge jeezy's ruling made it abundantly clear that there were no restrictions on the assets left behind and the debtor was free to sell them to anybody you want to do and that if s n s wanted to acquire the inventory which it purported to want to do it had to pay cash for it well why would judge d z make them pay cash mr to mean yes sir yes touch this session of the honorable united states court of appeals is now recess until the next session of this court god save the united states of america and this honorable court counsel you may disconnect from the meeting i t can stop all for corning's in the live audio stream