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Nature of Suit Code: 422
Nature of Suit: Bankruptcy Appeals Rule 28 USC 158
Cause of Action: 

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United States Bankruptcy Appellate Panel

FOR THE EIGHTH CIRCUIT

_______________

No. 04-6039NI

________________

In re: *

*

Tama Beef Packing, Inc. *

*

Debtor. *

*

*

AgriProcessors, Inc. *

* Appeal from the United States

Interested Party - Appellant * Bankruptcy Court for the Northern

* District of Iowa

v. *

*

Habbo G. Fokkena *

*

U.S. Trustee - Appellee. *

_____

Submitted: February 11, 2005

Filed: March 14, 2005

_____

Before SCHERMER, FEDERMAN, and VENTERS, Bankruptcy Judges.

_____

VENTERS, Bankruptcy Judge.

Appellate Case: 04-6039 Page: 1 Date Filed: 03/14/2005 Entry ID: 1878148 
1

 An agreement between the Panel Trustee and AgriProcessors provided

that, if AgriProcessors was not the ultimate purchaser of the lease, AgriProcessors

would be entitled to submit an administrative claim of not more than $50,000 to

allow it to recover a portion of its costs and expenses associated with the

transaction. 

2

This is an appeal of an order of the bankruptcy court determining the amount

of AgriProcessors, Inc.’s administrative expense claim to be $4,896. For the reasons

stated below, we reverse the court’s order.

 

I. STANDARD OF REVIEW

“Findings of fact, whether based on oral or documentary evidence, shall not be

set aside unless clearly erroneous, and due regard shall be given to the opportunity

of the bankruptcy court to judge the credibility of the witnesses.” Fed. R. Bankr. P.

8013. Legal conclusions are reviewed de novo. Waterman v. Ditto (In re Waterman),

248 B.R. 567, 570 (B.A.P. 8th Cir. 2000).

II. BACKGROUND

The facts underlying this appeal are set forth fully in AgriProcessors, Inc. v.

Iowa Quality Beef Supply Network, L.L.C. (In re Tama Beef Packing, Inc.) 290 B.R.

90 (B.A.P. 8th Cir. 2003) (Tama I), and need not be repeated here.

In Tama I, the Panel determined that AgriProcessors, Inc.’s initiation of and

participation in competitive bidding for the purchase of a bankruptcy estate asset (an

unexpired lease) conferred a benefit to the estate under the terms of 11 U.S.C. §

503(b)(1), and, therefore, AgriProcessors, Inc. (“AgriProcessors”) was entitled to an

administrative expense claim for its actual and necessary expenses, i.e., attorney’s

fees and expenses.1

 The Panel remanded the matter to the court, which had denied

AgriProcessors’s administrative expense claim, for a determination of the

reasonableness of the fees and expenses claimed.

Appellate Case: 04-6039 Page: 2 Date Filed: 03/14/2005 Entry ID: 1878148 
3

On remand, the court determined that AgriProcessors was entitled to a “breakup fee” of $4,896.00, representing 3.2% of the $153,000 purchase price ultimately

paid for the asset on which AgriProcessors was outbid. AgriProcessors timely

appealed that ruling.

III. DISCUSSION

This appeal arises primarily out of the bankruptcy court’s misinterpretation of

the Panel’s mandate in Tama I, and the Panel accepts responsibility to the extent it

may have miscommunicated the basis for its holding and the precise issue on remand.

The essential basis for our holding in Tama I was that the fees and expenses

AgriProcessors incurred through its participation in the competitive purchase of an

estate asset qualified as administrative expenses because they met the requirements

of § 503(b). AgriProcessors’s claim for those expenses arose from a transaction with

the estate and that transaction conferred a benefit to the estate. Tama I, 290 B.R. at

98-100. The Panel also – unfortunately – discussed AgriProcessors’s fee in terms

of a “break-up fee” and found that AgriProcessors’s claim met the nine factors set

forth in Calpine Corp. v. O’Brien Environmental Energy, Inc. (In re O’Brien

Environmental Energy, Inc.), 181 F.3d 527, 527-29 (3rd Cir. 1999), used to determine

the allowance of break-up fees as administrative expenses. Tama I, 290 B.R. at 98-

100.

With this appeal, however, the Panel has an opportunity to revise its analysis,

and we conclude that the break-up fee discussion was superfluous. AgriProcessors’s

claim was not a break-up fee; rather, it was simply a claim for an administrative

expense which occurred in the context in which break-up fees often surface, i.e., in

conjunction with a “stalking horse’s” unsuccessful bid. Depending on the

circumstances and the terms of the transaction, an unsuccessful stalking horse bidder

may seek reimbursement of its actual expenses or it may seek a break-up fee which

is designed to compensate the unsuccessful bidder for the risk and costs incurred in

Appellate Case: 04-6039 Page: 3 Date Filed: 03/14/2005 Entry ID: 1878148 
2 See In re President Casinos, Inc., 314 B.R. 786, 788-89 (Bankr E.D. Mo.

2004). 

3 Id. (articulating difference between the reimbursement of actual expenses

and the payment break-up fees which should be limited to fair an reasonable

percentage of the proposed purchase price).

4

advancing the competitive bidding process.2 The distinction is significant because

break-up fees are, as the bankruptcy court correctly concluded, usually limited to one

to four percent of the purchase price, whereas there is no such cap for actual fees and

expenses incurred. The only requirement is that the fees and expenses satisfy the

requirements of § 503(b).3

 

Consequently, the court’s analysis on remand of AgriProcessors’s claim as a

break-up fee was unnecessary, and, unfortunately, led to an erroneous ruling limiting

AgriProcessors’s claim. Further remand at this juncture is unnecessary, though,

inasmuch as the court did find on remand that AgriProcessors had incurred

reasonable fees and expenses of $45,014.99. (App. at 519) The U. S. Trustee does

not dispute that finding, and thus AgriProcessors Inc., is entitled to an administrative

expense claim in the amount of $45,014.99.

IV. CONCLUSION 

For the reasons stated above, we reverse the order of the bankruptcy court and

hereby determine that AgriProcessors Inc., is entitled to an administrative expense

claim against the bankruptcy estate of Tama Beef Packing, Inc., in the amount of

$45,014.99.

 

Appellate Case: 04-6039 Page: 4 Date Filed: 03/14/2005 Entry ID: 1878148