### REVISED November 26, 2013

IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

No. 13

- 30028

CHS, INCORPORATED,

Plaintiff

- Appellant

v. PLAQUEMINES HOLDINGS, L.L.C.,

Defendant

- Appellee

Appeal from the United States District Court for th e Eastern District of Louisiana

Before STEWART, Chief Judge, KING, and PRADO, Circuit Judges

. KING, Circuit Judge : Plaintiff

- Appellant CHS, Inc. , and non

- party South Louisiana Ethanol,
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. , each owned a fifty percent interest in a company whose sole asset was a tract of land. S outh Louisiana Ethanol filed for bankruptcy under Chapter 11 of the Bankruptcy Code, and, as part of the confirmed liquidation plan, the bankruptcy court ordered S out h L ouisiana E thanol to dissolve the company held jointly with CHS and to partition the tract of land. During the pendency of the required state court dissolution lawsuit, South Louisiana Ethanol sold to a third party an option to purchase all of its right , title, and interest acquired from the dissolution of the shared company. The third party then assigned its United States Court of Appeals Fifth Circuit 

### FILED November 5 , 2013 Lyle W. Cayce Clerk Case: 13-30028 Document: 00512453557 Page: 1 Date Filed: 11/26/2013No. 13

- 30028 rights under the option contract to Defendant

- Appellee Plaquemines Holdings,
L

. L

. C

. CHS responded by filing this suit, contending that S outh L oui siana
E thanol ’s option contract with Plaquemines constitutes the assignment of a litigious right under Louisiana law , entitling CHS to redeem the litigious right by reimbursing Plaquemines for the cost of the option contract plus interest. The district co urt granted Plaquemines ’s motion to dismiss, holding that the law at issue did not apply to judicial sales. For the following reasons, we AFFIRM

. I. Factual and Procedural Background 1
In 2005, HPS Development, L.L.C. (“HPS”) , purchased a decommissioned ethanol plant in Louisiana along the Mississippi River. Having decided to revitalize the plant, HPS acquir ed the necessary equipment and located a contractor to perform renovations. During the summer of 2006, HPS transferred t he entire property and its improvements to South Louisi ana Ethanol, L.L.C. (“SLE”), a wholly

- owned limited liability company. SLE secured financing and executed contracts to proceed with the renovations. In the spring of 2007, SLE selected Wachovia Secu rities to obtain permanent financing through syndication that would be sufficient to complete the plan t . However, Wachovia was unable to raise the needed capital. Since SLE had no further funds with which to finance the renovations, it stopped constructi on on September 20, 2007. SLE continued to pursue funding, but to
no avail. Shortly thereafter, SLE’ s contractor resorted to litigation. The business venture was at a standstill. SLE owned a non

- fun c tioning ethanol plant , together with the plant’s s urrounding land , and it could not

1 The complete record from the underlying bankruptcy action was not includ ed in our record, but we take judicial notice of this proceeding , In re S outh L ouisiana E thanol, L.L.C. , No. 09

- 12676 (Bankr. E.D. La. filed Aug. 25, 2009) , since it contains facts relevant to our analysis. 2 Case: 13-30028 Document: 00512453557 Page: 2 Date Filed: 11/26/2013No. 13

- 30028

p rocure additional financing in order to progress with the business. Because the ethanol plant had never been completed, the company had no income from its business operations. Essentially, SLE ’ s only value was in its li mited asset s

. On August 25, 2009, SLE voluntarily filed for Chapter 11 bankruptcy. Over a year later, following lengthy negotiations with several creditors, SLE submitted a Chapter 11 plan (together with a disclosure statement) proposing a complete liquidation of SLE’s assets. S LE ultimately filed two amended plans and disclosure statements

. The bankruptcy court confirmed the final liquidation plan in April 2011. Among other thin gs, the plan required that SLE institute legal proceedings to dissolve CHS

- SLE Land, L.L.C. (“Land”), a company that it held jointly with CHS , L.L.C. (“CHS”), whose s ole asset was 4.5 acres of land loc ated along the river. SLE owns a fifty percent interest in Land. The confirmed Chapter 11 plan manda ted that all of the assets of SLE (including its interest in Land) be sold as a unit. By the plan’s express terms, the sale would be

s ubject to “application, notice, and Bankruptcy Court approval.” SLE filed a petition in state court to dissolve Land in May 2011 , claiming that the business purpose of the partnership had been frustrated and that the parties could not agree on a plan of dissolution. CHS resisted the dissolution. While the state court dissolution proceeding was pending, SLE proceeded to
i mplement the confirmed plan. In June 2011, the bankruptcy court approved the bidding procedure for the sale of SLE’s assets, which included an “option to purchase all rights, title, and interest [SLE] may have in the dissolve d limited liability company, k nown as [Land], once accomplished judicially or otherwise.” CHS and others submitted bids, and the winning bid was submitted by J. A

. H. Enterprises (“JAH”)

. The bankruptcy court approved the sale in July 2011, and ordered the parties to close the sale on a later date. JAH

3 Case: 13-30028 Document: 00512453557 Page: 3 Date Filed: 11/26/2013No. 13

- 30028 then assigned its rights and interests in Land to Defendant

- Appellee Plaquemines Hold ings, L.L.C

. (“Plaquemines”). As part of the sale, SLE and Plaquemines entered into an option contract which provided that Plaquemines would pay $202,000 for an exclusive option to purchase all right, title, and interest distributed to SLE as a result of the dis solution of Land. The agreement further provide d that t he acquisition price would be $1 , in addition to the option price already paid. Plaquemines and SLE finalized the sale on August 23, 2011, and on September 9 , a creditor filed a motion in bankruptcy court to distribute proceeds from the sale condu cted by SLE. CHS did not learn tha t the sale had closed or that Plaquemines had purchased the sale items until the motion to distribute was filed. On September 22, 2011, CHS filed this suit, alleging that the sale between SLE and Plaquemines constituted t he assignment of a litigious right
and that it was entitled to red e e m that right under Louisiana law. Plaquemines filed a motion to dismiss for failure to state a claim, which the district court granted. The district court held that the Louisiana statute governing the sale of litigious rights , Louisiana Civil Code Article 2652 (“Article 2652”), did not apply to a sale made “within the framework of a bankruptcy case under Chapter 11 of the Bankruptcy Code,” and thus, CHS had failed to plead a plausible cla im for relief. CHS timely appealed. II. Standard of Review A d ismissal for failure to state a claim is reviewed de novo. Gearlds v.
Ent ergy Servs., Inc. , 709 F.3d 448, 450 (5th Cir. 2013). “To survive a motion to dismiss, a complaint must contain suffic ient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal , 556 U.S. 662, 678 (2009) (internal quotation marks omitted). “A claim has facial plausibility when the plaintiff pleads factual content t hat allows the court to draw the reasonable inference that the defendant is liable for the misconduct
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- 30028 alleged.” Id . The complaint need not contain detailed factual allegations, but it must provide more than conclusions. Gearlds , 709 F.3d at 450. When ev aluating issues of state law, federal courts “look to the final decisions of that state’s highest court.” Chaney v. Dreyfus Serv. Corp ., 595 F.3d 219, 229 (5th Cir. 2010). “In the absence of such a decision, ‘ we must make an
Erie guess and determine, in our best judgment, how [the highest state court ] would resolve the issue if presented with the same case.’” Six Flags, Inc. v. Westchester Surplus Lines Ins. Co ., 565 F.3d 948, 954 (5th Cir. 2009) (quoting In re Katrina Canal Breaches Litig ., 495 F.3d 191, 206 (5th Cir. 2007)). If we
are to make an Erie guess with respect to the application of Louisiana law, we must employ the jurisdiction’s “ civilian methodology ” and “examine primary sources of law: the constitution, codes, and statutes.” Bradley v. Allstate Ins. Co. , 620 F.3d 509, 517 n.2 (5th Cir. 2010). We may also consider intermediate state appellate court decisions, although we are not bound by them. Id.
III. Discussion The part ies’ dispute focuses on whether SLE’s sale of the opt ion contract to Plaquemines constitutes the assignment of a litigious right, and, if so, whether CHS may redeem that right by reimbursing Plaquemines for the price it paid for the option contract plus interest. Under Louisiana law, When a litigious righ t is assigned, the debtor may extinguish his obligation by paying to the assignee the price the assignee paid for the assignment, with interest from the time of the assignment. A right is litigious, for that purpose, when it is contested in a suit already filed.
La. Civ. Code Ann. a rt. 2652 (2013). The law is aimed at preventing unnecessary litigation by reducing the ability of third parties to buy and sell legal claims for profit. Smith v. Cook , 180 So. 469, 470 (La. 1937). Article 2652 “enable[s] the d efendant to take the place of the purchaser of the suit against him, by paying the price [the purchaser] has paid for it, with interest. Thereby 5 Case: 13-30028 Document: 00512453557 Page: 5 Date Filed: 11/26/2013No. 13

- 30028 the litigation is ended, and the object of the law attained.” Id

. (quoting Leftwich v. Brown , 4 La. Ann. 104 , 105 (1849)). The district court held that an exception to Article 2652 barred CHS fro m redeeming the litigious right , finding it unnecessary to consider whether SLE’s option contract with Plaquemines constitutes the assignment of a litigious right or if CHS is a debtor with an obligation to Plaquemines within the meaning of Article 2652

. 2 We first consider these threshold issues to determine whether Article 2652 applies to SLE’s sale of the option contract. Concluding that it does, we analyze whether a sale made pursuant to a Chapter 11 liqu idation plan is a judicial sale exempt from Article 2652. A. Assignment of a Litigious Right Plaquemines argues that there was no assignment of a litigious right because CHS is not a “debtor” within the meaning of the law. Plaquemines claims that because it purchased an option contract that granted it the option
to buy the assets SLE receives once the dissolution of Land is complete, CHS does not have any “ obligation ” that it can “ extinguish. ” Additionally, Plaqu emines argues that the option contract is not a “litigious right.” S ince these arguments overlap, we address them together. Article 2652 affects the ability of a “debtor ” to “extinguish his obligation ” by paying to the assignee the price that the assignee had paid for the right

. Under Louisiana law, “debtor” is synonymous with “obligor

. ” La. Civ. Code Ann. art. 1756 cmt. c. The law further defines a n obligation a s a “legal relationship whereby a per son, called the obligor, is bound to render a performance in favor of another, called the obligee. Performance may consist

2 Plaquemines also argues that the doctrine of res judicata bars CHS from litigating this matter. Like the district court, w e do not reach the merits of this argument because we hold that the judi cial

- sale exception applies, preventing CHS from redeeming the litigious right

. 6 Case: 13-30028 Document: 00512453557 Page: 6 Date Filed: 11/26/2013No. 13

- 30028 of giving, doing, or not doing something. ” Id. art. 1756. When an unsettled obligation is subject to litigation and assigned durin g the pendency of that litigation, Article 2652 allows the obligor to extinguish the obligation to give, do, or not do whatever is at issue. This point is best illustrated by Crain v. Waldron , 27 So. 2d 333 ( La. 1946). Crain involved a dispute between a father and his ten children over each individual’s ownership stake in a plot of land. Id. While the lawsuit was pending, the father sold his interest in the land to three individuals who substituted into the lawsuit as plaintiffs. Id . at 334. During the course of trial, the children sought to redeem their father’s claim to the land under Article 2652, alleging that their father had assigned a litigious right when he sold his interest in the land. Id . The substitute plaintiffs alleged that they had n ot received a litigious right “since all the parties admitted the others’ rights to a partition.” Id . The court rejected this argument, since

— the undisputed right to a partition notwithstanding

— the parties nevertheless dis agreed about the portion of the property to which each individual was entitled out of the partition. Id

. Here, SLE is in a position analogous to the father in Crain ; P laquemines is in a position analogous to the substitute plaintiffs; and CHS is in a position analogous to the childre n. Aft er SLE brought suit to dissolve Land,
P laquemines bought an option contract to purchase the assets SLE will receive for its fifty percent interest in Land

. While SLE indisputably owns a fifty percent interest in the company, the exact contours of that interest were not

se ttled at the time SLE sold the option contract to P laquemines

. Indeed, SLE’s dissolution petition specifically stated that “a perpetual deadlock exists concerning the operation of [Land]” and that “the parties have not agreed on a plan of dissolution of [ Land].” Under Crain , because the nature of each

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- 30028 company’s rights are unsettled, there has been an assignment of a litigious right. Plaquemines counters that C rain supports its position that i t has not received a litigious right . Neither CHS nor SLE dispute each other’s fifty percent ownership interest in Land , but the issue in Crain was the size of each party’s share

. 27 So. 2d at 334

. However, unlike the parties in Crain , CHS and SLE conte sted whether dissolut ion was the appropriate remedy. Th is case presents the opposite set of facts, but it is similar in that the parties still legally dispute the precise nature of the other’s rights. “ [ A ] right transferred after suit is instituted and an answer filed thereto, and before the judgment therein is final, is a litigious right, since there is a suit a nd contestation thereon.” Calderera v. O ’ Carroll , 551 So. 2d 824, 826

– 27 (La. Ct. App. 1989) ( q uoting Hawthorne v. Humble Oil & Ref. Co. , 210 So. 2d 110, 112 (La. Ct. App. 1969) ).
Th erefore, the right assigned

— the option to purchase the asset SLE receives from the dissolution of Land

— was litigious

. B. The J udicia l

- Sale E xception The Civil Code does not expressly state whet her there is an exception to Article 2652 , but such an exception may be f ound elsewhere in Louisiana law

. The Louisiana Code of Civil Procedure describes the effect of adjudications following judicial sales, stating that “[t]he ad judication transfers to the purchaser all the rights and claims of the judgment debtor as completely as if the judgment debtor had sold the property.” La. Code Civ. Proc. Ann. art. 2371 (2013) . Additionally, the Louisiana Revised Statutes provide that a “sheriff’s act of sale . . . shall conclude with the recital of the sale and transfer by the sheriff to the purchaser of all of the rights which the former owner had in the property sold.” La. Rev. Stat. Ann. § 13:4353 ( 2013 ). Article 2652, Article 2371, and § 13:4353 are not to be read in isolation, as the latter two create an exception to Article 2652. This exception has its 8 Case: 13-30028 Document: 00512453557 Page: 8 Date Filed: 11/26/2013No. 13

- 30028 roots in an 1828 decision, Hughes v. Harrison , 7 Mart. (n.s.) 227 (La. 1828). Hughes , relying on forme r Articles 690 and 694 of the Louisiana Code of Practice, which are presently codified as Article 2371 and § 13:4353, respectively, explains that property sold at auction in a sheriff’s sale does not carry with it certain legal restrictions. Id. at 227

– 2 8. The Louisiana Supreme Court later applied Hughes to Article 2652 , then codified as Article 2622, in Early v. Black , 12 La. 205 (1838). Under Early , Article 2652 only applies when “[t]he transfer . . . [is] a conventional assignment, between individual s capable of contracting.” Id . at 206. However, when property is sold pursuant to “an adjudication by a public officer, at a forced sale, made by order of a competent tribunal,” then Article 2652 has no effect. Id . Notably, Early does not create

a narr ow exception that applies only to sale by a sheriff’s auction, as the literal language of § 13:4353 would suggest. Instead, the exception is described broadly as including judicial sales. Almost eighty years later, Bluefields S.S. Co. v. Lala Ferreras Can gelosi S.S. Co. , 63 So. 96 (La. 1913), revisited Early in order to determine Article 2652’s potential application to a receiver’s sale of property as part of the liquidation of a company. In Bluefields , a plaintiff sued the defendant and thereafter went i nto receivership. Id. Th e receiver sold the original plaintiff’s interest in the lawsuit to a party that subsequently substituted itself into the action as plaintiff. Id . at 96

– 97. On appeal, the defendant sought remand so that it could avail itself of the redemption right under Article 2652, arguing that the sale by the receiver constituted the assignment of a litigious right, thereby bringing the substitute plaintiff’s claim within Article 2652. Id . The Louisiana Supreme Court rejected the defendant ’s argument, holding that Article 2652 only applies to a “conventional assignment[

. ]” Id . at 97

. The court concluded that the sale “was a judicial sale, made by the receiver appointed by a competent court for the express purpose of executing its orders i n the 9 Case: 13-30028 Document: 00512453557 Page: 9 Date Filed: 11/26/2013No. 13

- 30028 receivership proceedings of the plaintiff company, and the sale made by him was made under an order of that court.” Id . Accordingly, the sale was not a “conventional assignment,” as contemplated by Article 2652, and was exempt from redemption.
The holding of Bluefields and the statutory scheme on which it rests remain undisturbed. The district court properly applied these legal principles and concluded that the sale of S LE’s fifty percent share in Land was a judicial sale, exempt from Article 2652

. The district court held that “the Bankruptcy Court’s supervision of the auction and approval of the Sale serve as more than adequate safeguards of the policy interests enshrined in Article 2652.” On this basis, the district court held that CHS could no t maintain a cause of action under Article 2652

. A review of the Bankruptcy C ode confirms the reasoning of the district court and reveals that a sale made pursuant to a Chapter 11 liquidation plan fall s within the parameters of the judicial

- sale exception

. Chapter 11 of the B ankruptcy C ode permits a debtor to reorganize or liquidate all or substantially all of its assets

. See 11 U.S.C. § 1123(a) (5)(B) & (D) (2012). Under Chapter 11, a debtor may file a voluntary petition for bankruptcy, see id . § 301(a), or creditors may initiate an involuntary proceeding against a debtor, see id . § 303. After filing a petition, depending on the specific circumstances of the debtor, the bankruptcy court may appoint a trustee or the debtor may remain in possess ion and assume all of the legal responsibilities of a trustee. Id . § 1107(a); Compton v. Anderson ( In re MPF Holdings US LLC) , 701 F.3d 449, 453 (5th Cir. 2012); In re Triangle Chems

. , Inc ., 697 F.2d 1280, 1283

– 84 (5th Cir. 1983). Should the debtor assum e the responsibilities of the trustee as the debtor

- in

- possession, it must shed the role of busines sman and assume a new role. After this transformation , [T] he debtor, though left in possession by the judge, does not operate [the business] as it did befor e the filing of the petition,

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- 30028 unfettered and without restraint. . . . Rather, [a] debtor in possession holds its powers in trust for the benefit of creditors. The creditors have the right to require the debtor in possession to exercise those powers for t heir benefit. In re Hughes , 704 F.2d 820, 822 (5th Cir. 1983) (internal quotation marks and citations omitted). Although the debtor

- in

- possession is not a receiver or judicial liquidator under Louisiana law, his role is remarkably similar. 3

3 The duties of a trustee in a C hapter 11 liquidation proceeding are described in various provisions of the Bank ruptcy Code. Under § 704, the trustee must, among other things:
(2) be accountable for all proper ty received;

. . . [(5)] examine proofs of claims and object to the allowance of any claim that is improper;

. . . (8) if the business of the debtor is authorized to be operated, file

. . . periodic reports and summaries of the operation of such business

. . . ; (9) make a final report and file a final account of the administration of the estate with the court and with the United States trustee

. . . . 11 U.S.C. § 704(a)

. Under § 1106, the trustee shall also, in relevant part : (2) . . . [F] ile the list, schedule, and [disclosure] statement

. . . [ (3) ] investigate the acts, conduct, assets, liabilities, and financial condition of the debt or, the operation of the debtor’ s business and the desirability of th e continuance of such business

. . . [ (4) ] file a [reorganization] plan . . . (6) for any year for which the debtor has not filed a tax return required by law, furni sh, without personal liability, such information as may be required by the governmental unit with which such tax return was to be filed, in light of the condition of the debtor ’ s books and records and the availability of such information; (7) after confirmation of a plan, file such reports as are ne cessary . . . .
Id . § 1106(a) . Additionally, a trustee is authorized to initiate lawsuits, see id. § 323 ; enter into transactions, including for the use, sale, or lease of the property of the estate , wit h or without notice and hearing, depending on the circumstance, see id. § 363(c) ; and operate the debtor’s business, see id. § 1108. These duties are comparable to those of a receiver or judicial liquidator under Louisiana law. A receiver has
[F] ull au thority: (1) T o demand, collect, sue for and recover, in the name of the corporation, the debts and property of the corporation, and he may b e sued in the same manner; (2) T o compromise, compound and settle claims

. . . ; (3) T o sell and convey

. . . the pr operty of the corporation

. . . ; (6) T o carry on temporarily the business of the corporation

. . . ; (7) T o pay all debts and liabilities . . .; (12) T o file federal, state and local tax and inf ormation returns

. . . . 11 Case: 13-30028 Document: 00512453557 Page: 11 Date Filed: 11/26/2013No. 13

- 30028
In order t o successfully conclude a Chapter 11 proceeding, the debtor (or a creditor) must file a plan of reorganization (or liquidation), see 11 U.S.C. § 1121(a) & (c), accompanied by a disclosure statement that includes, inter alia, the details of the debtor’s fin ancial situation leading up to bankruptcy, see id. § 1125(a) & (b). The creditors and parties in interest will be given the opportunity to vote to accept or reject the plan. Id . § 1126. Finally, the bankruptcy court must enter an order confirming the pl an for it to become effective. Id . § 1129. Confirmation will only take place so long as several statutory requirements are met. Id . § 1129(a). These include the requirement that each holder of an impaired class o f claims o r interests receive s at least what it would have received if the debtor were liquidated under Chapter 7. See id. § 1129 (a)( 7). In addition, under the absolute priority rule, a dissenting class of unsecured creditors must be provided for in full before any junior class can retain any property under a Chapter 11 plan. See id

. § 1129(b)(2)(B)(i); Bank of Am. Nat’l Trust & Sav. Ass’n v. 203 N. LaS alle St. P’ship , 526 U.S. 434, 441

– 42 (1999). Lastly, the court must find that th e plan is “fair and equitable.” 11 U.S.C. § 1129(b)(1). The legal ramifications of a confirmed reorganization plan are highly significant. “[A] bankrup tcy court’s order confirming a plan of reorganization is given the same effect as a district court’s judgment on the merits for claim preclusion purposes.” Eubanks v. Fed. Deposit Ins. Corp. , 977 F.2d 166, 170 (5t h Cir. 1992) . Thus, a confirmed liquidatio n plan is not simply a plan to sell assets that has been approved by the court; the plan is effected by a direct order from the court that mandates the sale.

La. Rev. Stat. Ann. § 12:145(C); s ee also id. § § 12:146(C) (granting a judicial liquidator in dissolution proceedings powers enumerated in §12:145(C)) ; 12:152 ( B ) (“ [T] he

rec e iver shall have the powers of a judicial liquidator

. ”)

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- 30028 CHS argues that the bankruptcy court ’s orders approving the sale of SLE’s assets , including the sale of the option contract, did not direct the sale
but only approve d the sale, and that the court provided limited judicial oversight. Thus, CHS contends that these sales cannot be considered exempted judicial sales. In support of this proposition, CH S relies on Gekas v. Pipin (In re Met

- L

- Wood Corp.) , 861 F.2d 1012, 1016 (7th Cir. 1988), and In re North Port Assoc iates , Inc ., 182 B.R. 810, 813

– 14 (Bankr. E.D. Mo. 1995). However, both of these cases discuss a debtor’s sale of assets pursuant to 11 U.S.C. § 363

. Whatever may be the case with respect to the effect under Article 2652 of varying degrees of judicial involvement in § 363 sales (as to which we express no opinion), t he sale of assets at issue here was effected by an order confirming a Chap ter 11 plan and subsequent orders pursuant to that plan

. Cf

. Fla. Dep ’ t of Revenue v. Piccadilly Cafeterias, Inc. , 554 U.S. 33, 37 n.2 ( 2008) (distinguishing between pre

- confirmation sal es under § 363 and a confirmed C hapter 11 plan); In re Jasik , 727 F.2 d 1379, 1382

– 83 (5th Cir. 1984) ( same ); In re Braniff Airways, Inc ., 700 F.2d 935, 940 (5th Cir. 1983 ) (holding that a debtor cannot “ short circuit the requirements of Chapter 11 for confirmation of a reorganization plan ” by selling substantially all asset s under § 363). T he order ap proving the final sale to JAH, prior to its assignment to Plaquemines, noted that the sale was a liquidation of assets meant to “assist and implement the terms of SLE’s Amended Plan of Reorganization by Liquidation . . . confir med April 19, 2011[.]” Admittedly, the district court erroneously referenced § 363 when finding
that the sale had received sufficient judicial scrutiny, which explains CHS ’s argument concerning § 363 sales

. Additionally, the bankruptcy court’s order approving the final sale twice mentioned that the purchaser wa s a “good faith purchaser under [§] 363(m) of the Bankruptcy Code.” However, this does not detract from the fact that the sale was included in the co nfirmed plan, and a 13 Case: 13-30028 Document: 00512453557 Page: 13 Date Filed: 11/26/2013No. 13

- 30028 confirmed plan, as previously discussed, is subject to a myriad of statutory requirements and is an order of the court given res judicata effect. Turning to SLE’s sale of the option contract to Plaquemines , we find that the judicial

- sale exception to Article 2652 applies. We begin by noting that SLE was completely insolvent and incapable of generating revenue from the operation of its business, i.e., making ethanol, when it entered bankruptcy. As a matter of Louisiana law, f inancial desperation alone cannot transform a
conventional sale into a forced sale for the purposes of the judicial

- sale exception. See generally Sanders v. Ditch , 34 So. 860, 866 (La. 1903) (“[I]t might happen that a person unable, for one reason or another, to prosecute a just claim, would in that wa y be enabled to realize something, whereas, if left to himself, he would get nothing.”)

. O ur decision does not rest on SLE’s financial circumstances, but rather on the legal natu re of the bankruptcy proceeding

. Non etheless, an understanding of the company’s finances pro vides a practical context for the decisions that followed in the bankruptcy proceeding.
W hile SLE filed under Chapter 11 and a reorganization was a legal possibility , it was never a viable option. SLE lacked the ability to produce ethanol, so it could not continue to run its business and pay its creditors, making it highly improbable that a reorganization plan could have been confected, let alone approved. CHS argues that SLE was “ free to choose ” t he manner of its reorganization; however, an understanding of SLE’s business and the statutory structure under which i t operated once in bankruptcy reveals that it was not free to reorganize. SLE was effectively compelled to liquidate all of its
assets. Once in bankruptcy, SLE ceased operating as an independent business and began functioning withi n the strict parameters of the Bankruptcy C ode. As a debtor

- in

- possession , SLE’s role radically changed; its involvement in the ultimate decision to sell was si milar, if not identical, to the role of a receiver or 14 Case: 13-30028 Document: 00512453557 Page: 14 Date Filed: 11/26/2013No. 13

- 30028 judicial liquidator under Louisiana law. In acting as a functional receiver, SLE fits within Blu efields ’s and Early ’s requirement that the sale be made by a “public officer.” Bluefields , 63 So. at 97; Early , 12 La. at 206. In this capacity, SLE was bound by law to ensure that each creditor would receive at least what it would have received if the proceeding had gone through Chapter 7 liquidation. Once the liquidation plan was confirmed by court order, t he court then entered a second order describing the auction procedures and a third order approving the final sale to Plaquemines. Not only was the sale effectuated by three court orders, but the bankruptcy court was involved in the plann ing and execution of the final sale. SLE was bound to comply. This was a forced sale by a competent tribunal. See, e.g. , Early , 12 La. at 206

. The sale of a debtor’s property pursuant to a confirmed Chapter 11 liquidation plan, even when performed by t he debtor as a debtor

- in

- possession , is a compelled judicial sale . The sale is arranged and structured by a n individual or entity with duties akin to those of a receiver under Louisiana law;

s ubject to the stringent requirements of the United States Bankr uptcy Code ; and, most importantly, court

- ordered

. After the bankruptcy court confirmed SLE’s plan, SLE was bound to sell an option to purchase all of its interest s, rights, and title flowing from the dissolution of L and . This sale fits squarel y within th e statutory judicial

- sale exception to redemption, as described by Bluefields and its predecessors. As such, CHS may not redeem the litigious right through Article 2652. IV. Conclusion For the aforementioned reasons, we AFFIRM the order of the district
court dismissing CHS’s complaint with prejudice.

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- 30028 EDWARD C. PRADO, Circuit Judge, dissenting: I agree with the majority’s analysis and conclusion that the right that SLE assigned to Plaquemines was litigious. I must respectfully disagree with my collea gues, however, that the sale falls within the parameters of the judicial

- sale exception. The majority does not dispute that SLE voluntarily filed for Chapter 11 bankruptcy and submitted a Chapter 11 plan proposing a complete liquidation of its assets. Yet, the majority ignores this fact and focuses instead on the legal nature of the bankruptcy proceeding, and SLE’s operation, once it was in bankruptcy . For example, w hile acknowledging that “financial desperation
alone cannot transform a conventional sale into a forced sale for the purposes of the judicial

- sale exception,” Majority Op. at 14, the majority appears to suggest that financial des peration during a bankruptcy proceeding entered into voluntarily can indeed result in forced sales

. See id. (“[A]n understanding of the company’s finances provides a practical context for the decisions that followed in the bankruptcy proceeding .” (emphasi s added)); id. (“[A]n understanding of SLE’s business and statutory structure under which it operated once in bankruptcy reveals that it was not free to reorganize. SLE was effectively compelled to liquidate all of its assets.” (emphasis added)). I find that such a focus on the bankruptcy proceeding, rather than on SLE’s decision to enter bankruptcy voluntarily, is a misplaced focus on the means by which the sale is achieved rather than on the initial decision to sell. The focus should be on the decision to sell and its underlying incentives. As the district court noted, Article 2652 seeks to “ remov[e] the financial incentive from the assignment of litigious rights. ” CHS, Inc. v. Plaquemines Holdings, LLC , 484 B.R. 302, 307

– 08 (E.D. La. 2012) (citing U.S. v. 12,918.28 Acres of Land , 50 F. Supp. 712, 721

– 23 (W.D. La. 1943)). “ [T]he lawmakers have deemed it advisable from a standpoint of equity and public policy, in the 16 Case: 13-30028 Document: 00512453557 Page: 16 Date Filed: 11/26/2013No. 13

- 30028 sale of a matter in litigation, to favor the party against whom the matter in litiga tion is transferred over one who speculates in law suits.” Smith v. Cook , 180 So. 469, 472

– 73 (La. 1938). The judicial sales found in Bluefields , Early , and Hughes were completely devoid of any such financial incentive. See Bluefields S.S. Co. v. Lala F erraras Cangleosi S.S. Co. , 63 So. 96 (La. 1913) (receivership proceeding); Early v. Black , 12 La. 205 (1838) (sheriff ’ s sale); Hughes v. Harrison , 7 Mart. (n.s.) 227 (La. 1828) (sheriff ’ s sale). Those sellers did not pursue any financial incentive , much less speculate in their respective law suits. T hey had no part in the decision to sell whatsoever; rather, a competent tribunal exercised the initial decision

- making authority to sell. See,
e.g. , Early , 12 La. at 206 (finding that the purchaser held titl e by “an adjudication by a public officer, at a forced sale, made by order of a competent tribunal”). Here, financial desperation alone drove SLE’s decision to enter Chapter 11 bankruptcy and liquidate its assets. SLE found itself in a position where the financial incentive to file for Chapter 11 bankruptcy and liquidate its litigious right was greater than the financial incentive to continue its operations and to maintain its claim against CHS. The Supreme Court of
L ouisiana has recognized such a financially driven decision as one reason why a plaintiff may decide to sell its litigious right rather than continue prosecution. Sanders v. Ditch , 34 So. 860, 866 (La. 1903) ( “ [I]t might happen that a person unable, for on e reason or another, to prosecute a claim, would [by the sale of his litigious right] be enabled to realize something, whereas, if left to himself, he would get nothing. ” ). That SLE ultimately pursued this financial incentive through Chapter 11 does not l essen the financial incentives that guided its initial decision to liquidate. Nor does it alleviate the financial incentive concern that Article 2652 seeks to remedy.

17 Case: 13-30028 Document: 00512453557 Page: 17 Date Filed: 11/26/2013No. 13

- 30028 No competent tribunal compelled SLE’s initial decision to enter Chapter 11 bankruptcy and liquidate its assets. Instead, SLE liquidated its assets through bankruptcy to realize something, rather than nothing, for its litigious right. Such a financially motivated sale is precisely what Article 2652 seeks to remedy, and it should not fall w ithin the purview of the judicial

- sale exception

. Accordingly, I respectfully dissent.

18 Case: 13-30028 Document: 00512453557 Page: 18 Date Filed: 11/26/2013