1 15

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In re LightSquared Inc.

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

SUMMARY ORDER

R ULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT

. C ITATION TO A SUMMARY ORDER FILED ON OR AFTER

J ANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY F EDERAL R ULE OF A PPELLATE P ROCEDURE 32.1 AND THIS COURT ’ S

L OCAL R ULE 32.1.1. W HEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT

, A PARTY MUST CITE EITHER

THE F EDERAL A PPENDIX OR AN ELECTRONIC DATABASE ( WITH THE NOTATION “ SUMMARY ORDER ”). A PARTY CITING A

SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL

.

At a stated term of the United States Court of Appeals for the Second

Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley

Square, in the City of New York, on the 22 nd day of March

, two thousand

sixteen.

PRESENT: RALPH K. WINTER

RICHARD C. WESLEY,

CHRISTOPHER F. DRONEY

Circuit Judges.

________________ _______________ _____________

SANJIV AHUJA,

Appellant,

‐ v. ‐ 15

‐ 2480

LIGHTSQUARED INC., FORTRESS CREDIT

OPPORTUNITIES ADVISORS, LLC, 1

1 A question arose post

‐ argument as to whether Fortress Credit Opportunities Advisors,

LLC (“Fortress”) is a party to this appeal. Despite being served with all relevant2 LIGHTSQUARED INVESTORS HOLDINGS INC.,

ONE DOT FOUR CORP., ONE DOT SIX CORP.,

SKYTERRA ROLLUP LLC, SKYTERRA ROLLUP

SUB LLC, SKYTERRA INVESTORS LLC, TMI

COMMUNICATIONS DELAWARE, LIMITED

PARTNERSHIP, LIGHTSQUARED GP INC.,

LIGHTSQUARED LP, ATC TECHNOLOGIES, LLC,

LIGHTSQUARED CORP., LIGHTSQUARED

FINANCE CO., LIGHTSQUARED FINANCE CO.,

LIGHTSQUARED NETWORK LLC,

LIGHTSQUARED INC. OF VIRGINIA,

LIGHTSQUARED SUBSIDIARY LLC,

LIGHTSQUARED BERMUDA LTD., SKYTERRA

HOLDINGS (CANADA) INC., SKYTERRA

HOLDINGS (CANADA) INC., SKYTERRA

(CANADA) INC., ONE DOT SIX TVCC CORP.

Debtors

‐ Appellees

,

JPM INVESTMENT PARTIES, HARBINGER

CAPITAL PARTNERS LLC, CENTERBRIDGE

PARTNERS, L.P.

Appellees

.

________________ _______________ _____________

FOR APPELLANT: BIJAN AMINI (Avery Samet, Jeffrey Chubak, on the

brief ), Storch Amini & Munves PC, New York, NY

FOR APPELLEES: ANDREW M. LEBLANC (Michael L. Hirshfeld, on the

brief ), Milbank, Tweed, Hadley & McCloy LLP, New

York, NY.

moving papers filed in connection with this case, Fortress never took action to remove

itself. We agree with the Appellant that Fortress is a party to this appeal.3 Appeal from the United States District Court for the Southern District of

New York (Forrest, J. ).

UPON DUE CONSIDERATION, IT IS HEREBY ORDERED,

ADJUDGED AND DECREED that the order of the district court is AFFIRMED.

Appellant Sanjiv Ahuja (“Ahuja”) appeals from an opinion and order of

the United States District Court for the Southern District of New York (Forrest,

J. ), affirming the ruling of the United States Bankruptcy Court for the Southern

District of New York (Chapman, J. ). We assume the parties’ familiarity with the

underlying facts, the procedural history, and the issues presented for review,

which we reference only as necessary to explain our decision to affirm

for substantially the same reasons stated by the district court.

LightSquared 2 is a provider of wholesale mobile satellite communications

and broadband services. In May 2012, LightSquared filed for bankruptcy under

Chapter 11 of the Bankruptcy Code after the Federal Communications

2 “LightSquared” is a company that consists of twenty

‐ seven entities. For the remainder

of this order, the term “LightSquared” refers collectively to the twenty Chapter 11

debtors: LightSquared Inc., LightSquared LP, LightSquared Investors Holdings,

SkyTerra Rollup LLC, SkyTerra RollupSub LLC, SkyTerra Investors LLC, TMI

Communications Delaware, Limited Partnership, LightSquared GP Inc., ATC

Technologies, LLC, LightSquared Corp., LightSquared Finance Co., LightSquared

Network LLC, LightSquared Inc. of Virginia, LightSquared Subsidiary LLC,

LightSquared Bermuda Ltd., SkyTerra Holdings (Canada) Inc., SkyTerra (Canada) Inc.,

Inc., One Dot Four Corp., One Dot Six Corp and One Dot Six TVCC Corp.4 Commission (“FCC”) effectively suspended its valuable licenses for certain

terrestrial operations. The bankruptcy court confirmed LightSquared’s Modified

Second Amended Joint Plan (the “Plan”) for reorganization in an oral decision,

which was then affirmed on appeal to the district court. See In re LightSquared,

Inc.

, 534 B.R. 522, 525 (S.D.N.Y. 2015).

Under the Plan as approved, no common equity holder of LightSquared

Inc. would receive any recovery, meaning that Ahuja, who held 8% of the

common equity in LightSquared Inc., would receive no value in the

reorganization. Ahuja argues that the Plan should not have been confirmed

because (1) it does not satisfy 11 U.S.C. § 1129(b)’s fair and equitable rule, and (2)

it does not satisfy 11 U.S.C. § 1123(a)(4)’s equal treatment rule. LightSquared

rebuts each of Ahuja’s arguments in turn; it also argues that Ahuja’s appeal

should be dismissed as equitably moot.

I. Mootness

Equitable mootness is a prudential doctrine under which a court may in its

discretion dismiss a bankruptcy appeal “when, even though effective relief could

conceivably be fashioned, implementation of that relief would be inequitable.” In

re Chateaugay Corp.

, 988 F.2d 322, 325 (2d Cir. 1993) (“ Chateaugay I “). The5 doctrine requires courts to “carefully balance the importance of finality in

bankruptcy proceedings against the appellant’s right to review and relief.” In re

Charter Commc ʹ ns, Inc., 691 F.3d 476, 481 (2d Cir. 2012).

A bankruptcy appeal is presumed equitably moot when the debtor’s

reorganization plan has been substantially consummated. Id. at 482.

“Substantial consummation,” as defined by section 1101(2) of the Bankruptcy

Code, requires “(A) transfer of all or substantially all of the property proposed by

the plan to be transferred; (B) assumption by the debtor or by the successor to the

debtor under the plan of the business or of the management of all or

substantially all of the property dealt with by the plan”; and “(C) commencement

of distribution under the plan.” 11 U.S.C. § 1101(2). The presumption of

equitable mootness can be overcome, however, if all five of the “ Chateaugay

factors” are met:

(1) “the court can still order some effective relief”;

(2) “such relief will not affect the re

‐ emergence of the debtor as a

revitalized corporate entity”

(3) “such relief will not unravel intricate transactions so as to knock

the props out from under the authorization for every transaction

that has taken place and create an unmanageable, uncontrollable

situation for the Bankruptcy Court”6 (4) “the parties who would be adversely affected by the modification

have notice of the appeal and an opportunity to participate in the

proceedings”

(5) “the appellant pursued with diligence all available remedies to

obtain a stay of execution of the objectionable order if the failure to

do so creates a situation rendering it inequitable to reverse the

orders appealed from.”

In re Chateaugay Corp., 10 F.3d 944, 952–53 (2d Cir. 1993) (“ Chateaugay II ”)

(internal citations, quotations, and alterations omitted); In re Charter Commc ʹ ns,

Inc.

, 691 F.3d at 482. “The Chateaugay factors ensure that there is no per se

equitable mootness by requiring a court to examine the actual effects of the

requested relief.” In re Charter Commc ʹ ns, Inc.

, 691 F.3d at 482.

In December 2015, after the bankruptcy court and district court confirmed

the Plan, the FCC granted LightSquared’s application for approval of the

“change of control” of its FCC licenses, the final step in the substantial

consummation of the Plan. Accordingly, LightSquared filed a motion to dismiss

the present appeal as equitably moot in which it argued that Ahuja cannot

overcome the presumption of equitable mootness. In rebuttal, Ahuja concedes

that the Plan is now substantially consummated, but argues that he can

overcome the presumption of mootness under Chateaugay II

.7 Ahuja has met his burden of showing that the first, fourth, and fifth factors

for overcoming the presumption of mootness are met in this case. See Chateaugay

II, 10 F.3d at 952–53; In re Charter Commc’ns, Inc.

, 691 F.3d at 484–86. The first

factor is satisfied because “it is not impossible to grant [Ahuja] relief, in the sense

that the appeal[] [is] not constitutionally moot.” In re Charter Commc’ns, Inc.

, 691

F.3d at 484. The fourth factor is met because the parties that would be adversely

affected—namely, the new investors in reorganized LightSquared—are “parties

to this appeal” and “participated actively in the bankruptcy proceedings.” Id.

Ahuja satisfied the fifth factor because he diligently sought a stay in the

bankruptcy court, district court, and on appeal, and moved for an expedited

appeal. See id. ; see also In re Metromedia Fiber Network, Inc.

, 416 F.3d 136, 144 (2d

Cir. 2005) (“A chief consideration under Chateaugay II is whether the appellant

sought a stay

. . .”).

Ahuja argues that second and third factors are also met because this Court

can still order effective relief without “affect[ing] the re

‐ emergence of the

[LightSquared] as a revitalized corporate entity” or “knock[ing] the props out

from under the authorization for every transaction that has taken place” in three

ways: (1) by vacating the confirmation order, (2) by redistributing the equity in8 reorganized LightSquared, or (3) by awarding monetary damages. Chateaugay

II

, 10 F.3d at 952–53. We reject Ahuja’s first and second proposed forms of relief

because we find that vacating the confirmation order and redistributing the

equity in reorganized LightSquared is not the type of relief that can be

undertaken without knocking the props out from under completed transactions

or affecting the reemergence of the debtor from bankruptcy. See Chateaugay II, 10

F.3d at 952–53.

We are convinced, however, that this Court can order at least some

effective relief in the form of monetary damages in this case—even as little as one

dollar—without knocking the props out from under the completed transaction or

affecting reorganized LightSquared’s reemergence as a revitalized corporate

entity. 3 This conclusion finds direct support in Chateaugay II

, where we

recognized that some effective relief could be granted when an appellant “would

readily accept some fractional recovery that does not impair [the] feasibility [of

the bankruptcy plan] or affect parties not before this Court, rather than suffer the

3 While we find that monetary damages can be awarded in accordance with the

Chateaugay factors in the context of this specific case, in other cases, a court may find

that it could not grant monetary relief without unwinding the reorganization plan or

otherwise undermining the existence of the Chateaugay factors. See, e.g.

, In re Charter

Commc ʹ ns, Inc

., 691 F.3d at 485 (finding that the court could not grant monetary

damages to an appellant asserting a misclassification claim without unwinding the

reorganization plan and reclassifying creditors).9 mootness of its appeal as a whole.” 10 F.3d at 954. We determined that we could

“fashion effective relief” by remanding with instructions to the bankruptcy court

to order the return of any funds that were erroneously disbursed, so long as “that

can be done manageably and without imperiling [the debtor’s] fresh start.” Id. at

953. Likewise, in this case, Ahuja has signaled his willingness to accept some

fractional recovery in the form of monetary damages, and we could fashion such

relief without disturbing the Plan or affecting reorganized LightSquared’s fresh

start. 4

While Ahuja has overcome the presumption of equitable mootness, a

remand to assess is not necessary in this case. See Chateaugay II

, 10 F.3d at 954,

961 (declining to dismiss the appeal as equitably moot where the appellant could

4 In reaching this conclusion, we find additional support in two particularly instructive

cases. First, in considering an equitable mootness challenge, the Ninth Circuit observed

that it must “ask whether there are any forms of even partial relief that could be

provided without unraveling the [bankruptcy] plan.” In re Transwest Resort Props., Inc.

,

801 F.3d 1161, 1172–73 (9th Cir. 2015). Noting that “[l]ogically, the value of” the

appellant’s claim “was worth somewhere between nothing and $39 million,” the court

concluded that there was “no reason why, if the court were to devise a remedy that

required Reorganized Debtors to pay [the appellant] one dollar, for example, the plan

would be undone.” Id. at 1173. The Fifth Circuit reached the same conclusion. See In re

Texas Grand Prairie Hotel Realty, L.L.C.

, 710 F.3d 324, 328 (5th Cir. 2013). The court held

that it “could grant partial relief to [the appellant] without disturbing the

reorganization, by, for example

. . . granting a small money judgment.” Id. at 328. The

court noted that there was “no credible evidence that granting such fractional relief

would require unwinding any of the transactions undertaken pursuant to the

reorganization plan.” Id.10 be awarded monetary damages, but nevertheless refusing to grant relief on the

merits because the challenged reorganization plan complied with the Bankruptcy

Code). As set forth above, the Plan was fair and equitable, and complies with

the equal treatment rule. To the extent that Ahuja wishes to assert claims to

monetary damages other than the fair and equitable and equal treatment claims

raised here, he has waived those claims by failing to raise them before us, the

district court, or the bankruptcy court. See Otal Invs. Ltd. v. M/V Clary, 673 F.3d

108, 120 (2d Cir. 2012) (declining to consider arguments not raised in district

court in light of “well

‐ established general rule” that court of appeals will not

consider an issue raised for first time on appeal).

II. Confirmation of the Plan

“We look through the district court to the bankruptcy court’s decision

. . .”

In re DBSD N. Am., Inc.

, 634 F.3d 79, 94 (2d Cir. 2011). We independently review

the bankruptcy court’s legal conclusions de novo and its factual findings for clear

error. In re Ames Dep ʹ t Stores, Inc.

, 582 F.3d 422, 426 (2d Cir. 2009) (per curiam).

A. Fair and Equitable

Confirmation of a plan over the vote of a dissenting class requires that the

plan be “fair and equitable, with respect to each class of claims or interest that is11 impaired under, and has not accepted, the plan.” 11 U.S.C. § 1129(b)(1). While

the Bankruptcy Code “does not define the full extent of ‘fair and equitable,’” it

does “include[] a form of the absolute priority rule as a prerequisite.” In re

DBSD

, 634 F.3d at 94. That is, in order to be “fair and equitable” to a common

equity holder, a reorganization plan must meet the following two requirements:

(i) the plan provides that each holder of an interest of such class

receive or retain on account of such interest property of a value, as

of the effective date of the plan, equal to the greatest of the allowed

amount of any fixed liquidation preference to which such holder is

entitled, any fixed redemption price to which such holder is entitled,

or the value of such interest; or

(ii) the holder of any interest that is junior to the interests of such

class will not receive or retain under the plan on account of such

junior interest any property.

11 U.S.C. § 1129(b)(2)(C).

Ahuja does not assert that the absolute priority rule was violated by

distributions to creditor classes junior to his class; nor could he, as his class was

indisputably the most junior. Instead, Ahuja argues that the Plan is not fair and

equitable because senior creditors were paid more than their claims were worth.

Specifically, Ahuja contends that the bankruptcy court failed to properly value

reorganized LightSquared, thereby overpaying some senior creditors with

undervalued equity in reorganized LightSquared producing an “equity cushion”12 that ought to have resulted in a distribution to common equity holders of

LightSquared Inc.

We find that the Plan is fair and equitable to the common equity holders of

LightSquared Inc. The absolute priority rule is not violated where, as here, no

claim junior to Ahuja’s was paid before his claim. Moreover, the bankruptcy

court did not err, let alone clearly err, in concluding that reorganized

LightSquared did not have an equity cushion sufficient to pay the claims of

LightSquared Inc. common equity holders. The bankruptcy court’s conclusion

was premised on extensive factual findings, including, inter alia

, the significant

regulatory risks involved.

B. Equal Treatment

The Bankruptcy Code provides that any reorganization plan must

“provide the same treatment for each claim or interest of a particular class, unless

the holder of a particular claim or interest agrees to a less favorable treatment of

such particular claim or interest.” 11 U.S.C. § 1123(a)(4). Ahuja contends that the

Plan violates this requirement “[f]or the same reasons” that it violates the fair

and equitable treatment rule.13 Even accepting Ahuja’s contention that he did not waive his equal

treatment argument by failing to raise it before the bankruptcy court at the

confirmation hearing, it fails on the merits. The Plan cancels the interests of all

common equity holders in LightSquared Inc., including Harbinger Capital

Partners LLC (“Harbinger”) and Ahuja. Harbinger received value in the

reorganization not for its common equity interests, but rather for its secured

claim against LightSquared Inc. and the causes of action against third parties that

it agreed to attribute to reorganized LightSquared. Thus, the Plan “provide[d]

the same treatment for each claim or interest of [the common equity holder]

class” with respect to LightSquared Inc. common equity holders, comporting

with the equal treatment rule. 11 U.S.C. § 1123(a)(4).

We have considered Ahuja’s remaining arguments and find them to be

without merit. Accordingly, we AFFIRM the judgment of the district court.

FOR THE COURT:

Catherine O’Hagan Wolfe, Clerk