2010 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

1-15-2010

In re: Reliant Energy Channel

Precedential or Non-Precedential: Precedential

Docket No. 09-2074

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PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

_____________

No. 09-2074

 

 

In re: RELIANT ENERGY CHANNELVIEW LP, et al., 

Debtor

KELSON CHANNELVIEW LLC, f/k/a

Kelson Energy IV, LLC,

Appellant

 

On Appeal from the United States District Court

for the District of Delaware

(D.C. Civ. No. 08-00409)

Honorable Joseph J. Farnan, Jr., District Judge

 

Argued November 3, 2009

 

BEFORE: SCIRICA, Chief Judge, and JORDAN and 

GREENBERG, Circuit Judges

(Filed: January 15, 2010)
2

 

Andrew K. Glenn (argued)

Kasowitz, Benson, Torres & Friedman

1633 Broadway

21st Floor

New York, NY 10019

Garvan F. McDaniel

Bifferato Gentilotti

800 North King Street

P.O. Box 2165

Wilmington, DE 19801

 Attorneys for Appellant

Cory D. Kandestin

Robert J. Stearn, Jr. (argued)

Richards, Layton & Finger

One Rodney Square

920 North King Street

Wilmington, DE 19899

 Attorneys for Appellees

 

OPINION OF THE COURT

 

GREENBERG, Circuit Judge.
The actual purchaser was Fortistar’s affiliate GIM Channelview 1

Corporation LLC, but for ease of reference we will refer to the

purchaser as Fortistar.

3

I. INTRODUCTION

This matter comes on before this Court on appeal from

an order of the District Court entered on March 31, 2009,

affirming March 18, 2008 and June 9, 2008 orders of the

Bankruptcy Court in proceedings arising from the sale of a

major asset of the Debtors’ estate in this bankruptcy

proceeding. The Bankruptcy Court denied the request of an

unsuccessful bidder for the asset, Kelson Channelview LLC

(“Kelson”), for disbursement of administrative expenses in

the form of a break-up fee from the estate in the March 18,

2008 order, and then in the June 9, 2008 order approved the

sale of the asset to Fortistar, LLC. Kelson appealed but the 1

District Court affirmed the orders of the Bankruptcy Court.

In re Reliant Energy Channelview LP, 403 B.R. 308 (D. Del.

2009). We will affirm the order of the District Court and, in

effect, the order of the Bankruptcy Court of March 18, 2008. 

II. BACKGROUND

The Debtors in the Chapter 11 proceedings, Reliant

Energy Channelview LP and Reliant Energy Services

Channelview LLC (together, the “Debtors”), decided to sell
In its brief Kelson characterizes the sale as being of 2

“substantially all of the Debtors’ assets.” Appellant’s br. at 2.

4

their largest asset, a power plant in Channelview, Texas.2

With the assistance of consultants with expertise in the energy

industry, the Debtors contacted 115 potentially interested

purchasers. This substantial effort was fruitful for 38

potential bidders executed confidentiality agreements with

respect to a possible purchase, and 24 went further and

conducted due diligence on the purchase. Ultimately 12,

including Fortistar, made bids for the plant. Many of the bids,

however, were contingent on the bidder obtaining financing, a

difficult undertaking in the then prevailing business

environment. Kelson, however, submitted a complete bid of

$468 million not contingent on financing and was selected as

the winning bidder. Consequently, Kelson entered into an

Asset Purchase Agreement (“APA”) with the Debtors for the

power plant.

Inasmuch as the Debtors were in bankruptcy,

consummation of the APA required the Bankruptcy Court’s

approval. Consequently, the APA provided that the Debtors

immediately would seek an order from the Bankruptcy Court

allowing the sale. Moreover, the Debtors agreed that they

would seek an order approving certain “bid protections and

procedures” for Kelson’s benefit if the Court determined that

there should be an auction for the plant before its sale. These

proposed bid protections and procedures provided that

Debtors could not accept a competing bid unless it exceeded

Kelson’s bid by $5 million. Furthermore, the proposed bid

protections and procedures provided that if a competing bid
The objector’s claimed status as an equity holder was disputed 3

at the time but we are not concerned with that dispute. We

emphasize, however, that not all of the interested parties

supported the original proposed sale, and the Bankruptcy Court,

we think quite appropriately, acted with caution in considering

this very substantial matter. 

5

was accepted, Kelson would be entitled to a $15 million

break-up fee, about three percent of its bid, as well as

reimbursement for expenses it incurred in the sale process up

to $2 million. The practice of paying a break-up fee to an

initial bidder for assets has developed in bankruptcy and other

contexts to compensate the bidder for memorializing its

interest in acquiring the asset, an interest which sometimes, as

we will explain below, can be useful to the asset’s seller even

if the bid is not accepted. 

As the APA required, the Debtors requested that the

Bankruptcy Court authorize the sale of the plant to Kelson

without conducting an auction. In that motion, the Debtors

asserted that the Kelson bid “represents the highest and best

offer available for the Debtors’ assets and that further

marketing of the assets will not result in a higher purchase

price.” App. at 198. The Bankruptcy Court delayed its

decision on this motion when one of the Debtors’ equity

holders objected to the fast pace of the transaction.3

Ultimately, however, the Court would not approve the sale to

Kelson without an auction for the plant.

When the Court delayed the approval of the sale, the

Debtors, with the support of their Creditors, asked the Court
6

to authorize the bid protection measures that we have

described. However, Fortistar, which previously had

submitted a losing contingent bid, objected to this request and

asserted that it was willing to enter a “higher and better” bid

at an auction, but the $15 million break-up fee along with the

$2 million reimbursement for expenses would be a deterrent

to it doing so.

The Bankruptcy Court held a hearing to consider

authorization of the bid protections at which, among others,

William Hardie, the consultant to the Debtors in charge of

shopping the assets, and Andrew Johannensen, an officer of

the Debtors, testified. Hardie described the process the

Debtors had followed in seeking a buyer and explained that

the Debtors dropped Fortistar from consideration as a

purchaser when it lost its financing. At that point, the Debtors

and their creditors decided to sign the APA with Kelson as its

consummation would result in the full compensation of all the

Debtors’ creditors, and Kelson’s bid was for a fair price and

was financed fully. 

Hardie thought that by reason of all the work that had

been done in seeking bidders there was no need for an auction

as the Debtors already had obtained the best price for the

plant. Moreover, Hardie explained that in view of the

advantages of the Kelson bid the Debtors were willing to seek

the bid protections Kelson sought and he believed that Kelson

would not have agreed to make its bid unless the Debtors

agreed to seek the bid protections. Finally, Hardie thought

that the Kelson APA benefitted the Debtor’s estate because it

established a floor price and terms for the sale of the assets.

On cross-examination Hardie acknowledged, however, that
Of course, the text of the APA and not Hardie’s opinion of its 4

meaning governs its construction and interpretation and the

parties’ obligations under it.

7

Kelson would be bound by its offer even if the Court rejected

the bid protections, though he suggested that Kelson would

find a way to avoid its commitment if it desired to do so.4

Johannensen’s testimony was similar to that of Hardie.

The Bankruptcy Court nevertheless declined to

approve the sale of the plant without an auction and, in a

ruling from the bench, said that in deciding whether to

approve the bid protections it had to consider whether they

would enhance or chill bidding. In particular, the Court

believed that it was required to decide whether the proposed

protections would benefit the estate:

It’s hard generally to consider how bid

protections or break-up fees protect the estate.

I’ve heard the arguments and have approved

them in the case where the . . . parties have

convinced me that it is the only way to get other

bidders, any bidder to the table. But I’m not

convinced in this case that that is the case.

There are other bidders, at least one other

bidder. And I have in the past denied break-up

fees in circumstances where another party had
Kelson argues that this last sentence created a per se rule that 5

break-up fees are not available when there is another bidder, but

we do not believe that the Bankruptcy Court was applying any

such rule. Rather, we understand the experienced Court merely

to be saying that as a factual matter break-up fees often are not

needed when there are bidders for an asset other than the initial

bidder.

8

appeared and expressed an intention to bid at

the auction.5

App. at 589.

Ultimately the Bankruptcy Court entered its March 18,

2008 order approving the $5 million “overbid” requirement

which required that bids competing with Kelson’s bid must

exceed it by $5 million. In addition, the Court approved the

reimbursement to Kelson for expenses it incurred in the

transaction up to $2 million. Finally, however, in the

provision of its order at issue on this appeal, the Court refused

to authorize payment of the $15 million break-up fee. 

Kelson did not participate in the subsequent auction,

and, in fact, argued that its offer was no longer available.

Fortistar, however, submitted the winning, now fully financed

bid, which topped Kelson’s bid by $32 million. In accordance

with the Bankruptcy Court’s decision, the Debtors did not pay
There was an agreement that Kelson’s expenses were 6

$1,210,257.

9

Kelson the $15 million break-up fee, although they did pay

Kelson for its expenses. 

6

After the Bankruptcy Court entered an order on June 9,

2008, approving the sale to Fortistar, Kelson appealed to the

District Court from the order denying the payment of the $15

million break-up fee, arguing that the Bankruptcy Court

abused its discretion by denying Kelson’s request for the fee.

Kelson also argued that it was a stalking-horse bidder entitled

to a break-up fee as a matter of fundamental fairness and

contended that the Debtors were estopped from opposing its

appeal because they supported its request for the break-up fee

in the Bankruptcy Court. The District Court rejected Kelson’s

arguments and affirmed the March 18, 2008 and June 9, 2008

orders of the Bankruptcy Court and thus the District Court did

not allow the payment of the break-up fee. Kelson then filed

this appeal of the District Court’s order to the extent that it

affirmed the Bankruptcy Court’s order of March 18, 2008.

III. JURISDICTION AND STANDARD OF REVIEW

The Bankruptcy Court had initial jurisdiction over the

matter now before us as it concerned the administration of the

estate. 28 U.S.C. § 157(b). The District Court had

jurisdiction to review Kelson’s appeal under 28 U.S.C. §
In their brief Debtors contend that Kelson did not appeal to the 7

District Court from the June 9, 2008 order approving the sale.

Nevertheless, as we have indicated, the District Court affirmed

both the March 18, 2008 and June 9, 2008 orders. The disputed

scope of the District Court’s purely appellate jurisdiction,

however, is not significant to us because Kelson asks only that

we “issue an order granting [it] full payment” of the break-up

fee, appellant’s br. at 33, a matter over which the District Court

had jurisdiction and on which it ruled, and over which we now

have jurisdiction. Accordingly, we do not address any other

issue.

There are no disputes of what may be characterized as the 8

historical facts in this case.

10

158(a), and we have jurisdiction to review the District 7

Court’s final decision under 28 U.S.C. § 158(d)(1).

We exercise plenary review over the decision of the

District Court sitting as an appellate court in this bankruptcy

proceeding and consequently we review the ruling of the

Bankruptcy Court. See Lowenschuss v. Resorts Int’l, Inc. (In

re Resorts Int’l, Inc.), 181 F.3d 505, 509 (3d Cir. 1999). We

review the Bankruptcy Court’s legal determinations de novo,

its factual determinations for clear error, and its decision

denying the break-up fee on an abuse of discretion standard.

See Interface Group-Nevada, Inc. v. Trans World Airlines,

Inc. (In re Trans World Airlines, Inc.), 145 F.3d 124, 131 (3d

Cir. 1998).8
11

IV. DISCUSSION

A. The O’Brien Standard

In Calpine Corp. v. O’Brien Env’t Energy, Inc. (In re

O’Brien Env’t Energy, Inc.), 181 F.3d 527 (3d Cir. 1999)

(“O’Brien”), we set forth the controlling legal principles

applicable on this appeal. In O’Brien, the debtor, after

considering bids from several interested buyers for certain of

its assets, entered into an asset purchase agreement with

Calpine Corporation, which conditioned its bid on the parties’

ability to secure Bankruptcy Court approval of a $2 million

break-up fee. The debtor, supported by many of its creditors,

sought approval for the fee from the Bankruptcy Court.

Nevertheless, the Court denied the application, stating that a

break-up fee would complicate or even chill the bidding

process. However, the Court gave Calpine permission to

renew its application after an auction for the sale of the assets.

Notwithstanding Calpine’s insistence that it would not

make an offer without the assurance of a provision for a

break-up fee, it did enter the bidding process. After a

different bidder made the best offer, Calpine renewed its

request for a break-up fee, but the Court denied the request

after an evidentiary hearing. Calpine appealed and, after the

District Court affirmed, Calpine appealed to our Court.

Calpine argued to us that it was seeking the fee under

“applicable case law,” but we rejected this contention. We

held that courts do not have the authority to create new ways

to authorize the payment of fees from a bankruptcy estate, and
12

the methods of recovering fees from an estate are limited to

the procedures established by the Bankruptcy Code. We

concluded that a bidder must seek a break-up fee under 11

U.S.C. § 503(b), which, so far as germane here, permits

payment of post-petition administrative expenses for the

“actual, necessary costs and expenses of preserving the

estate.” We also held that there was no “compelling

justification for treating an application for a break-up fee and

expenses under § 503(b) differently from other applications

for administrative expenses under the same provision.”

O’Brien, 181 F.3d at 535. 

Therefore, we indicated that in considering requests for

break-up fees, we would apply the general standard used for

all administrative expenses—“the allowability of break-up

fees, like that of other administrative expenses, depends upon

the requesting party’s ability to show that the fees were

actually necessary to preserve the value of the estate.” Id.

Focusing specifically on break-up fees, we noted that it was

permissible to offer a break-up fee and reimbursement for

expenses to induce an initial bid, provided the allowance of

the fee does not give an advantage to a favored purchaser over

other bidders by increasing the cost of acquisition. We also

indicated that a break-up fee is not “necessary to preserve the

value of the estate” when the bidder would have bid even

without the break-up fee. Id. (citing Bruce A. Markell, The

Case Against Breakup Fees in Bankruptcy, 66 Am. Bankr.

L.J. 349, 359 (1992)). 

Applying this standard to the facts in O’Brien, we

found that Calpine would have made its bid even without the

assurance of a break-up fee, as it indeed did. For this reason,
In its brief Kelson argues that the “APA was necessary to 9

preserve the value of the estate, as it enabled the Debtors to

resolve a dispute with the pre-petition secured lenders with

respect to the use of cash collateral.” Appellant’s br. at 19.

While we do not doubt that a sale to Kelson would have

resolved the cash collateral dispute inasmuch as all the Debtors’

creditors were to be paid in full from the sale proceeds, the issue

before us is quite different from the need to placate the Debtors’

creditors, as we are concerned with whether the $15 million

break-up fee was necessary to preserve the value of the estate,

a matter relating to Kelson’s bid rather than to the consequences

of a sale of the plant such as the satisfaction of the Debtor’s

creditors. As we explain below, Kelson entered into the APA

13

among others, we found that an award of a break-up fee was

not necessary to preserve the value of the estate and we

affirmed the order of the District Court and thus the order of

the Bankruptcy Court denying allowance of the fee. 

B. Application of O’Brien To This Case

Under O’Brien, we must decide whether an award of a

break-up fee was necessary to preserve the value of the

Debtors’ estate. In this regard, we recognize that it could be

argued that in either or both of two ways a break-up fee could

have preserved the value of the estate. First, the opportunity

to obtain a break-up fee could have induced Kelson to make

its bid before the Bankruptcy Court ordered the auction, and

second, the provision for a break-up fee may have been

necessary to induce Kelson to adhere to its bid after the Court

ordered the conducting of the auction.9
without the assurance that it would receive a break-up fee if it

was unable to acquire the plant.

In this case, Kelson was compensated fully for its first-bid 10

expenses when the Bankruptcy Court awarded it $1,210,257 for

that purpose.

14

1. Was a break-up fee needed to induce the

first bid?

Kelson’s bid undoubtedly provided a benefit to the

estate by establishing a minimum price and a complete set of

offer terms and, in fact, the Bankruptcy Court required that

any competing bid exceed Kelson’s bid by at least $5 million.

Indeed, it is plausible to believe that an initial bid, ordinarily

or perhaps even always, will provide a benefit to an estate

because it will establish a floor price for the assets to be sold.

But we have to decide a different question, i.e., was an award

of a break-up fee necessary to produce this benefit and

preserve the value of the estate?

We recognize that the first bidder in a bankruptcy sale

necessarily takes a risk at least to the extent of investing the

time, money and energy needed to produce its bid.10

Nevertheless, while we understand that the first bidder may be

motivated in part to submit its bid by the possibility that it

will receive a break-up fee, it does not follow from that

motivation that the bidder will withdraw its bid, pass up on

the opportunity to acquire the asset to be sold, and nullify its

work in preparing its bid if a court, when ordering that there

be an auction of assets, declines to authorize a break-up fee to
15

be paid to the initial bidder. Surely O’Brien makes that clear

because even though Calpine had made its bid contingent on

the award of a break-up fee, it competed at the auction after

the Bankruptcy Court rejected the request for a break-up fee. 

Here, however, Kelson argues that the provision of a

break-up fee was necessary to entice it to bid, but the facts do

not support this argument. We are satisfied that it is clear

beyond doubt that Kelson did not condition its bid on the

presence of a provision for a break-up fee, although it did

condition the bid on the Debtors’ promise to seek authority to

pay it such a fee. Thus, section 8.1(d) of the APA provided

that “Sellers shall . . . file a bidding procedures motion with

the Bankruptcy Court . . . seeking the entry of an order

approving the bid protections.” App. at 288 (emphasis

added). These bid protections included the break-up fee.

Accordingly, there is no escape from the fact that Kelson did

make its bid without the assurance of a break-up fee, and this

fact destroys Kelson’s argument that the fee was needed to
In its brief Kelson asserts that “the Debtors improperly claim 11

that they only had an obligation to file a motion seeking

approval of the Bid Protections and the Break-Up Fee.

According to the Debtors, this means that the Break-up Fee was

always ‘unnecessary,’ thus making this contractual obligation

illusory.” Appellant’s br. at 5. Kelson argues that under New

York law which controls the interpretation of the APA “a

contract cannot be interpreted to create an illusory obligation.”

Id. We reject this argument because there was nothing illusory

about the Debtors’ obligation to seek authority for a break-up

fee as they did. Kelson knew or should have known that the

Debtors could urge the Bankruptcy Court to allow the fee but

they could not command it to do so. Thus, Kelson’s contention

in its brief that the “Debtors were required to obtain approval

[of] the Break-Up Fee, as a condition to Kelson’s bid,” id. at 25

(emphasis added), is plainly wrong.

16

induce it to bid. Rather, the mere possibility of the payment 11

of a break-up fee was sufficient for that purpose.

2. Was a break-up fee needed to preserve

Kelson’s bid?

The record suggests that although an assurance of a

break-up fee may not have been needed to induce Kelson’s

bid, it nevertheless could have been useful to assure that

Kelson adhered to its bid rather than abandoning its attempt to

purchase the plant in the event that the Bankruptcy Court

required an auction for its sale. A break-up fee certainly

provides a benefit to an estate if a bidder remains committed

to a purchase, though, as we have explained, we see no reason
17

to believe that bidders who already have made a full and

complete bid necessarily will abandon their efforts to obtain

an asset without an assurance of a break-up fee. In this case,

the Bankruptcy Court believed that the provision for the fee

would deter other possible purchasers from bidding for the

plant and would outweigh any possible benefit achieved for

the estate by keeping Kelson committed to the purchase

through the provision for the break-up fee. 

Clearly, the Bankruptcy Court was faced with a

difficult choice. If the Court denied the break-up fee, then

Kelson might abandon the purchase, as it supposedly did. If

another suitable bid had not materialized and Kelson had

walked away permanently from the purchase, the estate would

have been harmed severely by the denial of a break-up fee.

To avoid this result, the Court could have granted a break-up

fee to secure Kelson’s existing bid. Nevertheless, the Court

decided that a $15 million break-up fee was not necessary for

the protection of the estate. This decision, which we view

from the Court’s perspective on March 18, 2008, was justified

by (1) Fortistar’s assertion that it planned to continue bidding,

(2) the binding language of the APA, and (3) the logical belief

that Kelson would not abandon a fully negotiated agreement

if no other bidder materialized. Though we do not decide the

case on the basis of our knowledge of what happened after the

Court denied the fee, as we decide the case on the basis of the

record as of March 18, 2008, when the order from which

Kelson appealed to the District Court was entered, there is no

escape from the fact that the Bankruptcy Court’s decision was

shown to be correct when Fortistar placed a substantially

higher bid for the assets. 
18

3. Conclusion

We cannot say that the Bankruptcy Court abused its

discretion in its application of the O’Brien standard. Though

the allowance of a break-up fee might have benefitted the

estate, Kelson made its bid before the auction knowing that it

might not receive a break-up fee, and a retroactive grant of a

break-up fee could not have induced a bid that Kelson already

had made. Though, as we have made clear, the estate might

have benefitted if on March 18, 2008, the Bankruptcy Court

had provided for a break-up fee to secure Kelson’s adherence

to its earlier bid, the Court found that the potential harm to the

estate that a break-up fee would cause by deterring other

bidders from entering the bid process outweighed that benefit.

We cannot say that the Bankruptcy Court abused its discretion

in reaching its result. 

C. Application of the Business Judgment Rule

Instead of O’Brien

Kelson bases a substantial portion of its argument on

the circumstance that none of the Debtors’ creditors or equity

holders objected to its request for a break-up fee. Kelson

points out that the business judgment rule would have been

applied to the Debtors’ decision to support the award of a

break-up fee if the Debtors had not been in bankruptcy. We

agree that the Bankruptcy Court should not lightly dismiss

such a consensus among the creditors, but we are not willing

to conclude that the presence of unanimity among creditors

should require the Court to decide the matter through the

application of the business judgment rule. Clearly, section

503(b) does not give the Bankruptcy Court the authority to
Recently in McKenna v. Philadelphia, 582 F.3d 447, 459 n.13 12

(3d Cir. 2009), in considering an application for attorney’s fees,

we pointed out that “it should not be overlooked that the

awarding of an attorney’s fee is a judicial action and, regardless

of the parties’ indifference to it, a court need not lend its

imprimatur to an inappropriate order merely because there was

no objection to its entry.” The same principle applies to a

request for administrative expenses in the form of a break-up fee

under section 503(b).

We hasten to note that our comment in O’Brien about the 13

applicability of the business judgment rule in a bankruptcy case

was limited to the circumstance of a party seeking an alternative

to section 503(b) as a basis for awarding expenses from the

bankruptcy estate. We could not have meant then, and do not

mean now, that the business judgment rule is irrelevant when a

corporate governance dispute arises in a bankruptcy setting.

Indeed, more recently, in an adversary action brought in

connection with a bankruptcy and in which a plaintiff

challenged the actions of corporate fiduciaries, we recognized

19

award fees solely because there is no objection to them from a

party-in-interest. That section requires that for fees to be

awarded they must be part of “the actual, necessary costs and

expenses of preserving the estate,” and does not suggest that

that standard is met merely because there is no objection to

the application for the fees. Furthermore, the role of the 12

business judgment rule is of limited use on this appeal

because in O’Brien we stated that “we conclude that the

business judgment rule should not be applied as such in the

bankruptcy context.” 181 F.3d at 535.13
that the plaintiff was required to “plead around the business

judgment rule.” In re Tower Air, Inc., 416 F.3d 229, 238 (3d

Cir. 2005).

In its brief Kelson elevates its fundamental fairness argument 14

to the level of being a “doctrine.”

20

In declining to apply the business judgment rule we

have not overlooked Kelson’s contention that we should not

consider O’Brien’s rejection of the business judgment rule to

be controlling in this case for the Debtors are solvent and the

“sole affected shareholder has consented to the fee.”

Appellant’s br. at 14-15 n.2. We reject the contention that

O’Brien should not apply because, in providing the

circumstances in which a court may award fees, section

503(b) does not make a distinction depending on the solvency

of the debtor. We cannot rewrite that section to accommodate

Kelson.

D. Kelson’s “Fundamental Fairness” and Estoppel

Arguments

In the District Court, Kelson argued for the first time

that it was entitled to a break-up fee as a matter of

“fundamental fairness,” which Kelson interprets as a type of

unjust enrichment claim. But Kelson did not raise this claim 14

in the Bankruptcy Court, and we will not consider new claims

for the first time on appeal. Singleton v. Wulff, 428 U.S. 106,

120, 96 S.Ct. 2868, 2877 (1976). We are aware that Kelson

argues that it did raise its break-up fee claim in Bankruptcy

Court and that it is simply asserting a different basis for the
21

same claim. See Yee v. City of Escondido, 503 U.S. 519,

534-37, 112 S.Ct. 1522, 1532-33 (1992) (permitting new

argument in support of same claim). But we disagree with its

view of the record for a break-up fee under section 503(b) is

clearly a statutory claim, and a claim for a break-up fee as a

matter of “fundamental fairness” is a claim that can be

predicated only on the common law or a principle of equity.

These statutory and common law or equitable claims, though

seeking the same relief, are discrete, rather than being

different arguments advancing the same claim. See B&T

Masonry Constr. Co. v. Pub. Ser. Mut. Ins. Co., 382 F.3d 36,

40–41 (1st Cir. 2004) (same distinction addressed). 

Kelson also argues that the Debtors are estopped from

opposing its appeal because they supported the request for a

break-up fee in Bankruptcy Court. But debtors-in-possession

have a fiduciary duty to maximize the value of the estate,

Official Comm. of Unsecured Creditors of Cybergenics Corp.

v. Chinery, 330 F.3d 548, 573 (3d Cir. 2003), and the Debtors

here argue convincingly that if they adhered to their earlier

position in the face of the changed circumstances they would

harm the estate and violate their fiduciary duty. Overall, we

are satisfied that the Debtors’ opposition to Kelson’s appeal is

not unconscionable, does not undermine the integrity of the

judicial system, and is not made in bad faith. Therefore, we

reject Kelson’s estoppel arguments. In any event, even if we

disregarded the Debtor’s arguments and entertained Kelson’s

appeal on an ex parte basis, we would reach the same result

that we reach today. See supra note 12.
22

V. CONCLUSION

The Bankruptcy Court did not abuse its discretion

when it concluded that an award of a break-up fee was not

necessary to preserve the value of the estate and accordingly,

we will affirm the District Court’s order of March 31, 2009,

to the extent that it affirmed the order of the Bankruptcy

Court of March 18, 2008, denying authorization to pay the

break-up fee.