Opinion ID: 223265
Heading Depth: 1
Heading Rank: 3

Heading: ASARCO's Bankruptcy Proceeding

Text: In the bankruptcy proceeding, ASARCO and the Parent submitted competing plans of reorganization under Chapter 11. ASARCO's plan proposed to be partially funded with the SCC Judgment, which was the most substantial asset of the debtor's estate. Given the difficulty of valuing the SCC Judgment, ASARCO decided to sell the asset via a two-part bid solicitation process, subject to a topping auction. Such a process, ASARCO believed, would maximize the value of the SCC Judgment. ASARCO engaged the services of its financial advisor, Barclays Capital Inc., to help identify potential bidders for all or a portion of the SCC Judgment. In July 2009, while Barclays was conducting the first phase of the bid solicitation process, ASARCO moved the bankruptcy court for the order at the heart of this dispute. ASARCO requested authorization to reimburse certain expenses incurred by bidders selected to proceed to the second phase of the bid process. In its motion, ASARCO explained that after consulting with its advisors, it had decided to invite a select group of bidders to proceed to the second phase of the process. During the second phase, the bidders would have the opportunity to conduct additional due diligence relating to the SCC Judgment. That due diligence would entail highly sophisticated legal analysisand thus substantial legal costsand ASARCO believed it necessary to provide bidders with an incentive to undertake this investment. ASARCO thus sought authorization under section 363 of the Bankruptcy Code to reimburse qualified bidders for their due diligence expenses. On July 29, 2009, after a hearing, the bankruptcy court issued an order granting ASARCO's motion (the Reimbursement Order). The bankruptcy court concluded that ASARCO had demonstrated a compelling and sound business justification for the authorization requested. The Parent appealed the Reimbursement Order to the district court and moved for a stay pending appeal. The Order was stayed from August 11, 2009. By the time the district court resolved the appeal a year later, the parties' positions had materially changed due to the debtor's reorganization. The district court, adopting the bankruptcy court's recommendation, confirmed the Parent's plan of reorganization in November 2009. [4] Pursuant to that plan, the Parent regained control of ASARCO. The plan also provided for the Parent's release from the SCC Judgment upon the plan's effective date. The Parent's plan took effect on December 9, 2009. Shortly thereafter, the Parent filed a Rule 60(b) motion in the district court for relief from the SCC Judgment, to which ASARCO agreed. [5] In January 2010, the district court entered an order relieving the Parent of any obligations under the SCC Judgment. After the Parent's plan became effective, Elliott Management and the Baupost Group (the Intervenors) moved to intervene in the Parent's appeal of the Reimbursement Order. The Intervenors are beneficiaries of the Reimbursement Order that hold claims for due diligence expenses and fees incurred before the Order was stayed. The district court granted the Intervenors' motion. [6] In August 2010, after a hearing, the district court affirmed the bankruptcy court's Reimbursement Order. [7] This appeal followed.