Court Opinion

ID: 4511140
Source: CourtListenerOpinion
Date Created: 2020-02-28 01:00:23.708546+00
Date Added: 2024-06-11T12:15:10.757897
License: Public Domain

Case: 18-40557          Document: 00515324756         Page: 1   Date Filed: 02/27/2020

           IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT
                                                                          United States Court of Appeals
                                                                                   Fifth Circuit

                                            No. 18-40557
                                                                                 FILED
                                                                          February 27, 2020
                                                                            Lyle W. Cayce
In the Matter Of:                                                                Clerk

SHERWIN ALUMINA COMPANY, L.L.C.;
SHERWIN PIPELINE, INC.,

                 Debtors
---------------------------------------------------------

PORT OF CORPUS CHRISTI AUTHORITY,

                 Appellant

v.

SHERWIN ALUMINA COMPANY, L.L.C.; SHERWIN PIPELINE, INC.,

                Appellees

                      Appeal from the United States District Court
                           for the Southern District of Texas

        ON PETITION FOR REHEARING AND REHEARING EN BANC
Before HIGGINBOTHAM, SMITH, and HIGGINSON, Circuit Judges.
PATRICK E. HIGGINBOTHAM, Circuit Judge:
        The petitions for panel rehearing and rehearing en banc are denied. This
opinion is substituted in place of the prior opinion, In re Sherwin Alumina Co.,
L.L.C., 932 F.3d 404 (5th Cir. 2019).
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                                   No. 18-40557
      A bankruptcy sale extinguished an easement of the Port of Corpus
Christi Authority, an arm of the State of Texas. The Port initiated an adversary
proceeding against the debtors, Sherwin Alumina Company and Sherwin
Pipeline Incorporated, seeking to invalidate the sale and regain its easement.
The bankruptcy court rejected the Port’s sovereign immunity and fraud claims,
and the district court affirmed. On appeal from the district court, we find no
Eleventh Amendment violation or basis for a claim of fraud under 11 U.S.C.
Section 1144. We affirm. Our holdings should not be regarded as a disposition
of the due process claim that remains pending below.
                                         I.
      In 1998, the Port of Corpus Christi Authority purchased an 1,100 acre
parcel near Corpus Christi Bay in San Patricio County, Texas, adjacent to land
owned by the Sherwin Alumina Company, together with an easement granting
use and access to a private roadway on the Company’s land known as La
Quinta Road. Fifteen years later, in 2013, the Port and Sherwin Alumina
Company agreed to modify the easement, giving the Port permanent non-
exclusive access along a specific portion of the road and across an adjoining
drainage ditch. 1 The easement provided the primary means of commercial
access to the Port’s parcel.
      Three years later, on January 11, 2016, Sherwin Alumina Company and
Sherwin Pipeline Incorporated (collectively “Sherwin”) filed voluntary
petitions for Chapter 11 relief in the Bankruptcy Court for the Southern
District of Texas. Sherwin also filed an initial Joint Plan for reorganization,
proposing in relevant part to sell real property in the bankruptcy estate “free
and clear of all Liens, Claims, charges and other encumbrances” under Section
363(f) of the Bankruptcy Code.

      1In 2015, the Port released broader rights it held from the unmodified pre-2013
easement.
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                                  No. 18-40557
      The bankruptcy court approved bidding procedures. The Port bid for a
part of the bankruptcy estate, a port facility that did not include the La Quinta
Road parcel. The Port conditioned its bid on “an access easement . . . over
Seller’s private roadway known as La Quinta Road . . . if Buyer has been
unable to obtain such an easement before the Closing.” On April 21, 2016, the
Port and other bidders participated in an auction from which Corpus Christi
Alumina emerged as the successful bidder.
      In the following months Sherwin filed modified plans and associated
purchase agreements in which encumbrances other than those deemed
“permitted” would be stripped off the estate’s property in the proposed sale, as
authorized under Section 363(f) of the Bankruptcy Code. Permitted
encumbrances would be defined in a future proposed confirmation order. None
of these documents suggested that the Port’s easement would be a permitted
encumbrance.
      Sherwin filed a final proposed confirmation order in the early hours of
February 17, 2017, the day of the confirmation hearing. As with previous
filings, the proposed confirmation order provided that the buyer would receive
the property free and clear of all encumbrances, subject to a limited exception
for permitted encumbrances. In the proposed order, Sherwin defined permitted
encumbrances to encompass a number of specific servitudes—not including the
Port’s easement—as well as “easements or encumbrances . . . recorded prior to
July 1, 2009.” The definition was not redlined or otherwise identified as a
modification. The Port was served with the proposed confirmation order. Later
that day, the bankruptcy court held a hearing on the proposed plan and
confirmation order, which the Port “attended” telephonically. During the
hearing, Sherwin’s counsel stated that the proposed order submitted earlier
that day included “extensive modifications,” but that Sherwin “d[id]n’t believe
that they are material in any real way.” The court entered the order without

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                                       No. 18-40557
objection, confirming Sherwin’s modified Plan. The Plan went into effect on
February 27, 2017, on which date Sherwin sold its real property to Corpus
Christi Alumina. On March 3, 2017, the Confirmation Order became final and
non-appealable.
       On March 31, 2017, Corpus Christi Alumina sold the land encompassing
La Quinta Road to Cheniere Land Holdings LLC. Cheniere notified the Port
that its easement had been extinguished by the sale of the land. As the time to
appeal the confirmation order had expired, the Port filed an adversary
complaint with the bankruptcy court, collaterally attacking the confirmation
order as having been procured by fraud, barred by the state’s sovereign
immunity, and a denial of due process for want of notice. The bankruptcy court
dismissed the claims of fraud and sovereign immunity without leave to amend
but denied dismissal of the due process claim. The Port appealed the dismissals
and denial of leave to amend to the district court, which affirmed. This appeal
followed.
                                             II.
                                             A.
       We have jurisdiction to hear the appeal of the district court’s dismissals
of the Eleventh Amendment and fraud claims. 2 We review cases originating in
bankruptcy “perform[ing] the same function, as did the district court: [f]act
findings of the bankruptcy court are reviewed under a clearly erroneous
standard and issues of law are reviewed de novo.” 3 At this stage, we take the
well-pleaded facts as true, viewing them in a light most favorable to the
plaintiff. 4 We review the denial of leave to amend for abuse of discretion. 5

       2 Puerto Rico Aqueduct & Sewer Auth. v. Metcalf & Eddy, Inc., 506 U.S. 139, 143–44
(1993); 28 U.S.C. § 158(d)(1).
       3 In re Soileau, 488 F.3d 302, 305 (5th Cir. 2007) (quoting Nationwide Mut. Ins. Co. v.

Berryman Prods., 159 F.3d 941, 943 (5th Cir. 1998) (emphasis omitted)).
       4 Matter of ATP Oil & Gas Corp., 888 F.3d 122, 125–26 (5th Cir. 2018).
       5 Lewis v. Fresne, 252 F.3d 352, 356 (5th Cir. 2010).

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                                           B.
      Under the Eleventh Amendment, federal courts lack jurisdiction over
“any suit in law or equity, commenced or prosecuted against one of the United
States by Citizens of another State, or by Citizens or Subjects of any Foreign
State,” 6 or the state’s own citizens. 7 “States, nonetheless, may still be bound by
some judicial actions without their consent,” 8 including a bankruptcy
proceeding. Congress has the power to establish “uniform Laws on the subject
of Bankruptcies throughout the United States.” 9 The Supreme Court has read
the Clause “to authorize limited subordination of state sovereign immunity in
the bankruptcy arena.” 10
      In Tennessee Student Assistance Corporation v. Hood, the Supreme
Court held that a bankruptcy court’s discharge of an individual’s debt to the
state of Tennessee did not violate the Eleventh Amendment. Debtor Pamela
Hood’s educational debts were guaranteed by and later assigned to the state of
Tennessee. 11 When Hood filed for bankruptcy and sought to have this debt
discharged in an adversary proceeding, Tennessee protested that it did not
consent to the proceeding, and that the bankruptcy court’s discharge would
violate the Eleventh Amendment. 12 The Supreme Court disagreed. It found
that the discharge proceeding was an exercise of the bankruptcy court’s in rem
jurisdiction over the debtor’s estate; the debtor sought no affirmative relief
against the state, and the proceeding did not subject the state to any coercive

      6  U.S. CONST. amend. XI.
      7  Tennessee Student Assistance Corp. v. Hood, 541 U.S. 440, 446 (2004) (citing Hans
v. Louisiana, 134 U.S. 1, 15 (1890)).
       8 Id.
       9 U.S. CONST. art. I, § 8, cl. 4.
       10 Cent. Virginia Cmty. Coll. v. Katz, 546 U.S. 356, 363 (2006).
       11 Hood, 541 U.S. at 444.
       12 Id. at 445.

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judicial process. 13 The federal court’s disposition of a bankruptcy estate within
which a state has interests, where the proceeding is principally in rem and
avoids coercive judicial process against the state, 14 does not implicate, let alone
violate, the Eleventh Amendment. 15
       Under Texas law, the Port’s easement is a non-possessory property
interest in Sherwin’s land. 16 That the servient land was within the bankruptcy
estate is not disputed. Exercising jurisdiction over the Sherwin estate, and
thus the servient land, the bankruptcy court approved a Section 363(f) sale
“free and clear” of encumbrances, including the Port’s La Quinta Road
easement. The bankruptcy court did not award affirmative relief nor deploy
coercive judicial process against the Port—it did not exercise in personam
jurisdiction over the state. 17
       The Port argues that even if the encumbered land was within the court’s
jurisdiction, the La Quinta Road easement was its property, and not part of
the bankruptcy estate, such that exercise of the bankruptcy court’s in rem

       13   Id. at 450; In re Soileau, 488 F.3d at 307 (“[A]n in rem bankruptcy proceeding
brought merely to obtain the discharge a debt or debts by determining the rights of various
creditors in a debtor’s estate—such as is brought here—in no way infringes the sovereignty
of a state as a creditor.”).
        14 Hood, 541 U.S. at 446 (analogizing to “in rem admiralty actions when the State is

not in possession of the property”).
        15 Id. at 451. Hood is consistent with the previous holdings of this court. In a pre-Hood

case, Texas v. Walker, we similarly held that a bankruptcy court’s discharge of a debt owed
to the State of Texas was not a suit against the state, and therefore did not violate the
Eleventh Amendment. 142 F.3d 813, 822 (5th Cir. 1998) (“Walker’s entitlement to assert his
discharge against the state’s claims invoked no Eleventh Amendment consequences. The
state never was hauled into federal court against its will in the bankruptcy.”).
        16 Barnhill v. Johnson, 503 U.S. 393, 398 (1992) (“In the absence of any controlling

federal law, ‘property’ and ‘interests in property’ are creatures of state law.”). The Port points
to Texas law under which an easement is compensable if condemned under the State’s
eminent domain power. City of Houston v. Northwood Mun. Util. Dist. No. 1, 73 S.W.3d 304,
310 (Tex. App. 2001); Houston Lighting & Power Co. v. State, 925 S.W.2d 312, 314 (Tex. App.
1996).
        17 Hood, 541 U.S. at 453 (“The issuance of process, nonetheless, is normally an

indignity to the sovereignty of a State because its purpose is to establish personal jurisdiction
over the State.”).
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                                         No. 18-40557
jurisdiction could not reach the easement. Hood instructs otherwise. For
purposes of the Eleventh Amendment, the Port’s easement is like Tennessee’s
debt claim against Pamela Hood’s estate: the state holds an interest burdening
the bankruptcy res. Hood holds that a bankruptcy court’s exercise of in rem
jurisdiction over the debtor’s estate can extinguish the state’s interest
burdening that res without implicating the Eleventh Amendment.
       Of course, there remain statutory restrictions on the extinguishment of
third parties’ interests in bankruptcy-estate property. Section 363(f) of the
Bankruptcy Code provides that the court may sell property in the bankruptcy
res free and clear of others’ interests, but only under certain limited
circumstances. 18 The Port argues that none of those circumstances was met in
the sale of the easement. However, this argument is foreclosed. As the Port
concedes, any Section 363(f) objection had to have been raised on direct appeal
of the confirmation order and cannot be raised in this collateral adversary
proceeding. We affirm the dismissal of the Port’s Eleventh Amendment claim.
                                                C.
       Under Section 1144 of the Bankruptcy Code, “[o]n request of a party in
interest at any time before 180 days after the date of the entry of the order of
confirmation, and after notice and a hearing, the court may revoke such order
if and only if such order was procured by fraud.” 19 The elements of a claim for
fraud are (1) that the debtor or proponent made a materially false
representation or omission to the court; (2) that the representation was made
with knowledge of its falsity or reckless disregard for the truth; (3) that the

       18  Those circumstances are that “(1) applicable non-bankruptcy law permits sale of
such property free and clear of such interest; (2) [the] entity [with the interest in the property]
consents; (3) [the entity’s] interest is a lien and the price at which such property is to be sold
is greater than the aggregate value of all liens on such property; (4) such interest is in bona
fide dispute; or (5) such entity could be compelled, in a legal or equitable proceeding, to accept
a money satisfaction of such interest.” 11 U.S.C. § 363(f).
        19 11 U.S.C. § 1144.

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representation was made to induce the court’s reliance; (4) that the court
actually relied upon the representation; and (5) the court entered the
confirmation order in reliance on the representation. 20 A claim for fraud in an
adversary proceeding must satisfy the heightened pleading requirements of
Federal Rule of Civil Procedure 9(b). 21 Under Rule 9(b) “[i]n alleging fraud or
mistake, a party must state with particularity the circumstances constituting
fraud or mistake.” 22
       We need not proceed beyond the first element, because the Port fails to
allege any intentional false representation. During the confirmation hearing,
Sherwin’s counsel described last-minute changes to the proposed order as
“extensive modifications” that were not “material in any real way.” The Port
contends this was a misrepresentation because Sherwin’s last-minute changes
“[f]or the first time . . . attempt[ed] to directly impact the Port’s easement
property rights”—in other words, the modifications sprang a trap on the Port,
isolating its easement for extinguishment, a material change that should have
been announced as such to the bankruptcy court. But Sherwin’s last-minute
modifications to the proposed confirmation order had no such effect on the
Port’s easement. The Port’s allegation that Sherwin’s last-minute changes for
the first time “stripp[ed] third party easement property rights” from its land is
inaccurate. From Sherwin’s initial bankruptcy filing, more than a year before
the confirmation hearing, the debtor proposed a sale in which “all property of

       20  In re Davis Petroleum Corp., 385 B.R. 892, 912 (Bankr. S.D. Tex. 2008).
       21  FED. R. BANKR. P. 7009; In re Fornesa, 2016 WL 2930459, at *3 (Bankr. S.D. Tex.
May 13, 2016) (“Rule 9(b), Fed. R. Civ. P., as made applicable by Bankruptcy Rule 7009,
requires that fraud be pled with particularity. The particularity requirement requires that
the pleading identify who, what, when, where, and how the alleged fraud was committed.”).
        22 FED. R. CIV. P. 9(b); U.S. ex rel. Thompson v. Columbia/HCA Healthcare Corp., 125
F.3d 899, 903 (5th Cir. 1997) (“At a minimum, Rule 9(b) requires that a plaintiff set forth the
who, what, when, where, and how of the alleged fraud.” (internal quotation marks and
citation omitted)).
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the Estates to be acquired by the Buyer . . . shall vest in the Buyer, free and
clear of all Liens, Claims, charges, and other encumbrances.”
      Under Texas law, an easement is a type of encumbrance. 23 From the
beginning, by the general terms of Sherwin’s proposed sale, the debtor
proposed a Section 363(f) sale that would extinguish the Port’s easement. The
Port’s actions indicate that it so understood the proposed sale: in its
unsuccessful bid for certain estate lands it also sought to preserve the La
Quinta Road easement, on the implicit understanding that, absent agreement
providing otherwise, its La Quinta Road easement would be extinguished
under the terms of the sale.
      Sherwin’s last-minute modifications to the plan carved out exceptions to
encumbrances on the estate lands to be extinguished in the sale, preserving a
number of other encumbrances, including those recorded before July 2009.
Debtors’ counsel’s description of the changes as not “material in any real way”
was not misleading because they were not changes at all with respect to the
Port’s easement. They did not affect the La Quinta Road easement, which
remained subject to the same general rule that it would be stripped in the
Section 363(f) sale as a “encumbrance” on the servient estate land. The Port’s
situation remained unchanged by the last-minute modifications. The Port does
not allege the first element of fraud. We affirm the dismissal of the Port’s fraud
claim. This conclusion does not undermine the Port’s ongoing claim of a denial
of due process.

      23 City of Beaumont v. Moore, 146 Tex. 46, 55 (1947) (defining an “encumbrance” as a
“burden on land, depreciative of its value, such as a lien, easement or servitude”).
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                                              D.
       A court should grant leave to amend freely when justice so requires. 24 It
follows that where amendment would be futile, the court need not grant the
plaintiff leave to amend. 25
       Here, the bankruptcy court dismissed the Port’s fraud claim with
prejudice, 26 finding “[i]t would be futile to allow an amendment to the
Complaint because there are no facts that could be plead[ed] to support” the
claim. This determination was no abuse of discretion. The Port’s fraud claim is
premised on an alleged misrepresentation made by Sherwin’s counsel
regarding modifications. The bankruptcy court determined the Port could
plead no additional fact to salvage this claim. The district court did not abuse
its discretion in denying the Port leave to amend.
                                             III.
       We AFFIRM the dismissals of the Port’s Eleventh Amendment and fraud
claims, and the denial of leave to amend the complaint.

       24  FED. R. CIV. P. 15(a).
       25  Jacobsen v. Osborne, 133 F.3d 315, 318 (5th Cir. 1998).
        26 The Port’s arguments are restricted to the issue of whether it was entitled to amend

its § 1144 fraud claim.
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EDITH H. JONES, Circuit Judge, joined by OWEN, Chief Judge, and ELROD,
WILLETT, HO, DUNCAN, ENGELHARDT, and OLDHAM, Circuit Judges,
dissenting from denial of en banc reconsideration:

       The panel opinion gives the misleading impression that this is just
another example of a bankruptcy claimant’s having missed a deadline, argued
the wrong issues (Eleventh Amendment immunity and 11 U.S.C. § 1144 fraud
in inducement of the plan), and lost its chance at sharing in the debtor’s
estate. Still, the panel notes that a due process claim asserted by the Port of
Corpus      Christi      Authority      remains       pending       in      the   bankruptcy
court. Moreover, the panel claims not to have placed a thumb on the scale of
adjudicating that claim.         Because half of the active judges disagree with the
panel’s dismissive attitude toward the due process claim, this decision was
nearly vacated for en banc reconsideration.
       I write to clarify the stakes at issue. An easement is a real property
interest protected by Texas law, 1 the Bankruptcy Code 2, and the Constitution.3
It cannot be “stripped” in bankruptcy court, if at all, without compensation or
compliance with finely balanced statutory procedures. What occurred in the
bankruptcy court, according to the Port’s pleadings, raises troubling due
process questions.
       The Port has maintained a road easement for decades over the debtor’s
parcel that is the Port’s sole access to its own property. For the first time, as

       1   See generally Marcus Cable Assocs. L.P. v. Krohn, 90 S.W.3d 697, 700 (Tex. 2002);
Redburn v. City of Victoria, 898 F.3d 486, 495 (5th Cir. 2018) (“Because the easement holder
is the dominant estate owner and the land burdened by the easement is the servient estate,
the property owner may not interfere with the easement holder’s right to use the servient
estate for the purposes of the easement.” (quoting Marcus Cable, 90 S.W.3d at 721)); Rahmati
v. AJBJK, L.L.P., No. 01–15–01936–CV, 2017 WL 4820336, at *4–5 (Tex. App.—Houston [1st
Dist.] 2017, no pet.) (“[T]he transfer [of title to the servient estate] automatically passes all
easements attached to the property, even if not expressly referenced in the instrument of
transfer.” (citing Shelton v. Kalbow, 489 S.W.3d 32, 46 & n.11 (Tex. App.—Houston [14th
Dist.] 2016, pet. denied)).
        2 11 U.S.C. § 363(f).
        3 See fn. 7, infra.

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far as research has uncovered, the bankruptcy court’s confirmation order
stripped the Port’s easement, a “dominant estate” in the debtor’s real property,
without payment of any kind, without the Port’s consent, and without
otherwise satisfying the conditions of 11 U.S.C. § 363(f) for sales “free and
clear” of “interests” in a debtor’s property. 4 The bankruptcy court was not
squarely informed of this dispossession, and the Port asserts that it did not
learn about it in time to object to the confirmation. In fact, when the
bankruptcy court dismissed the counts of the Port’s adversary proceeding that
are decided by the panel in this appeal, the court refused to dismiss the Port’s
due process claim, telling the parties,

              I’m looking at a pleading. I have somebody who says,
              not only did I not know, I couldn’t have known,
              practically….[T]hat’s,    effectively, the   [Port’s]
              argument: you gave me 300 pages, you hid a sentence
              and I couldn’t possibly have been expected to have
              found it and understood its implications…I do think
              there has been an awful lot of confusion with using
              defined terms inappropriately. That’s something we’ll
              ferret out.

        Contrary to the bankruptcy court’s wholesome openmindedness, the
panel opinion repeatedly implies that the Port could have/should have known
the debtor’s intentions to “extinguish” its easement, which the debtor allegedly
swept       into     its      documentation         under      the      generic       term
“encumbrance.” Although the facts have not been fully vetted, the Port’s
pleadings suggest quite a different story.            No less than ten lengthy draft
documents required for a proposed sale of the debtor’s property were filed in

        4 As the panel opinion notes, the Port contends that none of these conditions was
fulfilled. Sherwin hardly disputes this, on the sole basis that the Port “waived” compliance
with Section 363(f) by failing to object to the plan.
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the bankruptcy court over a period of months. 5 Several of these described
“Acquired Real Property” as including Easements, “other than the Excluded
Properties.” Excluded Assets, the debtor represented, was an undefined
category that would be identified in a later schedule. The panel opinion states
that “[n]one of these [transactional documents] suggested that the Port’s
easement would be a permitted encumbrance,” i.e., an interest that would run
with the land in an eventual sale. More precisely, however, never prior to the
eve of confirmation was the schedule supplied, nor did any of the transactional
documents reference the Port’s easement directly or indirectly.
      After midnight preceding the confirmation hearing, the debtor filed a
proposed 334-page confirmation order. At paragraph 108, the debtor at last
defined “permitted encumbrances” to include a number of specific servitudes
as well as “easements or encumbrances…recorded prior to July 1, 2009.” This
vague definition excluded the Port’s easement, and only that easement, from
“encumbrances” that would survive the sale of the debtor’s real property. As
the panel opinion acknowledges, this definition was neither highlighted nor
otherwise identified, and the debtor’s counsel represented in court the next day
that he did not believe any material modifications had been made to the plan
of reorganization.    But the panel opinion says the Port is “inaccurate” “to
allege that Sherwin’s last-minute changes for the first time ‘stripp[ed] third
party easement property rights” from its land.
      The    record    before    us    casts   serious    doubt    on    the    panel’s
characterizations. Tellingly, during the hearing on the motion to dismiss, the
debtor’s counsel disavowed that any references to “acquired easements” and
“excluded easements” in the transactional documents included the Port’s

      5It is unnecessary here to recite the shifting terminology and references used in
amended plans of reorganization, disclosure statements, and modified asset purchase
agreements submitted to the court before the final documents on the eve of confirmation.
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easement. She explained that, “we can’t sell the Port’s easement. We don’t
own the Port’s easement.” 6 This concession heightens the imperative for the
debtor’s plan to have complied with Section 363(f), which limits a debtor’s right
to sell free and clear of others’ interests in property. See In re Energytec, 739
F.3d 215, 221-25 (5th Cir. 2013) (gas pipeline transportation fee, a covenant
running with the land under Texas law, could be extinguished only in
compliance with terms of Section 363(f)(5)); see also Gouveia v. Tazbir, 137 F.3d
295 (7th Cir. 1994) (although a property subject to covenants running with the
land might be sold under Section 363(f)(5), the fact that state law did not
ordinarily allow such covenants to be forcibly monetized meant that the
covenants could not be expunged in bankruptcy). 7 Likewise, to confirm its
plan, the debtor had to prove to the court that it had complied with all
applicable law. 11 U.S.C. § 1129(a)(1), (3).

       6  This statement is rendered even more confusing as counsel averred during the same
hearing two other propositions: that the term “encumbrances” under Texas law includes
easements, placing the Port on notice; and also that the transactional documents’ definition
of “liens” included easements. The first term has some purchase in Texas law because the
generic term “encumbrance” includes easements and many other “interests” in real property.
The second statement states a legally counterintuitive, if not simply incoherent, proposition
from the standpoint of giving an easement holder notice.
        7 See generally, Louisville Bank v. Radford, 295 U.S. 555, 601-02 (1935) (federal law

may not take without compensation, and give to another, “rights in specific property which
are of substantial value”) (Brandeis, J.). Citing the few cases found in this area,
commentators agree that easements may not be expunged in bankruptcy absent strict
compliance with Section 363(f). See, e.g., You Can’t Buy Me Love and You Can’t Buy a 363(f)
Order, Weil Bankruptcy Blog (July 27, 2017) (“Practitioners should take note and make
absolutely certain that they can satisfy at least one of the conditions of 363(f)(1)–(5) because
courts will likely not tolerate any 363(f) deficiencies, regardless of how good a deal it
represents for the estate.”); Gregory G. Hesse & Cameron W. Kinvig, How Problem Easements
Can Limit Sale Rights, 33 Am. Bankr. Inst. L.J. 32, 33 (May 1, 2014) (“[M]any courts have
shown a willingness to maintain covenants and other rights that run with the land in a §
363(f)(1) sale context, unless a party can demonstrate a specific state or federal law provision
that mandates that they be released.”); Lisa H. Fenning & Rosa Evergreen, Yet Another
Exception to 363(f): Covenants Running with the Land, in § 363 Sales: What You Get – and
What You Are Stuck With 46, 47 (Commercial Law League of America, Oct. 9, 2014) (citing,
inter alia, In re Energytec, 739 F.3d 215).
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   Case: 18-40557    Document: 00515324756         Page: 15   Date Filed: 02/27/2020

                                 No. 18-40557
      Whether the evolving terms of the transactional documents (a) informed
the Port sufficiently that its easement could be put at risk and (b) yielded
sufficient opportunity to be heard at the confirmation hearing raises troubling
and important due process issues to be resolved in the bankruptcy court.
      For these reasons, I respectfully dissent.

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