Liquidity Solutions, Inc. v. Winn-Dixie Stores, Inc. (In Re Winn-Dixie Store, Inc.) , 286 F. App'x 619 ( 2008 )

[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
FILED
________________________
U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
No. 07-15326 JULY 1, 2008
Non-Argument Calendar THOMAS K. KAHN
________________________ CLERK
D. C. Docket No. 07-00236-CV-J-33 & 05-BK-03817-JAF
In Re:
WINN-DIXIE STORE, INC., Debtor,
_________________________________________________________________
LIQUIDITY SOLUTIONS, INC.,
E&A FINANCING II, L.P.,
E&A SOUTHEAST, L.P.,
SHIELDS PLAZA, INC.,
WOODBERRY PLAZA (E&A), L.L.C.,
VILLA RICA RETAIL PROPERTIES, LLC,
HALPERN ENTERPRISES, INC.,
BANK OF AMERICA, as Trustee,
Plaintiffs-Appellants,
ORIX CAPITAL MARKETS, LLC,
CWCAPITAL ASSET MANAGEMENT, LLC,
Plaintiffs,
versus
WINN-DIXIE STORES, INC.,
ASTOR PRODUCTS, INC.,
CRACKIN’ GOOD, INC.,
DEEP SOUTH DISTRIBUTORS, INC.,
DEEP SOUTH PRODUCTS, INC., et al.,
Defendants-Appellees.
________________________
Appeal from the United States District Court
for the Middle District of Florida
_________________________
(July 1, 2008)
Before TJOFLAT, ANDERSON and BLACK, Circuit Judges.
PER CURIAM:
Appellants are landlords of several of the Appellees Winn-Dixie Stores, Inc.
(“Winn-Dixie”) and its affiliated companies. Appellants held guaranteed,
prepetition claims against debtor Winn-Dixie. These claims were extinguished as
part of a settlement among Winn-Dixie’s creditors that was memorialized in Winn-
Dixie’s Chapter 11 reorganization plan in its bankruptcy proceedings. In this
appeal, Appellants challenge the district court’s dismissal of their consolidated
appeal of the bankruptcy court’s Confirmation Order of Winn-Dixie’s
reorganization plan and the court’s order related to the guaranteed claims. The
appeal was dismissed on grounds of equitable mootness because the district court
determined that it was unable to afford the Appellants relief, in part, because the
plan had already been substantially consummated and the Appellants had failed to
seek a stay of the Confirmation Order. Appellants now seek to reverse the district
court’s finding of mootness and to reinstate their appeal so that it may be heard on
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the merits by the district court. Finding that the district court appropriately
determined that the consolidated appeal had been equitably mooted, we affirm.
I. FACTS
Winn-Dixie filed a petition for reorganization under Chapter 11 of the
Bankruptcy Code on February 21, 2005. At the time of filing, the company had
more than one billion dollars worth of prepetition obligations to various
creditors—including, among these, the Appellant landlords. The Appellants are
those who, among the larger pool of Winn-Dixie’s landlords, had prepetition
“guaranteed” claims, whereas other landlords did not. To resolve a complex
dispute among Winn-Dixie’s creditors, which is beyond the scope of this appeal,
the creditors arrived at a compromise as to Winn-Dixie’s affiliated debtors’
substantive consolidation. This compromise ultimately divided the company’s
debtors into five different classes and distributed new common stock in differing
proportions among the classes. Importantly, the compromise did not provide for
any special allotment of shares to those among the landlord class who were
holders of guaranteed claims.
This consolidation compromise was memorialized in Winn-Dixie’s
reorganization plan under Section 1121 of the Bankruptcy Code (“the Plan”). The
Plan required Winn-Dixie to (1) cancel all of its old common stock; (2) issue new
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common stock to be listed on NASDAQ; (3) pay its administrative, priority, and
secured creditors in cash and in full; (4) distribute its new stock to unsecured
creditors who had allowed claims; (5) retire its debtor-in-possession financing;
and, (6) enter into a $725 million exit financing facility with Wachovia Bank. The
Plan received the support of an overwhelming majority of Winn-Dixie’s more than
5,000 creditors, but roughly 23% of the landlords—principally those with
guaranteed claims—rejected the Plan.
Under the Plan and pursuant to the compromise among the creditors, Winn-
Dixie distributed its new stock to unsecured creditors at set distribution
percentages for allowed claims by class: noteholders obtained 96.5% satisfaction
of their claims (62.69 shares per $1000 of allowed claims); landlords obtained
70.6% satisfaction of their claims (46.26 shares per $1000 of allowed claims);
vendors also obtained 70.6% satisfaction of their claims (46.26 shares per $1000
of allowed claims); retirees obtained 59.1% satisfaction of their claims (38.75
shares per $1000 of allowed claims); and all other unsecured creditors obtained
53.2% satisfaction of their claims (34.89 shares per $1000 of allowed claims).
The Plan specifically did away with any prepetition guaranteed claims: “[A]ll
claims based on prepetition unsecured guarantees by one Debtor in favor of any of
the Debtors . . . shall be eliminated, and no separate distributions under the Plan
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shall be made on account of claims based upon such guarantees.” (District Court
Order at 5.) The Plan eliminated Appellant landlords’ guaranteed claims—and
thus rendered the entire class of landlords equal under the Plan — while
preserving, in effect, the guaranteed claims of noteholders who received a more
favorable stock distribution under the Plan on their claims. Appellants argued
before the courts below that the disparate treatment of their guaranteed claims was
unfair under the terms of the Plan.
The bankruptcy court held a confirmation hearing, received evidence and
briefs, and issued findings of fact and law and a confirmation order, upon finding
the Plan “fair and equitable and in the best interests of” the Appellees. On appeal
of the confirmation order to the district court,1 the Appellants renewed their
equitable arguments and sought additional stock distributions from a pool of stock
held in reserve under the Plan for paying disputed claims, despite the Plan’s
elimination of pre-petition guaranteed claims. Winn-Dixie argued that the district
court should not hear the Appellants claims on the merits because, since the
Appellants failed to seek a stay of the Confirmation Order, the company had
already substantially consummated the Plan and relief was no longer available to
1
Numerous landlords separately appealed the bankruptcy court’s Confirmation Order and
the related Guaranteed Claim Order, which the district court consolidated into a single appeal.
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the Appellants. Agreeing with Winn-Dixie, the district court dismissed the
consolidated appeal on the basis of equitable mootness, as described by our
decisions in In re Holywell Corporation, 911 F.2d 1539 (11th Cir. 1990), rev’d on
other grounds by Holywell Corp. v. Smith, 503 U.S. 47, 112 S. Ct. 1021 (1992),
and In re Club Associates, 956 F.2d 1065 (11th Cir. 1992). Appellants now seek
to reverse the dismissal of their consolidated appeal to the district court.
II. STANDARD OF REVIEW
We review de novo determinations of law made by either the district court
or the bankruptcy court.2 In re Club Assoc., 956 F.2d at 1069. The bankruptcy
court’s factual findings are reviewed under the clearly erroneous standard and the
district court is not authorized to make independent factual findings when it
undertakes review of the bankruptcy court’s decision. Id.
III. DISCUSSION
Appellants raise several arguments: (1) the district court ignored the
separate order disallowing the guaranteed claims in its analysis of the equitable
2
The Appellees’ brief recommends this Court review the district court’s dismissal of an
appeal on equitable mootness grounds for abuse of discretion under In re Continental Airlines,
Inc., 91 F.3d 553, 560 (3d Cir. 1996). We are bound by our decision in In re Club Associates,
however, wherein we reviewed the district court’s determination that an appeal was moot under
the standard articulated here. See United States v. Woodard, 938 F.2d 1255, 1258 (11th Cir.
1991) (articulating rule that decision of prior panel can only be overruled by the en banc court or
the Supreme Court).
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mootness doctrine; (2) the district court erred in dismissing the consolidated
appeal on equitable mootness grounds; and, (3) the Appellees’ grounds for moving
for dismissal of the appeal to the district court were flawed. For the reasons
discussed below, we do not find Appellants’ arguments persuasive.
A. Appeal of the Separate Order Related to Guaranteed Claims
As an initial matter, we are unpersuaded by Appellants’ argument that
because the district court failed to specifically address the bankruptcy order related
to dismissal of the guaranteed claims, it “completely disregarded” those issues
when finding the appeal moot. It is abundantly clear that the disallowance of the
landlords’ guaranteed claims was inextricably wrapped up with the settlement
among the creditors with respect to consolidation and was memorialized in the
reorganization plan that the bankruptcy court approved in its Confirmation Order.
Indeed, the only real substantive issue asserted by the parties on appeal to the
district court appears to have been whether the Confirmation Order was fair to the
landlords because the settlement did away with their guaranteed claims. Although
the bankruptcy court did enter a separate order disallowing the specific guaranteed
claims at issue here, it is incorrect to say that the district court disregarded this
order and the substantive issues it raised when the court addressed the
Confirmation Order and dismissed the consolidated appeal on mootness grounds.
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Whether the district court could afford relief to Appellants on their guaranteed
claims—and thus, in effect, overturning the order related to the guaranteed claims
in addition to modifying the confirmation order—was the primary substantive
issue addressed by the district court in its thorough mootness analysis.
B. Equitable Mootness Issues
Appellants assert that their appeal of the Confirmation Order was not moot
because the district court could have afforded them relief without rescinding
transactions already undertaken pursuant to the reorganization plan. “The
mootness doctrine, as applied in a bankruptcy proceeding, permits the courts to
dismiss an appeal based on its lack of power to rescind certain transactions.” In re
Holywell Corp., 911 F.2d at 1543. “Central to a finding of mootness is a
determination by an appellate court that it cannot grant effective judicial relief.
Put another way, the court must determine whether the reorganization plan has
been so substantially consummated that effective relief is no longer available.” In
re Club Associates, 956 F.2d at 1069. In determining whether an appeal of a
reorganization plan is moot, courts will necessarily consider what relief a court
can provide, given the status of the reorganization plan and its consummation in
the interim time. Id.; see also In re Holywell Corp. 911 F.2d at 1543; Miami Ctr.
Ltd. P’ship v. Bank of N.Y., 820 F.2d 376, 379 (11th Cir. 1987).
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Importantly, although not dispositive to the availability of judicial relief, see
In re Club Assoc., 956 F.2d at 1070 n.13, when a party has failed to seek a stay of
the confirmation order pending appeal to the district court, for practical reasons it
is often difficult for courts to afford relief to the appealing party because the court
is unable to rescind transactions taken in consummation of the reorganization plan
and confirmation order enforcing said plan. See Miami Ctr. Ltd. P’ship, 838 F.2d
at 1555 (noting that dismissal of an appeal on grounds of mootness is often
granted when an appeal that ultimately reversed the confirmation order would
“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”) (internal quotations and citations omitted). We will,
therefore, “not entertain any challenge to the Plan which seeks to modify or amend
its provisions,” when, in absence of a stay, substantial consummation of the plan
has been achieved. In re Holywell Corp., 911 F.2d at 1543; see also 11 U.S.C. §
1127(b) (2006) (“The proponent of a plan or the reorganized debtor may modify
such plan at any time after confirmation of such plan and before substantial
consummation of such plan . . . .”). This is precisely such a case.
Appellants assert that their appeal of the confirmation order was not moot
because the court could have afforded them relief without dismantling the
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confirmation plan or affecting the rights of third parties because the court could
have awarded Appellants common stock from the nine million shares held in
reserve under the Plan for disputed claims. But this argument overlooks the fact
that to have afforded Appellants any relief on their guaranteed claims, the district
court—as it correctly observed—would have had to alter or amend the
reorganization plan itself which expressly extinguished the very claims upon
which the Appellants now seek to obtain relief. In other words, central to the
reorganization plan itself was the consolidation settlement, of which an integral
component was disallowance of additional distributions to the Appellants solely
because the amounts owed by one debtor entity was guaranteed by another debtor.
We also thus agree with the district court that the requested modification of the
Plan would be material. To provide the relief sought by Appellants—additional
distributions because of such guarantee—would require the court to modify the
terms and conditions of the reorganization plan, which at this point—in part
because of Appellants’ failure to seek a stay—has been substantially consummated
by Winn-Dixie.3 Therefore, even were the relief Appellants’ sought before the
3
Importantly, on appeal, Appellants do not challenge the district court’s finding that the
Plan has been substantially consummated. The district court made a factual finding with regard
to substantial consummation based on an affidavit proffered by Winn-Dixie after execution of
the Confirmation Order. See In re Manges, 29 F.3d 1034, 1041 (5th Cir. 1994) (permitting
reviewing court to receive facts related to mootness). We see no reason to disturb the district
court’s finding on this issue, considering especially that the appellants have not challenged the
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district court available to them by way of the reserve stock, an order granting
Appellants relief would necessarily alter or amend the terms of the Plan and the
Confirmation Order. We decline, as the district court did, to permit an appeal that
would lead to an alteration or amendment of a substantially consummated
reorganization plan.4
C. Winn-Dixie’s Grounds for Seeking Dismissal
Appellants argue that Winn-Dixie’s grounds for seeking dismissal of their
appeal to the district court were flawed for two reasons: first, the absence of a stay
does not, in and of itself, command a finding of mootness; and, second, similarly,
substantial consummation of a reorganization plan will not singularly render an
appeal moot. Appellants are of course correct that neither factor—failure to seek a
stay or substantial consummation—in and of itself renders an appeal moot. See In
re Club Assoc., 956 F.2d at 1069 (“As the district court properly noted, substantial
consummation by itself does not resolve the issue. Even if substantial
consummation has occurred, a court must still consider all the circumstances of the
district court’s finding of substantial compliance.
4
Appellants assert that the considerations of equity that underlie this mootness doctrine
are on their side. However, it is anything but clear that the equities are in their favor in this case,
considering especially their own failure to seek a stay in the execution of the Confirmation Order
and also their representation in the settlement which led to the reorganization plan that
extinguished their guaranteed claims in the first instance.
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case to decide whether it can grant effective relief.”). But of the factors we
identified in Club Associates,5 none here favor permitting Appellants to proceed
with their appeal. The district court thoroughly discussed these factors. No
argument in the Appellants’ brief on appeal leads us to question the district court’s
well-reasoned discussion.
Moreover, we cannot fairly say, as the Appellants assert, that the fact of
substantial consummation itself is irrelevant to the relief sought by the Appellants
here. Even though the relief Appellants seek—issuance of additional stock from
the reserve pool—would not undo many of the transactions that have already taken
place pursuant to the Plan, it would, necessarily, “modify or amend” the Plan itself
and its provisions with regard to the landlords’ guaranteed claims. Furthermore,
and significantly, it would also diminish the stock available to those creditors,
unlike the Appellants, whose disputed claims were not resolved by the terms of the
Plan. The type of relief sought here is, again, precisely the type of relief that our
5
In a footnote, the Court suggested the relevant analysis for mootness should include an
evaluation of several questions:
Has a stay pending appeal been obtained? If not, then why not? Has the plan
been substantially consummated? If so, what kind of transactions have been
consummated? What type of relief does the appellant seek on appeal? What
effect would granting relief have on the interests of third parties not before the
court? And, would relief affect the re-emergence of the debtor as a revitalized
entity?
In re Club Assoc., 956 F.2d at 1069 n.11.
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decisions in Holywell and Club Associates make clear we will not afford once a
plan has been substantially consummated and relied upon by debtors, creditors,
and third-parties alike.
IV. CONCLUSION
For the foregoing reasons, the district court’s decision finding the
Appellants’ consolidated appeal moot is
AFFIRMED.6
6
Both the Appellants’ and Appellees’ requests for oral argument are denied.
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