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Ted Janger
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Ted Janger here. These are great questions about the article. I'll take a stab at them in the order that they are presented, and Melissa may weigh in later with her own take: 1) Equitable mootness should not come into play because that doctrine only applies to challenges to a confirmed plan of reorganization. An Ice Cube Bond would only be required for 363 sales closed prior to the confirmation of a plan so the doctrine would not come into play. The bond would be released and any "reserve" distributed upon plan confirmation, so there would be nothing to challenge post-confirmation. There is a related question with regard to the applicability of 363(m), which insulates a good faith 363 sale from reversal on appeal. However, 363(m) should not be implicated either, as the posting of the bond does not implicate the finality of the sale or the state of the title received by the purchaser. It only affects the distribution of the sale proceeds. 2) We don't see any constitutional (due process type) objection to the bond, in that the bond requirement merely preserves issues for later adjudication. In other words, it preserves process rather than denying it. 3) We don't see any Article III type objection either. One thing that the Supreme Court has been quite clear about in the TSAC v. Hood and Katz line of cases is the power of the Bankruptcy Court to administer property of the estate. All the bond does is insure that there will be property of the estate available to resolve disputes that arise after the sale closes. If the dispute needed to be resolved in an Article III court, there is no reason that the posting of an Ice Cube Bond would stand in the way. It simply ensures that claims arising out of that dispute will share equitably in the proceeds of the sale. 4) The question regarding adequate protection of unsecured creditors under 363(f) is a fascinating one. However, (at least tentatively) we don't think it's implicated here, either. As we frame the discussion, the funds are set aside preserve the status quo with regard to disputes about entitlement, and to indemnify the estate against harm caused by a procedural shortcut. The funds are not set aside to protect unsecured creditors against a decline in the value of the estate. 5) The unsecured creditors will learn about their distribution when the plan is confirmed. 6) We think that the posting of the bond will reduce, rather than increase the need of objecting creditors to appeal the sale order and/or seek a stay. That, indeed is one of the benefits of our proposed approach. 7) With regard to the Kodak scenario, We are not taking a position on the scope of the court's power to sell free and clear under 363(f). That would be an entire article unto itself. However, assuming that the court did have the power to sell the Kodak's patents free and clear of Apple's claims, the bond would be posted to compensate Apple if they were later found to be the owners of the patents (and entitled to compensation).
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May 27, 2013