In re PW

PW, LLC, a real estate developer, filed a Chapter 11 bankruptcy petition. At the request of DB Burbank, LLC (DB) (defendant), which held a senior $40 million claim against PW secured by almost all of PW’s assets, the bankruptcy court appointed Nancy Knupfer as trustee (the trustee) (defendant) in the case. Having concluded that PW’s property should be sold, the trustee entered into an agreement with DB whereby the property would be put up for bid and ultimately sold to DB for $41,434,465 if no bidder exceeded a specified price. The trustee moved the bankruptcy court to approve the sale of PW’s property free and clear of liens under 11 U.S.C. § 363(f)(3) and (f)(5). Over the objection of Clear Channel Outdoor, Inc. (Clear Channel) (plaintiff), a junior lienholder with a $2.5 million claim against PW, the court entered an order approving the sale. No bidders met the minimum price and other terms. The bankruptcy court entered an order confirming the sale to DB and finding DB to be a purchaser in good faith. Clear Channel’s request for a stay of the order pending appeal was rejected by both the bankruptcy court and a motions panel of the Bankruptcy Appellate Panel (BAP). The sale closed, and Clear Channel received nothing. Because DB purchased the PW property by credit bid, there were no proceeds to which Clear Channel’s lien could attach. Clear Channel appealed the sale and confirmation orders to the BAP.