In re: New Energy Corp.

New Energy operated a South Bend ethanol plant. In bankruptcy, it proposed to sell assets by auction, which was held in 2013. A joint venture, New Energy, submitted the winning bid of $2.5 million. New Energy, the trustee, and the Department of Energy, the largest creditor, asked the bankruptcy court to confirm this result. Natural Chem, which had not participated in the auction, opposed confirmation, arguing that establishment of the joint venture amounted to collusion. The Bankruptcy Court confirmed the sale. Natural Chem did not seek a stay and the sale closed. A district judge affirmed, observing that after the closing only a protest by the trustee permits a sale to be undone on grounds that “the sale price was controlled by an agreement among potential bidders,” 11 U.S.C.363(n). The Seventh Circuit affirmed, concluding that Natural Chem did not suffer an injury and that, under section 363, any injury would not be redressable. Collusion is a form of monopsony that depresses the price realized at auctions and would have made it easier for Natural Chem to secure the property. A reduction in the bid would have harmed New Energy’s creditors, not Natural Chem, which is why the trustee rather than a bidder is the right party to protest collusive sales. View "In re: New Energy Corp." on Justia Law