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Bank of N.Y. Trust Co. NA v. Pac. Lumber Co. (In re Scopac)

Bank of N.Y. Trust Co. NA v. Pac. Lumber Co. (In re Scopac)

United States Court of Appeals for the Fifth Circuit

October 19, 2010, Filed

No. 09-40307

Opinion

 [*277]  EDITH H. JONES, Chief Judge:

This appeal involves a dispute over compensation for diminution in the value of collateral during the pendency of a Chapter 11 bankruptcy. The appellants, holders of notes secured by the timber and non-timber assets of the Scotia Pacific Co., LLC ("Scopac"), seek review of  [**3] the district court's dismissal of their appeal for lack of subject matter jurisdiction and contend that the bankruptcy court erred in denying their "superpriority" administrative claim on the bankruptcy estate. 11 U.S.C. § 507(b). The Appellees, supporters of Scopac's reorganization plan, argue that the district court lacked jurisdiction due to the Noteholders' separate appeal of the plan confirmation order, an order this court affirmed, in large part, last year. See In re Pacific Lumber Co., 584 F.3d 229 (5th Cir. 2009) (Jones, C.J.). They further assert that the bankruptcy court correctly calculated the value of the Noteholders' administrative claim: zero. We hold that jurisdiction exists and, on the merits, uphold an administrative priority claim of $ 29.7 million.

I. BACKGROUND

In January 2007, the Pacific Lumber Company ("Palco") and several of its subsidiaries, including Scopac, filed petitions for relief under Chapter 11 of the Bankruptcy Code. Scopac's principal assets were 200,000 acres of redwood timberland and cash and cash equivalents on hand. There were three major creditors: the Noteholders were owed $ 714 million and had a lien on substantially all of Scopac's's assets;  [**4] Bank of America was owed $ 36.2 million and had a senior lien on the same  [*278]  assets; and Marathon, a private equity fund, was owed $ 160 million.

While the automatic stay was in place, the bankruptcy court entered a series of cash collateral orders authorizing Palco to employ creditors' assets for the purpose of preserving the value of the estate and requiring it to provide adequate protection to those creditors in return. 2 These orders granted Bank of America and the Noteholders a lien on all property of the estate not already subject to their existing liens and a superpriority administrative claim to the extent of the post-petition diminution of their interests.

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624 F.3d 274 *; 2010 U.S. App. LEXIS 21564 **; 64 Collier Bankr. Cas. 2d (MB) 726; 53 Bankr. Ct. Dec. 221; Bankr. L. Rep. (CCH) P81,866

In the Matter of: SCOPAC; SCOTIA DEVELOPMENT LLC; SALMON CREEK LLC; SCOTIA INN INC; BRITT LUMBER COMPANY, INC; THE PACIFIC LUMBER COMPANY; STEVE WILLS TRUCKING AND LOGGING LLC, Debtor. BANK OF NEW YORK TRUST COMPANY NA, as Indenture trustee for the Timber Notes ("Indenture Trustee"); CSG INVESTMENTS INC; ANGELO, GORDON & COMPANY L.P.; AURELIUS CAPITAL MANAGEMENT, L.P.; DAVIDSON KEMPNER CAPITAL MANAGEMENT LLC; SCOTIA REDWOOD FOUNDATION INC, Appellants, v. PACIFIC LUMBER COMPANY; SCOTIA PACIFIC LLC; MARATHON STRUCTURED FINANCE FUND LP; MENDOCINO REDWOOD COMPANY LLC; COMMITTEE OF UNSECURED CREDITORS; BANK OF AMERICA, Appellees. ANGELO, GORDON & CO LP; AURELIUS CAPITAL MANAGEMENT LP; DAVIDSON KEMPNER CAPITAL MANAGEMENT LLC, Appellants, v. MARATHON STRUCTURED FINANCE FUND LP; MENDOCINO REDWOOD COMPANY LLC; COMMITTEE OF UNSECURED CREDITORS; BANK OF AMERICA; SCOTIA PACIFIC LLC; PACIFIC LUMBER COMPANY, Appellees. CSG INVESTMENTS, INC, Appellant, v. SCOTIA PACIFIC LLC; PACIFIC LUMBER COMPANY, Appellees. SCOTIA REDWOOD FOUNDATION, INC., Appellant, v. SCOTIA PACIFIC LLC; PACIFIC LUMBER COMPANY, Appellees

Subsequent History: Modified by, On rehearing at, Rehearing denied by, in part Scotia Dev., LLC v. Pac. Lumber Co. (In re Scopac), 649 F.3d 320, 2011 U.S. App. LEXIS 17662 (5th Cir. Tex., 2011)

Prior History:  [**1] Appeal from the United States District Court for the Southern District of Texas.

Disposition: VACATED and REMANDED with Instructions.

CORE TERMS

confirmation, collateral, bankruptcy court, timberland, proceeds, mootness, reorganization, district court, collateral order, equitable, valuation, parties, timber, adequate protection, secured claim, diminution, reorganization plan, timber sale, consummated, deducted, hearings, administrative claim, discount rate, third party, foreclosure, notice, orders

Bankruptcy Law, Administrative Powers, Adequate Protection, Civil Procedure, Appeals, Standards of Review, De Novo Review, Subject Matter Jurisdiction, Jurisdiction Over Actions, General Overview, Bankruptcy, Case Administration, Bankruptcy Court Powers, Judicial Review, Abuse of Discretion, Clear Error Review, Procedural Matters, Bankruptcy Appeals Procedures, Notice of Appeal, Jurisdiction, Jurisdiction, Appellate Jurisdiction, Final Judgment Rule, Lower Court Jurisdiction, Plan Confirmation, Prerequisites, Administrative & Gap Claims, Claims, Types of Claims, Plans, Reorganizations, Justiciability, Mootness, Automatic Stay, Judicial Review, Secured Claims & Liens, Claim Determinations, Clearly Erroneous Review, Questions of Fact & Law