In re: : New Energy Corporation Appeal of : Natural Chem Holdings , LLC

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 13‐2501
IN THE MATTER OF :
NEW ENERGY C ORPORATION
A PPEAL OF :
NATURAL C HEM H OLDINGS , LLC
____________________
Appeal from the United States District Court for the
Northern District of Indiana, South Bend Division.
No. 3:13‐CV‐224 — Robert L. Miller, Jr., Judge.
____________________
A RGUED J ANUARY 10, 2014 — D ECIDED J ANUARY 15, 2014
____________________
Before FLAUM and EASTERBROOK , Circuit Judges, and
G RIESBACH, District Judge.*
EASTERBROOK , Circuit Judge. New Energy Corp. operated
an ethanol plant in South Bend, Indiana. After entering
bankruptcy, it proposed to sell most of its assets by auction.
One was held on January 31, 2013. The winning bid of $2.5
million came from a joint venture of Maynards Industries
* Of the Eastern District of Wisconsin, sitting by designation.

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No. 13‐2501 2
(1991) Inc. and Biditup Auctions Worldwide, Inc. New Ener‐
gy asked the bankruptcy court to confirm this result; so did
the United States Trustee, as representative of all creditors,
and the Department of Energy, the largest single creditor.
Only Natural Chem Holdings opposed confirmation of the
sale, contending that establishment of the joint venture
amounted to collusion that spoiled the auction.
Bankruptcy Judge Dees confirmed the sale and denied a
motion to reconsider that order because, among other things,
Natural Chem had not participated in the auction and thus
could not have been harmed. 2013 Bankr. L EXIS 3665 (Bankr.
N.D. Ind. Feb. 26, 2013). Natural Chem did not ask for a stay
in the bankruptcy court, and the sale closed. A district judge
affirmed the bankruptcy court’s conclusion, observing
among other things that after the closing only a protest by
the trustee permits a sale to be undone on the ground that
“the sale price was controlled by an agreement among po‐
tential bidders at such sale”. 11 U.S.C. §363(n). The trustee is
satisfied with the outcome.
Natural Chem’s appellate brief wants us to proceed as
ombudsmen, fixing problems brought to our attention by a
public‐spirited observer. That is not how §363 of the Bank‐
ruptcy Code works, however, nor is it an approach that Arti‐
cle III of the Constitution permits. The first question is stand‐
ing: has Natural Chem suffered a redressable injury as a re‐
sult of the conduct about which it complains? The bankrupt‐
cy and district judges thought not, concluding that Natural
Chem had not suffered an injury and that, because of §363,
any injury is not redressable.
To qualify for the auction, a potential bidder had to post
a bond of $250,000. Natural Chem did not do so. As a result,

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3 No. 13‐2501
it cannot have been injured as a bidder by the auction’s out‐
come; it was not going to prevail no matter what the other
bidders did. Nor could it have been injured as a creditor that
stood to receive a reduced payout: Natural Chem is not
among New Energy’s creditors.
Natural Chem says that it did not post the bond because,
under the auction’s terms, if it had been the high bidder and
not come up with at least $3 million (or the value of the win‐
ning bid, if lower) as soon as the sale was approved, the
bond would have been forfeited as partial compensation for
the creditors’ losses from delay (New Energy was losing
money) and the need to rerun the auction. Natural Chem
wanted to propose leasing the plant for a year with an op‐
tion to buy it for $4 million or more. The structure of its pro‐
posed offer was incompatible with a requirement of cash up
front. Yet bankruptcy courts are entitled to require cash bids,
rather than complex and hard‐to‐value bids including leases
and options. Cash bids are comparable; the sort of bid Natu‐
ral Chem wanted to make could not easily have been com‐
pared against others. Natural Chem chose not to play by the
auction’s rules. That was its right—but, because it did not
bid, it also was not harmed by the outcome. Thus In re Colo‐
ny Hill Associates, 111 F.3d 269 (2d Cir. 1997), does not assist
Natural Chem. Colony Hill dealt with a situation in which
lack of notice plus a rival’s misconduct prevented a person
from bidding; Natural Chem’s own choices led it not to bid.
Natural Chem also misunderstands why collusion
among bidders is forbidden. Collusion is a form of monop‐
sony that depresses the price realized at auctions. Collusion
by two bidders would have made it easier for Natural Chem
to secure the property. A reduction in the high bid would

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No. 13‐2501 4
have harmed New Energy’s creditors, not Natural Chem. Cf.
Brunswick Corp. v. Pueblo Bowl‐O‐Mat, Inc., 429 U.S. 477
(1977). This is why, under §363(n), the trustee rather than a
bidder is the right party to protest collusive sales. Natural
Chem’s proposal that we disregard what it views as an un‐
necessary technical limitation on post‐auction relief runs
smack into the Supreme Court’s insistence that judges im‐
plement the Bankruptcy Code as written, rather than make
changes that they see as improvements. See, e.g., RadLAX
Gateway Hotel, LLC v. Amalgamated Bank, 132 S. Ct. 2065
(2012).
Thus Natural Chem lacks standing for two independent
reasons: it did not bid at the auction, and had it done so it
would have been helped rather than harmed if the conduct
of which it complains were indeed collusive. Not that
agreement among bidders necessarily deserves opprobrium.
Joint ventures have the potential to improve productivity as
well as the potential to affect prices; that’s why in antitrust
law they are analyzed under the Rule of Reason rather than
a rule of per se illegality. See, e.g., Polk Bros., Inc. v. Forest City
Enterprises, Inc., 776 F.2d 185 (7th Cir. 1985); Rothery Storage &
Van Co. v. Atlas Van Lines, Inc., 792 F.2d 210 (D.C. Cir. 1986);
United States v. Addyston Pipe & Steel Co., 85 F. 271, 280–83
(6th Cir. 1898) (Taft, J.), affirmed, 175 U.S. 211 (1899). All
Natural Chem offered to show is that two other bidders
formed a joint venture; this is short of establishing forbidden
collusion. Perhaps the agreement increased the price real‐
ized—which could have harmed Natural Chem (had it bid)
but would have helped New Energy’s creditors and would
have been a reason to confirm the sale rather than set it
aside.

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5 No. 13‐2501
The potential benefits of joint ventures supply another
reason why Natural Chem cannot prevail. Section 363(m)
provides that even the reversal of an order of sale “does not
affect the validity of a sale or lease under such authorization
to an entity that purchased or leased such property in good
faith, whether or not such entity knew of the pendency of
the appeal, unless such authorization and such sale or lease
were stayed pending appeal.” This sale was not stayed, and
the bankruptcy judge found that the winning bidder acted in
good faith. That finding is not clearly erroneous or an abuse
of discretion and would be fatal to Natural Chem’s protest if
it had standing—which it does not.
A FFIRMED

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