Third Circuit disposition — 09-2074

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________
No. 09-2074
In re: RELIANT ENERGY CHANNELVIEW LP, et al.,
Debtor
KELSON CHANNELVIEW LLC, f/k/a
Kelson Energy IV, LLC,
Appellant
On Appeal from the United States District Court
for the District of Delaware
(D.C. Civ. No. 08-00409)
Honorable Joseph J. Farnan, Jr., District Judge
Argued November 3, 2009
BEFORE: SCIRICA, Chief Judge, and JORDAN and
GREENBERG, Circuit Judges
(Filed: January 15, 2010)

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2
Andrew K. Glenn (argued)
Kasowitz, Benson, Torres & Friedman
1633 Broadway
21st Floor
New York, NY 10019
Garvan F. McDaniel
Bifferato Gentilotti
800 North King Street
P.O. Box 2165
Wilmington, DE 19801
Attorneys for Appellant
Cory D. Kandestin
Robert J. Stearn, Jr. (argued)
Richards, Layton & Finger
One Rodney Square
920 North King Street
Wilmington, DE 19899
Attorneys for Appellees
OPINION OF THE COURT
GREENBERG, Circuit Judge.

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The actual purchaser was Fortistar’s affiliate GIM Channelview1
Corporation LLC, but for ease of reference we will refer to the
purchaser as Fortistar.
3
I. INTRODUCTION
This matter comes on before this Court on appeal from
an order of the District Court entered on March 31, 2009,
affirming March 18, 2008 and June 9, 2008 orders of the
Bankruptcy Court in proceedings arising from the sale of a
major asset of the Debtors’ estate in this bankruptcy
proceeding. The Bankruptcy Court denied the request of an
unsuccessful bidder for the asset, Kelson Channelview LLC
(“Kelson”), for disbursement of administrative expenses in
the form of a break-up fee from the estate in the March 18,
2008 order, and then in the June 9, 2008 order approved the
sale of the asset to Fortistar, LLC. Kelson appealed but the1
District Court affirmed the orders of the Bankruptcy Court.
In re Reliant Energy Channelview LP, 403 B.R. 308 (D. Del.
2009). We will affirm the order of the District Court and, in
effect, the order of the Bankruptcy Court of March 18, 2008.
II. BACKGROUND
The Debtors in the Chapter 11 proceedings, Reliant
Energy Channelview LP and Reliant Energy Services
Channelview LLC (together, the “Debtors”), decided to sell

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In its brief Kelson characterizes the sale as being of2
“substantially all of the Debtors’ assets.” Appellant’s br. at 2.
4
their largest asset, a power plant in Channelview, Texas.2
With the assistance of consultants with expertise in the energy
industry, the Debtors contacted 115 potentially interested
purchasers. This substantial effort was fruitful for 38
potential bidders executed confidentiality agreements with
respect to a possible purchase, and 24 went further and
conducted due diligence on the purchase. Ultimately 12,
including Fortistar, made bids for the plant. Many of the bids,
however, were contingent on the bidder obtaining financing, a
difficult undertaking in the then prevailing business
environment. Kelson, however, submitted a complete bid of
$468 million not contingent on financing and was selected as
the winning bidder. Consequently, Kelson entered into an
Asset Purchase Agreement (“APA”) with the Debtors for the
power plant.
Inasmuch as the Debtors were in bankruptcy,
consummation of the APA required the Bankruptcy Court’s
approval. Consequently, the APA provided that the Debtors
immediately would seek an order from the Bankruptcy Court
allowing the sale. Moreover, the Debtors agreed that they
would seek an order approving certain “bid protections and
procedures” for Kelson’s benefit if the Court determined that
there should be an auction for the plant before its sale. These
proposed bid protections and procedures provided that
Debtors could not accept a competing bid unless it exceeded
Kelson’s bid by $5 million. Furthermore, the proposed bid
protections and procedures provided that if a competing bid

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The objector’s claimed status as an equity holder was disputed3
at the time but we are not concerned with that dispute. We
emphasize, however, that not all of the interested parties
supported the original proposed sale, and the Bankruptcy Court,
we think quite appropriately, acted with caution in considering
this very substantial matter.
5
was accepted, Kelson would be entitled to a $15 million
break-up fee, about three percent of its bid, as well as
reimbursement for expenses it incurred in the sale process up
to $2 million. The practice of paying a break-up fee to an
initial bidder for assets has developed in bankruptcy and other
contexts to compensate the bidder for memorializing its
interest in acquiring the asset, an interest which sometimes, as
we will explain below, can be useful to the asset’s seller even
if the bid is not accepted.
As the APA required, the Debtors requested that the
Bankruptcy Court authorize the sale of the plant to Kelson
without conducting an auction. In that motion, the Debtors
asserted that the Kelson bid “represents the highest and best
offer available for the Debtors’ assets and that further
marketing of the assets will not result in a higher purchase
price.” App. at 198. The Bankruptcy Court delayed its
decision on this motion when one of the Debtors’ equity
holders objected to the fast pace of the transaction.3
Ultimately, however, the Court would not approve the sale to
Kelson without an auction for the plant.
When the Court delayed the approval of the sale, the
Debtors, with the support of their Creditors, asked the Court

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6
to authorize the bid protection measures that we have
described. However, Fortistar, which previously had
submitted a losing contingent bid, objected to this request and
asserted that it was willing to enter a “higher and better” bid
at an auction, but the $15 million break-up fee along with the
$2 million reimbursement for expenses would be a deterrent
to it doing so.
The Bankruptcy Court held a hearing to consider
authorization of the bid protections at which, among others,
William Hardie, the consultant to the Debtors in charge of
shopping the assets, and Andrew Johannensen, an officer of
the Debtors, testified. Hardie described the process the
Debtors had followed in seeking a buyer and explained that
the Debtors dropped Fortistar from consideration as a
purchaser when it lost its financing. At that point, the Debtors
and their creditors decided to sign the APA with Kelson as its
consummation would result in the full compensation of all the
Debtors’ creditors, and Kelson’s bid was for a fair price and
was financed fully.
Hardie thought that by reason of all the work that had
been done in seeking bidders there was no need for an auction
as the Debtors already had obtained the best price for the
plant. Moreover, Hardie explained that in view of the
advantages of the Kelson bid the Debtors were willing to seek
the bid protections Kelson sought and he believed that Kelson
would not have agreed to make its bid unless the Debtors
agreed to seek the bid protections. Finally, Hardie thought
that the Kelson APA benefitted the Debtor’s estate because it
established a floor price and terms for the sale of the assets.
On cross-examination Hardie acknowledged, however, that

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Of course, the text of the APA and not Hardie’s opinion of its4
meaning governs its construction and interpretation and the
parties’ obligations under it.
7
Kelson would be bound by its offer even if the Court rejected
the bid protections, though he suggested that Kelson would
find a way to avoid its commitment if it desired to do so.4
Johannensen’s testimony was similar to that of Hardie.
The Bankruptcy Court nevertheless declined to
approve the sale of the plant without an auction and, in a
ruling from the bench, said that in deciding whether to
approve the bid protections it had to consider whether they
would enhance or chill bidding. In particular, the Court
believed that it was required to decide whether the proposed
protections would benefit the estate:
It’s hard generally to consider how bid
protections or break-up fees protect the estate.
I’ve heard the arguments and have approved
them in the case where the . . . parties have
convinced me that it is the only way to get other
bidders, any bidder to the table. But I’m not
convinced in this case that that is the case.
There are other bidders, at least one other
bidder. And I have in the past denied break-up
fees in circumstances where another party had

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Kelson argues that this last sentence created a per se rule that5
break-up fees are not available when there is another bidder, but
we do not believe that the Bankruptcy Court was applying any
such rule. Rather, we understand the experienced Court merely
to be saying that as a factual matter break-up fees often are not
needed when there are bidders for an asset other than the initial
bidder.
8
appeared and expressed an intention to bid at
the auction.5
App. at 589.
Ultimately the Bankruptcy Court entered its March 18,
2008 order approving the $5 million “overbid” requirement
which required that bids competing with Kelson’s bid must
exceed it by $5 million. In addition, the Court approved the
reimbursement to Kelson for expenses it incurred in the
transaction up to $2 million. Finally, however, in the
provision of its order at issue on this appeal, the Court refused
to authorize payment of the $15 million break-up fee.
Kelson did not participate in the subsequent auction,
and, in fact, argued that its offer was no longer available.
Fortistar, however, submitted the winning, now fully financed
bid, which topped Kelson’s bid by $32 million. In accordance
with the Bankruptcy Court’s decision, the Debtors did not pay

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There was an agreement that Kelson’s expenses were6
$1,210,257.
9
Kelson the $15 million break-up fee, although they did pay
Kelson for its expenses.6
After the Bankruptcy Court entered an order on June 9,
2008, approving the sale to Fortistar, Kelson appealed to the
District Court from the order denying the payment of the $15
million break-up fee, arguing that the Bankruptcy Court
abused its discretion by denying Kelson’s request for the fee.
Kelson also argued that it was a stalking-horse bidder entitled
to a break-up fee as a matter of fundamental fairness and
contended that the Debtors were estopped from opposing its
appeal because they supported its request for the break-up fee
in the Bankruptcy Court. The District Court rejected Kelson’s
arguments and affirmed the March 18, 2008 and June 9, 2008
orders of the Bankruptcy Court and thus the District Court did
not allow the payment of the break-up fee. Kelson then filed
this appeal of the District Court’s order to the extent that it
affirmed the Bankruptcy Court’s order of March 18, 2008.
III. JURISDICTION AND STANDARD OF REVIEW
The Bankruptcy Court had initial jurisdiction over the
matter now before us as it concerned the administration of the
estate. 28 U.S.C. § 157(b). The District Court had
jurisdiction to review Kelson’s appeal under 28 U.S.C. §

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In their brief Debtors contend that Kelson did not appeal to the7
District Court from the June 9, 2008 order approving the sale.
Nevertheless, as we have indicated, the District Court affirmed
both the March 18, 2008 and June 9, 2008 orders. The disputed
scope of the District Court’s purely appellate jurisdiction,
however, is not significant to us because Kelson asks only that
we “issue an order granting [it] full payment” of the break-up
fee, appellant’s br. at 33, a matter over which the District Court
had jurisdiction and on which it ruled, and over which we now
have jurisdiction. Accordingly, we do not address any other
issue.
There are no disputes of what may be characterized as the8
historical facts in this case.
10
158(a), and we have jurisdiction to review the District7
Court’s final decision under 28 U.S.C. § 158(d)(1).
We exercise plenary review over the decision of the
District Court sitting as an appellate court in this bankruptcy
proceeding and consequently we review the ruling of the
Bankruptcy Court. See Lowenschuss v. Resorts Int’l, Inc. (In
re Resorts Int’l, Inc.), 181 F.3d 505, 509 (3d Cir. 1999). We
review the Bankruptcy Court’s legal determinations de novo,
its factual determinations for clear error, and its decision
denying the break-up fee on an abuse of discretion standard.
See Interface Group-Nevada, Inc. v. Trans World Airlines,
Inc. (In re Trans World Airlines, Inc.), 145 F.3d 124, 131 (3d
Cir. 1998).8

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11
IV. DISCUSSION
A. The O’Brien Standard
In Calpine Corp. v. O’Brien Env’t Energy, Inc. (In re
O’Brien Env’t Energy, Inc.), 181 F.3d 527 (3d Cir. 1999)
(“O’Brien”), we set forth the controlling legal principles
applicable on this appeal. In O’Brien, the debtor, after
considering bids from several interested buyers for certain of
its assets, entered into an asset purchase agreement with
Calpine Corporation, which conditioned its bid on the parties’
ability to secure Bankruptcy Court approval of a $2 million
break-up fee. The debtor, supported by many of its creditors,
sought approval for the fee from the Bankruptcy Court.
Nevertheless, the Court denied the application, stating that a
break-up fee would complicate or even chill the bidding
process. However, the Court gave Calpine permission to
renew its application after an auction for the sale of the assets.
Notwithstanding Calpine’s insistence that it would not
make an offer without the assurance of a provision for a
break-up fee, it did enter the bidding process. After a
different bidder made the best offer, Calpine renewed its
request for a break-up fee, but the Court denied the request
after an evidentiary hearing. Calpine appealed and, after the
District Court affirmed, Calpine appealed to our Court.
Calpine argued to us that it was seeking the fee under
“applicable case law,” but we rejected this contention. We
held that courts do not have the authority to create new ways
to authorize the payment of fees from a bankruptcy estate, and

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12
the methods of recovering fees from an estate are limited to
the procedures established by the Bankruptcy Code. We
concluded that a bidder must seek a break-up fee under 11
U.S.C. § 503(b), which, so far as germane here, permits
payment of post-petition administrative expenses for the
“actual, necessary costs and expenses of preserving the
estate.” We also held that there was no “compelling
justification for treating an application for a break-up fee and
expenses under § 503(b) differently from other applications
for administrative expenses under the same provision.”
O’Brien, 181 F.3d at 535.
Therefore, we indicated that in considering requests for
break-up fees, we would apply the general standard used for
all administrative expenses—“the allowability of break-up
fees, like that of other administrative expenses, depends upon
the requesting party’s ability to show that the fees were
actually necessary to preserve the value of the estate.” Id.
Focusing specifically on break-up fees, we noted that it was
permissible to offer a break-up fee and reimbursement for
expenses to induce an initial bid, provided the allowance of
the fee does not give an advantage to a favored purchaser over
other bidders by increasing the cost of acquisition. We also
indicated that a break-up fee is not “necessary to preserve the
value of the estate” when the bidder would have bid even
without the break-up fee. Id. (citing Bruce A. Markell, The
Case Against Breakup Fees in Bankruptcy, 66 Am. Bankr.
L.J. 349, 359 (1992)).
Applying this standard to the facts in O’Brien, we
found that Calpine would have made its bid even without the
assurance of a break-up fee, as it indeed did. For this reason,

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In its brief Kelson argues that the “APA was necessary to9
preserve the value of the estate, as it enabled the Debtors to
resolve a dispute with the pre-petition secured lenders with
respect to the use of cash collateral.” Appellant’s br. at 19.
While we do not doubt that a sale to Kelson would have
resolved the cash collateral dispute inasmuch as all the Debtors’
creditors were to be paid in full from the sale proceeds, the issue
before us is quite different from the need to placate the Debtors’
creditors, as we are concerned with whether the $15 million
break-up fee was necessary to preserve the value of the estate,
a matter relating to Kelson’s bid rather than to the consequences
of a sale of the plant such as the satisfaction of the Debtor’s
creditors. As we explain below, Kelson entered into the APA
13
among others, we found that an award of a break-up fee was
not necessary to preserve the value of the estate and we
affirmed the order of the District Court and thus the order of
the Bankruptcy Court denying allowance of the fee.
B. Application of O’Brien To This Case
Under O’Brien, we must decide whether an award of a
break-up fee was necessary to preserve the value of the
Debtors’ estate. In this regard, we recognize that it could be
argued that in either or both of two ways a break-up fee could
have preserved the value of the estate. First, the opportunity
to obtain a break-up fee could have induced Kelson to make
its bid before the Bankruptcy Court ordered the auction, and
second, the provision for a break-up fee may have been
necessary to induce Kelson to adhere to its bid after the Court
ordered the conducting of the auction.9

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without the assurance that it would receive a break-up fee if it
was unable to acquire the plant.
In this case, Kelson was compensated fully for its first-bid10
expenses when the Bankruptcy Court awarded it $1,210,257 for
that purpose.
14
1. Was a break-up fee needed to induce the
first bid?
Kelson’s bid undoubtedly provided a benefit to the
estate by establishing a minimum price and a complete set of
offer terms and, in fact, the Bankruptcy Court required that
any competing bid exceed Kelson’s bid by at least $5 million.
Indeed, it is plausible to believe that an initial bid, ordinarily
or perhaps even always, will provide a benefit to an estate
because it will establish a floor price for the assets to be sold.
But we have to decide a different question, i.e., was an award
of a break-up fee necessary to produce this benefit and
preserve the value of the estate?
We recognize that the first bidder in a bankruptcy sale
necessarily takes a risk at least to the extent of investing the
time, money and energy needed to produce its bid.10
Nevertheless, while we understand that the first bidder may be
motivated in part to submit its bid by the possibility that it
will receive a break-up fee, it does not follow from that
motivation that the bidder will withdraw its bid, pass up on
the opportunity to acquire the asset to be sold, and nullify its
work in preparing its bid if a court, when ordering that there
be an auction of assets, declines to authorize a break-up fee to

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15
be paid to the initial bidder. Surely O’Brien makes that clear
because even though Calpine had made its bid contingent on
the award of a break-up fee, it competed at the auction after
the Bankruptcy Court rejected the request for a break-up fee.
Here, however, Kelson argues that the provision of a
break-up fee was necessary to entice it to bid, but the facts do
not support this argument. We are satisfied that it is clear
beyond doubt that Kelson did not condition its bid on the
presence of a provision for a break-up fee, although it did
condition the bid on the Debtors’ promise to seek authority to
pay it such a fee. Thus, section 8.1(d) of the APA provided
that “Sellers shall . . . file a bidding procedures motion with
the Bankruptcy Court . . . seeking the entry of an order
approving the bid protections.” App. at 288 (emphasis
added). These bid protections included the break-up fee.
Accordingly, there is no escape from the fact that Kelson did
make its bid without the assurance of a break-up fee, and this
fact destroys Kelson’s argument that the fee was needed to

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In its brief Kelson asserts that “the Debtors improperly claim11
that they only had an obligation to file a motion seeking
approval of the Bid Protections and the Break-Up Fee.
According to the Debtors, this means that the Break-up Fee was
always ‘unnecessary,’ thus making this contractual obligation
illusory.” Appellant’s br. at 5. Kelson argues that under New
York law which controls the interpretation of the APA “a
contract cannot be interpreted to create an illusory obligation.”
Id. We reject this argument because there was nothing illusory
about the Debtors’ obligation to seek authority for a break-up
fee as they did. Kelson knew or should have known that the
Debtors could urge the Bankruptcy Court to allow the fee but
they could not command it to do so. Thus, Kelson’s contention
in its brief that the “Debtors were required to obtain approval
[of] the Break-Up Fee, as a condition to Kelson’s bid,” id. at 25
(emphasis added), is plainly wrong.
16
induce it to bid. Rather, the mere possibility of the payment11
of a break-up fee was sufficient for that purpose.
2. Was a break-up fee needed to preserve
Kelson’s bid?
The record suggests that although an assurance of a
break-up fee may not have been needed to induce Kelson’s
bid, it nevertheless could have been useful to assure that
Kelson adhered to its bid rather than abandoning its attempt to
purchase the plant in the event that the Bankruptcy Court
required an auction for its sale. A break-up fee certainly
provides a benefit to an estate if a bidder remains committed
to a purchase, though, as we have explained, we see no reason

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17
to believe that bidders who already have made a full and
complete bid necessarily will abandon their efforts to obtain
an asset without an assurance of a break-up fee. In this case,
the Bankruptcy Court believed that the provision for the fee
would deter other possible purchasers from bidding for the
plant and would outweigh any possible benefit achieved for
the estate by keeping Kelson committed to the purchase
through the provision for the break-up fee.
Clearly, the Bankruptcy Court was faced with a
difficult choice. If the Court denied the break-up fee, then
Kelson might abandon the purchase, as it supposedly did. If
another suitable bid had not materialized and Kelson had
walked away permanently from the purchase, the estate would
have been harmed severely by the denial of a break-up fee.
To avoid this result, the Court could have granted a break-up
fee to secure Kelson’s existing bid. Nevertheless, the Court
decided that a $15 million break-up fee was not necessary for
the protection of the estate. This decision, which we view
from the Court’s perspective on March 18, 2008, was justified
by (1) Fortistar’s assertion that it planned to continue bidding,
(2) the binding language of the APA, and (3) the logical belief
that Kelson would not abandon a fully negotiated agreement
if no other bidder materialized. Though we do not decide the
case on the basis of our knowledge of what happened after the
Court denied the fee, as we decide the case on the basis of the
record as of March 18, 2008, when the order from which
Kelson appealed to the District Court was entered, there is no
escape from the fact that the Bankruptcy Court’s decision was
shown to be correct when Fortistar placed a substantially
higher bid for the assets.

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18
3. Conclusion
We cannot say that the Bankruptcy Court abused its
discretion in its application of the O’Brien standard. Though
the allowance of a break-up fee might have benefitted the
estate, Kelson made its bid before the auction knowing that it
might not receive a break-up fee, and a retroactive grant of a
break-up fee could not have induced a bid that Kelson already
had made. Though, as we have made clear, the estate might
have benefitted if on March 18, 2008, the Bankruptcy Court
had provided for a break-up fee to secure Kelson’s adherence
to its earlier bid, the Court found that the potential harm to the
estate that a break-up fee would cause by deterring other
bidders from entering the bid process outweighed that benefit.
We cannot say that the Bankruptcy Court abused its discretion
in reaching its result.
C. Application of the Business Judgment Rule
Instead of O’Brien
Kelson bases a substantial portion of its argument on
the circumstance that none of the Debtors’ creditors or equity
holders objected to its request for a break-up fee. Kelson
points out that the business judgment rule would have been
applied to the Debtors’ decision to support the award of a
break-up fee if the Debtors had not been in bankruptcy. We
agree that the Bankruptcy Court should not lightly dismiss
such a consensus among the creditors, but we are not willing
to conclude that the presence of unanimity among creditors
should require the Court to decide the matter through the
application of the business judgment rule. Clearly, section
503(b) does not give the Bankruptcy Court the authority to

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Recently in McKenna v. Philadelphia, 582 F.3d 447, 459 n.1312
(3d Cir. 2009), in considering an application for attorney’s fees,
we pointed out that “it should not be overlooked that the
awarding of an attorney’s fee is a judicial action and, regardless
of the parties’ indifference to it, a court need not lend its
imprimatur to an inappropriate order merely because there was
no objection to its entry.” The same principle applies to a
request for administrative expenses in the form of a break-up fee
under section 503(b).
We hasten to note that our comment in O’Brien about the13
applicability of the business judgment rule in a bankruptcy case
was limited to the circumstance of a party seeking an alternative
to section 503(b) as a basis for awarding expenses from the
bankruptcy estate. We could not have meant then, and do not
mean now, that the business judgment rule is irrelevant when a
corporate governance dispute arises in a bankruptcy setting.
Indeed, more recently, in an adversary action brought in
connection with a bankruptcy and in which a plaintiff
challenged the actions of corporate fiduciaries, we recognized
19
award fees solely because there is no objection to them from a
party-in-interest. That section requires that for fees to be
awarded they must be part of “the actual, necessary costs and
expenses of preserving the estate,” and does not suggest that
that standard is met merely because there is no objection to
the application for the fees. Furthermore, the role of the12
business judgment rule is of limited use on this appeal
because in O’Brien we stated that “we conclude that the
business judgment rule should not be applied as such in the
bankruptcy context.” 181 F.3d at 535.13

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that the plaintiff was required to “plead around the business
judgment rule.” In re Tower Air, Inc., 416 F.3d 229, 238 (3d
Cir. 2005).
In its brief Kelson elevates its fundamental fairness argument14
to the level of being a “doctrine.”
20
In declining to apply the business judgment rule we
have not overlooked Kelson’s contention that we should not
consider O’Brien’s rejection of the business judgment rule to
be controlling in this case for the Debtors are solvent and the
“sole affected shareholder has consented to the fee.”
Appellant’s br. at 14-15 n.2. We reject the contention that
O’Brien should not apply because, in providing the
circumstances in which a court may award fees, section
503(b) does not make a distinction depending on the solvency
of the debtor. We cannot rewrite that section to accommodate
Kelson.
D. Kelson’s “Fundamental Fairness” and Estoppel
Arguments
In the District Court, Kelson argued for the first time
that it was entitled to a break-up fee as a matter of
“fundamental fairness,” which Kelson interprets as a type of
unjust enrichment claim. But Kelson did not raise this claim14
in the Bankruptcy Court, and we will not consider new claims
for the first time on appeal. Singleton v. Wulff, 428 U.S. 106,
120, 96 S.Ct. 2868, 2877 (1976). We are aware that Kelson
argues that it did raise its break-up fee claim in Bankruptcy
Court and that it is simply asserting a different basis for the

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21
same claim. See Yee v. City of Escondido, 503 U.S. 519,
534-37, 112 S.Ct. 1522, 1532-33 (1992) (permitting new
argument in support of same claim). But we disagree with its
view of the record for a break-up fee under section 503(b) is
clearly a statutory claim, and a claim for a break-up fee as a
matter of “fundamental fairness” is a claim that can be
predicated only on the common law or a principle of equity.
These statutory and common law or equitable claims, though
seeking the same relief, are discrete, rather than being
different arguments advancing the same claim. See B&T
Masonry Constr. Co. v. Pub. Ser. Mut. Ins. Co., 382 F.3d 36,
40–41 (1st Cir. 2004) (same distinction addressed).
Kelson also argues that the Debtors are estopped from
opposing its appeal because they supported the request for a
break-up fee in Bankruptcy Court. But debtors-in-possession
have a fiduciary duty to maximize the value of the estate,
Official Comm. of Unsecured Creditors of Cybergenics Corp.
v. Chinery, 330 F.3d 548, 573 (3d Cir. 2003), and the Debtors
here argue convincingly that if they adhered to their earlier
position in the face of the changed circumstances they would
harm the estate and violate their fiduciary duty. Overall, we
are satisfied that the Debtors’ opposition to Kelson’s appeal is
not unconscionable, does not undermine the integrity of the
judicial system, and is not made in bad faith. Therefore, we
reject Kelson’s estoppel arguments. In any event, even if we
disregarded the Debtor’s arguments and entertained Kelson’s
appeal on an ex parte basis, we would reach the same result
that we reach today. See supra note 12.

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22
V. CONCLUSION
The Bankruptcy Court did not abuse its discretion
when it concluded that an award of a break-up fee was not
necessary to preserve the value of the estate and accordingly,
we will affirm the District Court’s order of March 31, 2009,
to the extent that it affirmed the order of the Bankruptcy
Court of March 18, 2008, denying authorization to pay the
break-up fee.

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