Sunland, Inc.

UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW MEXICO
In re:
SUNLAND, INC., 	Case No. 7-13-13301 TR
Debtor.
MEMORANDUM OPINION ON HAMPTON FARMS, LLC’S EMERGENCY MOTION
FOR RECONSIDERATION, ETC.
This matter came before the Court on Hampton Farms, LLC’s (“Hampton’s”) Emergency
Motion for Reconsideration of Court’s Order (doc 402), Request for Stay Pending Appeal, Grant
Leave 	for 	Interlocutory 	Appeal, 	and 	for 	Equitable 	Relief, 	doc. 	403 	(the 	“Motion 	for
Reconsideration and Stay”). 	The Motion for Reconsideration and Stay relates to the Court’s
Memorandum Opinion, doc. 401 (“Memorandum Opinion”) and Order Denying Motion to
Approve Sale, Reopening Auction, and Setting Final Hearing on Motion to Sell, doc. 402
(“Order”), both entered March 25, 2014.
By its Motion for Reconsideration and Stay, Hampton seeks the following relief:
a. 	Reconsideration of the rulings set forth in the Memorandum Opinion and
Order;
b. 	An order staying any consummation of the sale to Golden Boy Farms, Ltd.
(“Golden Boy”);
c. 	Leave to file an interlocutory appeal of the Order; and
d. 	For the Court to exercise its equitable powers and award Hampton
$500,000 from the proceeds of the sale of estate assets to Golden Boy.
The Court held a final hearing on the Motion for Reconsideration and Stay on March 26,
2014. After considering the Motion for Reconsideration and Stay and the arguments of counsel,
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and being otherwise sufficiently informed, the Court denies the requested relief for the reasons
set forth below.
I. 	BACKGROUND AND PROCEDURAL HISTORY
On October 9, 2013, Sunland, Inc. filed a voluntary petition under Chapter 7 of the
Bankruptcy Code. 	Clarke C. Coll was appointed and is duly qualified and acting Chapter 7
trustee in this case (“Trustee”). During the months following the bankruptcy filing, the Trustee
met with a number of potential buyers in an effort to sell most of the tangible assets of the estate
(the “Acquired Assets”).
On January 31, 2014, the Trustee filed a Motion For Orders (A) Authorizing Sale of
Assets Free and Clear of All Liens, Claims and Interests, Subject to Higher and Better Offers,
(B) Establishing Bidding Procedures, 	(C) Approving Break-Up 	Fee, 	and 	(D) Approving
Surcharge For Trustee’s Fees, Commission, And Costs (the “Motion”). 	By his Motion, the
Trustee sought to establish a procedure under which he would sell the Acquired Assets to Ready
Roast Nut Company, LLC (“Ready Roast”) or any successful bidder at an auction of the assets.
Under the proposed procedures, if the Trustee received one or more “Qualified Bids” from
parties other than Ready Roast, then the Trustee would conduct an auction of the Acquired
Assets and sell them to the high bidder, subject to Court approval. The Trustee sent notice of the
Motion, including information regarding the auction, to all parties who expressed an interest in
purchasing the Acquired Assets. He also advertised the sale in several national newspapers and
trade journals.
From the time he filed the Motion until now, the Trustee has always emphasized the need
for a speedy sale of the Acquired Assets. 	Per the terms of the Ready Roast agreement, the
Trustee required a closing date of March 28, 2014. Hampton and Golden Boy all agreed to this
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deadline.
On March 5, 2014, Hampton submitted a Qualified Bid to purchase the Acquired Assets.
Hampton was the only party to submit such a bid. 	Shortly thereafter, the Court entered a
stipulated 	order 	authorizing 	the 	sale 	of 	the 	Acquired 	Assets 	and 	adopting the 	Bidding
Procedures attached to the Motion (the “Sale Order”). 	The Bidding Procedures set forth the
requirements for bidding on the Acquired Assets at auction. 	The Sale Order and Bidding
Procedures make clear that any sale is subject to Court approval, and that such approval must
include a finding that the successful bid provides the highest or otherwise best value for the
Acquired Assets and is in the best interest of the estate.
An auction of the Acquired Assets was conducted on March 20, 2014. Ready Roast and
Hampton participated in the auction. 	A total of 14 bids were made by Ready Roast and
Hampton, beginning at $17,475,000. Hampton was the high bidder, with a bid of $20,050,000.
Ready Roast was the back-up bidder, with a bid of $20,000,000. After the auction, Hampton and
Ready Roast each executed amendments to their respective asset purchase agreements to amend
the purchase price consistent with the auction.
The Court held a hearing on March 21, 2014 to determine whether to approve the sale of
the Acquired Assets to Hampton for $20,050,000. 	Shortly before the hearing the Trustee
received a telephone call from Paul Henderson of Golden Boy, offering to buy the Acquired
Assets on the same terms and conditions as Hampton, for $25,000,000. After hearing arguments
of counsel and the representations of the Trustee, the Court continued the hearing until March
24, 2014.
At the continued hearing, the Court heard testimony from the Trustee and a representative
of Golden Boy, admitted several exhibits into evidence, and heard extensive arguments of
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counsel. 	The Trustee sought guidance from the Court as to whether he was bound to proceed
with the Hampton offer, or was free to pursue a sale to Golden Boy for $25,000,000.
The morning of March 25, 2014, the Court entered the Memorandum Opinion and Order
disapproving the sale to Hampton for $20,050,000, ruling that the sale to Hampton could not be
approved as being in the best interests of the estate. The Court reopened the auction for further
bidding among Golden Boy, Hampton, and Ready Roast, with Golden Boy’s opening bid of
$25,000,000. Hampton filed the Motion for Reconsideration and Stay later that afternoon.
At the reopened auction, Golden Boy was the high bidder at $26,000,000, topping
Hampton’s bid of $25,100,000.
II. 	DISCUSSION
A. 	The Motion for Reconsideration.
Depending on when the motion is filed and the type of relief sought, courts construe
motions to reconsider under either Fed.R.Civ.P. 59(e) (motion to alter or amend a judgment) or
Fed.R.Civ.P. 60(b) (relief from judgment). 	Commonwealth Property Advocates, LLC v.
Mortgage Electronic Registration Systems, Inc., 680 F.3d 1194 (10 th Cir. 2011). 	Since the
Motion was filed one day after the Memorandum Opinion and Order were entered, the Court will
construe it as a motion to alter or amend the judgment pursuant to Fed.R.Civ.P. 59, made
applicable to bankruptcy proceedings by Fed.R.Bankr.P. 9023. 	In re McCaull, 2009 WL
185469, *3 (10th Cir. Jan. 26, 2009) (construing Debtor’s motion to reconsider filed within the
fourteen day period prescribed by Rule 9023 as a motion to alter or amend the judgment under
Rule 59); Buchanan v. Sherrill, 51 F.3d 227, 230 n. 2 (10 th Cir. 1995) (“No matter how styled,
we construe a post-judgment motion filed within [14] days challenging the correctness of the
judgment as a motion under Rule 59(e).”).
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To be eligible for relief from a final judgment under Rule 59, the moving party must
show: (1) an intervening change in the controlling law; (2) new evidence previously unavailable
for the Court to consider; or (3) a need to correct clear error or prevent manifest injustice. 	See
Brumark Corp. v. Samson Resources Corp., 57 F.3d 941, 948 (10 th Cir. 1995). Reconsideration
may also be warranted when “the court has obviously misapprehended a party’s position on the
facts or the law, or the court has mistakenly decided issues outside of those the parties presented
for determination.” In re Sunflower Racing, Inc., 223 B.R. 222, 223 (D. Kan. 1998). However,
Rule 59 does not afford parties seeking relief an opportunity to raise new arguments or to
“rehash arguments previously considered and rejected by the court.” Id.
The Motion for Reconsideration and Stay does not present any new arguments, law, or
facts, but instead asks that the Court reconsider its ruling for the reasons explained in Hampton’s
previously filed brief.
The Court carefully considered Hampton’s arguments before it issued the Memorandum
Opinion and Order and concluded that they were not well taken. 	The Court is not inclined to
reconsider those arguments now. The additional legal argument made by Hampton’s counsel at
the final hearing on the Motion for Reconsideration and Stay, while very well presented, did not
add materially to the law the Court had already considered. 	The Court therefore finds that
Hampton’s request for reconsideration should be denied.
B. 	The Motion for Stay Pending Appeal.
Federal Rule of Bankruptcy Procedure 8005 provides that a motion for stay pending
appeal of a decision by a bankruptcy judge must first be made to the bankruptcy judge.
Fed.R.Bankr.P. 8005. The purpose of a stay pending appeal is to preserve the status quo until the
appeal is decided. Tri-State Truck Ins., Ltd. v. First Nat’l Bank of Wamego, 2011 WL 4553071,
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*1 (D. Kan. 2011) (citing McClendon v. City of Albuquerque, 79 F.3d 1014, 1020 (10 th Cir.
1996)). In considering a motion for stay pending appeal, the Court considers the following four
factors: “(1) whether the stay applicant has made a strong showing that he is likely to succeed on
the merits; (2) whether the applicant will be irreparably injured absent a stay; (3) whether
issuance of the stay will substantially injure the other parties interested in the proceeding; and (4)
where the public interest lies.” 	Nken v. Holder, 556 U.S. 418, 426 (2009) (quoting Hilton v.
Braunskill, 481 U.S. 770 (1987)).
The party seeking a stay pending appeal must satisfy all four factors to obtain a stay
pending appeal. 	See Moore v. Tangipahoa Parish School Bd., 2013 WL 141791, *20 (5th Cir.
Jan. 14, 2013); In re Sunflower Racing, Inc., 225 B.R. 225, 227 (D. Kan. 1998). Factors one and
two -- likelihood of success1 and irreparable harm -- are the most critical. Nken, 556 U.S. at 434
(explaining that “[t]he first two factors of the traditional standard are the most critical.”).
1. 	Whether Hampton Has Made a Showing it is Likely to Succeed on
the Merits. This factor weighs against Hampton. As an unsuccessful bidder, Hampton may lack
standing to challenge the Court’s approval of the sale on appeal. 	See, e.g., In re Broadmoor
Place Investments, L.P., 994 F.2d 744, 746 n. 2 (10th Cir.1993) (noting that “absent some other
meritorious ground for appeal … an unsuccessful bidder and not an ‘aggrieved person’” with
standing to appeal an order approving a sale of assets); Kabro Assocs. of West Islip, LLC v.
Colony Hill Assocs. (In re Colony Hill Assocs.), 111 F.3d 269, 273 (2nd Cir. 1997) (recognizing
1 If the moving party establishes that the other three factors “tip decidedly in its favor,” the “likelihood of
success” factor for obtaining a stay pending appeal is “somewhat relaxed.” F.T.C. v. Mainstream Mktg.
Services., Inc., 345 F. 3d 850, 852 (10th Cir. 2003); F.T.C. v. Foster, 2007 WL 3023158, at *1 (10th Cir.
2007). 	Under the relaxed standard, the movant can satisfy the “likelihood of success” requirement by
showing that “questions going to the merits [are] so serious, substantial, difficult, and doubtful as to make
the issue ripe for litigation and deserving of more deliberate investigation.” 	Mainstream Mktg. at 853
(internal quotations omitted). Because the Court finds that Hampton has failed to demonstrate that most
of the other factors tip in its favor, the Court need not apply this more relaxed standard to the likelihood
of success requirement.
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that, although not an absolute rule, “an unsuccessful bidder ... usually lacks standing to challenge
a bankruptcy court's approval of a sale transaction.”).2 Given the number of circuit court
decisions involving somewhat similar facts, Hampton could be found by an appellate court to
come within an exception to the general rule. 	Nevertheless, the standing issue would present a
serious procedural hurdle in any appeal, complicating the appeal and diminishing Hampton’s
chances of success.
Even if Hampton has standing, the Court is not convinced Hampton is likely to prevail.
The Court carefully reviewed the testimony of the witnesses presented at the March 24, 2014
hearing, reviewed the parties’ briefs, and conducted a thorough, independent review of the case
law in this area. 	The Court believes it followed Tenth Circuit case law to the extent it gave
guidance in the matter, and relied upon well-reasoned circuit court opinions from other circuits
to fill in any gaps in current Tenth Circuit law.
Stripped to its essence, Hampton’s position is that it wants to buy the Acquired Assets for
almost $6 Million less than Golden Boy. Its sole ground for insisting on this result (which would
be terrible from the estate’s perspective) is that Golden Boy’s offer arrived a day after the
auction. 	Since the auction procedures specified from day one (a specification that Hampton
never objected to) that any successful bid was conditioned on Court approval based on a finding
of “highest or otherwise best value,” it is not clear what position Hampton can legitimately
pursue on appeal.
Of course the appellate courts could disagree with the Court’s decision, but the Court
2 Potential bidders may have standing to object to a sale under § 363 if they were not given proper notice
or if they challenge the intrinsic structure of the sale because of fraud, mistake, or unfairness. See Colony
Hill Associates, 111 F.3d at 273 (potential bidders have standing to challenge sale where debtor fails to
give proper notice of the sale); In re Moran, 566 F.3d 676, 681 (6th Cir. 2009) (An exception to the
general rule that frustrated bidders lack standing to object to a sale “may exist where [the]… bidder
challenges the intrinsic structure of the sale because it is tainted by fraud, mistake, or unfairness.”).
Those circumstances do not exist here.
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finds that, at a minimum, it is more likely than not the decision will be upheld on appeal.
2. 	Whether Hampton Would Be Irreparably Injured Absent a Stay. Hampton
has a strong argument that it will be irreparably harmed. 	Given § 363(m), without a stay the
Acquired Assets will soon be sold to Golden Boy, placing them out of Hampton’s reach were it
to succeed on appeal. 	Any appeal by Hampton therefore could become moot. 	See e.g., In re
C.W. Min. Co., 740 F.3d 548 (10 th Cir. 2014) (discussing how appeals of § 363(m) orders may
run into statutory and equitable mootness issues).
On the other hand, the asset purchase agreements signed by Hampton (and Ready Roast
and Golden Boy) do not give buyers the right to purchase the Acquired Assets if the Trustee
defaults. 	Instead, the agreements allow the Trustee to simply return the buyer’s earnest money
as their “sole and exclusive remedy.” 	Thus, even if Hampton prevailed on appeal the Trustee
would not be required to sell the property to Hampton, and Hampton would have no damages
claim or claim for specific performance. 	This damages limitation provision undercuts to a
significant degree Hampton’s irreparable harm argument.
Notwithstanding Hampton’s damages limitation problem, denying the stay request
reduces Hampton’s chances of owning the Acquired Assets if it were to prevail on appeal. The
Court therefore finds that the factor addressing irreparable harm weighs in Hampton’s favor.
3. 	Whether Issuance of the Stay Would Substantially Injure the Other
Parties. Granting a stay would substantially injure the Trustee, creditors, Golden Boy, and other
parties in interest. An appeal could take years, during which time the Sunland peanut processing
plant could sit idle, declining in value. 	The peanut inventory, with a value between $2 Million
and $5 Million, would become worthless. Local farmers could rotate to other crops or find other
buyers for their peanut production. 	Significant expenses would continue to accrue, including
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interest, insurance, pest and rodent control, and security expenses. By the time all appeals were
exhausted, the value of the Acquired Assets could go from $25 Million to a fraction of that
amount.
Hampton argues that there would be no significant loss of value because, if Golden Boy
terminated its interest due to a stay,3 Hampton would then purchase the Acquired Assets for
$25,100,000 as the back-up bidder and pursue the appeal. This argument is entirely speculative;
no one can know when or if Golden Boy would terminate the agreement, or what Hampton
might or might not do if such a termination occurred. Further, the argument proposes a scenario
that seems to turn the stay pending appeal from a shield into a sword. 	Finally, the loss to the
Trustee would be $900,000 at a minimum, a significant sum.
Hampton also argued that the Court should enter a stay until at least April 24, 2014 to
allow it to obtain emergency review of the Court’s decision. The Court does not believe there is
any realistic chance of obtaining appellate review that quickly. 	Further, in all likelihood the
party losing before the district court (or bankruptcy appellate panel) would seek Tenth Circuit
review. To be meaningful, any stay would have to be lengthy.
Overall, this factor weighs against Hampton.
4. 	Where the Public Interest Lies. 	While there is a strong public interest in
upholding the integrity of judicial sales,4 there is also a strong public interest in paying creditors
as much as possible in bankruptcy cases. 	Furthermore, in this case there is a strong public
interest in completing a sale of the Acquired Assets as soon as possible, for the benefit of the
3 The purchase agreement signed by the Trustee and Golden Boy provides that Golden Boy is obligated to
close the transaction if closing can occur before April 24, 2014.
4 The Court does not believe the integrity of judicial sales was compromised in this case. The bidding
procedures and sale order required Court approval of any sale, which was to be based on a finding that the
proposed sale “will provide the highest or otherwise best value for the Acquired Assets and is in the best
interests of the estate.” Golden Boy’s unexpected $25 Million upset bid, which was made in good faith,
prevented the Court from making such a finding in connection with Hampton’s $20,050,000 bid.
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area farmers, local vendors, and others in the Portales area. Sunland was a substantial economic
presence in the Portales area and employed many area residents. Entry of a stay would prolong
the economic suffering caused by Sunland’s shut-down last August. 	On balance, the public
interest strongly favors completing the sale immediately.
In summary, one factor favors Hampton and three factors favor the Trustee. Hampton’s
request for a stay must therefore be denied.
C. 	Leave for Interlocutory Appeal.
Hampton asks for leave from this Court to file an interlocutory appeal. This request must
be directed to the District Court or the Tenth Circuit Bankruptcy Appellate Panel. 	See In re
Gregory Rockhouse Ranch, 2008 WL 394984 (Bankr. D.N.M. 2008) (request for leave to appeal
must be directed to the bankruptcy appellate panel); In re Countrywide Home Loans, Inc., 387
B.R. 467, 470 (Bankr. W.D. Pa. 2008) (same); In re Frascella Enterprises, Inc., 388 B.R. 619
(Bankr. E.D. Pa. 2008) (bankruptcy court forwarded motion for leave to file interlocutory appeal
to the district court for ruling).
Furthermore, since the Court’s order granting the Trustee’s motion to approve the sale of
the Acquired Assets to Golden Boy for $26,000,000 is a final, appealable order, the issues
Hampton wishes to take up on appeal can be addressed in connection with that order.
D. 	Equitable Relief.
Finally, Hampton seeks an award of $500,000, to be paid from of the proceeds of the sale
of the Acquired Assets. 	In order to seek such relief, Hampton should file an application for
administrative expense claim. The Court would adjudicate any such claim in the normal course
of business, and takes no position at this time whether the application would have merit.
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III. 	CONCLUSION
As the request for reconsideration makes no new arguments, it will be denied. 	The
request for leave to file an interlocutory appeal must be directed to the appellate court and will
therefore be denied without prejudice. 	The request for an award of $500,000 is denied without
prejudice to Hampton filing an application for administrative expense.
As to Hampton’s request for a stay, if the Court could stay the sale of the Acquired
Assets without harming the estate, Golden Boy, creditors, or the public interest, it would
seriously consider doing so, to preserve Hampton’s right to an appeal. It is clear, however, that a
stay, even of short duration, would significantly harm all interested parties, and possibly even
harm Hampton as well, since the assets it bid on would decline in value. 	For this reason, and
also because the Court does not believe Hampton is likely to succeed in any appeal, the Court
cannot grant Hampton’s request for a stay pending appeal.
A separate order will be entered consistent with this Memorandum Opinion.
_______________________________________
Hon. David T. Thuma
United States Bankruptcy Judge
Entered March 27, 2014.
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Copies to:
Chris Pierce
2632 Mesilla St. NE
Albuquerque, NM 87110
George D. Giddens, Jr
10400 Academy Rd NE, # 350
Albuquerque, NM 87111
Clarke C. Coll
P.O. Box 2288
Roswell, NM 88202
Alice N. Page
P.O. Box 608
Albuquerque, NM 87103
Thomas D. Walker
500 Marquette Ave. NW, #650
Albuquerque, NM 87102
Patricia A. Bradley
6500 Jefferson St. NE, #260
Albuquerque, NM 87109
Paul M. Fish
P.O. Box 2168
Albuquerque, NM 87103-2168
John J. Hall
600 Washington Ave. Suite 2500
St. Louis, MO 63101
Gail Gottlieb
P.O. Box 1945
Albuquerque, NM 87103
Ed Mazel
201 3d Street NW, #505
Albuquerque, NM 87102
Victor Carlin
P.O. Box 27047
Albuquerque, NM 87125
Roderick W. O’Donoghue
2601 Oberlin Rd., Ste. 100
Raleigh, NC 27608
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