NBR Shoppes, LLC et al v. SB Capital Group, LLC et al
ORDER. The Decision of the Bankruptcy Court awarding a breakup fee in the amount of $175,476.45 to SB Capitol is AFFIRMED. SB Captiol's request for an award of attorney's fees for defending this appeal is DENIED. The Clerk of the Court is directed to enter judgment accordingly, transmit a copy of this Order and Judgment to the Clerk of the Bankruptcy Court, terminate the appeal and close the file. Signed by Judge Sheri Polster Chappell on 9/15/2016. (LMF)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
FORT MYERS DIVISION
IN RE: ANTARAMIAN PROPERTIES,
LLC and ANTARAMIAN FAMILY, LLC
NBR SHOPPES, LLC, NAPLES BAY
FINANCIAL HOLDINGS, LLC, F. FRED
PEZESHKAN, RAYMOND SEHAYEK
and IRAJ ZAND,
Case No: 2:15-cv-289-FtM-38
SB CAPITAL GROUP, LLC and
This matter comes before the Court on Appellants, NBR Shoppes, LLC, Naples
Bay Financial Holdings, LLC. Fred Pezeshkan, Iraj Zand, and Raymind Sehayek's
(collectively NBR) Appeal of the Bankruptcy Court's Order Awarding Breakup Fee to SB
Capitol Group for Expenses Incurred as a Stalking Horse (Doc. #6) filed on June 16, 2015.
The Appellees, SB Capitol Group, LLC and Gulf Shore Capitol Partners, LLC collectively
(SB Capitol) filed their Response in Opposition (Doc. #9) on July 16, 2015. NBR filed a
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Reply Brief (Doc. #10) on July 30, 2015. The Appeal is fully briefed and ripe for the
SB Capitol initially agreed to purchase the property at issue from the Debtors for
$22.5 million pursuant to Section 23 of the Bankruptcy Code 11 U.S.C. § 1123. As part
of the transaction SB Capitol proposed a breakup fee of $450,000 and an expense
reimbursement of up to $150,000 if the Debtors sold the property to another party via an
On February 17, 2015, the Debtors and SB Capitol presented that plan to the
Bankruptcy Court. However, two days later, the Debtors filed a motion to sell the assets
and provide stalking horse protection to CPC Acquisitions, LLC (CPC). While CPC
offered the same purchase price as SB Capitol, CPC agreed to a much lower breakup
fee of $225,000. On February 20, 2015, SB Capitol informed the Bankruptcy Court that
it would improve its initial proposal. SB Capitol filed its improved Stalking Horse Motion
with the Bankruptcy Court on February 24, 2015.
A hearing was conducted by the Bankruptcy Court on SB Capitol’s improved
stalking horse proposal. On February 25, 2015, the Bankruptcy Court issued an Order
approving SB Capitol’s designation as the stalking horse bidder based upon SB Capitol’s
letter of intent dated February 23, 2015, and SB Capitol’s proposed Investment
Agreement. In re Antaramian Properties, 9:14-bk-10145 (Doc. #390). In making its
determination that SB Capitol should be the designated as the stalking horse bidder, the
Bankruptcy Court found that SB Capitol’s bid was the highest and best offer available. Id.
The Bankruptcy Court continued that:
Subject to the conditions set forth in the Amended Bid
Procedures and in accordance with the Amended Bid
Procedures, authorized to pay to SB Capital Group an
expense reimbursement payment in the amount of up to
$200,000 (the “Expense Reimbursement”) if SB Capital
Group does not withdraw its Stalking Horse Offer before the
expiration of the Due Diligence Period and the Inspection
Period in the event that the Closing does not occur due to
either (1) the Final Sale Order not being entered by the
Bankruptcy Court and any Alternative Transaction is
consummated or (2) a breach or default by Seller under the
Stalking Horse Purchase Agreement; provided, however, that
if the Alternative Transaction is consummation of the Creditor
Plan, SB Capital shall not be entitled to the Expense
Reimbursement, unless the Creditor Plan Proponents amend
the Creditor Plan to increase the economic value currently
offered under the Creditor Plan to any claimant, class of
claimants, or interest holders, in which event, and subject to
the other conditions in the Amended Bid Procedures, SB
Capital shall be entitled to the Expense Reimbursement.
Id. (emphasis in original).
The Bankruptcy Court specifically noted that the Stalking Horse Motion did not
seek the approval of SB Capitol’s Investment Agreement and the Bankruptcy Court made
no determination in that regard. Id. at n.4. Instead, the Bankruptcy Court gave SB Capitol
up to and including March 6, 2015, to submit a sales agreement. That date was later
enlarged up to and including March 9, 2016. The Debtors elected not to enter into the
transaction with SB Capitol and instead entered into an agreement with NBR. Based on
the protections granted it in the Stalking Horse Protection Order, SB Capital filed its
Motion for Payment of Expense Reimbursement, seeking expense reimbursement of
expenses totaling $197,427.29. While the Debtors agreed that SB Capital Group was
entitled to expense reimbursement, NBR, filed an objection to the SB Capitol’s
A hearing was held on the reimbursement issue on April 1, 2015. The Bankruptcy
Court announced its ruling on April 14, 2015. In its ruling finding in favor of SB Capitol,
the Bankruptcy Court found that that SB Capital Group was entitled to expense
reimbursement, but not in the full amount requested. The Bankruptcy Court adjusted
downwards the hourly fee rates requested by SB Capital Group’s attorneys and capped
expenses for meals.
On April 25, 2015, the Bankruptcy Court ordered the Plan
Proponents of approved plan to pay SB Capitol, as the stalking horse bidder, a breakup
fee of $175,476.45 for expenses in its failed purchase attempt. NBR subsequently filed
the instant appeal of the Bankruptcy Court’s Order granting the breakup fee.
STANDARD OF REVIEW
Pursuant to 28 U.S.C. § 158(a). The United States District Court functions as an
appellate court in reviewing decisions of the United States Bankruptcy Court. In re Fish,
2013 WL 1104884, *2 (M.D. Fla. March 18, 2013) (citing In re Colortex Indus., Inc., 19
F.3d 1371, 1374 (11th Cir.1994)). This Court reviews de novo the legal conclusions of
the bankruptcy court. In re Fish, 2013 WL 1104884 at *2 (citing In re JLJ, Inc., 988 F.2d
1112, 1116 (11th Cir.1993)).
The standard of review employed by this Court in reviewing the bankruptcy court's
findings of fact is the clearly erroneous standard of review described in Federal Rule of
Bankruptcy Procedure 8013: “Findings of fact, whether based on oral or documentary
evidence, shall not be set aside unless clearly erroneous, and due regard shall be given
to the opportunity of the bankruptcy court to judge the credibility of the witnesses.” In re
Fish, 2013 WL 1104884 at *2 (citing In re Thomas, 883 F.2d 991, 994 (11th Cir.1989)). A
finding of fact is clearly erroneous when, “although there is evidence to support it, the
reviewing court on the entire record is left with the definite and firm conviction that a
mistake has been committed.” Crawford v. W. Elec. Co., Inc., 745 F.2d 1373, 1378 (11th
Cir.1984) (citing United States v. United States Gypsum Co., 333 U.S. 364, 68 S. Ct. 525,
92 L. Ed. 746 (1948)).
NBR appeals the decision of the Bankruptcy Court arguing: (1) the Bankruptcy
Court erred in awarding SB Capitol a breakup fee where SB Capitol never submitted a
definitive, written proposal to acquire Debtors’ asset; (2) alternatively assuming that SB
Capitol’s letter of intent is deemed a definitive, written proposal, the Bankruptcy Court
committed reversible error in awarding the breakup fee because SB Capitol’s plan did not
increase the economic value of the treatment of any creditor, class of creditor or equity
security holders over the confirmed plan; and (3) if the Bankruptcy Court correctly
awarded the breakup fee to SB Capitol, the breakup fee itself was unreasonable.
(1) Whether the Bankruptcy Court Erred in Awarding SB Capitol a Breakup Fee
NBR argues that it was error for the Bankruptcy Court to award a breakup fee to
SB Capitol because SB Capitol never entered into a definitive purchase agreement. SB
Capitol avers that a binding agreement is not necessary to award a breakup fee.
A breakup fee is a “fee paid by a seller to a prospective purchaser in the event that
a contemplated transaction is not consummated.” In re Dorado Marine, Inc., 332 B.R.
637, 639 (Bankr. M.D. Fla. 2005) (quoting Calpine Corp. v. O'Brien Envtl. Energy, Inc. (In
re O'Brien Envtl. Energy, Inc.), 181 F.3d 527, 528 (3d Cir.1999)). The fee is intended to
compensate the bidder for the time, effort, and risk of being the stalking horse, and to
encourage the bidder to do the necessary due diligence with the assurance that its efforts
will be compensated if it is unsuccessful. Id. at 535. In a normal case, a debtor and a
prospective bidder agree on certain bid procedures, including a breakup fee if the parties
feel it is necessary, and present the court with a motion requesting approval of those
procedures. In re Dorado Marine, Inc., 332 B.R. at 639. If the court approves the fee,
then if the conditions precedent are met, and the bidder is unsuccessful, the fee is paid.
While NBR avers that a breakup fee cannot be paid to SB Capitol because there
was no binding purchase agreement, the terms and conditions of the Bankruptcy Court’s
Stalking Horse Protections Order did not require a binding purchase agreement for the
breakup fee to be paid. The Bankruptcy Court directed the Parties as follows:
The Stalking Horse Offer shall be further memorialized by a
more definitive purchase and sale agreement among the
Debtors and the Stalking Horse Bidder similar to that
appended to the Letter of Intent (the “Stalking Horse Purchase
Agreement”), which the Debtors shall file with the Bankruptcy
Court promptly upon its execution (to occur on or before
March 6, 2015).
In re Antaramian Properties, 9:14-bk-10145 (Doc. #390, p.6). The Bankruptcy Court
specifically noted that the Stalking Horse Motion did not seek the approval of SB Capitol’s
Investment Agreement and the Bankruptcy Court made no determination in that regard.
Id. at p.3, n.4. The Bankruptcy Court found SB Capitol’s Letter of Intent and Investment
Agreement were sufficient to invoke stalking horse protections for SB Capitol.
NBR argues that while the Bankruptcy Court did not consider that a final
agreement was not in place when it granted stalking horse protections to SB Capitol, the
Court did set a deadline for such an agreement to be in place. The Bankruptcy Court did
indeed direct SB Capitol to file a purchase and sales agreement by March 6, 2015. SB
Capitol moved the Court for an extension of time to file the sales agreement, which the
Court granted giving SB Capitol up to March 9, 2015, to file. However, on March 9, 2015,
NBR and the other plan proponents filed their Joint Plan of Reorganization (Joint Plan)
for the properties. The Joint Plan rejected SB Capitol’s offer and accepted the alternative
transaction proposed by NBR. Id. (Doc. #413). The Debtors terminated negotiations with
SB Capitol in favor of an alternative bidder on the day SB Capitol’s sales agreement was
due. As such, a binding purchase agreement could not be finalized on March 9, 2015,
because the deal with SB Capitol was cancelled by NBR and the Joint Plan proponents.
Furthermore, NBR recognized in the March 9, 2015 Joint Plan that SB Capitol
would be entitled to breakup fees due to the fact that an alternative transaction was
accepted as part of the new Joint Plan. The Joint Plan states in pertinent part: “The Plan
Proponents estimate that the Plan Cash and Cash on Hand shall be sufficient to pay the
following . . . Any Break Up Expenses to SB Capitol to the extent Allowed by the
Bankruptcy Court.” Id. at p.2.
Since a final purchase agreement was not a condition precedent in the Bankruptcy
Court’s Stalking Horse Protection Order, and the Debtors rejected the Stalking Horse bid
submitted by SB Capitol by accepting the Joint Plan’s alternative transaction, the
Bankruptcy Court did not commit an error by awarding SB Capitol a breakup fee.
Whether SB Capitol’s Plan Increased the Economic Value
NBR argues that the Joint Plan did not increase the economic value to any creditor,
class of creditors or equity security holders. NBR avers that SB Capitol cannot receive a
breakup or expense fee because the Joint Plan did not improve the economic value for
the Plan Proponents and creditors over the economic value of the initial plan offered by
SB Capitol. SB Capitol argues that NBR’s argument is precluded by res judicata because
during the confirmation of the Joint Disclosure Statement for the Joint Plan NBR argued
in favor of the economic benefits of the Joint Plan over the initial plan sponsored by SB
NBR’s argument that the Joint Plan’s economic value is actually less than the SB
Capitol’s plan is without merit. The affidavit of Robert Frazitta, Vice President for the
Naples Bay Property and Trustee of the (Antatamian) Family Trust listed reasons to the
Bankruptcy Court why the Joint Plan was of benefit. (Doc. #3-38). Frazitta stated that the
Joint Plan would minimize administrative costs by avoiding protracted litigation. Frazitta
continued that the Joint Plan would close the Chapter 11 proceedings as expeditiously
as possible, and create a unified ownership that would enhance the distribution of funds
to the creditors. Significant reduction in litigation costs and an enhanced distribution of
funds to creditors would improve the economic value of the Joint Plan by reducing costs
and fees and by getting funds to creditors quicker than the SB Capitol plan.
Furthermore, NBR noted in the Disclosure Statement filed with the Bankruptcy
Court that the Joint Plan would be in the best interest of the creditors. The Disclosure
Statement reads in pertinent part:
The Plan Proponents believe the Plan is in the best interest of
creditors and stakeholders and maximizes distributions to
creditors that would otherwise be consumed by costly
litigation and result in the accrual of additional administrative
expense. To understand the nature of the disputes that
existed among the Plan Proponents, the Plan Proponents
urge parties-in-interest to consult and compare the disclosure
statement filed by the Creditor Plan Proponents with the
disclosure statement filed by the Debtors on March 2, 2015.
The disclosure statements describe the complex nature of
many of the claims resolved by the Plan and outlines the
various positions of the parties with respect to various
Litigation Claims, Causes of Action, and Avoidance Actions.
Given the diametrically opposed positions of the parties, it is
difficult, if not impossible to determine the probability of
success. The only certainty is that if the disputes were
litigated, all of the Plan Proponents would incur significant
attorney’s fees, reducing the assets that could be contributed
to fund a plan of reorganization.
(Doc. #3-28, p. 21).
It is somewhat disingenuous for NBR to argue to the Bankruptcy Court the benefits
to the creditors of the Joint Plan over SB Capitol’s plan, and then argue the opposite to
this Court. Based upon NBR’s own statements and that of the Joint Plan’s proponents
supporting the economic value of the Joint Plan over SB Capitol’s plan, the Court finds
the Joint Plan increased the economic value to creditors, any class of creditors or equity
security holders. Since the Joint Plan increased the economic value to the creditors the
Bankruptcy Court did not commit reversible error in awarding the breakup fee to SB
(3) Whether the Breakup Fee Itself was Unreasonable
NBR argues that the amount of the breakup fee awarded to SB Capitol was
unreasonable under the circumstances. SB Capitol responds that breakup fees that
range from 1% to 4% of the purchase price of the property at issue are considered
reasonable by most courts.
The Bankruptcy Court approved a breakup fee award of up to $200,000.00 in its
original Order approving SB Capitol as the stalking horse. (Doc. #390). NBR did not
object to the $200,000.00 expense cap at that time. SB Capitol submitted its Motion for
Payment of Expense Reimbursement, seeking expense reimbursement of expenses
totaling $197,427.29. After reviewing SB Capitol’s request, the Bankruptcy Court reduced
the reimbursement to $175,476.45. To arrive at the reduced reimbursement fee, the
Bankruptcy Court capped the attorney’s hourly rate and limited the out of town meal
expenses to $85.00 per day.
The Bankruptcy Court’s reimbursement award was within the limits set forth in the
Stalking Horse Order and was less than 1% of the total purchase price. See In Re Sea
Island Company, 2010 WL 4393269 * 3 (Bankr S.D. Ga. September 15, 2010) (holding
that a breakup fee of 3% constituted a fair and reasonable percentage of the proposed
purchase price). The rates of the attorneys from New York and Chicago were reduced to
better reflect the local rates for the same work and the daily meal per diem was reduced
to offset what the Bankruptcy Court determined to be overly expensive meals. As such,
the Court finds that the Bankruptcy Court’s reimbursement determination of $175,476.45
(4) Whether the Case should be Remanded to the Bankruptcy Court for Attorney’s
SB Capitol moves the Court to remand the case back to the Bankruptcy Court for
a determination on attorney’s fees for having to defend this appeal.
presented no case law or rule that would support its position.
In fact, neither the
Bankruptcy Code nor the Rules of Bankruptcy Procedure contain provisions expressly
providing for an award of attorney’s fees on appeal to a prevailing party, whether debtor
or creditor. In Re Anthony L. Tartaglia, 2:07-cv-100-FtM-29. the Court notes that 11
U.S.C. § 523(d), does allow a debtor reasonable attorney’s fees in a determination of
dischargeablity where a discharge is obtained and the creditor’s position was not
substantially justified. However, the facts of this case do not fall under § 523(d).
Fed. R. Bankr. P. 8020 allows the Court to impose costs including attorney’s fees
associated with an appeal that is determined by the Court or the Bankruptcy Appeals
Panel (BAP) to be frivolous. In re Porto, 645 F.3d 1294, 1306–07 (11th Cir. 2011). The
Advisory Committee Note to Rule 8020 references Federal Rule of Appellate Procedure
38 and states that the authority to impose sanctions is the same for district courts sitting
as appellate courts, bankruptcy appellate panels, and courts of appeals. Fed. R. Bankr.
P. 8020 advisory committee's note. The Supreme Court has stated that “Rules 11 and 38
are better read together as allowing expenses incurred on appeal to be shifted onto
appellants only when those expenses are caused by a frivolous appeal, and not merely
because a Rule 11 sanction upheld on appeal can ultimately be traced to a baseless filing
in district court.” In re Porto, 645 F.3d at 1306, 07 (citing Cooter & Gell v. Hartmarx Corp.,
496 U.S. 384, 407, 110 S. Ct. 2447, 2462, 110 L. Ed.2d 359 (1990)).
The Bankruptcy Court disagreed with NBR’s position and awarded SB Capitol its
expenses incurred in performing its due diligence as the stalking horse. This Court
agreed with the Bankruptcy Court’s determination as described above which resulted in
NBR losing its appeal. However, simply because NBR lost on appeal does not make the
appeal frivolous. Cordoba v. Dillard's, Inc., 419 F.3d 1169, 1181–82 (11th Cir.2005)
(quoting Christiansburg Garment Co. v. EEOC, 434 U.S. 412, 421–22, 98 S.Ct. 694, 700,
54 L.Ed.2d 648 (1978) (holding that “[I]t is important that courts not engage in post hoc
reasoning by concluding that, because a plaintiff did not ultimately prevail, his action must
have been unreasonable or without foundation. This kind of hindsight logic could
discourage all but the most airtight claims, for seldom can a prospective plaintiff be sure
of ultimate success.”).
NBR’s appeal referenced case law and made cogent arguments that supported its
premise. Therefore, the Court does not find good cause to remand the case to the
Bankruptcy Court for attorney’s fees on appeal.
Based upon the Court’s review of the Parties memoranda of law and the
bankruptcy record, the Bankruptcy Court did not err in awarding SB Capitol a breakup
fee. Further, the Bankruptcy Court did not committed reversible error in awarding the
breakup fee because SB Capitol did not submit a signed sales agreement with its stalking
horse proposal. Finally, the amount of expenses awarded to SB Capitol was reasonable.
Accordingly, it is now
(1) The Decision of the Bankruptcy Court awarding a breakup fee in the amount of
$175,476.45 to SB Capitol is AFFIRMED.
(2) SB Captiol’s request for an award of attorney’s fees for defending this appeal
(3) The Clerk of the Court is directed to enter judgment accordingly, transmit a
copy of this Order and Judgment to the Clerk of the Bankruptcy Court,
terminate the appeal and close the file.
DONE and ORDERED in Fort Myers, Florida this 31st day of August, 2016.
Copies: All Parties of Record
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