Official Committee of Equity Security Holders of Spectrum Jungle Labs Corporation v. Spectrum Jungle Labs Corporation

Filing 31

ORDER DENYING 17 Emergency Motion for Certification of Interlocutory Appeal. Signed by Judge Xavier Rodriguez. (rg)

In the United States District Court for the Western District of Texas
O f fic ia l Committee of Equity S e c u r it y Holders of Spectrum J u n g le Labs Corp. Appellant v. S p e c t r u m Jungle Labs Corp. Appellee § § § § § § § § § § O rder O n this date, the Court considered the "Emergency Motion of the Official C o m m i t t e e of Equity Security Holders of Spectrum Jungle Labs Corp., et al., p u r s u a n t to 28 U.S.C. § 1292(b) for Certification of Interlocutory Appeal of Order D e n y in g Stay Pending Appeal" (docket no. 17), and the Response and Reply th e r e to . Pursuant to an Order from the Fifth Circuit, this Court ordered

Civ. No. SA:09-CV-576-XR

e x p e d i t e d briefing and has given the motion expedited consideration. After such c o n s id e r a tio n , the Court will deny the motion to certify an interlocutory appeal. I. D e b to r Spectrum Jungle Labs filed for Chapter 11 bankruptcy in the W e s te r n District of Texas on February 3, 2009, and simultaneously filed a pren e g o tia te d proposed plan of reorganization. The proposed plan essentially

c a n ce le d all existing or "old" equity and gave new equity to Spectrum's existing

b o n d h o ld e r s .

The United States Trustee appointed the Equity Committee,

A p p e l l a n t here, to represent the interests of the existing equity holders. The E q u it y Committee asserted that the plan was not proposed in good faith and was n o t fair and equitable with regard to existing equity's interests. On April 28, 2009, after making some modifications to the original plan, t h e Debtors filed their Joint Plan of Reorganization of Spectrum Jungle Labs C o r p o r a tio n , et al. The Bankruptcy Judge conducted a lengthy hearing on the m e r i t s of the proposed plan in June. Because existing equity holders' interests w e r e impaired and the plan gave over 70% of the new equity to the existing th r e e note/bondholders, Harbinger, D.E. Shaw, and Avenue Capital, a main c o n t e s te d issue was Spectrum's value. Three different experts testified

r e g a r d i n g valuation: Joshua Scherer, retained by the Debtors; Barry Ridings, r e ta in e d by Harbinger; and Enrique Senior, retained by the Equity Committee. O n July 15, 2009, over the Equity Committee's objection, Bankruptcy J u d g e King entered an Order confirming the Proposed Joint Plan of R e o r g a n iz a t io n of Spectrum Jungle Labs Corporation. On July 15, the Equity C o m m it t e e filed a notice of appeal of the Confirmation Order. The Equity C o m m it t e e summarizes its issues on appeal as follows: (1) the Plan's treatment o f the Existing Equity Holders is not "fair and equitable" (as required by section 1 1 2 9 (b )(1 ) of the Bankruptcy Code) because the Noteholders will receive c o n s id e r a t io n worth more than the amount of their claims; (2) the Plan was not p r o p o s e d in good faith (as required by section 1129(a)(3) of the Bankruptcy Code) b e c a u se Spectrum's board proposed the Plan to satisfy its creditors but took no 2

a ct io n to protect existing equity holders, and Spectrum and the negotiating n oteh o ld e rs took affirmative actions during the bankruptcy to artificially depress S p e c tr u m 's value; (3) the Plan includes a post-confirmation injunction that e ffe c tiv e ly discharges and releases nondebtor third parties, which is not p e r m it t e d under binding Fifth Circuit precedent; (4) the Plan provides for the p a y m e n t of the fees and expenses of the negotiating noteholders, including a tt o r n e y s ' fees and financial advisor fees without the need for application in v io la tio n of 11 U.S.C. § 503(b); and (5) the Confirmation Order contains an im p r o p e r provision that purports to make actions taken under it immune to r e v e r s a l. On July 16, the Equity Committee filed an Emergency Motion for a Stay 1 P e n d i n g Appeal pursuant to Rule 8005 of the Federal Rules of Bankruptcy P r o c e d u r e , requesting expedited consideration and oral argument. This Court granted the requests for expedited consideration and oral a r g u m e n t and held a hearing on the motion to stay on July 22. This Court is s u e d an Order denying the stay on July 24. In that Order, the Court noted t h a t a party seeking a stay must show: (1) a likelihood of success on the merits, (2 ) irreparable injury if the stay is not granted, (3) absence of substantial harm t o the other parties from granting the stay, and (4) service to the public interest fr o m granting the stay. Hunt v. Bankers Trust Co., 799 F.2d 1060, 1067 (5th Cir. 1986). This Court concluded that the Equity Committee had failed to

A motion for stay was initially presented to the Bankruptcy Judge for his consideration, but the motion was denied on July 16.

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d e m o n s t r a t e a likelihood of success on the merits and the absence of substantial h a rm to the debtor from granting the stay, and thus denied the motion. O n July 27, the Equity Committee filed a notice of appeal and an e m e r g e n c y motion for certification of an interlocutory appeal pursuant to 28 U .S .C . § 1292(b). On July 30, the Fifth Circuit first issued an order suspending th is Court's order denying the stay, as well as staying all proceedings in this C o u r t and in the bankruptcy court pending further order. Shortly after, the F if th Circuit modified the stay to permit this Court, on an expedited basis, to c o n s id e r and rule on the Equity Committee's motion for certification of in t e r lo c u t o r y appeal. This Court ordered a response on an expedited schedule, w h ic h the Debtors filed on August 3. The Agent for the Senior Secured Lenders a n d Harbinger Capital joined in the Response. The Equity Committee also filed a n expedited Reply on August 3. II. T h e Equity Committee moves this Court to issue a certification pursuant t o 28 U.S.C. § 1292(b), which provides: W h e n a district judge, in making in a civil action an order not o th e r w is e appealable under this section, shall be of the opinion that s u c h order involves a controlling question of law as to which there is substantial ground for difference of opinion and that an im m e d ia te appeal from the order may materially advance the u ltim a te termination of the litigation, he shall so state in writing in s u c h order. 2 8 U.S.C. § 1292(b).2 Thus, leave to hear the appeal of an interlocutory order is

It is undisputed that the order denying the stay is an interlocutory order. The Fifth Circuit had once held that it could not hear appeals of interlocutory orders of a district court

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g e n e r a lly granted only if the order being appealed meets the three criteria set fo r th in 28 U.S.C. § 1292(b). Clark-Dietz & Assocs.-Eng'rs, Inc. v. Basic Constr. C o ., 702 F.2d 67, 69 (5th Cir. 1983). These criteria include: (1) whether the order d e a l s with a controlling question of law; (2) whether a ground for substantial d is a g r e e m e n t regarding the question exists; and (3) whether an immediate a p p e a l would materially advance the ultimate termination of the litigation. Id. T h e Equity Committee asks this Court to certify a number of questions for in t e r lo c u t o r y appeal, all of which form the basis for the underlying appeal from th e confirmation order, as the Equity Committee acknowledges. See Motion at 6 (noting that consideration of the interlocutory appeal on the questions r e q u e s te d by the Equity Committee would "allow the Court of Appeals to review t h e essential questions of law raised by the Appeal"). The Equity Committee a r g u e s that a ground for substantial disagreement on these issues exists because t h e requested certified questions "present issues which the Court of Appeals has n o t yet had the opportunity to consider." The Equity Committee further argues t h a t an interlocutory appeal would materially advance the litigation because "m a n y of the key legal questions which are determinative of the Appeal would

sitting as an appellate court in a bankruptcy case under § 1292(b) because § 1292(b) was superseded by 28 U.S.C. § 158(d), which provided for court of appeals jurisdiction over appeals only from final decisions of a district court sitting in an appellate capacity. See, e.g., Matter of Topco, Inc., 894 F.2d 727, 735 n.12 (5th Cir. 1990). Thus the only means of appellate review when a district court denied a stay pending appeal of a bankruptcy court's order was a writ of mandamus. Id. However, the Supreme Court has since made clear that § 158(d) does not exclude application of § 1292(b), and thus interlocutory orders of a district court, sitting as either a bankruptcy trial or bankruptcy appellate court, are reviewable by the court of appeals under § 1292(b). Connecticut Nat'l Bank v. Germain, 503 U.S. 249 (1992); see Matter of Nichols, 21 F.3d 690, 693 & n.9 (5th Cir. 1994) (recognizing abrogation of Fifth Circuit's approach).

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b e analyzed by the Court of Appeals" or at the very least would provide valuable g u id a n c e to this Court with respect to the "novel and difficult issues of law r a is e d by the Appeal." I I I. A s previously noted in the Order denying the motion to stay, the main is s u e is whether Spectrum was properly valued, which depends in large part on t h e testimony of the three expert witnesses. The difference among the experts' v a l u a tio n s arises primarily from the inclusion of a control premium in the v a lu a tio n methods. Judge King, in his oral pronouncement of fact findings and conclusions of la w , noted that he believed each of the experts to be well-qualified, that they "d is a g r e e d in a number of key areas," and that he had to "weigh the evidence." J u n e 25, 2009 Tr. at 95. He stated that he had to evaluate the witnesses and m a k e choices, and that he found "Mr. Ridings' opinion most persuasive" and a g r e e d "with Mr. Ridings' analysis." Id. at 96. King thought Senior was "a very q u a lifie d individual," but found that "his reliance on the control factor d if fe r e n t ia t e s his opinion from that of the report of Mr. Ridings." Id. at 97. F u r th e r , Judge King concluded, "a bankruptcy plan is different from a hostile t a k e o v e r outside of bankruptcy" and "different from a tender offer outside of b a n k r u p tc y " and the debtor has the exclusive right to file a plan of r e o r g a n iz a tio n and seek acceptance in a limited amount of time, which they did, a n d they could do so with the bondholders' prepetition agreement. Id. at 97-98.

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J u d g e King then stated, "The issue comes down to value. And I think that the m a rk e t is one reflection of the value, and so the market prices of the bonds and t h e shares of stock are certainly relevant, but they're not determinative. Even if the market is wrong, I would find Mr. Ridings' analysis to show that there's n o value above the amount of debt that this company holds." Id. at 98. Thus, J u d g e King orally found that the value range was 2.3 to 2.5 billion, while the d e b t is 2.6 to 2.7 billion, and therefore there was no value left over for the equity h o ld e r s . Id. Judge King continued, "As far as value, I've listened to all the testimony o f all experts and their various approaches, and they have basically three a p p r o a c h e s , and it's something like the approach to real estate properties, where y o u have market costs and direct sales approach. They use different approaches fo r valuing enterprise value. But, in my opinion, the correct value is the value n o w , the value at the time of confirmation, not at some date in the future." Id. a t 98-99. He stated, "I think control is a subjective factor. Certainly the experts c a n take whatever subjective factors they think in ­ take into account any s u b je c tiv e factors that they think need to be taken into account, and certainly M r . Senior did. But I would point out that Spectrum got control of Remington a n d Rayovac when it bought them, and that hasn't worked out so great so far; it may in the future. They may increase their sales, they may increase their m a r k e t share, they may be able to sell those divisions to other investors. So, at t h is point, I think it's a matter of opinion whether there was a valuable control

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p r e m iu m on those companies. That's just by way of example." Id. at 99-100. J u d g e King then concluded that Spectrum has "tremendous upside potential in t h e future. But the value is what a buyer would pay today without duress or u n d u e influence, and, in my opinion, that's between 2.3 and 2.5 billion." Id. at 101. T h e Agent for the Senior Secured Lenders also notes that the Bankruptcy J u d g e made written findings of fact and conclusions of law in the Confirmation O r d e r . Of relevance here, the Confirmation Order states: T h e Court has heard the expert testimony offered by Perella W e in b e r g Partners LP on behalf of the Debtors, Lazard Freres & Co. L L C on behalf of Harbinger, and Allen & Company LLC on behalf o f the Equity Committee. The Court finds the expert testimony o ffe r e d by [Ridings of] Lazard Freres & Co. LLC to be the most c r e d ib le as to the valuation of the Debtors. Based upon such expert t e s tim o n y , together with the expert testimony provided by [Scherer o f] Perella Weinberg Partners LP and other testimony received, the C o u r t finds that total claims against the Debtors are approximately $ 2 .7 billion, including postpetition interest on the Noteholder C la im s , which would be payable before any distribution could be m a d e to junior Classes. The enterprise value of the Debtors is a p p r o x im a t e ly $2.3 billion to $2.5 billion. Class 7 Noteholders, with C l a im s , including postpetition interest, estimated to be in the a m o u n t of $1,133,507,174 as of July 15, 2009, will receive New N o t e s in the aggregate face amount of $218,076,405 and New C o m m o n Stock for the balance of their Claims. The New Common S t o c k attributable to the Noteholder Claims is estimated to have an a g g r e g a te value in the range of approximately $453 million to $615 m illio n , against the remaining balance of $915,430,769. Based on t h e s e numbers, the aggregate percentage recovery for the N o t e h o ld e r Claims, considering both the New Notes and the New C o m m o n Stock, is estimated to be in the range of approximately 6 0 % to 75%. Because the Noteholder Claims will not be paid in full u n d e r the Plan, no distribution of property of the Debtors can be m a d e to any junior Class of Claims or Interests. Classes 8 and 9 are ju n io r impaired classes of Claims and Interests that are receiving n o distribution under the Plan and are deemed to have rejected the

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P la n pursuant to 11 U.S.C. § 1126(g). The Plan does not d is c r i m in a t e unfairly and is fair and equitable with respect to C la s s e s 8 and 9 as required by 11 U.S.C. § 1129(b)(1). Because there is insufficient value in the Debtors' assets to produce payment in fu ll to Class 7, which has prior rights to Classes 8 and 9, the Plan m a y be confirmed notwithstanding the Debtors' failure to satisfy 11 U .S .C . § 1129(a)(8) as to such Classes. Upon confirmation and the o c c u r r e n c e of the Effective Date, the Plan shall be binding upon the m e m b e r s of all classes of Claims and Interests, including, but not lim it e d to, Classes 8 and 9. C o n fir m a t io n Order ¶ AA, at 13-14. T h e Bankruptcy Court did not issue specific findings regarding how it a rr iv e d at its valuation. The Court notes that in Clark Pipe & Supply v. Smith, 8 9 3 F.2d 693, 697 (5th Cir. 1990), the Court held that it could review a valuation d e t e r m in a tio n even in the absence of precisely articulated reasons for the actions o f the bankruptcy court based on the fact that the bankruptcy court expressly a c c e p t e d the expert testimony offered by the trustee that liquidation value s h o u ld be used, and that expert testimony contained reasons in support of its c o n c lu s io n . Similarly, because Judge King expressly agreed with Ridings'

a n a ly s is , this Court may review the valuation determination by referring to R id i n g s ' analysis.3 However, though it appears clear that Judge King relied p r im a rily on Ridings' analysis, because Judge King did not determine value e x a c t ly in accord with Ridings' valuation, it may be necessary to remand for s u p p le m e n t a l findings of fact regarding the precise method Judge King used to

The Equity Committee asserts that Judge King relied on Scherer's analysis regarding valuation as well, based on the language in the Confirmation Order. However, both his oral and written findings indicate that he relied on Ridings to determine valuation. The Confirmation Order references Scherer only in regard to the amount of claims against the Debtors.

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r e a c h his results when considering the merits of the appeal. However, the Court fin d s that the current record is sufficient to resolve the issues presented by the m o tio n to stay and the motion to certify an interlocutory appeal. IV . T h e Equity Committee asks the Court to certify the following "main" is s u e s for appeal:4 (1 ) Whether the Bankruptcy Court erred as a matter of law in concluding that t h e Debtors' enterprise value can be determined by taking into account the c u r r e n t market prices of the Debtors' securities; ( 2 ) Whether the Bankruptcy Court erred as a matter of law by excluding the D e b t o r s ' future earning potential in determining the Debtors' value; (3 ) Whether the Bankruptcy Court erred as a matter of law in concluding that t h e r e is a "reorganization value" standard unique to bankruptcy that ignores the r e c o g n iz e d value of control; ( 4 ) Whether the Bankruptcy Court erred as a matter of law when it failed to c o n s id e r the value of control being given to the holders of the Debtors s u b o r d in a te d notes (the "Noteholders") in the Debtors' plan of reorganization; (5 ) Whether the Bankruptcy Court erred as a matter of law by relying upon the D e b t o r s ' expert's (Scherer's) valuation and its valuation of a "minority tradable" in t e r e s t in stock, without making any findings of fact that the Noteholders are

The Equity Committee also asks the Court to certify three additional issues that do not relate to the good faith/fair and equitable question; these issues, which do not warrant a stay even if meritorious, will be summarily addressed later in this Order.

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r e c e iv in g only minority, tradable interests in reorganized Spectrum; (6 ) Whether the Bankruptcy Court's implicit finding that the Noteholders will r e c e iv e only a minority, tradable interest under the Plan is clearly erroneous; (7 ) Whether the Bankruptcy Court erred as a matter of law in adopting u n r e lia b l e valuation methods and improperly applied valuation methodologies; and (8) Whether the Bankruptcy Court erred as a matter of law in concluding that t h e Plan was proposed in good faith and did not violate otherwise applicable nonb a n k r u p tc y law despite the Debtors' admission that they failed to fulfill the fi d u c ia r y duties owed to their shareholders under Wisconsin law (Spectrum's sta te of incorporation). S e c tio n 1292(b) permits a district court to certify that its "order involves a controlling question of law as to which there is substantial ground for d i ffe r e n c e of opinion." On its face, this Court's Order denying the stay involves n o controlling question of law as to which there is substantial ground for d if fe r e n c e of opinion and certainly decides none of the issues that the Equity C o m m it t e e seeks to have certified. All that was decided by this Court was w h e t h e r the Equity Committee had demonstrated a likelihood of success on the m e r it s of the issues presented in the appeal. The Court stands by its prior c o n c lu s io n that the Equity Committee has failed to demonstrate a likelihood of s u c c e s s on the merits, and a stay would be inappropriate absent a showing that, w it h o u t the alleged error by the Bankruptcy Court, Spectrum's enterprise value w o u ld exceed its debt. To the extent that the Equity Committee seeks to have 11

t h is Court certify issues on which this Court itself has not made any definitive r u lin g s based on full briefing and a full record, the Court finds it inappropriate t o certify those issues for appeal.5 This alone supports denying the motion for c e r tific a tio n . However, the Court recognizes that the decision of whether the Equity C o m m it t e e demonstrated a substantial likelihood of success of the merits in v o lv e s an examination of the underlying issues on appeal, including issues of la w , even though the Court issued no rulings on the underlying issues. The C o u r t thus turns to whether those issues should be certified as requested. W ith regard to the value of Spectrum, two main issues control this appeal: fir s t , whether the Noteholders would have control of the reorganized Spectrum a n d second, if they would, how a control premium should be factored into the v a l u a t i o n analysis. The first issue, as apparently recognized by the Equity C o m m it t e e , is a question of fact. The second issue, whether the valuation m e th o d must include a control premium if warranted by the facts, may be p r o p e r ly characterized as a legal question. See ClarkPipe & Supply Co. v. Smith, 8 9 3 F.2d 693, 697-98 (5th Cir. 1990) ("Valuation is a mixed question of law and

If such a direct appeal were desired, 28 U.S.C. § 158(d)(2) provides the appropriate standard, not § 1292(b); however, this Court would not certify a direct appeal under the § 158(d)(2) standards either. The Court further notes that the parties have submitted new arguments and materials, such as the full transcript from the bankruptcy court, in conjunction with the motion to certify that were not available to this Court when ruling on the motion to stay. Further, to consider the underlying merits, the Court will need additional materials, such as Ridings' report, that have not yet been submitted. This is yet another reason why it would be premature to certify the underlying issues on appeal for an interlocutory appeal at this time, when the only issue actually pending and decided by this Court is whether a stay is justified.

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fa c t , the factual premises being subject to review on a `clearly erroneous' s ta n d a r d , and the legal conclusions being subject to de novo review."). T h e fact issue underlying the Equity Committee's arguments is thus w h e t h e r the Noteholders would have control of the reorganized Spectrum. C o n t r o l has been defined as an interest that allows the shareholder to " u n ila t e r a lly direct corporate action, select management, decide the amount of d i s tr ib u t io n , rearrange the corporation's capital structure, and decide whether t o liquidate, merge, or sell assets." Estate of Godvey v. C.I.R., 286 F.3d 210 (4th C ir . 2002) (citing Estate of Newhouse, 94 T.C. at 251-52). It is undisputed that the Negotiating Noteholders together will hold b e t w e e n 70 and 80% of the stock in the reorganized Spectrum. The Equity C o m m it t e e argues that this mandates inclusion of a control premium, for even if the noteholders do not act in concert, they have the ability to do so and thus t h e ability to control. In the Bankruptcy Court, the Equity Committee asserted t h a t Scherer admitted that the noteholders would have the ability to control r e o r g a n i z e d Spectrum. June 25, 2009 Tr. at 79-80. The Equity Committee also p o i n t e d out that "the actions in this case alone" show that "they have the ability a n d have exercised control; the noteholders' agreement, their agreement was r e q u ir e d for the plan, the restructuring supports agreement, the plan s u p p le m e n t and all of its contents, including the new charter and the r e g is t r a t i o n rights agreement." Id. at 80. The Equity Committee further

p o in t e d to the fact that "the noteholders blocked the company from seeking a

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v a lu a b le benefit of its NOLs that would raise the value, because they are in c o n t r o l ." Id. In addition, the Equity Committee noted that protections originally c o n t e m p la t e d by a proposed shareholders' agreement were instead placed into t h e charter. Id. at 80-81. The Committee thus argues that "every significant s te p in this case has been accomplished through the agreement of each of those p a r tie s " and essentially argues that the ability to control has value, even if the n o t e h o l d e r s do not utilize it. H o w e v e r , there was also evidence that the noteholders are independent a n d have no agreement in place to act jointly, which this Court noted in its O r d e r denying the stay. Further, it is undisputed that each noteholder Possibility of

i n d i v id u a lly is not receiving enough shares to give it control.

c o n tr o l is not actual control. Having the power to do an act unilaterally and h a v i n g the power to do an act only with the participation of others are not the s a m e thing. Thus, the Court disagrees with the Equity Committee's

fu n d a m e n t a l assumption that the possibility of joint action is sufficient to m a n d a te a finding of control and inclusion of a control premium. As a result, the E q u it y Committee has failed to demonstrate that Judge King's implied finding 6
Debtors argue that Judge King did make an express finding of lack of control, citing to his statement that "it's a matter of opinion whether there was a valuable control premium on those companies." June 25, 2009 Tr. at 100. However, taken in context, it is clear that this statement is not referring to whether there was a valuable control premium on Spectrum, but on Remington and Rayovac ("those companies"). Judge King was simply making the point that control does not necessarily mandate a control premium. Thus, the Court agrees with the Equity Committee that Judge King did not make an express finding regarding the existence of control. However, such a finding can be implied, and this Court may review the Bankruptcy Court's implied fact findings for clear error. See, e.g., Rivera v. Wyeth-Ayerst Labs., 283 F.3d 315, 319 (5th Cir. 2002) ("We review for clear error all facts expressly or impliedly found by the district court."). Moreover, Judge King expressly adopted Ridings' analysis, and Ridings stated that he
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r e g a rd in g control is likely to be found clearly erroneous, and failed to d e m o n s tr a te a likelihood of success on the merits of its sixth issue. This implicit fa c t finding does not present a controlling issue of law suitable for certification. F u r t h e r , based on Judge King's implied finding of no control, it cannot be s a id that Judge King erred in his valuation by declining to include a control p r e m iu m .7 It therefore follows that the Equity Committee has not demonstrated a likelihood of success on the merits of its requested issues related to the impact o f control on the valuation (requested issues 3, 4, 5, and 7), nor does the Court fin d that there is substantial room for disagreement on this issue based on the c u r r e n t record. Further, these issues are not controlling issues of law suitable fo r certification because they are irrelevant without a finding of control. N o r has the Committee demonstrated a likelihood of success on the merits o f its other valuation arguments that would justify a stay. In the first and s e c o n d proposed certified issues, Debtors challenge the Bankruptcy Court's

would not find control. Ridings testified that, though the three bondholders will own more than 50 percent of the stock, they do not work together and he "wouldn't use the word control." June 22, 2009 Tr. at 291. He further stated that one could not "count on" the fact that the three bondholders would act together going forward, and noted "[t]hey certainly haven't acted together very well so far." Id. at 291. He continued, "I think it's highly speculative to assume that these three will remain in concert." Id. at 292. Thus, this fact finding can be fairly attributed to Judge King by his agreement with Ridings' analysis. Moreover, this Court did not simply "defer" to Judge King's fact findings (or lack thereof), as the Equity Committee contends in its Reply. Rather, it reviewed the evidence available to it at the time, and concluded that the Equity Committee failed to show that such a finding of no control was clearly erroneous. Even if Judge King found in favor of the Equity Committee on the issue on control and even if his failure to then include a control premium in the valuation was error as a matter of law, the Equity Committee would not necessarily be entitled to reversal. The debtor has argued that there was no control in fact, and the Court finds this argument persuasive. As may the court of appeals, this court may affirm the bankruptcy court's judgment on any basis supported by the record. See United States v. Clay, 408 F.3d 214, 218 n.7 (5th Cir. 2005).
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c o n c lu s i o n that Spectrum's enterprise value can be determined by taking into a c c o u n t the current market prices of Debtors' securities and that Spectrum's fu tu r e earning potential should be excluded.8 However, in his oral finding and c o n c lu s io n s , Judge King expressly stated that "[e]ven if the market is wrong, I w o u ld find Mr. Ridings' analysis [persuasive] to show that there's no value above t h e amount of debt this company holds." As the Committee acknowledges, R id i n g s testified that "the market is not a reliable reflection of values for a c o m p a n y 's stock or its bonds when the company is in financial distress or in b a n k r u p t c y ." Reply at 18 n.10 (citing June 22,2 009 Tr. at 257-58). Thus, the E q u it y Committee has not demonstrated a likelihood of success on the issue of w h eth er the Bankruptcy Judge's consideration of current market prices resulted in an incorrect valuation, nor has it shown that, had the Bankruptcy Judge not e r r e d in this alleged manner, the result would have been an enterprise value in e x ce s s of the debt such that a stay might be justified. T h u s , the Court finds that, insofar as the Equity Committee has failed to s h o w a substantial likelihood of success on the merits with regard to its main is su e s , there is no controlling issue of law subject to disagreement that would be a p p r o p r ia te to certify for interlocutory appeal. Further, after considering the harm factors in the stay analysis, the Court w o u ld only consider granting a stay on the issues related to valuation. The E q u it y Committee's other proposed issues, even if meritorious, would not

The Committee briefed this issue as one point, and thus this Court considers them together.

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w a r r a n t a stay pending appeal. C o n c lu s io n T h e only issue currently before this Court is whether a stay of the c o n f ir m a t io n order is appropriate pending the resolution of the appeal. Based o n the factors relevant to such a motion, the Court ruled that a stay was not w a r r a n t e d . For the reasons stated herein, the Court declines to certify an in t e r lo c u t o r y appeal of its Order denying the stay. The Equity Committee's E m e r g e n c y Motion for Certification of Interlocutory Appeal (docket no. 17) is a c c o r d in g l y DENIED. The Clerk of Court is directed to forward a copy of this O r d e r to the Fifth Circuit Court of Appeals. I t is so ORDERED. S I G N E D this 5th day of August, 2009.

_________________________________ X A V IE R RODRIGUEZ U N I T E D STATES DISTRICT JUDGE

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