Fisker’s Capped Credit Bidder is Denied Interlocutory Appeal and Direct Certification to the Third Circuit

Hybrid Tech Holdings, LLC v. Official Committee of Unsecured Creditors (In re Fisker Automotive Holdings, Inc.), No. 14-99 (GMS), 2014 WL 546036 (D. Del. Feb. 7, 2014); Hybrid Tech Holdings, LLC v. Official Committee of Unsecured Creditors (In re Fisker Automotive Holdings, Inc.), No. 14-99 (GMS), 2014 WL 576370 (D. Del. Feb. 12, 2014)

Chief Judge Sleet of the District Court has denied the emergency request of Hybrid Tech Holdings, LLC (“Hybrid”) for leave to appeal the Bankruptcy Court’s order capping for cause Hybrid’s credit bid as well as Hybrid’s emergency request for direct certification to the Third Circuit.  As discussed previously on this blog, on January 17, 2014, Chief Judge Kevin Gross limited Hybrid’s entitlement to credit bid its claim at bankrupt-Fisker’s asset sale, reducing the bid from the requested $75 million to $25 million, and thus, paving the way for a public auction of Fisker’s assets with Hybrid and Wanxiang America Corporation (“Wanxiang”) as the leading contenders.  The Bankruptcy Court’s January 17 Memorandum Opinion can be found here.

With respect to its denial of Hybrid’s appeal request, the District Court in the first instance held that the Bankruptcy Court’s order was not final and appealable as of right.  In holding so, the Court noted the “work left” for the Bankruptcy Court with respect to Hybrid’s credit bid and the sale process as well as the remedies available to Hybrid should the auction proceed and a court ultimately determine that Hybrid’s bid should not have been capped.  More specifically, the Court highlighted, among other things, open issues as to the extent of Hybrid’s secured claim and sale proceed allocation as well as Hybrid’s ability to receive a cash return if successful at the auction and ultimately deemed entitled to a full credit bid.

Turning next to its denial of leave to appeal the interlocutory order, the District Court held that Hybrid failed to demonstrate the governing factors of 28 U.S.C. § 158(a)(3), namely that “such order involves a controlling question of law as to which there is substantial ground for difference of opinion”, “that an immediate appeal from the order may materially advance the ultimate termination of the litigation”, and that exceptional circumstances exist to “justify a departure from the basic policy of postponing a review until after the entry of final judgment.”  Importantly, the Court concluded that no substantial grounds for a difference of opinion exist with respect to the foundation of the Bankruptcy Court’s ruling – that a right to credit bid may be limited for cause under section 363(k) in order “to foster a competitive bidding environment” (a principle recognized by the Third Circuit in its 2010 decision In re Philadelphia Newspapers, LLC, 599 F.3d 298 (3d Cir. 2010)).  Moreover, given the many issues still unresolved in Fisker’s “complex, multi-step” bankruptcy cases as well as Hybrid’s available remedies to it should the auction proceed, the Court perceived an immediate appeal more likely to impede, rather than hasten, the cases.

The aforementioned holdings were relied upon by the Court a few days later to deny Hybrid’s emergency request for direct certification to the Third Circuit.  Interestingly, the Court expressed its frustration with Hybrid’s “barrage of ‘emergency’ motions of dubious merit and even more doubtful urgency”, precluding it from filing any additional motions regarding the credit bid order.

Much has been, and will likely be, said about the potential effects of Judge Gross’s decision on credit bid rights and future § 363 asset sales.  Only time will tell whether such predictions come true.  However, what is known now is that a public auction of Fisker’s assets was held, with Wanxiang defeating Hybrid to emerge as the successful purchaser with a winning bid of approximately $149 million – almost double the amount of Hybrid’s requested credit bid of $75 million.