                  UNITED STATES COURT OF APPEALS
                       FOR THE FIFTH CIRCUIT


                      _______________________

                            No. 98-40793
                      _______________________


IN THE MATTER OF: VOLUNTARY PURCHASING GROUPS, INC.;
OFFICIAL UNSECURED CREDITOR’S COMMITTEE OF VOLUNTARY
PURCHASING GROUPS INC.,

                                                            Debtors.

SOUTHERN PACIFIC TRANSPORTATION COMPANY and
ST. LOUIS SOUTHWESTERN RAILWAY COMPANY,

                                                       Appellants,

                              versus

VOLUNTARY PURCHASING GROUPS, INC.; OFFICIAL UNSECURED
CREDITOR’S COMMITTEE OF VOLUNTARY PURCHASING GROUPS INC.,

                                                       Appellees.


_________________________________________________________________

           Appeal from the United States District Court
                 for the Eastern District of Texas
                            (3:98-MC-5)
_________________________________________________________________

                        September 20, 1999

Before JONES, DUHÉ, and BARKSDALE, Circuit Judges.*

PER CURIAM:

          The issue before us is whether the district court erred

in denying a stay pending appeal to that court of the confirmation

order concerning the reorganization plan of Voluntary Purchasing

Groups, Inc.   We conclude that the court abused its discretion by

     *
      Pursuant to 5TH CIR. R. 47.5, the Court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
failing to consider the Railroad appellants’ likelihood of success

on appeal and thus by misperceiving appellants’ hardship and the

resulting balance of the equities that are also relevant to the

question of a stay pending appeal.            In re: First South Savings

Assn., 820 F.2d 700, 705 (5th Cir. 1987).

           Appellees contend at the outset that this court lacks

appellate jurisdiction because the order denying the stay is not a

final order and, alternatively, the Railroads lack standing to

contest the confirmation order.         Neither of these assertions has

merit.     The final order challenge was rejected by an interim

motions panel of this court on a sound basis.          We will not disturb

it.   See In re: Forty-Eight Insulations, Inc., 115 F.3d 1294, 1300

(7th Cir. 1997).     Appellees’ argument that the Railroads should

have no say in objecting to confirmation, because, sometime after

the confirmation proceedings, the Railroads’ claim was reduced from

the amount attributed to them for voting purposes, is frivolous.

The bankruptcy court refused the Debtor’s request to “estimate” the

Railroads’ claim at zero at the confirmation hearing or to have a

separate estimation proceeding for the Railroads; the Debtor and

Unsecured Creditors Committee failed to appeal the bankruptcy

court’s order   allowing    the   claim   as    $7.2   million   for   voting

purposes; and the Debtor and the Committee therefore waived any

complaints about the bankruptcy court’s allowance of the Railroads’

claim for voting purposes.

           The district court’s order denying a stay does not

indicate   whether   it   considered    the    likelihood   of   appellants’


                                    2
success on the merits of their appeal, and, to the extent they are

relevant, this court’s emergency motions panel’s decisions denying

stays are similarly opaque.1             Close review of the bankruptcy

court’s orders persuades us that the appellants have identified

serious   appellate    issues   that     could      require   reversal   of    the

confirmation order, or, at least, remand for its clarification.                  A

sketch of just two of the issues demonstrates their significance.

           First,   the   Railroads        assert    that   the    debtor’s   plan

violates the Absolute Priority Rule, 11 U.S.C. § 1129(b)(2)(B)(ii),

which requires a debtor to pay under its reorganization plan any

impaired non-accepting class of creditors in full with respect to

their claims before any junior class may receive distributions.

According to the Railroads, the members of the co-op who held

junior claims will be receiving money before the Railroads’ claims

are paid in full; thus, the court had to approve the plan, if at

all, under a cram-down analysis.           The importance of this analysis

is highlighted by the Supreme Court’s recent decision in Bank of

America National Trust and Savings Ass’n. v. 203 N. LaSalle St.

Partnership,   _____    U.S.    _____,      119   S.Ct.     1411   (1999).    The


     1
      A procedural tangle engulfs the preliminary motions in this
court. Ordinarily, a single motions panel will hear all pre-trial
motions raised by the parties on appeal. In this case, however,
because of the make-up of special summer motions panels, the filing
of the motion to dismiss after the summer motions panel’s work had
concluded, and the renewal of the motion to stay that was re-routed
to the summer motions panel (in November), the motions did not
receive the consistent attention of one set of judges. While these
events were unfortunate, and most unusual, they do not affect final
disposition of the case, inasmuch as the oral argument panel is not
bound by decisions of an interim panel.      EEOC v. Neches Butane
Products Co., 704 F.2d 144, 146 (5th Cir. 1983).

                                       3
bankruptcy court neither explained how the Absolute Priority Rule

was fulfilled nor expressly applied the “new value” exception, the

viability of which is unclear following LaSalle.

          Second, the Railroads challenge the bankruptcy court’s

analysis of the best interest of creditors test, 11 U.S.C. §

1129(a)(7), which requires that each holder of a claim in a class

either approve the plan or receive property under the plan of a

value, as of the plan’s effective date, which is not less than such

holder would receive under a Chapter 7 liquidation at that date.

Each member of an impaired class must be satisfied according to the

best interest test.   In this case, the court had to be convinced

that the Railroads will not receive less in the plan than they

would in a Chapter 7 liquidation.       Instead of determining or

estimating what amount the Railroads would receive, the bankruptcy

court kept referring to the “unique status” of the debtor as a co-

op, and it relied on “policy considerations” that have no place in

the application of the statute.   Further, the court focused on what

the debtor would pay into the plan rather than what the creditor

will receive out of it, and it applied an apparently arbitrary 30%

discount factor while stating that “the court does not totally

agree but certainly does not disagree with using such a rate.”   The

underlying factual basis for the bankruptcy court’s conclusion that

the best interest test was satisfied is simply not comprehensible.

We identify these issues not because they are exhaustive, but




                                  4
because they draw immediate attention to the viability of the

confirmation order.1

                Having overlooked the issues raised by appellants, the

district court was led to denigrate their hardship if a stay is not

granted and its impact on the balance of equities.              Without a stay,

the confirmed plan may begin to be consummated, and the Railroads’

appeal will become moot.         See In Re: U.S. Brass Corp., ____ F.3d

____ (5th Cir. 1999).        Moreover, either the bankruptcy or district

court will have to resolve whether the plan’s “effective date”

occurs only after the completion of all appeals.2                Absent a stay,

the Railroads’ right to contest the confirmation order could be

thwarted.        While we do not underestimate the hardship to the other

parties to the bankruptcy -- including the unsecured creditors,

tort   claimants,      and   members   of    the   co-op   --   the   balance    of

hardships clearly weighed in favor of granting a stay rather than

permitting a procedurally flawed, and therefore incomplete, plan to

be   confirmed      and   consummated.       The   best    resolution   for     the

hardships would be prompt decision making on the part of the lower

courts.        Further, the public interest weighs heavily in favor of a



           1
        Our focus on these issues should not detract from the
district court’s consideration on appeal of all issues that have
been properly raised by the Railroads.
       2
       For reasons not clear to us, part of the bankruptcy case
and/or lawsuits treated by it have been “referred” to Judge Sanders
in the Northern District of Texas. The basis for any such transfer
of responsibility for the bankruptcy case, which is pending in the
Eastern District of Texas, was not clearly explained by the
parties.   We trust the lower courts will assure themselves of
jurisdiction to act in these potentially complex proceedings.

                                         5
confirmation process that is seen specifically to follow and

comport with applicable statutory standards.

          For the foregoing reasons, the judgment of the district

court is REVERSED, and the case is REMANDED for entry of a stay

pending appeal of the confirmation order to the district court.




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