
USCA1 Opinion

	




                            UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT        No. 97-1381                        IN RE:  HEALTHCO INTERNATIONAL, INC.,                                       Debtor,                                                                                      ________                           HICKS, MUSE & CO., INC., et al.,                                     Appellants,                                          v.                           WILLIAM A. BRANDT, JR., TRUSTEE,                                      Appellee.                                                                                      ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                          FOR THE DISTRICT OF MASSACHUSETTS                   [Hon. Nathaniel M. Gorton, U.S. District Judge]                                              ___________________                                                                                      ____________________                                        Before                                Stahl, Circuit Judge,                                       _____________                       Godbold* and Cyr, Senior Circuit Judges.                                         _____________________                                                                                      ____________________             David L. Evans,  with whom Harold  B. Murphy, Daniel J.  Lyne, D.             ______________             _________________  _______________  __        Ethan  Jeffery, Hanify & King, Mike McKool, Jr., Jeffrey A. Carter and        ______________  _____________  ________________  _________________        McKool Smith were on brief for appellants        ____________             David C. Cohn, with  whom David B. Madoff and Cohn  & Kelakos LLP             _____________             _______________     ___________________        were on brief for appellee.                                                                                      ____________________                                  February 12, 1998                                                                                      ____________________                                    ____________________             *Of the Eleventh Circuit, sitting by designation.                    CYR, Senior Circuit Judge.    The question presented on                    CYR, Senior Circuit Judge.                          ____________________          appeal  is whether the bankruptcy court  abused its discretion by          approving a settlement between the chapter 7 trustee for Healthco          International, Inc. and a consortium of banks  ("the Bank Group")          which  financed  a  prepetition  leveraged  buy-out   ("LBO")  of          Healthco by appellants Hicks Muse & Co., Inc. and its coinvestors          (collectively:  "Hicks Muse").  We affirm.                                          I                                          I                                      BACKGROUND                                      BACKGROUND                                      __________                    Appellant Hicks Muse  financed the 1991 LBO  with a $50          million term  loan and a  $65 million  revolving credit  facility          from the  Bank Group,  secured by liens  on all  Healthco assets.          Healthco filed its chapter 11 petition in June 1993 and continued          to operate  as a  debtor-in-possession.   Three  months later  an          interim  trustee  was  appointed   and  the  reorganization   was          converted to a chapter 7 liquidation.                    By  the  time  the chapter  7  trustee  ("Trustee") was          appointed  approximately  one  month   later,  Healthco's  assets          already  were  undergoing  liquidation  by  the interim  trustee,          subject  to  bankruptcy  court  approval.    In  the  chapter  11          schedules the Healthco  assets were valued  at $149 million,  but          were later  assigned  a liquidation  value  between $33  and  $66          million.                    After  obtaining relief  from the  automatic stay,  see                                                                        ___          Bankruptcy Code   362, 11 U.S.C.   362, the Bank  Group proceeded          to  liquidate its Healthco  collateral, having agreed  to provide                                          2          the  Trustee with "full, complete, and detailed accounting[s]" of          the liquidation  on a monthly basis.   Over the ensuing  year the          Trustee lodged several  complaints, with the  Bank Group and  the          bankruptcy  court, that  the promised  accountings  had not  been          forthcoming  or  were  deficient.    Eventually  the  Bank  Group          submitted  a thirty-page accounting  pursuant to court  order and          provided   the  Trustee  with  thirty  cartons  of  raw  invoices          generated during the collateral liquidation process.                    After declining to incur "the  incredible cost . . . of          . . . go[ing] through the[se]  records item by item," the Trustee          commenced an adversary proceeding against Hicks Muse and the Bank          Group, asserting two principal claims.   First, since the LBO had          left  Healthco insolvent,  the  Trustee  claimed  that  the  $115          million lien  obtained by the  Bank Group on the  Healthco assets          constituted  a  voidable fraudulent  transfer  (hereinafter: "the          fraudulent  transfer claim").   See Bankruptcy Code    544(b), 11                                          ___          U.S.C.   544(b).  Second, the Trustee claimed that the Bank Group          had  liquidated  its  Healthco  collateral   in  a  "commercially          unreasonable"  manner, see  Mass. Gen.  Laws Ann.  ch. 106,    9-                                 ___          504(3) ("UCC"), which yielded only $50-60 million on  assets with          an  estimated value  (per chapter  11  schedules) exceeding  $149          million (hereinafter:  "the UCC claim").                    The Trustee  subsequently proposed to dismiss  both the          fraudulent transfer claim  and the UCC claim, see  Fed. R. Bankr.                                                        ___                                          3          P. 9019(a);1 see also Fed. R. Bankr. P. 9014 (contested matters),                       see also Fed. R. Bankr. P. 9014 (contested matters),                       ___ ____          in return  for the Bank  Group's agreement  to pay the  chapter 7          in return  for the Bank  Group's agreement  to pay the  chapter 7          estate $9  million in cash,  waive roughly $1 million  in allowed          estate $9  million in cash,  waive roughly $1 million  in allowed          priority  claims against the  chapter 7  estate and  a deficiency          priority  claims against the  chapter 7  estate and  a deficiency          claim estimated  at $35  million, and assign  to the  Trustee any          claim estimated  at $35  million, and assign  to the  Trustee any          LBO-related  claims the  Bank  Group  might  have  against  third          LBO-related  claims the  Bank  Group  might  have  against  third          parties,  including  nonsettling   defendants  in  the  adversary          parties,  including  nonsettling   defendants  in  the  adversary          proceeding.2  The Trustee in turn agreed not to oppose the $50-60          proceeding.             million secured  claim asserted  by  the Bank  Group against  the          Healthco collateral.  Several codefendants, including Hicks Muse,          objected to the settlement.                    At the hearing before the bankruptcy court, the Trustee          contended  that the proposed  $45 million settlement  would serve          the  "best interests"  of  the  chapter 7  estate,  see Kowal  v.                                                              ___ _____          Malkemus (In  re Thompson),  965 F.2d 1136,  1141 n.5,  1145 (1st          ________  _______________          Cir. 1992), for two reasons.  First, the Trustee pointed out that          the $45  million offer would  return the chapter 7  estate ninety          percent of  the $50 million estimated maximum  litigated value of          the  fraudulent transfer claim, without litigation risk.  Second,                                        ____________________               1Bankruptcy Rule 9019(a) provides: "On motion by the trustee               1Bankruptcy Rule 9019(a) provides: "On motion by the trustee          and  after  notice  and  a  hearing,  the  court  may  approve  a          and  after  notice  and  a  hearing,  the  court  may  approve  a          compromise or settlement."          compromise or settlement."               2Initially the Trustee  proposed that the Bank  Group assign               2Initially the Trustee  proposed that the Bank  Group assign          its deficiency  claim to  the Trustee,  but the  bankruptcy court          its deficiency  claim to  the Trustee,  but the  bankruptcy court          disapproved  the assignment  as inconsistent  with the  Trustee's          disapproved  the assignment  as inconsistent  with the  Trustee's          fiduciary   obligation  to   unsecured  creditors.     The  court          fiduciary   obligation  to   unsecured  creditors.     The  court          nonetheless concluded that  an outright waiver of  the deficiency          nonetheless concluded that  an outright waiver of  the deficiency          claim would be  permissible.  As appellants do  not challenge the          claim would be  permissible.  As appellants do  not challenge the          bankruptcy court ruling in the  latter respect, we do not address          bankruptcy court ruling in the  latter respect, we do not address          it.          it.                                          4          the Trustee noted several factors  central to his assessment that          the UCC claim, fully litigated, could generate only minimal value          for  the  chapter 7  estate.   See  infra  Section  II.B.1.   The                                         ___  _____          bankruptcy  court  approved  the  proposed  settlement  with  one          pertinent modification.3                    On  intermediate appeal  to  the district  court, Hicks                    On  intermediate appeal  to  the district  court, Hicks          Muse  challenged the bankruptcy court finding that the settlement          Muse  challenged the bankruptcy court finding that the settlement          between the  Trustee and  the Bank Group  had been  negotiated in          between the  Trustee and  the Bank Group  had been  negotiated in          "good faith."   The  district court ruled  the "good  faith" test          "good faith."   The  district court ruled  the "good  faith" test          immaterial under  the "best interests" standard  applicable under          immaterial under  the "best interests" standard  applicable under          Bankruptcy Rule 9019,  and opined that a finding  of "good faith"          Bankruptcy Rule 9019,  and opined that a finding  of "good faith"          might  be misperceived  by state  courts as  a basis  for barring          might  be misperceived  by state  courts as  a basis  for barring          Hicks Muse from pursuing its state-law contribution claim against          Hicks Muse from pursuing its state-law contribution claim against          the Bank Group.  In all other respects the bankruptcy court order          the Bank Group.  In all other respects the bankruptcy court order          was affirmed by the district court.          was affirmed by the district court.                                          II                                          II                                      DISCUSSION                                      DISCUSSION                                      __________          A.   Appellate Jurisdiction          A.   Appellate Jurisdiction               ______________________                    The  Trustee contends that  the appeal is  moot because          Hicks  Muse knowingly disregarded his warning that the settlement          would be  consummated  promptly  absent a  timeous  stay  of  the                                        ____________________               3The court expressly refrained from determining the validity               3The court expressly refrained from determining the validity          vel non of  the Bank Group's purported assignment  to the Trustee          vel non of  the Bank Group's purported assignment  to the Trustee          ___ ___          of its causes  of action against  nonsettling codefendants.   For          of its causes  of action against  nonsettling codefendants.   For          post-settlement   procedural  developments   in  this   adversary          post-settlement   procedural  developments   in  this   adversary          proceeding, see In re Healthco  Int'l, Inc., 208 B.R. 288 (Bankr.          proceeding, see In re Healthco  Int'l, Inc., 208 B.R. 288 (Bankr.                          ___________________________          D. Mass.  1997); In re  Healthco, 203 B.R.  515 (Bankr. D.  Mass.          D. Mass.  1997); In re  Healthco, 203 B.R.  515 (Bankr. D.  Mass.                           _______________          1996); In re  Healthco, 201 B.R. 19 (Bankr. D. Mass. 1996); In re          1996); In re  Healthco, 201 B.R. 19 (Bankr. D. Mass. 1996); In re                 _______________                                      _____          Healthco, 195 B.R. 971 (Bankr. D. Mass. 1996).          Healthco, 195 B.R. 971 (Bankr. D. Mass. 1996).          ________                                          5          bankruptcy court order  approving the settlement.   As Hicks Muse          sought no stay,  the Bank Group promptly disbursed  $9 million to          the  Trustee, from  which $2.5  million  has since  been used  to          defray   professional  fees.    Thereafter,  all  claims  in  the          adversary proceeding against  the Bank Group were  dismissed with          prejudice.               1.   Equitable Mootness               1.   Equitable Mootness                    __________________                    The   "equitable   mootness"  doctrine   imports   both          "equitable"  and  "pragmatic"  limitations   upon  our  appellate          jurisdiction  over bankruptcy appeals.   See Institut  Pasteur v.                                                   ___ _________________          Cambridge Biotech Corp. (In re Cambridge Biotech Corp.), 104 F.3d          _______________________  _____________________________          489, 492  n.5 (1st Cir.), cert.  denied, 117 S.  Ct. 2511 (1997);                                    _____  ______          Rochman v. Northeast  Utils. Serv. Group (In re  Public Serv. Co.          _______    _____________________________  _______________________          of N.H.), 963 F.2d 469, 471 (1st Cir. 1992).          _______                    The   equitable   mootness  test  inquires  whether  an          unwarranted  or  repeated  failure  to  request  a  stay  enabled          developments to evolve in reliance  on the bankruptcy court order          to the degree that their remediation has become impracticable  or          impossible.   Id. at  472.  In  the instant  case, however, Hicks                        ___          Muse  neither repeatedly  ignored  its right,  nor  significantly          delayed utilizing its opportunities, to  seek a stay of the order          approving the Bank  Group settlement.  Cf. id.  at 472-73 (noting                                                 ___ ___          that   appellants   ignored   several   opportunities   to   take          interlocutory appeals  from orders denying stays  during sixteen-          month period following confirmation of reorganization plan).                    Nor  has the Trustee met the "pragmatic" mootness test,                                          6          which  contemplates proof  that the  challenged  bankruptcy court          order   has  been  implemented  to  the  degree  that  meaningful          appellate  relief  is  no  longer  practicable  even  though  the          appellant  may  have  sought  a  stay  with  all  due  diligence.          Instead,  the  Trustee  relies either  upon  more  finely focused          reorganization  provisions  not applicable  here,  see Bankruptcy                                                             ___          Code    1127(b), 11  U.S.C.   1127(b)  (barring plan modification          after  "substantial  consummation"),   or  inapposite  settlement          provisions pursuant to which lawsuits in nonbankruptcy courts had          already   been   dismissed   with   prejudice,   or   substantial          distributions  had been  made  to parties  no longer  amenable to          bankruptcy  court  jurisdiction.    Here,  of  course,  the  only          dismissal  with  prejudice  occurred  in  the  instant  adversary          proceeding and there has been no showing that any portion  of the          settlement  proceeds  disbursed  to the  Trustee,  or  to persons          employed by  the Trustee,  could not be  recovered with  relative          ease.   See  In re  The  Gibbons-Grable Co.,  141  B.R. 614,  617                  ___  ______________________________          (Bankr. N.D.  Ohio 1992)  (noting that  interim disbursements  of          compensation  under Bankruptcy Code  sections 330 and  331 remain          subject to  reconsideration); see also  In re Spillane,  884 F.2d                                        ___ ____  ______________          642, 644 (1st Cir. 1989).                    Accordingly, the  equitable mootness doctrine  does not          bar the present appeal.               2.   Section 363(m) Mootness               2.   Section 363(m) Mootness                    _______________________                    The  Trustee further contends that the appeal is mooted          by section 363(m), which states:                                          7                    The reversal  or modification on appeal of an                    authorization  under [  363(b)  or (c)]  of a                    _____________                            __ _                    sale  or lease  of property  [of the  estate]                    ____  __ _____  __ ________                    does not  affect the  validity of  a sale  or                                                         ____  __                    lease under such  authorization to an  entity                    _____                           __ __  ______                    that  purchased or  leased  such property  in                    ____  _________ __  ______  ____ ________                    good faith, whether  or not such entity  knew                    of the  pendency of  the appeal, unless  such                    authorization  and such  sale  or lease  were                                             ____  __ _____                    stayed pending appeal.          Bankruptcy Code    363(m), 11  U.S.C.   363(m)  (emphasis added).          The Trustee argues that section 363(m) applies because the claims          which were settled with the  Bank Group constituted "property  of          the estate,"  see Bankruptcy Code    541(a), 11 U.S.C.    541(a),                        ___          and therefore the settlement  was the functional equivalent  of a          "sale . . . of property" of the estate under section 363(m).  The          Trustee s contention is fraught with problems.                    First,  it is  at odds  with  the unambiguous  language          employed in  section 363(m).   See Laracuente v.  Chase Manhattan                                         ___ __________     _______________          Bank, 891  F.2d 17,  22 n.2,  23 (1st  Cir. 1989)  (in construing          ____          Bankruptcy Code,  "our inquiry .  . .  ends where,  as here,  the          plain  language of  the statute  is unambiguous").   By  its very          nature  a settlement resolves  adversarial claims prior  to their                                                            _____          definitive determination by  the court.   In  contrast, a  "sale"          effects a  [t]ransfer  of [ the title .  . . ] [to]  property for          [a] consideration .  . . .   Black s Law Dictionary 1200 (5th ed.          1979).   The bankruptcy court below simply  endorsed a settlement          negotiated  by  the  adversaries  whereby  the  Trustee abandoned          claims  against  the  Bank  Group  in  return  for  a  prescribed          consideration.                      Second,  the interpretation urged by the Trustee is not                                          8          in step  with the  legislative policy  animating section  363(m),          which  sought to  encourage  optimum bids  for  "property of  the          estate"  from  entities  not otherwise  privy  to  the bankruptcy          proceedings,  by  ensuring  that  orders   approving  such  sales          promptly  become final  absent a  timeous  stay.   See Mark  Bell                                                             ___ __________          Furniture Warehouse, Inc.  v. D.M. Reid Assocs. (In  re Mark Bell          _________________________     _________________  ________________          Furniture  Warehouse,  Inc.), 992  F.2d  7,  8  (1st Cir.  1993);          ___________________________          Willemain  v.  Kivitz,  764  F.2d  1019,  1023  (4th  Cir.  1985)          _________      ______          (defining  "good  faith  purchaser" as  " one  who  purchases the          assets for  value, in good  faith, and without notice  of adverse          claims ") (citation omitted);  Greylock Glen  Corp. v.  Community                                         ____________________     _________          Sav. Bank, 656 F.2d 1, 4 (1st Cir. 1981).   By contrast, the Bank          _________          Group in no sense qualified as an outside bidder eligible for the          extraordinary "finality"  guaranties afforded by  section 363(m).          Instead, as the defendant directly targeted by the Trustee in the          subject adversary proceeding, not only was the Bank Group the one          "bidder" at  all concerned  about resolving  the disputed  claims          asserted against it  by the Trustee, but it  lacked any incentive          to abandon  its settlement bargain  with the Trustee  even absent          the  extraordinary "finality"  guaranties  envisioned in  section          363(m).                    Finally,  the authorities  cited  by  the  Trustee  are          inapposite or inconclusive at best.   See, e.g., In re Telesphere                                                ___  ____  ________________          Communications,  Inc.,  179  B.R. 544  (Bankr.  N.D.  Ill. 1994).          _____________________          Telesphere  suggests  no broad  functional equivalence  between a          __________          property sale or  lease and a settlement, but  simply that courts                                          9          may consult section 363 for guidance in identifying standards for                                      ________          such  basic procedures  as  "notice" and  "hearing,"  id. at  552                                                                ___          (citing  11 U.S.C.    363(b)), particularly since  no substantive          Code  provision  directly  governs  settlement approvals  by  the          bankruptcy  court,  compare  Fed.  R.  Bankr.  9019  (prescribing                              _______          procedural guidance for settlements), with Fed. R. Bankr. P. 6004                                                ____          (prescribing distinct  procedural rules  for   363  sales).   For          that  matter,  Telesphere did  not  so  much as  mention  section                         __________          363(m),  let alone  endorse its  wholesale  importation into  the          settlement arena.4                                        ____________________              4Nevertheless,  there lurks a concern, not raised here, which          may cut the  other way.  Prior  to the Bankruptcy Code,  sales of          property belonging to the estate  were governed by Bankruptcy Act            70(f), 11 U.S.C.   110 (repealed), and settlements were subject          to  Bankruptcy  Act    27,  11 U.S.C.     50 (repealed).    See 9                                                                      ___          Lawrence  P. King,  Collier on  Bankruptcy   9019.RH,  at 9019-12                              ______________________          (15th  ed. 1995).   Former  Bankruptcy Rule  919, predecessor  to          Bankruptcy  Rule   9019,  was   the  procedural  counterpart   to          Bankruptcy  Act   27, whose substantive  provisions have not been          carried forward in  the Bankruptcy Code.   See In re Dow  Corning                                                     ___ __________________          Corp.,  198 B.R.  214, 244-47  (Bankr.  E.D. Mich.  1996); In  re          _____                                                      ______          Sparks, 190 B.R. 842, 843-44  (Bankr. N.D. Ill. 1996).  Moreover,          ______          the legislative history relating to the repeal  of Bankruptcy Act            27 affords no insight to the intent behind this discontinuity.               Although  Bankruptcy  Rule  9019  purports  to  empower  the          bankruptcy court  to approve  settlements, it  may not   abridge,          enlarge, or modify any substantive right  [enacted in the Code].                                  ___________          28  U.S.C.   2075 (emphasis added).  Thus, absent some clear Code          source  for the substantive power to approve settlements, one may          question  whether Congress envisioned section 363 as that source,          but see Martin v.  Kane (In re A & C Properties),  784 F.2d 1377,          ___ ___ ______     ____  ______________________          1381 n.4 (9th Cir. 1986) (suggesting, in dicta, that Congress may          have intended  the general equitable powers prescribed  in Code            105 to subsume the specific  powers described in Bankruptcy Act            27),  or  whether the  power  to  approve settlements  is  simply          inherent to the judicial forum.               As in any other case,  we must consider, sua sponte if  need                                                        ___ ______          be,  whether we  possess  subject  matter  jurisdiction  over  an          appeal.  See Lopez v. Unanue Casal (In re Unanue Casal), 998 F.2d                   ___ _____    ____________  __________________          28, 30 (1st  Cir. 1993).  Nonetheless, we  may bypass problematic          jurisdictional  questions if it  appears that the  appeal must in                                          10          B.   The UCC Claim Settlement5          B.   The UCC Claim Settlement               ________________________                    Hicks Muse  maintains that the bankruptcy  court abused                    Hicks Muse  maintains that the bankruptcy  court abused          its discretion in  approving the UCC  claim settlement absent  an          its discretion in  approving the UCC  claim settlement absent  an          adequate factual foundation for determining the value  of the UCC          adequate factual foundation for determining the value  of the UCC          claim because  the Trustee never  reviewed the thirty  cartons of          claim because  the Trustee never  reviewed the thirty  cartons of          invoices  generated by  the  Bank  Group  during  its  collateral          invoices  generated by  the  Bank  Group  during  its  collateral          liquidation.    See  supra  Section  I; see  also,  e.g.,  In  re          liquidation.    See  supra  Section  I; see  also,  e.g.,  In  re                          ___  _____              ___  ____   ____   ______          Goldstein,   131  B.R.   367,  371   (Bankr.   S.D.  Ohio   1991)          Goldstein,   131  B.R.   367,  371   (Bankr.   S.D.  Ohio   1991)          _________          (disapproving settlement because trustee made no "thorough review          (disapproving settlement because trustee made no "thorough review          of the  underlying documents  [a trust  and will]  and applicable          of the  underlying documents  [a trust  and will]  and applicable          law").          law").                    The  bankruptcy  court   essentially  is  expected   to                    The  bankruptcy  court   essentially  is  expected   to          " assess[] and  balance the  value of  the claim[s]  . .  . being          " assess[] and  balance the  value of  the claim[s]  . .  . being          compromised against the value . . . of the compromise proposal. "          compromised against the value . . . of the compromise proposal. "          Jeffrey v.  Desmond, 70 F.3d  183, 185 (1st Cir.  1995) (citation          Jeffrey v.  Desmond, 70 F.3d  183, 185 (1st Cir.  1995) (citation          _______     _______          omitted).    It may  consider,  among  other  factors:   (1)  the          omitted).    It may  consider,  among  other  factors:   (1)  the          probability of  success were the  claim to be litigated     given          probability of  success were the  claim to be litigated     given          the   legal   and   evidentiary   obstacles  and   the   expense,          the   legal   and   evidentiary   obstacles  and   the   expense,          inconvenience  and delay entailed  in its litigation     measured          inconvenience  and delay entailed  in its litigation     measured          against  the more  definitive,  concrete and  immediate  benefits          against  the more  definitive,  concrete and  immediate  benefits                                        ____________________          all events fail on the merits.  See Institut Pasteur, 104 F.3d at                                          ___ ________________          492.  As this is such a case, we proceed to the merits.               5Bankruptcy court orders endorsing settlements are  reviewed          for manifest  abuse of  discretion.  See  Jeffrey v.  Desmond, 70                                               ___  _______     _______          F.3d 183,  185 (1st Cir.  1995).   Moreover,  "[t]he [bankruptcy]          judge . .  . is not to  substitute her judgment  for that of  the          trustee,  and  the trustee's  judgment  is  to  be accorded  some          deference."  Hill v. Burdick (In re Moorhead Corp.), 208 B.R. 87,                       ____    _______  ____________________          89  (B.A.P.  1st  Cir.  1997).      Compromises  are  favored  in          bankruptcy.   9 Collier on Bankruptcy   9019.01, at 9019-2.                          _____________________                                          11          attending the  proposed settlement, see  Kowal, 965 F.2d  at 1141          attending the  proposed settlement, see  Kowal, 965 F.2d  at 1141                                              ___  _____          n.5, 1145 (so-called "best interests" standard); (2) a reasonable          n.5, 1145 (so-called "best interests" standard); (2) a reasonable          accommodation  of the  creditors'  views  regarding the  proposed          accommodation  of the  creditors'  views  regarding the  proposed          settlement;   and  (3)  the  experience  and  competence  of  the          settlement;   and  (3)  the  experience  and  competence  of  the          fiduciary proposing the settlement.  See Jeffrey, 70 F.3d at 185;          fiduciary proposing the settlement.  See Jeffrey, 70 F.3d at 185;                                               ___ _______          In  re Texaco,  Inc., 84  B.R.  893, 902  (Bankr. S.D.N.Y.  1988)          In  re Texaco,  Inc., 84  B.R.  893, 902  (Bankr. S.D.N.Y.  1988)          ____________________          (citing Protective  Committee  for  Indep.  Stockholders  of  TMT          (citing Protective  Committee  for  Indep.  Stockholders  of  TMT                  _________________________________________________________          Trailer Ferry, Inc. v. Anderson, 390 U.S. 414 (1968)).          Trailer Ferry, Inc. v. Anderson, 390 U.S. 414 (1968)).          ___________________    ________                                          12               1.   "Best Interests"               1.   "Best Interests"                     ______________                    The Trustee identified several reasons for settling the          UCC claim for  minimal value.6   First, the estate  would face  a                                           First, the estate  would face  a          formidable  burden in  attempting to  demonstrate  that the  Bank          formidable  burden in  attempting to  demonstrate  that the  Bank          Group liquidated its collateral in a  "commercially unreasonable"          Group liquidated its collateral in a  "commercially unreasonable"          manner.  Second,  Hicks makes too much of  the Trustee's decision          manner.  Second,  Hicks makes too much of  the Trustee's decision          to  forego a costly and time-consuming lapidarian review of every          to  forego a costly and time-consuming lapidarian review of every          invoice generated  during the collateral  liquidation, especially          invoice generated  during the collateral  liquidation, especially          since  Hicks makes  no suggestion  that  the individual  invoices          since  Hicks makes  no suggestion  that  the individual  invoices          reflect any relevant  information other than the  price obtained.          reflect any relevant  information other than the  price obtained.          Ordinarily a UCC   9-504(3) claimant must show  something besides          Ordinarily a UCC   9-504(3) claimant must show  something besides          a low price,  as by demonstrating that the collateral liquidation          a low price,  as by demonstrating that the collateral liquidation          was not conducted in a commercially reasonable manner.  See Mass.          was not conducted in a commercially reasonable manner.  See Mass.                  _________                                       ___          Gen. Laws  Ann. ch. 106,    9-507(2); RTC  v. Carr, 13  F.3d 425,          Gen. Laws  Ann. ch. 106,    9-507(2); RTC  v. Carr, 13  F.3d 425,                                                ___     ____          429-30 (1st Cir.  1993) (citing Chartrand v. Newton  Trust Co., 5          429-30 (1st Cir.  1993) (citing Chartrand v. Newton  Trust Co., 5                                          _________    _________________          N.E.2d  421, 423  (Mass.  1936));  Nadler  v.  BayBank  Merrimack          N.E.2d  421, 423  (Mass.  1936));  Nadler  v.  BayBank  Merrimack                                             ______      __________________          Valley, N.A., 733 F.2d  182, 184 (1st  Cir. 1984).  Thus,  absent          Valley, N.A., 733 F.2d  182, 184 (1st  Cir. 1984).  Thus,  absent          ____________          extraordinary circumstances not present here,  mere evidence that          extraordinary circumstances not present here,  mere evidence that          the Healthco collateral might have returned more than $50 million          the Healthco collateral might have returned more than $50 million          in some exquisitely  orchestrated liquidation did not  offset the          in some exquisitely  orchestrated liquidation did not  offset the          substantial  burdens and  risks  which  the  Trustee  would  have          substantial  burdens and  risks  which  the  Trustee  would  have          encountered in litigating the UCC claim.          encountered in litigating the UCC claim.                    Furthermore,  the insistence  by  Hicks  Muse that  the                    Furthermore,  the insistence  by  Hicks  Muse that  the                                        ____________________               6On  the other hand, Hicks Muse offered no solid evidentiary          basis  for second-guessing  the  Trustee's  assessment  that  the          settlement recoveries would amount to  90% of the total allegedly          due the estate on the fraudulent transfer claim.                                          13          Trustee review every  invoice in the thirty  cartons delivered by          Trustee review every  invoice in the thirty  cartons delivered by          the  Bank Group  is predicated  on the  mistaken notion  that the          the  Bank Group  is predicated  on the  mistaken notion  that the          Trustee or  the bankruptcy court was obliged  to fix the value of          Trustee or  the bankruptcy court was obliged  to fix the value of          the UCC claim with near mathematical precision before it could be          the UCC claim with near mathematical precision before it could be          settled.  See Kowal, 965 F.2d at 1145 ("[A] chapter 7 trustee . .          settled.  See Kowal, 965 F.2d at 1145 ("[A] chapter 7 trustee . .                    ___ _____          .   realistically  cannot  be  required  to  demonstrate  to  the          .   realistically  cannot  be  required  to  demonstrate  to  the          satisfaction of every  individual creditor and the debtor,  or to          satisfaction of every  individual creditor and the debtor,  or to          any compelling degree  of certitude, that the  settlement benefit          any compelling degree  of certitude, that the  settlement benefit          to  the chapter  7  estate and  the  value of  the  settled claim          to  the chapter  7  estate and  the  value of  the  settled claim          comprise  a matched set.").  Among other practical considerations          comprise  a matched set.").  Among other practical considerations          overlooked under this  approach is the reality that  many, if not          overlooked under this  approach is the reality that  many, if not          most, claims settled  in bankruptcy proceedings are  not amenable          most, claims settled  in bankruptcy proceedings are  not amenable          either to ready or exact valuation in the abstract.  In re Energy          either to ready or exact valuation in the abstract.  In re Energy                                                               ____________          Coop., 886 F.2d  921, 929 (7th Cir. 1989)  (" [A]n exact judicial          Coop., 886 F.2d  921, 929 (7th Cir. 1989)  (" [A]n exact judicial          _____          determination of the values in  issue would defeat the purpose of          determination of the values in  issue would defeat the purpose of          compromising  the claim. ")  (citation omitted);  In  re Lee  Way          compromising  the claim. ")  (citation omitted);  In  re Lee  Way                                                            _______________          Holding Co.,  120 B.R. 881,  897 (Bankr. S.D. Ohio  1990) (noting          Holding Co.,  120 B.R. 881,  897 (Bankr. S.D. Ohio  1990) (noting          ___________          that settling party  need only have  "[f]amiliarity with a  case,          that settling party  need only have  "[f]amiliarity with a  case,          its factual patterns, legal theories, and evidence," and need not          its factual patterns, legal theories, and evidence," and need not          be  "so familiar  with the  case as to  be prepared  for trial").          be  "so familiar  with the  case as to  be prepared  for trial").          Thus, "th[e] responsibility  of the bankruptcy judge, and ours on          Thus, "th[e] responsibility  of the bankruptcy judge, and ours on          review,  is not to decide the  numerous questions of law and fact          review,  is not to decide the  numerous questions of law and fact          raised by  appellants but  rather to canvass  the issues  and see          raised by  appellants but  rather to canvass  the issues  and see          whether the settlement  'fall[s] below  the lowest  point in  the          whether the settlement  'fall[s] below  the lowest  point in  the          range of  reasonableness. "  Cosoff  v. Rodman (In re  W.T. Grant          range of  reasonableness. "  Cosoff  v. Rodman (In re  W.T. Grant                                       ______     ______  _________________          Co.), 699 F.2d 599, 608 (2d Cir. 1983) (citation omitted); see In          Co.), 699 F.2d 599, 608 (2d Cir. 1983) (citation omitted); see In          ___                                                        ___ __                                          14          re Energy Coop., 886 F.2d at 929.7          re Energy Coop., 886 F.2d at 929.          _______________                    The  evidence on  sale-price  insufficiency was  highly                    The  evidence on  sale-price  insufficiency was  highly          suspect as well.  The original complaint valued the UCC  claim at          suspect as well.  The original complaint valued the UCC  claim at          $99 million or more (i.e., $149 million minimum asset value, less          $99 million or more (i.e., $149 million minimum asset value, less                               ____          $50 million  in sale  proceeds generated to  date).   The Trustee          $50 million  in sale  proceeds generated to  date).   The Trustee          quite  reasonably  attributed  its  overestimation to  aggressive          quite  reasonably  attributed  its  overestimation to  aggressive          pleading typical of  plaintiffs generally at early stages  in the          pleading typical of  plaintiffs generally at early stages  in the          proceedings.   Moreover, it  is often  a practical  necessity for          proceedings.   Moreover, it  is often  a practical  necessity for          fiduciaries and  claimants in  bankruptcy proceedings  to utilize          fiduciaries and  claimants in  bankruptcy proceedings  to utilize          the inflated asset  values listed in the debtor's  schedules as a          the inflated asset  values listed in the debtor's  schedules as a          main   source  for  their   valuation  estimates  prior   to  any          main   source  for  their   valuation  estimates  prior   to  any          opportunity  to conduct  discovery, see  Fed. R.  Bankr.  P. 7026          opportunity  to conduct  discovery, see  Fed. R.  Bankr.  P. 7026                                              ___          (discovery)  &  7015  (permitting  post-discovery  amendments  to          (discovery)  &  7015  (permitting  post-discovery  amendments  to          complaints  in adversary proceedings).  See Associates Commercial          complaints  in adversary proceedings).  See Associates Commercial                                                  ___ _____________________          Corp. v. A & A Transp., Inc. (In re A & A Transp., Inc.), 10 B.R.          Corp. v. A & A Transp., Inc. (In re A & A Transp., Inc.), 10 B.R.          _____    ___________________  _________________________          867,  868-69 (Bankr. D. Mass. 1981) ("[A]lthough the Debtor signs          867,  868-69 (Bankr. D. Mass. 1981) ("[A]lthough the Debtor signs          the  schedules under  oath, the  values listed  therein are  only          the  schedules under  oath, the  values listed  therein are  only          reasonable  estimates, and  very often  the  person charged  with          reasonable  estimates, and  very often  the  person charged  with          preparing  the schedules  has little  or no  knowledge about  the          preparing  the schedules  has little  or no  knowledge about  the          value of  certain types of  property listed  therein.").   Fairly          value of  certain types of  property listed  therein.").   Fairly          early on, in  fact, the Trustee uncovered evidence  that the $149          early on, in  fact, the Trustee uncovered evidence  that the $149          million valuation estimate was grossly excessive.          million valuation estimate was grossly excessive.                                        ____________________               7We  reject   the  contention  that  the   bankruptcy  court          necessarily  considered the  UCC  claim  valueless.    Since  the          evidence  did not  compel  a  finding that  $45  million was  the          minimum needed to settle the fraudulent transfer claim, see supra                                                                  ___ _____          note 6, some unidentified portion  of the settlement sum may have          reflected a reasonable discounting of the UCC claim.                                           15                    At   a  hearing   conducted  during   the   chapter  11                    At   a  hearing   conducted  during   the   chapter  11          proceedings, Healthco  personnel  pegged  the  likely  collateral          proceedings, Healthco  personnel  pegged  the  likely  collateral          liquidation  value at  between $33  and 66  million,  which quite          liquidation  value at  between $33  and 66  million,  which quite          accurately presaged the  $50-60 million  ultimately generated  in          accurately presaged the  $50-60 million  ultimately generated  in          sale proceeds.   See In re Tennessee Chem. Co., 143 B.R. 468, 475          sale proceeds.   See In re Tennessee Chem. Co., 143 B.R. 468, 475                           ___ _________________________          (Bankr. E.D. Tenn. 1992) ("[T]he usual assumption [is] that going          (Bankr. E.D. Tenn. 1992) ("[T]he usual assumption [is] that going          concern  value is  greater  than  forced  sale,  liquidation,  or          concern  value is  greater  than  forced  sale,  liquidation,  or          salvage  value.").   Furthermore,  for  some  time  Healthco  had          salvage  value.").   Furthermore,  for  some  time  Healthco  had          utilized a deficient inventory control system which may well have          utilized a deficient inventory control system which may well have          caused gross overstatements in its 1993 inventories.          caused gross overstatements in its 1993 inventories.                    Yet more importantly, however, Healthco was the largest                    Yet more importantly, however, Healthco was the largest          distributor  of  dental  supplies  in  the  United  States,  with          distributor  of  dental  supplies  in  the  United  States,  with          extensive worldwide  markets.   Its  huge  market share  and  the          extensive worldwide  markets.   Its  huge  market share  and  the          necessity  that  its  inventories virtually  be  "dumped"  on the          necessity  that  its  inventories virtually  be  "dumped"  on the          market  reasonably  could  be  expected  to  cause  significantly          market  reasonably  could  be  expected  to  cause  significantly          depressed prices.   Moreover,  many Healthco  accounts receivable          depressed prices.   Moreover,  many Healthco  accounts receivable          were  in  serious  dispute and  unlikely  to  attract substantial          were  in  serious  dispute and  unlikely  to  attract substantial          offers from third  parties.   See, e.g., Brown  v. Riley &  Power          offers from third  parties.   See, e.g., Brown  v. Riley &  Power                                        ___  ____  _____     ______________          Mgt., Inc.  (In re Omni  Mech. Contractors, Inc.), 114  B.R. 518,          Mgt., Inc.  (In re Omni  Mech. Contractors, Inc.), 114  B.R. 518,          __________   ___________________________________          522  (Bankr. E.D. Tenn. 1990) ("The  value of accounts receivable          522  (Bankr. E.D. Tenn. 1990) ("The  value of accounts receivable          may be discounted for uncollectible and disputed debts.").  Hicks          may be discounted for uncollectible and disputed debts.").  Hicks          Musecitesnorecordevidencewhichwouldunderminetheseconsiderations.8          Musecitesnorecordevidencewhichwouldunderminetheseconsiderations.                                        ____________________               8As the  Healthco collateral liquidation was  exceptional in          these  important respects, the Trustee supportably concluded that          the decision by the Bank  Group not to obtain a liquidation-value          appraisal   prior   to   its  collateral   liquidation   was  not          unreasonable,  or at  the very  least that  the trier of  fact at          trial could have found it excusable.                                          16                    Finally, the  Trustee reasonably concluded that even if                    Finally, the  Trustee reasonably concluded that even if          the sale proceeds  obtained by the Bank Group were  shown to have          the sale proceeds  obtained by the Bank Group were  shown to have          been  low,  it  was  most   unlikely  that  it  could  have  been          been  low,  it  was  most   unlikely  that  it  could  have  been          demonstrated that the  collateral liquidation had been  conducted          demonstrated that the  collateral liquidation had been  conducted          in a commercially unreasonable manner, given that it had begun in          in a commercially unreasonable manner, given that it had begun in          1993 on terms  and conditions approved  by the bankruptcy  court.          1993 on terms  and conditions approved  by the bankruptcy  court.               __ _____  ___ __________ ________  __ ___ __________  _____          Although close  bankruptcy court  oversight  did not  necessarily          Although close  bankruptcy court  oversight  did not  necessarily          rule  out   a  claim  that   the  Bank  Group   unilaterally  and          rule  out   a  claim  that   the  Bank  Group   unilaterally  and          "unreasonably" exceeded  or disregarded the terms  and conditions          "unreasonably" exceeded  or disregarded the terms  and conditions          of  the  collateral  liquidation,  Hicks  Muse  cites  no  record          of  the  collateral  liquidation,  Hicks  Muse  cites  no  record          evidence that  the Bank Group  did so.  Accordingly,  we conclude          evidence that  the Bank Group  did so.  Accordingly,  we conclude          that the "best interests" factor favored the settlement.          that the "best interests" factor favored the settlement.               2.   Creditor Views               2.   Creditor Views                    ______________                    The  unsecured creditors  committee strongly  supported          the  proposed settlement,  as did  the  overwhelming majority  of          individual unsecured  creditors.   See Lee Way  Holding Co.,  120                                             ___ ____________________          B.R. at 904 (noting importance of creditors committee support for          settlement).  The only objections came from some noncreditors and          nonsettling creditors  who  were codefendants  in  the  adversary          proceeding.  Hicks Muse counters that creditors committee support          for the original  settlement proposal must be  discounted because          the settlement  underwent modification before  gaining bankruptcy          court approval.  Be that as  it may, there is no indication  that          any  creditor  withdrew  its  consent  based on  the  de  minimis                                                                __  _______          modifications  subsequently made by the bankruptcy court, none of          whichdetracted from the overall reasonableness of the compromise.                                          17               3.   The Trustee's Competence and Experience               3.   The Trustee's Competence and Experience                    _______________________________________                    Other  than by  implication,  through  reliance on  the          Trustee's reasonable decision not to review the thirty cartons of          individual  invoices, see supra  Section II.B.1., Hicks  Muse has                                ___ _____          not   questioned  the   Trustee's   professional  competence   or          experience.   Absent  such  a  challenge,  this  factor  provided          further  support for the settlement.  See  Hill v. Burdick (In re                                                ___  ____    _______  _____          Moorhead Corp.), 208 B.R. 87, 89 (B.A.P. 1st Cir. 1997).          ______________                    We  therefore   conclude  that   Hicks  Muse   has  not          demonstrated a  manifest abuse  of discretion  by the  bankruptcy          court.          C.   Other Settlement Terms          C.   Other Settlement Terms               ______________________               1.   Assignment Clause               1.   Assignment Clause                    _________________                    Next,  Hicks Muse  contests  a settlement  modification          which deferred  any determination regarding the enforceability of          certain   causes  of   action  against   nonsettling  defendants,          including  Hicks  Muse, which  the  Bank  Group assigned  to  the          Trustee.   Hicks Muse contends  that the bankruptcy court  had no          choice  but to  strike this  modification because  it lacked  the          power to  approve the assignment.   See Caplin v.  Marine Midland                                              ___ ______     ______________          Grace Trust Co.  of N.Y., 406 U.S. 416, 434  (1972) (holding that          ________________________          trustee lacked standing to sue in behalf  of individual creditors          of estate); Williams v. California First Bank, 859 F.2d 664, 666-                      ________    _____________________          67  (9th  Cir. 1988)  (applying Caplin  ban even  though creditor                                          ______          purportedly assigned its claim to trustee).                    We need  not address the  Caplin question on  which the                                              ______                                          18          Hicks  Muse  contention  is  predicated.    Unlike  a  settlement          agreement wherein the  estate abandons an enforceable  right, the          assignment by the Bank Group conferred a benefit upon the chapter          7  estate.    As  the  bankruptcy court  acted  well  within  its          discretion  in  determining  that the  benefit  conferred  by the          settlement served the  "best interests" of  the chapter 7  estate          without regard to whether the Trustee realized additional benefit          from the subject assignment, nothing more was required.9               2.   Potential Contribution Claims               2.   Potential Contribution Claims                    _____________________________                     Finally,  Hicks  Muse   faults  the  bankruptcy  court          finding that  the  Trustee  and  the Bank  Group  negotiated  the          settlement  in "good  faith."   It characterizes  the  finding as          immaterial  to the Rule  9019(a) "best  interests of  the estate           standard and worries  that the Bank Group may  misuse the finding          should  Hicks Muse  later  seek  contribution,  since  state  law          normally bars  nonsettling defendants  from asserting  claims for                                        ____________________               9Hicks Muse cites  no apposite authority  for its view  that          the bankruptcy  court had to determine the enforceability vel non                                                                    ___ ___          of the assignment before approving the settlement agreement under          Rule  9019(a),  particularly  since   the  Caplin-Williams  issue                                                     ______ ________          remained unripe  for adjudication  unless and  until the  Trustee          were to assert an assigned claim against Hicks Muse.               Furthermore, though we need not resolve the matter, it seems          unlikely  that  Hicks Muse  could demonstrate  cognizable injury.          The  Bank Group  (and its  putative assignee)  would have  had to          assert    in the adversary proceeding, see Fed. R. Bankr. P. 7013                                                 ___              whatever LBO-related  claims  it  held  against  Hicks  Muse.          Whereas  the Trustee  notes that  he  elected not  to assert  any          derivative claim against  Hicks Muse  at trial  in the  adversary          proceeding.  See Mai Systs. Corp. v. C.U. Techs., Inc. (In re Mai                       ___ ________________    _________________  _________          Systs.  Corp.),  178 B.R.  50,  55  (Bankr.  D. Del.  1995)  (res          _____________                                                 ___          judicata normally bars subsequent litigation of claim which could          ________          have  been litigated  in earlier  contested  matter or  adversary          proceeding).                                          19          contribution  against codefendants  who  have  settled  with  the          plaintiff in "good  faith."  See, e.g., Mass. Gen.  Laws Ann. ch.                                       ___  ____          231B,   4 (Contribution Among Tortfeasors Act).                    The district court  attempted to accommodate the  Hicks          Muse concern  by amending the  settlement order so as  to reserve          the  question whether the bankruptcy court's "good faith" finding          would be entitled  to preclusive effect in any  subsequent state-          law  contribution action.   Although  we concur  in the  district          court's  action,  we   think  Hicks  Muse   was  entitled  to   a          determination that  the interpretation  feared by  Hicks Muse  is          precluded by the settlement order.                    The  "best  interests" standard  under  Bankruptcy Rule          9019 contemplates a determination by  the bankruptcy court as  to          whether the  proposed settlement  was negotiated  in good  faith.          See, e.g.,  In re  Kuhns, 101 B.R.  243, 246-47 (Bankr.  D. Mont.          ___  ____   ____________          1989)  (disapproving "bad faith" settlement).  Although the "good          faith" finding  by the  bankruptcy court  below was  expressed in          general  terms,  without mentioning  contribution,  elsewhere the          court explicitly provided that the legal effect of the settlement          order   on  contribution   claims   was   to   be   governed   by          "[n]onbankruptcy law."                    Moreover,  there is  considerable question  whether the          bankruptcy  court possessed  the  power to  make  a "good  faith"          finding  preempting  future  contribution  claims by  nonsettling          parties  in these  circumstances.   Compare,  e.g., Feld  v. Zale                                              _______   ____  ____     ____          Corp. (In  re Zale  Corp.), 62 F.3d  746, 752-54 (5th  Cir. 1995)          _____ ___________________                                          20          (holding  that  bankruptcy   court  approving  settlement  lacked          jurisdiction to resolve claims  between nondebtors), with Munford                                                               ____ _______          v. Munford, Inc.  (In re Munford,  Inc.), 97 F.3d 449,  455 (11th             _____________   ____________________          Cir.  1996)  (holding  that  Bankruptcy Code     105  may empower          bankruptcy court to bar future contribution claims by nonsettling          defendants).   In all events,  since the Trustee did  not request          extraordinary equitable relief  under Bankruptcy Code    105, cf.                                                                        ___          supra  Section   II.C.1  (bankruptcy  court  need  not  determine          _____          enforceability of  settlement terms  which pose  no detriment  to          chapter 7 estate), we need not resolve this question.  Absent any          clear indication that future contribution claims were foreclosed,          we  conclude that  the bankruptcy  court  discussed "good  faith"          simply as another factor in its "best interests" analysis, see In                                                                     ___ __          re Kuhns, 101  B.R. at 246-47, rather than with a view to barring          ________          or otherwise affecting future contribution claims.                    Accordingly,  should Hicks  Muse subsequently  assert a          state-law contribution claim against the  Bank Group, it is to be          governed by  the applicable state  law.  If the  applicable state          law  were  to  comport  with  the  "good  faith"  standard  under          Bankruptcy  Rule  9019,  the  Bank  Group  might  prevail on  its          contention  that the  settlement order collaterally  estops Hicks          Muse  from  relitigating  the  factual issue  as  to  whether the          settlement  between  the  Trustee and  the  Bankruptcy  Group was          negotiated  in  good  faith.    As  there  may  be  no  necessary          equivalence   between  Bankruptcy   Rule   9019  and   applicable          nonbankruptcy contribution  law  regarding  the  governing  "good                                          21          faith" standard, we venture no opinion.                    Affirmed.                    Affirmed.                    ________                                          22
