                             In the
 United States Court of Appeals
               For the Seventh Circuit
                          ____________

No. 02-3088
CORPORATE ASSETS, INC.,
                                                          Appellant,
                                 v.

GUS A. PALOIAN, Chapter 7 Trustee of
GGSI LIQUIDATION, INC., et al.,
                                                  Trustee-Appellee,
                                and

GOSS INTERNATIONAL CORPORATION,
                                              Intervenor-Appellee.

                          ____________
            Appeal from the United States District Court
       for the Northern District of Illinois, Eastern Division.
             No. 02 C 2056—Elaine E. Bucklo, Judge.
                          ____________
    ARGUED MAY 13, 2003—DECIDED MAY 17, 2004
                    ____________



 Before ROVNER, DIANE P. WOOD, and EVANS, Circuit
Judges.
  ROVNER, Circuit Judge. At an auction sanctioned by the
bankruptcy court, Corporate Assets, Inc. (“CAI”) submitted
the high bid for assets belonging to the debtors, but its
apparent victory proved short-lived. A higher, “upset” bid
2                                              No. 02-3088

tendered to the debtors after the close of the auction con-
vinced the debtors, with the bankruptcy court’s approval, to
reopen the bidding. CAI won the second auction with a bid
$352,500 higher than its original bid. CAI appealed the
bankruptcy court’s decisions to reopen the bidding and to
confirm the sale to CAI at the higher price established
by the second auction. The district court affirmed. In re
GGSI Liquidation, Inc., 280 B.R. 425 (N.D. Ill. 2002). CAI
has now appealed to this court, contending that the bank-
ruptcy court abused its discretion in allowing a second
auction and in refusing to confirm the results of the first
auction. We also affirm.


                            I.
  On September 10, 2001, debtors Goss Holdings, Inc. and
Goss Graphic Systems, Inc.1 (collectively, “Goss”) filed
voluntary chapter 11 bankruptcy petitions (later consoli-
dated) with the bankruptcy court. Shortly thereafter, the
debtors sought approval from the court to sell by auction
certain personal property (including newspaper printing
press manufacturing equipment, furniture, and fixtures)
located at Goss’s manufacturing facility in Cedar Rapids,
Iowa (the “Cedar Rapids assets” or the “assets”).
  On December 20, 2001, the bankruptcy court entered an
order approving specific bidding procedures for the auction
and sale of the Cedar Rapids assets. R. 4 Tab 3 & Ex. A.
Pursuant to these rules, each interested party was to
submit a written bid to Goss in advance of the auction along
with an executed copy of an asset purchase agreement that
Goss had prepared, financial data demonstrating that it
had the financial ability to consummate the asset purchase,


1
  Goss Graphic Systems, Inc. later changed its name to GGSI
Liquidation, Inc.
No. 02-3088                                                  3

and a deposit. Id. Ex. A at 2-3. Goss was in turn empowered
to review these submissions and determine whether each
bidder was “qualified” in the sense of having submitted the
requisite materials and having demonstrated its bona fides
and ability to make good on its offer. Id. Ex. A at 1-2. Goss
was then to conduct an auction among qualified bidders on
January 21, 2002, at which time those bidders would have
the opportunity to increase the amounts of their bids. Id.
Ex. A at 4. Upon conclusion of the auction, Goss, in consul-
tation with its pre- and post-petition lenders and the
committee of its unsecured creditors, was to ascertain the
highest and best offer and present that bid to the bank-
ruptcy court for approval at a sale hearing scheduled for
January 23, 2002. Id. Ex. A at 4-5. However, Goss’s recom-
mendation that the court approve a particular offer was not
to be taken as an acceptance of that offer; only the court’s
approval of an offer was to be so construed. Id. Ex. A at 5.
A modifications provision included in the approved proce-
dures also gave Goss substantial discretion to reject any bid
and/or to impose additional conditions and terms on the
sale of its property prior to the sale hearing:


                      Modifications
    Goss may (a) determine, with the agreement of rep-
    resentatives of the [pre- and post-petition] Lenders and
    the Committee [of unsecured creditors], which Qualified
    Bid(s), if any, is the highest or otherwise best offer; and
    (b) reject at any time before entry of an order of the
    Bankruptcy Court approving a Qualified Bid, any bid
    that is (i) inadequate or insufficient, (ii) not in confor-
    mity with the requirements of the Bankruptcy Code,
    the bidding procedures, or the terms and conditions of
    sale, or (iii) contrary to the best interests of Goss, its
    estate[ ], and its creditors. At or before the Sale Hear-
    ing, Goss may impose such other terms and conditions
4                                               No. 02-3088

    as it may determine to be in the best interests of Goss’
    estate, its creditors and other parties in interest.
Id. Ex. A at 6.
  Included in the draft purchase agreement that bidders
were to execute in advance of the auction was a term con-
cerning the removal of the Cedar Rapids assets from Goss’s
property. R. 4 Tab 3 Ex. B. at 5-6, § 5.1. That provision
required the purchaser to remove the bulk of the assets
from the property on or before June 1, 2002. Id. However,
noting that Goss was attempting to sell the property, the
agreement reserved to Goss the right to require removal of
the assets prior to June 1 in the event that the property was
sold. Id. A number of interested bidders expressed concern
to Goss about that reservation, and some submitted written
bids conditioned on deletion of that language from the
purchase agreement. R. 4 Tab 4 at 9.
  After becoming aware of the concerns that prospective
bidders had about the early-removal provision, Goss decided
that it would delete that provision from the asset purchase
agreement. By this time Goss had, in fact, contracted to sell
the Cedar Rapids facility to a third party. Goss arranged to
sublease the property from the new owner until June 1 at
a cost of $115,000, so that the eventual purchaser of the
Cedar Rapids assets would not be forced to remove them
from the property before that date. R. 4 Tab 9 at 13. In the
week prior to the auction, Goss advised some, but not all, of
the bidders on the assets that the purchase was no longer
subject to the early-removal term (see R. 4 Tab 6 at 18-19,
24-25; R. 4 Tab 9 at 22-23); the rest were informed of the
change at the time of the auction (see R. 4 Tab 4 at 8-10).
Goss would later advise the bankruptcy court that once it
informed (some of) the prospective bidders that the Cedar
Rapids assets would not have to be removed prior to June
1, the bid amounts on the assets jumped from a high of
approximately $1.6 million to $2.2 million. R. 4 Tab 9 at 13.
No. 02-3088                                                 5

  The auction proceeded as scheduled on Monday, January
21, 2002. After the amounts of the written bids that Goss
had received were announced at the start of the auction,
qualified bidders were given the opportunity to increase
their bids. Before opening the floor to further bids, however,
Goss’s attorney solicited questions from the bidders. One of
the bidders asked, “Will this be final today, or will someone
be able to go to the court date three days from now and up
our bid?” R. 4 Tab 4 at 15. Goss’s attorney responded as
follows:
    Well, the Court’s order provides that today is the day
    for the auction, and when we close the auction it will be
    final. I cannot obviously state that someone can’t walk
    into court on Wednesday [the day scheduled for the sale
    hearing] and offer 10 million dollars for the stuff and
    have the Court say that it’s not going to accept their
    bid; but under the procedures, today is the day for the
    auction.
    The debtors anticipate that when they close the auction
    today, they will take the lead bidder who has provided
    all of the necessary information and deposits to be a
    qualified bidder and will present that to the Court to
    approve.
    So I guess I can’t give you 100 percent assurances that
    someone can’t walk into court on Wednesday and try to
    outbid whoever wins today, but I think that is a very
    slim possibility.
Id. at 15-16.
  Of the written bids that had been submitted to Goss in
advance of the auction, CAI’s was the highest, in the
amount of $2.25 million. When the bidding was reopened at
the auction, none of the other bidders topped that bid.
Several did increase their bids, but only in an apparent
effort to secure second place behind CAI’s high bid. Myron
Bolling Auctioneers (“MBA”) ultimately secured the second-
6                                                No. 02-3088

place slot, with a bid of $2.075 million. At the close of
bidding, Goss’s counsel indicated that the final bids of the
four qualified bidders would be submitted to the bankruptcy
court at the sale hearing scheduled for January 23 and that
Goss would expect to close on the sale on the following day.
Id. at 29-30, 33-34. Goss’s attorney also advised the bidders
that if any of them wished to object to the sale process, they
must file their objections no later than 4:00 p.m. on the day
prior to the sale hearing. Id. at 33. The auction was then
declared closed. Id. at 34.
  The next day, January 22, MBA’s representative, Myron
Bolling (“Bolling”) contacted Goss and indicated that MBA
wished to increase its bid to $2.45 million, an amount
$200,000 or just under nine percent greater than CAI’s high
bid. MBA had not known prior to the auction that Goss had
decided to remove from the purchase agreement the
language permitting Goss to require removal of the Cedar
Rapids assets prior to June 1. See R. 4 Tab 6 at 18-19, 24-
25; see also R. 4 Tab 4 at 10 (after Goss’s counsel announces
removal of that sale condition, Bolling asks him to clarify
when assets would have to be removed). Evidently, during
the auction, Bolling and another MBA representative were
able to communicate this information to some, but not all,
of the members of the MBA bidding group who were not
present at the auction. R. 4 Tab 6 at 25; R. 4 Tab 9 at 14-15,
21. Following the auction, when everyone in the MBA group
became aware of the change, they decided to increase
MBA’s bid.
  Presented with the higher offer from MBA, Goss, with the
concurrence of its lenders and the committee of unsecured
creditors, decided that it would ask the bankruptcy court to
continue the sale hearing scheduled for January 23 so that
it could conduct a second auction. The bankruptcy court
granted the request and rescheduled the hearing for
January 29, 2002, reserving judgment as to whether it
would accept the results of the second auction or instead
No. 02-3088                                                  7

confirm the sale to CAI based on its winning bid at the first
auction. R. 4 Tab 10 at 9. Goss then set January 24, 2002,
as the date of the second auction and notified the bidders.
  CAI participated in the second auction, subject to a full
reservation of its legal rights, and subsequently won with
a final bid of $2.6025 million, an amount approximately
15.7 percent higher than its previous bid. At the sale
hearing on January 29, 2002, the debtors requested that the
bankruptcy court confirm the results of the second auction
and declare CAI the winner based on its high bid at that
auction. CAI objected, arguing that the results of the first
auction should be confirmed with CAI as the winning bidder
at a price of $2.25 million. CAI also submitted an adminis-
trative expense claim seeking compensation for the costs it
had incurred as a result of the second auction. See 11 U.S.C.
§ 503(b)(1)(A).
   The bankruptcy court (Hon. Carol A. Doyle) granted
Goss’s request to confirm the results of the second auction
and denied CAI’s request for expenses. R. 4 Tabs 2, 6. The
court was mindful of the need to preserve the integrity
and finality of the auction process and to recognize the rea-
sonable expectations of the parties who participated in the
first auction. R. 4 Tab 6 at 20. On the other hand, the court
also had to consider the governing principle in confirming
a sale, which is to secure the highest price for the benefit of
the estate and creditors. Id. (citing In re Chung King, Inc.,
753 F.2d 547, 549 (7th Cir. 1985)). Accepting CAI’s winning
bid at the second auction was in the best interests of the
estate—that bid was more than $350,000 higher than CAI’s
bid at the first auction. Id. at 22. And after weighing the
circumstances, the court was satisfied that confirming the
results of the second auction was contrary neither to the
reasonable expectations of the bidders nor the integrity and
finality of the auction process. Id. The modifications
provision of the bidding procedures had given Goss the
authority to reject a bid not in the best interests of the
8                                                No. 02-3088

estate at any time before the court entered an order
approving a qualified bid; it had also empowered Goss to
impose additional conditions in the interests of the estate
prior to or at the sale hearing. In the court’s view, Goss’s
decision to reject CAI’s high bid at the first auction and to
reopen the auction to further bidding “would fit within that
very, very broad language.” Id. at 23. CAI had been aware
of the bidding procedures, including the modifications
provision, and so to the extent CAI expected that its high
bid at the first auction necessarily would be approved, its
expectation was unreasonable. Id. at 23-24. Likewise,
because the bidding procedures granted Goss the authority
to reject any bid until such time as the court had entered a
sale order, the decision to reopen the auction did not
undermine the interests in finality and integrity of the
auction process. Id. at 24. Moreover, in the court’s view, the
second auction provided a more level playing field than the
first had done. Id. at 24-25. Prior to the first auction, some
but not all bidders had been made aware of Goss’s decision
to remove the language that might have required removal
of the Cedar Rapids assets prior to June 1. MBA did not
learn of the change until the day of the auction and was not
able to inform all of the members of its bidding group until
after the auction had concluded. Id. at 25. For these
reasons, the court concluded that it was appropriate to
confirm CAI’s winning bid at the second auction rather than
the first. Id. at 26. Because the court had overruled CAI’s
objection to the second auction, the court found no ground
on which to compensate CAI for the fees it had incurred in
pursuing that objection or for the difference between its
first and second bids. Id.
  CAI appealed the bankruptcy court’s decision to the
district court. Soon after that appeal was filed, the proceed-
ings in the bankruptcy court were converted from Chapter
11 to Chapter 7 proceedings.
No. 02-3088                                                   9

  The district court (Hon. Elaine E. Bucklo) affirmed the
bankruptcy court’s decision. In re GGSI Liquidation, Inc.,
280 B.R. 425 (N.D. Ill. 2002). The district court recognized
that when a bankruptcy court is asked to confirm the re-
sults of an auction, it is faced with two competing interests:
“the integrity and finality of public auctions and the best
interests of the bankruptcy estate’s creditors.” Id. at 428
(citing In re Food Barn Stores, Inc., 107 F.3d 558, 564 (8th
Cir. 1997)). The former interest is satisfied if a court acts in
a manner consistent with the rules by which the auction
has been conducted and in compliance with the reasonable
expectations of the bidders. Id. at 429 (quoting Food Barn,
107 F.3d at 565). Although in this case the bidding proce-
dures approved by the bankruptcy court contemplated one
auction rather than two, the modifications provision
authorized Goss to reject any bid not in the best interests of
the estate and its creditors, to review the bids in light of
those interests before making a recommendation to the
bankruptcy court, and to impose other terms and conditions
on the sale at any time up to and during the sale hearing.
At the same time, the approved procedures did not specify
any cut-off beyond which Goss could no longer accept bids.
The bankruptcy court therefore had correctly concluded that
Goss acted within the rules when it reopened the bidding.
Id. Goss had not departed from the bidders’ reasonable
expectations in taking this step. Id. at 429-30. All of the
bidders had received a copy of the approved procedures
prior to the auction, and although Goss’s counsel had
informed bidders that the results of the (first) auction were
likely to be final, he had also told them that he could not
give them “100 percent assurances” on that score. Thus,
CAI’s expectations that its high bid at the first auction
would be accepted were not “ ‘adequately solidified’ ” so as
to demand a showing of fraud or gross inadequacy before
the bidding could be reopened. Id. at 430 (quoting Food
Barn, 107 F.3d at 565 n.13). The court agreed with the
bankruptcy court that the second auction was in the best
10                                               No. 02-3088

interests of the estate and Goss’s creditors. Id. The approxi-
mately 16 percent differential between CAI’s high bids at
the first and second auctions, although perhaps insufficient
to demonstrate gross inadequacy in the original bid (see
Chung King, 753 F.2d at 550), was nonetheless a “signifi-
cant boon” to the estate. Id. The bankruptcy court thus was
within its discretion to conclude that the benefit to the
estate in the second auction outweighed the bidders’
expectations as to the results of the first auction and the
interest in the finality and integrity of public auctions. Id.
Finally, because Goss’s position with respect to the validity
of the second auction was not frivolous and because the
bankruptcy court had properly accepted the results of the
second auction, the district court concluded that “funda-
mental fairness” did not require CAI to be compensated for
the legal fees it incurred in opposing the second auction or
for the greater price it had to pay for the Cedar Rapids
assets as a result of the second auction. Id. (quoting In re
Met-L-Wood Corp., 115 B.R. 133, 135-36 (N.D. Ill. 1990)). It
therefore sustained the denial of CAI’s administrative
expense claim. Id.


                             II.
  In reviewing the district court’s decision to affirm the
bankruptcy court, we employ the same standard of review
that the district court itself used. E.g., Frierdich v. Mottaz,
294 F.3d 864, 867 (7th Cir. 2002). The bankruptcy court’s
confirmation or refusal to confirm an asset sale will only be
overturned in extreme cases, when the bankruptcy court
has abused its discretion. In re Chung King, Inc., 753 F.2d
547, 549 (7th Cir. 1985). Generally speaking, a court abuses
its discretion when its decision is premised on an incorrect
legal principle or a clearly erroneous factual finding, or
when the record contains no evidence on which the court
rationally could have relied. See United States v. Jain, 174
No. 02-3088                                               11

F.3d 892, 899 (7th Cir. 1999); Salgado by Salgado v.
General Motors Corp., 150 F.3d 735, 739 & n.4 (7th Cir.
1998).
   As the lower courts recognized, two principal interests
come to the fore when a bankruptcy court is asked to con-
firm the results of a judicial sale. “The governing principle
at a confirmation proceeding is the securing of the highest
price for the bankruptcy estate.” Chung King, 753 F.2d
at 549. A central purpose of bankruptcy, after all, is to
maximize creditor recovery. E.g., Precision Indus., Inc. v.
Qualitech Steel SBQ, LLC, 327 F.3d 537, 548 (7th Cir.
2003). But there is also an interest in the finality and
integrity of the process by which bids are accepted and ap-
proved. “ ‘If parties are to be encouraged to bid at judicial
sales[,] there must be stability in such sales and a time
must come when a fair bid is accepted and the proceedings
are ended.’ ” Chung King, 753 F.2d at 550 (quoting In re
Webcor, Inc., 392 F.2d 893, 899 (7th Cir. 1968)); see also
Shlensky v. H.R. Weissberg Corp., 410 F.2d 1182, 1185-86
(7th Cir. 1969). A tension arises between these two inter-
ests where, as here, someone makes a higher, upset bid
after the auction has concluded and bidding has formally
closed. Accepting a late bid may mean more money for
creditors in the short run, but by upsetting the expectations
of those who thought the bidding was at an end, it may in
the long term undermine confidence in judicial sales and
discourage prospective purchasers from making their best
offers in a timely manner. See Chung King, 753 F.2d at 554.
“[R]efusing to confirm a sale to a high bidder merely
because an intervening higher bid has been received is the
surest way to destroy confidence in judicial sales and defeat
the purpose sought to be accomplished thereby to realize
the greatest amount from such sales to those entitled to
receive the proceeds thereof.” J.J. Sugarman Co. v. Davis,
203 F.2d 931, 932 (10th Cir. 1953). A bankruptcy judge
confronted with this scenario thus faces the unenviable task
12                                               No. 02-3088

of “walk[ing] a tightrope” between the competing interests.
In re Financial News Network Inc., 980 F.2d 165, 166 (2d
Cir. 1992); see also In re Food Barn Stores, Inc., 107 F.3d
558, 565 (8th Cir. 1997).
  The cases dealing with upset bids reflect a continuum,
along which the bankruptcy court’s discretion to reopen the
bidding in pursuit of estate maximization diminishes as the
sale comes closer to becoming a fait accompli and as the
expectations of the participants solidify. Food Barn, 107
F.3d at 565. Once a court has confirmed the sale of the
debtor’s assets to the auction’s victor, for example, the
public interest in finality is high and the parties reasonably
expect that the bidding is over. Id. At that juncture, only a
narrow range of circumstances will support a court’s
decision to vacate the sale order and reopen the bidding.
The simple fact that a late bid offers the estate more money
than the bid previously approved by the court will not
suffice; only if the belated bid reveals the initial sale price
to be “so grossly inadequate as to shock the conscience of
the court,” Chung King, 753 F.2d at 550, or if the original
auction was tainted by fraud, mistake, or some comparable
defect, Webcor, 392 F.2d at 899, will a court be justified in
setting aside a confirmed sale. See also Food Barn, 107 F.3d
at 565; In re Irvin, 950 F.2d 1318, 1320-21 (7th Cir. 1991).
On other hand, “where the sale ha[s] not progressed to a
comparable plateau,” the bankruptcy court enjoys broader
discretion to decide whether to entertain a late bid, and its
judgment in that regard commands commensurate defer-
ence from the reviewing court. Food Barn, 107 F.3d at 565.
For example, where the bidding for a debtor’s property is
“complex and fluid,” Financial News, 980 F.2d at 170, or
where it is “informal and flexible,” Food Barn, 107 F.3d at
566, and where the court has not yet approved sale to a
particular bidder, the court might appropriately conclude
that consideration of a late bid would not unduly frustrate
the reasonable expectations of the participants or compro-
No. 02-3088                                                13

mise the integrity of the process. Id. at 565-66; Financial
News, 980 F.2d at 170. In that setting, financial gain for the
estate and its creditors might suffice as a basis for reopen-
ing the bidding without an additional showing that the
initial bids were grossly inadequate or that the original
bidding was tainted by fraud or some other irregularity.
Food Barn, 107 F.3d at 567.
  In this case, the bankruptcy court had not yet confirmed
the results of the first auction when it continued the sale
hearing so that Goss could conduct a second auction. Our
cases reflect the significance of the confirmation order vis-à-
vis the parties’ reasonable expectations and the interest in
the finality and regularity of the sale process. We have
repeatedly cited the entry of a sale order as the point at
which the court loses much of the discretion it otherwise
enjoys in deciding whether to confirm the results of the
auction and at which it must be able to identify a compel-
ling reason in order to recognize a late bid. Irvin, 950 F.2d
at 1320-21; Chung King, 753 F.2d at 549-50; Webcor, 392
F.2d at 899; In re Marathon Foundry & Mach. Co., 239 F.2d
122, 130 (7th Cir. 1956). That is not to say that the bank-
ruptcy court enjoys unbounded authority in any circum-
stance to accept additional bids so long as it has not yet
entered a sale order, see Food Barn, 107 F.3d at 565 n.13;
Financial News, 980 F.2d at 169-70, but it is to say that
until that point, the court enjoys broader discretion
to balance the goal of estate maximization against the
interest in regularity and finality and the parties’ expecta-
tions.
  CAI contends that, notwithstanding the lack of a sale
order, once the first auction had closed with it as the high
bidder, it had every reason to think that the bidding was
done and that the court’s approval was but a formality, so
that it was an abuse of discretion for the bankruptcy court
to allow Goss to conduct a second auction based on MBA’s
upset bid. CAI’s position is not entirely without support in
14                                              No. 02-3088

the facts. The bidding procedures, and the court’s order
approving those procedures, envisioned a single auction, as
the bankruptcy and district courts both recognized. R. 4 Tab
3 at 2 ¶ 3 & Ex. A at 4-5. When asked at the auction about
the finality of the bidding, Goss’s counsel informed the
bidders that “when we close the auction it will be final.” R.
4 Tab 4 at 15. Counsel did go on to qualify that statement
somewhat, noting that he could not entirely rule out the
possibility that the court might entertain a dramatically
higher upset bid at the sale hearing; but he saw that as “a
very slim possibility.” Id. at 16. The auction proceeded in a
straightforward matter, and it was clear from the moment
when the written bids were disclosed at the start of the
hearing until the bidding closed that CAI’s was the high
bid. At the close of the auction, neither Goss’s counsel nor
any other participant said anything suggesting that further
bidding was anticipated. This was not, in the parlance of
Financial News, a “complex and fluid” bidding process that
left the participants uncertain as to what could be expected
next. 980 F.2d at 170; see also Food Barn, 107 F.3d at 566.
  In view of these circumstances, CAI urges us to follow In
re Gil-Bern Indus., Inc., 526 F.2d 627 (1st Cir. 1975), and
hold that the bankruptcy court abused its discretion in
permitting a second round of bidding. The bankruptcy court
in Gil-Bern had issued a notice inviting bids on the debtor’s
property to be submitted in writing by a fixed date and
time, with a sale hearing to follow several hours later. The
appellant had submitted the high bid as of the specified
deadline. However, when the parties appeared in court for
the sale hearing, a second bidder sought leave to make a
higher bid. The bankruptcy court allowed it to do so, and
under protest, the appellant then made a new bid of its own
to best its competitor. The court then confirmed the sale to
the appellant on its final bid. On appeal, the First Circuit
vacated the sale order out of concern that the bankruptcy
court’s decision to reopen the bidding was contrary to the
No. 02-3088                                                 15

reasonable expectations of the participants. The notice
calling for bids on the property had specified a day and time
as of which the bidding would close, and although the high
bid as of that deadline was subject to the bankruptcy court’s
approval, there was no suggestion that the appellant’s
initial bid was inadequate, such that the bankruptcy court
would have been entitled to reject it outright. See id. at 628-
29. Nor was there even a substantial disparity between that
bid and the belated upset bid; instead, the bankruptcy court
had reopened the bidding simply because the upset bid was
modestly greater than the appellant’s timely bid. Id. The
First Circuit viewed this as an unfair and imprudent step,
barring some established practice of entertaining late bids
that would have placed the appellant on notice that its
timely offer remained subject to further bidding at the
confirmation hearing:
    If there is no local custom to the contrary, we are in
    accord with the established rule that it is an abuse of
    discretion for a bankruptcy court to refuse to confirm an
    adequate bid received in a properly and fairly conducted
    sale merely because a slightly higher offer has been
    received after the bidding is closed. It might not only be
    thought improper for a bankruptcy court to proceed in
    an irregular fashion merely to gain a few extra dollars
    in one case, but in the long run such a practice would be
    penny wise and pound foolish. Creditors in general
    would suffer if unpredictability discouraged bidders
    altogether. At the least such practices might encourage
    low formal bids. We would not approve such a proce-
    dure. . . .
Id. at 629 (citations omitted). The court remanded the case
to the district court for an assessment as to whether there
was, in fact, a local practice that would have justified the
bankruptcy court’s decision to receive additional bids at the
confirmation hearing. See id.
16                                                No. 02-3088

   We decline to draw from Gil-Bern a hard and fast rule
precluding a bankruptcy court from entertaining an upset
bid on a debtor’s property once an auction has concluded or
the deadline for offers has passed. Courts that have consid-
ered Gil-Bern, including the First Circuit itself, have
cautioned against a such a rigid application of its rationale.
See In re Muscongus Bay Co., 597 F.2d 11, 13 (1st Cir.
1979); see also Food Barn, 107 F.3d at 564-65; Financial
News, 980 F.2d at 170. These courts have emphasized that
bankruptcy courts face a difficult task in weighing the
competing interests implicated by upset bids and that they
must be accorded maximum discretion in striking an
appropriate balance. Financial News, 980 F.2d at 169 (“[Gil-
Bern] should not be blindly applied so as to reduce the
broad discretion and flexibility a bankruptcy court must
necessarily have to enhance the value of the estates before
it”); see also Food Barn, 107 F.3d at 565-66; Muscongus Bay,
597 F.2d at 13. Moreover, Gil-Bern itself recognized that
the perceived finality of a sale does not turn entirely on the
formal close of bidding. Rather, the court held out the
possibility that local custom might allow for late bids to be
made at the sale hearing itself, thus postponing a reason-
able belief in the finality of the process until after the court
had itself confirmed the sale to the high bidder. 526 F.2d at
629. No such custom has been established here, but there
are other circumstances which would have alerted bidders
to the possibility that the results of the first auction were
not necessarily final.
  As the bankruptcy and district courts both emphasized,
the modifications provision of the bidding procedures, of
which CAI and the other bidders were aware, bestowed on
Goss broad discretion to reject any bid and to impose
additional conditions on the sale of the Cedar Rapids assets
right up to the moment of the sale hearing. R. 4 Tab 3 Ex.
A at 6. The reservation of this discretion to Goss would have
tempered any expectation at the close of the first auction
No. 02-3088                                                17

that the Cedar Rapids assets necessarily would be sold to
CAI in view of its high bid. See Shipe v. Consumers’ Serv.
Co., 29 F.2d 321, 322 (7th Cir. 1928); accord J.J. Sugarman,
203 F.2d at 933-34; see also In re WPRV-TV, Inc., 983 F.2d
336, 342 (1st Cir. 1993). Moreover, Goss’s counsel did not
accept CAI’s high bid at the close of the first auction, nor
did he formally declare CAI the winner. See Sugarman, 203
F.2d at 934. Although it is evident from a review of the
record that counsel expected to recommend approval of
CAI’s bid (see R. 4 Tab 4 at 15-16, 29-30), the bidding
procedures themselves clearly stated that the presentation
of a particular bid to the court did not constitute acceptance
of that bid. R. 4 Tab 3 Ex. A at 5. “Goss will be deemed to
have accepted a bid only when a bid has been approved by
the Bankruptcy Court at the Sale Hearing.” Id. (emphasis
ours).
   It is also significant that, as the bankruptcy court found,
the first auction did not occur on an entirely level playing
field. Not everyone knew, prior to the first auction, that
Goss had decided to delete from the purchase agreement
the provision entitling it to insist on early removal of the
purchased assets. Apparently, those bidders who had ex-
pressed concern to Goss about the provision had been
advised of Goss’s decision to get rid of it during the week
prior to the auction. Others, like MBA, first learned of the
revision at the auction itself. MBA later represented to the
bankruptcy court that the individuals who participated in
the auction on MBA’s behalf were not able to contact all
members of the bidding group to advise them of this new
information until after the auction had concluded. Once the
bidding group as a whole was aware that the Cedar Rapids
assets would not have to be removed prior to June 1, MBA
decided that it was willing to offer more money for those
assets. None of this is disputed by CAI, and the record gives
us no reason to believe that MBA’s explanation for its late
bid was not genuine. To the contrary, the record in several
18                                              No. 02-3088

respects tends to confirm that this revision to the terms of
the sale was regarded as highly material by the bidders. As
we noted earlier, some of the bidders had not only criticized
the early-removal provision, but had gone so far as to
condition their original written bids on the excision of this
term from the asset purchase agreement. Toward that end,
Goss itself was willing to expend $115,000 to sublease the
property from the new owner. And, according to Goss, after
it informed bidders that it would accede to their demand,
bid amounts on the Cedar Rapids assets increased from a
high of around $1.6 million to about $2.2 million. Finally,
after Goss’s counsel announced the revision at the outset of
the auction, it was one of MBA’s representa-
tives—Bolling—who followed up with a request that counsel
clarify when the assets would have to be removed from the
Cedar Rapids facility. Collectively, these facts bear out the
notion that the removal term was important to MBA as it
was to the other bidders, and that it was the late hour at
which MBA learned of the term’s removal, rather than any
nefarious intent to withhold its best bid until after the
auction closed, that explained its upset bid. See Food Barn,
107 F.3d at 566 (“we are comfortable that this is not a
situation in which the potential buyer purposely bided its
time during the auction, taking an opportunity to survey
the landscape of the sale, only later to submit an upset bid
at the lowest possible price”); Financial News, 980 F.2d at
170 (noting that, under the circumstances, upset bid was
not an attempt “to circumvent the auction process”).
  Finally, MBA’s upset bid offered significantly more money
to Goss’s estate. The bid was $200,000 more than CAI’s
high bid at the first auction, an increase of roughly nine
percent. That percentage likely would not be enough of a
difference to justify a decision to reopen the bidding if the
bankruptcy court had already entered an order confirming
the sale to the winning bidder at the first sale. See Chung
King, 753 F.2d at 550-51 (“Relatively small differences,
such as in the present case [8.6 percent] have been ex-
No. 02-3088                                                 19

pressly found not to shock the conscience of the court and
not to cause the original confirmed sale price to be viewed
as grossly inadequate.”). But that is not the situation we
have here. The court had not yet approved the sale to CAI
when Goss informed the court of MBA’s upset bid and asked
the court to postpone the sale hearing so that a second
auction could be held. The much greater threshold that
would have to be crossed in order to justify setting aside a
confirmation order thus did not apply. See Food Barn, 107
F.3d at 567.
  The bankruptcy court, in sum, was presented with a re-
quest that it postpone the sale hearing so that Goss could
conduct a second auction and entertain additional bids on
its property. Goss made that request after consultation with
its lenders and the committee of unsecured creditors. The
request itself was premised on MBA’s upset bid, which
offered significantly more money for the Cedar Rapids
assets than CAI’s high bid at the first auction. The tar-
diness of this bid was explained by the fact that MBA, in
contrast to other bidders, did not know prior to the auction
of a material revision to the terms of the asset purchase
agreement. MBA had tendered its upset bid on the day
following the first auction, before the results of that auction
had been presented to the bankruptcy court. As the bank-
ruptcy court had not yet conducted a sale hearing, Goss
retained discretion under the bidding procedures to reject
any bid that it believed was not in the best interests of the
estate and its creditors and to impose additional conditions
on the sale of the property.
  Confronted with these circumstances, the bankruptcy
court did not abuse its discretion in deciding to permit a
second auction and to confirm the sale of the Cedar Rapids
assets to CAI based on the results of the second auction
rather than the first. The bankruptcy court carefully
weighed the relevant considerations and reasonably con-
cluded that the prospect of additional remuneration for the
20                                               No. 02-3088

estate and its creditors outweighed concerns about the
finality and regularity of the sale proceeding. As the court
had not yet conducted a sale hearing when MBA made its
upset bid, the interest in the finality of the sale had not yet
ascended to a point demanding that a gross shortcoming in
the first auction be shown in order to justify renewed
bidding. Although the first auction had come to a close and
none of the parties had expected bidding to resume, CAI’s
high bid had not been formally accepted, and Goss was still
empowered to reject that bid and/or to burden it with
additional conditions until such time as the court approved
the sale to CAI. CAI’s expectation that it had won the right
to purchase the Cedar Rapids assets was therefore not
without qualification. On these facts, the bankruptcy court
was entitled to conclude that CAI’s expectations as the high
bidder, and the public interest in the finality of the sale
proceedings, were not so solidified as to preclude a second
auction. At the same time, the bankruptcy court rightfully
was concerned that MBA’s lack of foreknowledge about the
excision of the early-removal provision from the asset
purchase agreement had placed it at a disadvantage at the
first auction. A second auction offered the means of redress-
ing that inequity as well as securing a higher price on the
Cedar Rapids assets for the estate. See Muscongus Bay, 597
F.2d at 12-13. CAI, of course, was able to and did partici-
pate in the second auction along with the other qualified
bidders; so far as the record reveals, it was prejudiced only
in the sense of having to pay more for the right to purchase
the assets.
  The bankruptcy court also acted within its discretion in
denying CAI’s administrative expense claim. This type of
claim is a means of seeking priority reimbursement for “the
actual, necessary costs and expenses of preserving the
estate . . . . ” 11 U.S.C. § 503(b)(1)(A). Generally speaking,
“a claim will be afforded priority under § 503 if the debt
both (1) ‘arise[s] from a transaction with the debtor-in-
No. 02-3088                                                21

possession’ and (2) is ‘beneficial to the debtor-in-possession
in the operation of the business.’ ” In re Jartran, Inc., 732
F.2d 584, 587 (7th Cir. 1984) (quoting In re Mammoth Mart,
Inc., 536 F.2d 950, 954 (1st Cir. 1976)). This court has
recognized that fundamental fairness may, in appropriate
circumstances, demand that a party injured in some man-
ner by the administration of the estate be compensated
pursuant to section 503. Yorke v. N.L.R.B., 709 F.2d 1138,
1143 (7th Cir. 1983) (citing, inter alia, Reading Co. v.
Brown, 391 U.S. 471, 482-84, 88 S. Ct. 1759, 1765-66
(1968)). CAI’s claim is premised on the notion that it was
inappropriate for Goss to have asked for the second auction
and for the bankruptcy court to have confirmed the results
of that auction instead of the first. For the reasons we have
already discussed, we do not believe that either Goss or the
bankruptcy court committed any impropriety that might
justify compensation to CAI pursuant to section 503.


                            III.
  Finding no abuse of discretion in the bankruptcy court’s
decision to confirm the sale to CAI based on the results of
the second auction or in its denial of CAI’s administrative
expense claim, we AFFIRM the judgment. We commend the
district and bankruptcy courts for their careful and thor-
ough consideration of this case.
A true Copy:
       Teste:

                        ________________________________
                        Clerk of the United States Court of
                          Appeals for the Seventh Circuit
22                            No. 02-3088




     USCA-02-C-0072—5-17-04
