Courts may be faced with post-bankruptcy auction challenges from losing bidders (sometimes also joined by aggrieved individual creditors or committees) to either the manner in which the sale was conducted or the outcome of the auction. In deciding whether to approve a sale, courts are necessarily required to balance assuring finality of process with maximizing value for the estate. Courts are generally reluctant to deny sale approval or reopen an auction after bidding has concluded simply to allow for a slightly higher bid or to permit a new bidder to participate. However, courts have also demonstrated a willingness to reopen auctions if the circumstances justify doing so—typically situations where the auction suffered from a procedural issue or resulted in inadequate bids as compared to the value of the property being sold.
A recent decision by the Bankruptcy Court for the District of Delaware in In re Allied Sys. Holdings,1 illustrates the difficult balancing act that a court must undertake in the face of a post-bankruptcy auction objection. The Allied court, in deferring primarily to the debtors’ need to uphold its fiduciary duties, may also have laid the foundation for expanding the previously limited circumstances in which a court will allow an auction to be reopened.
