In the
United States Court of Appeals
For the Seventh Circuit
Nos. 08-3585, 08-3587, 08-3588 & 08-3590
IN RE:
A IRADIGM C OMMUNICATIONS, INC.,
Debtor.
F EDERAL C OMMUNICATIONS C OMMISSION,
Appellant,
v.
A IRADIGM C OMMUNICATIONS, INC., AND
T ELEPHONE AND D ATA S YSTEMS, INC.,
Appellees.
Appeals from the United States District Court
for the Western District of Wisconsin.
Nos. 07-cv-616-bbc, 07-cv-617-bbc, 07-cv-660-bbc,
and 08-cv-152-bbc—Barbara B. Crabb, Judge.
A RGUED M AY 4, 2009—D ECIDED A UGUST 4, 2010
2 Nos. 08-3585, 08-3587, 08-3588 & 08-3590
Before K ANNE and E VANS, Circuit Judges, and D OW,
District Judge.
D OW, District Judge. The parties are here because of the
continuing saga that has been the Chapter 11 reorganiza-
tion of Airadigm Communications, Inc. (“Airadigm”). The
latest appearance involves three claims of Telephone
and Data Systems, Inc. (“TDS”). The claims were filed in
Airadigm’s 2006 bankruptcy, but have roots in Airadigm’s
1999 bankruptcy and 2000 plan of reorganization. The
Federal Communications Commission (“FCC”) objected
to all three claims. The bankruptcy court overruled the
objections to two of the claims, but sustained the objec-
tion to the third and disallowed that claim. The district
court affirmed in part and reversed in part, concluding
that the objections to all three claims should be overruled.
To resolve the appeal, we combine three ingredi-
ents—equal parts bankruptcy law, stipulation interpret-
ation, and estoppel. The admixture leads us to agree
with the district court’s treatment of two of the three
claims at issue. The judgment of the district court is
affirmed in part and reversed in part.
I. Background
A. Airadigm, its Licenses, and the 1999 Bankruptcy
Airadigm is a telecommunications company whose
principal assets are fifteen mobile phone service licenses
The Honorable Robert M. Dow, Jr., of the United States
District Court for the Northern District of Illinois, sitting by
designation.
Nos. 08-3585, 08-3587, 08-3588 & 08-3590 3
that it won at auction in the late 1990s. The FCC issued
the licenses and retained a security interest in them. In
the FCC’s argot, the licenses were “C-block” and “F-block”
licenses. The C-block licenses were 30 megahertz each
and the F-block licenses were 10 megahertz each. With
the licenses in hand, Airadigm had the capacity to
provide mobile phone service in Wisconsin, Iowa, and
Michigan.
The licensing scheme and its nomenclature come from
an amendment to the Communications Act of 1934;
the amendment set aside 120 megahertz of the electro-
magnetic spectrum for mobile communications devices.
We described the scheme and its attendant regulations
in some detail the last time that the parties were here.
In re Airadigm Communications, Inc. (Airadigm II), 547 F.3d
763, 765 (7th Cir. 2008). The C- and F-blocks were set
aside for small businesses and rural telephone
companies (among others). Unlike licenses that could be
purchased by the large telecommunications companies,
these licenses could be purchased on installment plans
with favorable interest rates. See Federal Communications
Commission v. NextWave Personal Communications, Inc.,
537 U.S. 293, 296 (2003) (detailing the statutory and regula-
tory regime applying to C- and F-block licenses).
The favorable licensing scheme, however, was not
without shoals: the Congressional Budget Office (“CBO”)
predicted that many successful license-bidders would
be forced into bankruptcy “unless the debt owed to the
government by the * * * licensees is sharply reduced.”
Congressional Budget Office, IMPENDING D EFAULTS BY
W INNING B IDDERS IN THE FCC’S C B LOCK A UCTION: I SSUES
4 Nos. 08-3585, 08-3587, 08-3588 & 08-3590
AND O PTIONS 4 (1997), http://www.cbo.gov/ftpdocs/0xx/
doc37/cblock.pdf.
In 1999, Airadigm unintentionally proved the CBO’s
prescience by defaulting on its obligation to make pay-
ments on the licenses and filing a Chapter 11 bank-
ruptcy petition in the United States District Court for the
Western District of Wisconsin. At that time, and pursuant
to FCC regulations, the FCC revoked the licenses. See
47 C.F.R. § 1.2110(g)(4)(iv). The decision to revoke the
licenses made waves, because a bankruptcy estate
springs into existence by operation of law whenever a
bankruptcy petition is filed. The estate consists of all
property of the debtor “wherever located and by whom-
ever held.” 11 U.S.C. § 541(a). So revoking the licenses
issued to Airadigm had two major effects: (1) it removed
(at first blush) the licenses from the estate, and (2) it
made (again, at first blush) the FCC an unsecured creditor.
See also Airadigm II, 547 F.3d at 766 (describing the
FCC’s early litigation position).
In keeping with the FCC’s license revocation, the plan
of reorganization (“2000 Plan”) that Airadigm proposed
treated the licenses as if they were not part of the bank-
ruptcy estate. The bankruptcy court confirmed the 2000
Plan over the FCC’s objections. The linchpin of the plan
was Airadigm’s petition to the FCC for reinstatement of
the licenses; treatment of various claims in the 2000
Plan depended on how and when the FCC acted on
Airadigm’s petition.
Nos. 08-3585, 08-3587, 08-3588 & 08-3590 5
B. Salient Features of the 2000 Plan—the OEDA and
Ericsson Claims
The 2000 Plan provided treatment of two creditors’
claims that are of consequence to this appeal—the Oneida
Enterprise Development Authority (“OEDA”) and
Ericsson, Inc. (“Ericsson”). The claims of each were to
be paid under the 2000 Plan, and they were to be
financed by loans provided by TDS. Both of the claims
have since been assigned to TDS.
The claims were to be given different treatment de-
pending on whether the 2000 Plan’s “Primary Plan” or
“Back-up Plan” applied. Article V of the 2000 Plan detailed
the treatment of the claims under the Primary Plan. If the
FCC denied reinstatement of all the licenses or failed to
act on Airadigm’s petition in a timely manner, then
Article X, the Back-up Plan, would apply to OEDA’s claim.
Here is how OEDA’s claim would shake out: under the
Primary Plan, OEDA would receive $49 million, “[p]ro-
vided that the FCC grant[ed] reinstatement of at least the
Minimum Licenses,” a term of art.1 The $49 million was
to be paid when the FCC’s order reinstating the
license became final. 2000 Plan § 5.3.
1
The Minimum Licenses was a number that varied based on
the bandwidth of the licenses and the population covered by
the licenses. If fewer than the Minimum Licenses were rein-
stated, a complicated formula governed the amount that OEDA
was owed. See 2000 Plan § 6.12.
6 Nos. 08-3585, 08-3587, 08-3588 & 08-3590
Under the Back-up Plan in Article X, however, OEDA’s
claim was to be slashed. The Back-up Plan stated: “On the
Back-up Transfer Date * * * Buyers”—TDS—“shall pay
OEDA $2 million in full satisfaction of its secured
Claims.” 2000 Plan § 10.7. The Back-up Transfer Date was
ten days after the date on which TDS no longer had to
fund one of the loans that TDS made as part of the
2000 Plan—the so-called “Funding Termination Date.” See
2000 Plan §§ 2.5, 2.24, 6.7. Section 6.7 of the 2000 Plan
gave TDS the option to extend the Funding Termination
Date beyond that which was spelled out in the plan.
Ericsson filed the other important claim that was to be
paid under the 2000 Plan. Under the 2000 Plan’s Primary
Plan, Ericsson would receive $41 million “[p]rovided
that the FCC grant[ed] reinstatement of at least the Mini-
mum Licenses.” 2 The $41 million was to be paid when
the FCC’s order reinstating the license became final. If
fewer than the Minimum Licenses were reinstated, the
amount owed to Ericsson would be reduced pursuant to
a formula based on the number of licenses that were
reinstated. See 2000 Plan §§ 5.2(b), 6.12. Under the Back-
up Plan, Ericsson generally was not entitled to any pay-
ments but was entitled to keep the liens securing the
claim. 2000 Plan §§ 10.2, 10.5, 5.2.
Payment of OEDA’s and Ericsson’s claims would be
financed by a loan provided by TDS. 2000 Plan §§ 6.4-6.5.
2
Ericsson’s full claim was for $71 million. Of that, $30 million
was paid as part of one of the cash advances made by TDS
and is not in issue. The remaining $41 million provides the
basis for the claim in this appeal.
Nos. 08-3585, 08-3587, 08-3588 & 08-3590 7
The holders of allowed claims were entitled to go to
court to force payment of the loans that would pay
their claims. 2000 Plan § 12.6 (“[T]he holder of an
Allowed Claim shall be entitled to take any steps neces-
sary to enforce this Plan against the Debtor, the assets of
Debtor or [TDS].”).
C. Financing the 2000 Plan—the Claim 14 Loans
In addition to the TDS loan that would pay for the
Ericsson and OEDA claims, three other TDS loans are
important to our story. 3 The loans were part of the 2000
Plan and have become the subject of a new claim in the
2006 bankruptcy. We will call these advances of funds
the “Claim 14 Loans.” The Claim 14 Loans comprise the
Confirmation Loan, the Working Capital Loan, and the
Construction Loan. The Confirmation Loan furnished
funds for a $30 million collateral payment to Ericsson
that is not in issue, as well as funds to pay administra-
tive expense claims, priority claims, and a few other claims
that are not important to this case. The loan was to be
secured by a first priority security interest in all of
Airadigm’s Unlicensed Assets—a term defined in the
2000 Plan to include every Airadigm asset except the FCC
licenses and the proceeds of the licenses. However, the
2000 Plan and the loan documents suggest that the
loan was not a loan at all, but an asset sale. Although the
3
By describing them as “loans,” we do not mean to beg the
question—although, as it happens, the case does not require
us to answer the question either.
8 Nos. 08-3585, 08-3587, 08-3588 & 08-3590
loan accrued interest at a yearly rate of 8.5%, the 2000
Plan also stated that “[t]he Confirmation Loan will be
repaid by the surrender to Buyers”—that is, TDS—“of all
collateral securing the Confirmation Loan, and Buyers
shall be obligated to accept a surrender of the collateral
in full and complete satisfaction of the Confirmation
Loan.” 2000 Plan § 6.3 (emphasis added). That feature,
repayment solely by collateral surrender, is the FCC’s
problem with the loan.
The second TDS loan was the “Working Capital Loan.”
The Working Capital Loan was secured by a negative
pledge of Airadigm’s assets and was to be used by
Airadigm for “its ongoing working capital needs.” Under
the 2000 Plan, the loan amount was for up to $600,000
per month, an amount which would be reduced to the
extent Airadigm could stand on its own. Interest on the
Working Capital Loan was to accrue at a yearly rate
of 8.5%. The amount of the loan and the interest were
due and payable on the Funding Termination Date. 2000
Plan §§ 6.6, 6.7. The loan was to be repaid by sur-
rendering Airadigm’s non-license assets. App. 135.
The third TDS loan was the “Construction Loan.” The
Construction Loan was for “not less than $1.5 million * * *
for the purpose of financing [Airadigm’s] acquisition
and construction of additional cell sites.” The loan was
secured by a first priority purchase money security
interest in the equipment and property that was pur-
chased with the loan. The loan contained the same now-
controversial provision that appeared in the other loans:
“The Construction Loan will be repaid by the surrender
Nos. 08-3585, 08-3587, 08-3588 & 08-3590 9
of the collateral securing the Construction Loan to [TDS],
and [TDS] shall be obligated to accept a surrender of
the collateral in full and complete satisfaction of the
Construction Loan.” 2000 Plan § 6.8.
***
The bankruptcy court confirmed the 2000 Plan over the
FCC’s objections.
D. NextWave, the Stipulation, and the 2006 Bankruptcy
After the bankruptcy court confirmed the 2000 Plan,
the Supreme Court ruled in Federal Communications Com-
mission v. NextWave Personal Communications, Inc., 537
U.S. 293 (2003), that the FCC’s automatic license revoca-
tion rule violated 11 U.S.C. § 525. Section 525 says that
agencies “may not * * * revoke * * * a license * * * [issued to]
a debtor under this title * * * solely because” the debtor
has not paid “a debt that is dischargeable” in bankruptcy.
The Supreme Court held that the FCC’s license revoca-
tion rule violated Section 525 and therefore was an
invalid exercise of authority under the Administrative
Procedures Act. 537 U.S. at 300-02; 5 U.S.C. § 706(2)(A).
After NextWave came down, the FCC denied as moot
Airadigm’s petition to have the licenses reinstated.
“[B]ecause Airadigm was under the protection of
Chapter 11 of the U.S. Bankruptcy Code, the Commis-
sion’s automatic cancellation rule was ineffective.” In re
Airadigm Communications, Inc., 18 F.C.C.R. 16296, 16299
(F.C.C. Aug. 8, 2003).
The legal effect of the FCC’s ruling was not just to
restore the licenses, but to declare that Airadigm always
10 Nos. 08-3585, 08-3587, 08-3588 & 08-3590
had the licenses. As a practical matter, the FCC acknowl-
edges that the ruling had the effect of restoring the li-
censes. But by the time that the FCC’s 2003 ruling came
around, TDS was no longer obligated under the 2000
Plan to fund the loans that were to pay creditors. In other
words, even though the 2000 Plan would have paid
the claims of OEDA and Ericsson that are discussed
above, and even though the 2000 Plan made the claims
enforceable after the Plan was confirmed (2000 Plan § 12.6),
the funding to pay the claims had dried up.
In May 2006, Airadigm filed a new Chapter 11 bank-
ruptcy petition. It also filed a motion for a final decree
closing the 1999 bankruptcy. See Fed. R. Bankr. P. 3022.
The FCC objected to closing the 1999 bankruptcy
and argued instead that the parties should discuss
modifications to the 2000 Plan, apparently pursuant to
11 U.S.C. § 1127(b), which gives the proponent of a
plan and the bankruptcy court authority to modify a
plan post-confirmation “if circumstances warrant such
modification.”
The parties settled the dispute over whether to allow a
new bankruptcy to proceed by entering into a “Stipula-
tion.” As originally drafted it had five operative para-
graphs, four of which matter and are set out below:
1. Except as otherwise specifically set forth in this
Stipulation, all of the rights of Airadigm as debtor,
and the FCC and TDS as creditors, under the 2000
Plan, including their respective rights as holders of
the Allowed Claims they hold pursuant to the 2000
Plan (including the rights of TDS as assignee of certain
Nos. 08-3585, 08-3587, 08-3588 & 08-3590 11
Allowed Claims), are in no way prejudiced by closing
the 1999 Bankruptcy Case and proceeding with the
2006 Bankruptcy Case.
2. The FCC’s Allowed Claim in the 1999 Bankruptcy
Case shall be allowed in the 2006 Bankruptcy Case.
The claims of TDS as assignee of the Allowed Claims
of Ericsson, Inc. and Oneida Enterprise Development
Authority in the 1999 Bankruptcy Case shall be al-
lowed in the 2006 Bankruptcy Case. In addition, the
claims of TDS arising from its advances of funds in
accordance with the 2000 Plan shall be allowed in
the 2006 Bankruptcy Case in the amount of such
loans with interest to the extent provided in the
2000 Plan.
3. In reliance on these Stipulations, (a) the FCC does
not object to the closing of the 1999 Bankruptcy Case
and will withdraw its Objection to the Motion, and (b)
the FCC waives any right it may have to dispute
Airadigm’s right to commence the 2006 Bankruptcy
Case, with prejudice.
4. All other rights of the parties hereto (including,
without limitation, the right of the FCC and TDS to
seek the inclusion and allowance of interest on their
Allowed Claims (including assigned Allowed Claims)
in the 2006 Bankruptcy Case) are expressly reserved.
***
When the Stipulation was entered, in June 2006, counsel
for TDS, Airadigm, and the FCC sought to “clarify” its
meaning on the record. In doing so, the parties made
12 Nos. 08-3585, 08-3587, 08-3588 & 08-3590
the Stipulation more difficult to interpret. The com-
ments to the bankruptcy court by counsel for TDS were
representative:
[T]here is an unresolved issue as to the right to claim
interest accrued on [the claims from the 2000 case].
And there are also, as not referenced in the stipulation,
open questions with respect to the nature or extent
of security for various claims.
As to those two unresolved issues, the parties do not
intend by this stipulation to waive a right as might
be appropriate or as might be authorized under the
code or the rules to pursue disputes, should they
choose to do so in the future.
With that clarification, we believe the stipulation
resolves the objection of the FCC * * *.
The FCC’s lawyer spoke briefly, but in similarly broad
and opaque terms. Counsel emphasized that while the
FCC was waiving its objection to closing the 1999 bank-
ruptcy case, the Stipulation was not intended to speak to
“substantive arguments” between the parties that the
FCC had made elsewhere. The FCC has not identified
for us precisely where that elsewhere is, however, nor
has it contended that the unidentified substantive argu-
ments included the argument that it presses on appeal.
The bankruptcy judge gave the parties an opportunity
to ensure that something more coherent was placed in the
record: “Once again, you’re all welcome to write down
what you mean here if you want * * * I’m not exactly sure
why you don’t write down what you mean, but if you
Nos. 08-3585, 08-3587, 08-3588 & 08-3590 13
want this entered as it is with the modifications on the
record, that’s fine with me.” It was fine with TDS and the
FCC, too. With that, the bankruptcy judge approved the
Stipulation as modified and later entered an order that
allowed the 2006 bankruptcy to proceed.
The parties are here now because TDS filed three
claims in the 2006 bankruptcy, and the FCC objected.4
Claim 14 was based on the Confirmation Loan, the
Working Capital Loan, and the Construction Loan that
was contained in the 2000 Plan. Claim 15 was based on
the OEDA claim from the 1999 bankruptcy. Claim 16
was based on the Ericsson claim from the 1999 bank-
ruptcy. The bankruptcy court overruled the FCC’s objec-
tions to Claims 14 and 16; the bankruptcy court sus-
tained the objection to Claim 15 and disallowed the claim.
The district court affirmed with respect to Claims 14 and
16, but reversed with respect to Claim 15. We think that
the bankruptcy court reached the correct result, although
we rest our decision on grounds that are different from
those set out in the bankruptcy court’s opinions.
II. Standard of Review
We review the bankruptcy court’s judgment under the
same standards employed by the district court. Miller v.
LaSalle Bank Nat’l Assoc., 595 F.3d 782, 785 (7th Cir. 2010)
4
TDS moved for summary judgment on Claim 14, the parties
filed cross-motions for summary judgment on Claim 16, and
the bankruptcy court held a trial on Claim 15.
14 Nos. 08-3585, 08-3587, 08-3588 & 08-3590
(“When reviewing a bankruptcy court’s decision, an
appeals court applies the same standard of review as
does the district court.”); In re Ingersoll, Inc., 562 F.3d
856, 863 (7th Cir. 2009); In re Marrs-Winn Co., Inc., 103 F.3d
584, 589 (7th Cir. 1996). Matters of law are reviewed
de novo. Wiese v. Cmty. Bank of Cent. Wis., 552 F.3d 584, 588
(7th Cir. 2009); Frierdich v. Mottaz, 294 F.3d 864, 867 (7th
Cir. 2002); In re Platter, 140 F.3d 676, 678 (7th Cir. 1998).
However, the bankruptcy court’s interpretation of a
plan that it confirmed receives deferential, abuse-of-
discretion review, as an interpretation of the court’s own
order. Airadigm II, 547 F.3d at 768; Matter of Greenig, 152
F.3d 631, 633 (7th Cir. 1998); Matter of Weber, 25 F.3d
413, 416 (7th Cir. 1994). “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.” Corporate
Assets, Inc. v. Paloian, 368 F.3d 761, 767 (7th Cir. 2004).
Ultimately, we may affirm on any basis that is sup-
ported by the record, so long as it has been fairly pre-
sented. Stockwell v. City of Harvey, 597 F.3d 895, 901 n.2
(7th Cir. 2010).
III. Discussion
Airadigm’s 2000 Plan preceded NextWave and depended
on whether and when the FCC reinstated the licenses;
the underlying premise was that the licenses were not
part of the bankruptcy estate. The 2000 Plan did not
envision that, like Dorothy in the Wizard of Oz, Airadigm
had the licenses all along.
Nos. 08-3585, 08-3587, 08-3588 & 08-3590 15
NextWave produced interpretive difficulties as to
whether a given claim should receive Primary or Back-
up treatment under the 2000 Plan. In addition, the 2000
Plan, particularly when combined with the Stipulation,
produces interpretive difficulties as to the status of the
Claim 14 Loans. On appeal, the FCC contends that the
debts resulting from the Claim 14 Loans should be
“recharacterized” as equity, an ownership interest. Equity
typically gets wiped out in bankruptcy, so TDS is disin-
clined to accept the FCC’s position. We are similarly
disinclined, although for reasons that are different
from those articulated by the bankruptcy court.
And as to two other claims, we conclude that the
bankruptcy court did not abuse its discretion in inter-
preting a plan of reorganization that it had confirmed.
Claim 15 was properly disallowed; Claim 16 was
properly allowed.
A. Claim 14
The bankruptcy court concluded that the FCC’s challenge
to Claim 14 must live or die on the viability in this
circuit of a cause of action for recharacterization. Rechar-
acterization is a theory, adopted by the overwhelming
majority of courts to have considered the question, that
bankruptcy courts may place the proper label of “claim”
(generally, debt) or “interest” (equity) on an advance of
funds, regardless of what the parties call it. The bank-
ruptcy court concluded that this Court would not likely
recognize a cause of action for recharacterization and
16 Nos. 08-3585, 08-3587, 08-3588 & 08-3590
therefore overruled the FCC’s objection to Claim 14.5
The district court affirmed. On appeal, the FCC argues
primarily not that the claim should be recharacterized
as an equity interest but that Claim 14 should be disal-
lowed because it was an asset sale agreement and not a
bona fide loan.
We conclude that the only issue that the FCC preserved
for appeal was foreclosed by the Stipulation. Therefore,
we affirm the judgment of the district court.
1. The FCC Preserved Only its Recharacterization
Argument
At the outset, we have to determine which of the FCC’s
arguments have been preserved for appeal. The bank-
ruptcy court, too, heard both arguments that the FCC
made to us—that Claim 14 should be disallowed because
the Claim 14 Loans were in actuality a disguised sale
of assets and that Claim 14 should be “recharacterized”
as equity. The bankruptcy court addressed only the
recharacterization argument. When the FCC appealed
that ruling to the district court, the FCC spent most of
its brief arguing that the bankruptcy court’s rechar-
acterization ruling was incorrect. The FCC did not argue
that Claim 14 should be disallowed because it was a sale
of assets. Thus, the only argument that was preserved
5
The bankruptcy court concluded that bankruptcy judges
do not have equitable authority to recharacterize claims pursu-
ant to Section 105(a) of the Bankruptcy Code. We do not
reach that issue as part of this ruling.
Nos. 08-3585, 08-3587, 08-3588 & 08-3590 17
was the recharacterization argument. In re Qualitech
Steel Corp., 276 F.3d 245, 248 (7th Cir. 2001) (ruling that a
matter not timely presented to the district court was
forfeited); see also In re UAL Corp., 468 F.3d 444, 449 (7th
Cir. 2006) (appellee in bankruptcy appeal could seek to
affirm judgment on any issue preserved in the district
court); Boyers v. Texaco Ref. and Mktg., Inc., 848 F.2d 809,
812 (7th Cir. 1988) (reasoning that reversing a district
court on grounds not presented to it would undermine
the “essential function of the district court”).
The FCC contends that it preserved the argument
that Claim 14 should be disallowed and not just
recharacterized. Specifically, the FCC points out in its
reply brief to us that in the “issues presented on appeal”
portion of its district-court brief, the FCC included the
question of “[w]hether TDS’s alleged loans to the Debtor
were, in reality, capital contributions, equity investments
or an agreement to purchase Debtor’s non-License assets”
(emphasis added). There are multiple problems with
that position. First, given the lack of subsequent briefing
on the now-italicized issue, the FCC did not do enough
to flesh out its argument. APS Sports Collectibles, Inc. v.
Sports Time, Inc., 299 F.3d 624, 631 (7th Cir. 2002)
(conclusory analyses construed as waived). Second, it
is not even clear that the argument as presented to the
district court is distinct, because at least one case
suggests that asset sales agreements may be recharac-
terized as equity. See In re Official Comm. of Unsecured
Creditors for Dornier Aviation (N. Am.), Inc., 453 F.3d 225,
234 (4th Cir. 2006).
18 Nos. 08-3585, 08-3587, 08-3588 & 08-3590
In short, the FCC did not do enough to signal to the
district court or TDS what it was arguing. Therefore, the
FCC has forfeited all but its recharacterization argu-
ment. However, the FCC should not bemoan the forfei-
ture of its “disguised-asset-sale-disallowance” argument,
for as we construe the Stipulation, the FCC would be
prohibited from making that argument in any event.
2. The Stipulation Bars the FCC from Pressing its
Preserved Argument
TDS argued below that the FCC’s objection to Claim 14
is barred by the Stipulation. The bankruptcy judge dis-
agreed. After noting that the in-court modifications to
the Stipulation produced internal inconsistencies, he
stated, “I still do not understand exactly what the
parties intended when they entered the stipulation, but
its unclear and sometimes contradictory language
prevents me from finding in it any intent to preclude
them from objecting to each other’s claims.”
We respectfully disagree with the bankruptcy court
(and the FCC). Although we agree that the Stipulation
gave the parties the right to make certain objections to
one another’s claims, we think that the Stipulation was
sufficiently clear to bar the FCC from raising the only
objection that it has preserved for appeal. Thus, we
need not reach the portion of the bankruptcy judge’s
opinion that addresses the viability of recharacterization
actions in this circuit. Sierra Club v. Morton, 405 U.S. 727,
732 n.3 (1972) (federal courts are not authorized to
issue advisory opinions); see also Hayburn’s Case, 2 U.S.
408 (1792).
Nos. 08-3585, 08-3587, 08-3588 & 08-3590 19
The parties do not contest whether a stipulation
allowing a claim in bankruptcy is valid. See Airadigm II,
547 F.3d at 773 (giving effect to the Stipulation at issue
in this case); Matter of Superior Toy & Mfg. Co., 78 F.3d
1169, 1175 (7th Cir. 1996) (quoting Seidle v. GATX Leasing
Corp., 778 F.2d 659 (11th Cir. 1985)); Matter of Stoecker,
5 F.3d 1022, 1029 (7th Cir. 1993); cf. also Standard Brass
Corp. v. Farmers Nat’l Bank of Belvidere, 388 F.2d 86, 89
(7th Cir. 1967). They disagree merely as to the Stipula-
tion’s meaning. We start there. As with matters of
contract interpretation, the meaning of a stipulation
presents a question of law subject to de novo review.6
Braxton v. United States, 500 U.S. 344, 350 (1991); Tidemann
6
The FCC urges that more deferential review is appropriate
because the bankruptcy judge was uniquely situated to
interpret the Stipulation. The idea is similar to the doctrine of
extrinsic ambiguity, which teaches that in some cases even
seemingly plain terms in a contract prove murky when placed
within a broader factual context. See, e.g., Green v. UPS
Health and Welfare Package for Retired Employees, 595 F.3d 734,
738 (7th Cir. 2010). The FCC’s argument is that the bank-
ruptcy judge has the broader context and is therefore in a
superior position to interpret the Stipulation. We are uncon-
vinced. First, the bankruptcy judge’s opinion does not suggest
reliance on any specialized knowledge to which we ought
defer. He based his interpretation of the Stipulation on the
same writing and oral statements that are before us. And while
it is true that the FCC stated in court that it intended to reserve
other “substantive arguments” it had previously made to the
court, the FCC has not informed us what those arguments
were—something that it plainly could have done.
20 Nos. 08-3585, 08-3587, 08-3588 & 08-3590
v. Nadler Golf Car Sales, Inc., 224 F.3d 719, 723 (7th Cir.
2000) (meaning of stipulation reviewed de novo).
Applying those principles in this case is relatively
straightforward. 7 Paragraph 2 of the Stipulation speaks
directly to Claim 14. The second sentence provides
that “the claims of TDS arising from its advances of
funds in accordance with the 2000 Plan shall be allowed
in the 2006 Bankruptcy Case in the amount of such loans
with interest to the extent provided in the 2000 Plan” (em-
phasis added).
The language of Paragraph 2 yields at least two
possible readings of how much the FCC was allowed to
challenge. The most expansive reading of Paragraph 2,
which we reject, is that the FCC was completely unfet-
tered to argue about Claim 14. On this reading, Claim 14
was allowed only “to the extent” of its treatment under
the 2000 Plan. The construction is unwieldy and
assumes that the antecedent of “to the extent provided in
the 2000 Plan” at the very end of the quoted sentence
in Paragraph 2 is the “claims of TDS” at the very
beginning of the sentence. That reading would allow the
FCC to argue that TDS was only ever entitled to the
purported collateral securing the cash advances, rather
than limiting the attack to the amount of the loans
7
The FCC notes that there may be a question as to whether
federal or state law applies to the interpretation of a litigation
stipulation in bankruptcy. However, we agree that general
principles of contract interpretation yield the same result
regardless of which substantive law is applied.
Nos. 08-3585, 08-3587, 08-3588 & 08-3590 21
actually advanced. Thus, if Claim 14 was really an asset
sale, then it would leave TDS with only an unsecured
claim for the value of that collateral. See § 101(5) (claim
broadly defined to encompass damages claims for
breach of contract).
The expansive reading, however, is not the best reading.
Basic principles of contract interpretation teach that “to
the extent provided in the 2000 Plan” refers to “interest”
or, at most, “amount of such loans with interest” because
of the “last antecedent rule.” 8 The last antecedent rule
provides that “[r]elative and qualifying phrases, gram-
matically and legally, where no contrary intention
8
The word “such” often adds little meaning while introducing
imprecision. See, e.g., H.W. Fowler, A D ICTIONARY OF M ODERN
E NGLISH U SAGE 602 (2d ed. 1965) (noting that the term in legal
writing is often merely “a starchy substitute for that”). What
meaning the term adds, however, undermines the FCC’s
argument. “Such” is often used by lawyers to mean “aforemen-
tioned.” See Bryan A. Garner, G ARNER ’S M ODERN A MERICAN
U SAGE 758-59 (2003) (referring to such as a “pointing word”).
Yet, by referring to the “aforementioned” “advances of funds”
as “loans,” the Stipulation concedes their status as loans. In
addition, if one substitutes “loans with interest” for the afore-
mentioned “advances of funds,” the Stipulation reads:
“[T]he claims of TDS arising from its advances of funds in
accordance with the 2000 Plan shall be allowed in the 2006
Bankruptcy Case in the amount of such [advances of funds] to
the extent provided in the 2000 Plan.” Courts frequently turn to
rules of grammar to aid interpretation (e.g., Barnhart v. Thomas,
540 U.S. 20, 26 (2003)), and in this case those rules militate
against the FCC’s argument.
22 Nos. 08-3585, 08-3587, 08-3588 & 08-3590
appears, refer solely to the last antecedent.” Shelby
County State Bank v. Van Diest Supply Co., 303 F.3d 832, 836
(7th Cir. 2002) (quoting J.G. Sutherland, STATUTES AND
S TATUTORY C ONSTRUCTION § 267, at 349 (1st ed. 1891)); see
also Barnhart v. Thomas, 540 U.S. 20, 26 (2003) (illustrating
that “antecedent” for purposes of the rule means the
immediately adjacent “noun or phrase”); Miniat v. Ed
Miniat, Inc., 315 F.3d 712, 715 (7th Cir. 2002) (employing
the last antecedent rule in contract interpretation);
Peterson v. Sinclair Ref. Co., 123 N.W.2d 479, 486 (Wis. 1963).
Applying the last antecedent rule means that the
parties were generally free to fight about, at most, the
amount of funds that were actually advanced and the
calculation of the interest.
And although the last antecedent rule will give way
where a contrary intention appears (Miniat, 315 F.3d at
715; O’Kane v. Apfel, 224 F.3d 686, 690 (7th Cir. 2000)),
the rest of Paragraph 2 only bolsters the reading. The
Stipulation states that Claim 14 shall be allowed in the
“amount” of the loans with interest. If the FCC were free
to contend that the loans were really a sale of assets, it
would not only require a “bookend antecedent rule,” it
would read out the part of the sentence that describes
the amount of the claim. Language supporting the
FCC’s argument would look quite different from that
contained in the Stipulation—something like, “TDS
shall have an allowed claim based on its advance of
funds to Airadigm.” Language along those lines would
have left the parties free to fight about the economic
substance of the advances of funds.
Nos. 08-3585, 08-3587, 08-3588 & 08-3590 23
None of the issues reserved in the Stipulation, including
the oral modifications, mandates a different result. When
a contract is modified, its terms consist “of not only the
new terms agreed upon, but also as many of the terms
of the original contract which were not abrogated by the
modification.” Estreen v. Bluhm, 255 N.W.2d 473, 479
(Wis. 1977); see also Curia v. Nelson, 587 F.3d 824, 830 (7th
Cir. 2009) (a modified contract “introduces new elements
into the details * * * but leaves the general purpose and
effect undisturbed,” except to the extent the modification
cancels the earlier agreement). As originally drafted,
Paragraph 4 of the Stipulation reserved the ability to
challenge, “without limitation, the right of the FCC and
TDS to seek the inclusion and allowance of interest on
their Allowed Claims.” The in-court modifications ex-
panded Paragraph 4: As counsel for TDS elaborated
before the bankruptcy court, “[T]here is an unresolved
issue as to the right to claim interest on those claims. * * *
[T]here are also * * * open questions with respect to the
nature or extent of security for various claims.”9 TDS’s
counsel also referred to “other unresolved issues.” Counsel
for Airadigm said that Paragraph 4 reserves “all rights”
but then listed only matters related to security interests
9
Matters related to security arguably were already referenced
in the Stipulation as written, because Paragraph 4 reserved
the right to challenge interest on claims, and only oversecured
creditors may be entitled to interest on their claims under
11 U.S.C. § 506(b).
24 Nos. 08-3585, 08-3587, 08-3588 & 08-3590
as being reserved.1 0 The canon of construction ejusdem
generis teaches that the general reservation of rights
claimed by Airadigm should be limited to “items of the
same type or nature as those specifically enumerated.”
United States v. Sec. Mgmt. Co., 96 F.3d 260, 265 (7th Cir.
1996) (discussing Wisconsin law). In other words, the
FCC had to argue that its challenge to Claim 14 is like
the specific items that were reserved; it has not at-
tempted to do so.
As to the “substantive arguments” that the FCC alludes
to, the FCC essentially leaves us in the dark as to what
those arguments might be. In the absence of extrinsic
evidence—whose absence is puzzling given that these
were the FCC’s arguments—it must do more. First, it is
axiomatic that courts interpret contracts so as to give
effect to all of their provisions. Premcor USA, Inc. v. Am.
Home Assurance Co., 400 F.3d 523, 527 (7th Cir. 2005)
(describing the principle as a “cardinal rule” of contract
interpretation); First Am. Title Ins. Co. v. Dahlmann, 715
N.W.2d 609, 616-17 (Wis. 2006) (a construction of a
contract that neutralizes one provision should not be
adopted if another construction “which gives effect to
all of its provisions is consistent with the general intent”);
Pierce v. Physicians Ins. Co. of Wis., Inc., 692 N.W.2d 558,
566 (Wis. 2005) (same principle with respect to stipu-
10
Counsel for Airadigm stated in full: “Your Honor, I think
Paragraph 4 is broad. It reserves all rights. We just want to
be clear it includes the rights of security interests, protection
of security interests and value of secured claims.”
Nos. 08-3585, 08-3587, 08-3588 & 08-3590 25
lations). So the argument that the breadth of the ambigu-
ous, in-court modification swallows Paragraph 2 of the
Stipulation is as close to a non-starter as is possible.
More importantly, we have stated that although an
ambiguous contract presents a factual issue, parties may
not rest on their laurels at summary judgment: a court
should provide the most plausible reading of an ambigu-
ous contract where parties do not point to extrinsic evi-
dence at summary judgment. N.E. Communications of
Wis., Inc. v. CenturyTel, Inc., 516 F.3d 608, 611 (7th Cir.
2008) (“When only the contract’s language is in evidence,
however, a court renders its own decision whether or
not the document is ambiguous.”). That rule is in keeping
with the numerous cases from this circuit that teach
that summary judgment is the “put up or shut up” mo-
ment in the life of a case. E.g., Everroad v. Scott Truck Sys.,
Inc., 604 F.3d 471, 476 (7th Cir. 2010). The FCC has not
presented the Court with extrinsic evidence that
suggests that the broader issues that the parties intended
to reserve include disallowing a claim in its entirety.
Given that Paragraph 2 allows the Claim 14 Loans in
the amount of the loans, the argument that Paragraph 4
similarly permits parties to argue that a claim is
disallowed is not just implausible, it does violence to the
rest of the Stipulation. Cardinal principles of interpreta-
tion militate against adopting the FCC’s position. Premcor
USA, 400 F.3d at 527. On these grounds alone, the
FCC’s challenge to Claim 14 must be rejected.
Moreover, even if the Stipulation had left room to
argue that Claim 14 should be disallowed, we still
would conclude that a recharacterization action is off the
26 Nos. 08-3585, 08-3587, 08-3588 & 08-3590
table. Again, recharacterization was the only issue that
the FCC preserved. To see why it is off the table, we need
to say a little about recharacterization actions. In doing
so, we repeat that this case does not require us to
decide whether and under what circumstances
recharacterization actions may be appropriate in this
circuit.
The overwhelming weight of authority supports
the proposition that bankruptcy courts act within their
equitable powers when they recharacterize loans as
infusions of equity. In re SubMicron Sys. Corp., 432 F.3d
448, 454-55 (3d Cir. 2004); In re Official Comm. of Unsecured
Creditors for Dornier Aviation (N. Am.) Inc., 453 F.3d 225, 233
(4th Cir. 2006); In re AutoStyle Plastics, Inc., 269 F.3d 726,
748 (6th Cir. 2001); In re Hedged-Invs. Assocs., Inc., 380 F.3d
1292, 1298 (10th Cir. 2004); but see In re Pac. Express, Inc., 69
B.R. 112, 115 (9th Cir. BAP 1986)).1 1 Invariably citing the
seminal case of Pepper v. Litton, 308 U.S. 295 (1939), these
cases reason that bankruptcy courts should look to the
substance rather than the form of transactions. Likewise,
these cases reason that courts have equitable authority
to properly characterize a transaction because the term
“claim” is a Bankruptcy Code term of art (see 11 U.S.C.
§ 101(5)), and allowed claims in bankruptcy receive
better treatment than equity interests. E.g., In re Insilco
11
This Court has acknowledged that recharacterization is
distinct from equitable subordination but has never defini-
tively stated whether we recognize a cause of action for
recharacterization. See Matter of Lifschultz Fast Freight, 132
F.3d 339, 345 n.3 (7th Cir. 1997).
Nos. 08-3585, 08-3587, 08-3588 & 08-3590 27
Techs., Inc., 480 F.3d 212, 218 & n.10 (3d Cir. 2007)
(“[E]quity holders receive nothing unless all creditors
are paid in full.”).
Critically for our purposes, actions for recharacteriza-
tion differ from actions for equitable subordination pur-
suant to Section 510(c) of the Bankruptcy Code. In an
equitable subordination action, the analysis focuses on
the behavior of a creditor, knocking down the status of a
claim where a creditor engages in inequitable conduct.
See In re Kreisler, 546 F.3d 863, 865 (7th Cir. 2008) (“Equita-
ble subordination is generally appropriate only if a
creditor is guilty of misconduct that causes injury to the
interests of other creditors.”); Matter of Lifschultz Fast
Freight, 132 F.3d 339, 344 (7th Cir. 1997) (equitable sub-
ordination allows the bankruptcy court to root out ill-
gotten gains). In contrast, recharacterization focuses
on the underlying substance of the disputed transac-
tion—that is, whether the filed claim satisfies the Bank-
ruptcy Code’s definition of “claim.” Hedged-Invs., 380
F.3d at 1297; Dornier Aviation, 453 F.3d at 232; cf. also
United Airlines, Inc. v. HSBC Bank USA, N.A., 416 F.3d 609,
612 (7th Cir. 2005) (“It is unlikely that the [Bankruptcy]
Code makes big economic effects turn on the parties’
choice of language rather than the substance of their
transaction * * *.”). In other words, recharacterization is a
definitional attack.
Determining whether a claim should be recharacterized
as an interest thus comes logically prior to deter-
mining whether a claim should be subordinated: equitable
subordination presumes that the claim is in fact a “claim”
within the meaning of the Code. Recharacterization
28 Nos. 08-3585, 08-3587, 08-3588 & 08-3590
occurs when one has mislabeled a transaction. SubMicron
Sys., 432 F.3d at 454 (explaining that recharacterization
is focused on whether “a debt actually exists”). As one
bankruptcy court judge explained, “Determining the
equitable subordination issue prior to determining
whether the advance is a loan or a capital contribution is
similar to taking the cart before the horse.” Diasonics, Inc.
v. Ingalls, 121 B.R. 626, 630 (Bkrtcy. N.D. Fla. 1990). Less
colloquially, when a claim is equitably subordinated, a
court disregards a party’s formal rights; when a claim is
recharacterized, a court determines what those formal
rights are in the first instance.
With that broader understanding of recharacterization
actions, it becomes evident why the FCC is barred by the
Stipulation from seeking to have Claim 14 recharacterized
as an equity interest. The Stipulation acknowledges ad
nauseum that TDS had claims that would be allowed in the
2006 bankruptcy. The caption of the Stipulation reads
“STIPULATION OF CLAIMS OF THE FEDERAL COM-
MUNICATIONS COMMISSION AND TELEPHONE &
DATA SYSTEMS, INC.” And with respect to the Claim 14
Loans, the parties agreed that “the claims of TDS arising”
from the loans “shall be allowed in the 2006 bankruptcy”
(emphasis added). The language makes the case similar
to In re Insilco Techs., Inc., 480 F.3d 212 (3d Cir. 2007). That
case concerned a Chapter 11 liquidation in which the
creditors’ committee moved to have a trustee appointed.
There was a dispute, but the motion was resolved through
a settlement agreement. The settlement agreement speci-
fied that the “Senior Lenders’ * * * claims against the
Debtors * * * are fully and finally allowed” in an amount
Nos. 08-3585, 08-3587, 08-3588 & 08-3590 29
that was spelled out in the agreement. Insilco, 480 F.3d
at 216.
In rejecting an effort to have the claims recharacterized
as equity, the Third Circuit noted that in bankruptcy
law, the terms “claim” and “allowed” are terms of art. A
claim is a “right to payment, whether or not such right
is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured, or unsecured.” 11 U.S.C.
§ 101(5)(A). The term is broadly defined, so as to include
legal rights. E.g., Fogel v. Zell, 221 F.3d 955, 960 (7th
Cir. 2000); McClellan v. Cantrell, 217 F.3d 890, 895 (7th Cir.
2000) (claim based on fraud). When a claim is “allowed,”
that means that it is accepted as valid. See 11 U.S.C.
§ 502(a); Fed. R. Bankr. P. 3001(f) (properly filed and
executed proof of claim is prima facie evidence that a
claim is valid); Adair v. Sherman, 230 F.3d 890, 894 (7th Cir.
2000).
Given the specialized meanings of the terms involved,
the Insilco Court reasoned that the settlement agreement
by its terms precluded an action for recharacterization.
Because a recharacterization action implicates the
validity of the underlying claim, a claim could not be
deemed both valid (allowed) and not a claim at all:
“[L]oans cannot be both allowable claims and equity
investments; * * * the latter (an interest) is not a claim at
all. By agreeing that the [disputed loans] are * * * allowable
claims, [the parties] necessarily agreed that the [disputed
loans] were true loans.” Insilco, 480 F.3d at 218.
Although Insilco involved a settlement that the bank-
ruptcy court approved as part of a consent order and
30 Nos. 08-3585, 08-3587, 08-3588 & 08-3590
reorganization plan, its reasoning is equally apt here. A
contrary result would ignore the fact that claims and
interests are separate animals in bankruptcy law. As
one noted commentator has observed, the definitional
provisions are “[t]he heart of any code” (Douglas G. Baird
et al., B ANKRUPTCY: C ASES, P ROBLEMS, AND M ATERIALS 31
(Rev. 3d ed. 2001)), and the parties cannot claim ignorance
of building-block terms. As in Insilco, the parties agreed
that the “claims” would be “allowed.” There is simply
no way that a claim could be “allowed” as a claim if it
were, in fact, an equity interest. Moreover, Paragraph 2
of the Stipulation does Insilco one better by referring
to TDS’s advances of funds as “loans.” Attempting to
call the loans equity is too much for any plausible con-
struction of the Stipulation to bear.
Thus, even if the Stipulation had included a broad
reservation of rights, we would not accept the FCC’s
argument on the only issue that the FCC preserved for
appeal—recharacterization. Accordingly, the judgment
of the district court with respect to Claim 14 is affirmed.
C. Claim 15
Claim 15 stands on different footing with respect to the
Stipulation. Although the Stipulation provides that the
claim of TDS as assignee of OEDA “shall be allowed in
the 2006 Bankruptcy case,” the 2000 Plan provides two
different treatments for the claim. Critically, the parties
do not define OEDA’s claim separate and distinct from
its treatment under the 2000 Plan. E.g., TDS Br. at 44
Nos. 08-3585, 08-3587, 08-3588 & 08-3590 31
(implicitly agreeing with the district court’s conclusion
that the Stipulation transferred “the 2000 Plan rights”); id.
at 48-49 (discussing whether the Primary Plan or Back-up
Plan applied to Claim 15). We conclude both that
the bankruptcy court did not abuse its discretion in
interpreting the 2000 Plan and that TDS is judicially
estopped to make the argument that it advances with
respect to Claim 15.
Before OEDA assigned its rights to TDS, OEDA con-
tended that the Primary Plan applied and that it was
therefore entitled to $49 million. OEDA asked the bank-
ruptcy court to order TDS to fund the Reinstatement
Loan, which under the 2000 Plan would have paid the
claim in the amount of $49 million. The bankruptcy court
denied OEDA’s motion and concluded that the Back-up
Transfer Date occurred on November 14, 2002. Under
Section 10.7 of the 2000 Plan, the Back-up Transfer
Date triggered the $2 million payment in the Back-up
Plan: “On the Back-up Transfer Date * * * [TDS] shall
pay OEDA $2 million in full satisfaction of its secured
claims.”
In 2004, TDS filed a declaratory judgment action against
OEDA. TDS took the position that OEDA was entitled
only to $2 million under the 2000 Plan. See Loose
Pleadings, Vol. V, Ex. 7; see also App. 221 (settlement
agreement). As part of the settlement of that action,
OEDA assigned to TDS whatever rights it had against
32 Nos. 08-3585, 08-3587, 08-3588 & 08-3590
Airadigm.12 TDS filed Claim 15. Subsequently, the bank-
ruptcy court sustained the FCC’s objection and disal-
lowed the claim; the bankruptcy court reasoned that the
Back-up Plan applied to the OEDA claim. The Back-up
Plan applied because the “Back-up Transfer Date” had
been reached. Section 10.7 of the 2000 Plan provided that,
on the Back-Up Transfer Date, OEDA was entitled to
$2 million from TDS. Therefore, TDS (as the assignee of
OEDA’s rights) had only a right of payment from itself,
rather than a claim for $49 million.1 3
1. The Bankruptcy Court Did Not Abuse its Dis-
cretion
The plain language of the 2000 Plan provides that OEDA
was entitled only to $2 million, meaning, as the FCC put
it, that TDS stepped into satisfied shoes. In re Doctors
Hosp. of Hyde Park, Inc., 337 F.3d 951, 956-57 (7th Cir.
2003) (assignor can give only that which he has). Section
10.7 of the 2000 Plan, which is titled “Payment to OEDA,”
provides that “[o]n the Back-up Transfer Date * * * [TDS]
shall pay OEDA $2 million in full satisfaction of its
secured claims.” As the bankruptcy court succinctly laid
out, the Back-up Transfer Date is defined as the tenth
business day after the Funding Termination Date. 2000
Plan § 2.5. The Funding Termination Date is defined as
12
The parties dispute whether the assignment was valid,
a question which we need not reach.
13
As the bankruptcy court noted, the actual proof of claim
was filed for $40 million plus interest. App. 81, 89.
Nos. 08-3585, 08-3587, 08-3588 & 08-3590 33
the date when TDS’s obligation to fund the “Working
Capital Loan” terminated. That date was extendable
at TDS’s option. 2000 Plan § 6.7.
Moreover, under the literal terms of the 2000 Plan, the
Primary Plan could not govern, because claims were to be
paid only when the licenses were reinstated—something
which, because of NextWave, never actually took place.
And because it never took place, TDS never had the
obligation to fund the loans that would have paid OEDA’s
claims. TDS’s analysis accounts only for the general
purpose of the plan—one option if Airadigm had
the licenses and another option if it did not—without
discussing the fact that the contingencies in the
2000 Plan were not just linked to whether Airadigm
had the licenses, but also to whether Airadigm had the
financing to pay the claims at issue.
To be sure, the conundrum presents thorny questions
of interpretation, but we do not think that the bank-
ruptcy court abused its discretion in interpreting the
plan. Instead of pointing out how the bankruptcy court
abused its discretion, TDS offered only its own con-
clusory assertions to the effect that the FCC’s Claim, which
was allowed, had to be treated the same as the OEDA
claim. But TDS has not shown how, as a matter of plan
interpretation, all creditors had to be subject either to
Primary Plan treatment or Back-up Plan treatment. In
light of the labyrinthine nature of the 2000 Plan, TDS’s
conclusion is hardly self-evident. Therefore, we reverse
the judgment of the district court and direct it to enter
judgment consistent with the bankruptcy court’s treat-
ment of the claim.
34 Nos. 08-3585, 08-3587, 08-3588 & 08-3590
2. TDS is Judicially Estopped to Argue that Claim 15
Should be Allowed
Independent of the foregoing, we also note that TDS
is not entitled to judgment on Claim 15 because it is
judicially estopped to argue that it is entitled to the
$49 million claim. See Matter of Cassidy, 892 F.2d 637, 641-42
(7th Cir. 1990).
Judicial estoppel is an equitable concept that prevents
parties from playing “fast and loose” with the courts
by prevailing twice on opposing theories. Butler v. Vill. of
Round Lake Police Dep’t, 585 F.3d 1020, 1022 (7th Cir. 2009).
The doctrine is “invoked by a court at its discretion.” New
Hampshire v. Maine, 532 U.S. 742, 750 (2001) (quoting
Russell v. Rolfs, 893 F.2d 1033, 1037 (9th Cir. 1990)). The
doctrine’s purpose is to protect the integrity of the
judicial process. Johnson v. ExxonMobil Corp., 426 F.3d
887, 891 (7th Cir. 2005). Put a bit colorfully, judicial
estoppel “protect[s] the courts from being manipulated
by chameleonic litigants who seek to prevail, twice,
on opposite theories.” Levinson v. United States, 969 F.2d
260, 264 (7th Cir. 1992). Without judicial estoppel, par-
ties’ inconsistent litigating positions could undermine the
integrity of the judiciary by “creat[ing] the perception
that either the first or the second court was misled * * *.”
Moses v. Howard Univ. Hosp., 606 F.3d 789, 792 (D.C. Cir.
2010) (quoting Maine, 532 U.S. at 750).1 4
14
The FCC did raise the issue of judicial estoppel in its
opening brief (FCC Br. at 46-47), although the doctrine can be
raised by courts sua sponte because judicial estoppel concerns
(continued...)
Nos. 08-3585, 08-3587, 08-3588 & 08-3590 35
Although the Supreme Court has emphasized that
there is no formula for judicial estoppel, it has identified
at least three pertinent factors for courts to examine:
(1) whether the party’s later position was “clearly incon-
sistent” with its earlier position; (2) whether the party
against whom estoppel is asserted in a later proceeding
has succeeded in persuading the court in the earlier
proceeding; and (3) whether the party “seeking to assert
an inconsistent position would derive an unfair ad-
vantage or impose an unfair detriment on the opposing
party if not estopped.” Maine, 532 U.S. at 750-51 (collecting
cases and repeating that no rigid formula applies to the
analysis); see also Thore v. Howe, 466 F.3d 173, 181 (1st Cir.
2006) (“The contours of the judicial estoppel doctrine
are not sharply defined * * *.”); Moses, 606 F.3d at 792
(party may not change positions “simply because his
interests have changed”).
Judicial estoppel does not come into play only when a
party attempts to retreat in a second case from an argu-
ment on which it prevailed in a separate earlier case. It
also “prevents a party from prevailing in one phase of
a case on an argument and then relying on a contra-
dictory argument to prevail in another phase.” Pegram v.
Herdrich, 530 U.S. 211, 227 n.8 (2000) (citing Rissetto v.
Plumbers & Steamfitters Local 343, 94 F.3d 597, 605 (9th Cir.
(...continued)
the integrity of the judicial system independent of the interests
of the parties. Grigson v. Creative Artists Agency, L.L.C., 210
F.3d 524, 530 (5th Cir. 2000).
36 Nos. 08-3585, 08-3587, 08-3588 & 08-3590
1996)); see also Al’s Serv. Ctr. v. BP Prods. N. Am., Inc., 599
F.3d 720, 728 (7th Cir. 2010) (reasoning that, even with
regard to two separate suits, success at an early stage of
the earlier litigation would be no bar to the application
of the doctrine in subsequent litigation); Cont’l Ill. Corp. v.
Comm’r, 998 F.2d 513, 518 (7th Cir. 1993) (although
the doctrine is normally raised in successive suits “it is
not so limited”); Charles Alan Wright et al., 18B FEDERAL
P RACTICE AND P ROCEDURE § 4477, at 552 (2d ed. 2002)
(theories of judicial estoppel draw from the fact of incon-
sistency rather than the fact of adjudication). Likewise,
there is no requirement that the parties be the same
for judicial estoppel to apply. What matters for purposes
of judicial estoppel is whether, in reaching its earlier
decision, the court relied on the representation of the
one against whom estoppel is asserted. Rederford v. U.S.
Airways, Inc., 589 F.3d 30, 38 (1st Cir. 2009); Lowery v.
Stovall, 92 F.3d 219, 223 n.3 (4th Cir. 1996) (judicial
estoppel does not have a mutuality requirement because
the doctrine “is designed to protect the integrity of the
courts rather than any interest of the litigants”).
In this case, TDS successfully argued before the bank-
ruptcy court that the Back-up Plan controlled with
respect to the $49 million claim at issue. Before OEDA
assigned its claim to TDS, OEDA filed a motion with the
bankruptcy court which asked the court to interpret the
2000 Plan and force TDS to make the Reinstatement Loan
and fund OEDA’s claim. TDS opposed OEDA’s motion,
arguing that the Back-up Plan controlled with respect
to OEDA. TDS’s argument then was nearly identical to
the description of the bankruptcy judge’s ruling on
Nos. 08-3585, 08-3587, 08-3588 & 08-3590 37
Claim 15 that we set out above. Compare App. 251 (TDS’s
position with respect to OEDA’s motion), with App. 84
(bankruptcy court’s decision with respect to Claim 15).
The bankruptcy court denied OEDA’s motion on the
merits, based on “the briefs and supporting papers of
the parties,” as well as oral argument (which was
basically a repeat of TDS’s position in its brief). As part
of that ruling, the bankruptcy court determined that the
Back-up Transfer Date occurred on November 14, 2002.
App. 219. Because the Back-up Transfer Date occurred,
TDS did not have to fund the Reinstatement Loan that
would have paid OEDA’s $49 million claim. The result
of denying OEDA’s motion was a savings of $47 million
for TDS.
Application of judicial estoppel seems particularly
appropriate in the setting of this case, in which the
parties were assisting the bankruptcy court in inter-
preting the meaning of the 2000 Plan. In light of the
numerous interpretive difficulties caused by the
NextWave decision, the bankruptcy court was faced with
no small task. If we accepted TDS’s argument on appeal,
it would give the impression that, rather than helping the
bankruptcy court to interpret the plan, TDS hood-
winked that court. TDS’s position is diametrically op-
posed to the position that it took before the bankruptcy
court. Moreover, TDS would receive an “unfair advan-
tage” (Maine, 532 U.S. at 751), because if OEDA had a $49
million claim under the Primary Plan, then TDS would
have been obligated to pay it. Now that the bankruptcy
is closed, not only would TDS be entitled to the value
of the claim, it would be relieved from the burden of
38 Nos. 08-3585, 08-3587, 08-3588 & 08-3590
paying for the claim. Its inconsistent litigation position
would yield a king’s ransom.
Finally, we see in TDS’s brief no “reasonable justifica-
tion” for the change in its litigating position. Thore, 466
F.3d at 185; see also Johnson Serv. Co. v. Transamerica Ins.
Co., 485 F.2d 164, 175 (5th Cir. 1973) (reasoning that
estoppel is appropriate for “cold manipulation and not
an unthinking or confused blunder”). Based on our
review of the matter, we conclude that the successful
contention made by TDS when it disputed OEDA’s right
to payment cannot “exist side by side” (Cleveland v.
Policy Mgmt. Sys. Corp., 526 U.S. 795, 803 (1999) (SSDI and
ADA claims not mutually exclusive)) with its current
position. Therefore, TDS was not entitled to change
positions based on the “exigencies of the moment” (Maine,
532 U.S. at 750 (quoting United States v. McCaskey, 9 F.3d
368, 378 (5th Cir. 1993))), and even if the bankruptcy
court had abused its discretion, TDS would not be
entitled to relief.
C. Claim 16
Finally, we affirm the judgment of the district court
with respect to Claim 16. As with Claim 15, the Stipulation
does not answer the question of whether the Back-up Plan
or the Primary Plan was intended to govern. The FCC
argues that the value of the claim is zero because under
the Back-up Plan, Ericsson was not entitled to payment
and its liens would have been extinguished. We
conclude that even if the Back-up Plan applied, the
Nos. 08-3585, 08-3587, 08-3588 & 08-3590 39
2000 Plan did not extinguish the liens, and the liens may
give rise to a claim in a subsequent bankruptcy.
The default rule is that a lien is extinguished as part of
a plan of reorganization unless the plan says otherwise.
11 U.S.C. § 1141(c) (property dealt with by a plan is
“free and clear of all claims and interest of creditors”);
Matter of Penrod, 50 F.3d 459, 462-63 (7th Cir. 1995). Section
5.2 of the 2000 Plan specifically retained Ericsson’s liens:
If Ericsson fails to receive payment with respect to
any of the Reinstated Licenses, Ericsson shall retain
its Liens on such Reinstated Licenses and the pro-
ceeds thereof to secure payment of the unpaid
portion of its [claim]. Ericsson shall retain its Liens
on any Licenses that are terminated and not rein-
stated and the related proceeds thereof.
The Back-up Plan provided that no payments would
be made “on account of Claims against the Debtor,” except
as specified in the Back-up Plan, but did not purport
to extinguish Ericsson’s liens on licenses that were not
reinstated. That feature makes the treatment of Ericsson
different from the treatment of OEDA: as we have
already observed, OEDA’s Back-up treatment stated
that the payment was in full satisfaction of its secured
claim. 2000 Plan § 10.7. We presume that the difference
in the language of the plan is purposeful. LaSalle Nat’l
Trust, N.A. v. ECM Motor Co., 76 F.3d 140, 144 (7th Cir.
1996) (contract interpretation should give effect to each
term). That means that, at first blush, TDS retains the liens.
The FCC’s attempted trump card is to argue that
NextWave means that the licenses were neither “Rein-
40 Nos. 08-3585, 08-3587, 08-3588 & 08-3590
stated” nor “terminated and not reinstated.” We are not
persuaded.
Principles of contract law apply to interpreting a plan
of reorganization: “A confirmed plan or reorganization
is in effect a contract between the parties and the terms
of the plan describe their rights and obligations.” Ernst &
Young LLP v. Baker O’Neal Holdings, Inc., 304 F.3d 753,
755 (7th Cir. 2002). And the primary purpose of
contract interpretation is to give effect to the objective
intent of the parties. Solowicz v. Forward Geneva Nat’l,
LLC, 780 N.W.2d 111, 124 (Wis. 2010). “By intent we * * *
mean * * * the scope and purpose of the document as
manifest by the language used.” Id. (brackets omitted).
The language in Section 5.2 that we quoted above was
designed to ensure that Ericsson retained its liens re-
gardless of what happened with Airadigm’s petition to
have the licenses reinstated. Everyone, including the
FCC, thought that Airadigm did not have the licenses
when the 2000 Plan was drafted. Therefore, and in light
of the manifest purpose of the 2000 Plan as revealed
through the undisputed circumstances surrounding its
adoption (cf. Ehlinger v. Hauser, 758 N.W.2d 476, 486 (Wis.
Ct. App. 2008)), we find no ambiguity as to the status
of the Ericsson liens. The FCC has pointed us to no evi-
dence that any of the parties contemplated any other
treatment than to preserve the liens. “We will not bend
the language of a contract to create an ambiguity when
none exists, but neither will we follow a literal interpreta-
tion when [to do so] would lead to an unreasonable
or absurd result.” Chi. Bd. of Options Exch. v. Conn. Gen.
Life Ins. Co., 713 F.2d 254, 258 (7th Cir. 1983) (citation
omitted).
Nos. 08-3585, 08-3587, 08-3588 & 08-3590 41
As a last ditch effort, the FCC points out that even if
Ericsson retained the liens, a lien is not a right to pay-
ment. Not true. The term “claim” is defined broadly in
the Bankruptcy Code. And under Johnson v. Home State
Bank, a right that is purely in rem may give rise to a “right
to payment.” 501 U.S. 78, 84-86 (1991) (“[W]e must
infer that Congress fully expected that an obligation
enforceable only against a debtor’s property would be a
‘claim’ under § 101(5) of the Code.”). In Johnson, the
Court ruled that a mortgage lien, which survived an
individual debtor’s discharge of personal liability in a
Chapter 7 bankruptcy case, gave rise to a claim sub-
ject to inclusion in the debtor’s subsequent Chapter 13
reorganization plan. Thus, the FCC’s argument that TDS
does not have a claim in the 2006 bankruptcy because
there was no obligation to make payments on the
Ericsson claim under the 2000 Plan’s Back-up Plan (FCC
Br. at 53) is unavailing. TDS had a claim as defined by
the Bankruptcy Code in the 2006 bankruptcy because it
had an in rem right that survived the 2000 Plan. That is a
key lesson—or at least a lesson that follows natu-
rally—from Johnson. Under the 2000 Plan, Ericsson was
going to get paid or keep its liens. TDS, as the assignee
of Ericsson’s claim, took the same right.
Therefore, the judgment of the district court is affirmed
with respect to Claim 16.
IV. Conclusion
For the reasons set forth above, the judgment of the
district court is A FFIRMED in part and R EVERSED in part.
42 Nos. 08-3585, 08-3587, 08-3588 & 08-3590
The district court’s judgment is affirmed, except as to the
treatment of Claim 15. As to that claim, the district court
is directed to enter judgment consistent with the bank-
ruptcy court’s treatment of the claim.
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