A Plus Sewer & Water Co., 15-29123

Background

Debtor A Plus Sewer & Water Co. filed a voluntary Chapter 11 (small business) on Sept. 29, 2015; no unsecured creditors' committee appointed.
Firmco is the largest secured creditor; court previously ordered adequate protection payments of $4,500 to Firmco.
The confirmed Plan (proposed by Debtor) treated Firmco’s secured claim of $291,181.32 with an "Initial Payment" of $68,470.49 and total Plan distributions of $215,000 tied to release of Firmco’s lien on certain "Excess Property."
Firmco and Caterpillar voted to accept the Plan believing the Initial Payments would be paid in addition to (not netted against) prior adequate protection payments; later told by Debtor that the Initial Payment had already been paid via adequate protection.
Firmco (joined by Caterpillar) moved under Fed. R. Bankr. P. 3018(a) to change their votes to rejection and objected to the proposed confirmation order, arguing material nondisclosure/misunderstanding about payments.
The Debtor argued (inter alia) that adequate protection properly reduced loan principal, parties negotiated terms, ballots were informed, and the Rule 3018(a) standard for "cause" is not met.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether "cause" exists under Rule 3018(a) to permit Firmco/Caterpillar to change votes	Firmco/Caterpillar: they relied on Debtor representations that Initial Payments were separate from adequate protection, and would have voted differently if aware	Debtor: ballots and Plan terms (and budgets) reflected negotiated treatment; adequate protection properly reduced amounts; change is strategic and untimely	Denied — court found no sufficient cause; votes were intelligently cast and change would improperly block confirmation
Whether Debtor’s conduct (alleged nondisclosure) supports relief to rescind votes	Firmco/Caterpillar: Debtor failed to disclose that adequate protection constituted the Initial Payment, inducing votes in favor	Debtor: parties negotiated payments; the Plan/budget showed funding; claims of nondisclosure amount to disagreement over payment application, not fraud	Denied — court found no misreading or tainting of votes and alternative remedies exist post-confirmation
Whether relief should instead be pursued by other procedural avenues	Firmco/Caterpillar: sought immediate change of vote as fastest way to prevent confirmation	Debtor: suggested other remedies (Rule 60(b), breach motions, conversion, breach of contract, or enforcement under Plan) would be appropriate	Court agreed other motions would be more appropriate if relief justified; Rule 3018(a) not the right vehicle here
Whether proposed confirmation order should be signed despite objection	Firmco/Caterpillar: objected to order based on payment dispute and requested Court refrain from signing	Debtor: proposed order accurately memorialized hearing and should be entered	Court overruled objection and directed Debtor to submit a proposed order reflecting these findings

Key Cases Cited

In re Dow Corning Corp., 237 B.R. 374 (Bankr. E.D. Mich. 1999) (Rule 3018(a) cause should generally be easy to satisfy absent improper motive)
In re Windmill Durango Office, LLC, 481 B.R. 51 (B.A.P. 9th Cir. 2012) (change of vote is improper for mere strategic reversal; courts exercise discretion)
In re MCorp Fin., Inc., 137 B.R. 237 (Bankr. S.D. Tex. 1992) (examples of cause include misreading plan or communication breakdown allowing an informed vote)
In re Houser Shoes, Inc., 245 B.R. 486 (W.D.N.C. 2000) (timeliness of Rule 3018(a) motion is a relevant factor)