666 B.R. 418
Bankr. N.D. Ga.2024Background
- Edgewood Food Mart, Inc. (the Debtor), operating a gas station and convenience store in Atlanta since 2005/2006, filed for Subchapter V bankruptcy on November 10, 2023, following insolvency triggered by a large $2,375,000 judgment in favor of creditor Lamar Lester due to a shooting incident on the property.
- The Debtor proposed a three-year plan to pay projected disposable income ($159,000), with a personal escrow guarantee from its principal, Mr. Panjwani, ensuring creditors are paid if business income falls short.
- The plan bifurcated Mr. Lester's claim into a secured portion ($2,500) and a general unsecured portion (~$150,240 pro rata distribution), and Mr. Panjwani agreed to pay all allowed administrative claims from personal funds and forgo his salary during the plan.
- Mr. Lester objected to confirmation on the grounds of alleged bad faith, infeasibility of the plan, failure of the liquidation test, and alleged unfair discrimination—also raising issues regarding supposed breaches of fiduciary duty and equitable ownership of the property.
- The court held an evidentiary hearing, received expert testimony, and evaluated both parties’ factual and legal submissions; the plan was nonconsensual as at least one class (Lester) rejected it, requiring § 1191(b) analysis.
Issues
| Issue | Lester's Argument | Debtor's Argument | Held |
|---|---|---|---|
| Good faith (§1129(a)(3)) | Plan not for reorganization, relies on faulty projections, ignores claims against equity owner | Plan legitimately aims to maximize returns to creditors with concessions from insiders | Plan proposed in good faith; evidence supports purpose & honesty |
| Liquidation test (§1129(a)(7)) | Chapter 7 would yield more via potential property and fiduciary claims or asset purchase | Chapter 7 claims are speculative/unsupported, admin costs reduce recovery | Plan satisfies test; no viable alternate claims, Ch. 7 recovery lower |
| Feasibility (§1129(a)(11)) | Plan based on unreliable projections, not a true reorganization | Escrow guarantees payout; projections are optimistic but supportable | Plan is feasible; escrow ensures all plan payments |
| Unfair discrimination/fair & equitable (§1191(b)) | Plan arbitrarily limits Lester's payout & 3-year term unfair | Same treatment for equal priority claims; 3-year plan supported by Subchapter V | No unfair discrimination; 3-year term fair & equitable |
Key Cases Cited
- In re McCormick, 49 F.3d 1524 (11th Cir. 1995) (good faith plan proposal requires a reasonable likelihood of success consistent with bankruptcy code objectives)
- In re Seaside Eng'g & Surveying, Inc., 780 F.3d 1070 (11th Cir. 2015) (bankruptcy reorganization's purposes include job preservation and maximizing creditor recovery)
- In re Pikes Peak Water Co., 779 F.2d 1456 (10th Cir. 1985) (feasibility analysis avoids confirming unrealistic 'visionary' plans)
- In re Pizza of Hawaii, Inc., 761 F.2d 1374 (9th Cir. 1985) (feasibility requirement tested by likelihood of plan completion without further reorganization)