In Re Davis Heritage GP Holdings, LLC
443 B.R. 448
Bankr. N.D. Fla.2011Background
- Debtor is Davis Heritage GP Holdings, LLC, a three-tier LLC structure with Middle Tier (7 single-member) and Lower Tier (8 entities) that own various real properties; Debtor manages all entities as a single enterprise and used a single bank account for operations.
- Lower Tier LLCs own several significant properties (Antiqua at NMB, Baleen of Destin, Beau View of Biloxi, Biscayne Bay, Diamond of Navarre, The Club at Hendricks Isle, The Diplomat of Jackson, Stratford Mill) with substantial values and encumbrances; many are not disclosed in schedules or financials.
- Debtor’s primary creditor is Inervest, which holds a large judgment from Mississippi and obtained a levy on Middle Tier LLCs; Wells Fargo (Acquisition Loan) and SunTrust (guarantied loans) also hold secured claims against assets tied to insiders.
- Debtor filed Chapter 11 on September 26, 2010 and filed a plan on December 7, 2010; Inervest moved for dismissal, stay relief, and abstention; court held evidentiary hearings and evaluated bad faith and best interests of creditors.
- Court determines the case is filed in bad faith to shield insiders and protect assets via a three-tier structure; assets for reorganization are not within the estate; plan is not in best interests of creditors; case is dismissed with stay relief and abstention motions denied as moot.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Bad faith filing under § 1112/best interests | Inervest | Davis Heritage | Dismissal granted for bad faith |
| Confirmation feasibility and best interests | Inervest | Debtor | Plan not in best interests; not feasible |
| Property of the estate and jurisdiction over Lower Tier | Inervest | Debtor | Estate lacks jurisdiction over Lower Tier assets; structure shields assets |
| Effect of three-tier structure on automatic stay | Inervest | Debtor | Stay not effective against Lower Tier assets; dismissal appropriate |
| Adequacy of creditors’ treatment | Inervest | Debtor | Plan unfair/inequitable; creditors not protected |
Key Cases Cited
- In re Phoenix Piccadilly, Ltd., 849 F.2d 1393 (11th Cir. 1988) (bad faith factors for continuance of stay and dismissal; intent to abuse judicial process)
- In re Lorraine Guardian, Ltd., 104 B.R. 435 (Bankr.N.D.Fla. 1989) (single-asset case analog; dismissal when no reorganization prospects)
- Singer Furniture Acquisition Corp. v. SSMC Inc., 254 B.R. 46 (M.D. Fla. 2000) (holding company with no business; bad faith filing to circumvent litigation)
- In re Brittain, 435 B.R. 318 (Bankr.D.S.C. 2010) (bankruptcy remote entities and jurisdictional considerations)
- Olmstead v. F.T.C., 44 So.3d 76 (Fla. 2010) (Florida Supreme Court on surrender of single-member LLC interests post-Olmstead)