In Re: Ganess Maharaj
2012 U.S. App. LEXIS 12080
4th Cir.2012Background
- Ganess and Vena Maharaj operated an auto body shop and filed Chapter 11 after incurring substantial debts from a fraud loss.
- Debtors continued to operate in possession during the Chapter 11 proceedings.
- The plan proposed four creditor classes and would keep the business running to pay Class III claims; Access Bank held Class I and IV, and a separate automobile lender held Class II; Discover Bank held Class III debt and opposed the plan.
- Debtors sought cram-down over Discover Bank’s dissent, arguing BAPCPA abrogated the absolute priority rule for individuals.
- The bankruptcy court rejected the broad view of BAPCPA abrogation and adopted the narrow view, denying plan confirmation.
- On appeal, the Fourth Circuit reviewed de novo whether BAPCPA abrogated the absolute priority rule for individual debtors and affirmed the bankruptcy court’s denial of confirmation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether BAPCPA abrogates absolute priority for individuals in Chapter 11 | Maharaj: BAPCPA broad view abrogates the rule | Maharaj: Congress preserved the rule for individuals | Abrogation not shown; rule preserved |
| Whether §1129(b)(2)(B)(ii) and §1115 yield a plain meaning or ambiguity | Maharaj: language unambiguous and broad enough to absorb post-petition property | Maharaj: language ambiguous; interpreted to preserve prior practice | Language ambiguous; context shows preservation of the absolute priority rule |
| What is the proper interpretive approach given statutory context and history | Maharaj: legislative history supports abrogation | Maharaj: no clear repeal or historical support for abrogation | Context and history support preserving the absolute priority rule |
| Whether implied repeal principles counsel against abrogation | Maharaj: implied repeal is permissible under broad view | Maharaj: implied repeal should not be inferred without clear evidence | Implied repeal not found; avoid broad change |
Key Cases Cited
- Norwest Bank Worthington v. Ahlers, 485 U.S. 197 (1988) (absolute priority rule rooted in pre-BAPCPA practice)
- Case v. Los Angeles Lumber Products Co., 308 U.S. 106 (1939) (origin of the term 'absolute priority')
- In re Seafort, 669 F.3d 662 (6th Cir. 2012) (chapter 13 parallel to 11 interpretation; supports estate-post-petition view)
- In re Gbadebo, 431 B.R. 222 (Bankr. M.D. Fla. 2010) (supports traditional, plain-language preservation view)