In Re Lindsey
453 B.R. 886
Bankr. E.D. Tenn.2011Background
- Debtor filed voluntary Chapter 11 on April 5, 2010 and operates as debtor-in-possession under 11 U.S.C. § 1107.
- Debtor proposed an Amended Plan with twelve classes, three of which are impaired, to be implemented via asset sales, income, and plan payments.
- Amended Plan contemplates sale of various pre- and post-petition assets (e.g., Briarthicket Road property interests, ownership interests in several LLCs and corporations).
- Certain property is to be retained by the Debtor, including multiple real properties, notes, stock, and various LLC interests, rather than being sold.
- Ballots show Pinnacle National Bank, Mountain National Bank, and FirstBank rejected the Amended Plan; further proceedings and objections arose regarding confirmation.
- The Banks filed motions for summary judgment asserting the Amended Plan violates the absolute priority rule under 11 U.S.C. § 1129(b)(2)(B)(ii).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the absolute priority rule applies to individual Chapter 11 debtors after BAPCPA. | Banks contend the rule remains intact for individuals. | Debtor argues amendments via 1115 broadened estate, potentially eliminating the rule. | The court adopts the narrow view; the absolute priority rule continues to apply. |
| Whether Debtor may retain pre-petition property under 1115 notwithstanding cram-down prior unsecured creditors. | Banks argue retention of pre-petition property violates absolute priority. | Debtor argues 1115 allows retention of estate property post-petition. | Retention of pre-petition property violates absolute priority; plan cannot be confirmed. |
Key Cases Cited
- In re Tegeder, 369 B.R. 477 (Bankr. D. Neb. 2007) (broad view of 1115/1129(b)(ii) adopted to eliminate absolute priority)
- In re Roedemeier, 374 B.R. 264 (Bankr. D. Kan. 2007) (broad view adopted, treating 1115 as absorbing estate)
- In re Shat, 424 B.R. 854 (Bankr. D. Nev. 2010) (legislative history on BAPCPA examined; broad view discussed)
- In re Gbadebo, 431 B.R. 222 (Bankr. N.D. Cal. 2010) (narrow interpretation favored; 1115 supplements not supplants 541)
- In re Mullins, 435 B.R. 352 (Bankr. W.D. Va. 2010) (narrow interpretation; absolute priority preserved for prepetition property)
- In re Maharaj, 449 B.R. 484 (Bankr. E.D. Va. 2011) (endorses narrow view preserving absolute priority for prepetition property)