In Re Multiut Corp.
449 B.R. 323
Bankr. N.D. Ill.2011Background
- Debtor Multiut Corporation filed a Chapter 11 petition; plan confirmation was opposed by Dynegy Marketing and Trade.
- The Plan classifies claims into four classes; Class 2 contains disputed Dynegy and related claims, treated differently from Class 3 general unsecured claims.
- Dynegy asserted plan defects including improper classification under §1122 and unfair treatment under §1129(b), among others.
- The District Court judgment against Debtor and Draiman in favor of Dynegy was amended to over $22 million, with an appeal pending.
- The Plan delays distributions to Class 2 pending resolution of related litigation and reserves certain disputed claims; Dynegy argues these features fail to meet several confirmation standards.
- The court sustained some objections, denied confirmation, and set a May 24, 2011 hearing to decide whether to convert or dismiss the case.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Classification of Dynegy's claim under §1122(a) | Dynegy claims Dynegy's claim is improperly classified. | Debtor argues broad discretion allows separate classification for disputed/setoff-able claims. | Plan classification upheld; no §1122(a) violation. |
| Same treatment within class under §1123(a)(4) | Plan improperly differentiates Class 2 members from other unsecureds. | Different treatment is justified by disputes and potential setoffs; not required to be identical within class. | Plan provides uniform treatment within Class 2; §1123(a)(4) satisfied. |
| Feasibility under §1129(a)(11) | Plan projections show adequate cash flow and distributions. | Projections are inconsistent and likely overstated; credible liquidation analysis lacking. | Feasibility not shown; plan fails §1129(a)(11). |
| Good faith under §1129(a)(3) | Plan relies on incomplete valuations and blanket reservations; not in good faith. | Plan amounting to continued litigation risk contemplated; reservations limited. | Plan not proposed in good faith; §1129(a)(3) sustained. |
| Permissible cram-down under §1129(b) | Plan discriminates unfairly against Dynegy by delaying payments and lacking interest; fails absolute priority. | Insiders’ setoffs and pending disputes justify timing; no sub rosa releases. | Plan fails §1129(b) due to unfair discrimination and absolute priority concerns. |
Key Cases Cited
- 203 N. LaSalle St. P'ship v. Laguna, 526 U.S. 434 (U.S. 1999) (best interests and feasibility standards guiding plan confirmation)
- In re Woodbrook Assocs., 19 F.3d 312 (7th Cir. 1994) (debtor’s classification discretion in Chapter 11 plans)
- In re Wabash Valley Power Ass'n, Inc., 72 F.3d 1305 (7th Cir. 1995) (limits on classification—disparities and business reasons allowed)
- In re Dow Corning Corp., 244 B.R. 648 (E.D. Mich. 1999) (definition of substantial similarity; treatment of claims within classes)
- In re Bergner & Co., 140 F.3d 1111 (7th Cir. 1998) (need for specific reservation language under plan to preserve estate claims)