In Re Red Mountain MacHinery Co.
451 B.R. 897
Bankr. D. Ariz.2011Background
- Debtors filed Chapter 11; Comerica Bank appeals the order confirming the first amended plan.
- Comerica seeks a stay pending appeal under Bankruptcy Rule 8005; emergency hearing conducted.
- Plan allocates $15.9M secured §1111(b) claim to Class 2, with present value of $10M paid due to valuation.
- Comerica elected §1111(b) as to remaining collateral, but denial as to collateral purchased via a §363 sale.
- Debtor’s plan includes new value from equity owners and exit financing; other classes unanimously accept.
- Court denies stay pending appeal, finding no irreparable injury and no strong likelihood of success on appeal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether §1111(b) sale-exception applies to collateral already purchased at a §363 sale. | Comerica: exception applies to post-sale elections. | Debtor: exception not needed where creditor already owns collateral. | No serious legal question; exception not required to protect rights. |
| Whether denial of §1111(b) for the collateral Comerica purchased constitutes irreparable injury. | Comerica would be irreparably harmed if stay denied. | No irreparable injury given existing collateral value and plan structure. | No irreparable injury; stay denied. |
| Whether feasibility, new value contribution, and classification raise serious legal questions on appeal. | Comerica contends plan flaws in feasibility, new value, classification, and interest rate. | These are factual issues, not serious legal questions; no clear error shown. | No serious legal questions; arguments fail on the record. |
| Impact of the plan’s treatment of secured/unsecured claims on §1129(a)(10) and overall confirmation. | Comerica argues potential failure to satisfy impairment/acceptance requirements. | Plan acceptance and impairment are satisfied by other classes; issue is moot for stay. | Not a basis for reversible error; no irreparable injury shown. |
Key Cases Cited
- Nken v. Holder, 129 S. Ct. 1749 (U.S. 2009) (establishes stay standards for emergency relief)
- Leiva-Perez v. Holder, 640 F.3d 962 (9th Cir. 2011) (sliding scale balancing for stays; irreparable harm threshold)
- Alliance for the Wild Rockies v. Cottrell, 632 F.3d 1127 (9th Cir. 2011) (balance of hardships; serious questions can suffice with hardship tilt)
- In re Pine Gate Assocs., Ltd., 2 Bankr.Ct. Dec. (LRP) 1478 (Bankr.N.D. Ga. 1976) (Pine Gate rationale on §1111(b) purpose)
- 680 Fifth Ave. Assocs. v. Mut. Benefit Life Ins. Co., 29 F.3d 95 (2d Cir. 1994) (§1111(b) election and protections for undersecured creditors)
- Tuma v. Firstmark Leasing Corp. (In re Tuma), 916 F.2d 488 (9th Cir. 1990) (Congressional intent to protect future appreciation via §1111(b))
- SubMicron Systems Corp., 432 F.3d 448 (3d Cir. 2006) (undersecured creditor protections and §363(k) interaction)
- In re Bonner Mall P'ship, 2 F.3d 899 (9th Cir. 1993) (classification and absolute priority considerations)
- Acequia, Inc. v. Clinton (In re Acequia, Inc.), 787 F.2d 1352 (9th Cir. 1986) (feasibility and plan confirmation standards)