In re Tucker
479 B.R. 873
Bankr. D. Or.2012Background
- Debtors-in-Possession operate a tanning salon; Tucker is employed elsewhere.
- Petition filed December 13, 2010; multiple plans proposed (first May 2011, first amended Aug 2011, second amended Dec 2011, third amended Aug 2012).
- Second amended plan aimed to satisfy the absolute priority rule to pay unsecured creditors over ten years and required sale of the business.
- Bankruptcy court initially denied confirmation of the first amended plan; Friedman (9th Cir. BAP 2012) held the absolute priority rule not applicable in individual Chapter 11 cases.
- MBM Group, LLC objected to confirmation; third amended plan added cash distribution to unsecured creditors; unsecured class rejected by a narrow margin.
- Court ultimately finds the third amended plan satisfies §1129(a) and (b) despite §1129(a)(8) rejection, under §1129(b)(1) as fair and equitable.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does Friedman remove the absolute priority rule in individual Chapter 11 cases? | Debtors advocate broad Friedman rule. | MBM argues Friedman controls; absolute priority remains applicable. | Absolute priority not applicable; plan can be confirmed under 1129(b)(1) if fair and equitable. |
| Are BAP decisions binding on the bankruptcy court here? | Court should follow Friedman without retrial. | Some argue BAP decisions not binding; require reconsideration. | Court adopts middle ground; BAP decisions inform but are not automatically binding without retrial. |
| Is the third amended plan fair and equitable to unsecured creditors under §1129(b)? | Plan preserves estate and pays unsecureds over time; fair despite lower dividend. | Narrow retention of pre-petition assets may be unfair to dissenting class. | Plan is fair and equitable; §1129(b) satisfied for cramdown. |
| Does the plan meet §1129(a)(8) and other requirements for confirmation? | Class acceptance lacked, but other criteria met under cramdown. | Unsecured class dissent prevents confirmation under §1129(a)(8). | Although §1129(a)(8) not met, confirmation granted under §1129(b)(1). |
Key Cases Cited
- In re Friedman, 466 B.R. 471 (9th Cir. BAP 2012) (absolute priority not applicable in individual Chapter 11 cases; broad interpretation of 1115 estate)
- In re Dollar Associates, 172 B.R. 945 (N.D. Cal. 1994) (criteria for fair and equitable under 1129(b)(2) beyond absolute priority)
- In re Bonner Mall Partnership, 2 F.3d 899 (9th Cir. 1993) (new value doctrine and plan funding concepts for cramdown)
- In re Gurr, 194 B.R. 474 (Bankr.D. Ariz. 1996) (binding effect of BAP decisions in Ninth Circuit context)