River Road Hotel Partners, LLC v. Amalgamated Bank
651 F.3d 642
| 7th Cir. | 2011Background
- River Road and RadLAX debtors filed Chapter 11 in Aug 2009; Amalgamated Bank served as administrative agent/trustee for the lenders.
- Debt totals: River Road loans ~$155.5 million; RadLAX loans ~$142 million; both lenders seek preservation of secured positions.
- Plans proposed asset sales with stalking horse bids of $42 million (River Road) and $47.5 million (RadLAX).
- Lenders object to proposed procedures, arguing plans cannot be confirmed under 11 U.S.C. §1129(b)(2)(A)(ii) because credit bidding would be denied.
- Bankruptcy court ruled plans could not be confirmed under §1129(b)(2)(A)(iii); appeals certified to Seventh Circuit; mootness questions addressed but plan filings continued.
- Court ultimately affirmed the bankruptcy court’s interpretation that cramdown plans selling encumbered assets free and clear must satisfy §1129(b)(2)(A)(ii).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether §1129(b)(2)(A) allows confirmation under (iii) for plans selling encumbered assets without credit bidding | Debtors argue (iii) applies globally to satisfy indubitable equivalence | Lenders argue (iii) does not authorize such plans; (ii) controls for credit bidding protections | Plain-language reading ambiguous; but court ultimately rejects (iii) as license for such plans |
| Does §1129(b)(2)(A) unambiguously authorize cramdown under (iii) despite lack of credit bidding | Debtors contend (iii) can grant fair and equitable treatment | Lenders contend only (ii) provides fair and equitable treatment in this context | No unambiguous authorization; court adopts interpretation that (ii) governs such plans |
| Should the Debtors’ plan be affirmed under the better interpretation of §1129(b)(2)(A)(iii) | Interpretation should avoid superfluous provisions and respect creditor protections | Interpretation would undermine established credit-bidding protections | Better interpretation does not permit confirmation under (iii) for these plans |
| Does the plan satisfy §1129(b)(2)(A) given creditor protections in other Code provisions | Plan satisfies indubitable equivalence via open-market valuation | Open-market valuation without credit bidding under (iii) conflicts with 363(k) and related protections | Conclusion: cramdown plans must satisfy (ii) protections; (iii) not sufficient here |
Key Cases Cited
- In re Philadelphia Newspapers, LLC, 599 F.3d 298 (3d Cir.2010) (concerning scope of §1129(b)(2)(A)(iii))
- Pacific Lumber Co. v. United States Trustee, 584 F.3d 229 (5th Cir.2009) (indubitable equivalence via auction value vs. credit bidding)
- Porco v. Trs. of Ind. Univ., 453 F.3d 390 (7th Cir.2006) (mootness and reviewability principles)
- Fed. Election Comm'n v. Wisconsin Right to Life, Inc., 551 U.S. 449 (U.S. 2007) (mootness exception for timing issues)
- Duncan v. Walker, 533 U.S. 167 (U.S. 2001) (statutory interpretation canons; avoid superfluous provisions)
- Bloate v. United States, 130 S. Ct. 1345 (U.S. 2010) (canons of construction regarding general vs. specific provisions)