659 B.R. 398
Bankr. M.D. Ga.2024Background
- Trimax Medical Management, Inc., an expense-sharing management company, filed for Chapter 11 Subchapter V bankruptcy shortly after a wrongful termination judgment was awarded to former CEO David Field.
- Dr. Hugh F. Smisson III solely owns Trimax and controls related entities that both owe significant unpaid management fees to Trimax and receive its management services.
- The plan proposed by Trimax impairs the class of unsecured creditors (including Field), who voted to reject it; the Subchapter V Trustee and Field both objected to plan confirmation.
- The main objections focus on the treatment and valuation of insider receivables and the distribution mechanism for creditor payments.
- Hearings were held over several days, with evidence presented on Trimax’s finances, its insider relationships, and projected reorganization prospects.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Good Faith §1129(a)(3) | Plan filed to benefit insiders, includes improper expenses, car purchase shows bad faith | Operations normal, expenses are legitimate, prepetition conduct irrelevant | Plan proposed in good faith; objection overruled |
| Best Interests of Creditors §1129(a)(7) | Receivables undervalued, plan not best for creditors | Receivables from insiders are uncollectible, liquidation analysis is accurate | Liquidation values accurate; objection overruled |
| Fair & Equitable, Unfair Discrimination §1191(b) | Plan is self-serving, fails to treat Field fairly, insiders benefit | Dividend is result of legitimate projections, all disposable income applied | Plan is fair, equitable, does not discriminate |
| Trustee Payment Objection | Payments should go through trustee, not debtor | Debtor agrees to modified distribution (unsecured payments via Trustee) | Agreement accepted, objection otherwise overruled |
Key Cases Cited
- In re Phoenix Piccadilly, Ltd., 849 F.2d 1393 (11th Cir. 1988) (addresses bad faith in filing a petition, not plan confirmation)
- In re Seaside Engineering & Surveying, Inc., 780 F.3d 1070 (11th Cir. 2015) (sets standard for good faith in confirmation: likelihood of achieving bankruptcy objectives)
- In re McCormick, 49 F.3d 1524 (11th Cir. 1995) (interprets good faith under § 1129(a)(3) as requiring a plan be likely to achieve Bankruptcy Code purposes)
- In re United Marine, Inc., 197 B.R. 942 (Bankr. S.D. Fla. 1996) (bad faith exists if no realistic chance of reorganization and just to frustrate creditors)
- In re Albany Partners, Ltd., 749 F.2d 670 (11th Cir. 1984) (addresses indicators of bad faith in bankruptcy context)