M.V.J. Auto World, Inc.
Tagged opinion
ORDERED in the Southern District of Florida on June 21, 2024.
United States Bankruptcy Court
MEMORANDUM OPINION ON ORDER CONFIRMING NON-CONSENSUAL SUBCHAPTER V PLAN OF REORGANIZATION UNDER 11 U.S.C. §1191(b)
This matter came before the Court on May 1, 2024 at 1:30 p.m. (the “Confirmation Hearing“), to consider confirmation of the First Amended Plan of Reorganization of M.V.J. Auto World, Inc. (ECF #79) (the “Plan“) filed on February 20, 2024 by the Debtor, M.V.J. Auto World, Inc. (the “Debtor“). The issue before the Court is whether a subchapter V plan can be consensually confirmed under
FACTUAL BACKGROUND
On August 21, 2023, the Debtor filed a voluntary petition for relief under subchapter V of chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code“) (ECF #1). On February 20, 2024, the Debtor filed the Plan, which was set for Confirmation Hearing on May 1, 2024.
The Debtor‘s Plan contains two impaired classes: class 2 is a secured claim of Ocean Bank and class 3 is a secured claim of the U.S. Small Business Administration (“SBA“). Class 2 voted to accept the plan, but class 3 did not vote.
The Debtor seeks confirmation of the Plan pursuant to
ANALYSIS
Confirmation of a plan under subchapter V of chapter 11 is governed by
[t]he court shall confirm a plan under this subchapter only if all of the requirements of
section 1129(a) , other than paragraph (15) of that section, of this title are met.
if all of the applicable requirements of
section 1129(a) of this title, other than paragraphs (8), (10), and (15) of that section, are met with respect to a plan, the court, on request of the debtor, shall confirm the plan notwithstanding the requirements of such paragraphs if the plan does not discriminate unfairly, and is fair and equitable, with respect to each class of claims or interests that is impaired under, and has not accepted, the plan.
The Debtor argues that, in a subchapter V case, when an impaired class of creditors fails to cast a ballot at all, that class should not be counted at all for purposes of
Both courts in the Franco‘s Paving case and the Hot‘z Power Wash case held that a non-voting class can be ignored for purposes of whether
In order to get to Congressional intent, each court held that when the Bankruptcy Code was enacted, and the voting requirements for confirmation modified, Congress clearly never contemplated that there would be a class of impaired creditors where no creditor voted. Thus, according to these courts, there is essentially a void in the statute. The Franco‘s Paving court created a mathematical equation to demonstrate that to have a non-voting impaired class creates a mathematical absurdity when attempting to apply the dictates of
Adopting and expanding on the Franco‘s Paving reasoning, the Hot‘z Power Wash court concluded:
the application of the mathematical calculation in
§ 1126(c) is absurd as applied to nonvoting class, and because the Code is silent on the correct treatment of a nonvoting class, this Court is left with only one option: when an impaired class of creditor fails to cast a ballot, that class will not be counted for purposes of whether§ 1129(a)(8) is satisfied.
The Court disagrees with the reasoning of the courts in Hot‘z Power Wash and Franco‘s Paving as the Bankruptcy Code on this point is neither silent nor absurd, but, rather, unambiguous and consistent with the purposes of the Bankruptcy Code. When a statute is unambiguous the court must the interpret statute “according to its terms.” Hartford Underwriters Ins. Co. v. Union Planters Bank, N.A., 530 U.S. 1, 6 (2000). “We begin our construction of a statutory provision where courts should always begin the process of legislative interpretation, and where they often should end it as well, which is with the words of the statutory provision.” See CBS Inc. v. PrimeTime 24 Joint Venture, 245 F.3d 1217, 1222 (11th Cir. 2001). “When the import of words Congress has used is clear ... we need not resort to legislative history, and we certainly should not do so to undermine the plain meaning of the statutory language.” Harris v. Garner, 216 F.3d 970, 976 (11th Cir. 2000) (en banc). So, “[w]hen the words of a statute are unambiguous, then, this first canon [of statutory construction] is also the last: judicial inquiry is complete.” Id. at 973. Moreover, “[t]he Supreme Court and this Court have warned on countless occasions against judges ‘improving’ plain statutory language in order to better carry out what they perceive to be the legislative purposes.” Bracewell v. Kelley (In re Bracewell), 454 F.3d 1234, 1240 (11th Cir. 2006).
The Franco‘s Paving and Hot‘z Power Wash courts reasoned that, when enacting section 1126, Congress did not contemplate that a class of creditors might not vote for a plan; that is incorrect. First,
That reasoning is strained at best. The analysis in this case is quite simple. In order to be consensually confirmed under
In this case,
Notwithstanding, because the Plan satisfies all of the other applicable provisions of
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Copies furnished to: Zach B. Shelomith, Esq. Christian Somodevilla, Esq. Timothy S. Kingcade, Esq.
Attorney Shelomith is directed to serve a copy of this Memorandum Opinion on interested parties who do not receive service by CM/ECF, and file a proof of such service within two (2) business days from entry.