The American Bankruptcy Institute recently published Mr. Glasser’s summary of a recent decision by the Ninth Circuit BAP. Click here to view the original article.
Beal Bank USA v. Windmill Durango Office, LLC, US Trustee, DP Air Corp., BAP No. NV-11-1728-DKiPa, NV-11-1737-DKiPa (Related appeals) (B.A.P. 9th Cir. July 6, 2012)
The bankruptcy court did not abuse its discretion by denying a secured creditor’s Rule 3018(a) motion. That motion sought to amend a favorable plan confirmation vote cast by the assignor of the claim before the assignor transferred the claim to the secured creditor. The Ninth Circuit BAP affirmed that withdrawing a previously cast vote for the purpose of blocking plan confirmation does not amount to “cause” under Rule 3018(a). The Ninth Circuit BAP also affirmed the bankruptcy court’s findings with respect to the plan feasibility and good faith. These rulings, however, were based on the evidentiary record and do not mark a change in the law.
Appeal to the Ninth Circuit BAP from the United States Bankruptcy Court for the District of Nevada on Order confirming the Debtor’s Chapter 11 Plan.
Debtor’s sole asset was a commercial office building. Beal Bank (the “Bank”) held a security interest in the office building and challenged a cramdown plan that the Debtor proposed pursuant to 11 U.S.C. 1129(b)(2)(B). One week before the ballot deadline, the Bank paid $1,250 to acquire an unsecured claim so that it could block plan confirmation. The assignor of the unsecured claim, however, had already voted in favor of the Debtor’s plan before selling his claim to the Bank. The Bank moved, pursuant to Rule 3018(a), to change the vote previously cast in connection with the acquired unsecured claim. The Bank freely admitted that it purchased the claim for the express purpose of blocking confirmation of a plan it believed the Debtor had proposed in bad faith. In addition, because the Bank bought the claim prior to the ballot deadline, the Bank argued that denying its request to change the vote would deny creditors “the full benefit of their right of franchise under Chapter 11.” The bankruptcy judge found that allowing the Bank to amend the vote for the purpose of blocking plan confirmation would do violence to the bankruptcy process. ln addition, the bankruptcy judge stated that it was “not appropriate [for creditors] to wait ’til the plans [were] balloted and then decide what claims [they were] going to buy.” Cause under Rule 3018(a) requires something more than a mere change of heart. Despite calling this a “close question,” the Ninth Circuit BAP affirmed the bankruptcy court’s decision to deny the Rule 3018(a) motion. The bankruptcy court did not abuse its discretion by finding that the Bank’s reasons for withdrawing the assignor’s vote were improperly motivated.
Judge(s): Dunn, Kirscher and Pappas