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Media Alerts - Western Real Estate Equities, L.L.C. v. Village at Camp Bowie I, L.P. - Fifth Circuit
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February 28, 2013
  Western Real Estate Equities, L.L.C. v. Village at Camp Bowie I, L.P. - Fifth Circuit
Headline: Fifth Circuit affirms confirmation of Chapter 11 cramdown bankruptcy plan supported by "artificially impaired" unsecured creditor class over objections of secured creditor class.

Area of Law: Bankruptcy, Chapter 11

Issue Presented: Whether a Chapter 11 bankruptcy plan satisfies the requirements of §1129(a)(10) when the plan "artificially" impairs a class of creditors.

Brief Summary: Western Real Estate Equities purchased an overdue promissory note secured by real property owned by Village at Camp Bowie and instituted non-judicial foreclosure. Village then filed a petition for bankruptcy under Chapter 11 of the Bankruptcy Code. Section 1129(a)(10) of the Bankruptcy Code prohibits a court from confirming a plan of reorganization unless "at least one class of claims that is impaired under the plan has accepted the plan." Village proposed a Chapter 11 reorganization plan in which a class of unsecured creditors were minimally impaired by a short delay in payment, even though sufficient funds existed in the plan to pay the unsecured debt in full immediately. The unsecured creditors approved and the bankruptcy court confirmed the cramdown plan over Western's objection that § 1129(a)(10) does not recognize approval by an "artificially" impaired class. Western appealed. The U.S. Court of Appeals for the Fifth Circuit affirmed, joining the Ninth Circuit in holding that § 1129(a)(10) does not distinguish between "artificially" and economically driven impairment. The Fifth Circuit expressly departed from the Eighth Circuit's contrary view. The Court observed that reorganization plans still have to comply with § 1129(a)(3)'s good faith requirement.

For the full opinion, please see: http://www.ca5.uscourts.gov/op...2/12-10271-CV0.wpd.pdf.

Significance: The Circuits are divided on the interpretation of § 1129(a)(10).

Panel: Circuit Judges Higginbotham, Clement, and Haynes

Argument Date: 12/03/2013

Date of Issued Opinion: 02/26/2013

Docket Number: No. 12-10271

Decided: Affirmed

Case Alert Authors: Brandon Hindmarsh & Louis Holzer

Counsel: John Mark Chevallier, McGuire, Craddock & Strother, P.C., for Appellee Village at Camp Bowie I. John Robert Forshey, Forshey & Prostok, L.L.P., for Appellant Western Real Estate Equities.

Author of Opinion: Judge Higginbotham

Case Alert Circuit Supervisor: Aaron-Andrew P. Bruhl

    Posted By: Aaron Bruhl @ 02/28/2013 10:18 AM     5th Circuit  

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