- Case Type:
- Business
- Case Status:
- Affirmed
- Citation:
- 22-1248-BCL (9th Circuit, Jun 15,2023) Not Published
- Tag(s):
-
- Ruling:
- The Bankruptcy Appellate Panel of the Ninth Circuit (BAP) affirmed the order of the U.S. Bankruptcy Court for the District of Nevada (BC) converting the chapter 11 case of NTI-NC Inc. (DR), both debtor and appellant, to a chapter 7 one pursuant to section 1112(b) despite sparse findings.
- Procedural context:
- On February 10, 2022, James Gleich (Gleich) caused four related entities--the DR; National Transportation Inc. (NTI), the DR's parent corporation; and NTI-CA Inc. and NTI-GROUNDTRANS Inc., two other subsidiaries of NTI (collectively, the NTI Entities)--to file four separate chapter 11 bankruptcy cases. Gleich jointly ran the NTI Entities with his friend and business associate of thirty (30) years, John Kindt (Kindt). Kindt promptly moved to dismiss the four cases under § 1112(b), arguing that Gleich lacked authority to file them. Ultimately, the parties agreed to dismiss the chapter 11 cases for NTI, NTI-CA, and NTI-GROUNDTRANS, but to ratify the chapter 11 filing for NTI-NV. NTI-NV filed its first set of schedules six weeks after filing the petition and some amended schedules three months later; then and after, it filed various disclosure statements and proposed plans.
November 15, 2022, set the appeal in motion. On that date, the BC disapproved the DR's second amended disclosure statement, questioned the accuracy and nature of some of the DR's disclosures as to its assets and even the BC's own jurisdiction to adjudicate the assets and claims of non-debtor entities, and found the linked proposed plan to be "patently unconfirmable" for, among other reasons, ignoring corporate formalities and purporting to reorganize the affairs of non-debtor entities without any support for doing so. Naturally, the BC concurrently denied the DR's motion for financing for these same reasons. After entering its ruling, the BC announced that it would issue an order to show cause (OSC) why the DR's whole case should not be dismissed or converted to chapter 7 and why its counsel should not be sanctioned.
Somehow, matters got more complicated thereafter. First, the DR filed its own motion to dismiss based on the substantial and continuing loss to or diminution of the estate and its inability to show a reasonable likelihood of rehabilitation before the OSC Order issued. 9525 Hillwood, LLC, which held a lease agreement with NTI for real property in Las Vegas, opposed this motion and instead argued for conversion. Next, the BC issued its OSC Order, which the DR opposed. At the hearing, after Hillwood and the DR presented their points, the BC entered an oral ruling converting the DR's chapter 11 case to a chapter 7 one.
The DR timely appealed.
- Facts:
- The DR, a Nevada corporation, was formed in either 2019 or 20203 and was a subsidiary of a larger group of entities in the transportation business in Nevada, New York, and California. NTI was incorporated in Nevada in 2018 by Gleich and Kindt who each held a 50% ownership interest. A 10% ownership interest in NTI was later conveyed to Booty Green, LLC, leaving Gleich and Kindt each holding a 45% interest in NTI. NTI, in turn, was the 100% owner of, in addition to the DR, both NTI-CA Inc. and NTI-GROUNDTRANS Inc. NTI would collect the accounts receivables of the businesses and pay their expenses. Gleich ran the Nevada operations, while Kindt ran the Los Angeles and New York operations. Formally, Gleich and Kindt were the directors and officers of the NTI Entities, while Gleich is and was the President and CEO of NTI-NV, and a man named "Marc Jacobi" is (or was) also a director of NTI-NV.
- Judge(s):
- Julia W. Brand; Frederick P. Corbit; and William J. Lafferty III
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