Minerals Technologies, Inc. v. Novida Corp.
- Case Type:
- Business
- Case Status:
- Affirmed
- Citation:
- BAP No. CO-17-004 and BAP No. CO-17-005 (10th Circuit, May 16,2018) Published
- Tag(s):
-
- Ruling:
- The bankruptcy court did not err by: (i) approving the separate classification of administrative convenience claims where, among other things, there was already an impaired class that would vote in favor of the plan; (ii) confirming the plan over the objection of a dissenting class of creditors because the dissenting class would receive the same percentage recovery as an affirming class; and (iii) ruling that the plan was feasible because plan success was not determined by the Plan Administrator prevailing on litigation against the appellants.
- Procedural context:
- The creditor-appellants had lost in their efforts in the bankruptcy court to block confirmation of the debtor's chapter 11 liquidation plan, arguing that (1) their claims should not have been separately classified and (2) the plan was not feasible. The losing creditors appealed.
- Facts:
- The debtor, Novinda Corporation, developed and produced a product to remove mercury from coal ash. Novinda financed its operations through venture capital funding and secured and unsecured loans. The appellants were lenders to and equity owners of Novinda and, in one instance, a competitor of Novinda. Before making further loans to Novinda, the appellants required Novinda to allow appellant Colloid Environmental Technologies, LLC to become the exclusive manufacturer of Novinda's product. In return, Novinda paid Colloid an amount equal to Colloid's cost of production plus an agreed-upon profit. If Novinda couldn't pay, Colloid converted accounts receivable into promissory notes.
Novinda filed its chapter 11 petition after Colloid notified Novinda that Colloid was increasing prices by 50%. Novinda claimed that the 50% price increase designed to force Novinda out of business. Colloid and the other appellants argued that Novinda could not profitably operate its business due to a Supreme Court opinion overturning EPA regulations on mercury pollution.
After filing its chapter 11 petition, Novinda sold its assets, including Novinda's intellectual property and equipment, to certain investment funds (Funds). Novinda's bankruptcy estate retained the litigation claim against the appellants. Novinda proposed a liquidating plan, funded in part by a $400,000 contribution from the Funds, that provided for litigation against the appellants. The appellants objected to confirmation of Novinda's plan and filed a motion to convert. The bankruptcy court overruled the appellants' objections and denied their motion to convert.
- Judge(s):
- KARLIN, NUGENT, MOSIER
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