- --- F.3d ---- (11th Cir. Mar. 12, 2015)
- Affirmed. Equity holder being paid in full for interest in debtor under plan cannot block plan by insisting on being equity holder in reorganized debtor. Going concern method was appropriate method for valuation of debtor and findings regarding discount rate, etc. and consideration of risk of loss of key employees in arriving at discount rate were not clearly erroneous. Dow Corning factors and additional "fair and equitable" considerations in In re Munford decision, 97 F.3d 4449 (11th Cir 1996) are appropriate considerations when considering bar order releasing non-consenting creditor's claims against a non-debtor pursuant to plan of reorganization, which are reviewable for abuse of discretion. Dow Corning factors are: (1) identity of interests between debtor and third party, usually an indemnity relationship, such that a suit against non-debtor is, in essence, a suit against the debtor; (2) non-debtor has contributed substantial assets to the reorganization; (3) injunction is essential to reorganization - it hinges on the debtor being free from indirect suits against parties that would have indemnity or contribution claims against the debtor; (4) the impacted class has overwhelmingly voted to the accept the Plan; (5) the plan provides a mechanism to pay for all or substantially all of the class(es) affected by the injunction; (6) plan provides opportunity for non-settling claimants to recover in full; and (7) bankruptcy court made a record of specific factual findings supporting its conclusions. The court also affirmed the bankruptcy court's findings of good faith and of the appropriate interest rate.
- Procedural context:
- Lender to wholly-owned subsidiaries of debtor that also acquired equity interest in debtor by purchasing it in chapter 7 case of guarantor, appeals confirmation of debtor's plan. District Court affirmed bankruptcy court, prompting further appeal to Circuit court.
- Debtor Seaside is a civil engineering and surveying firm that entered real estate development business and formed wholly-owned subsidiaries to borrow money with personal guaranties from principals of Seaside. Subsidiaries defaulted and lender sued on the guaranties. Individual guarantors filed chapter 7 and, in the chapter 7 case of one individual guarantor, the trustee auctioned the guarantor's shares of Seaside and sold them to the lender. Seaside then filed for chapter 11 and confirmed a plan that formed a new entity called Gulf Atlantic managed by the guarantors and owned by their respective irrevocable family trusts. Outside equity holders, including the lender to the subsidiaries of Seaside that acquired the guarantor's shares, received promissory notes in exchange for their interests in Seaside. Confirmation order and plan included limited non-debtor releases / bar orders in favor of debtor and reorganized debtor, officers, directors, and members for any act, omission, transaction, or other occurrence in connection with, relating to, or arising out of the chapter 11, or the plan except for fraud, gross negligence, or willful misconduct.
- MARTIN, ANDERSON, and COTE (District Judge (S.D.N.Y) sitting by designation)
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