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Ninth Circuit Ruling Eases Plan Acceptance Requirement in Multi-Debtor Plans of Reorganization
In a case of first impression at the circuit level, the United States Court of Appeals for the Ninth Circuit held that section 1129(a)(10) of the Bankruptcy Code — which requires a favorable vote of at least one impaired class of creditors in order to confirm a Chapter 11 plan — applies on a “per-plan” basis, rather than a “per-debtor” basis. See, JPMCC 2007-C1 Grasslawn Lodging, LLC v. Transwest Resort Props. Inc., et al. (In re Transwest Resort Props. Inc.), No. 16-16221, 2018 WL 615431 (9th Cir. Jan. 25, 2018).
Bankruptcy Code section 1129(a) sets forth the legal requirements that must be met before a court may confirm a Chapter 11 plan of reorganization. Among them are the creditor acceptance requirements necessary for plan confirmation. A Chapter 11 plan must divide creditors into classes of similarly situated creditors — generally according to the priority level of their claims. 11 U.S.C. §1122. Impaired creditors vote on a Chapter 11 plan together with other members of their class. A class of creditors is deemed to accept when at least two thirds by number of creditors and over one half by dollar amount votes in favor of the plan. 11 U.S.C. §1126. Bankruptcy Code section 1129(a)(8) suggests that all creditor classes must vote to accept in order to confirm a Chapter 11 plan. However, if certain additional statutory requirements are met, a “cramdown” plan may be confirmed under section 1129(a)(10), provided that at least one class of impaired creditors has voted to accept the plan.
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