Law.com Subscribers SAVE 30%

Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.

Acquisition of Claims for Plan Control

By Jeff J. Friedman

The United States Court of Appeals for the Ninth Circuit recently provided additional guidance to creditors seeking to block confirmation of a plan by acquiring claims against the debtor. In Pacific Western Bank, et al. v. Fagerdala USA-Lompoc, Inc. (In re Fagerdala USA-Lompoc, Inc.), 891 F.3d 848 (9th Cir. 2018), the court held that a bankruptcy court may not designate claims under section 1126(e) of the Bankruptcy Code for bad faith simply because a creditor offers to purchase only a subset of available claims to block confirmation of a plan or because blocking confirmation will adversely impact the remaining creditors.

Relying heavily and expanding on the court's twenty-year old decision in Figter Ltd. v. Teachers Ins. & Annuity Ass'n of Am. (In re Figter, Ltd.), 118 F.3d 635 (9th Cir.), cert. denied, 522 U.S. 996 (1997), the court held that “[a]t a minimum, there must be evidence that a creditor is seeking 'to secure some untoward advantage over other creditors for some ulterior motive.'” 891 F.3d at 854, citing Figter, 118 F.3d at 639.

The Case

In Fagerdala, Pacific Western Bank, which held the senior secured claim against the debtor through its wholly owned subsidiary Coastline RE Holdings Corp. (Pacific Western), had its votes designated in respect of unsecured claims it acquired to block confirmation of the debtor's plan. The court held that “the bankruptcy court erred when it refused to analyze whether Pacific Western acted under an 'ulterior motive', beyond its 'mere enlightened self interest' in protecting its secured claim.” 891 F.3d at 852.

This premium content is locked for Entertainment Law & Finance subscribers only

  • Stay current on the latest information, rulings, regulations, and trends
  • Includes practical, must-have information on copyrights, royalties, AI, and more
  • Tap into expert guidance from top entertainment lawyers and experts

For enterprise-wide or corporate acess, please contact Customer Service at [email protected] or 877-256-2473

Read These Next
Bankruptcy Sales: Finding a Diamond In the Rough Image

There is no efficient market for the sale of bankruptcy assets. Inefficient markets yield a transactional drag, potentially dampening the ability of debtors and trustees to maximize value for creditors. This article identifies ways in which investors may more easily discover bankruptcy asset sales.

Judge Rules Shaquille O'Neal Will Face Securities Lawsuit for Promotion, Sale of NFTs Image

A federal district court in Miami, FL, has ruled that former National Basketball Association star Shaquille O'Neal will have to face a lawsuit over his promotion of unregistered securities in the form of cryptocurrency tokens and that he was a "seller" of these unregistered securities.

Why So Many Great Lawyers Stink at Business Development and What Law Firms Are Doing About It Image

Why is it that those who are best skilled at advocating for others are ill-equipped at advocating for their own skills and what to do about it?

Blockchain Domains: New Developments for Brand Owners Image

Blockchain domain names offer decentralized alternatives to traditional DNS-based domain names, promising enhanced security, privacy and censorship resistance. However, these benefits come with significant challenges, particularly for brand owners seeking to protect their trademarks in these new digital spaces.

Coverage Issues Stemming from Dry Cleaner Contamination Suits Image

In recent years, there has been a growing number of dry cleaners claiming to be "organic," "green," or "eco-friendly." While that may be true with respect to some, many dry cleaners continue to use a cleaning method involving the use of a solvent called perchloroethylene, commonly known as perc. And, there seems to be an increasing number of lawsuits stemming from environmental problems associated with historic dry cleaning operations utilizing this chemical.