U.S. Bank N.A. v. Village at Lakeridge, LLC, Docket No. 15-1509

Bankruptcy: Chapter 11: Reorganization: Cramdown plan: Clear error:

Chapter 11 of the Bankruptcy Code enables a debtor company to reorganize its business under a court-approved plan governing the distribution of assets to creditors. See 11 U. S. C. §1101 et seq. The plan divides claims against the debtor into discrete “classes” and specifies the “treatment” each class will receive. §1123; See §1122. Usually, a bankruptcy court may approve such a plan only if every affected class of creditors agrees to its terms. See §1129(a)(8). But in certain circumstances, the court may confirm what is known as a “cramdown” plan— that is, a plan impairing the interests of some non-consenting class. See §1129(b). Among the prerequisites for judicial approval of a cramdown plan is that another impaired class of creditors has consented to it. See §1129(a)(10). But crucially for this case, the consent of a creditor who is also an “insider” of the debtor does not count for that purpose. See ibid. (requiring “at least one” impaired class to have “accepted the plan, determined without including any acceptance of the plan by any insider”).

The Code enumerates certain insiders, but courts have added to that number. According to the Code’s definitional section, an insider of a corporate debtor “includes” any director, officer, or “person in control” of the entity. §§101(31)(B)(i)–(iii). Because of the word “includes” in that section, courts have long viewed its list of insiders as non-exhaustive. See §102(3) (stating as one of the Code’s “rules of construction” that “‘includes’ and ‘including’ are not limiting”); A. Resnick & H. Sommer, Collier on Bankruptcy ¶101.31, p. 101–142 (16th ed. 2016) (discussing cases). Accordingly, courts have devised tests for identifying other, so-called “non-statutory” insiders. The decisions are not entirely uniform, but many focus, in whole or in part, on whether a person’s “transaction of business with the debtor is not at arm’s length.” Ibid. (quoting In re U. S. Medical, Inc., 531 F. 3d 1272, 1280 (CA10 2008)).

(…) The Court of Appeals for the Ninth Circuit affirmed by a divided vote. According to the court, a creditor qualifies as a non-statutory insider if two conditions are met: “(1) the closeness of its relationship with the debtor is comparable to that of the enumerated insider classifications in the Code, and (2) the relevant transaction is negotiated at less than arm’s length.” In re Village at Lakeridge, LLC,814 F. 3d 993, 1001 (2016).

((…) This Court granted certiorari to decide a single question: Whether the Ninth Circuit was right to review for clear error (rather than de novo) the Bankruptcy Court’s determination that Rabkin does not qualify as a non-statutory insider because he purchased MBP’s claim in an arm’s length transaction).

(J. Sotomayor, with whom J. Kennedy, Thomas, and Gorsuch join, concurring: The Court’s discussion of the standard of review thus begs the question of what the appropriate test for deter­mining non-statutory insider status is. I do not seek to answer that question, as the Court expressly declined to grant certiorari on it. I have some concerns with the Ninth Circuit’s test, however, that would benefit from additional consideration by the lower courts).

Secondary authority: A. Resnick & H. Sommer, Collier on Bankruptcy ¶101.31, p. 101–142 (16th ed. 2016).

(U.S.S.C., March 5, 2018, U.S. Bank N.A. v. Village at Lakeridge, LLC, Docket No. 15-1509, J. Kagan, unanimous)

Procédure de faillite selon le Chapitre 11, cas dans lesquels le plan de répartition peut être imposé même en l'absence du support d'au moins un créancier sans lien avec l'entreprise ou ses organes de décision.

Usuellement, une cour fédérale des faillites ne peut approuver un tel plan que s'il est ratifié par toutes les classes de créanciers (cf. 11 U.S.C. §1129(a)(8)).

Ce n'est que dans certains cas que la cour peut imposer un plan à une classe de créanciers qui ne consentent pas (cf. §1129(b)). La première condition est qu'au moins une classe de créanciers (lésés par le plan) ait approuvé ledit plan. Le consentement d'un créancier qui est en même temps un "insider" n'est à cet égard pas compté.

La loi donne une définition exemplaire de l'"insider", que la jurisprudence a complété. A la notion de personne "qui contrôle l'entité" s'est ajoutée la notion de personne dont la transaction avec l'entreprise débitrice ne s'est pas faite dans un rapport d'égalité ("at arm's length"). Cependant, la Cour ne s'est pas occupée en l'espèce de l'adéquation de dite définition. Elle ne s'est occupée que de la question de savoir si l'autorité précédente, le 9è Circuit fédéral, avait appliqué un standard de révision correct de la décision de première instance (la cour fédérale des faillites). La Cour juge que le 9è Circuit a appliqué à juste titre le critère de la "clear error" et non le critère "de novo". S'agissant de la question, non résolue ici, de la définition de l'"insider", les Juges Sotomayor, Kennedy, Thomas et Gorsuch font part, dans une opinion concurrente, de leurs doutes s'agissant de la définition jurisprudentielle donnée à ce jour au terme "insider".