In a May 9, 2014 decision, Chief Judge Morris of the United States Bankruptcy Court for the Southern District of New York held that a Chapter 11 bankruptcy plan proposed by an LLC that owned two parcels of land could not be confirmed over the objection of a creditor with both secured and unsecured claims. The decision turned on whether an unsecured, junior, impaired claim relating to an ownership interest in the debtor triggered the absolute priority rule to prevent cram down. In re RAMZ Real Estate Co., LLC, 510 B.R. 712 (Bankr. S.D.N.Y 2014)
The debtor, RAMZ Real Estate Co., LLC filed a Chapter 11 bankruptcy plan with seven classes of claims, five of which were secured by liens against property owned by RAMZ and two of which were unsecured. The dispute arose from the objections of one creditor, the Community Preservation Corporation ("CPC"), which held a secured, but impaired, interest in Class 3 and an unsecured, impaired interest in Class 6.
Under Section 1129 of the Bankruptcy Code, a debtor must satisfy two conditions to confirm a Chapter 11 plan. First, section 1129(a)(8) requires that each impaired class of claim must accept the plan. Section 1124 assumes that a class is impaired unless the plan "leaves unaltered the legal, equitable, and contractual...
