Bankruptcy

Sub Rosa Plans

By Stephen Lubben

Lots of discussion of sub rosa plans lately, but little discussion of the fact that the 2d Circuit has never really embraced the Braniff-type analysis of this issue.  For example, the sale objection filed by the "Committee of Chrysler Affected Dealers" --- who don't seem to have filed a 2019 statement, so this may be academic -- quotes from the Iridium opinion, qutoing Braniff on the reasons why the 5th Circuit has prohibited sub rosa plans. (Obj. at 20).

But the Dealers don't quote the next sentence in Iridium, where the 2d Circuit goes on to say:

In this Circuit, the sale of an asset of the estate under § 363(b) is permissible if the ?judge determining [the] § 363(b) application expressly find[s] from the evidence presented before [him or her] at the hearing [that there is] a good business reason to grant such an application.? Comm. of Equity Sec. Holders v. Lionel Corp. (In re Lionel Corp.), 722 F.2d 1063, 1071 (2d Cir.1983).

Motorola, Inc. v. Official Comm. of Unsecured Creditors (In re Iridium Operating, LLC), 478 F.3d 452, 466 (2d Cir.2007).

"In this CIrcuit," sounds a lot like "unlike the 5th Circuit," by my reading.  And the Iridium court goes on to uphold the bankruptcy court's ruling that the settlement in question did not constitute a sub rosa plan, despite violating the absolute priority rule.  (Which, as I've said before, I don't think is being violated in this case in any event).

Full post as published by Credit Slips on May 21, 2009 (boomark / email).