Radlax Gateway Hotel, LLC v. Amalgamated Bank
May 29, 2012
Case #: 11-166
Scalia, J., delivered the Court's unanimous opinion; Kennedy, J., did not participate in the decision.
Full Text Opinion: http://www.supremecourt.gov/opinions/11pdf/11-166.pdf
Bankruptcy Law: A debtor may not obtain confirmation of a Chapter 11 cramdown plan to sell an encumbered asset clear of liens under §1129(b)(2)(A) and prohibit creditors to credit-bid.
Petitioner obtained a secured loan for which Respondent was trustee. Petitioner became insolvent and sought a Chapter 11 nonconsensual “cramdown” plan for relief in the U.S. Bankruptcy Court. If approved, the plan would auction Petitioner's assets and use the proceeds to repay Respondent, but prohibited Respondent from credit-bidding. The court concluded the credit-bid prohibition did not comply with the provisions of 11 U.S.C. § 1129(b)(2)(A), and the US Court of Appeals for the Seventh Circuit affirmed. The Supreme Court affirmed and held that Petitioner may not obtain confirmation of the Chapter 11 plan to sell collateral free of Respondent's lien if it is prohibiting the Respondent from credit-bidding at the auction. The Court found that for the plan to be "fair and equitable" it must meet one of three provisions: (1) creditor retains the lien and receives deferred cash payments, (2) the property is sold clear of the lien, the creditor is allowed to credit-bid, and creditor gets a lien on sale proceeds or, (3) creditor is provided with the "indubitable equivalent" of the claim. Using the general vs. specific statutory interpretation canon, the Court held that (2) applied because it specifically addressed the matter before the Court.