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Вашингтон Мучел Message Board

  • bobwatchhere bobwatchhere Mar 25, 2010 12:04 PM Flag

    Judge Walrath @ the 2008 BK Conference

    Since Judge W attended this conference as a panelist, perhaps we can gain some understanding on her perspective.

    American Bankruptcy Institute
    2008 Winter Leadership Conference
    Conference Title:
    Rule 9019 Settlements and the Confirmation Process:Favored Negotiation or the New Cram Down?

    Section 1129(a) requires a finding by the court that the debtor has complied
    with all Code requirements, that the plan was proposed in good faith, that the plan is feasible, that each creditor will be paid at least as much as it would have received in a Chapter 7 case, and that priority claims are paid in full.

    C. Rule 9019.Settlements of disputed claims allow the judicial system to function more efficiently. “In Chapter 11 bankruptcies, settlements also help clear a path for the efficient administration of the bankruptcy estate, including any eventual plan of reorganization.” But before a pre-plan settlement can take effect, it must be approved by the bankruptcy court pursuant to Federal Rule of Bankruptcy Procedure 9019 Rule 9019(a) provides that, “[o]n motion by the trustee, after notice and a hearing, the court may approve a compromise or settlement.” The purpose of Rule 9019 is to “prevent the making of concealed agreements which are unknown to the creditors and unevaluated by the court.” Courts have developed standards for deciding if a settlement is fair and equitable. In the Second Circuit, the factors for settlement approval are based on the original framework set forth in TMT Trailer Ferry, Protective Comm. for Indep. Stockholders of TMT Trailer Ferry, Inc. The Second Circuit factors are:
    (1) the balance between the litigation's possibility of success and the settlement's
    future benefits;
    The Third Circuit considers the following four factors in deciding whether to approve a settlement:
    (1) the probability of success in litigation;
    (2) the likely difficulties in collection;
    (3) the complexity of the litigation involved, and the expense, inconvenience, and
    delay necessarily attending it; and
    (4) the paramount interest of creditors.3
    When a Rule 9019 compromise is considered within the context of a reorganization plan, some jurisdictions also consider “the extent to which the settlement is truly the product of arms-length bargaining, and not of fraud or collusion.” Further, the courts have “consistently rejected compromises proposed by self-interested parties.”
    My lay-person’s thoughts: If the absolute priority rule is to be applied, I would surmise that it only applies to those invested in WMI to include bondholders and shareholders. In that light, I do not see how a settlement agreement can include gifting “estate assets and funds” to JPM or the FDIC because that would directly violate the “absolute priority rule”. I also read that we cannot receive any less than that which would be adjusted and provided under liquidation via Chapter 7 rules.

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