The Village went bankrupt, owing to U.S. Bank $10 million and Village’s owner, MBP, $2.7 million. Village proposed a Chapter 11 plan to which US Bank did not consent. To obtain approval of the plan as a cramdown plan under 11 USC 1129(a)(10), Village needed the consent of an impaired class of creditors who were not insiders. Since MBP was an insider, it sold its claim for $5,000 to a doctor who was having an affair with an MBP board member. The bankruptcy court approved the cramdown plan, finding over US Bank’s opposition that the sale to the doctor was at arms’ length and therefore that the doctor (who consented to the plan) was not an insider. This decision holds that on appeal, that finding should be reviewed for clear error only. Though a mixed fact-law question, the question of whether a sale was conducted at arms-length is primarily factual and thus best decided by the trial court.
U.S. Supreme Court (Kagan, J.; Kennedy, J. and Sotomayor, J., concurring); March 5, 2018; 2018 WL 1143822.