What is an “impaired” bankruptcy claim?

The Bankruptcy Code requires that a plan receive a favorable vote from “at least one class of claims that is impaired under the plan.”  11 U.S.C. § 1129(a)(10).  In Western Real Estate Equities LLC v. Village at Camp Bowie I, LP, thirty-eight unsecured trade creditors of a real estate venture voted to approve the debtor’s plan, while the secured creditor voted against it.  No. 12-10271 (Feb. 26, 2013).  The secured creditor complained that the consent was not valid because the plan “artificially” impaired the unsecured claims, paying them over a three-month period when the debtor had enough cash to pay them in full upon confirmation.  Recognizing a circuit split, the Fifth Circuit held that section 1129 “does not distinguish between discretionary and economically driven impairment.”  The Court conceded that the Code imposes an overall “good faith” requirement on the proponent of a plan, but held that the secured creditor’s argument here went too far by “shoehorning a motive inquiry and materiality requirement” into the statute without support in its text.

What is a “detailed” statement about drilling costs?

A Louisiana statute requires a well operator to provide landowners “a sworn, detailed, [and] itemized statement” about drilling costs.  Brannon Properties v. Chesapeake Operating, No. 12-30306 (Feb. 21, 2013, unpublished).  The Fifth Circuit reversed a summary judgment for the operator, finding that the district court correctly concluded that its report lacked enough detail under the unambiguous language of the statute, and that the analysis should have ended there.  Id. at 5 (“The statute clearly connects the costs reported to the benefits received in exchange.  . . . [I]t must tell the unleased mineral owner what it is getting for its money.”).  The Court faulted the district court for proceeding to analysis of the statute’s purpose after reaching a conclusion that its terms were unambiguous, and also for finding an incorrect purpose inconsistent with those terms. Id. at 6-7.

Statutory interpretation 101 — “prejudice” and “reasonable time”

The FDIC repudiated a North Texas office lease as receiver for a failed bank, the landlord sued for unreasonable delay in violation of the statute authorizing the FDIC’s action, and the FDIC defended on the ground that the delay caused no harm in a depressed real estate market and thus could not have been unreasonable.  Building Four Shady Oaks Management LP v. FDIC, No. 12-0080 (Dec. 21, 2012, unpublished).  The district court and Fifth Circuit agreed with the FDIC.  The opinion clearly illustrates basic statutory interpretation and how a factor such as “prejudice” may be incorporated by a statutory term such as “reasonable time.”