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The disclosure statements themselves made no bones about the fact that the sole purpose of the plan was "to monetize the sole valuable asset of the Debtor -- the NOLs." While the monetization of NOLs is not by itself illegal, said the court, the plan, and likely the entire bankruptcy case, served no purpose other than to make use of the NOLs, or to avoid paying taxes. Because the case served no legitimate bankruptcy purpose, the court held that the plan violated section 1129(d) and, therefore, denied confirmation on this ground as well.
* In re Mayco Plastics, Inc., 379 B.R. 691 (Bankr. E.D. Mich. Jan. 2008) (Shefferly, J.)
Post-petition lenders who provided credit under section 364(c)(1) did not have standing to object to the plan. The court concluded that section 364(c)(1) granted the lenders "super priority" claims which were, in terms of prioirty, somewhere between administrative expenses and secured claims. However, while section 364(c)(1) required the claims to be paid before any administrative expenses, the lenders' claims in this case were sufficiently distinguishable from administrative expense claims such that lenders lacked standing to object to a proposed plan under section 1129(a)(9)(A), which requires payment of all administrative expenses. The lenders' lack of standing to object, however, did not relieve the debtor of its burden to demonstrate the confirmability of the plan. Said the court, "Although successful in litigating the two narrow legal issues addressed in this opinion, [i.e., the status of the lenders' claims and their standing to object,] the Debtor must now navigate its plan through the remaining elements of S 1129 of the Bankruptcy Code . . . ."
* Kurak v. Dura Auto. Sys., Inc. (In re Dura Auto. Sys., Inc.), 379 B.R. 257
(Bankr. D. Del. Dec. 2007) (Carey, J.) A party's section 1109(b) right to be heard overrode the "no-action" clause. Certain holders of subordinated notes under an indenture agreement objected to a plan. The indenture trustee intervened and sought a declaratory judgment, arguing inter alia that the note holders lacked standing to object because they failed to allege that they met the indenture agreement's pre-conditions before pursuing remedies with respect to the notes. However, section 1109 gave the note holders a right to be heard, said the court, and dismissing the complaint would not advance the interests of any party or further the purpose of the indenture agreement's no-action clause.
* In re S. Beach Securities, 376 B.R. 881 (Bankr. N.D. Ill. Nov. 2007) (Goldgar, J.)
U.S. Trustee was not acting "as a trustee in a case" and had standing to object to confirmation. The debtor challenged the standing of the U.S. Trustee (UST) to object to confirmation under section 1129(d), which says that "on request of a party in interest that is a governmental unit, the court may not confirm a plan if the principal purpose of the plan is the avoidance of taxes." While it would seem counterintuitive to argue that the UST is not a governmental unit, the definition of that section excepts from that definition the UST when it
