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* In re Hart's Mfg. Co., 383 B.R. 720 (Bankr. W.D. Tenn. Mar. 2008) (Emerson, J.)
Bankruptcy court declined to approve a post-confirmation sale which was made pursuant to a confirmed plan and expressly conditioned upon court approval. The bankruptcy court gave two reasons for rejecting the sale. First and foremost, the sale was not in the best interest of creditors. The proceeds from the sale was only enough to partially satisfy one of two liens against the property, leaving both liens unsatisfied and nothing left to pay unsecured creditors. Second, and in the alternative, the court found the winning bid to be grossly inadequate in light of the evidence indicating that the fair market value of the property was six times greater than the proposed sale price. Because the confirmed plan authorized the sale with the express condition that the sale remain subject to court approval, the court used its discretion and declined to bless the sale.
* Salsberg v. Trico Marine Servs., Inc. (In re Trico Marine Servs., Inc.), 374 B.R. 529 (Bankr. S.D.N.Y. Aug. 2007) (Bernstein, J.)
Noteholders failed to establish CFO's fraud in misstating the debtor's actual revenue and earnings at the confirmation hearing. The pre-packaged chapter 11 plan proposed to cancel existing common stock and issue new common stock to be disbursed under the terms of the chapter 11 plan. Holders of existing stock received warrants under the pre-petition term sheet and would be able to exercise them post-confirmation without affecting the debtor's other obligations. Prior to confirmation, one noteholder objected to the plan and, during the confirmation hearing, examined the debtor's CFO regarding its fourth quarter revenue and EBITDA projections.68 Over the noteholder's objection, the court confirmed the plan. Following confirmation, the noteholder sought to set aside the confirmation order and revoke the discharge under section 1144. The court refused to vacate the confirmation order but allowed the noteholder to amend his claim to assert damages from the CFO's alleged fraud.
The bankruptcy court held a trial during which the CFO conceded that his estimates at confirmation were not spot-on in light of slightly higher actual numbers for the debtor's revenue and EBITDA. That information, however, did not become available until after the confirmation hearing. The bankruptcy court found that, when viewed in light of the debtor's financial health, as a whole, and in light of the CFO's credibility, the misstatements did not amount to fraud on the noteholders or on the court. Said the bankruptcy court, the CFO satisfied his duty of candor and his duty to disclose material information, and any bias the noteholder asserts did not, by itself, amount to the CFO's perjury or an intent to deceive. Without deciding whether the noteholder's burden of proof was by clear and convincing evidence or by a preponderance of the evidence, the court concluded that the plaintiff noteholder failed to meet either burden.69
68 The objecting party actually objected four days before he acquired shares of the debtor's old common stock.
69
On appeal, the district court concluded that the issue was a factual one and not a legal one. Because the noteholders failed to meet their burden on appeal of showing clear error on the bankruptcy court's part, the district court affirmed. See Salsberg v. Trico Marine Servs., Inc. (In re Trico Marine Servs., Inc.), 382 B.R. 201
