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Holding: The court held that the debtor's case should be dismissed as a bad faith filing because the debtor did not show an "unanticipated change in circumstances" to warrant its proposed unilateral modification of the secured lender's rights under the confirmed plan in debtor's previous case. The court found that the debtor's first Chapter 11 case did not automatically render its second case invalid, but because the first Chapter 11 plan had been substantially consummated, the court found that second petition may have contravened 11 U.S.C. § 1127(b)'s prohibition of modifying a substantially consummated confirmed plan. The court recognized that many courts have found an unanticipated change in circumstances may justify a modification of a substantially consummated confirmed plan in certain situations. The debtor argued that the tithes from its congregation were less than its projections, at least partly due to a building fund campaign in which the congregation reduced their regular tithes to donate to the building fund. The court found this to be more like a market fluctuation rather than a "fundamental change" in the law or the market that other courts recognized as an unanticipated change in circumstances. The court also found that the debtor's own building fund campaign, and not some outside force, caused the change in circumstances, which was foreseeable. The court also found that the debtor's increase in rent for temporary modular buildings was foreseeable because the debtor's knew the lease terms and could have anticipated that its need for the buildings would extend beyond the lease term. Additionally, the court rejected the debtor's argument that expenses for electrical and air conditioning repairs constituted an unforeseen change in circumstances because, as other courts have held, such maintenance is not extraordinary due to the limited life expectancy on such equipment. The court concluded that the debtor did not meet its burden of demonstrating unanticipated changed circumstances. The above reasoning combined with a finding of several other factors indicating bad faith, such as the debtor owning essentially one asset and the bankruptcy being essentially a two-party dispute, favored the court's determination that the debtor's second Chapter 11 case should be dismissed for filing in bad faith.
vi. In re East End Development, LLC, 491 B.R. 633 (Bankr. E.D.N.Y. 2013)
Issue: Whether the managing member of the debtor limited liability company (LLC) had authority to file the bankruptcy petition.
Holding: The court held that the LLC's operating agreement had to be construed as providing the managing member with authority to file a bankruptcy petition on behalf of the LLC. A member of the LLC moved to dismiss the LLC's bankruptcy case on the grounds that the managing member lacked authority to file for bankruptcy on the LLC's behalf. The court looked to state law, which required the court to look at the authority granted to the managing member of the LLC in the operating agreement. The operating agreement was silent as to whether the managing member had authority to file bankruptcy on behalf of the LLC. The moving member argued that due to the operating agreement's silence, the court should analogize authority to file bankruptcy to authority to liquidate and wind up the LLC, which required both members' consent under the operating agreement. The court, however, found that the operating agreement gave
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