11. See In re DBSD N. Am., 634 F.3d at 102.
12. See, e.g., In re Dune Deck Owners, 175 B.R. at 844. The type of "ulterior motive" that §1126(e) is intended to target is illustrated in the Fifth Circuit's decision in Texas Hotel Sec. v. Waco Dev., 87 F.2d 395 (5th Cir. 1936). The Waco decision necessitated the creation of the "good faith" rule, and the facts of the case are described in detail in the Second Circuit's DBSD decision. See In re DBSD N. Am., 634 F.3d at 102-03.
13. See generally In re Dune Deck Owners, 175 B.R. at 844; In re Adelphia Commc'ns, 359 B.R. at 61.
14. See In re Dune Deck Owners, 175 B.R. at 844-45 (citations omitted).
15. The court In re Dune Deck Owners, 175 B.R. at 845 n.13, noted that, although not embodied in the Bankruptcy Code as enacted, the original House bill included a provision that expressly authorized a court to designate the vote of an "entity that has, with respect to such class, a conflict of interest that is of such a nature as would justify exclusion of such entity's claim or interest." According to the Dune Deck court, the House drafters "intended to insure that a creditor who held conflicting claims in two classes could be excluded from voting in one—though not necessarily both—of those classes." Id. However, the Dune Deck discussion is at least somewhat at odds with the Adelphia decision, in which the court discussed that a creditor who may hold a conflict of interest by owning bonds of multiple debtors in a single Chapter 11 case, or holding bonds in "different, antagonistic, classes of a particular debtor in a single chapter 11 case" as a result of its motive to hedge, does not necessarily lead to a finding of bad faith. See In re Adelphia Commc'ns, 359 B.R. at 63.
16. As briefly discussed by the Second Circuit in the DBSD decision, external factors must be evaluated in determining what considerations may have informed a creditor's vote since not every ulterior motive constitutes the sort of improper motive that will support a finding of bad faith. For example, trade creditors who regularly conduct business with a debtor may vote in the way most likely to assure future business with that debtor post-reorganization, or a secured creditor may seek liquidation of a debtor (in lieu of reorganization) as interest rates improve to permit funds loaned to the debtor to be recovered immediately and reinvested more wisely. See In re DBSD N. Am., 634 F.3d at 102 (citations omitted). These types of behaviors, while ulterior, should not be held to so taint a vote as to require designation. See In re The Landing Assocs., 157 B.R. at 807.
17. See In re Figter, 118 F.3d at 639.
18. In re Allegheny Int'l, 118 B.R. 282, 286-87 (Bankr. W.D. Pa. 1990). The investor was neither a previous creditor nor equity owner of the debtor, and only purchased the debt in order to qualify as a party in interest authorized to file a plan pursuant to §1121 of the Bankruptcy Code.
19. Id. at 289-99.
20. Id. at 289.
Subscribe to New York Law Journal
