N O T FO R PUB L ICAT IO N UNITED STATES C OUR T OF APPEALS FOR THE NINTH C IR C UIT
In re : C HR ISTOPHER

JOHN HAM ILTON; ELIZAB ETH LEIGH TESOLIN, De btors,

------------------------------ C HR ISTOPHER

JOHN HAM ILTON; ELIZAB ETH LEIGH TESOLIN,

Appe lla nts,
v. ELITE OF LOS ANGELES, INC .; SAN DIEGO TESTING SER

VIC ES, INC
. , Appe lle e s. No. 18-60043 B AP No. 17-1273
M EM O R ANDUM *

Appe a l from

the Ninth C irc uit B ankruptc y

Appe lla te Pane l La ffe rty III, Spra ke r, and Kurtz , B ankruptc y Judge s, Pre siding Argue d a nd Subm itte d Fe brua

ry 6, 2020 Pa sa de n a , C a l ifornia 

# FIL ED
MAR 16 2020 M OLLY C. DW Y E R, CLERK U. S. CO URT O F APPEALS

* This disposition is not a ppropria te for public a t ion a

nd is not pre c e de nt e xc e pt a s provide d

by Ninth C irc uit R

ule 36-3.B e fore : B OGGS, * * IKUTA, a nd C HR ISTEN, C i rc u it Judge s. Appe lla nts C hristophe r Ham ilton a nd Eliz a be th Te s olin obta ine d
c onfirm ation of the ir Sixth Am e nde d C ha pte r 11 Pla

n of R e orga

niz a tion ove r the obje c tion of a

ppe lle e s Elite of Los Ange le s, Inc
. an d San Die g o Te sting Se rvic e s, Inc
. (Elite ). Elite a

ppe a le d the ba

nkruptc y c ourt’ s pla

n c onfirm a tion orde r to the B ankruptc y

Appe l late Pane l , whic h re ve rse d ba se d on its c onc lusion tha t the Pla n did not sa tisfy a ll sta tutory c onfirm a tion re quire m e n ts a nd inc l ude d a

n im pe rm issible c olle c t ion injunc tion. Se e Elite of L.A., Inc . v . Hamilton ( In re Hamilton ), No. SC -17-1273-LSKu, 2018 W L 3637905 (B .A.P. 9th C ir. July 31, 2018). Ha

m ilton a nd Te solin now a

ppe a l from

the B AP orde r. W e have jurisdic tion pursua

n t to 28 U.S.C . §158(d)(1), re v ie w the B A P’ s de c ision d e nov o,
and a pply the sa m e sta n d ard of re vie w tha

t the B A P a

pplie d to the ba nkruptc y
c ourt’ s ruling. In reMolask y , 843 F.3d 1179, 1183 (9th C ir. 2016). W e a ffirm the B AP’ s orde r re ve rsing the ba n k ruptc y c ourt’ s pla

n c onfirm a tion orde r. 1. The ba n kruptc y c ourt a pprove d the Pla

n provision tha

t e njoine d c re ditors from c olle c ting nondisc ha

rge a ble de bt during the

Pla n pe riod, inc luding Elite ’ s

* * The Honora

ble Da nny J. B oggs, Unite d

Stat e s C irc uit Judgefor the U.S. C ourt of Appe a l s for the Sixth C irc uit, sitting by de signa t ion. 2nondisc ha

rge a ble judgm e n t a ga inst Ha

m ilton. 1 The ba

nkruptc y c ourt re lie d on two
c a se s that he ld a c o urt m ay

e xe rc ise its e quita

b le powe rs pursua

nt to 11 U.S.C . § 105(a ) to a

p prove a C ha p t e r 11 pla

n tha t e njoins c o lle c tion of nondisc ha rge a ble de bt without running a

foul of 11 U.S.C . § 1141(d)(2). Se eC ompute r Task Group, Inc
. v . Brotby (

In reBrotby ), 303 B .R . 177, 190 (9th C ir. B A P 2003); In re Me r c ado , 124 B .R . 799, 801 (B ankr. C .D. C a l. 1991). Ham ilton sim

ila rly re lie s on Brotby and M

e rc ado on a

ppe a l, but both c a se s
are d istinguisha

ble . In both, the

pla ns c onte m

p late d tha t nondisc h arge a

ble c la im s would be pa id in full. Se e Brotby , 303 B .R . a t 190; M e rc ado , 124 B .R . a t 801. He re , the re wa s no finding or re c ord e vide nc e tha t Ha m ilton will be

a ble to pa y Elite ’ s nondisc h arge a

ble judgm e nt during the Plan te rm or the re a fte r. In fa c t, it is undispute d tha

t the nondisc h a

rge a ble de bt will signific antly inc re a se , to ove r $3
m illion, by

the e nd of the Pla

n pe riod. W e know of no c a s e in whic h our c o urt (or

1 Afte r Ham ilton le ft his job a t Elite , a jury found Ha m ilton lia ble for bre a c h of fiduc ia ry duty , bre a c h of duty

of loy a lty , inte ntiona l inte rfe re nc e with prospe c tive e c o nom ic a d

va n t a ge , tra de se c re t m isa

ppropria tion, a nd punitive dam a ge s. In re

Hamilton , 584 B .R . 310, 315 (B .A.P. 9th C ir. 2018). Ha m ilton a nd Te solin file d the i r C ha

p t e r 11 pe tition a fte r the sta te c ourt e nte re d a la

rge judgm e nt in Elite ’ s favor. W e lat e r a ffirm e d the ba nkruptc y c ourt’ s de te rm ination tha t the judgm e nt wa s nondisc h arge a ble unde r 11 U.S.C . § 523(a )(6) be c a use of Ham ilton’ s willful a

nd m a lic ious c onduc t. Se e In reHamilton , 785 F. App’ x 438, 439 (9th C i r. 2019). 3the B AP) ha s a pprove d a c olle c tion injunc tion in suc h c i rc um sta nc e s. 2 Ham ilton
and Te solin a lso sugge st the c olle c tion injunc t ion is se ve ra b le from the Pla n, but the b ankruptc y c ourt de te rm ine d tha t its inc lusion wa s ne c e ssa ry for the Pla

n’ s
suc c e ss. 2. Se c tion 1129(a

)(11) re quire s a finding by the ba nkruptc y c ourt tha t pla n
c onfirm ation “ i s not like ly to be followe d by

liquida tion, or thene e d for furthe r fina nc ia l re orga

niz a tion, of the de btor.” 11 U.S.C . § 1129(a )(11). To sa tisfy this
se c t ion, known a s the “ fe a sibility re q uire m e nt,” the de btor m

ust de m onstra

te tha t the p la n “ ha s a re a sona ble proba bility of suc c e ss.” First Southern N at’l Bank v . Sunny slope Hous. Ltd. P’ship (

In reSunny

slope Hous. Ltd. P’ship ), 859 F.3d 637, 646–47 (9th C ir. 2017) (e n ba nc ) (quoting In re Ac e quia, Inc ., 787 F.2d 1352, 1364 (9th C ir. 1986)). “ A ba

nkruptc y c ourt’ s finding of fe a sibility is re vie we d for a

buse of disc re tion.” Id. a t 647. The re c ord doe s not support the ba nkruptc y c ourt’ s finding tha

t the Plan wa s not like ly to be followe d by

liquida tion or furthe r fina

n c ia l re orga

niz a tion. B e c a use of the a c c ruing inte re st on Elite ’ s nondisc ha rge a ble judgm e nt, Ha

m ilton

2 The disse n t re lie s on C

ope land v . Fink (

In reC ope l and ), 742 F.3d 811 (8th C ir. 2014). B ut in tha

t c a se , the Eighth C irc uit a ssum e d tha t the nondisc h arge a

ble de bt would be“ pa id in full re gardle ss of the pla

n im ple m e nte d

in ba nkruptc y .” Id. a t 815 (e m

pha sis in origina

l ). 4will owe m ore to Elite a t the e nd of the Pla

n pe riod tha

n a t the be g inning, a

n d his work life e xpe c ta

nc y will be five y e ars shorte r. The ba nkruptc y c ourt’ s sum

m ary finding tha

t Ha m i lton a nd Te solin will be

a ble to m a k e the re q

uire d pa ym e nts unde r the Pla

n doe s not a lone susta in a fe a s ibility

finding, a

nd tha t c ourt did not
a ddre s s whe the r the y will ne e d to se e k liquida tion or furthe r re orga

niz a tion a t the
e nd of the Pla

n pe riod. Ac c ordingly , we c onc lude that the ba nkruptc y c ourt a buse d its disc re t ion by

de te rm ining tha

t the Pla n wa s fe a sible within the

m e a ning of § 1129(a )(11). 3. Elite argue s tha

t Ha m ilton ha s im

prope rly use d C ha pte r 11 to de la

y
e nforc e m e nt of its nondisc ha rge a ble judgm e n t while he runs Ha m ilton C olle ge C onsulting (HC C ), a

c om p e titor busine ss owne d by his m othe r. Ham ilton re c e ive s
an a nnua l sa l a ry of $199,000 a

nd ha s inc urre d profe ssiona l fe e s in e xc e ss of $2
m illion, whic h HC C ha s a gre e d to pa y . Se c tion 1129(a

)(3) re quire s tha

t a pla n be “ propose d in good fa ith a n d not by
any m e ans forbidde n by

la w” in orde r to be c onfirm e d. 11 U.S.C
. § 1129(a )(3). A pla n is propose d in good fa ith if it a c hie ve s a re sult c onsiste nt with the purpose s of the B an kruptc y

C ode
. Platinum C

apital, Inc . v . Sy lmar Plaza, L.P. ( In reSy lmar Plaza, L.P .), 314 F.3d 1070, 1074 (9th C ir. 2002). The prim ary purpose s of C ha pte r 11 a re to re ha bilita te the de btor a

nd m a xim iz e the va lue of the e sta te . 5Sunny

slope , 859 F.3d a

t 645. The good-fa ith de te rm ination is ba s e d on the tota lity of the c irc um sta

n c e s. Sy lmar Plaza , 314 F.3d a t 1074. Thepropose d Pla n fa ils to
m e e t the se obje c tive s. It is not fe a sible , it a p pe ars like ly

tha t Ham ilton will be
una ble to pa y the ba llooning nondisc

ha rge a b le de bt a t the e nd of the Plan pe riod, the re are unre solve d issue s c onc e rning Ha m ilton’ s de gre e of c ontrol ove r HC C , and the re is no e v ide n c e tha t Ha m ilton m a de a

de m and for inde m

nific ation from HC C to pa

y Elite ’ s judgm e n t . 3 Ac c o rdingly , we c onc lude tha t the ba nkruptc y
c ourt c le a rly e rre d by finding tha

t the Pla n wa s propose d in good fa ith, a s re quire d by § 1129(a )(3). 4. A ba nkruptc y c ourt m ay

c onfirm a C ha pte r 11 pla

n ove r the obje c tions of
an im pa ire d c re ditor if thepla

n is “ fa ir a

nd e quita ble ” to e a c h

c re ditor c la s s pursua nt to 11 U.S.C
. § 1129(b)(1). Zac hary v . C a lifornia Bank

& Tr. , 811 F.3d 1191, 1194 (9th C ir. 2016). To befa ir a nd e q uita ble , the pla

n m ust sa t isfy e ithe r the “ a bsolute priority

rule ,” c odifie d at § 1129(b)(2)(B )(ii), se e Zac hary , 811 F.3d
a t 1193–94, or a

n e xc e p t ion to therule known a s the “ ne w va lue c orolla ry ,” Libe rty N at’l Ente rs. v . AmbancLa Me sa Ltd. Pshp. (

In re AmbancLa Me

sa Ltd. P’ship ), 115 F.3d 650, 654 (9th C ir. 1997). To sa tisfy the ne w va lue c orolla ry , the de btor
m ust offe r ne w va lue unde r the Pla n. Id . He re , be c a

u se the Plan provide d tha t

3 Se e C a l. C i v. C o de § 2778(1). 6Ham ilton a

nd Te solin would re ta in a ny none x e m p t a nd une nc um

be re d e quity in a
re nta l prope rty

the y own, the ba

nkruptc y c ourt re quire d tha

t the Pla n sa t isfy the
ne w va lue c orolla

ry . Ha m ilton re sponde d by

se c uring a

c om m itm e nt from HC C to
c ontribute , on the Pla

n ’ s e ffe c tive date , $200,000 in c a s h for a dm inistra tive
e xpe nse s and a

$380,000 prom

issory note to c ove r the ba la

n c e of profe ssiona l fe e s. The ba nkruptc y c o urt found tha

t HC C ’ s ple dge d c ontribution provide d ne w va lue
and m e t the othe r c rite ria

for the ne w va lue c orolla ry . B e c a use HC C wa s a l re a dy

pa y ing Ha m ilton’ s a nd Te solin’ s profe ssiona l fe e s pursua

nt to a n inde m nity a gre e m e nt with Ha

m i lton a t the tim e HC C se c ure d the e ffe c t ive date c ontribution, we c onc l ude tha

t the ba nkruptc y c o urt e rre d by finding tha

t HC C ’ s c ontribution wa s ne w . The B AP’ s orde r re ve rsing the ba nkruptc y c ourt’ s pla

n c onfirm a tion orde r is AFFIRM E D
.

7Hamilton v . Elite of Los Ange le

s, Inc
. , 18-60043 IKUTA, C irc uit Judge , disse nting: C hristophe r Ham ilton a

nd Eliz a be th Te solin (re fe rre d to he re c olle c tive ly a s Ham ilton) owe Elite of Los Ange le s, Inc . a nd Sa n Die go Te sting Se rvic e s, Inc
. (Elite ) ove r $2 m illion. The ba nkruptc y c ourt c onfirm e d a pla

n unde r whic h

a ll
unse c ure d c re ditors, inc l uding Elite , would re c e i ve a pro rata sha re of the ir de bt
ove r a five -y e ar pe riod. At thee nd of the pla n te rm , a la rge portion of Elite ’ s de bt would re m a in. B e c a

use Elite ’ s de bt is nondisc h arge a ble , Ham ilton will ha

ve to
c ontinue to pa

y it, like ly for the re st of his life
. The m a jority re ve rse s the ba nkruptc y c ourt’ s de te rm ination ba se d sole ly on its own a sse ssm e nt of the
e quitie s. B e c a

u s e the C ode ba

rs Elite from

pursuing c olle c tion e fforts until the e nd of the pla n, the ba nkruptc y c ourt did not a

buse its disc re tion in a

p proving the pla n ’ s c olle c tion injunc tion a g a inst Elite
. M ore o ve r, the ba nkruptc y c ourt did not
c le arly e rr in de te rm ining tha

t the pla n is fe a sible and wa s propose d in good fa ith. B e c a use I would a ffirm

the ba nkruptc y c ourt, I disse nt. 1 

# FIL ED
MAR 16 2020 M OLLY C. DW Y E R, CLERK U. S. CO URT O F APPEALS

1 W e re vie w the ba

nkruptc y c o urt’ s rulings inde

pe nde ntly , In re

Salazar , 430 F.3d 992, 994 (9th C ir. 2005), a nd give no de fe re nc e to the de c ision of the B ankruptc y

Appe l late Pane l , In re K

adje v ic h , 220 F.3d 1016, 1019 (9th C ir. 2000). W e re vie w the ba

nkruptc y c ourt’ s c onc lusions of la

w de novo, In re

Salazar , 430 F.3d at 994, its fa c tua l findings for c le ar e rror, Id. , a nd its c onfirm a tion of a re orga niz a tion pla

n for a buse of disc re tion, In reMarshall , 721 F.3d 1032, 1045 (9th C ir. 2013).I

The ba nkruptc y c o urt did not a

b use its disc re tion in a

pproving the pla

n’ s
c olle c tion injunc tion, whic h pre c lude s Elite from c olle c ting its nondisc

h arge a ble de bt during the

life of the pla

n, be c a use the C ode itse l f pre c lude s Elite from doing
so. Unde r § 362 of the C ode , the filing of a pe tition under C ha

pte r 11 “ o pe ra t e s
a s a sta y , a pplic a ble to a l l e ntitie s, of . . . thee nforc e m e nt, a ga inst the de btor or
a ga inst prope rty

of the e sta

t e , of a judgm e nt obta ine d be fore the c om m e nc e m e nt of the c a se unde r this title
. ” 11 U.S.C . § 362(a )(2). This a u tom a tic sta

y “ c ontinue s until . . . the

tim e a disc ha rge is gra nte d or de nie d .” § 362(c )(2)(C ). B y de fa ult,

“ the c onfirm a tion of a

pla n . . . disc ha

rge s the de btor from

any de bt tha t a rose be fore the date of suc h c onfirm a tion” and is disc ha rge a b le . § 1141(d)(1)(A). Individua l de btors a

re gove rne d

by a diffe re nt provision. In 2005, C ongre ss
e na c te d the B ankruptc y A b use Pre ve ntion a nd C onsum e r Prote c tion Ac t (B APC PA), whic h am e nde d § 1141 to inc lude the following provision: “ In a c a se in whic h the de btor is a

n individual . . . c onfirm a tion of thepla n doe s not disc ha

rge
any de b t provide d for in the pla n until the c ourt gra

nts a disc ha rge on c om

ple tion of a ll pa y m e nts unde r the pla

n . ” Pub. L. No. 109–8, 119 Sta t. 23 (2005) (c odifie d
a t 11 U.S.C . § 1141(d)(5)(A). In sum , whe n a n individual de btor file s a pe tition 2unde r C ha

pte r 11, the a

utom a tic sta

y unde r § 362(a ) c ontinue s until “ the c ourt gran ts a disc h arge on c om

ple tion of a ll pa

ym e nts unde r the pla

n.” § 1141(d)(5)(A). Put diffe re ntly , the sta y c ontinue s until the

pla n e nds. B e c a

use Ham ilton is a

n individual, § 362 ba

rs Elite from

e nforc ing the pre -pe tition judgm e nt a ga inst him

until the “ c om ple t ion of a ll pa

ym e nts unde r the pla

n.” § 1141(d)(5)(A). No c ourt ha s y e t a ddre sse d how the B APC PA c ha nge d the duration of the
a utom a t ic sta

y for individua l de btors. So Ha m ilton inc lude d a

provision in the pla n tha t would pre ve nt Elite from e nforc ing the pre -pe tition judgm e nt during the pla n pe riod. This so-c a l le d c olle c tion injunc tion is func tiona lly e quiva le nt to the C ode ’ s a u tom a tic sta

y , a s am e nde d by

the B APC PA. The m a jority disa p prove s of the c olle c tion injunc t ion be c a use “ the re wa s no finding or re c ord e vide n c e tha t Ha m ilton will be

a ble to pa y Elite ’ s nondisc ha

rge a ble judgm e n t during thePla n te rm or the re a fte r.” M a

j. Op. a t 3. B ut the C ode doe s not re quire full pa ym e nt of nondisc ha

rge a b le de bt during the

life of
a pla n. Inste a d, a “ de btor ne e d only form ulate a pla n whic h pa

y s the nondisc ha

rge a ble de bts pro ra

ta with othe r unse c ure d c re ditors during the life of the p la n.” In reC

ope land, 742 F.3d 811, 814 (8th C ir. 2014) (a l te ra tions a nd
c ita tion om itte d ). Inde e d, “ i t is ha rdly re m arka b le tha t a nondisc ha

rge a ble de bt 3m ay

re m a in a fte r a

de btor ha s e m e rge d from ba nkruptc y ; tha

t is pre c ise ly

what

‘ n ondisc ha

rge a ble ’ m e ans.” 2 Id. Give n the B APC PA, the c olle c tion injunc tion is unne c e ssa ry . B u t be c a

use the c olle c tion injunc tion doe s the work of the C o de ’ s a utom a tic sta

y , a nd nothing
m ore , the ba

nkruptc y c o urt did not a

buse its disc re t ion in a

pproving it. II Nor did the ba

nkruptc y c ourt c le arly

e rr in c onc luding tha

t the pla n wa s fe a s ible . As the C ode e xpla ins the fe a sibility re quire m e n t, a “ c ourt sha l l c onfirm

a pla n only if . . . [c ] onfirm a tion of thepla n is not like ly

to be followe d by

the liquida tion, or the ne e d

for furthe r fina

nc ia l re orga

n iz a tion, of thede btor or a ny
suc c e ssor to the de btor unde r the pla n, unle ss suc h liquida

tion or re orga

niz a tion is propose d in the pla n .” 11 U.S.C . § 1129(a )(11). The fe a sibility ana l y sis is foc use d on the de btor’ s a

bility to fulfill its obliga

tions u nde r

the plan
. Se e

, e .g. , In reLoop

2 The m a jority a tte m pts to distinguish C

ope land on the ground tha

t the Eighth C irc uit a s sum e d

tha t the nondisc ha

rge a ble de bt would be“ pa id in full re gardle ss of the pla

n im ple m e nte d in ba

nkruptc y .” M a

j. Op. a t 4 n.2. B ut the Eighth C irc uit doe s not e xpla in its ba sis for this a ssum ption; it c ould ha

ve re a s ona bly c onc lude d tha

t the holde rs of nondisc ha rge a ble de bt would bepa id in full re ga rdle ss of the pla

n be c a use the de bt wa s nondisc ha rge a ble , just a s in this c a se . M ore signific ant, C ope land re fuse d to a l low the de btors to prioritiz e pa ym e nt of nondisc ha

rge a ble de bt ove r paym e nt to unse c ure d c re ditors, the a pproa c h the ba n k ruptc y c ourt a pprove d— and the m a

jority disa pprove s— in this c a se . Se e In reC

o pe l and , 742 F.3d a

t 814–15. 476, LLC

465 B
. R . 525, 544 (B .A.P. 9th C ir. 2012). Though it is not e ntire ly c le ar what “ l iquida

tion or re orga

niz a tion” m e ans a s a

pplie d to individua

l de btors, it is ge ne ra lly a g re e d tha

t a de btor m ust de m o nstra

te tha t theplan h a s a

“ re a sona ble proba b ility of suc c e ss.” In reAc e quia, Inc
. , 787 F.2d 1352, 1364 (9th C ir. 1986). He re , the ba

nkruptc y c o urt de te rm ine d that Ha m ilton c ould m a ke the pa ym e nts unde r the c onfirm e d pla n. Ne ithe r Elite nor the m a jority disa g re e . Ne ve rthe le ss, the m a

jority holds tha

t the ba nkruptc y c ourt a

b use d its disc re tion be c a use Ham ilton “ will owe m ore to Elitea t the e nd of the Pla n pe riod tha

n at the be ginning” and the c ourt “ did not a ddre ss whe the r [Ha m ilton] will ne e d to se e k liquida tion or furthe r re orga

niz a tion a t the e n d of the Plan pe riod.” M a j. Op. a t 5. This ruling is e

rrone ous, be c a

use fe a sibility doe s not hinge on whe the r a

de btor will be a ble to m a ke c e rta i n pa

ym e nts afte r

the pla n ha s e nde d. Inste a d, fe a sibility turns on thede btor’ s a

bility to live up to thete rm s of the pla n. Se e In re

Loop 76, LLC , 465 B .R . a t 544. The re is no dispute that Elite ’ s nondisc h a rge a ble de b t will grow during the pla n pe riod due to the a c c rua l of inte re st. B u t unde r the C ode , tha

t fa c t ha s no be aring on fe a sibility . The distric t c o urt did not c le arly e rr. III Fina lly , the ba

n kruptc y c ourt did not c le arly

e rr in c onc luding tha

t the pla n 5wa s propose d in good fa i t h. Se e 11 U.S.C . § 1129(a )(3) (providing tha t a
re orga niz a tion pla

n m ust ha ve be e n “ propose d in good fa ith a nd not by any m e ans forbidde n by

la w” ). The good fa ith de te rm ination is ba se d on the tota lity of the
c irc um s ta nc e s , a nd the re quire m e nt is sa

tisfie d whe n the pla

n “ a c hie v e s a

re sult
c onsiste n t with theobje c tive s a nd purpose s of the C ode .” In re Sy lmar Plaza, L.P. , 314 F.3d 1070, 1074 (9th C ir. 2002)

. “ W hile the prote c t ion of c re ditors’ inte re sts is a n im porta n t purpose unde r C ha

pte r 11, the Supre m e C ourt ha s m a de c le ar that
suc c e ssful de btor re orga

niz a tion a nd m a xim i z a tion of theva lue of the e s tate are the prim ary purpose s.” In reSunny

slope Hous. Ltd. P’ship , 859 F.3d 637, 645 (9th C ir. 2017) (e n ba

nc ) (a lte ra t ion om itte d) (quotingIn reBonne r Mall P’ship , 2 F.3d 899, 916 (9th C ir. 1993), abrogate d on othe r grounds by Bullard v . Blue Hills Bank , 575 U.S. 496 (2015)). The m e re fa c t “ that a

de btor propose s a pla

n in whic h it a va ils itse lf of a

n a pplic a ble C ode provision doe s not c o nstitutee v ide nc e of ba d fa ith.” In reSy lmar Plaza , 314 F.3d a t 1075 (a lte ra tion a

nd c ita tion om itte d). The re m ust be m ore . The re is no e v i de nc e tha

t Ha m ilton subm

itte d the pla

n in ba d fa ith. Nothing in the C o de or our pre c e de nt sugge sts tha t a de btor propose s a

pla n in ba d fa ith
m e re ly be c a u se the de btor will only

pa rtia lly pa y an unse c ure d c re ditor’ s nondisc ha

rge a ble de bt during the

life of a pla

n, a nd the de bt will inc re a se due to 6the a c c rua l of inte re st. He re , unde r the c onfirm e d pla n, Ha m ilton will be

fre e of a ll disc ha rge a ble de bt in five y e ars, a

nd from that point on will be a ble to a lloc a te
a va ila ble funds to pa

y ing off Elite ’ s de bt. The ba n kruptc y c ourt de te rm ine d tha

t this stra te gy wa s a n e ffic ie nt a

n d le gitim a te wa

y to re solve the outsta

nding de bt of Ham ilton’ s c re ditors. This fa c tua l de te rm i na tion is not c le a rly e rrone ous. 3
* ** The m a jority im plie s tha t Ha m ilton is a

ba d a c tor, a

nd the re fore wa s not
e ntitle d to ha

v e his pla n c o nfirm e d. The m a

jority note s tha t in Elite ’ s sta

te c ourt
a c tion a ga inst Ha

m ilton, the

jury awarde d Elite punitive dam a ge s, a nd tha t in ba nkruptc y proc e e dings, Elite ’ s sta

te award wa s de e m e d nondisc ha rge a ble due to

“ Ham ilton’ s willful a

nd m a lic ious c onduc t.” The m a jority a lso se e m s to a c c e pt Elite ’ s a rgum e n t tha t Ha m ilton im prope rly use d C ha pte r 11 to de la

y pa ym e nt

“ while he runs Ha

m ilton C olle ge C onsulting (HC C ), a c om pe titor busine ss.” M a

j
. Op. at 3 n.1, 5. De btors who fa i le d to c ure the ir de b ts would fa c e ha rsh punishm e nt in

3 I would re m and with re spe c t to the ba nkruptc y c ourt’ s de te rm ination tha t the p la n sa tisfie d the ne w va lue c orolla ry rule . Although Ha

m ilton pre viously inform e d the ba n k ruptc y c ourt tha t he would re ta in “ a t

le a st $66,000 in e quity

in the Pa sa de na

Prope rty ,” it is unc le ar what the proje c te d va lue of the Pa sa de na Prope rty will be in five y e ars. The re fore , we c a nnot de te rm ine whe the r the $200,000 c ontribution is “ re a sona b ly e quiva le nt” to Ha

m ilton’ s re ta ine d e quity inte re s t. In reAmbanc La Me sa Ltd. P’ship , 115 F.3d 650, 654 (9th C ir. 1997).

7e arlie r tim e s. If this we re anc ie nt R om e , a de btor c o uld be c ut into pie c e s and distribute d am o ng the c re ditors. Se e 2 W
. B la c kstone , C om m e nta rie s on the La

ws of Engla nd 472 (1766). W e re this 13th c e ntury Engla nd, a de btor c ould be im prisone d. Sturge

s v . C row ninshie ld , 17 U.S. 122, 140–41 (1819). B ut toda y in
our c ountry , a ll de btors m ay ava il the m se l ve s of the B ankruptc y C ode , ba d a c tors inc l ude d. While Elite ’ s nondisc ha rge a ble de bt is siz e a

b le , the C ode provide s re lie f
e ve n for de btors who c arry a ne ar insurm ounta

b le am ount of de bt. I disse nt.

8