FI LED U.S. COURT OF APPEALS ELEV ENT H CI RCUI T FEB 10, 201 1 J OHN LEY CLERK [PUBLISH]
IN THE UN ITED STATES COURT OF APPEALS FOR THE ELE VENTH CIRCUIT

__ __ __ __ __ __ __ __ __ __ __ __ No. 0 9- 11 69 7

__ __ __ __ __ __ __ __ __ __ __ __ D. C. Dock etNos . 08 -0 04 42 -CV-C B-M , 04 -1 18 58 IN RE: CHARLES L. LETT, SR.,
Deb to r.

__ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ ALABAMA DEPARTMENT OF ECONOMIC & COM MUNITY AFFAIRS , Pl ai nt iff -Ap pe ll an t,
ve rs us BALL HEAL THCARE-DALLAS, LL C, REGIONS BANK,
In te rv en or -Pl ai nt iffsApp el le es , ve rs us CHARLES L. LET T, SR., Defen da nt -Ap pe ll ee.__ __ __ __ __ __ __ __ __ __ __ __ App eal fro m

th e Uni te d S ta te s Di st ric t Co urt fo r th e So ut he rnDis tri ctof Al ab am a

__ __ __ __ __ __ __ __ __ __ __ __ _ (Feb ru ary 10 , 20 11 ) Befo re TJ OFLAT, CARNES andCOX, Circ ui t J ud ge s. TJOFLAT, Cir cu itJu dg e: Thi s ap pe al ari se s o utof a n i nd iv idua l Ch ap te r 11 ba nkrupt cy pro ceed in g fil edinth e Ban krup tc y

Co urt fo r th e So ut he rnDis tri ctof Al ab am a b y Dr. Cha rle s L. Lett , Sr. (“ Lett ” o r “ Deb to r”). As in th e d is tri ctco urt o n app eal , th e St at e o f Alab am a, by andth ro ug h t he Alab am a Dep art m en t o f Eco no m ic an d C omm un ity Affai rs (“ ADECA” or“ Cred it or ”), ch al le ng es th e b an krup tc y co urt’s co nf

irmatio n of Lett ’s pl anof r eo rg an iz at io n. Bro ad ly stat ed , “ Ch ap te r 11 st rik es a ba la nc e b etween a de bt or ’s in te res t i n
reo rg an iz in g a ndres tru ctur in g i ts de bt s an d t he cred it or s’ in te res t i n m ax im iz in g th e v al ue of t he ba nkrupt cy est at e.” Fl a. Dep t. o f Rev en ue v. Pi ccad il ly Cafe te ria s, In c., 55 4 U.S. 3 3, 5 1, 1 28 S. Ct. 2 32 6, 2 33 9, 1 71 L. Ed. 2d20 3 (2 00 8) (ci ta ti on s o m it te d) . Its foc us is on th e reo rg an iz at io n o f a d eb to r’s ob li ga ti on s rat he r th anth e o rd erl y

li qu id at io n o f a d eb to r’s as se ts . Cor po rat io ns as we ll as

2in di vi du al s m ay tak e ad va nt ag e o f th e p ro vi si on s o f th e ch ap te r. As wit h a ll ba nkrupt cy

sch em es , Chapt er 1 1 en vi si on s t ha t t he cla im s o f so m e cre di to rs wil l 1
no t b e p ai d i n fu ll , andth us pro vi de s p ro te ct io ns to en su re tha t t ho se cred it or s
rece iv in g l es s t ha n t he ful l v al ue of t he ir c la im —“ im pa ire d” cred it or s —ar e 2 tre at edfai rly. A s s uc h, i f a cl as s of i m pa ire d c red it or s v ot es to reject a pr op os ed 3 4 pl anof r eo rg an iz at io n, a b an krup tc y co urt m ay

on ly app ro ve th e p la n i f it
co nf orm s wi th a se t o f pr ov is io ns ou tl in edin § 1 12 9( b) of t he Ban kr up tc y Co de
. Thi s p ro cedur e is kn own co ll oq ui al ly as a “ cram do wn.” In B an k o f Am eri ca

5 Nati on al Trus t & Sav in gs Ass ’n v. 2 03 N. LaSall e St reetPart ne rs hi p, t he Uni te d

All statutory

ref ere nces he rein a

re to Title 11 of the United States Code, 11 U.S.C. 1 § 101 et seq. (the “B ankruptc y Code”). Strictly speaking , it is the cla im of a cr editor that is impaired, not the c reditor itself. 2 § 1124. For

simpli city ’s sake , we r efe r to a c reditor that is a holde r of a n impaired c laim as an “impaire d cre ditor.” A plan of r eorg anization places c laims ag ainst a debtor into grouping s known as 3 “cla sses”; a c lass may

only contain similarly

situated claims. § 1122 (“ [A] plan may placea claim or a n interest in a pa

rticular c lass only

if such cla im or interest is substantially simil ar to the other c laims or interests of suc h class.”) . A cr editor may ultimately

have mor e than one claim place d within differe nt classes, a s is the case with ADECA’s cla ims here. In order for a class of impaire d cre ditors to accept a proposed pla n, a majority

of the 4 cre ditors and those holdingtwo-thirds of the total dollar a mount of the claims within that class must vote to approve the pla n. § 1126(c)
. I f all impaired c reditors vote to re ject a pla n, then the plan c annot be c rammed down. 5 See § 1129(a )(10) (“I f a c lass of cla ims is i mpaired unde r the plan, at least one c lass of cla ims that is impaired under

the plan [must] acc ept[] the plan . . . .”)
. 3St at es Supr em e Co urt ex pl ai ne d t hi s p ro ces s, i nc lu di ng th e cen tra l fu nc ti on of t he

“ ab so lu te pri or it y

rul e” i n acram

do wn: The re ar e two co nd it io ns fora cram do wn. Fi rs t, al l re qu ire m en ts of § 1 12 9( a) m

us t b e m et(sa ve forth e p la n’s ac cep ta nc e b y each im pa ire d c la ss of c la im s o r in te res ts , see § 1 12 9( a)(8 )). . . . Secon d, th e o bjec ti on of a n i m

pa ire d c red it orcla ss m ay be ov erri dd enon ly if “ th e p la n d oe s n otdi sc riminat e u nf ai rly, andis fai r an d e qu it ab le , wit h re sp ectto each cla ss of c la im s o r in te res ts th atis im pa ire d u nd er, an d h as no t ac cep te d, t he pl an .” § 1 12 9( b) (1 ). As t o adi ss en ti ng cl as s o f un se curedcred it or s, s uc h apl anm ay be fou ndto be “ fai r an d equi tabl e” o nl y

if t he all owe d v al ue of the cla im is to be pa idin ful l, § 1 12 9( b) (2 )(B) (i) , or, i n t he alt ern at iv e, if “ th e h ol de r of

an y cla im or in te res t t ha t i s juni orto th e cl ai m s o f su ch [im pa ire d u ns ecu red ] cl as s wil l n otrece iv e o r ret ai n u nd er the pl anon acco un t o f su ch jun io r cl ai m or i nt eres t an y

pro pe rty,” § 1 12 9( b) (2 )(B) (ii ). Thatlat te r co nd it io n i s t he co re o f wha t i s kno wn as th e “ ab so lu te pri or it y rul e. 52 6 U.S. 4 34 , 44 1– 42 , 11 9 S . Ct. 1 41 1, 1 41 5– 16 , 14 3 L. Ed. 2 d 6 07 (19 99 ) (al te rat io n i n o rig in al ) (em ph as is ad de d) ; s ee al so Norwe stBan k Worthi ng to n v . Ahl ers , 48 5 U.S. 1 97 , 20 2, 1 08 S. Ct. 9 63 , 96 6, 9 9 L. Ed. 2 d 1 69 (19 88 ) (“ [T]he ab so lu te pri or it y

rul e p ro vi de s t ha t a d is se nt in g c la ss of u ns ecu redcred it or s m us t be pro vi de d fo r in ful l b efo re an y jun io r cl as s ca n re cei ve or r et ai n a ny pro pe rty [u nd er a re or ga ni zat io n] pl an .” (al te rat io n i n o rig in al ) (ci ta ti on s o m it te d) (in te rn al qu ot at io n m ark s o m it te d) ). Thu s, t he ab so lu te pri or ity rul e sp eci fic al ly prev en ts a ho ld er o f equi ty int eres ts —wh os e cl ai m is jun io r to th atof u ns ecu red

4cred it or s— fro m ret ai ni ng pro pe rty int eres ts un de r th e p la n u nl es s d is se nt in g im pa ire d u ns ecu redcred it orcla ss es are p ai d i n fu ll
. 6 A ban krup tc y

co urt h as anin de pe nd en t o bl ig at io n t o e ns ur e th ata pr op os ed pl anco m pl ie s wi th th is ab so lu te pri or it y rul e b efo re “ cramm in g” th atpl ando wn up on di ss en ti ng cred it orcla ss es . By pro vi di ng a ri gi d s etof o bl ig at io ns forth e
co urt i n app ro vi ng a pl anin cram do wn, Ch ap te r 11 serve s t o p rev en t b ot h a de bt orfro m

un fai rly dis cri m in at in g a ga in sta sp eci fic cred it oror g ro up of cred it or s, as well as o bs ti na te cred it or s fr om ho ld in g up the ap pr ov al of a n ot he rwis e so un d p la n o f reo rg an iz at io n. Be cau se ev enanun co nt ro ve rs ia l Ch ap te r 11 pl anwil l n orm al ly im

pa cta va rie ty of pa rti es wit h c om pe ti ng in te res ts , a ba nkrupt cy

co urt n eces sa ril y

pl ay s an act iv e ro le in th e m or e co nt en ti ou s cr am do wn o f a p la n o f reo rg an iz at io n.
The ter m “absolute prior ity

rule” does not appe ar in the B ankruptc y Code, but it is a 6 “cr eatur e[] of law a

ntedatingthe cur

rent B ankruptc y

Code.” B ank of Am. Nat’l Trust & Sav. Ass’n v. 203 N. L aSalle St. P’ship, 526 U.S. 434, 444, 119 S . Ct. 1411, 1417, 143 L . Ed. 2d 607 (1999). The rule de veloped to prote ct ag ainst “the da ng er inhe rent in any

reorg anization plan proposed by

a debtor . . . that the plan will simply turn out to be too g ood a dea l for the debtor[] .” I d. (citations omitted). “He nce thepre- Code judicial response known as the a bsolute priority rule, that fa irness and e quity require d that ‘the c reditors . . . be paid bef ore the stockholders c ould reta in [ equity

interests] for any

purpose whatever .’” I d. (quotingN. Pac. Ry . Co. v. Boyd, 228 U.S. 482, 508, 33 S. C t. 554, 561, 57 L . Ed. 931 (1913))
. There is a major exception to the rule, known as the “ new va lue exception,” which contemplates the rec eipt of prope rty by equity holders bef

ore f ull pay ment of cr editors in a debtor’s r eorg anization, provided that those equity holders make a “f

resh c ontribution” to the insolvent enterpr ise. Case v. L .A. Lumber Prods. Co., 308 U.S. 106, 121, 60 S. C t. 1, 10, 84 L
. Ed. 110 (1939). We de cline fur ther discussion of this exception to the absolute priority rule, a s it is not at issue in thi s case . 5Inth e cas e atha nd , ADECA, an im pa ire d c red it orin a di ss en ti ng cla ss , arg ue s t ha t t he pl anap pr ov edby the ba nkrupt cy co urt d oe s n otco m

pl y wit h t he
cram do wn p ro vi si on s s etforth in § 1 12 9, s pe ci fic al ly the ab so lu te pri or it y rul e. Whi le ADECA rais edth is is su e b efo re the di st ric t co urt, i t d idno t d o s o b efo re the ba nkrupt cy

co urt. Squa rel y be fo re u s, the n, i s wh ethe r an im pa ire d c red it or

ina di ss en ti ng cl as s i n acram

do wn p ro ceed in g u nd er § 11 29 of C hapt er 1 1 m ay ch al le ng e o n ap pe al a ba nkrupt cy

co urt’s co nf

irmatio n o f a p la n o f reo rg an iz at io n o n t he gro un d th atitvi ol at es th e ab so lu te pri or it y rul e, de sp it e th atcred it or ’s fai lu re t o fo rm al ly ob ject o n t ha t g ro un d wh il e th e p ro ceed in g re m ai ne d i n t he ba nkrupt cy co urt. Bec au se of t he un ique na tu re o f th e ab so lu te pri or it y rul e an d t he st atut ory ob li ga ti on s fa ci ng a ba nkrupt cy co urt i n acram

do wn p ro ceed in g, we h ol d t ha t a cred it orm ay

in de edha ve su ch a ch al le ng e h eardin th e ap pe ll at e co urts , no twi th st an di ng th e g en eral ly app li cab le civ il pl ai n e rro r ru le
. The d is tri ctco urt 7 de ni edADECA th e o pp ortu ni ty to fu ll y pre se ntit s ar gu m en ts reg ard in g t he ab so lu te pri or it y

rul e. W e th eref

or e v acat e th e d is tri ctco urt’s ru li ng an d re m an d

We use the term “ civil plain error rule” to stand for the pr oposition t hat an issue not 7 raised at the trial court leve l by a litiga nt may not be pre ssed on appe al abse nt a showingthat a miscarr iag e of justice w ill result from the appe llate cour t’s ref usal to addre ss the issue. See infra part I I .B.1. 6wit h i ns tru ct io ns to rul e o n t he m eri ts of ADECA’s ab so lu te pri or it y rul e arg um en ts in a m an ne r co ns is te ntwit h t hi s o pi ni on . W e b eg in in pa rt I wit h abri ef d is cu ss io n o f th e fac ts an d t he pro ceed in gs be lo w. In p artII we ad dr es s t he m at te r of m oo tn es s, an d, fi nd in g tha t t hi s
co nt ro ve rs y

is no t m oo t, co ns id er the civ il pl ai n e rro r ru le an d i ts ap pl ic at io n t o ADECA’ s s ub st an ti ve arg um en ts on ap pe al reg ard in g t he ab so lu te pri or it y rul e. I. A. Lettis a pr act ic in g p hysic ia n i n S el m a, Alab am a. As a re su ltof ade fau lton a Uni te d S ta te s Dep art m en t o f Hou si ng an d Urb anDeve lo pm en t l oa n, Cr ed it or ADECA hel d ajud gm en t l ie n a ga in stLettin anam ou ntinex ces s o f $3 m il li on . 8 In te rv en orBal l Hea lt hc are- Dall as , LLC (“ Bal l” ) ho ld s a l eas eh ol d i nt eres t i n t he la rg es t as se t o f Lett ’s est at e, a nur si ng ho m e lo cat edin Sel m a. AfterLettfil eda 9
vo lu nt ary Ch ap te r 11 pe ti ti on on Marc h 2 6, 2 00 4, ADECA fi le d apro of of c la im

Under Alabama law, ADE CA’s rec orded judgment lien was a lien on any

rea l or 8 persona l property

owned by

L ett, subject to exist ing liens a nd encumbr ance s. Ala. Code § 6-9- 211. L ett acknow ledg ed as muc h in his proposed plan of r eorg anization: “[ ADECA’s] claim, beinga judg ment lien, has priority as it relate s to any

proper ty not alrea dy

encumbe red.” Ba ll is nota cr editor of L ett and ther efor e neither assented to nor

voted ag ainst any

of 9 his proposed plans of r eorg anization. Regions B ank, the holder of a mortg ag e upon the lea sehold interest held by

Ba ll, filed a motion to int erve ne in the appe al, which the district c ourt grante d. Reg ions Bank did not, howe ver, inde pendently file any briefs in the district c ourt or in this court and, in ef fec t, is not a party

in these appe llate proc eeding s.

7in th e am ou ntof $ 3,0 12 ,06 0.3 4 b as edon it s ju dg m en t l ie n. As in di cat edby L et t

in th e b an krup tc y

pro ceed in gs , he f

il edth e p et it io n t o re or ga ni ze an d t o h an dl e ad equa te ly his cred it or s, p art ic ul arl y ADECA. Becau se no ot he r cre di to r is pa rty to th is ap pe al , we foc us pre do m in an tl y on th e tr eat m en t o f ADECA’ s cl ai m s th ro ug ho utth e p ro ceed in gs in th e co urts be lo w. On No ve m

be r 4, 2 00 4, Let t fi le d h is fir stpro po se d p la n o f reo rg an iz at io n, whi chdi vi de d ADECA’s cl ai m in to sec ur edan d u ns ecu redcla im s. Cla ss 7 1 0
co nt ai ne d t he sec ur edpo rti onof ADECA’s cl ai m . For t ha t cl as s Let t p ro po se d t o

“pa y ADECA a to ta l o f $3 ,50 0.0 0 i n 2 an nu al in st al lm en ts of $ 1,7 50 .00 du e o n t he
an ni ve rs ary da te of t he co nf irmatio n o rd er.” Th e am ou ntof $ 3,5 00 was b as edon th e p ur po rte d v al ue of Let t’s u ne nc um be redpro pe rty, a val ue ADECA con te st ed th ro ug ho utth e p ro ceed in gs . The remaind er o f ADECA’ s m ul ti -m il li on do ll ar cl ai m was t reat edas age ne ral un se cu redcla im an d g ro up edto ge th er wi th all ot he r
su ch cla im s i n C la ss 8. ADECA’ s u ns ecu redcla im , th e la rg es t i n C la ss 8, was 1 1
The amount of ADECA’s c laim exceeded the value of L ett’s unenc umbere d proper ty , 1 0 and ADE CA did not elect for specia l treatment of its cla im under § 1111(b) (2). As suc h, the secur ed portion of its claim—the “ allowed” amount—was limited to the value of the collater al, while the re maining de ficienc y was prope rly

treated as a

n unsecur ed cla im. See §§ 506(a) (1), 1111; see a lso Kenneth N. Klee, All You Eve r Wanted to Know About Cram Down Under the New B ankruptc y

Code, 53 Am. Ba

nkr. L .J . 133, 151–52 (1979). The plac ement of A DECA’s unsec ured c laim varied f rom plan to plan; at times it was 1 1 g rouped w ith all other g ener al unsec ured c laims ag ainst L ett, while at other times it was in a class by itself. The propone nt of a plan “ has consider able discr etion to classify claims and intere sts acc ordingto the fac ts and circ umstances of the ca se . . . .” I

n re H oly well Corp., 913 F.2d 873, 8sc he du le d t o b e p ai d a t o ne pe rcen t i n t hr ee an nu al in st al lm en ts , beg in ni ng on e

y ear f ro m co nf irmatio n. OnDecem

be r 21 , 20 04 , th e b an krup tc y adm in is tra to r fil eda br ie f ob

jecti on to th e p la n, s ta ti ng th atitco ul d n otbe ap pr ov edbe cau se it s
sc he du le of p aym en ts “ vi ol at e[] th e ab so lu te pri or it y rul e o f 11 U.S.C. Sec 1 12 9.” Und et erre d, Let t fi le d a n a m en de d p la n o f reo rg an iz at io n, i nc reas in g t he
se cu redpo rti on of ADECA’s cl ai m to $4 ,79 4 b as edona rev is edva lu at io n o f th e rel ev an t p ro pe rty. A ga in , th e b an kr up tc y adm in is tra to r ob

jecte d o n t he gro un d th atth e am en de d p lan v io la te d t he ab so lu te pri or it y rul e. Ther e is no in di cat io n i n th e rec or d tha t t he adm in is tra to r so ob jecte d a t t he reque stof ADECA, o r th at ADECA ob

jecte d t o t he pl anon th e sp eci fic gro un d t ha t i t v io la te d t he ab so lu te pr io rit y rul e. Lettfil eda se co ndam en de d p la n o n Oct ob er 1 2, 2 00 7, an d, fi na ll y , a th ird
am en de d p la n o n No ve m be r 16 , 20 07 —t he pl anno w at i ss ue (th e “ Pl an ”). As t o th e se cu redpo rti on of ADECA’s cl ai m , th e Pl anpl aceditinCla ss 7 an d p ro po se d to pa y $2 35 ,61 5 i n i ns ta ll m en ts of $ 12 ,61 6 b eg in ni ng rou gh ly five y ears aft er
co nf irmatio n. Th is in crea se in ADECA’ s s ecu redcla im was the res ul t o f y et
880 (11th Cir. 1990). The r ecor d indicates that, be causeADECA’s unse cure d claim and the claims of other

g ener al unsec ured c reditors we re of equal pr iority , L ett reta ined the discre tion to place them in the same c lass or sepa rate classes so longas such c lassifications wer e not “designed to manipulate c lass voting”or to “violate[] basic priority rights.” I d. There is no indication of such misbehavior here
. 9an ot he r rev al ua ti on of Let t’s u ne nc um be redpro pe rty. T he Pla n t he n s ep arat ed ADECA’ s u ns ecu redcla im —t he di ffer en ce b etweenth e to ta l o wedan d t he Cla ss 7 s ecu redcla im

—fr om all ot he r ge ne ral un se curedcla im s an d p la ceditalo ne in Cl as s 8 . Of th e g reat er tha n $ 2 m il li on va lu e o f ADECA’ s u ns ecu redcla im , th e pl anwou ldpa y

rou gh ly $20 ,00 0, o r on e p erce nt , in two an nu al in st al lm en ts aft er pa ym en t o f al l s ecu redcla im s. All ot he r un se cu redcla im s, i n C la ss 9, were
sc he du le d t o b e p ai d a t o ne pe rcen t o f th ei r va lu e inon e in st al lm en t s ix m on th s aft er co nf irmatio n. Fin al ly, th e Pl anst at edth at“ [e]xce ptas o th erwi se pro vi de d

1 2 in an y pro vi si on of t hi s Pl an , on th e Effec ti ve Date all pro pe rty of the Est at e sh al l

Nothing in the r ecor d indicates that the Class 9 g ener al unsec ured c laims should be 1 2 considere d “junior” to AD ECA’s Class 8 unsecur ed cla im simply beca use they wer e plac ed in a differ ent class. While dissimi lar c laims may not be place d in the same c lass in a plan of reor g anization, the Ba

nkruptcy Code does not re quire that similar cla ims mustbe plac ed in the same c lass. See supra

notes 3, 11. As the absolute priority rule c oncer

ns the trea

tment of unsecur ed cla ims vis à vis j unior claims, we f ail to see how the differ ent treatment of the cla ims in Classes 8 and 9 violates the rule
. The dispar ate tre atment of similar cla ims may g ive rise to other

arguments outside the absolute priority

rule in a c ram down, how ever . Recognizi ngthis, ADECA asserts on a ppeal that the segreg ation of its unsecure d claim from the c laims of other unsec ured c reditors “discriminate[s] unfairly” ag ainst its unsecured c laim in violation of the more g ener al cr am down provisions found in § 1129(b)(1) . Be cause our nar row holdingtoday

only allows for the revie w of otherw ise unprese rved c halleng es to a c ram down pla n on the ground that it violates the absolute priority

rule found in § 1129(b)(2) (B ), we do not addre ss this argument. I f the district court a g ree s that the claims in Class 9 are not junior to ADECA’ s Class 8 claim, it shoul d not addre ss ADECA’s arguments reg ardingunfair disc rimination, as doing so w ould exceed the scope of our holding
. 10rev es t i n t he Reo rg an iz edDebt or , all free a ndcle ar o f al l cl ai m s, l ie ns ,

en cu m br an ces an d o th er i nt eres ts of c red it or s.” 1 3 Lettdi st rib ut edba ll ot s t o i m pa ire d c red it or s fo r th e p ur po se of s eek in g
acce pt an ce o f th e Pl aninacco rd an ce wi th § 1 12 9( a)(8 ). ADECA vo te d t o re ject th e Pl an an d s ub m it te d awrit te n re sp on se . Pur su an t t o § 11 28 , th e b an krup tc y

1 4 1 5
co urt h el d aco nf

irmatio n h eari ng on Jan uary 9, 2 00 8. Of p art ic ul ar re le va nc e to th is ap pe al are s ta te m en ts m ad e b y th e b an krup tc y

jud ge an d c ou ns el for Lett—an d t ho se no t m ad e b y co un se l fo r ADECA—atth is he ari ng . The co nf irmatio n h eari ng be ga n wi th a reci ta ti on of t he res ul ts of t he ba ll ot in g fo r th e Pl an . Col li ns Pet taway , Jr., co un se l fo r Lett , in fo rm edth e co urt th atalt ho ug h ADECA h advo te d t o re ject t he Pla n, atlea ston e im pa ire d c la ss of cred it or s h advo te d t o a ccep t t he Pla n. Thu s, t he co urt re m ark edto Pet ta way , 1 6

“ The go odne ws i s you h av e anacce pt in g v ot e o f a cl as s, an d t ha t g et s you t o
In an individual Chapter 11 pr ocee ding, the debtor’s inter ests in property of the e state 1 3 are junior to the interests of a ll creditors, includingunsecur ed cr editors. See, e .g ., In re Ea st, 57 B.R. 14, 17 (B ankr. M.D. L a. 1985). The rete ntion of proper ty by such a debtor—including “contr ol or the potential for future e arning s”—without full pay ment to dissenting impaire d cre ditor classes ther efor e dire ctly implicates the absolute pr iority rule. I d.; see a lso infra note 26. ADECA ca st this vot e with re g ard to both its secure d and unsec ured c laims. 1 4 Whil e this written re sponse ra ised sever al objections, it did not attack the Plan for 1 5 failingto comply

with the absolute priority rule. The F eder al L and B ank Association of South Alabama, an impaire d secur ed cr editor 1 6 whose c laim occupied a

class by itself, voted to approve the Plan.

11co nf

irmatio n, b ecau se y ou ha ve to ha ve on e im pa ire d c la ss acce pt in g, wh ic h you ha ve .” Inth e sa m e ex ch an ge , th e co urt ex pl ai ne d, “ Tha t m ean s wi th [Lett ] ha vi ng reject in g c la ss es , we hav e to pro ceedun de r 11 29 (b ) as to th os e reject in g c la ss es . Youha ve to pro ve . . . th aty ou m eet. . . th e 1 12 9( a) s ta nd ard s an d t he (b) st an da rd s as to th e reject in g c la ss es , Mr. Pet ta way .” Late r in th e p ro ceed in g, t he
co urt re qu ire d P et ta way

to pro fferev id en ce t ha t t he Pla n c om pl ie d wi th th e cra m do wn p ro vi si on s o f Ch ap te r 11 , sp eci fic al ly whe th er the Pla n m etth e requi rem en ts of § 1 12 9( b) “ as to ADECA andth e o th er n on -v ot es or r eject in g v ot es .” Pet ta way ob li ge d, s ta ti ng th at“ [Let t] will pro fferth atth e Pl anco m pl ie s wit h a ll of t he ap pl ic ab le pro vi si on s o f Sec ti on 11 29 an d, al so , he wo ul d p ro ffer th atall ap pl ic ab le pro vi si on s o f th e ti tl e h av e b een m et .” He fu rth er at te st edth at th e Pl anth atha s b een pro po se d . . . ha s cl as si fie d a ll of the cla im s an d [h as in fo rm ed ] al l o f th e Cre di to rs an d C la ss es . . . ap pr op ria te ly; an d th atth e Pl anis fil edpu rs ua ntto an d i n c on si de rat io n o f th e Dis cl os ur e St at em en t; th atth e Pl anis pro po se d i n g oo d fa it h; th atitis hi s b es t ef

fo rt; an d t ha t t he reas on he fil edfor rel ie f un de r Ch ap te r 11 was be cau se he ha d wh atha d a m ou nt edto a $3 .2 m il li onwit h i nt eres t jud gm en t t ha t ADECA h adon hi m th athe di d n otha ve en ou gh ass et s to co ve r, so he so ug htrel ie f fro m th e Co urt. The co urt i nt errupt edPet ta way in th e m id stof h is pro fferto pre sc ie nt ly add , “ And by the way , hea rin g n o o bjec ti on .” Co un se l fo r ADECA, pre se ntat t he he ari ng , rem ai ne d s il en t.

12Pet ta way co nt in ue d: Andth at[Lett ] wou ldals o p ro fferth atas i t re la te s t o a ll Cred it or s th atm ay no t h av e v ot edor m ay

no t h av e acc ep te d t he Pla n, t ha t the Pl anis fai r an d e qu it ab le to all cla ss es , andth atth ere i s n o u nf ai r di sc riminat io n t o e it he r of th em to m eetth e requi rem en ts of S ect io n 11 29 (b ). Fo ll owi ng Petta way ’s pro ffer , Letttes ti fie d u nd er o ath t ha t “ ev erythi ng Mr. Pet ta way sai d” was c orrect . Ja m es Turn ip se ed , cou ns el forADECA, was th engi ve n t he flo orfor arg um en t. He p res en te d anu m be r of ob jecti on s t o t he Pla n, n on e o f whi ch we ta ke up on ap pe al
. Not ab ly, he di d n otad dr es s t he Pla n’s co m pl ia nc e o r 1 7
no nc om pl ia nc e wit h the ab so lu te pri or it y rul e. Inli gh t o f th is co nf

irmatio n h eari ng , th e b an krup tc y co urt ap pr ov edth e Pl an , ent eri ng a two -p ag e co nf irmatio n o rd er o n J an ua ry 14 , 20 08 . In t ha t o rd er, th e co urt n ot edth at“ Dr. Lett , th ro ug h apro ffer , tes ti fie d t ha t t he pl anm etall of th e requi rem en ts of 1 1 U.S.C. § 11 29 (a) an d (b ),” an d s ta te d t ha t i t “ co nc lu de s an d fin ds th atth e o bjec ti on s o f ADECA are due to be ov erru le d a ndth e p la n m eet s th [e] nec es sa ry

requi rem en ts of § 11 29 .”

ADECA most forc efully argued the issue of

nondischarg eability , which wa s the 1 7 subject of a

separ ate a

ppeal to this court. See A la. Dep’ t of Econ. a nd Cmty . Affa irs v. L ett, 368 F. App’ x 975 (11th Cir. 2010). 13On Fe brua ry 12 , 20 08 , th e b an krup tc y co urt i ss ue d a“ Mem or an du m Opi ni on an d Am en de d Ord er Co nf irming Debt or s Pl anof R eo rg an iz at io n.” The
co urt an no un cedth at“ in co ns id eri ng th e Pl an[th e co urt] fou ndth atth e Pl an
co m pl ie d wi th all ne ces sa ry

requi rem en ts un de r al l ap pl ic ab le pro vi si on s, t o wit : . . . th e d eb to r . . . m etth e ab so lu te pri or it y requi rem en ts em

bo di edin § 1 12 9( b) (2 ).” ADECA app eal edth e am en de d o rd er o f co nf irmatio n t o t he Uni te d S ta te s Dis tri ctCo urt fo r th e So ut he rnDis tri ctof Al ab am a, bu t d idno t s eeka st ay of t he pa ym en ts sch edul edun de r th e Pl an . B. On ap pe al to th e d is tri ctco urt, ADECA arg ue d, i nt er al ia , th atth e Pl an vi ol at edth e ab so lu te pri or it y rul e se t fo rth in § 1 12 9( b) (2 ) of Ch ap te r 11
. In

1 8

Specifica lly , ADECA argued in the district cour t that 1 8 [i ]n t his case, the Debtor’ s Plan violates the absolute priority rule on two c ounts: one, ther e is a c lass junior to ADECA’s unsec ured c laim in Cl ass 8, the Class 9 g ener al unsec ured c reditors, who a re r ece iving pr operty

under the Plan, when ADECA’s g ener al unsec ured c laim is not being [paid] i n full. . . . Secondly , the Debtor

himself has intere sts that are subor dinate to all cr editors. . . . Under the Debtor ’s Plan, L ett is rece iving pr operty . . . . [T] he De btor’s re tention of prope rty

interests, whe n all unsecur ed cr editors ar e not beingpaid in full, clea rly and undisputedly

violates the absolute priority rule. 14res po ns e, in te rv en orBal l an d Deb to r Lettco nt en de d tha t t he ap pe al was e qu it ab ly

m oo t o r, al te rn at iv el y , th atth e Pl anha d b een pro pe rly con firm ed
. The di stric t co urt fi rs t ad dr es se d t he m oo tn es s i ss ue . It co nc lu de d t ha t, al th ou gh ADECA hadfai le d t o o bt ai n ast ay of t he co nf

irmatio n o rd er p en di ng ap pe al , th e in te rv en orfai le d t o s uf fic ie nt ly dem on st rat e th atth e Pl anha d b een
subs ta nt ia ll y

co ns umm at ed . As su ch , th e ap pe al was n otequi tabl y m oo t. 1 9 The co urt t he n turne d t o ADECA’s ab so lu te pri or ity rul e arg um en t. Rat he r th anad dr es s t he m eri ts , th e co urt fo un d t ha t ADECA h adno t p res erv edth e is su e fo r rev ie w bec au se itdi d n otrai se th e is su e in th e b an krup tc y co urt. Elabo rat in g, th e d is tri ctco urt s ta te d: The Elev en th Cir cu itpe rm it s co ns id erat io n o f a p ur e que st io n o f law no t ra is edbe lo w if t he fai lu re t o c on si de r th atis su e o n app eal wou ld res ul t i n am is carr ia ge of ju st ic e. “ A ‘ m is carr ia ge of ju st ic e’ is a ‘[d]ecis io n o r ou tc om e o f [a] leg al pro ceed in g t ha t i s p reju di ci al or in co ns is te ntwit h [t he ] subs ta nt ia l ri gh ts of [ a] part y .’ ” [Wrig htv. Han naSte el Co rp ., 27 0 F .3d13 36 , 13 42 n.8 (11 th Cir . 20 01 )] (quo ti ng Bla ck ’s Law Dict io na ry , 99 9 (6 th ed . 19 90 )). ADECA arg ue s t ha t t hi s C ou rt s ho ul d a dd res s t he ab so lu te pri or ity rul e d es pi te it s fa il ur e to pre se rv e th e is su e b el ow, b utADECA reli es on In r e Pere z, 30 F.3d12 09 (9t h C ir. 1 99 4) , a cas e in whi ch th e Nin th Cir cu it he ldth atth e ab so lu te pri or it y rul e is a le ga l i ss ue th atm ay be co ns id eredforth e fi rs t t im e o n app eal . ADECA doe s n ot , ho wev er, ad dr es s t he Elev en th Cir cu it ’s add it io na l re qu ire m en t fo r co ns id eri ng is su es no t p res erv edforap pe al , i.e., th atfai lu re t o c on si de r th e is su e wil l re su ltin a m is carr ia ge of ju st ic e. Sp eci fic al ly, th ere i s n o
We undertake a similar mootness analy sis below. See infra part I I .A. 1 9 15ev id en ce t ha t t he subs ta nt ia l ri gh ts of ADECA wi ll be vi ol at edor t ha t

ADECA will su fferpre

jud ic e if th e is su es on ap pe al are n ot ad dr es se d. Itto okfou r pr op os edpl an s an d a lm os t as m an y y ears for th e Ban krup tc y

Co urt t o app ro ve a pl anof r eo rg an iz at io n i n t hi s ca se . Whe th er an ot he r atte m

ptto reo rg an iz e th e d eb to r in Ch ap te r 11 wou ldm eetwit h s uc ces s, an d p utADECA ina be tt er p os it io n, i s a m at te r of sp ecu la ti on . (em ph as is ad de d)
. Acco rd in gl y , th e d is tri ctco urt af firm edth e d eci si on of t he ba nkrupt cy co urt wit ho utad dr es si ng whet he r th e Pl anco m pl ie d wi th § 1 12 9( b) or t he ab so lu te pr io rit y rul e. Thi s ap pe al fol lo wed
. II. W e rev ie w con cl us io ns of l aw m ad e b y eit he r th e d is tri ctco urt o r th e ba nkrupt cy

co urt d e n ov o. We will no t d is tu rb th e b an krup tc y co urt’s fa ctua l de te rm in at io ns un le ss th ey are cl earl y

erro ne ou s; th e d is tri ctco urt i s n ot
au th or iz edto m ak e in de pe nd en t fa ctua l fi nd in gs . In re Club As so cs ., 95 6 F .2d 10 65 , 10 69 (11 th Cir . 19 92 ) (ci ti ng In r e Subl et t, 8 95 F.2d13 81 , 13 83 –8 4 (1 1t h Ci r. 19 90 )). W it h t he se st an da rd s o f rev ie w inm in d, we turn t o t he di st ric t co urt’s
co nc lu si on s o f la w th atADECA’ s ap pe al was n otm oo t b utno ne th el es s b arre d b y th e ci vi l p la in erro r ru le
. A.

16Deb to r Lettan d i nt erv ern orBal l fi rs t co nt en d t ha t t hi s ap pe al is equi tabl y

m oo t b ecau se th e Pl anha s al read y be en“ so subs ta nt ia ll y

co ns umm at edth at effe ct iv e rel ie f is no lo ng er av ai labl e.” Id . at 1 06 9 (quo ti ng Mi am i Ct r. Ltd . P’shi p v. Ba nkof N.Y., 82 0 F .2d37 6, 3 79 (11 th Cir . 19 87 )). “ Subs ta nt ia l
co ns umm at io n” is de fin edas (A) tr an sf er o f al l o r subs ta nt ia ll y

all of t he pro pe rty pro po se d b y th e pl anto be tra ns ferr ed ; (B) a ss um

pt io n b y th e d eb to r orby the su cces so r to th e d eb to r un de r th e p la n o f th e b us in es s o r of th e m an ag em en t o f al l o r subs ta nt ia ll y al l o f th e p ro pe rty deal t wi th by the pl an ; an d (C) c omm en cem en t o f di st rib ut io n u nd er the pl an . § 1 10 1( 2) . W e m

us t co ns id er the se fact or s, b ut“ [e]ven if s ub st an ti al
co ns umm at io n h as oc curred , a co urt m us t s ti ll co ns id er al l t he cir cu m st an ces of t he
cas e to de ci de whethe r itcan granteffec ti ve rel ie f.” Inre Cl ub Ass oc s., 9 56 F.2d at10 69
. In c on si de rin g t he se cir cu m st an ces , we m us t “ st rik [e] th e p ro pe r 2 0

The Eleve nth Circuit in In re Club Associate s offe red a list of “subsidiary

questions” a 2 0 court may consider when lookingat the “c ircumstance s of the ca se”: Has a stay pendingappea l been obtaine d? I f not, then why not? Has the pla

n been substantially

consummated? I f so, what kind of tra nsactions havebeen consummated? What ty

pe of r elief doe s the appe llant seek on a ppeal? What eff ect would grantingrelief

have on the interests of third pa rties not befor e the court? And, would re lief af fec t the re- emer g ence of the de btor as a r evitalized entity ? The a

nswers to these questions provide the re viewingcourt with the backdr op to evaluatethe ultimate issue of whe ther a confirmation plan has progresse d to the point where eff ective judicia l relief is no long er a viable option. 956 F.2d 1065, 1069 n.11 ( 11th Cir. 1992). 17ba la nc e b etween th e equi tabl e co ns id erat io ns of f in al it y an d g oo d fa it h re li an ce o n a jud gm en t an d t he co m

pe ti ng in te res ts th atun de rli e th e ri gh t o f a p art y to see k
rev ie w of aba nkrupt cy

co urt o rd er ad ve rs el y

affe ct in g h im .” Id . (ci ti ng In r e In fo
. Dial og ue s, In c., 66 2 F .2d47 5, 4 77 (8t h C ir. 1 98 1) ). The p art y ass ert in g m oo tn es s be ars th e b ur de n o f pe rs ua si on . In re And ers on , 34 9 B .R. 44 8, 4 54 (E.D. Va. 20 06 ) (fo ot no te om it te d)
. W e fi ndth at , des pi te ADECA’ s fa il ur e to ob ta ina st ay pe nd in g app eal an d de sp it e th e fac t t ha t p aym en ts ha ve be enm ad e u nd er the Pla n, Deb to r ha s n ot

“ subs ta nt ia ll y

co ns umm at edit s re or ga ni zat io n p la n t o the ex te ntth atit[ha s] be co m e[] leg al ly andpra ct ic al ly im po ss ib le to un win d t ha t wh ic h h as alr ead y be en do ne .” Inre Co nd ec, In c., 22 5 B .R. 80 0, 8 03 (M.D. Fl a. 19 98 ) (ci ta ti on s o m it te d)
. Ult im at el y , whi le we sh are Deb to r’s co nc ern s ab ou t t he im pa ctof in va li da ti ng th e Pl anon ot he r cre di to rs ’ ex pe ct at io ns , we bel ie ve th atth e
subs ta nt iv e is su es in th is cas e m ay be res ol ve d wi th ou t p reju di ci ng th e ri gh ts of ab se ntth irdpa rti es . As s uc h, we h ol d tha t Let t an d B al l h av e n otm etth ei r 2 1 bu rd enof d em on st rat in g t ha t t hi s ap pe al is equi tabl y m oo t.
L ett and B all espec ially

fea r that they

will be require d to disgorg e pay ments alrea dy 2 1 made a ccor ding to the Plan in the e vent that the Plan is found to violate the absolute priority rule, prejudicingabsent third par ties. We believe that a

findingthat the Plan runs af oul of Chapter 11 will not necessarily

lead to such pr ejudice, a s the Plan could be re structure d to comport with the Ba nkruptcy Code without requiringwholesale disgorg ement. Of course , we trust the wisdom of the bankr uptcy court in super

vising such a

delicate endea

vor. 18Pu t s im pl y , Cred it ordo es no t wi sh to return t o t he drawin g b oardwit h reg ardto th e en ti re Pl an : “ ADECA do es no t s eekto un do or h av e Let t re co up pa ym en ts m ad e to sec ur edcred it or s . . . , who were b as ic al ly recei vi ng th ei r
cu rren t l oan p aym en ts th ro ug ho utth is len gt hy Chap te r 11 pro ceed in g, an d,
es se nt ia ll y , con ti nu edto rece iv e th ei r reg ul ar m on th ly paym en ts un de r Lett ’s pr op os edPla n o f Reo rg an iz at io n.” Rep ly Br. App el la nt4– 5. ADECA ha s n o in te res t i n ups et ti ng th e ex pe ct at io ns of s en io r se cu redcred it or s cu rren tl y
rece iv in g p aym en ts un de r th e Pl an , as i ts ab so lu te pri or it y rul e arg um en ts foc us on th e tr eatm en t o f un se cu redcred it or s an d the di sp os it io n o f pr op ert y to Lett
. Fu rth er, ADECA is st il l years fr om rece iv in g i ts fir stpay

m en t u nd er the Plan fo r ei th er i ts sec ur edor u ns ecu redcla im s. Equi tabl e co ns id erat io ns , th eref or e, do no t requi re u s t o d eem

th is co nt ro ve rs y

m oo t. B. W e th eref

or e m us t co ns id er wh ethe r th e ci vi l p la in erro r ru le pre cl ud es
rev ie w of t he Pla n’s co m pl ia nc e wit h t he ab so lu te pri or it y rul e. Befo re ad dr es si ng th is is su e, we be gi n wi th a rev ie w of g en eral ap pe ll at e p rin ci pl es reg ard in g t he pr es erv at io n o f is su es forrev ie w. W e n ot e atth e o ut se t o urrel uc ta nc e to in tru de up on th e p ro vi nc e o f th e b an krup tc y co urts be lo w by reac hi ng is su es no t b ro ug ht

19be fo re the m , as “ [b ]ankrupt cy cas es are t o b e tr ie d i n b an krup tc y co urt.” In re Air Co nd it io ni ng , Inc . of Stuart, 8 45 F.2d29 3, 2 98 (11 th Cir . 19 88 ). 1.

“ Ord in ari ly an ap pe ll at e co urt d oe s n otgi ve co ns id erat io n t o i ss ue s n ot rai se d b el ow.” Ho rm el v. Hel ve rin g, 3 12 U.S. 55 2, 5 56 , 61 S. Ct. 7 19 , 72 1, 8 5 L. Ed. 1 03 7 (1 94 1) . Not io ns of p ro cedur al fai rn es s, fi na li ty, an d i ns ti tu ti on al
co m pe te nc e in fo rm

th is pru de nt ia l d oc tri ne . As Ju st ic e Bl ackex pl ai ne d: [O]ur p ro cedur al sch em e co nt em pl at es th atpa rti es sh al l co m e to is su e in th e tr ia l fo ru m

ve st edwith aut ho rit y

to de te rm in e que st io ns of f act . Thi s i s es se nt ia l i n o rd er tha t p art ie s m ay ha ve th e o pp ortu ni ty to of fer a ll th e ev id en ce t he y

be li ev e rel ev an t t o the is su es whi ch th e tri al tri bu na l i s al on e co m pe te ntto de ci de ; i t i s eq ua ll y ess en ti al in or de r th atli ti gant s m ay

no t b e su rp ris edon ap pe al by fina l d eci si on th ere o f is su es up on whi ch th ey ha ve ha d n o o pp ortu ni ty to i ntro du ce ev id en ce. Id . Non ethe le ss , th is pri nc ip le is no t u nyiel di ng ; “ [t]he re m ay alwa y s b e
ex cep ti on al cas es or p art ic ul ar ci rcu m st an ces whi ch wil l p ro m pta rev ie win g o r ap pe ll at e co urt, wh ere i nju st ic e m ig htot he rwis e res ul t, t o c on si de r qu es ti on s o f la w whi ch were n ei th er p res se d n orpa ss edup on by the co urt . . . bel ow.” Id . at 55 7, 6 1 S . Ct. at72 1 (c it in g B la ir v . Oest erl ei n M ach . Co., 2 75 U.S. 22 0, 2 25 , 48 S. Ct . 87 , 88 , 72 L. Ed. 24 9 (1 92 7) ). In s ho rt, t hi s co urt s ho ul d “ reco gn iz [e] th e de si rab il it y

an d e xi st en ce o f a g en eral pra ct ic e u nd er wh ic h app el la te co urts

20co nf

in e th em se lv es to th e is su es rai se d b el ow,” b ut“ ne ve rth el es s [s ho ul d] no t l os e si gh t o f th e fac t t ha t s uc h app el la te pra ct ic e sh ou ldno t b e ap pl ie d wh ere t he ob vi ou s re su ltwou ldbe a pl ai n m is carr ia ge of ju st ic e.” Id . at 5 58 , 61 S. Ct. at 72 2. “ Thi s [i s a] civ il ve rs io n o f th e p la inerro r ru le .” Inre Mo ne ta ry Group, 9 1 B.R. 1 38 , 14 1 (M .D. Fla. 1 98 8)
. The Elev en th Cir cu itha s embrace d t hi s co nc ep ti on of t he civ il pl ai n e rro r
ru le
. See, e.g ., Roo fin g & Sh eetMet al Serv s., In c. v. La Qu in taMo to r In ns , Inc ., 2 2 68 9 F .2d98 2, 9 90 (11 th Cir . 19 82 ) (“ Sp eci fic al ly, we wil l co ns id er an is su e n ot rai se d i n t he di st ric t co urt i f itin vo lv es a pu re que st io n o f law, andif re fu sa l t o

In Princeton Homes, Inc. v. Virone , a pane l of this court outlined five sce narios in 2 2 which an a

ppellate c ourt may

ignor e the f

ailure of a litiga nt to preser

ve an issue f

or appe al: First, an a ppellate c ourt will consider a n issue not raised in the district cour t if it involves a pure question of law, a nd if ref usal to consider it would re sult in a miscarr iag e of justice. Sec ond, the rule ma y be re laxed where the appe llant raises an objec tion to an order which he ha d no opportunity to raise at the district court level. Third, the r

ule does not bar

consideration by

the appe llate cour

t in the first instance where the intere st of substantial justi ce is at stake. F ourth, a fe dera l appellate court is justified in resolvingan issue not passed on be low . . . wher e the proper resolution is beyond any

doubt. Finally , it may

be appropriate to c onsider an issue first ra ised on appe al if that issue pre sents signific ant questions of g ener al impact or of great public conce rn. 612 F.3d 1324, 1329 n.2 ( 11th Cir. 2010) (quoting D ean Witter Rey nolds, Inc. v. F erna

ndez, 741 F.2d 355, 360–61 ( 11th Cir. 1984)). 21co ns id er i t wo ul d re su ltin a m is carr ia ge of ju st ic e.” (ci ti ng Mart in ez v . Mat he ws,

54 4 F .2d12 33 , 12 37 (5t h C ir. 1 97 6) )). 2 3 As d is cu ss edin part I .B, supr a, th e d is tri ctco urt re li edon th is pre ced en t t o di sm is s t he cas e wit ho utad dr es si ng th e m eri ts of ADECA’s arg um en ts ba se d o n th e ab so lu te pri or it y

rul e. Inap pl y in g t he civ il pl ai n e rro r ru le , th e co urt ex pl ic it ly fo un d tha t n o m is carr ia ge of ju st ic e wou ldres ul t fr om it s d ecl in in g t o h ear s uc h arg um en ts . W e d is ag ree wi th th e d is tri ctco urt. We do so , ho wev er, n otbe cau se a
m is carr ia ge of ju st ic e wil l re su ltfro m a refu sa l t o h ear ADECA’s s ub st an ti ve ch al le ng es . Rath er, we fi ndth atth e ap pl ic at io n o f th e ab so lu te pri or it y rul e in a Ch ap te r 11 cram

do wn p ro ceed in g s uf

fic ie nt ly pla ces th e m at te r be fo re the ba nkrupt cy

co urt s o a s t o p res erv e th e is su e fo r ap pe al . An im pa ire d c red it orin a di ss en ti ng cla ss ne edno t fo rm al ly objec t o n s uc h g ro un d i n t he ba nkrupt cy co urt in ord er t o app eal anim

pr op erl y co nf irmed cram do wn p la n. To g iv e fu rth er co nt ex t t o t hi s h ol di ng , we exa m in e th e ab so lu te pri or it y
ru le in part I I.B.2 , andtu rnto th e in te ract io n o f th e ru le an d t he civ il pl ai n e rro r
ru le in part I I.B.3 . W e b el ie ve th atall owi ng forsu ch ap pe ll at e rev ie w in th is

In Bonne r v. City

of Prichar d, 661 F.2d 1206, 1209 ( 11th Cir. 1981) (en ba nc), this 2 3 court a dopted as bindingprec edent a ll decisions of the for mer F ifth Circuit handed down prior to October 1, 1981. 22na rro w sce na rio pro m ot es fai rn es s i n c on te nt io us cram do wn p ro ceed in gs witho ut
un du ly lim it in g t he lo gi cal th ru stof t he civ il pl ai n e rro r ru le
. 2. Und ers ta nd in g t he op erat io n o f th e ab so lu te pri or it y rul e requi res a br ie f
ov erv ie w of c on firm at io n p ro ceed in gs in a Ch ap te r 11 cram do wn. Gen eral ly, § 1 12 9 d es cri be s t he requi rem en ts th ata co urt m us t en su re ar e m etbe fo re ap pr ov in g a ny pro po se d C hapt er 1 1 p la n o f reo rg an iz at io n. Sect io n 1 12 9( a) pr es cri be s t ha t “ [t]he co urt s ha ll co nf irm a p la n o nl y

if” itm eet s an enum erat edset of requi rem en ts . Of sp eci al in te res t t o o uran al y si s ar e § § 1 12 9( a)(8 ) an d 11 29 (b )(1 ). Sect io n 1 12 9( a)(8 ) requi res th at“ [w]ith res pe ctto each cla ss of cl ai m s o r in te res ts —(A) s uc h c la ss ha s ac cep te d t he pl an ; o r (B) s uc h c la ss is no t im pa ire d u nd er the pl an .” Inou r cas e, itis un di sp ut edth atADECA’ s s ecu redan d
un se curedcla im s ar e im

pa ire d a ndth atADECA has reject edth e Pl anwit h re ga rd to Cla ss es 7 an d 8
. 2 4 Sect io n 1 12 9( b) (1 ) co nt em pl at es su ch reject io n b y

anim pa ire d c la ss . It read s, i n re le vantpa rt:

As discussed in par

t I .A, supra, at least one impaire d class of c laims voted to acc ept the 2 4 Plan, thus satisfying therequire ment of § 1129(a)(10) that “at lea st one class of c laims that is impaired unde r the plan ha s acc epted the pla n . . .” bef ore it may be conf irmed by the cour t. 23if a ll of t he ap pl ic ab le requi rem en ts of s ub se ct io n (a ) of th is sec ti on ot he r th anpa rag rap h (8 ) are m etwit h re sp ectto a pl an , th e co urt, o n reque stof the pro po ne ntof t he pl an , sh al l co nf irm th e p la n no twi th st an di ng th e requi rem en ts of s uc h p arag rap h i f th e p la n d oe s no t d is cri m in at e u nf

ai rly, andis fai r an d e qu it ab le , with re sp ectto each cla ss of c la im s o r in te res ts th atis im pa ire d u nd er, an d h as no t acce pt ed , th e p la n. § 1 12 9( b) (1 ). Inba nkrupt cy

pa rla nc e, th is is a “ cram

do wn,” a s t he co urt i s g iv enth e
au th or it y to “ cram ” th e o pp os edpl ando wn upo n acred it or in a no nc on se nt in g cl as s. Sec ti on 11 29 (b )(2 ) de fin es th e sp eci fic cri te riaa pl anm us t co nf orm to in
or de r to be de em ed“ fai r an d e qu it ab le .” Thes e ad di ti on al m eas ur es pro te ct 2 5 di ss en ti ng im

pa ire d c la ss es , as ade bt orcan no t i so la te cla im s fo r un fai r tr eatm en t
orpu t the in te res ts of e qu it y ho ld ers ah eadof t he in te res ts of c red it or s. As a s is te r ci rcu itha s ex pl ai ne d, “ [t]he ph ras e ‘fair an d e qu it ab le ’ is no t a
va gu e ex ho rta ti on to ba nkrupt cy jud ge s t ha t t he y

do th e ri gh t t hi ng ; ra th er, i t im pl em en ts th e so -cal le d abs ol ut e p rio rit y rul e u nd er wh ic h a n o bjec ti ng cla ss
m us t b e p ai d i n fu ll be fo re an y cla im or i nt eres t ju ni orto itge ts an yth in g a t al l.”
For impaired sec ured c laims in cram down, the Code require s in part that the plan 2 5 provide “ that the holders of such cla ims retain the liens sec uringsuch cla ims, whether the proper ty subject to such liens is reta ined by the debtor or

transfe rre d to another e ntity , to the extent of the allowed amount of such claims. . . .” § 1129(b)(2) (A). F or impaired unse cure d claims in cram down, the plan must provide that the holder of the c laim be paid in full or that “the holder

of any claim or intere st that is juni or to the cla ims of such class will not rec eive or reta in under the pla

n on acc ount of such junior cla im or interest any proper ty . . . .” § 1129(b)( 2)(B ). 24Inre Per ez, 3 0 F .3d12 09 , 12 12 –1 3 (9 th Cir . 19 94 ). Sect io n 1 12 9( b) do es no t

crea te a li stof p ot en ti al arg um en ts or a ffi rm at iv e d efen se s fo r th e h ol de rs of cl ai m s i n a gg rie ve d c la ss es ; ra th er, i t s et s o utst ric t re qu ire m en ts th ata co urt m us t
en su re ar e m etbe fo re a p ro po se d p la n m ay be co nf irmed. Im po rta nt ly, th e Ban krup tc y Co de en vi si on s a b an krup tc y co urt ex erci si ng
anin de pe nd en t dut y

to en su re tha t t he st ric tu res of § 11 29 (b ) are m etwit h re ga rd to im pa ire d d is se nt in g c la ss es of c red it or s i n aCh ap te r 11 cram do wn. See In r e Pi pe r Airc raftCo rp ., 24 4 F .3d12 89 , 12 99 –1 30 0 n .4 (1 1t h C ir. 2 00 1) (“ A cou rt
m us t i nd ep en de nt ly sati sf

y it se lf t ha t t he se cri te ria[in § 1 12 9] are m et . Thu s, i t
m us t co ns id er fa ct s re la ti ng to th es e cri te riaev enin th e ab se nc e o f an ob jecti on .”);
se e al so In r e Bau gh , 73 B.R. 4 14 , 41 6 (B an kr . E.D. Ark . 19 87 ) (“ Inad di ti on to
co ns id eri ng th e o bjec ti on s ra is edby credi to rs , th e Co urt h as anin de pe nd en t dut y to de te rm in e whe th er the pl anha s m etall th e requi rem en ts ne ces sa ry for
co nf irmatio n.” (ci ta ti on s o m it te d) ). The reco rdpl ai nl y

sh ows th atth e b an krup tc y co urt fu ll y

un de rs to odth is in de pe nd en t o bl ig at io n a ndad dr es se d t he ab so lu te pri or it y rul e in co nf

irming th e Pl ande sp it e ADECA’ s fa il ur e to ob ject. In de ed , th e co urt s pe ci fic al ly requ ire d Deb to r to pro fferev id en ce t ha t t he Pla n c on fo rm edto th e ab so lu te pri or it y rul e. As d is cu ss edin part I .A, supr a, th e b an kr up tc y adm in is tra to r ob

jecte d s uasp on te
25to two sep arat e reo rg an iz at io n p la ns du e to th ei r vi ol at io ns of t he rul e. Even if t he

co urt u lt im at el y

erre d a s a m at te r of

law o n t he m eri ts , itcan no t b e sa idth atitdi d
no t re ach th e m eri ts or t ha t t he co urt d idno t co nt em pl at e it s dut ie s u nd er § 1 12 9( b)
. 3. W e fi na ll y

m us t d eci de whet he r th e ci vi l p la in erro r ru le sh ou ldap pl y to fo recl os e anap pe ll at e arg um en t fr om anim pa ire d c red it orin a di ss en ti ng cla ss th ata cramm eddo wn Ch ap te r 11 pl anvi ol at es th e ab so lu te pri or it y rul e. W e be li ev e th atitsh ou ldno t, as th e cra m do wn p ro vi si on s o f th e Ban krup tc y Co de
se rv e to ren de r th e ci vi l p la inerro r ru le in ap pl ic ab le to su ch ch al le ng es . As o ne di st ric t co urt ru li ng ona ba nkrupt cy ap pe al ex pl ai ne d, [i]t i s wi th in th is Co urt’s d is cret io n t o re so lv e an is su e n otde ci de d i n th e Ban krup tc y

Co urt i f th e rec or d t ho ro ug hl y pre se nt s t he is su e. In co nt ras t, i f th e rec or d re fle ct s an is su e was pre se nt edin a cu rs ory m an ne r an d n ev er p ro pe rly pres en te d t o t he Ban krup tc y Co urt, the is su e is no t p res erv edforap pe al . In o th er wo rd s, i t i s n oten ou gh th at th e rec or d p ro vi de s fa ct s wh ic h m ay pe rm itth e res ol ut io n o f an is su e; rat he r th e rec or d m

us t b e ad equa te ly dev el op ed , to th e p oi ntth atth e Ban krup tc y

Co urt co ul d h av e p as se d o n t he is su e, ev enth ou gh th at co urt d ecl in edto do so . Inre Mo ne ta ry

Group, 9 1 B .R. at 1 40 (ci ta ti on s o m it te d) . Here, th e b an krup tc y
co urt s uf fic ie nt ly con si de redth e ab so lu te pri or it y rul e is su e th atADECA ch al le ng es on ap pe al . The rec or d i s “ ad equa te ly dev el op ed ”; th e b an krup tc y co urt
26requi redLett ’s cou ns el to pro ffer ev id en ce g oi ng di rect ly to t he he artof t he
m at te r. Als o, t he bankrupt cy adm in is tra to r’s ru li ng s i nd ic at e th atth e co urt was fu ll y co gn iz an t o f it s re sp on si bi li ti es st emm in g fr om th e ab so lu te pri or it y

rul e in
co nf irming Lett ’s reo rg an iz at io n. Fi na ll y , th e b an krup tc y co urt n oton ly “ co ul d ha ve pa ss edonth e is su e” o f th e ab so lu te pri or it y rul e, bu t i t, i n fa ct , reach edth e
m eri ts onth is is su e in it s co nf irmatio n o rd er. See in fra p artI.B. To rei te rat e, we do no t h ol d t ha t a f

ai lu re t o h ear ADECA’s arg um en t g ro un de d i n t he ab so lu te pr io rit y rul e wou ldlea d t o am is carr ia ge of ju st ic e; rathe r, we ho ldth atth e requi rem en ts of § 11 29 (b ) in a cram do wn p ro ceed in g s uf

fic ie nt ly pres en t t he ab so lu te pri or it y

rul e in th e b an krup tc y

co urt as to pre se rv e th e is su e fo r rev ie w
an d o bv ia te th e ci vi l p la in erro r ru le in th is narro w con te xt . In s um , th e fac ts ha ve sh own th atth e ab so lu te pri or it y rul e was pre se nt edto an d c on si de redby the ba nkrupt cy

co urt. The is su e is th eref or e p res erv edforap pe al
. The Nin th Cir cu itha s ad dr es se d t he civ il pl ai n e rro r ru le un de r si m il ar ci rcu m st an ces an d h as als o b een unpe rs ua de d t ha t i t s ho ul d app ly w it h fu ll rig orto
anab so lu te pri or it y

rul e ch al le ng e o n app eal . The co urt t he re fo cu se d o n t he
so m ewh atno n- ad ve rs ari al na tu re o f ba nkrupt cy pro ceed in gs : [T]his [ci vi l p la in erro r] rul e is ap pl ie d m or e fl ex ib ly in the ba nkrupt cy

co nt ex t t o re fle ctth e rea li ty tha t b an krup tc y pro ceed in gs are n otpre ci se ly anal og ou s t o n orm al adve rs ary li ti ga ti on . The
27pr in ci pa l re as on we requi re p art ie s t o ra is e an is su e in th e tr ia l co urt i s

to gi ve th atco urt an op po rtu ni ty to re so lv e th e m at te r an d, h op efu ll y , av oi d e rro r. Als o, wh enm at te rs are fi rs t ra is edinth e tr ia l co urt, i t’s po ss ib le to de ve lo p t he reco rdas n eed edto pre se ntth e is su e p ro pe rly on ap pe al . In n orm al adve rs ari al li ti ga ti on , nei th er the tri al jud ge no r op po si ng co un se l h av e th e res po ns ib il it y to rai se is su es a pa rty fail s to rai se ; i f th e aff

ect edpa rty fail s t o o bjec t, t he is su e n ev er co m es be fo re the co urt. The m at te r is di ffer en t i n b an krup tc y pro ceed in gs whe re d eb to rs -in -p os se ss io n a ndtru st ees ha ve a res po ns ib il ity to rai se cert ai n i ss ue s, an d t he co urt i ts el f m us t p as s o n t ho se is su es , whet he r orno t t he y ’re sp eci fic al ly putin di sp ut e. Inre Per ez, 3 0 F .3dat 1 21 3 (f oo tn ot e o m it te d) . Putsu cci nc tl y , Debt orpl acedth e ab so lu te pri or it y

rul e sq ua rel y

be fo re the co urt wh enhe pro ffer edco m pl ia nc e wit h § 1 12 9 a ndso ug htco nf

irmatio n o f hi s C hapt er 1 1 p la n i n c ram do wn. See id . at 12 14 . In t he se na rro w cir cu m st an ces , we bel ie ve th atth e ci vi l p la in erro r ru le sh ou ldno t p recl ud e th is ap pe al
. Fi na ll y , we no te ou r co nc ern forth e tr eat m en t o f im pa ire d c red it or s i n a di ss en ti ng cla ss who do no t at te ndco nf irmatio n h eari ng s i n aCh ap te r 11 cram do wn p ro ceed in g. Whil e a cre di to r th atfai ls to ap pe ar m ay waiv e m an y arg um en ts , su ch a cred it or sh ou ldpre su m e th atth e b an krup tc y co urt wi ll co m

pl et e it s s ta tu to ril y

m an da te d dut ie s— an d, re la te dl y , forth e ap pe ll at e co urts to he ar ch al le ng es when th e co urt errs as am at te r of law co nc ern in g t he ab so lu te pri or it y
ru le
.

28Ourrul in g t od ay sh ou ldno t l eadto a pr ol ife rat io n o f ap pe ll at e li ti ga ti on or tra ns fer the bu lkof b an krup tc y li ti ga ti onto th e d is tri ctco urts . Rath er, we fu ll y tru stth e b an krup tc y

co urts to ex erci se sk il lfu ll y th ei r du ti es an d t he di st ric t co urts to di sp at ch fri vo lo us ap pe al s, p art ic ul arl y gi ve n t he so m ewh atm ech an ic al op erat io n o f th e ab so lu te pri or it y rul e. If an yth in g, o urho ld in g t od ay sh ou ld red ed ic at e b an krup tc y

co urts to th e fai th fu l ex ecu ti on of the ir s ta tu to ry du ti es an d
en su re tha t co nt en ti ou s cr am do wn p ro ceed in gs oc cu r as en vi si on edby Con gr es s. As we h av e fo cu se d o n t he pro cedur al nu an ces of t hi s ca se , we res erv e fo r th e d is tri ctco urt fi na l ju dg m en t o n wh ethe r th e Pl anvi ol at es th e ab so lu te pri or it y
ru le . W e draw ren ewedatt en ti on , ho wev er, t o ADECA’s two m ai n c om pl ai nt s: fir st , th atth e Pl ancal ls forth e p aym en t o f ge ne ral un se cu redcla im s s ix m on th s aft er co nf irmatio n, wh il e itsch edul es pa y m en ts to ADECA’ s cl ai m s t o b eg in m an y y ears aft er co nf

irmatio n; an d s eco nd , th atth e Pl ancal ls forimm ed ia te rev es ti ng of al l p ro pe rty of the est at e in th e d eb to r up on co nf irmatio n. W e b el ie ve th at

2 6

ADECA’s se cond complaint more direc tly implicates the absolute pr iority rule a nd 2 6 thus warr ants greater attention from the district court. See supra notes 12, 13. The debtor’s proper ty interests in a Chapter

11 proce edingare subordinate to all cr editors’ intere sts. See, e.g ., In re Tomlin, 22 B .R. 876, 877 (Ba nkr. M.D. Ala. 1982) . L ett asser ts that he may

reta in property so long a s he re tains no equity interest in that prope rty

under the terms of the Plan. The United States Supreme Court has re jected this view. See Norwe st Bank Worthing ton v. Ahlers, 485 U.S. 197, 207–08, 108 S. C t. 963, 969, 99 L . Ed. 2d 169 (1988) ( “We join with the consensus of authority which has r ejec ted this ‘no value’ theory . Even whe re de bts far e x cee d the cur rent value of assets, a de btor who re tains his equity interest in the ente rprise r etains ‘pr operty .’ Whether the va lue is ‘pre sent or prospe ctive, for dividends or only

for pur poses of c ontrol’ a 29ADECA has th e ri gh t t o h av e th es e co m pl ai nt s ad jud ic at edon th e m eri ts , andwe
are c ert ai n t ha t t he se is su es wil l b e ap tl y ha nd le d i n t he co urt b el ow. Acco rd in gl y , we VACATE the di st ric t co urt’s d eci si on an d R EMAND for fu rth er d is po si ti on co ns is te ntwit h t hi s o pi ni on . SO ORDERED.

reta ined equity

interest is a prope rty

interest to ‘whic h the cr editors [are] entitled . . . befor e the stockholders [can] retain it for a ny purpose whatever .’” ( quoting N. Pac . Ry . Co. v. Boyd, 228 U.S. 482, 508, 33 S. C t. 554, 561, 57 L . Ed. 931 (1913)) ). 30CARNES, co nc urrin g i n the jud gm en t:

I joi n i n t he Co urt’s jud gm en t o nl y be cau se it s d eci si onto di sp en se wit h t he
co nt em po ran eo us ob

jecti onrul e in ap pe al s fr om th e b an krup tc y

co urt t o t he di st ric t co urt s te m s fr om , andis st ric tl y li m it edby, th e u ni qu e n atur e o f th e ba nkrupt cy

co urt’s duty

to in qu ire in to an d re vi ew th e cra m do wn p ro vi si on s o f a Ch ap te r 11 pl anfor

pu rp os es of e nf

or ci ng th e ab so lu te pri or it y rul e co nt ai ne d i n 8 U.S.C. § 1 12 9( b) (2 )(B) . Any ot he r de fectin a Ch ap te r 11 pl anwhi ch is no t br ou gh t t o t he att en ti on of t he ba nkrupt cy co urt wi ll no t b e p res erv edforrev ie w in th e d is tri ctco urt. See Majo rit y Op. at10 n. 1 2 (“ [O]ur n arro w ho ld in g t od ay on ly al lo ws fo r th e rev ie w of o th erwi se unpr es erv edch al le ng es to a cram do wn p la n o n th e g ro un d t ha t i t v io la te s t he ab so lu te pri or it y rul e fo un d i n § 11 29 (b )(2 )(B) .”). It is als o wo rth no ti ng th atth ere was a sp eci fic ob jecti on inth e d is tri ctco urt. As a
res ul t, t od ay ’s dec is io n d oe s n ot , andco ul d n ot , ho ldth atanab so lu te pri or it y rul e vi ol at io n c ou ldbe rev ie wedby thi s C ou rt i f th ere h adbe enno ob jecti on to th e pl anon th atsp eci fic gro un d i n t he di st ric t co urt. Fi na ll y , reas on requi res reco gn iz in g t ha t we ar e v acat in g t he di stric t co urt’s de ci si on no t b ecau se th atco urt fa il edto fai th fu ll y fol lo w th e la w, bu t i ns te adon ly be cau se itun de rs ta nd ab ly lack edth e p res ci en ce t o p red ic t tha t t hi s C ou rt wo ul d

31carv e o utanex cep ti on to a well -kno wn ru le of l aw th atha s n earl y un iv ers al ap pl ic at io n.

32