Source: https://case-law.vlex.com/vid/324-f-3d-197-597325566
Timestamp: 2020-08-09 05:51:56
Document Index: 554230595

Matched Legal Cases: ['§ 502', '§ 1334', '§ 158', '§ 158', '§ 1124', '§ 1124', '§ 1124', '§ 101']

324 F.3d 197 (3rd Cir. 2003), 01-4140, In re PPI Enterprises (United States) Inc. - Federal Cases - Case Law - VLEX 597325566
Docket Nº: 01-4140
Party Name: In re: PPI ENTERPRISES (U.S.), INC. and POLLY PECK PRODUCE, INC., Debtors SHELDON H. SOLOW, d/b/a SOLOW BUILDING COMPANY v. PPI ENTERPRISES (U.S.), INC., POLLY PECK PRODUCE, INC., ARVI LIMITED and PPI HOLDINGS, B.V. Sheldon H. Solow, d/b/a Solow Building Company, Appellant
324 F.3d 197 (3rd Cir. 2003)
In re: PPI ENTERPRISES (U.S.), INC. and POLLY PECK PRODUCE, INC., Debtors
SHELDON H. SOLOW, d/b/a SOLOW BUILDING COMPANY
PPI ENTERPRISES (U.S.), INC., POLLY PECK PRODUCE, INC., ARVI LIMITED and PPI HOLDINGS, B.V.
Sheldon H. Solow, d/b/a Solow Building Company, Appellant
Argued July 15, 2002
On Appeal from the United States District Court for the District of Delaware D.C. Civil Action No. 00-cv-00469 (Honorable Roderick R. McKelvie)
STEPHEN J. SHIMSHAK, (ARGUED) JAMES H. MILLAR, Paul, Weiss, Rifkind, Wharton & Garrison New York WILLIAM A. HAZELTINE, Page 200
Potter Anderson & Corroon Wilmington, Delaware Attorneys for Appellant JAMES L. PATTON, JR.(ARGUED), TIMOTHY E. LENGKEEK, Young Conaway Stargatt & Taylor, Wilmington, DE, Attorneys for Appellees, PPI Enterprises (U.S.), Inc., Polly Peck Produce, Inc., ARVI Limited and PPI Holdings, B.V.
CHARLENE D. DAVIS, (ARGUED) The Bayard Firm, Wilmington, DE, Attorney for Appellees, Arvi Limited and PPI Holdings, B.V.
SCIRICA, Circuit Judge :
Sheldon Solow owns a Manhattan office tower at 9 West 57th Street. On August 9, 1989, he leased 10,000 square feet to PPI Enterprises ("PPIE"), a Delaware corporation, for its corporate headquarters. The lease ran for ten years, requiring annual payments (in monthly installments) of $620,000 for five years and $650,000 thereafter. Polly Peck International, PLC, a United Kingdom corporation and the indirect corporate parent of PPIE, guaranteed these commercial lease obligations.1 Sanwa Bank issued a stand- by letter of credit to Solow, on behalf of PPIE, in the amount of $650,000.
In September 1991, PPIE abandoned its corporate headquarters in Manhattan and ceased paying rent to Solow. On October 8, 1991, Solow delivered PPIE written notice of default under the lease. After PPIE failed to cure the default, Solow Page 201
gave notice on October 21, 1991, of his intent to terminate the lease. Remaining rent due under the leasehold agreement totaled approximately $5.86 million. Solow subsequently drew on Sanwa Bank's letter of credit, applying it in lieu of monthly rent payments between October 1991 and July 31, 1992. By the latter date, the letter of credit was exhausted. On October 25, 1991, Solow sued PPIE and Polly Peck in the United States District Court for the Southern District of New York. On November 13, 1992, the district court granted Solow partial summary judgment, holding PPIE wrongly terminated its lease, but did not address possible damages. On March 4, 1996, almost four and one half years after filing its initial lawsuit and after the failure of settlement negotiations, Solow asked the district court to schedule a damages trial. On the eve of that proceeding, PPIE filed for Chapter 11 bankruptcy in Delaware. PPIE stated it had four objectives: (1) concluding the Polly Peck "wind-down"; (2) "liquidating" PPIE; (3) invoking provisions to reject a restriction on its ability to sell the Del Monte stock and (4) limiting Solow's lease termination damages under Bankruptcy Code § 502(b)(6).
On March 31, 1998, PPIE filed its bankruptcy plan ("Plan"), dividing administrative claims and priority tax claims into four classes.6 After providing for the four-class division, the Plan stated: "The treatment of and consideration to be received by holders of Allowed Claims and Interests pursuant to this Article IV of the Plan shall be in full and complete satisfaction, settlement, release and discharge of such Claims and Interests. The Debtors' obligations in respect of such Claims and Interests shall be satisfied in accordance with the terms of this Plan."
The Plan treated Solow's claim as a "Class 2 non-insider general unsecured claim." PPIE contended Plan approval by the classes of creditors was unnecessary since none were impaired. Nonetheless, PPIE solicited votes from Classes 1, 2, and 3. Only two of seven ballots were returned from Class 2  Solow's "no" vote and one "yes" vote. With no clear majority, Solow contends Class 2 effectively rejected the Plan.7
The Bankruptcy Court had subject matter jurisdiction under 28 U.S.C. §§ 1334 and 157. The District Court had jurisdiction over the Bankruptcy Court's order under 28 U.S.C. § 158(a). We have jurisdiction under 28 U.S.C. § 158(d). We review the Bankruptcy Court's "legal determinations de novo, its factual findings for clear error, and its exercises of discretion for abuse thereof." In re Cont'l Airlines, 203 F.3d 203, 208 (3d Cir. 2000).
"Impairment" is a term of art crafted by Congress to determine a creditor's standing in the confirmation phase of bankruptcy plans. In re L & J Anaheim Assoc., 995 F.2d 940, 942-43 (9th Cir. 1993). Each creditor has a set of legal, equitable, and contractual rights that may or may not be affected by bankruptcy. If the debtor's Chapter 11 reorganization plan does not leave the creditor's rights entirely "unaltered," the creditor's claim will be labeled as impaired under § 1124(1) of the Bankruptcy Code. If the creditor's claim is impaired, the Code provides the creditor with a vote that, depending on the value of the creditor's claim, may be sufficient to defeat confirmation of the bankruptcy plan.
The Bankruptcy Code creates a presumption of impairment "so as to enable a creditor to vote on acceptance of the plan." In re Monclova Care Ctr., Inc., 254 B.R. 167, 178-79 (Bankr. N.D. Ohio 2000); In re Seasons Apartments, L.P., 215 B.R. 953, 958 (Bankr. W.D. La.1997). Under 11 U.S.C. § 1124(1), the presumption of impairment is overcome only if the plan "leaves unaltered the [creditor's] legal, equitable, and contractual rights." 9 The burden is placed on the debtor to demonstrate the plan leaves the creditor's rights unaltered.
We begin with the language of the Bankruptcy Code. United States v. Ron Pair Enters., Inc., 489 U.S. 235, 241(1989). As noted, § 1124(1) provides that a claim is impaired unless the plan "leaves unaltered the legal, equitable, and contractual rights to which such claim . . . entitles the holder of such claim." Under § 101(5), a "claim" refers broadly to a creditor's right to recovery. 10 See also Johnson v. Home State Bank, 501 U.S. 78, 83 (1991) ("We have previously explained that Congress intended by this language to adopt the broadest available definition of 'claim.' ") (citations omitted).
Solow contends a broad definition of "claim" requires a finding of impairment whether the source of impairment is the plan or a statute. The Bankruptcy Court rejected Solow's argument, finding he "confuse[d] two distinct concepts: (i) plan impairment, under which the debtor alters the...
725 F.2d 315 (5th Cir. 1984), 82-1481, Sun Towers, Inc. v. Heckler