Opinion ID: 805173
Heading Depth: 4
Heading Rank: 1

Heading: American Capital I

Text: When we last reviewed Skinner‟s bankruptcy proceedings in American Capital I, we analyzed whether the case was “proceeding in bad faith,” In re Am. Capital Equip., LLC, 296 F. App‟x at 274, or, as the District Court stated, whether the Third Plan “reflected a bad faith use of the bankruptcy process.” In re Am. Capital Equip., No. 06-0891, at . In so doing, we considered the objectives underlying Chapter 11, and determined based on the record before us at the time that Skinner‟s bankruptcy case was proceeding in good faith because the Third Plan‟s surcharge attempted to maximize the property available to satisfy creditors. In re Am. Capital Equip., LLC, 296 F. App‟x at 274-75. Skinner argues that our initial good faith determination and reasoning circumscribes our good faith determination here. We disagree. 31 A prior determination that a bankruptcy petition was filed or proceeded in good faith does not necessarily preclude a later inquiry into whether a plan under that petition is proposed in good faith for purposes of confirmation. The question of whether a Chapter 11 bankruptcy petition is filed in good faith is a judicial doctrine, distinct from the statutory good faith requirement for confirmation pursuant to § 1129(a)(3). In re Combustion Eng’g, 391 F.3d at 247 n.67; 6 Norton Bankr. L. & Prac. § 112:10 (3d ed. 2012). The judicial doctrine inquires into the motivation for proceeding in bankruptcy, see In re Integrated Telecom Express, Inc., 384 F.3d 108, 121 (3d Cir. 2004), and “requires an examination of all of the facts and circumstances and depends upon an amalgam of factors, none of which is dispositive.” 6 Norton Bankr. L. & Prac., supra, § 112:10. In contrast, “the good-faith confirmation requirement is narrower and focuses primarily on the plan itself,” id., and on “whether such a plan will fairly achieve a result consistent with the objectives and purposes of the Bankruptcy Code.” In re Combustion Eng’g, 391 F.3d at 247. It might be that a bankruptcy case which is filed and proceeds in good faith nevertheless results in a plan that does not fairly achieve a result consistent with the objectives and purposes of the Bankruptcy Code. Furthermore, information affecting the good faith determination might be added to the record throughout the process leading up to confirmation. We found in American Capital I that the use of a surcharge maximizes property available to satisfy creditors, and that Skinner‟s case was therefore attempting to achieve a valid bankruptcy goal. However, a company may pursue a 32 valid bankruptcy goal, yet in the end, propose a plan that is otherwise inconsistent with the Bankruptcy Code. Thus, the fact that Skinner‟s case proceeded in good faith with a valid bankruptcy purpose, is not sufficient to assure us at the confirmation stage that the plan itself otherwise comports with the objectives of the Bankruptcy Code. In American Capital I, we did not deal with the same concerns that are now before us; we did not address confirmation, the Fifth Plan, or questions involving fairness, collusion, or conflict of interest. See generally, In re Am. Capital Equip., LLC, 296 F. App‟x at 273-75; see also In re Am. Capital Equip., LLC, No. 06-0891, at  (JA1380) (“the issue before us is not . . . confirma[tion]”); id. at  (“We understand that the Insurers viewed this [Third] Plan as an insurance scam. The Insurers might be right. However, these are all issues that will be explored in the adversary proceeding, and, possibly, during plan confirmation proceedings regarding the now viable Fifth Plan.”). Thus, our limited discussion in American Capital I, regarding whether Skinner was proceeding for purposes of achieving a valid bankruptcy purpose, does not now preclude us from considering whether the Fifth Plan will fairly achieve its purposes, and whether it is otherwise consistent with the objectives and purposes of the Bankruptcy Code. We turn now to these questions.