Opinion ID: 3062086
Heading Depth: 5
Heading Rank: 1

Heading: Waiver of Election of Remedies

Text: SMDI first argues that the Joint Plan was unfair because it included a provision expressly preventing the Liquidating Trustee from voluntarily accepting a monetary 10 See, e.g., Bank of N.Y. Trust Co. v. Official Unsecured Creditors Comm. (In re Pacific Lumber), 584 F.3d 229, 245–46 (5th Cir. 2009) (“Even a plan compliant with the[] alternative minimum standards [of § 1129(b)(2)] is not necessarily fair and equitable.”); In re Grandfather Mountain Ltd. P’ship, 207 B.R. 475, 487 (Bankr. M.D.N.C. 1996) (“[T]he plan must literally be fair and equitable. The determination . . . must be made on a case-by-case basis and depends upon the specific facts and circumstances of each case.” (citation omitted)); 7-1129 Collier on Bankruptcy ¶ 1129.03[4][b][ii] (16th ed. 2012) (“[S]ome courts have incorrectly read the interplay of section 1129(b)(1) and section 1129(b)(2) to be an exhaustive delineation of the fair and equitable rule . . . .”). 43 recovery in lieu of the Domain Name if he prevailed in the AP. According to SMDI, the estate had the right, under the APA, to take the value of the Domain Name instead of recovering the name itself. This right, SMDI argues, was worth millions of dollars.11 Conf. App., Aplt. Br. at 48–49. In consideration for the estate abandoning this right, ConsumerInfo promised in the Joint Plan to fund the Adversary Proceeding, subordinate the CCB Claims, and pay up to $300,000 to resolve claims (other than the CCB Claims) against the estate. Id. at 49. SMDI argues that the consideration the estate received was inadequate. This argument is flawed. We think the consideration ConsumerInfo provided was worth more and the right the estate waived was worth less than SMDI recognizes. While SMDI says ConsumerInfo failed to prove the value of subordination of the CCB Claims, the bankruptcy court estimated Claim 42-1 at $225,000, and nothing in the record suggests that Claim 27-2 was not worth its face value of over $130,000. SMDI also asserts that ConsumerInfo’s promise to fund the AP “provided no value to the estate” simply because the Trustee agreed not to elect a monetary remedy in lieu of the Domain Name. Conf. App., Aplt. Br. at 49. To the contrary, even if the estate planned to turn 11 SMDI reasons as follows: If the estate chose to accept the Domain Name, it had to turn it over to ConsumerInfo for no additional consideration. If, on the other hand, it accepted monetary compensation for SMDI’s conversion of the name, it would keep 75% of that recovery under § 1.1(d) of the APA. See APA § 1.1(d) (providing that ConsumerInfo would “receive 25% of the Net Proceeds from Monetary Recoveries”). Thus, if the Domain Name was worth $5,000,000, the estate waived the right to elect a $3,750,000 recovery. Conf. App., Aplt. Br. at 48–49. 44 over to ConsumerInfo the primary fruit of the AP—the Domain Name—it also hoped to recover monetary damages (of which it would retain 75%). Thus, it still stood to gain from ConsumerInfo funding the AP. More critically, however, SMDI overlooks the fact that the election of remedies waiver was worth very little if, as the bankruptcy court and district court both believed, the APA already required the estate to do its best to recover the Domain Name. In confirming the Joint Plan, the bankruptcy court concluded that the APA did not give the estate the option of accepting money instead of the Domain Name in the first place. Paige, 2007 WL 4143212, at  (“The court further finds that there is a reasonable basis for the Trustee to convey the Domain Name to ConsumerInfo, if recovered, because the Trustee is obligated to do so under the APA.”). The bankruptcy court restated the same conclusion more explicitly two years later in its Adversary Proceeding decision. There, it concluded that the “APA required that . . . if the Trustee was successful in proving that the Domain Name was the property of the estate, or otherwise recovered the Domain Name, he would be required to deliver the Domain Name to ConsumerInfo. The . . . APA did not contemplate the delivery of value of the Domain Name in lieu of the Domain Name itself.” Paige, 413 B.R. at 901. The district court agreed that the 75%-25% provision existed to allocate damages recovered in addition to the Domain Name. Paige, 443 B.R. at 891. To the extent it could do so in good faith, the Trustee had a duty to recover the Domain Name and turn it over to ConsumerInfo. If these courts were correct, then ConsumerInfo was not, as SMDI claims, buying a right worth $3,750,000. Rather, 45 ConsumerInfo was buying only peace of mind by gaining the estate’s express abandonment of a right it probably did not even possess. We need not decide whether the bankruptcy court and district court were right on this point or not. We only have to determine whether the chances of SMDI’s interpretation prevailing were sufficiently doubtful that the estate’s acceptance of less than 75% of the Domain Name’s value was fair. We think that even if the courts’ interpretation of the APA was not the only possible reading of that document, it was at least a reasonable one. Thus, the Joint Plan only deprived the estate of a right to elect remedies that likely did not exist. Even if an unfair compromise of claims could have made the Joint Plan unfair to SMDI’s interest under § 1129(b), we reject SMDI’s argument that the consideration the estate received was inadequate.