Court Opinion

ID: 3175636
Source: CourtListenerOpinion
Date Created: 2016-02-08 21:07:59.173106+00
Date Added: 2024-06-11T12:16:28.471964
License: Public Domain

NOT FOR PUBLICATION                            FILED
                    UNITED STATES COURT OF APPEALS                         FEB 08 2016

                            FOR THE NINTH CIRCUIT                      MOLLY C. DWYER, CLERK
                                                                         U.S. COURT OF APPEALS

In re: THE VILLAGE AT LAKERIDGE,                 No. 13-60038
LLC, FKA Magnolia Village, LLC,
                                                 BAP No. 12-1456
              Debtor,

                                                 MEMORANDUM*
U.S. BANK N.A., Trustee, et al., by and
through CWCapital Asset Management
LLC, solely in its capacity as Special
Servicer,

              Appellant,

  v.

THE VILLAGE AT LAKERIDGE, LLC,

              Appellee,

ROBERT ALAN RABKIN,

              Real Party in Interest.

In re: THE VILLAGE AT LAKERIDGE,                 No. 13-60039
LLC, FKA Magnolia Village, LLC,
                                                 BAP No. 12-1474
              Debtor,

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
U.S. BANK N.A., Trustee, et al., by and
through CWCapital Asset Management
LLC, solely in its capacity as Special
Servicer,

              Appellant,

  v.

THE VILLAGE AT LAKERIDGE, LLC,

              Appellee,

ROBERT ALAN RABKIN,

              Real Party in Interest.

                          Appeal from the Ninth Circuit
                           Bankruptcy Appellate Panel
            Kirscher, Pappas, and Taylor, Bankruptcy Judges, Presiding

                      Argued and Submitted October 22, 2015
                            San Francisco, California

Before: CLIFTON and N.R. SMITH, Circuit Judges, and LASNIK,** District
Judge.

       The bankruptcy court did not err in declining to designate Rabkin’s claim as

being assigned and voted in bad faith pursuant to 11 U.S.C. § 1126(e). We affirm.

       **
             The Honorable Robert S. Lasnik, District Judge for the U.S. District
Court for the Western District of Washington, sitting by designation.

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      We review for clear error the bankruptcy court’s finding that a party acted in

good faith. Figter Ltd. v. Teachers Ins. & Annuity Ass’n of Am. (In re Figter Ltd.),

118 F.3d 635, 638 (9th Cir. 1997). In reviewing a decision for clear error, we

      may not look to what we would have done had we been in the trial
      court’s place in the first instance, because that review would be de novo
      and without deference. Rather, the scope of our review limits us to
      determining whether the trial court reached a decision that falls within
      any of the permissible choices the court could have made.

United States v. Hinkson, 585 F.3d 1247, 1261 (9th Cir. 2009) (citing United States

v. Yellow Cab Co., 338 U.S. 338 (1949)).

      Under § 1126(e), “the court may designate any entity whose acceptance or

rejection of [a reorganization] plan was not in good faith, or was not solicited or

procured in good faith or in accordance with the provisions of this title.”

Acceptance or rejection is made in bad faith if a creditor is “not attempting to

protect [his] own proper interests, but [is], instead, attempting to obtain some

benefit to which [he is] not entitled,” such as an “untoward advantage over other

creditors for some ulterior motive.” In re Figter Ltd., 118 F.3d at 638–39. Ulterior

motives include “malice, ‘strikes’ and blackmail,” or attempts to “destroy an

enterprise in order to advance the interests of a competing business.” Id. at 639

(citation omitted). A creditor who attempts “to preserve what he reasonably

perceives as his fair share of the debtor’s estate” does not act in bad faith. Id.

                                           -3-
(citation omitted). However, a debtor’s attempt to sell claims against itself to “an

insider or affiliate for the purpose of blocking a plan, or fostering one [has been]

seen as a badge of bad faith.” Id.

      The bankruptcy court considered all relevant facts and concluded Rabkin did

not vote for Lakeridge’s reorganization plan in bad faith. The court acknowledged

that Rabkin had not conducted much due diligence, but noted that the claim’s

purchase price was “relatively small” and “had the potential for a big payoff.” The

court determined that Rabkin had engaged in speculative investing with no bad

motive. The court also acknowledged that Rabkin had refused to accept U.S.

Bank’s offer to buy his claim for more than he could recover under the proposed

reorganization plan, but noted that Rabkin’s refusal was “really not surprising

given the circumstances.” The court cited U.S. Bank’s heavy-handed tactics during

Rabkin’s deposition as one reason Rabkin simply may not have “be[en] interested

in dealing with the people who made the offer.” Finally, the court noted that

Bartlett had not asked Rabkin to vote in favor of Lakeridge’s reorganization plan.

      Although we may not have reached the same result as the bankruptcy court

had we been sitting in its place, we cannot say the court’s decision was clearly

erroneous. U.S. Bank has not proven that Rabkin had ulterior motives for voting in

favor of the confirmation plan. Nor has U.S. Bank proven that Rabkin was an

                                          -4-
insider, such that Lakeridge acted in bad faith by assigning Rabkin the claim.

Therefore, the BAP’s holding, affirming the bankruptcy court’s decision on bad

faith, is AFFIRMED.

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