Court Opinion

ID: 9352341
Source: CourtListenerOpinion
Date Created: 2023-01-05 20:00:26.949591+00
Date Added: 2024-06-11T17:01:09.671112
License: Public Domain

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                                                           [PUBLISH]
                                 In the
                 United States Court of Appeals
                        For the Eleventh Circuit

                         ____________________

                               No. 21-13774
                         ____________________

        In re: AMERICA-CV STATION GROUP, INC., et al.,
                                                               Debtor.
        ___________________________________________________
        __________________
        EMILIO BRAUN,
        RAMON DIEZ BARROSO,
        PEGASO TELEVISION CORP.,
                                                  Plaintiffs-Appellants,
        versus
        AMERICA-CV STATION GROUP, INC.,
        AMERICA-CV NETWORK, LLC,
        CARIBEVISION HOLDINGS, INC.,
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        2                     Opinion of the Court                21-13774

        CARIBEVISION TV NETWORK, LLC,

                                                     Defendants-Appellees.

                            ____________________

                  Appeal from the United States District Court
                      for the Southern District of Florida
                     D.C. Docket No. 1:20-cv-23120-DPG
                           ____________________

        Before WILLIAM PRYOR, Chief Judge, JILL PRYOR, and GRANT,
        Circuit Judges.
        GRANT, Circuit Judge:
               Just before the Chapter 11 reorganization plans of
        Caribevision Holdings, Inc. and Caribevision TV Network, LLC
        were set to be confirmed, the debtors filed an emergency motion
        to modify the plans under 11 U.S.C. § 1127(a). The initial plans
        called for equity in the reorganized companies to be split between
        four shareholders: Ramon Diez-Barroso, Pegaso Television Corp.,
        Emilio Braun, and Vasallo TV Group. The modification, after
        being approved by the bankruptcy court, stripped the first three of
        their equity and allocated full ownership to the fourth—a company
        controlled by the debtors’ Chief Executive Officer.
               Taken by surprise, the three ousted shareholders, who
        collectively call themselves the Pegaso Equity Holders, now
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        21-13774              Opinion of the Court                      3

        challenge the bankruptcy court’s order granting the debtors’
        emergency motion to modify the reorganization plans. They
        contend that they were entitled to a revised disclosure statement
        and a second opportunity to vote on the plans under Federal Rule
        of Bankruptcy Procedure 3019(a)—a procedural protection the
        bankruptcy court did not provide them. We agree. When a
        modification to a Chapter 11 reorganization plan materially and
        adversely affects the treatment of a class of claim or interest
        holders, those claim or interest holders are entitled to a new
        disclosure statement and another opportunity to vote. Because the
        modification materially and adversely affected the Pegaso Equity
        Holders, we reverse and remand to the bankruptcy court.
                                        I.
               Caribevision Holdings, Inc. and Caribevision TV Network,
        LLC are holding companies of a set of Spanish-language television
        networks in South Florida, Puerto Rico, and New York. These
        networks air live daily news and entertainment programming.
        With an audience of over 12 million viewers, they claim to operate
        the largest independent Spanish-language television conglomerate
        based in the United States.
               The networks were beset with financial difficulties
        stemming from, among other things, litigation with shareholders,
        debt owed to creditors, and the impact of Hurricane Maria’s
        landfall in Puerto Rico. In May 2019, the holding companies—
        along with two operating companies they own—filed voluntary
        petitions for Chapter 11 bankruptcy. The Chapter 11 proceeding
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        4                         Opinion of the Court                    21-13774

        would restructure the companies’ debt obligations while
        maintaining ongoing operations. Each company authorized Carlos
        Vasallo, the networks’ President and Chief Executive Officer, to
        make all decisions regarding the Chapter 11 petitions.
                To finance the discharge of debt obligations and maintain
        operations, the proposed reorganization plans called for the
        post-petition holding companies’ equity holders to make a new
        $500,000 capital contribution and execute a $1.6 million line of
        credit. The new equity in the reorganized holding companies was
        to be allocated in proportion to the amount of capital each post-
        petition shareholder contributed. 1 To achieve this, the plans
        “cancelled and extinguished” the equity interests in the pre-petition
        entities and “[s]imultaneously” issued new equity interests in the
        reorganized holding companies. The three Pegaso Equity Holders
        were each to receive individual shares that collectively amount to
        65.8% of the equity interests in each reorganized holding
        company—50.1% to Diez-Barroso, 11.9% to Pegaso Television
        Corp., and 3.8% to Braun. The remainder was to go to the Vasallo
        TV Group, LLC—a company owned by Carlos Vasallo. The plans
        classified all the equity interest holders together into the same
        class—Class 3.

        1 Ramon Diez-Barroso, the Vasallo TV Group, and Pegaso Television Corp.
        all owned equity in the pre-petition holding companies. The record is unclear
        as to Emilio Braun’s equity interests.
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        21-13774              Opinion of the Court                       5

               At first this bankruptcy case was proceeding like any other.
        The debtors submitted the plans to the bankruptcy court along
        with a disclosure statement. Minor objections were made; an
        amended disclosure statement was filed. The bankruptcy court
        approved it, votes on the reorganization plans were solicited, and
        ballots were filed. A year into the bankruptcy, everything was
        going according to plan.
               Until it wasn’t. Two weeks before the confirmation hearing,
        the same day as the deadline to cast a ballot, the debtors informed
        the Pegaso Equity Holders that they needed the exit financing
        three days before the confirmation hearing. The debtors believed
        that this was necessary to comply with their view of the bankruptcy
        court’s requirement to certify that funding was available. But the
        Pegaso Equity Holders assert that this was unexpected. The
        reorganization plans, along with the disclosure statement,
        provided that the financial contributions were to be made “on the
        Effective Date”—a date that would not occur until after the
        Confirmation Order became a final order.
              The Pegaso Equity Holders missed the debtors’ new
        deadline, although the funds arrived before the confirmation
        hearing. Vasallo took this opportunity to fund the entire $500,000
        equity contribution himself and executed the full line of credit.
        Once he had done so, the debtors—still under his control—filed an
        emergency motion to modify the reorganization plans in Vasallo’s
        favor. Because he was now providing all the exit financing, the
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        6                     Opinion of the Court                21-13774

        modification proposed to give him all of the equity in the
        reorganized holding companies.
               The emergency motion was not served on the Pegaso
        Equity Holders, who had not yet entered an appearance in the
        bankruptcy court. The record reflects that they knew of (and
        privately objected to the idea of) a contemplated modification, but
        there is no evidence that they knew the motion was filed or were
        aware of its specific terms. To the contrary, in a series of emails
        exchanged between the parties in the hours leading up to the
        confirmation hearing, the debtors assured the Pegaso Equity
        Holders that they would “try to resolve the situation.”
               To that end, the debtors (again, controlled by Vasallo)
        appeared to work with the Pegaso Equity Holders to facilitate the
        transfer of their portion of the equity contribution and execution
        of the line of credit. The debtors continued to coordinate the wire
        transfer and line of credit from the Pegaso Equity Holders even
        after Vasallo had covered the entire equity contribution himself
        and even after the debtors had filed the emergency motion
        requesting modification of the plans in favor of Vasallo.
               The debtors received the full wire transfer in their trust
        account from the Pegaso Equity Holders the day before the
        confirmation hearing. Despite that payment, they went forward
        with the hearing on their emergency motion to modify the plans.
        At that hearing—which the Pegaso Equity Holders did not
        attend—the debtors informed the bankruptcy court that the equity
        contributions from the Pegaso Equity Holders were in their trust
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        21-13774               Opinion of the Court                       7

        account. But they proceeded with the modifications in any event.
        They told the court that because they also had the $500,000 from
        Vasallo, they intended to return the funding to the Pegaso Equity
        Holders and proceed with the modified plans. The bankruptcy
        court approved the modifications and did not require a new
        disclosure statement or the resolicitation of votes.
               The court immediately proceeded to consider confirmation.
        Confirmation of a Chapter 11 plan typically requires the impaired
        classes of creditors and equity interest holders to accept the plan.
        11 U.S.C. § 1129(a)(8). When it came time to count the votes, no
        one in Class 3—the equity interest holders of the pre-petition
        holding companies—had cast a ballot. But under the Code, if a plan
        provides that the interests of a class do not entitle the interest
        holders to “receive or retain any property under the plan on
        account of” their interests, then they are “deemed not to have
        accepted a plan.” 11 U.S.C. § 1126(g). The court read the initial
        reorganization plans to extinguish the pre-petition equity interests
        without giving those interest holders anything in return. So the
        court’s solution was to “deem” that Class 3 had rejected the plans.
        It then confirmed the modified plans via a “cramdown” over the
        deemed dissent of the Class 3 interest holders. See 11 U.S.C.
        § 1129(b).
               The Pegaso Equity Holders were given no reason to believe
        they would lose their equity interests at the confirmation hearing.
        After all, the debtors had assured them that they were seeking a
        solution and had actively worked to coordinate the wire transfer in
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        8                      Opinion of the Court                21-13774

        the days before the hearing. The Pegaso Equity Holders had
        invested over $65 million into the companies and held equity in the
        debtors since their inception. Braun attested that he was “unaware
        until after the Confirmation Hearing” that his “equity interests in
        the Debtors would be formally extinguished.” Braun and the rest
        of the Pegaso Equity Holders did not have reason to expect to lose
        their equity in a bankruptcy proceeding that focused on addressing
        debts owed to third parties.
               Two days after the bankruptcy court’s order confirming the
        plans, the Pegaso Equity Holders moved for the court to reconsider
        the confirmation order to the extent that it adopted the
        modification. They argued that they had timely performed their
        funding obligations under the plans, were entitled to disclosure of
        the contemplated modification, and should regain the equity
        interests they had lost. They also moved to strike the effective date
        to prevent the debtors from moving to substantial consummation
        of the plans as it related to the issuance of equity. As a remedy,
        they requested only reallocation of the equity interests in the
        reorganized holding companies. They did not want to disrupt the
        broader reorganization process.
              The bankruptcy court denied the motions, ruling that the
        Pegaso Equity Holders did not present newly discovered evidence
        and that there was no manifest error of law or fact in granting the
        motion to modify. The court reasoned that the Class 3 interest
        holders were not entitled to additional disclosure and voting
        because they had already been deemed to have rejected the original
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        21-13774                Opinion of the Court                         9

        bankruptcy plan. Relying on an out-of-circuit bankruptcy court
        decision, the court said that the “law is clear that modifications to
        a plan only require further disclosure and resolicitation in respect
        of those parties who previously voted for the Plans.” The
        bankruptcy court also rejected the Pegaso Equity Holders’ claim
        that they were denied due process because they were not served
        with the motion to modify. And it denied as untimely the motion
        to strike the effective date.
                The Pegaso Equity Holders next took their case to the
        district court and repeated the arguments they had made in their
        motion for reconsideration. The district court agreed with the
        bankruptcy court. It said that “a class of creditors or equity interest
        holders who have not accepted a plan have no say in whether that
        plan can be modified.” The bankruptcy court’s orders were thus
        affirmed.
               The Pegaso Equity Holders now appeal to this court.
                                          II.
                In bankruptcy cases we sit “as a second court of review” that
        examines the bankruptcy court’s factual and legal determinations
        independently. In re Optical Techs., Inc., 425 F.3d 1294, 1299–1300
        (11th Cir. 2005) (quotations omitted). We review the bankruptcy
        court’s factual findings for clear error, and any legal conclusions by
        it or the district court de novo. Id. at 1300.
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        10                     Opinion of the Court                21-13774

                                        III.
                                         A.
                Modifying a Chapter 11 reorganization plan before
        confirmation is relatively easy: the “proponent of a plan may
        modify such plan at any time before confirmation.” 11 U.S.C.
        § 1127(a). This is by design. The Bankruptcy Code seeks to
        facilitate negotiation between the debtor and its creditors, equity
        holders, and other interested parties. 7 Collier on Bankruptcy
        ¶ 1127.03[1] (16th ed. 2022). Easy modification allows negotiated
        outcomes to quickly become part of the plan.
                But there are a few constraints. The modified plan must still
        comply with the Code’s substantive requirements for any
        reorganization plan. 11 U.S.C. § 1127(a). This means that the
        modification must comply with § 1122’s restrictions on the
        classification of claims and interests and § 1123’s requirements for
        the contents of a reorganization plan. Id. An important substantive
        requirement for our purposes is found in § 1123(a)(4). Unless the
        disfavored class members consent, the modified plan must
        “provide the same treatment for each claim or interest of a
        particular class.” Id. § 1123(a)(4).
               There are also procedural constraints. A modification must
        comply with § 1125’s requirement that claim and interest holders
        be given “adequate information” about the contents of a plan. Id.
        § 1127(c). Before a modification is filed, this is accomplished in a
        disclosure statement, which must be approved by the bankruptcy
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        21-13774               Opinion of the Court                       11

        court as containing adequate information. Id. § 1125(b); Fed. R.
        Bankr. P. 3016(b). A sufficient statement ensures that investors can
        make an informed vote. See 11 U.S.C. § 1125(a)(1).
               Under certain circumstances, when a modification is made
        after votes are cast based on an old disclosure statement, the debtor
        must provide a new disclosure statement and call for another
        round of voting. In re New Power Co., 438 F.3d 1113, 1117–18
        (11th Cir. 2006). But not all modifications trigger this requirement.
        A claim or interest holder is entitled to this procedural protection
        only if, after a hearing, the bankruptcy court finds that the
        modification “materially and adversely changes the way that claim
        or interest holder is treated.” Id. Because these determinations are
        mixed questions of law and fact, we review them de novo. Id. at
        1117.
               The Pegaso Equity Holders argue that the bankruptcy court
        erred by skipping this review for materiality and adversity, as well
        as the new disclosure and voting that would follow from a correct
        decision on those issues. We agree. As we see it, the original plans
        gave the Pegaso Equity Holders the exclusive opportunity to
        obtain 65.8% of the equity interests in the reorganized holding
        companies. The sole purpose of the modification was to strip them
        of this equity. The modification therefore “materially and
        adversely” changed the way the Pegaso Equity Holders were
        treated under the plans, entitling them to a new disclosure
        statement and a second chance to cast a ballot.
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        12                      Opinion of the Court                  21-13774

               The lower courts reasoned that because the Pegaso Equity
        Holders were deemed to have rejected the unmodified plans,
        additional disclosure and resolicitation were not required. This is
        wrong on two fronts. First, because the Class 3 interest holders
        were entitled to property under the plans (the opportunity to
        obtain 65.8% of the equity interest in the reorganized companies),
        the bankruptcy court was not permitted to deem them as having
        rejected the plans under 11 U.S.C. § 1126(g). And second, even if
        we were to counterfactually assume that they did reject the plans,
        interest holders that previously rejected (or did not vote for) a
        reorganization plan are still entitled to additional disclosure and
        voting if the treatment of their interests is materially and adversely
        affected by a modification.
                                           1.
               We start with the first error—deeming the Pegaso Equity
        Holders to have rejected the plans. Section 1126 provides a set of
        voting rules that govern the confirmation of Chapter 11 plans. For
        a class of interest holders to accept a plan, holders of at least two-
        thirds of the interests voting must vote in its favor. 11 U.S.C.
        § 1126(d). But under § 1126(g), if the plan provides that the claims
        or interests of a class do not entitle the holders to “receive or retain
        any property under the plan on account of such claims or
        interests,” then the class will be “deemed not to have accepted a
        plan.” Id. § 1126(g). On the other hand, if the unmodified plans
        did entitle the Class 3 interest holders to receive property on
        account of their pre-petition equity interests, then § 1126(g) does
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        21-13774               Opinion of the Court                        13

        not apply—meaning the bankruptcy court could not deem the
        Pegaso Equity Holders to have rejected the plans. So the question
        is whether the Pegaso Equity Holders were entitled to receive or
        retain property under the unmodified plans on account of their
        interests.
                Answering that question, it turns out, is straightforward
        because of Supreme Court precedent. In Bank of America National
        Trust, the Court analyzed a similar Chapter 11 plan in which the
        former partners of the debtor received ownership in a reorganized
        partnership in exchange for capital contributions. Bank of Am.
        Nat’l Tr. & Sav. Ass’n v. 203 N. LaSalle St. P’ship, 526 U.S. 434, 440
        (1999). A more senior creditor, however, would not be paid in full.
        Id. at 439–440, 442. The senior creditors invoked the “absolute
        priority rule,” which bars junior claim or interest holders from
        receiving or retaining property when senior claim or interest
        holders do not. Id. at 442; 11 U.S.C. § 1129(b)(2)(B)(ii). So the
        question was whether the former partners (the junior account
        holders) had received or retained property on account of their
        interests—the same question at issue here. Bank of Am. Nat’l Tr.,
        526 U.S. at 437, 442. The Court said yes; it characterized the former
        partners as having received an exclusive opportunity to obtain
        equity in the reorganized entity. Id. at 455. And that opportunity
        qualified as a property interest received on account of their
        partnership interest in the pre-petition entity. Id. at 455–56; accord
        id. at 460 (Thomas, J., concurring in the judgment).
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        14                      Opinion of the Court                   21-13774

                 It is true that, as the lower courts noted, the plans here state
        that the equity interests held by the Class 3 interest holders “shall
        be extinguished on the Effective Date . . . .” But if one reads on,
        the same sentence continues and establishes new equity interests:
        “. . . and New Equity Interests in the Reorganized Debtor shall be
        issued to the following Persons in the following percentages on the
        Effective Date: (i) Ramon Diez-Barroso – 50.1%, (ii) Vasallo TV
        Group, LLC – 34.2%, (iii) Pegaso Television Corp. – 11.9%, and (iv)
        Emilio Braun – 3.8%.” This new equity is in proportion to the
        amount of the equity contribution each interest holder would
        provide, specified elsewhere in the plans.
               For our purposes, these plans are not materially different
        from the plans at issue in Bank of America National Trust. Like the
        former partners there, the Class 3 interest holders here were set to
        receive equity in the reorganized entities in exchange for a capital
        contribution. And like the former partners, the Class 3 interest
        holders were in a position to make that equity contribution
        because of their status as pre-petition equity holders.
               The lower courts therefore mischaracterized the
        reorganization plans. Yes, the pre-petition equity interests were
        “extinguished.” But on account of their status as holders of those
        interests, the Class 3 interest holders received an exclusive
        opportunity to obtain equity in the reorganized companies. This
        was not an opportunity offered to the world at large; it was one
        offered exclusively to these four shareholders. As the Supreme
        Court explained, this is a property interest because of “its
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        21-13774               Opinion of the Court                        15

        protection against the market’s scrutiny of the purchase price by
        means of competing bids.” Bank of Am. Nat’l Tr., 526 U.S. at 456.
        Such an exclusive opportunity to obtain equity is a property
        interest received on account of interests in the pre-petition
        companies. Id. at 455.
               If that were not enough, the voting provisions of the plans
        point to the same conclusion. The plans state—multiple times—
        that the Class 3 interest holders were entitled to vote. But, as we’ve
        discussed, former equity holders who simply have their interests
        extinguished are not entitled to vote as a function of § 1126(g). See
        11 U.S.C. § 1126(g). By nevertheless giving the Class 3 interest
        holders voting rights, the plans implicitly concede that the Pegaso
        Equity Holders were entitled to receive or retain property.
               Because the Class 3 interest holders were entitled to receive
        property under the plans on account of their interests, § 1126(g)
        does not apply. Consequently, without a formal rejection from the
        Pegaso Equity Holders, the bankruptcy court had no basis for
        deciding that they had rejected the unmodified plans. So even
        under the bankruptcy court’s flawed interpretation of Bankruptcy
        Rule 3019(a), the court erred in denying the Pegaso Equity Holders
        a new disclosure statement and vote.
                                          2.
              We now move to that flawed interpretation—the
        bankruptcy court’s second error.     The bankruptcy court
        improperly narrowed Bankruptcy Rule 3019(a) by construing it to
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        16                     Opinion of the Court                21-13774

        require additional disclosure and voting only when a claim or
        interest holder materially or adversely affected by a proposed
        modification had previously voted to accept the plan.
                This interpretation contravenes the text of the rule. The
        rule provides that if the court finds that “the proposed modification
        does not adversely change the treatment of the claim of any
        creditor or the interest of any equity security holder who has not
        accepted in writing the modification, it shall be deemed accepted
        by all creditors and equity security holders who have previously
        accepted the plan.” Fed. R. Bankr. P. 3019(a) (emphasis added).
        The key word here is “any.” “Read naturally, the word ‘any’ has
        an expansive meaning, that is, ‘one or some indiscriminately of
        whatever kind.’” United States v. Gonzales, 520 U.S. 1, 5 (1997)
        (citation omitted); accord Merritt v. Dillard Paper Co., 120 F.3d
        1181, 1186 (11th Cir. 1997). The repeated use of the word “any”
        refers to creditors or equity security holders of whatever kind. The
        text does not permit any narrower interpretation. The rule
        therefore requires additional disclosure and voting if the
        modification materially and adversely affects any creditor or
        interest holder, not just those voting to accept the plan.
               Our precedent likewise does not distinguish between
        classes. We have said that “the bankruptcy court may deem a claim
        or interest holder’s vote for or against a plan as a corresponding
        vote in relation to a modified plan unless the modification
        materially and adversely changes the way that claim or interest
        holder is treated.” New Power, 438 F.3d at 1117–18 (emphasis
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        21-13774               Opinion of the Court                      17

        added). “If it does,” we continued, “the claim or interest holder is
        entitled to a new disclosure statement and another vote.” Id. at
        1118. The text of the rule and our precedent thus both make clear
        that if a modification materially and adversely changes the
        treatment of any claim or interest holder who has not accepted the
        modification in writing, then that claim or interest holder is
        entitled to a new disclosure statement and resolicitation of votes.
        So too here.
                                        B.
              The debtors argue that any error committed by the
        bankruptcy court was harmless. They note that the Pegaso Equity
        Holders had some notice of the contemplated modification and in
        any event were deemed to have rejected the plans. As they put it,
        the bankruptcy court treated the Pegaso Equity Holders exactly as
        they ask—as having rejected the plans. But that is an incomplete
        view.
               To be sure, for a creditor or equity interest holder that
        already voted to reject a plan, a second rejection vote in response
        to a modification that materially and adversely affects its interest
        will have little effect. On the other hand, a creditor or equity
        interest holder that previously voted to accept a plan benefits from
        the added disclosure and revoting because it can change its vote to
        reject the plan—recourse not available to a creditor or equity
        interest holder that voted to reject the initial plan.
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        18                     Opinion of the Court                 21-13774

               But a dissenting vote on a Chapter 11 plan does not give the
        debtor a free pass to modify the plan to the detriment of that
        dissenting claim or interest holder. This case shows exactly why a
        new disclosure statement can protect a claim or interest holder
        who previously voted to reject the plans. A new disclosure
        statement with additional time to vote would have given the
        Pegaso Equity Holders an opportunity to object to the
        modification on substantive grounds.
                And on substantive grounds, there were serious problems.
        The debtors’ modification stripped the Pegaso Equity Holders of
        the exclusive opportunity to obtain equity interests and reallocated
        it to the Vasallo TV Group. As a result, within the Class 3 interest
        holders, one member received property under the plan and the
        others received nothing. That was improper. All modifications,
        including this one, must comply with § 1123. 11 U.S.C. § 1127(a).
        That section requires that the plans provide “the same treatment
        for each claim or interest of a particular class, unless the holder of
        a particular claim or interest agrees to a less favorable treatment of
        such particular claim or interest.” Id. § 1123(a)(4). The plans as
        modified violate this requirement by treating the Pegaso Equity
        Holders less favorably than the Vasallo TV Group. Without the
        consent of the Pegaso Equity Holders, the modification was not
        allowed.
               For that same reason, the modified plans were improperly
        confirmed. A plan may be confirmed only if it “complies with the
        applicable provisions” of Chapter 11. Id. § 1129(a)(1). Here,
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        21-13774               Opinion of the Court                       19

        because the modified plans did not comply with § 1123(a)(4), they
        could not meet that standard. Accordingly, to the extent that the
        plans incorporated the modification, confirmation was also
        improper.
                These substantive errors show why whatever notice the
        Pegaso Equity Holder’s might have had does not render the
        bankruptcy court’s errors harmless. When confirming a plan
        without the consent of all impaired classes under § 1129(b),
        bankruptcy courts have an “independent duty” to ensure that
        § 1129’s requirements are met “with regard to impaired dissenting
        classes of creditors in a Chapter 11 cram down.” In re Lett, 632
        F.3d 1216, 1229 (11th Cir. 2011). This means that the bankruptcy
        court “must consider” facts relating to the criteria of § 1129 “even
        in the absence of an objection.” In re Piper Aircraft Corp., 244 F.3d
        1289, 1299–1300 n.4 (11th Cir. 2001). The Pegaso Equity Holders
        therefore did not have an obligation to even make an objection—
        it was the bankruptcy court’s independent obligation to ensure that
        the plans did not discriminate within a class. Had the bankruptcy
        court recognized that the Class 3 interest holders received property
        under the plans, it could not have granted the modification or
        confirmed the modified plans because the Vasallo TV Group was
        treated more favorably than the rest of Class 3. See 11 U.S.C.
        §§ 1129(a)(1), 1123(a)(4).
               Moreover, the notice the Pegaso Equity Holders did
        receive—notice of a contemplated modification on the day before
        the confirmation hearing—is not the same as the disclosure
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        required by the Code. Had the Pegaso Equity Holders received the
        additional disclosure to which they were entitled, they could have
        cast an actual vote rejecting the modified plans and presented their
        objections to the court. At that point, they could have explained
        that the modification discriminated within Class 3 without their
        consent in violation of § 1123(a)(4).
               The notice the Pegaso Equity Holders received did not give
        them this opportunity because it lacked sufficient detail of the
        terms of the modification and came just hours before the
        confirmation hearing. The distinction between notice of the
        motion to modify and additional disclosure is all the more
        important here because debtor’s counsel, after filing the motion to
        modify, falsely assured the Pegaso Equity Holders that he wanted
        to be helpful and would try to resolve the situation—all while
        moving full speed ahead on the modification in the bankruptcy
        court.
               For these reasons, the bankruptcy court’s subsequent notice
        finding does not insulate its errors as harmless. Ensuring that
        interest holders that are materially and adversely affected by last-
        minute modifications receive an opportunity to review the
        modification and consider whether to change their vote or present
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        21-13774                  Opinion of the Court                              21

        an objection is a primary benefit of the procedural requirements.
        That benefit should have been available here. 2
                                             IV.
                We end by considering the remedy. In bankruptcy cases we
        are mindful that we must strike “the proper balance between the
        equitable considerations of finality and good faith reliance on a
        judgment and the competing interests that underlie the right of a
        party to seek review of a bankruptcy court order adversely
        affecting him.” In re Club Assocs., 956 F.2d 1065, 1069 (11th Cir.
        1992). Below, the debtors moved to dismiss this appeal as equitably
        moot. The district court denied that motion based on its review of
        the record, stating that “it is possible to grant effective judicial
        relief.” The debtors do not challenge that order on appeal, nor do

        2 The Pegaso Equity Holders also raise a constitutional due process challenge.
        But “federal courts should avoid reaching constitutional questions if there are
        other grounds upon which a case can be decided.” BellSouth Telecomms.,
        Inc. v. Town of Palm Beach, 252 F.3d 1169, 1176 (11th Cir. 2001). Because we
        resolve this case on non-constitutional grounds, we decline to consider the
        constitutional due process question.
        For different reasons, we also do not wade into the parties’ dispute over the
        proper deadline to provide the equity contribution and exit financing. As we
        explained, the bankruptcy court’s review of a modification under § 1127(a) is
        narrow. It is limited to assessing whether the modification complies with
        sections 1122, 1123, and 1125 of the Code. 11 U.S.C. § 1127(a). The court is
        not tasked with assessing the reasonableness of the modification or its
        justifications. Accordingly, we do not consider or decide whether the debtors
        were correct that the exit funding and financing needed to be provided before
        the confirmation hearing.
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        22                     Opinion of the Court                21-13774

        they raise equitable mootness in their briefings. We therefore
        assume that this appeal is not equitably moot, and that relief can be
        granted.
                At the same time, we recognize that it has been over two
        years since these plans were confirmed and that they have been
        substantially consummated. In reversing the order granting the
        motion to modify the reorganization plans, we assume that it
        remains true today that effective judicial relief can be granted. But
        we leave the exact contours of that relief to the bankruptcy court
        in the first instance. We therefore remand to the bankruptcy court
        to fashion an equitable remedy.
                                   *     *      *
               The bankruptcy court erred in granting the debtor’s
        modification without first requiring that the debtor provide the
        Pegaso Equity Holders with a revised disclosure statement and a
        second opportunity to cast a ballot. We therefore REVERSE the
        order granting the debtor’s emergency motion to modify the
        reorganization plans, REVERSE IN PART the bankruptcy court’s
        order confirming the reorganization plans to the extent that it
        adopts the modification, and REMAND to the bankruptcy court to
        fashion an equitable remedy consistent with this opinion.