In re Colony Properties International, LLC

Full title: In re COLONY PROPERTIES INTERNATIONAL, LLC, a California limited liability…

Court: United States Bankruptcy Court, Southern District of California

Date published: Sep 19, 2011

10-02937-PB11, 10-03361-PB11 (Bankr. S.D. Cal. Sep. 19, 2011)

Opinion

In re COLONY PROPERTIES INTERNATIONAL, LLC, a California limited liability company, Debtor. In re COLONY PROPERTIES INTERNATIONAL II, LLC, a California limited liability company, Debtor. Nos. 10-02937-PB11, 10-03361-PB11 United States Bankruptcy Court, Southern District of California September 19, 2011

         NOT FOR PUBLICATION

          CONFIRMATION ORDER

          PETER W. BOWIE, CHIEF JUDGE UNITED STATES BANKRUPTCY COURT.

         Shortly after these chapter 11 cases were filed, the Court ordered the appointment of a trustee. The very experienced Richard M. Kipperman was appointed and, thereafter sought and obtained joint administration of the two cases.

         After evaluation of the cases, their respective assets, and the claims against each, Mr. Kipperman and creditors KBR Group, LLC, KBR Opportunity Fund I, LP, and KBR Opportunity Fund II, LP (collectively KBR) proposed a joint plan of reorganization. The plan drew objections from the trustees of the Nicolas Marsch estate and the Briarwood estate. Mr. Marsch and two nondebtor entities under his control, Briarwood Capital, Inc., and Colony Properties, LLC, also filed objections to confirmation.

         Meanwhile, KBR filed objections to the claims of Briarwood Capital, Inc., and Colony Properties, LLC. Nicolas Marsch filed objections to the KBR claims.

         Early on in the confirmation process, KBR reached settlements with former counsel for the Colony debtors, Mintz Levin, and with First Place Equities as a putative creditor. The settlements with Mintz Levin and First Place Equities were approved, while proceedings on the claim objections were ruled on in part, and continued in part. A Second Amended Plan was filed by Mr. Kipperman and KBR. Soon thereafter the Court allowed the claims of KBR over the objections of Mr. Marsch.

         In addition to his objection to confirmation of the joint plan, Mr. Marsch, in conjunction with American Lawyers Funding, LLC, filed a competing plan of reorganization pursuant to which he essentially sought to buy the opportunity to continue to litigate. For multiple reasons stated on the record in open court, confirmation of Mr. Marsch's plan was denied.

         The objection of the Briarwood estate, through its trustee, was resolved by the settlement concerning First Place Equities. The objection of the Marsch estate, through its trustee, was orally withdrawn in open court after approval of the settlement between the Marsch trustee and KBR.

         The remaining objections are those of Mr. Marsch and his nondebtor entities. The primary objections, including lack of impaired class voting for the plan, were predicated on Mr. Marsch's position that KBR's claims were invalid. Those objections were disposed of by the allowance of KBR's claims. Mr. Marsch also objected to the separate classification of Classes 3, 4 and 5 under the Plan. Class 5 consisted of the claim of First Place Equities. As noted above, that claim has been settled. Under the Second Amended Plan, Classes 3 and 4 are treated the same as other unsecured creditors, thus rendering moot the classification objection. This amendment also addressed Mr. Marsch's argument that the Plan was not fair and equitable with respect to Classes 3 and 4.

         Mr. Marsch had also argued that the release provisions under the Plan were too broad, releasing claims that did not belong to the Colony Debtors. Under the Second Amended Plan, it has been made clear that only those claims belonging to the Debtors are released.

         Finally, Mr. Marsch, and others, objected to confirmation on the ground that the joint plan was proposed without a disclosure statement. Though rare, such a procedure is not unheard of. See e.g., In re Union County Wholesale Tobacco & Candy Co., 8 B.R. 442 (Bankr.D.N.J. 1981). The purpose of a disclosure statement is to give parties in interest, whose votes are being solicited, adequate information about the plan. See Bankruptcy-Code § 1125(a) & (b). In the case at hand, however, no votes were solicited. Under the terms of the joint plan, finalized as the Second Amended Plan, general unsecured creditors will be paid in full and are unimpaired, and thus are presumed to have accepted the plan. Conversely, the equity holders will receive nothing, and are deemed to have rejected. Finally, KBR is impaired, but as plan proponent accepts the plan. Accordingly, the Court finds that the lack of disclosure statement in this case is not a bar to confirmation.

         The objections to confirmation have all either been settled, resolved by the allowance of KBR's claim over the objection of Mr. Marsch, overruled as set forth above, and/or mooted by the modifications in the Second Amended Plan. Confirmation of the competing plan proposed by Mr. Marsch has been denied for the reasons explained by the Court at the August 22, 2011 hearing.

         Finally, the Court has independently reviewed the Second Amended Plan and finds that it meets the requirements set forth in Bankruptcy Code § 1129(a)(1) through (16) and (b)(1).

         For all of the reasons set forth above, the Court hereby orders that the Second Amended Plan may be confirmed. Counsel for KBR shall lodge a confirmation order consistent herewith.

         IT IS SO ORDERED.