Opinion
Case Nos. BK-N-03-52300-GWZ through BK-N-03-52304 and BK-N-03-52470 through BK-N-03-52474, (joint administration).
December 20, 2004
Neal L. Wolf, Todd L. Padnos, LEBOEUF, LAMB, GREENE MacRAE, LLP, San Francisco, CA.
Adelaide Maudsley, LEBOEUF, LAMB, GREENE MacRAE, LLP, Salt Lake City, UT.
John F. Murtha, WOODBURN AND WEDGE, Reno, NV, Attorneys for Official Committee of Unsecured Creditors.
Michael P. Richman, MAYER, BROWN ROWE MAW, LLP, New York, New York.
James Patrick Shea, SHEA CARLYON, LTD., Las Vegas, Nevada, Attorneys for Textron Financial Corporation.
Judy B. Calton, HONIGMAN, MILLER, SCHWARTZ COHN, LLP, Detroit, MY.
Joan C. Wright, James R. Cavilla, ALLISON, MacKENZIE, RUSSELL, PAVLAKIS, WRIGHT FAGAN, LTD., Carson City, Nevada, Attorneys for the Trustee.
Rollin G. Thorley, Special Assistant United States Attorney, OFFICE OF THE UNITED STATES ATTORNEY, Las Vegas, Nevada.
Daniel G. Bogden, UNITED STATES ATTORNEY, Las Vegas, Nevada, Attorneys for the Internal Revenue Service.
Nicholas Strozza, Assistant U.S. Trustee, OFFICE OF THE UNITED STATES TRUSTEE, Reno, Nevada.
Suzanne M. Fischer, Trial Attorney, OFFICE OF THE SOLICITOR, UNITED STATES DEPARTMENT OF LABOR, San Francisco, California, Attorney for Elaine L. Chao, Secretary of Labor, United States Department of Labor.
The "Joint Motion of the Official Committee of Unsecured Creditors and Textron Financial Corporation To Approve Settlement and Compromise" (the "Motion"), filed on October 8, 2004, came before the Court for hearing on November 19, 2004 at 9:30 a.m. (the "Settlement Hearing"). Appearances were as noted on the record. The Court, having reviewed the Motion and related pleadings and papers, having heard the arguments of counsel, and good cause appearing, makes the following Amended Findings of Fact and Conclusions of Law (the "Amended Findings and Conclusions"), which constitute the Court's findings of fact and conclusions of law under Rule 52 of the Federal Rules of Civil Procedure, as made applicable herein by Rules 7052 and 9014 of the Federal Rules of Bankruptcy Procedure (the "Bankruptcy Rules"):
All capitalized terms used but not otherwise defined in these Amended Findings and Conclusions shall have the meanings ascribed to them in the Motion and the Amended Settlement Term Sheet, as applicable.
The separate "Order Approving Settlement and Compromise" was filed with the Court on or about December 6, 2004 (the "Order").
These Amended Findings and Conclusions supplement the Court's oral findings of fact and conclusions of law made on the record at the Settlement Hearing, and those previously made in the Order. In the event of any inconsistency between the oral findings made on the record at the Settlement Hearing and the Amended Findings and Conclusions, these Amended Findings and Conclusions shall govern. In accordance with Bankruptcy Rule 7052, all findings of fact shall be construed as conclusions of law, and all conclusions of law shall be construed as findings of fact, when appropriate, irrespective of how set forth in these Amended Findings and Conclusions.
FINDINGS OF FACT
1. On July 9, 2003 (the "Initial Debtors Petition Date"), Mego Financial Corp., Leisure Homes Corporation, Leisure Resorts Corporation, Leisure Services Corporation and Atlantic Development Corporation (collectively, the "Initial Debtors") filed voluntary Chapter 11 petitions.
2. On July 21, 2003 (the "Subsequent Debtors Petition Date"), Steamboat Suites, Inc., Cimarron Golf Club, LLC, Overlook Food and Beverage Company, Colorado Land and Grazing Corporation and Brigantine Preferred Properties, Inc. (collectively, the "Subsequent Debtors" and together with the Initial Debtors, the "Debtors") filed voluntary Chapter 11 petitions.
3. C. Alan Bentley was appointed Chapter 11 Trustee (the "Trustee") in each of the above-captioned cases (the "Chapter 11 Cases") on July 11, 2003 for the Initial Debtors and on August 13, 2003 for the Subsequent Debtors.
4. On August 13, 2003, the Court entered its Final Order Authorizing Joint Administration of Chapter 11 Cases designating the Chapter 11 case of Mego Financial Corp. (Case No. BK-N-03-52300) as the lead case.
5. Textron Financial Corporation, Dorfinco Corporation and Litchfield Financial Corporation (collectively "Textron") made loans and other financial accommodations to or for the benefit of the Debtors and their subsidiaries prior to the commencement of the Chapter 11 Cases.
6. On August 14, 2003, the Court entered the Final Order (I) Authorizing Postpetition Financing, (II) Authorizing Use of Cash Collateral and (III) Granting Adequate Protection (the "Final Financing Order").
7. The Final Financing Order set forth a detailed recitation of the loans and financial accommodations provided by Textron and the documentation related thereto (the "Prepetition Loan Documents"). All such loans, financial accommodations and other amounts owing under, or in connection with, the Prepetition Loan Documents are hereinafter referred to as the "Prepetition Obligations."
8. As set forth in Paragraph E of the Final Financing Order, the Trustee and the Debtors acknowledged, as of the Petition Date, the Prepetition Obligations in the total amount of $45,371,660. The Final Financing Order also contained a recitation of the liens and other security interests (the "Prepetition Collateral") granted by the applicable Debtors to the Prepetition Lenders to secure the Prepetition Obligations.
9. Pursuant to the Final Financing Order, Textron agreed to provide postpetition financing to the Debtors in an amount up to $8,000,000 (the "Postpetition Obligations"). Pursuant to Paragraph 5 of the Final Financing Order, the Postpetition Obligations were to be treated as Superpriority Claims, subject only to Paragraph 7 which provided for a carve-out of certain expenses and professional fees.
10. Pursuant to Paragraph 6 of the Final Financing Order, to secure repayment of the Postpetition Obligations, Textron received postpetition liens on all of the Debtors' unencumbered property, priming liens on all of the Debtors' property encumbered prepetition by the liens of the Prepetition Lenders, and junior liens on all of the Debtors' property encumbered prepetition by the liens and interests of other lenders (collectively, the "Postpetition Collateral" and together with the Prepetition Collateral, the "Textron Collateral").
11. Pursuant to Paragraph 8 of the Final Financing Order, the Debtors were also authorized to use the Textron Cash Collateral in exchange for provision of adequate protection, in the form of, among other things, replacement liens, superpriority claims, and the Debtors' payment to the Prepetition Lenders of "net cash proceeds" from the sale or other disposition of any Prepetition Collateral, or any Collateral subject to a replacement lien.
12. The Credit Agreement established January 12, 2004 as the termination date (the "Maturity Date") with respect to the Postpetition Obligations. The Trustee and Textron subsequently agreed to extend the Maturity Date to February 19, 2004 (the "Extended Maturity Date"). After February 19, 2004, with the support of Textron, the Debtors continued to use the cash collateral of Textron pursuant to orders entered on April 23, 2004, July 2, 2004 and November 1, 2004. The November 1, 2004 order extended the use of cash collateral through December 31, 2004.
13. Prior to the Final Financing Order becoming final, the Committee requested an order permitting the Committee an extension of time to challenge the validity, enforceability, or priority of substantially all of the Prepetition Obligations.
14. On October 2, 2003, the Court entered an Order on Motion of the Official Committee of Unsecured Creditors Pursuant to Rule 9023 and 9024 of the Federal Rules of Bankruptcy Procedure to Reconsider and Alter and Amend Certain Portions of or, in the Alternative, Set Aside the Final Order (I) Authorizing Postpetition Financing, (II) Authorizing Use of Cash Collateral, and (III) Granting Adequate Protection (the "Extension Order").
15. On October 10, 2003, the Committee commenced an adversary proceeding against Textron (Adv. No. 03-5111) ("Textron I") challenging certain of the prepetition interests of Textron related to Cimarron Golf Club, LLC ("Cimarron"). On July 1, 2004, this Court, in Textron I, entered its Order Granting Textron Financial Corporation's (1) First Motion for Partial Summary Judgment Against the Committee, And (2) Second Motion for Partial Summary Judgment Against the Committee [Deposit Accounts]. On July 12, 2004, the Committee filed its Stipulation of Dismissal of Textron I.
16. On October 31, 2003, the Committee commenced a second adversary proceeding against Textron (Adv. No. 03-5125) ("Textron II") challenging certain additional prepetition interests of Textron related to Leisure Homes Corporation, Brigantine Preferred Properties, Colorado Land and Grazing Corporation, and Steamboat Suites, Inc.
17. On March 31, 2004, the Committee commenced a third adversary proceeding against Textron (Adv. No. 04-5114) ("Textron III" and together with Textron II, the "Adversary Proceedings").
18. In Textron III, the parties disagreed about the applicable law and the application of the terms of the Final Financing Order with respect to the postpetition financing Textron provided to the Debtors. The Committee and Textron agreed to a preliminary framework for informal discovery and to a timeline for the preparation of potentially dispositive motions. The Committee and Textron were briefing cross-motions for summary judgment in Textron III when a tentative settlement agreement was reached on September 10, 2004.
19. As of September 10, 2004, each of the Adversary Proceedings was in the discovery stage, which discovery was stayed pending approval of the settlement agreement.
20. Through the filing of the Motion, the Committee has incurred fees and expenses in the amount of approximately $750,000 and Textron has incurred fees and expenses in excess of $1,000,000 in the prosecution and defense, respectively, of the Adversary Proceedings (including Textron I).
21. In addition to the Adversary Proceedings, at the time of the Settlement Hearing, there existed a number of objections filed by both the Committee and Textron with respect to each other's payments and other actions relating to the Chapter 11 Cases (together with the Adversary Proceedings, the "Disputes").
22. The Committee asserted that it had good causes of action against Textron with respect to (i) the exclusion of certain Notes Receivable which are not Pledged Notes Receivable from the Prepetition Collateral; (ii) the perfection of the Prepetition Lenders secured interest in the White Sands Property; (iii) certain fraudulent transfer claims; (iv) the correct payoff date of the Postpetition Obligations; and (v) the amount and propriety of Textron's counsel's claims. Moreover, the Committee has asserted that success on these claims could result in Textron being undersecured prepetition and the freeing of certain assets for the benefit of parties other than Textron.
23. Textron denied each and every one of the Committee's allegations, and further asserted that, even if the Committee were successful on some or even all of the foregoing, Textron's Adequate Protection would nonetheless result in the assets in question being secured in favor of Textron.
24. The parties conferred and concluded that settlement of the Disputes is in the best interest of the Committee and Textron, and ultimately in the best interest of the Debtors' estates in permitting an orderly resolution to an otherwise complicated set of issues. On October 8, 2004, the parties filed the Motion, with that certain "Settlement Term Sheet" attached thereto.
25. Following extended negotiations with the Trustee, on November 5, 2004, the parties filed the "Notice of Filing of Amended Term Sheet on Joint Motion of the Official Committee of Unsecured Creditors and Textron Financial Corporation to Approve Settlement and Compromise," with that certain Amended Settlement Term Sheet (referred to herein as the "Settlement" or the "Amended Settlement Term Sheet") attached thereto as Exhibit "1," and a fully executed copy of which is attached hereto as Exhibit "1." The Amended Settlement Term Sheet supersedes and replaces the Settlement Term Sheet, and otherwise modifies the Settlement by, among other things, (i) including the Trustee as a party to the Settlement, (ii) resolving certain disputes concerning payment of administrative expenses between the Committee, Textron and the Trustee, and (iii) providing for the subsequent submission of a joint plan of liquidation in the Chapter 11 Cases.
26. The Amended Settlement Term Sheet generally provides for the following: (i) Textron shall purchase the Committee's counsel's administrative claim for certain unpaid fees and expenses in the amount of $677,000 (the "Committee Administrative Claim") and shall assign the Committee Administrative Claim to the general unsecured creditors; (ii) Textron shall permit a percentage of all amounts it recovers on account of its secured claims (whether or not such recoveries are obtained under a Chapter 11 plan, a Chapter 7 liquidation or otherwise) following the Settlement Effective Date to be transferred for the benefit of the general unsecured creditors and the Committee's counsel according to a negotiated waterfall; (iii) Textron shall pay out of its cash collateral and only following approval thereof by the Court, certain administrative claims of the Trustee and his professionals for fees and expenses incurred through a certain date; and (iv) Textron shall fund out of its cash collateral an additional pool to be applied by the estate to pay certain administrative costs (including the fees and expenses of the Trustee and his professionals for periods incurred following the Settlement Effective Date at reduced rates for the continuation of the Trustee's activities) in conjunction with a plan of liquidation. The Settlement further provides, among other things, for general releases among the parties, including with respect to the Adversary Proceedings and Disputes.
27. The Amended Settlement Term Sheet further recognizes the validity of Textron's liens, that Textron is senior and fully secured, and that Textron's money is funding the Settlement.
28. The Settlement in no way limits or impairs the ability of the Court or any party in interest with standing and not a party to the Settlement to (i) object or otherwise respond to any professional fee applications, or (ii) pursue any disgorgement rights the Court or such party may have pertaining to administrative claims. However, no party shall have any disgorgement rights with respect to the consideration paid by Textron for the Committee Administrative Claim, which consideration is not being paid in satisfaction of any administrative claim or expense within the meaning of section 503 of the Bankruptcy Code.
29. The Trustee's uncontroverted testimony at the Settlement Hearing was that the Settlement is (i) in the best interest of the Debtors' estates, and (ii) reasonable, given the particular circumstances of this case. The Trustee supported and became a party to the Settlement because, among other things, he believed that neither he nor the Committee could have achieved a greater return than that provided for in the Settlement, even if they were one hundred percent (100%) successful in litigation against Textron. As stated by the Trustee, without the cessation of the Adversary Proceedings, the ongoing, substantial costs being incurred by professionals for the Committee, the estates and Textron would further erode any potential recovery.
30. The Trustee further believed that the Settlement adequately resolved certain disputes pertaining to the Trustee's and the Trustee's Professionals' administrative claims. To fully and completely satisfy such claims, as further provided in the Settlement, Textron agrees to pay out of its cash collateral and only following approval thereof by the Court, for the Trustee's and Trustee Professionals' unpaid legal fees and unreimbursed expenses through and including October 25, 2004, the lesser of (a) 64% of the allowed amount of the Trustee/Trustee Professionals Administrative Claim, and (b) $721,000, in complete satisfaction of all but $219,000 of the Trustee/Trustee Professionals Administrative Claim. Textron agrees to pay the Trustee/Trustee Professionals Administrative Claim in two parts: (i) $521,000 on the later of the Settlement Effective Date or approval of the fees and expenses in question, and (ii) the remainder on the earlier of certain events, but in no event later than April 30, 2005. Further, if a joint plan of liquidation is confirmed, the Trustee and the Trustee Professionals will share pro rata in a pool of $219,000 in full and complete satisfaction of the Trustee/Trustee Professionals Remaining Claim. For work performed after October 25, 2004, the Trustee and the Trustee Professionals agree to certain discounts provided for in the Settlement. Neither Textron nor the Committee shall seek disgorgement of any payments received by the Trustee and the Trustee Professionals on or prior to October 25, 2004, provided such payments do not exceed $3,837,194. In consideration of these and certain other promises and conditions provided for in the Settlement, the Trustee and the Trustee Professionals agree to, among other things, an approximate $3 million reduction in their fees that would have come ahead of priority unsecured creditors, including, without limitation, the IRS and the Secretary (as such parties are defined below).
31. On October 28, 2004, the Secretary of Labor (the "Secretary") filed the "Secretary of Labor's Objection to Joint Motion of the Official Committee of Unsecured Creditors and Textron Financial Corporation to Approve Settlement and Compromise" and the Declaration of Holly G. Thomas in support thereof. On November 1, 2004, the United States, on behalf of the Internal Revenue Service (the "IRS") filed the "United States' Opposition to Joint Motion of the Official Committee of Unsecured Creditors and Textron Financial Corporation to Approve Settlement and Compromise." Through their objections, the Secretary and IRS argued, respectively, among other things, that the Settlement violates the Bankruptcy Code's priority scheme because it distributes estate assets to non-priority unsecured creditors before administrative or priority unsecured creditors.
32. On November 15, 2004, the United States, on behalf of the IRS, filed the "United States' Opposition to Joint Motion of the Official Committee of Unsecured Creditors and Textron Financial Corporation to Approve Settlement and Compromise (As Such Motion Was Amended by the Notice Filed on November 5, 2004)," by which the IRS, among other things, renewed its previous objections.
33. The objections filed by the Secretary and the IRS were limited to legal issues, and offered no evidence in opposition to the Motion.
34. On November 16, 2004, the Committee filed its "Omnibus Reply of Official Committee of Unsecured Creditors to (I) The Secretary of Labor's Objection to the Joint Motion of the Official Committee of Unsecured Creditors and Textron Financial Corporation to Approve Settlement and Compromise; (II) The United States Opposition to Joint Motion of the Official Committee of Unsecured Creditors and Textron Financial Corporation to Approve Settlement and Compromise; and (III) The United States Opposition to Joint Motion of the Official Committee of Unsecured Creditors and Textron Financial Corporation to Approve Settlement and Compromise (As Such Motion Was Amended by the Notice Filed on November 5, 2004)" (the "Committee's Reply"). On November 16, 2004, Textron filed its "Reply of Textron Financial Corp. to the Objections of the Secretary of Labor and the Internal Revenue Service to the Joint Motion of the Official Committee of Unsecured Creditors and Textron Financial Corp. to Approve Settlement and Compromise" ("Textron's Reply").
35. Notice of the Settlement Hearing, and service and notice of the Motion, the Amended Settlement Term Sheet, the Committee's Reply, Textron's Reply, these Amended Findings and Conclusions, and the Order were reasonable in light of the circumstances and in compliance with applicable law. No other or further notice is or shall be required. No additional notice of or other filings, pleadings or orders with respect to the transfers of claims set forth in the Amended Settlement Term Sheet is or shall be required, whether pursuant to Federal Rule of Bankruptcy Procedure 3001 or otherwise.
Based upon the foregoing Findings of Fact, the Court makes the following Conclusions of Law:
CONCLUSIONS OF LAW
A. Notice of the Settlement Hearing, and service and notice of the Motion, the Amended Settlement Term Sheet, the Committee's Reply, Textron's Reply, these Amended Findings and Conclusions, and the Order were reasonable in light of the circumstances and in compliance with the Bankruptcy Code, the Local Bankruptcy Rules for the District of Nevada and other applicable law, and afforded due process to all parties
B. Bankruptcy Rule 9019(a) provides in pertinent part: "[o]n motion by the trustee and after notice and a hearing, the court may approve a compromise or Settlement."
C. To approve the Amended Settlement Term Sheet, the Court must find that it is "fair, reasonable and in the best interest of the estate." In re Louise's, Inc., 211 B.R. 798, 801 (D. Del. 1997). The Court has great latitude to authorize a compromise. Goodwin v. Mickey Thompson Entertainment Group (In re Mickey Thompson Entertainment Group), 292 B.R. 415, 420 (B.A.P. 9th Cir. 2003).
D. The Ninth Circuit has stated that a compromise or settlement must be (i) fair and equitable to creditors; (ii) in the best interests of the estate; and (iii) reasonable, given the particular circumstances of the case. Mickey Thompson Entertainment Group, 292 B.R. at 420 ( citing Woodson v. Fireman's Fund Ins. Co. (In re Woodson), 839 F.2d 610, 620 (9th Cir. 1987); Martin v. Kane (In re AC Props.), 784 F.2d 1377, 1380 (9th Cir. 1986)).
E. To determine the fairness, reasonableness and adequacy of a proposed compromise, a bankruptcy court must consider (a) the probability of success in the litigation; (b) the difficulties, if any, to be encountered in the matter of collection; (c) the complexity of the litigation involved, and the expense, inconvenience and delay necessarily attending it; and (d) the paramount interest of the creditors and a proper deference to their reasonable views in the premise. Mickey Thompson Entertainment Group, 292 B.R. at 420 ( citing AC Props., 784 F.2d at 1381).
F. The Amended Settlement Term Sheet satisfies each of the requirements articulated by the Ninth Circuit in AC and the other cases cited above.
G. With respect to the first AC factor, "the probability of success in the litigation," the Court is not required to conduct an exhaustive investigation into the validity of the various claims, or conduct a "mini trial" of those claims. Instead, the Court is required to canvass the issues, which it has amply done, and determine whether the Settlement falls below some lowest point in the range of reasonableness. The Court is keenly aware of the issues surrounding the Disputes and the Settlement. The Parties positions in the Disputes are fairly entrenched and success on the merits is unclear. The Amended Settlement Term Sheet is a fair and reasonable compromise of the Disputes.
H. With respect to the second AC factor, "the difficulties, if any, to be encountered in the matter of collection," if the Committee did prevail on all or some of the Adversary Proceedings, it is unclear whether and what amount, if any, of that recovery would inure to the benefit of its constituency, the general unsecured creditors, given the remaining assets and the outstanding administrative and priority claims in the Chapter 11 Cases.
I. With respect to the third AC factor, "the complexity of the litigation involved, and the expense, inconvenience and delay necessarily attending it," the Court finds that both Parties have incurred significant amounts of time and resources through the discovery stages of the Adversary Proceedings, and equally significant amounts would necessarily be expended in proceeding to dispositive motion hearing and, if necessary, trial. Through the filing of the Motion, the Committee has incurred fees and expenses in the amount of approximately $750,000, and its counsel estimated that the Committee likely would incur "well in excess of a million dollars of additional legal fees before this was over." By not further pursuing the Adversary Proceedings, significant administrative expenses are being avoided, which would have come ahead of both priority and non-priority unsecured creditors.
J. With respect to the fourth AC factor, "the paramount interest of the creditors and a proper deference to their reasonable views in the premise," the Court, in conducting its own analysis and exercising its own discretion, and according deference to both the opinion and judgment of the Committee and the Trustee, Concludes that the Amended Settlement Term Sheet clearly is in the best interest of the creditors of the Debtors' estates. The Committee has negotiated a potential return for its constituency that would not exist absent the Settlement. That is, but for Textron's voluntary assignment of certain of its bankruptcy dividends to general unsecured creditors, the funds would otherwise be required to be paid to Textron.
K. With respect to priority unsecured creditors, including without limitation, the IRS and the Secretary, they are not being harmed by the Settlement; to the contrary, they are receiving an indirect benefit through the significant reduction of administrative claims. The Trustee and the Trustee Professionals have agreed to recover only approximately 64% of their fees, resulting in an approximate $3 million reduction in administrative expenses. Committee counsel has agreed to take a significant portion of its fees from payments that come directly from Textron's collateral, that otherwise would have been payable to Textron, ahead of all priority unsecured creditors. Committee counsel further has agreed to recover any amounts in excess of $677,000 only from the waterfall payments from Textron's liquidation proceeds and litigation recoveries, as further described in the Settlement. Textron has agreed to pay substantial sums upfront, out of its own collateral proceeds, to Committee counsel, the Trustee and Trustee Professionals, which amounts Textron otherwise would be entitled to on account of its superpriority or secured claims. Textron is giving up the right to seek disgorgement of payments received by the Committee and Committee counsel, and Textron has only limited disgorgement rights against the Trustee and the Trustee Professionals. Textron is allowing use of its cash collateral to fund certain Trustee and Trustee Professional services, which are to be performed at the discounted rates provided for in the Settlement. Textron further has the right, but not the obligation, to lend on a first out basis up to an additional $281,000 to the Debtors, Trustee or other liquidating entity out of Textron's cash collateral. The unsecured creditors of the Debtors' estates are receiving significant value via (i) the assignment of the Committee Administrative Claim, and (ii) the waterfall payments from Textron's liquidation proceeds, as described in paragraph 23 of the Settlement. No party has argued or provided evidence that the Debtors' estates are giving up substantial potential recoveries from Textron that might otherwise be available for distribution to any creditors other than Textron, or that the Settlement is not otherwise within a range of reasonableness permissible for the Court to approve in accordance with applicable Ninth Circuit law. It is beyond doubt that all creditors, priority or otherwise, benefit by the reduction of the outstanding administrative claims and the preclusion of substantial administrative claims that would have been incurred in connection with continued litigation of the Adversary Proceedings.
L. The Settlement in no way limits or impairs the ability of the Court or any party in interest with standing and not a party to the Settlement to (i) object or otherwise respond to any professional fee applications, or (ii) pursue any disgorgement rights the Court or such party may have pertaining to administrative claims. However, no party shall have any disgorgement rights with respect to the consideration paid by Textron for the Committee Administrative Claim, which consideration is not being paid in satisfaction of any administrative claim or expense within the meaning of section 503 of the Bankruptcy Code.
M. The Amended Settlement Term Sheet is consistent with and supported by Official Unsecured Creditors' Committee v. Stern (In re SPM Mfg. Corp.), 984 F.2d 1305 (1st Cir. 1993), and its progeny, including without limitation, Official Committee of Unsecured Creditors of Grand Eagle Companies, Inc. et al. v. Asea Brown Boveri, Inc., 313 B.R. 219 (N.D. Ohio 2004). SPM, and the cases following SPM, provide generally that creditors are free to do whatever they wish with the bankruptcy dividends they receive, including to share them with other creditors. The Settlement is being funded by Textron's own money, not funds belonging to the Debtors' estates. Textron can do as it pleases with its own money. Here, it chooses to pay $677,000 to the Committee's counsel, and then get an assignment of the claim for the benefit of the unsecured creditors, pursuant to the terms of the Amended Settlement Term Sheet.
N. Contrary to the Secretary's and IRS's contentions, nothing in the Amended Settlement Term Sheet alters or otherwise interferes with the priority of payments to holders of claim in accordance with the Bankruptcy Code's priority scheme.