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Dish Network Corp. v. DBSD N. Am., Inc. (In re DBSD N. Am., Inc.) - 634 F.3d 79 (2d Cir. 2010)

Rule:

The Bankruptcy Code prescribes no limits on standing beyond those implicit in U.S. Const. art. III. Congress has given courts of appeals jurisdiction over all final decisions, judgments, orders, and decrees of the district courts in bankruptcy cases, 28 U.S.C.S. § 158(d)(1) Courts in turn have jurisdiction to review all final judgments, orders, and decrees of the bankruptcy courts, § 158(a)(1). Nevertheless, for practical reasons courts of appeals have adopted the general rule, that in order to have standing to appeal from a bankruptcy court ruling, an appellant must be "a person aggrieved."

Facts:

ICO Global Communications founded DBSD in 2004 to develop a mobile communications network that would use both satellites and land-based transmission towers. In its first five years, DBSD made progress toward this goal, successfully launching a satellite and obtaining certain spectrum licenses from the FCC, but it also accumulated a large amount of debt. Because its network remained in the developmental stage and had not become operational, DBSD had little if any revenue to offset its mounting obligations. On May 15, 2009, DBSD (but not its parent ICO Global), filed a voluntary petition in the United States Bankruptcy Court for the Southern District of New York, listing liabilities of $813 million against assets with a book value of $627 million. Sprint, a creditor, argued that the plan improperly gave shares and warrants to DBSD's owner — whose interest lied below Sprint's in priority — in violation of the absolute priority rule of 11 U.S.C. § 1129(b)(2)(B). DISH, meanwhile, argued that the bankruptcy court erred when it found DISH did not vote "in good faith" under 11 U.S.C. § 1126(e) and when, because of the § 1126(e) ruling, it disregarded DISH's class for the purposes of counting votes under 11 U.S.C. § 1129(a)(8). DISH also argues that the bankruptcy court should not have confirmed the plan because the plan was not feasible. 

Issue:

Does a creditor have standing to appeal confirmation of the plan?

Answer:

Yes.

Conclusion:

The district court's confirmation order was reversed based on the absolute priority rule and was affirmed on all other grounds. The matter was remanded.  The creditor, which held an unliquidated, unsecured claim based on a lawsuit against the debtor's subsidiary, had standing to appeal confirmation of the plan because confirmation affected it directly and financially. The absolute priority rule was violated because the existing shareholder received property under the plan on account of its junior interest. The second creditor argued that the bankruptcy court improperly designated the second creditor's vote as not in good faith under 11 U.S.C.S. § 1126(e). The court of appeals held that designation was permissible given findings that the second creditor, an indirect competitor of the debtor, bought a blocking position in a class of claims in order to obtain the debtor's telecommunications spectrum rights. It was appropriate to disregard the second creditor's entire class in determining plan acceptance under § 1129(a)(8).

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