WASHINGTON, D.C. - The U.S. Supreme Court on April 2 granted
the U.S. solicitor general leave to participate in oral arguments in a case in
which a creditor bank argues that the Bankruptcy Code precludes confirmation of
a hotel chain's Chapter 11 plan that proposes to sell collateral free and clear
of liens without allowing the bank to credit bid (RadLAX Gateway Hotel LLC
v. Amalgamated Bank, No. 11-166, Chapter 11, U.S. Sup.).
RadLAX Gateway Hotel LLC filed for Chapter 11 bankruptcy
in the U.S. Bankruptcy Court for the Northern District of Illinois.
Creditor Amalgamated Bank opposed RadLAX's Chapter 11 reorganization plan on
grounds that it was unconfirmable pursuant to 11 U.S. Code Section
The Bankruptcy Court agreed with Amalgamated and said the
plans could not be confirmed. A panel of the Seventh Circuit U.S. Court
of Appeals affirmed the Bankruptcy Court's ruling, and RadLAX appealed to the
Supreme Court on Aug. 5.
RadLAX argues that the Seventh Circuit ruling creates
"an untenable split" with two other circuit courts: the Third
Circuit and the Fifth Circuit. Moreover, RadLAX maintains that the case
is the "ideal vehicle" for resolving the split because it presents a
precise question of law with no material factual disputes.
Amalgamated Bank, in a brief that was filed in March,
argues that not only does 11 U.S. Code Section 1129(b) preclude confirmation of
the Chapter 11 plan, but depriving a secured creditor of its right to credit
bid cannot be reconciled with the structure of Chapter 11.
Moreover, the bank maintains that no purpose would be
served by precluding credit bidding when property is sold free and clear of
Credit bidding preserves the settled expectations of
secured creditors when they bargain for a security interest, and it furthers
the policy of maximizing the value of the bankruptcy estate, the bank contends.
solicitor general filed a motion on March 9 seeking permission to participate
in oral arguments.
RadLAX is represented by David M. Neff, Brian A. Audette
and Eric E. Walker of Perkins Coie in Chicago.
Amalgamated is represented by Adam A. Lewis of Morrison & Foerster in San
Francisco, Norman S. Rosenbaum of the firm's office in New York, John W.
Costello of Edwards Wildman Palmer in Chicago and Deanne E. Maynard, Brian R.
Matsui and Marc A. Hearron of Morrison & Foerster in Washington.
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