US Bank v. The Village at Lakeridge, LLC

Lakeridge has one member, MBP. MBP is managed by a board of five members, one of whom is Kathie Bartlett. Bartlett shares a close business and personal relationship with Dr. Robert Rabkin. Lakeridge filed for bankruptcy and US Bank held a fully secured claim worth about $10 million and MBP held an unsecured claim worth $2.76 million. After MBP's board decided to sell its unsecured claim, Rabkin purchased the claim for $5000. US Bank subsequently moved to designate Rabkin's claim and disallow it for plan voting purposes. The bankruptcy court held Rabkin was not a non-statutory insider and that Rabkin did not purchase MBP's claim in bad faith. However, the bankruptcy court designated Rabkin’s claim and disallowed it for plan voting, because it determined Rabkin had become a statutory insider by acquiring a claim from MBP. Lakeridge and Rabkin both appealed, and US Bank cross-appealed. The BAP reversed the finding that Rabkin had become a statutory insider as a matter of law by acquiring MBP’s claim and affirmed the findings that Rabkin was not a non-statutory insider and that the claim assignment was not made in bad faith. The BAP held that insider status cannot be assigned and must be determined for each individual “on a case-by-case basis, after the consideration of various factors.” Finally, the BAP held Rabkin could vote to accept the Lakeridge plan under 11 U.S.C. 1129(a)(10), because he was an impaired creditor who was not an insider. The court affirmed the BAP's decision. View "US Bank v. The Village at Lakeridge, LLC" on Justia Law