In Re General Growth Properties, Inc.

General Growth Properties, Inc. (GGP) (debtor) was a real estate investment-trust corporation with hundreds of project-level subsidiaries that owned shopping centers, master-planned communities, and office buildings. GGP centralized construction, leasing, management, property maintenance, and cash management but created separate subsidiaries as special-purpose entities (SPEs) liable for mortgages on individual properties that were obligated to maintain separate identities to insulate each subsidiary from the debts of affiliates and prevent default. The SPEs had operating agreements that required independent managers to consider the interests of GGP and its creditors under Delaware law and required all managers to consent before an SPE could file bankruptcy. After the 2008 financial crisis, GGP suffered financially although several of its high-end shopping centers remained profitable. When GGP filed for bankruptcy reorganization, the solvent subsidiaries tried to avoid following suit and their assets being used to finance GGP’s reorganization, but some solvent subsidiaries nonetheless filed for reorganization shortly after GGP. Six entities moved to dismiss the individual bankruptcies as filed in bad faith, arguing that the SPE or bankruptcy-remote structure of the project-level debtors required the court to analyze the financial distress of each individual debtor separately in determining whether an individual filing was in good faith instead of analyzing GGP’s distress as a whole.