In re Trans Max Technologies, Inc.

Entrepreneur Samuel Higgins acquired ignition manufacturer Trans Max Technologies, Inc. (Trans Max) (debtor) in 2004. Higgins had previously obtained the rights to the patented design of a vertical-takeoff-and-landing (VTOL) aircraft, and Higgins wanted Trans Max to investigate engine technologies that could be paired with the VTOL design to make flying cars. To resolve Trans Max’s preacquisition debts, Higgins had Trans Max file for chapter 11 bankruptcy. Trans Max’s reorganization plan proposed to cancel all of Trans Max’s outstanding debt and outstanding equity securities and then issue shares of new Trans Max common stock to creditors. Under the plan, Higgins would contribute $50,000 and the VTOL design rights to Trans Max in exchange for 9,000,000 shares of new Trans Max common stock. The plan assumed that Trans Max would not incur any debt after the reorganization because Trans Max intended to license the flying-car design to joint ventures that would be funded entirely by outsiders, without Trans Max entering into any financial commitments of its own. The bankruptcy trustee objected to Trans Max’s plan, asserting that the plan was not feasible as required by 11 U.S.C. § 1129(a)(11). At a plan-confirmation hearing, Higgins testified that Trans Max had been in preliminary negotiations with a potential investor regarding the capital Trans Max needed to operate after the reorganization. However, Trans Max did not identify specific investors or give information about the investment beyond Higgins’s belief that Trans Max could reach a binding agreement with a joint venturer for 100 percent of the necessary funding. The bankruptcy court considered Trans Max’s request to confirm the plan.