RadLAX Gateway Hotel, LLC v. Amalgamated Bank
United States Supreme Court
132 S.Ct. 2065 (2012)
In 2007, RadLAX Gateway Hotel, LLC, and RadLAX Gateway Deck, LLC (RadLAX) borrowed $142 million from Longview Ultra Construction Loan Investment Fund (Longview) to finance the purchase of property, construction of a parking structure, and renovations of a hotel. Amalgamated Bank (Bank) served as trustee for Longview. The loan was secured by all RadLAX’s assets. RadLAX was not able to complete the improvements and filed for bankruptcy under Chapter 11. RadLAX proposed a plan under Chapter 11 to auction substantially all of RadLAX’s assets under specified auction procedures. The procedures provided for an initial bid of $47 million to be submitted by a stalking horse, which refers to a bidder that has agreed to make an advance bid. The procedures allowed for the Bank to bid, but the Bank was not permitted to credit-bid. This meant that the Bank could not use the debt it was owed to offset the purchase price. Essentially, the Bank would be required to pay cash for the property. RadLAX sought to confirm this plan using the cramdown provisions in 11 U.S.C. § 1129(b)(2)(A), because the Bank would not consent. The cramdown provisions permit a court to confirm a Chapter 11 plan over the objection of one or more impaired classes of creditors. The bankruptcy court denied the plan, and RadLAX appealed to the United States Court of Appeals for the Seventh Circuit. The Seventh Circuit affirmed, and RadLAX petitioned the United States Supreme Court for review, which was granted.
Rule of Law
Holding and Reasoning (Scalia, J.)
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