(Unpublished) - In re Matthew Edward Autterson, 13-30184 TBM (Bankr. D. Colo. February 26, 2016) (Docket No. 432). 11 U.S.C. 1122(b), 1129(a) and (b); competing plans; bad faith; gerrymandering; and improper use of an administrative convenience class.

In an individual Chapter 11 case involving competing plans of reorganization, the Court denied confirmation of both plans, one propounded by the debtor, and the other propounded by debtor's only significant non-insider creditor. After denying confirmation of both plans, albeit on different grounds, the Court dismissed the case on the non-insider creditor's motion to dismiss.



The individual debtor, a man who had amassed considerable wealth in a 30 year career in the financial services industry, filed Chapter 11 immediately after a bank obtained a $2,600,000 judgment against him on a guaranty. When debtor filed his case, he had only two other significant creditors, a family partnership and a family trust. In addition, debtor owed a total of $11,000 to a handful of other unsecured creditors, including his law firm.



The day after the bank obtained a judgment against the debtor, the debtor effected a change in the ownership structure of the family partnership to dilute his control. The Court found that debtor's conduct was done to thwart the bank's effort to collect on its judgment. Another pre-petition planning device the debtor employed was to inflate the claims of the family partnership and the family trust.



After a contested evidentiary trial, the Court found that the debtor's prepetition conduct as well as the manner and methods used to prosecute his plan epitomized bad faith. In prosecuting his plan, the debtor created an artificially impaired "administrative convenience class," and improperly placed his law firm in that class in an effort to gerrymander the affirmative vote of that class.



The Court denied confirmation of debtor's plan. In addition, the Court found that the competing plan propounded by the bank was not confirmable because the mechanism it proposed to pay the family partnership and the family trust was neither feasible nor fair and equitable. The bank's plan also suffered from classification infirmities.



Finally the Court found that "cause" existed for dismissal or conversion and then considered which was in the best interests of the creditors and the estate. Among the factors which weighed heavily in the Court's decision to dismiss, rather than convert the case, were the unique structural alignment of the parties, the amounts of their respective claims, the history of the dispute between the debtor and the bank, the debtor's bad faith, and the apparent futility of involving a Chapter 7 trustee in this two party dispute.