Team R38

NO. 17-412

In the Supreme Court of the

United States of America OCTOBER TERM, 2017

IN RE HIGH ROCKS, INC., DEBTOR,

HIGHWAY 61, INC., Petitioner,

V.

HIGH ROCKS, INC., Respondent.

ON WRIT OF CERTIORARI FROM THE UNITED STATES COURT OF APPEALS FOR THE THIRTEENTH CIRCUIT

BRIEF FOR RESPONDENT

COUNSEL FOR RESPONDENT TEAM R38

DATED JANUARY 22, 2018

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QUESTIONS PRESENTED

I. Why a bankruptcy court may approve a sale of real property “free and clear” of a leasehold interest in such property held by an objecting lessee pursuant to § 363(f) of the Bankruptcy Code notwithstanding the protection that exists for lessees in § 365(h) of the Bankruptcy Code.

II. Why a bankruptcy court may approve a gift settlement of proceeds that does not conform

with the Bankruptcy Code’s absolute priority scheme if the gift consists of non-estate assets, does not result in a final disposition, and furthers the policy goals of the Code.

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TABLE OF CONTENTS

QUESTIONS PRESENTED ......................................................................................................... i TABLE OF AUTHORITIES ....................................................................................................... ii OPINIONS BELOW .................................................................................................................. viii

STATEMENT OF JURISDICTION ........................................................................................ viii

STATUTORY PROVISIONS ................................................................................................... viii

STATEMENT OF THE CASE. ...............................................................................…….............1

SUMMARY OF THE ARGUMENT ...........................................................................................3

STANDARD OF REVIEW ...........................................................................................................4

ARGUMENT ..................................................................................................................................5

I. A BANKRUPTCY COURT MAY APPROVE A SALE OF REAL PROPERTY “FREE AND CLEAR” OF A LEASEHOLD INTEREST IN SUCH PROPERTY HELD BY AN OBJECTING LESSEE PURSUANT TO § 363(f) NOTWITHSTANDING THE PROTECTIONS THAT EXIST FOR LESSEES IN § 365(h) OF THE BANKRUPTCY CODE………………………………………………………………………………………....5

A. The Bankruptcy Code provisions of §§ 363(f) and 365(h) should be read in harmony

according to the canons of construction………………………………………………...5

B. Section § 363 authorizes the sale free and clear of the Respondent’s leasehold because “interests” is broadly defined and Congress did not proscribe leasehold interests from this power…………………………………………………………………………………8

1. Section 363(f) authorizes such sale because “interests” is broadly

defined………………………………………………………………………………...8

2. Congress did not intend § 365 to limit a trustee’s power of sale under § 363………9

C. Section 365 does not limit a trustee’s power of sale because § 365 expressly applies to formal rejection of a lease where the debtor lessor retains possession of the property and § 365 is only applicable “to the extent that such rights are enforceable under applicable nonbankruptcy law.”………………………………………………………12

1. Section 365 does not apply where the debtor lessor does not retain possession of the

property and affirmatively rejects the lease but rather sells real property subject to a lease…………………………………………………………………………………13

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2. Even if this court finds the trustee’s failure to either assume or reject the lease amounted to “de facto rejection,” § 365(h) is only applicable “to the extent that such rights are enforceable under applicable nonbankruptcy law.”……………………15

II. A BANKRUPTCY COURT MAY APPROVE A GIFT SETTLEMENT OF PROCEEDS

THAT DOES NOT CONFORM WITH THE BANKRUPTCY CODE’S ABSOLUTE PRIORITY SCHEME IF THE GIFT CONSISTS OF NON-ESTATE ASSETS, DOES NOT RESULT IN A FINAL DISPOSITION, AND FURTHERS THE POLICY GOALS OF THE CODE…………………………………………………………………………..…18

A. As a gift settlement of non-estate assets, the absolute priority rule does not govern

the instant case………………………………………………………………………….19

B. This Court’s decision in Jevic is not applicable to the instant case because this gift settlement does not result in a final disposition and furthers the policy goals of the Bankruptcy Code.……………………………………………………………… ………23

CONCLUSION…………………………………………………………………………………31

APPENDICES— Appendix A ................................................................................................................................... A Appendix B ................................................................................................................................... B Appendix C ................................................................................................................................... C Appendix D ................................................................................................................................... D Appendix E ................................................................................................................................... E

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TABLE OF AUTHORITIES UNITED STATES SUPREME COURT CASES Butner v. United States,

440 U.S. 48 (1979)……………………………………………………………………….15

City of Chicago v. Env’tl Def. Fund, 511 U.S. 200 (1993)……………………………………………………………………….6

Connecticut Nat'l Bank v. Germain,

503 U.S. 249 (1992)……………………………………………………………………….9 Czyzewski v. Jevic Holding Corp.,

137 S. Ct. 973 (2017)………………………………………………………………..passim Ex Parte Christy,

44 U.S. 292 (1842)……………………………………………………………………….17 Fourco Glass Co. v. Transmirra Products Corp.,

353 U.S. 222 (1957)……………………………………………………………………….6 Hamilton v. Lanning,

560 U.S. 505 (2010)……………………………………………………………………...15 Keene Corp. v. United States,

508 U.S. 200 (1993)……………………………………………………………………….9 Morton v. Mancari,

417 U.S. 535 (1974)…………………………………………………………………….....6 N.L.R.B. v. Bildisco & Bildisco,

465 U.S. 513 (1984)……………………………………………………………………...12

Nobelman v. Am. Sav. Bank, 508 U.S. 324 (1993)……………………………………………………………………...16

Protective Comm. for Indep. Stockholders of TMT Trailer Ferry, Inc. v. Anderson,

390 U.S. 414 (1968)…………………………………………………………………22, 24 Rubin v. United States,

449 U.S. 424 (1981)……………………………………………………………………….9 Russello v. United States,

464 U.S. 16 (1983)………………………………………………………………………...9

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Toibb v. Radloff,

501 U.S. 157 (1991)……………………………………………………………………...25

Watt v. Alaska, 451 U.S. 259 (1981)………………………………………………………………….........6

UNITED STATES CIRCUIT COURTS OF APPEAL CASES Canter v. Ramsey (In re Hotel Governor Clinton),

96 F.2d 50 (2d Cir. 1938)………………………………………………………………...15 Capital Factors, Inc. v. Kmart Corp. (In re Kmart Corp.),

359 F.3d 866 (7th Cir. 2007)……………………………………………………….........25 In re ICL Holding Co., Inc. 802 F.3d 547, 555 (3d Cir. 2015)………………………………………………………...19 Medical Malpractice Ins. Ass’n v. Hirsch (In re Lavigne),

114 F.3d 379 (2d Cir. 1997) ……………………………………………………………..12 Metropolitan Life Ins. Co. v. Murel Holding Corp. (In re Murel Holding Corp.),

75 F.2d 941 (2d Cir. 1935) ………………………………………………………………10 Motorola, Inc. v. Official Comm. of Unsecured Creditors (In re Iridium Operating LLC),

478 F.3d 452 (2d Cir. 2007) ……………………………………………………..19, 23, 25

Morning Mist Holding, Ltd. v. Krys (In re Fairfield Sentry, Ltd.), 714 F.3d 127 (2d Cir. 2013) ………………………………………………………………4 Official Comm. of Unsecured Creditors of Cybergenics Corp. v. Chinery,

330 F.3d 548 (3d Cir. 2015) ……………………………………………………………..25 Official Comm. of Unsecured Creditors v. Stern (In re SPM Mfg, Corp),

984 F.2d 1305 (1st Cir. 1993)………………………………………………………..19, 21 Pinnacle Rest. at Big Sky, LLC v. CH SP Acquisitions (In re Spanish Peaks Holdings II, LLC),

872 F.3d 892 (9th Cir. 2017)……………………………………………………….4, 7, 14 Precision Indus., Inc. v. Qualitech Steel SBQ, LLC,

327 F.3d 537 (7th Cir. 2003)………………………………………………………..passim

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UNITED STATES DISTRICT COURT CASES Cheslock-Bakker & Assocs., Inc. v. Kremer (In re Downtown Athletic Club of New York City, Inc.),

44 Collier Bankr. Cas. 2d 342 (S.D.N.Y. 2000) ………………………………….......8, 13

Dishi & Sons v. Bay Condos LLC, 510 B.R. 696 (S.D.N.Y. 2014)………………………………………………...9, 10, 12, 13

UNITED STATES BANKRUPTCY COURT CASES Gary Hill, Jr. v. MKBS Holdings, LLC (In re Hill),

307 B.R. 821 (Bankr. W.D. Pa. 2004)…………………………………………………...13 Hewlett v. Ng (In re Ng),

2007 WL 4365564 (Bankr. N.D. Cal. Dec. 13, 2007) …………………………………..13 In re Stein,

281 B.R. 845 (Bankr. S.D.N.Y. 2002)…………………………………………………...14 In re Fryar,

2017 WL 1489822 (Bankr. E.D. Tenn. Apr. 25, 2017)……………………........ 24, 27, 28

In re Taylor, 198 B.R. 142, 162 (Bankr. D. S.C. 1996) ………………………………………………...8 Jacobs v. Terpitz (In re Dewey & LeBoeuf LLP)

478 B.R. 627 (Bankr. S.D.N.Y. 2012)……………………………………………….......23 La Jolla Mtg. Fund v. Rancho El Cajon Assocs.,

18 B.R. 283 (Bankr. S.D. Cal. 1982)…………………………………………………….10 STATUTORY PROVISIONS 11 U.S.C. § 361………………………………………………………………………………….10 11 U.S.C. § 363(e)…………………………………………………………………………….9, 11 11 U.S.C. § 363(f)…………………………………………………………………………......5, 15 11 U.S.C. § 363(f)(1)……………………………………………………………………….7, 8, 11 11 U.S.C. § 365(d)(1)……………………………………………………………………………13 11 U.S.C. § 365(d)(4)(A)………………………………………………………………………...13

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11 U.S.C. § 365(h)…………………………………………………………………………….5, 12 11 U.S.C. § 507…………………………………………………………………………………..18 11 U.S.C. § 1129(b)………………………………………………………………………….18, 19 LEGISLATIVE HISTORY H.R. REP. NO. 595, 95TH CONG. 1ST SESS. 345 (1977)…………………………………………..11 SECONDARY SOURCES 3-363 Collier P 363.06 (16th ed. 2017) ………………………….……………………………….9 Kevin M. Judisak, et. al., Bankruptcy Law—The Standard for Rejecting Collective Bargaining

Agreements in Bankruptcy: Labor Discovers It Ain’t ‘Necessarily” So, 63 NOTRE DAME L. REV., 79 (1988).……………………………………………….……………………………..20

Larry M. Eig, U.S. CONGRESSIONAL RESEARCH SERVICE. STATUTORY INTERPRETATION:

GENERAL PRINCIPLES AND RECENT TRENDS, 1, 42 (RL97589)…………… ...…………….....5 Maria Brouwer, Reorganization in US and European Bankruptcy Law, 22 EUR. J. LAW ECON. 5

(2006)…………………………………………………...……………………………………20 Grant S. Nelson & Dale A. Whitman, Real Estate Finance Law § 7.13 (3d ed. 1994).…………15

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OPINIONS BELOW

The bankruptcy judge for the District of Moot approved both the Committee Settlement

and the sale of High Rocks to 4th Street. R. at 8. In its approval of the sale, the bankruptcy court

found 365(f) trumps Highway’s asserted rights under 365(h) of the Bankruptcy Code. R. at 8–9.

In its approval of the Committee Settlement, the court found that the absolute priority rule was not

applicable. R. at 9. In doing so, however, the judge recognized the novelty of Highway’s objections

and stayed the sale’s closing in order for Highway to file the instant appeal. R. at 8. On appeal to

the United States District Court for the District of Moot, the district court affirmed the bankruptcy

court’s ruling. R. at 9. On appeal from the district court to the Thirteenth Circuit Court of Appeals,

the court once again affirmed the approval of both the sale and the settlement. R. at 3. The Supreme

Court of the United States granted Highway 61’s petition for a writ of certiorari, giving rise to the

instant action. R. at 1.

STATEMENT OF JURISDICTION

The formal statement of jurisdiction is waived pursuant to Competition Rule VIII.

STATUTORY PROVISIONS INVOLVED

The relevant statutory provisions involved in this case are listed below and are reproduced in Appendices A through E. 11 U.S.C § 361 11 U.S.C § 363(e) 11 U.S.C § 363(f) 11 U.S.C. § 365(h) 11 U.S.C. §1129(b)(2)(C)

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STATEMENT OF THE CASE

In May 2014, High Rocks, Inc. (“High Rocks”), the debtor in this case, broke ground to

develop a resort on a parcel of land located outside the City of Rainier in the State of Moot. R. at

4. This development, High Rocks, consists of a casino, a 30-story hotel, and a 7,000-seat outdoor

amphitheater. R. at 4. High Rocks leased the amphitheater to Highway 61, Inc. (“Petitioner”) to

operate the venue in exchange for a fixed fee of $400,000 per year and a share of the revenue

(“Highway lease”). R. at 5. To fund this construction, High Rocks financed the $800 million

project with a secured loan in favor of North Country Bank (“North Country”). R. at 4. Although

it had never attempted such a project in the past, Skyline Construction Inc. (“Skyline”), as the

lowest bidder, was chosen as the main contractor. R. at 4.

During initial construction, problems arose in the hotel tower and casino building from

Skyline’s alleged use of inadequate construction materials. R. at 4. This caused enormous

complications to the completion of the resort properties including, among other defects, requiring

most of the plumbing to be replaced. R. at 4. Despite these hindrances, Skyline constructed the

majority of the amphitheater, but before it could finish installing seating, sound equipment and

special acoustic panels, High Rocks terminated its contract with Skyline due to its

mismanagement. R. at 4.

In January 2016, High Rocks hired a new contractor to resume construction of the hotel

tower and casino, but not the amphitheater due to its lack of experience. R. at 5. Instead, Highway

would install the remaining seats, sound system, and acoustic panels for $2 million to expedite the

amphitheater’s opening in November 2016. R. at 6. In February 2016, North Country sold its

note at an undisclosed discount to 4th Street, a company with an established record of owning and

operating similar resorts and entertainment properties. R. at 5. In June 2016, 4th Street commenced

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a foreclosure action on the property as part of its plan to establish full ownership, which prompted

High Rocks to initiate this chapter 11 bankruptcy case in Moot in July 2016. R. at 5.

At the first hearings, High Rocks announced its intent to open in a few months as

construction progressed. R. at 6. The postpetition contract for Highway’s completion of the

amphitheater was approved by the bankruptcy court without objection. R. at 6. Unfortunately,

High Rocks continued to face complications with the facilities and was forced to halt construction

when it ran out of cash in December 2016. R. at 6. With no remaining funds to reorganize, High

Rocks filed a motion to sell its assets “free and clear” of any encumbrances under § 363(f) of the

Bankruptcy Code, including the leasehold interest held by Highway. R. at 6–7.

Before the sale, the Official Committee of Unsecured Creditors (“Committee”) alerted 4th

Street of its various lender liability claims against it, as well as against Skyline, for its

mismanagement of the development. R. at 7. No qualified bidders other than 4th Street came

forward for the auction of the High Rocks facility on January 11, 2017. R. at 7. When 4th Street

was named the winner for its credit bid in the full amount of its secured debt, it gave notice to all

interested parties that it would oversee the management of the amphitheater on its own. R. at 7.

Before the hearing, 4th Street, High Rocks, and the Committee reached a $2 million gift

settlement agreement in exchange for the Committee’s withdrawal of its objection to the sale

(“Committee Settlement”). R. at 8. This gift was intended to fund the Committee’s claims against

Skyline. R. at 8. Highway filed an objection under § 365(h) of the Bankruptcy Code and claimed

the general provisions of § 365(h) allowed it to maintain its lease. R. at 7. Highway also sent a

letter to inform a letter to inform High Rocks it wished to retain its leasehold interest. R. at 8. At

the hearing, Highway again claimed its leasehold interest was protected under § 365(h) and raised

an additional objection that the Settlement did not comply with the absolute priority rule. R. at 8.

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The bankruptcy court found the Committee Settlement did not implicate the absolute

priority rule and that it was in all parties’ best interest that to enable the Committee to litigate their

claims against Skyline. R. at 9. Furthermore, the court held § 363(f) supersedes Highway’s rights

to keep the Lease under § 365(h). R. at 8–9. Nonetheless, the court found that Highway’s

objections raised a novel issue and stayed the closing of the sale so Highway could file this appeal.

R. at 8. The Thirteenth Circuit affirmed the district court’s approval of both the sale to 4th Street

free and clear of Highway’s leasehold under § 363(f) and the Committee Settlement. R. at 20.

SUMMARY OF THE ARGUMENT

The perceived conflict between §§ 363(f) and 365(h) may be quelled by a plain reading of

these two sections in distinct circumstances. Section 365 does not offer lessees protection against

every conceivable threat to their possessory interests, but rather focuses on a specific event—the

rejection of a lease by the trustee or debtor-in-possession—and spells out the rights of parties

affected by such event. Therefore, the Petitioner’s interest in the leasehold is an interest § 363 can

eliminate because the Highway Lease was not rejected prior to the sale. Additionally, this Court

should find that nonbankruptcy law determines the rights of the parties in the instant case because

this interpretation preserves the Petitioner’s bargained for prepetition property rights without

enhancing them on the inference that Congress intended a different section to apply as absolute.

Congress had the opportunity to change the language of § 365, specifically the effect of a § 363

sale on a lease, but abstained from doing so, even at the time of the 1994 amendments. Hence, this

Court should not limit High Rocks’ ability to sell its property free and clear of the Respondent’s

leasehold interest pursuant to § 363(f) notwithstanding the protections given to lessees under §

365(h).

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While the absolute priority rule was recently extended to settlements by this Court, rather

than just chapter 11 reorganization plans, this priority scheme was not and cannot be intended to

include the distribution of a gift of non-estate assets as a matter of policy. When a settlement is

nonconsensual, it can be approved by a court if it is fair and equitable or if it furthers the

Bankruptcy Code’s legitimate policy goals. As a gift of 4th Street’s personal money, the

Committee Settlement is a distribution of non-estate assets, and therefore is not subject to the

absolute priority rule. While it is undisputed the Petitioner does not consent to the Committee

Settlement, consent is unnecessary for a gift of unrelated non-estate property. This Settlement

consists of 4th Street’s separate and individual non-estate property, to which the Petitioner has no

legal right. Additionally, it is uncontested that the Committee Settlement is fair and equitable

pursuant to the TMT Trailer Ferry factors and upon approval of this gift, additional burdens and

unnecessary expenses will be saved by all parties by avoiding undue delay in the proceedings.

Therefore, this Court should not further extend Jevic to bar a noncreditor from gifting its own

property to nonpriority creditors to prevent burden and delay of bankruptcy proceedings.

STANDARD OF REVIEW

The review of a bankruptcy court’s decision on questions of statutory interpretation, such

as whether leases survive the sale of estate property “free and clear” of interests, are reviewed by

this Court de novo. Pinnacle Rest. at Big Sky, LLC v. CH SP Acquisitions (In re Spanish Peaks

Holdings II, LLC), 872 F.3d 892, 897 (9th Cir. 2017). The review of the merits of a bankruptcy

court’s legal conclusions, such as the extent to which the absolute priority rule should be applied,

are also reviewed de novo. Morning Mist Holding Ltd. v. Krys (In re Fairfield Sentry, Ltd.), 714

F.3d 127, 132 (2d Cir. 2013).

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ARGUMENT

I. A BANKRUPTCY COURT MAY APPROVE A SALE OF REAL PROPERTY “FREE AND CLEAR” OF A LEASEHOLD INTEREST IN SUCH PROPERTY HELD BY AN OBJECTING LESSEE PURSUANT TO § 363(f) NOTWITHSTANDING THE PROTECTIONS THAT EXISTS FOR LESSEES IN § 365(h) OF THE BANKRUPTCY CODE.

The Bankruptcy Code is a complex statutory scheme that provides for the comprehensive

financial resolution of an enterprise or person that has financially failed. By application of its

many provisions, the Bankruptcy Code attempts to balance the often-conflicting goal of

maximizing a debtor’s opportunity to make a fresh start, and in a chapter 11 bankruptcy,

reorganize, with the value of the debtor’s estate for equitable distribution to creditors. As with any

extensive enactment, one provision may appear in conflict with another provision of the same law,

not only textually but with respect to its purpose. Sections 363 and 365 are two such provisions.

Section 363 provides a trustee or debtor-in-possession the authorization to sell estate property free

and clear of any interest. 11 U.S.C. § 363(f). Whereas, § 365(h) purports to protect lessees from

rejection of their lease by a debtor lessor. 11 U.S.C. § 365(h).

As such, this discussion will begin by analyzing these provisions of the Bankruptcy Code

and how they may be read in harmony. The second part will then discuss why the plain meaning

and intentional neglect by Congress in amending the statutory text justifies the result in this case.

Lastly, the final section will discuss why, absent affirmative rejection and retention of the property,

the sale in the case at bar was not limited by § 365.

A. The Bankruptcy Code provisions of §§ 363(f) and 365(h) should be read in harmony according to the canons of construction.

Where language of a statute is plain, the sole role of the courts is to enforce it in accordance

with its terms. Larry M. Eig, U.S. CONGRESSIONAL RESEARCH SERVICE. STATUTORY

INTERPRETATION: GENERAL PRINCIPLES AND RECENT TRENDS, 1, 42 (RL97589; Dec. 19, 2011).

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This principle is known as the plain meaning doctrine, which requires a court to presume that

“Congress acts intentionally and purposely when it includes particular language” in a statute. See

City of Chicago v. Environmental Defense Fund, 511 U.S. 200, 208 (1993). Consequently, when

presented with two allegedly conflicting provisions, this Court has the obligation to “give effect to

each if [it] can do so while preserving their sense and purpose.” Watt v. Alaska, 451 U.S. 259, 267

(1981); Morton v. Mancari, 417 U.S. 535, 551 (1974) (“[W]hen two statutes are capable of co-

existence, it is the duty of the courts, absent a clearly expressed congressional intention to the

contrary, to regard each as effective.”). Therefore, this Court may read § 363(f) to apply to the

instant case notwithstanding § 365(h)’s legislative intent because such inquiry is irrelevant where

the language of § 363 is plain and unambiguous. Courts who fall in line with the majority view not

only rely on the perceived conflict between these provisions, but also the canon of construction

that “however inclusive may be the general language of a statute, it will not be held to apply to a

matter specifically dealt with in another part of the same enactment.” Fourco Glass Co. v.

Transmirra Products Corp., 353 U.S. 222, 228 (1957). However, the majority’s approach fails to

acknowledge the underlying principle of the maxims of statutory construction—namely, that such

a canon is only elicited where the provisions cannot be read to avoid conflict. Here, a plain reading

of the statutory text allows this Court to read both provisions as to give effect and purpose to each.

The Seventh Circuit first decided the issue before this Court, and held that § 365 does not

limit a trustee or debtor-in-possession’s ability to sell a debtor’s real property free and clear of a

tenant’s lease under § 363(f). Precision Indus., Inc. v. Qualitech Steel SBQ, LLC, 327 F.3d 537,

541 (7th Cir. 2003). The court began its analysis like all statutory interpretation cases—by looking

at the statutory language. Id. at 543-44. The court concluded the provisions themselves did not

suggest that one superseded the other. Id. at 547. Further, the court concluded that the plain

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language of § 365 limited its applicability to circumstances where there was rejection of a lease.

Id. Lastly, the court concluded that the provisions of § 363 themselves provided a mechanism to

protect the rights of parties affected by such a sale. Id. at 547-48.

The Ninth Circuit recently reviewed this issue and also held § 365 was inapplicable as

related to the specific facts at issue there. Matter of Spanish Peaks Holdings II, LLC, 872 F.3d 892,

896-97 (9th Cir. 2017). The Ninth Circuit addressed possible concerns that an effort to harmonize

these two statutes would amount to an effective repeal of § 365(h). Id. First, the court reasoned

the language of § 363(e) provided mandatory protection, but only upon request. Id. The court

noted that the holders of the leasehold interest did not ask for adequate protection until after the

sale had occurred. Id. at 900. Second, the court reasoned the language of § 363 authorized free

and clear sales but only in certain circumstances where such action was justified. Id. Although,

the lease holders did not dispute that at least one of the provisions of § 363(f) were met, the court

took specific interest in subsection (f)(1), which authorizes a sale if “applicable nonbankruptcy

law permits sale of such property free and clear of such interest.” Id. (citing 11 U.S.C. § 363(f)).

This Court has the obligation and ability to construe these two provisions in such a way as

to avoid conflicts between them in accordance with the plain meaning doctrine. The Seventh and

Ninth Circuits recognized this principal and reasoned it was not only equitable, but correct to

interpret and reconcile §§ 363(f) and 365(h) in such a way as to avoid reading a restraint into §

363 that Congress itself did not carve. Section 365(h) distinctly applies where a debtor lessor

remains in possession of its property and rejects a lease, and is inapplicable where the debtor lessor

sells property subject to an interest, such as a leasehold, free and clear of that interest pursuant to

§ 363. Accordingly, in order to preserve the sense and purpose of a § 363 sale, this Court should

read the two allegedly conflicting statutes in such a way so as to give its intended effect to each.

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B. Section 363 authorizes the sale free and clear of the Respondent’s leasehold because the word “interests” is broadly defined and Congress did not proscribe leasehold interest from this power.

Section 363(f) authorizes a trustee or debtor-in-possession to sell property of the estate

“free and clear of any interest in such property.” 11 U.S.C. § 363(f). Although the term interest, as

it applies in § 363(f) is not defined within the Code, the Petitioner’s interest in the leasehold of the

amphitheater is an interest that § 363 can eliminate. See Qualitech, 321 F.3d at 545-46.

Additionally, because Congress did not limit a trustee’s power of sale in either §§ 363(f) or 365(h),

this Court should not inscribe such an exception, thereby expanding a party’s prepetition property

rights. Accordingly, this section will first discuss why the express wording of § 363 applies to the

sale of real property free and clear of a leasehold interest, and second, why a plain reading of both

provisions justifies the result in the case at bar.

1. Section 363(f) authorizes such sale because “interests” is broadly defined. Bankruptcy courts and district courts have reached differing views on § 363 and its effect

on leases. [insert string cite maybe] Nonetheless, all courts have agreed on at least one aspect of §

363—the term “interest” as used in § 363(f), although not defined anywhere in the Bankruptcy

Code, involves obligations “connected to, or aris[ing] from the property being sold,” which

includes leasehold interests. See Cheslock-Bakker & Assocs., Inc. v. Kremer (In re Downtown

Athletic Club of New York City, Inc.), 44 Collier Bankr. Cas. 2d 342, 348 (S.D.N.Y. June 9, 2000)

(holding that under the expansive interpretation of interest, possessory rights of a lessee fall within

the scope of § 363(f)); In re Taylor, 198 B.R. 142, 162 (Bankr. D. S.C. 1996) (“a leasehold is a

type of ‘interest’ that fits within the plain text of the . . . statute”). Even courts holding for the

Petitioner’s position do not dispute that the term “interests” applies to leaseholds, and thus, the

Petitioner’s lease was appropriately eliminated pursuant to a § 363 sale.

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2. Congress did not intend § 365 to limit a trustee’s power of sale under § 363. Congress did not intend for the protections of § 365(h) to limit the rights of a trustee or

debtor-in-possession under § 363(f). This Court has repeatedly instructed “that courts must

presume that a legislature say in a statute what it means and mean in a statute what it says there.”

See Connecticut Nat'l Bank v. Germain, 503 U.S. 249, 253–54 (1992) (quoting Rubin v. United

States, 449 U.S. 424, 430 (1981)). Looking at the overall statutory structure and the lack of cross

references between §§ 365(h) and 363(f), “the statutory provisions themselves do not suggest that

one supersedes or limits the other.” Qualitech, 327 F.3d at 546–47. In fact, nothing in § 365(h)

precludes the trustee from terminating a lessee’s rights if so empowered under another provision

of the Bankruptcy Code. Dishi & Sons v. Bay Condos LLC, 510 B.R. 696, 698 (S.D.N.Y. 2014).

Where Congress includes particular “language in one section of a statute but omits it in another . .

. , it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion

or exclusion.” Keene Corp. v. United States, 508 U.S. 200, 208 (1993) (quoting Russello v. United

States, 464 U.S. 16, 23 (1983)). Section 363(e) requires a court, on request of a party in interest,

to condition a sale so as to provide “adequate protection” to an interest in property that is sold

under § 363. 11 U.S.C. § 363(e); see also 3-363 Collier P 363.06 (16th Ed. 2017). Accordingly,

this Court should not allow the Petitioner to carve out an exception to a § 363 sale that Congress

itself did not inscribe, specifically, where the Petitioner has slept on the rights provided to them

pursuant to the applicable section of the Bankruptcy Code, specifically adequate protection.

Because a leasehold qualifies as an “interest” in property for purposes of § 363(f), a lessee of

property being sold pursuant to subsection (f) would have the right to affirmatively insist that its

interest be protected. Precision Indus. v. Qualitech Steel SBQ, LLC, 327 F.3d 537, 547–48 (7th

Cir. 2003). Though the invocation of “adequate protection” does not necessarily guarantee a

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lessee’s continued possession of the property, it does demand in the alternative, that the lessee be

compensated for the value of its leasehold. See In re Murel Holding Corp., 75 F.2d 941, 942 (2d

Cir. 1935); La Jolla Mtg. Fund v. Rancho El Cajon Assocs., 18 B.R. 283, 286 (Bankr. S.D. Cal.

1982). Section 361 defines such protection as (1) periodic cash payments, (2) additional or

replacement liens, and (3) “such relief as will result in the realization by such entity of the

indubitable equivalent of such entity's interest.” 11 U.S.C. § 361; Dishi & Sons, 510 B.R. at 698.

In Dishi & Sons v. Bay Condos LLC, Bay Condos LLC, the Debtor, filed for chapter 11

bankruptcy providing in the plan that the unexpired lease to the laundromat was to be assumed,

but all other nonresidential unexpired leases not assumed would be deemed rejected under the

plan, including a lease to TGM. 510 B.R. 696, 704 (S.D.N.Y. 2014). Dishi & Sons successfully

bid on the property at auction upon the court’s approval. Id. At the conclusion of a noticed hearing,

the bankruptcy court entered an order approving the sale. Id. Before an order was entered,

however, TGM submitted a letter to the court asserting its right to retain possession of the unit for

the duration of its lease under § 365(h), and, alternatively, as adequate protection under § 363(e).

Id. at 700. Consequently, the court held that where estate property under lease is to be sold, § 363

permits the sale to occur free and clear of a lessee's possessory interest, provided however, that the

lessee is granted adequate protection for its interest upon request. Id. Because TGM submitted a

letter to the court asserting its right to retain its appurtenant rights, and alternatively asserted its

rights under § 363(e) as adequate protection, the court reasoned that TGM was entitled to continued

possession. Id.

The Dishi & Sons case is distinct from the case at bar in two respects: first, the lessee in

Dishi appropriately submitted its request to the court, and second, the lessee in Dishi asserted its

rights under the specific provision of § 363(e). The Petitioner in the present case did neither and,

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accordingly, slept on its rights by failing to formally petition the bankruptcy court as provided in

the provision specifically applicable to the facts of this case. When Congress intended to

subordinate or condition § 363, it did so expressly. For example, § 363(l) is explicitly subordinate

to § 365 and § 363(d) is explicitly subordinate to various subsections of § 362. As between §§ 363

and 365, however, no such cross-reference exists and Congress provided no such limitation in the

plain language of either statute. As the court in Dishi & Sons recognized, when the protections of

§ 365(e) are invoked, the bankruptcy court is obligated to condition the sale as necessary to protect

that interest. In the instant case, for reasons unknown to the lower courts, the Petitioner never

asserted its rights for adequate protection of its leasehold interest. Though the result of § 363 may

seem harsh to lessees, the legislature has two built in safeguards—first, such sale is only authorized

if one of the five conditions of § 363(f) are met and second, the holder of an affected interest may

seek adequate protection through § 363(e).

Here, even if this Court were to find an obligation to provide adequate protection by way

of the letter submitted to High Rocks, Inc., the Petitioner still has the burden of proof on the

validity, priority, and extent of such an interest. 11 U.S.C. § 363(e)(1). The most common form of

adequate protection is to have the lien or other interest attach to the proceeds of the sale. H.R. REP.

NO. 595, 95TH CONG. 1ST SESS. 345 (1977). Because the sale of real property was sold credit bid

equaling the value of the property, there were no cash proceeds realized from the sale.

Correspondingly, even if this Court granted the Petitioner adequate protection, the Petitioner

would appropriately receive nothing because the Highway Lease is subordinate to 4th Street’s

prior lien against the property. See 11 U.S.C. § 363(f)(1). The right to credit bid its claim is an

important protection for 4th Street when its collateral is being liquidated in a bankruptcy sale like

in the present issue before this Court. This outcome, although unfortunate for the Petitioner, is a

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matter of facts and circumstances. For example, if 4th Street would have been a junior lien holder

instead, the Petitioner could likely meet their burden of proof for adequate protection because they

would have priority. Under the current facts presented to this Court, however, the Petitioner’s

prepetition bankruptcy rights should not be enhanced on the inference that Congress intended a

different section to apply as absolute. Congress had the opportunity to change the language of §

365, specifically the effect of a § 363 sale on a lease, but abstained from doing so, even at the time

of the 1994 amendments. Hence, this Court should not limit High Rocks’ ability to sell its property

free and clear of the Petitioner’s leasehold interest pursuant to § 363(f) notwithstanding the

protections given to lessees under § 365(h).

C. Section 365 does not limit a trustee’s power of sale because § 365 expressly applies to formal rejection of a lease where the debtor lessor retains possession of the property and § 365 is only applicable “to the extent that such rights are enforceable under applicable nonbankruptcy law.”

Section 365(h) preserves a lessees’ rights where the trustee has formally rejected the lease.

11 U.S.C. § 365(h). Consequently, § 365(h) is inapplicable because the Highway Lease was not

rejected prior to the sale. From the perspective of the estate, the power of rejection given to a

trustee, or alternatively a debtor-in-possession, is an election to decline a contract or lease asset; it

is a decision not to obligate the estate to an unprofitable agreement. See N.L.R.B. v. Bildisco &

Bildisco, 465 U.S. 513, 528 (1984); Dishi & Sons, 510 B.R. at 698. It is a choice not to assume or

obligate the estate on a contract or lease “as the price of obtaining the continuing benefits of the

non-debtor party's performance." Medical Malpractice Ins. Ass’n v. Hirsch (In re Lavigne), 114

F.3d 379, 387 (2d Cir. 1997). But rejection is not termination. Qualitech, 327 F.3d at 547

(construing the failure of the trustee to timely assume the lease as a “repudiation” rather than a

rejection that would have triggered § 365(h)). Like many provisions of the Bankruptcy Code, these

statutes co-exist with other purposes such as protecting lessees, but also maximizing a creditor’s

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recovery. Admittedly, High Rocks agrees that § 365 embodies a congressional intent to protect

lessees, but nothing in either §§ 363 or 365 make that intention absolute. An evaluation of the

statutory language of § 365 shows its applicability is not only specific, but narrow. Accordingly,

this part will first discuss why the express wording of § 365 is limited in scope and does not apply

to the facts of the instant case, and second, why even if this Court agrees with the Petitioner that

in effect the sale would rise to de facto rejection, the wording of § 365 justifies a sale free and clear

in the instant case.

1. Section 365 does not apply where the debtor lessor does not retain possession of the property and affirmatively rejects the lease but rather sells real property subject to a lease.

A § 363(f) sale made without any formal assumption or rejection of the lease extinguishes

a lessee's rights under § 365(h). See, e.g., Hewlett v. Ng (In re Ng), 2007 WL 4365564, *1 (Bankr.

N.D. Cal. Dec. 13, 2007); Gary Hill, Jr. v. MKBS Holdings, LLC (In re Hill), 307 B.R. 821, 825–

26 (Bankr. W.D. Pa. 2004). Although in some circumstances, a trustee’s failure to act is deemed a

rejection,1 Congress itself did not provide for that outcome within § 363 as it applies to the

circumstances before this Court—a nonresidential lease where the debtor is the lessor and such

lease is not rejected prior to the sale. This is distinct from circumstances where a trustee explicitly

rejects a lease by the time of the sale with the intentions to retain the property but not obligate the

estate. Consequently, if there is no timely rejection, § 363(f) permits a free and clear sale because

§ 365(h) is irrelevant. Precision Indus., Inc. v. Qualitech Steel SBQ, LLC, 327 F.3d 537, 545–46

(7th Cir. 2003).2

1 See 11 U.S.C. § 365(d)(1) (stating that failure to assume or reject residential lease within sixty days in liquidation bankruptcy is deemed a rejection); see also 11 U.S.C. § 365(d)(4)(A) (stating that failure to assume or reject nonresidential lease within 120 days deemed a rejection if the debtor is the lessee). 2 See also Dishi & Sons v. Bay Condos LLC, 510 B.R. 696, 698 (S.D.N.Y. 2014) (providing that nothing in the express terms of § 365(h) suggests that it applies to any and all events that threaten a lessee’s possessory rights); In re

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While undefined within the enactment of the Bankruptcy Code, a “rejection” is understood

as “an affirmative declaration by the trustee that the estate will not take on the obligations of the

lease. . . .” In re Spanish Peaks Holdings II, LLC, 872 F.3d 892, 894 (9th Cir. 2017). The Ninth

Circuit, in determining that § 365 was not triggered, reasoned that although a “sale of property free

and clear of a lease may be an effective rejection of the lease in an everyday sense, it is not the

same rejection contemplated by § 365.” Id. (emphasis added). In Spanish Peaks Holdings, the

debtor owned a resort in Big Sky, Montana, secured by a mortgage later assigned to Spanish Peaks

Holdings in the amount of $122 million. Id. Spanish Peaks Holdings later leased restaurant space,

known as the Pinnacle lease, and a parcel of commercial real estate, known as the Opticom lease.

Id. During the bankruptcy proceedings, the trustee moved the bankruptcy court for an order

authorizing a sale pursuant to § 363 without mention of the Pinnacle or Opticom leases. Id. at 895.

Both companies objected to the sale, later renewing their objections, and arguing the Code allowed

them to retain possession of the property notwithstanding the sale. Id. The bankruptcy court

entered an order approving the sale without addressing the objections; the debtor’s biggest creditor,

the holder of the secured mortgage, was the successful bidder. Id. at 896. After agreeing with the

Seventh Circuit’s rationale that § 365 does not limit § 363, the court reasoned that § 365 was not

implicated where the trustee did not reject the leases. Id. Thus, the court held that § 363(f)(1)

authorized the sale of property free and clear of the Pinnacle and Opticom leases. Id. at 901.

A nonresidential lease where the debtor lessor does not retain the property or reject such

lease prior to the sale does not trigger the language of § 365. This is distinct from circumstances

where a trustee explicitly rejects a lease with the intentions to retain the property but not be

Downtown Athletic Club of New York City, Inc., 44 CollierBankr. Cas. 2d 342 (S.D.N.Y. 2000); In re Stein, 281 B.R. 845, 851 (Bankr. S.D.N.Y.) (“[T]he trustee is not seeking to assume or reject the lease . . .; he is attempting to sell property of the estate under § 363(b).”).

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obligated by a lease’s corresponding obligations. Similar to Spanish Peaks Holdings, the sale order

in the case at bar made no mention of the Highway Lease but rather conditioned the sale as free

and clear pursuant to § 363(f). Although it may seem unfortunate that, although the Petitioner did

object to the sale, as did the lessee in Spanish Peaks Holdings, the result is justified by a plain

reading of the statutory text. The Seventh and Ninth Circuits, the only circuit courts of appeal who

have interpreted these same provisions, held § 365 inapplicable absent formal rejection of the

lease. As the lower courts found in the instant case, there was no rejection of the Highway Lease

to trigger the protections § 365(h) offers lessees. Consequently, this Court should find § 365

inapplicable to the Petitioner’s case because the lease was not rejected prior to the approved sale.

2. Even if this court finds the trustee’s failure to either assume or reject the release amounted to “de facto rejection,” § 365(h) is only applicable “to the extent that such rights are enforceable under applicable nonbankruptcy law.”

Even if this Court fell in line with the Seventh Circuit’s analysis, which recognized that the

failure to assume either a lease or contract before a sale in effect amounts to de facto rejection, §

365 is only applicable to the extent that the holder’s interest is enforceable under nonbankruptcy

law. Qualitech, 327 F.3d at 541;11 U.S.C. § 365(f). As this Court acknowledged, Congress “left

the determination of property rights in the assets of a bankruptcy estate to state law.” Butner v.

United States, 440 U.S. 48, 55 (1979). Although a lease creates an interest in land, this interest is

not absolute—it is subject to prior mortgages and encumbrances. See Canter v. Ramsey (In re Hotel

Governor Clinton), 96 F.2d 50 (2d Cir. 1938); cert. denied. 305 U.S. 613 (1938). If a lease is

executed after the grant of a prior mortgage, judicial foreclosure of the mortgage will extinguish

the lease such that a foreclosure sale is free and clear of the lessee's interest in the property, as long

as the lessee is joined as a defendant in the foreclosure action. See generally Grant S. Nelson &

Dale A. Whitman, Real Estate Finance Law § 7.13 (3d ed. 1994). Here, even if this Court finds

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the lease was rejected, any rights the Petitioner has in the property were subordinate to 4th Street’s

interest, irrespective of the bankruptcy. The Bankruptcy Code should not be read to erode past

bankruptcy practice absent a clear indication that Congress intended such a departure. See

Hamilton v. Lanning, 560 U.S. 505, 517 (2010). In fact, this Court has long recognized that

applying state law to determine property rights in bankruptcy furthers the fundamental purpose of

the bankruptcy process as a predictable and orderly debt-collection mechanism based on a party’s

bargained for position. See generally, Nobelman v. Am. Sav. Bank, 508 U.S. 324, 329 (1993).

Accordingly, this Court should not enhance the Petitioner’s bargained for position by invoking a

provision of the Bankruptcy Code that is inapplicable to the circumstances before this Court.

When presented with facts similar to the case at hand, the Seventh Circuit, without

addressing which condition of § 363(f) applied, authorized the sale, and held that § 365 did not

limit this sale power. Qualitech, 327 F. 3d at 546. In Qualitech, the debtor, owned and operated a

steel mill in Pittsboro, Indiana, and had entered into lease and supply agreements with Precision.

Id. at 538. The debtor filed a chapter 11 bankruptcy petition and substantially all of the debtor’s

assets were sold at auction for a credit bid of $180 million to a group of senior prepetition lenders

that held the primary mortgage on the Pittsboro property. Id. At the conclusion of the sale hearing,

the bankruptcy court entered an order approving the sale, and Precision, which had notice of the

hearing, did not object to the order. Id. That order directed Qualitech to convey its assets to the

prepetition lenders “free and clear of all liens, claims, encumbrances, and interests.” Id. The court

reasoned that Precision neither objected to the sale nor sought the protection available under §

363(e). Id. Accordingly, the court concluded its possessory interest was extinguished by the sale.

Id. at 548.

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Given the priority of the Highway Lease, the sale of High Rocks was justified by the

Petitioner’s failure to seek the relief provided within § 363, but also a plain reading of the statutory

text. In both provisions before this Court, Congress’ intention was unambiguous as evidenced by

the clear verbiage to implicate “nonbankruptcy law,” which allows, or at least limits any action.

First, is the authorization found within § 363 for a sale free and clear if “applicable nonbankruptcy

law permits sale of such property free and clear of such interest.” Second, is the limitation found

within § 365 for protection of a lessee whose unexpired lease was rejected, but only to “the extent

that such rights are enforceable under applicable nonbankruptcy law.” The free and clear sale

doctrine was first established by this Court under the Bankruptcy Act of 1841, where the power

was described as a judicially-created foreclosure sale conducted for the purpose of reducing estate

assets to cash for distribution to creditors. See Ex Parte Christy, 44 U.S. 292, 312 (1842).

Similar to Qualitech, where the court did not discuss what condition of § 363(f) was

accomplished to authorize the sale, the lower court’s opinion is silent as to whether subsection

(f)(1) was the condition met for authorizing the sale. Nonetheless, the result in Qualitech and the

case at bar are justified under nonbankruptcy law, specifically foreclosure law. The mortgage lien

has priority and the Petitioner is aware of the foreseeable outcome that the senior mortgage could

be called into question under bankruptcy. Thus, the Petitioner has notice of the risk it takes as

junior interest holder. Namely, that when a lease is subordinate to a mortgage securing an interest

in the property, then the tenant has no interest in such proceeds and the lease would be terminated

upon foreclosure sale.

If the facts in the case at bar had been such that the Highway Lease had priority over 4th

Street’s interest by way of the mortgage, state foreclosure law would require any sale to be subject

to the Highway Lease. Unfortunately for the Petitioner, however, § 365(h) preserves certain tenant

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rights but it was not intended to enhance them. The sale in the instant case was achieved by credit

bid by 4th Street, the senior prepetition lender by assignment from North Country Bank. Similar

to Qualitech, where the highest bidder was the prepetition lender, this is an important distinction

because for intents and purposes, and as recognized by the lower court, a foreclosure action has

occurred. This is not prohibited by the Bankruptcy Code and, as acknowledged by this Court, is

exactly how a free and clear sale should operate. This Court should hold that nonbankruptcy law

determines the rights of the parties in the instant case because this interpretation preserves the

parties’ bargained for prepetition property rights in order of their respective priorities against High

Rocks’ real property, and also because the statutory text of both §§ 363 and 365 invoke its

application.

II. A BANKRUPTCY COURT MAY APPROVE A GIFT SETTLEMENT OF PROCEEDS THAT DOES NOT CONFORM WITH THE BANKRUPTCY CODE’S ABSOLUTE PRIORITY SCHEME IF THE GIFT CONSISTS OF NON-ESTATE ASSETS, DOES NOT RESULT IN A FINAL DISPOSITION, AND FURTHERS THE POLICY GOALS OF THE CODE.

Section 1129(b) of the Bankruptcy Code establishes the absolute priority rule, which

determines creditor hierarchy for bankruptcy proceedings. 11 U.S.C. § 1129(b); see also 11 U.S.C.

§ 507. In Czyzewski v. Jevic Holding Corp., this Court held § 1129(b) is less flexible than

previously interpreted by courts, however, in doing so, limited its holding to structured dismissals

resulting in the transfer of estate property or a final disposition. 137 S.Ct. 973, 983 (2017). Absent

approval of this gift settlement from 4th Street’s personal assets, which are separate and individual

from the estate assets at issue, the Committee will likely be unable to pursue its claims against the

original contractor, Skyline. R. at 17. Without the opportunity to pursue additional litigation, there

is little to no likelihood of recourse for any involved parties, which is detrimental to not only High

Rocks as the debtor, but also 4th Street and the Committee as creditors, and the Petitioner as an

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involved party. R. at 17. This Court should approve the Committee Settlement because § 1129(b)

and Jevic are inapplicable and pursuant to these authorities, the absolute priority rule is not binding

on the parties in the instant case.

A. As a gift settlement of non-estate assets, the absolute priority rule does not apply to the instant case.

The absolute priority rule is a creditor hierarchy scheme applied to reorganization plans

and settlements for chapter 11 bankruptcy proceedings. 11 U.S.C. § 1129(b); Czyzewski v. Jevic

Holding Corp., 137 S.Ct. 973 (2017). Gift settlements consisting of non-estate property continue

to be excepted from the absolute priority rule. In re ICL Holding Co., Inc., 802 F.3d 547, 555 (3d

Cir. 2015). While under this rule, administrative liens qualify a creditor as a senior lienholder who

takes priority over junior creditors, traditionally, under chapter 11, courts have supported

flexibility in interpreting Congressional intent under this section. See, e.g., Official Comm. of

Unsecured Creditors v. Stern (In re SPM Mfg. Corp.), 984 F.2d 1305, 1313 (1st Cir. 1993);

Motorola, Inc. v. Official Comm. of Unsecured Creditors (In re Iridium Operating LLC), 478 F.3d

452, 464–65 (2d Cir. 2007). However, the absolute priority rule is not “absolute” at all and is

merely one factor in considering a settlement’s permissibility. Id at 464. The absolute priority rule

traditionally does not apply to bankruptcy proceedings in which the settlement consists entirely of

non-estate assets. In re SPM, 984 F.2d at 1305; In re ICL Holding Co., 802 F.3d 547, 555 (3d Cir.

2015) see also, Jevic, 137 S.Ct. at 983.

The First Circuit has long permitted secured creditors to gift their own money to unsecured

creditors without being subject to the absolute priority rule. In re SPM, 984 F.2d at 1313. There,

where previously distributed estate assets were contested pursuant to the absolute priority rule,

once the money was no longer part of the estate, the bankruptcy court no longer had jurisdiction

over the proceeds. Id. The court even acknowledged that it is routine practice for nonpriority

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creditors to “receive payment from third parties for their claims without interference by the

bankruptcy court,” justifying the practice by pointing to the fact that it prevents creditors from

being tied up in extensive litigation over the claims and saves the proceedings from unnecessary

delay. Id. at 1314.

While this Court’s decision in Jevic has limited the application of the absolute priority rule,

this limitation does not apply to settlements of non-estate property. See Jevic, 137 S.Ct. at 978.

The record is clear that the gift settlement of $2 million from 4th Street to the Committee is the

only viable option available to permit the Committee to pursue further litigation against Skyline

for the breach of contract stemming from its faulty work as the general contractor of the High

Rocks entertainment facility. The Bankruptcy Code emphasizes the interests of reorganization

when a company files for chapter 11 bankruptcy and disfavors conversion to chapter 7 bankruptcy

proceedings. See Kevin M. Judisak, et. al., Bankruptcy Law—The Standard for Rejecting

Collective Bargaining Agreements in Bankruptcy: Labor Discovers It Ain’t ‘Necessarily” So, 63

NOTRE DAME L. REV., 79 (1988). The foundational policy implemented by the Bankruptcy Code

with regard to reorganization attempts contrasts with the majority of other countries' bankruptcy

principles—one reason why the United States has a greater rate of success for reorganization of a

company involved in chapter 11 bankruptcy proceedings. See Maria Brouwer, Reorganization in

US and European Bankruptcy Law, 22 EUR. J. LAW ECON. 5 (2006). Although the likelihood of

reorganization for High Rocks does not seem promising at the current time, the Bankruptcy Code

favors settlements, such as the Committee Settlement in the instant case, over the alternative

chapter 7 conversion because of its saved expense.

Further, settlements of non-estate assets have rarely been subject to the absolute priority,

and even in light of this Court’s recent decision in Jevic, the absolute priority rule is still

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inapplicable to the instant case. No provision of the Bankruptcy Code denies or even suggests it

would be inappropriate to permit a party to a bankruptcy proceeding from utilizing its own

individual assets to remit payment to a lower priority creditor, as acknowledged by the First

Circuit. In addition, policy considerations do not support barring unsecured creditors from

receiving any payment for the liens they hold, especially if payment is not made pursuant to a

structured dismissal. Here, the payment by 4th Street to the Committee was not made as part of a

structured dismissal, and was merely a gift settlement of 4th Street’s own cash that was not

comingled with the estate assets to which the Petitioner would be entitled pursuant to the chapter

11 bankruptcy proceedings. The Petitioner’s argument that the gift settlement here is improper is

further undermined by the First Circuit’s recognition that “neither the Code nor the Rules prohibit

or discourage creditors from receiving cash from nondebtors in exchange for their claims.” In re

SPM, 984 F.2d at 1314. The cash settlement made by 4th Street follows this reasoning as 4th Street

is not the debtor in this bankruptcy proceeding, but rather a third party gifting its own assets to

lower priority creditors, which is routine in chapter 11 bankruptcy cases.

While the claims against Skyline for the faulty construction of High Rocks belong to the

Committee, rather than the estate, the fact that the Petitioner does not have a right of recovery to

whatever award the Committee recovers pursuant to the Skyline litigation (if any), should not bar

the Committee from having the opportunity to pursue these claims. If the Committee does not have

the opportunity to take legal action against Skyline, Skyline is essentially permitted to remain off

the hook for the subpar work product it was contracted to produce. To disallow the Committee to

receive this settlement from 4th Street, despite the fact that it is proper as a gift of non-estate

property, and therefore prevent the Committee from pursuing its claims against Skyline, would be

unjust and senselessly deprive the Committee in the same way the Petitioner is being deprived.

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While de-emphasizing the significance of the TMT Trailer Ferry factors3 with regard to

nonconsensual settlements, this Court declined to extend its decision in Jevic to the distribution of

non-estate property, as is the case with the Committee here. The Petitioner is not entitled to recover

its administrative lien by any means possible solely by virtue of having the lien and status as a

creditor with an interest senior to the Committee—its interest is limited to distribution of estate

assets, not by any assets from 4th Street solely because it purchased High Rocks’ property and

associated entertainment facility. To extend claims to the assets and monetary proceeds to which

the Petitioner is entitled as a senior creditor to include 4th Street’s individual assets would be

unreasonable and a violation of the Bankruptcy Code’s principles. Nothing in the Bankruptcy Code

bars a gift settlement of non-estate assets to a junior creditor, and Congress, the proper authority

to amend the Bankruptcy Code as its creator, has taken no steps to limit, or govern in any way, the

distribution of gift settlements to junior creditors. Additionally, as a policy concern, this type of

invasion of 4th Street’s separate property could have the effect of deterring companies from buying

out of bankruptcy proceedings, as 4th Street did with High Rocks in the instant case.

The instant case perfectly illustrates the danger of a precedential slippery slope that would

ensue if Jevic were extended to compensate for Congress’ intentional legislative silence. Gift

settlements have traditionally been upheld and accepted as a permissible means of distributing

property in bankruptcy proceedings and historically have not been subject to the limitations and

parameters of the absolute priority rule. To assert control over all of 4th Street’s assets solely

because it purchased the note from North Country does not comport with the goals of the

Bankruptcy Code. Further, it could have the unintended consequence of serving as a deterrent to a

3 These factors include the probability of the litigation’s success, difficulties associated with collection, how complex the litigation is, including associated expense and delay and the interest of the creditors balanced with deference when reasonable. Protective Comm. for Indep. Stockholders of TMT Trailer Ferry, Inc. v. Anderson, 390 U.S. 414, 424 (1968)

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company or person purchasing property involved in bankruptcy proceedings. For example, a buyer

could potentially be held responsible for any and all liens as well as have all of their separate

property, such as the $2 million gift settlement in the case at hand, up for grabs by senior

lienholders despite a creditors’ interest currently being limited to estate property. To extend this

interest beyond state property would not safeguard buyers like 4th Street from having all of their

personal assets from being subject to liens held by creditors of the estate. Without such a safeguard,

there is nothing to prevent a creditor from laying claim to any and all of the buyers’ personal

property if it would fulfill payment of lien held by a creditor like the Petitioner. Backing this

intrusive policy would set a dangerous precedent and lead to a slippery slope in which none of 4th

Street’s property is safe, despite the fact that it does not belong to the estate. For these reasons, this

Court should not find that the Bankruptcy Code supports the idea that the absolute priority rule

should extend to gift settlements.

B. This Court’s decision in Jevic is not applicable to the instant case because this gift settlement does not result in a final disposition and furthers the policy goals of the Bankruptcy Code.

Settlements are not subject to the absolute priority rule’s hierarchy when they are

consensual, are not part of a final disposition, or serve a significant bankruptcy related purpose.

See Jevic, 137 S.Ct. at 984–85. A gift that has the effect of enlarging the estate or furthering other

policy goals of the Code are considered to serve the significant bankruptcy purpose to permit

nonconformation with the absolute priority rule. Motorola, Inc. v. Official Comm. of Unsecured

Creditors (In re Iridium Operating, LLC), 478 F.3d 452, 464–465 (2d Cir. 2007); see also see also

Jacobs v. Terpitz (In re Dewey & LeBoeuf LLP), 478 B.R. 627, 640 (Bankr. S.D.N.Y. 2012).

While the United States Supreme Court tightened the applicability of the absolute priority rule in

Jevic, interpreting § 1129(b)’s silence to include settlements in addition to reorganization plans,

Further, the absolute priority rule is merely one factor to determine whether a settlement is fair and

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equitable, rather than determinative of permissibility under the Bankruptcy Code. In re Fryar,

2017 WL 1489822 (Bankr. E.D. Tenn. Apr. 25, 2017) (denying approval of a priority-skipping

gift settlement solely because no factors demonstrating how the gift was fair and equitable and

therefore furtherance of the Code’s policy goals were provided). While the settlement in the instant

case is nonconsensual, it is undisputed that it was not distributed as part of a final judgment.

Additionally, the Committee Settlement meets the TMT Trailer Ferry factors for determining

fairness and equity and benefits all parties involved in the instant proceedings. 4 Because the gift

settlement given by 4th Street to the Committee does not result in a final disposition and is

supported by the policy goals of the Bankruptcy Code, this Court’s narrow ruling in Jevic is not

applicable to the instant case.

In Jevic, this Court addressed how settlements and the absolute priority rule coexist in the

face of legislative silence. Czyzewski v. Jevic Holding Corp., 137 S.Ct. 973, 984 (2017). In that

case, respondent Jevic, a trucking company, filed for chapter 11 bankruptcy following a 2006

leveraged buyout. Id. at 980. Pursuant to the bankruptcy proceedings, the unsecured creditors sued

the parties responsible for the leveraged buyout as a fraudulent transfer; however, the suit was

settled as part of a structured dismissal, effectively releasing funds to the unsecured creditors

before releasing funds to the wrongfully terminated employees who were placed higher in priority

in connection with their wrongful termination wage claims. Id. This Court narrowly held that its

decision—which it limited to the case before it—established explicit limits to the use of gift

settlements, allowing such only in cases involving final disposition of a chapter 11 bankruptcy and

where the settlement furthers a legitimate bankruptcy purpose. Id. at 984. This Court limited its

4Note that in the instant case, the issue of whether a settlement is fair and equitable is undisputed, as both parties have stipulated that the applicable TMT Trailer Ferry balancing factors have been met. R. at 15; Protective Comm. for Indep. Stockholders of TMT Trailer Ferry, Inc. v. Anderson, 390 U.S. 414, 424 (1968).

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decision to only include settlements resulting in a final disposition in order to protect the interests

of disfavored creditors as well as the “reliance interests acquired in bankruptcy,” which are not

preserved when a settlement ends the bankruptcy proceedings and all related litigation. Id. at 984–

85.

This Court’s emphasis on whether a distribution furthers the policy goals of the Bankruptcy

Code echoes the Second Circuit’s decision in In re Iridium, which held that a bankruptcy court

may approve a priority skipping gift settlement that favors a junior creditor’s interest when

appropriate reasons are articulated to support the gift. In re Iridium Operating, LLC, 478 F.3d at

464–465. The gift in Iridium served to enlarge the estate, which in turn could provide a greater

likelihood of recourse for outstanding creditors. Id. Because the plan enlarged the estate, did not

result in a final disposition, and the settlement supported the reorganization goals of a chapter 11

proceeding, the bankruptcy court and approved the plan and affirmed such on appeal, despite the

fact that the settlement proceeds were of estate assets. Id at 467. In fact, priority skipping gifts

outside of a reorganization plan are commonplace in bankruptcy proceedings and various other

courts have followed this trend. See, e.g., Toibb v. Radloff, 501 U.S. 157, 163–64 (1991); Capital

Factors, Inc. v. Kmart Corp. (In re Kmart Corp.), 359 F.3d 866, 872 (7th Cir. 2007); Official

Comm. of Unsecured Creditors of Cybergenics Corp. v. Chinery, 330 F.3d 548, 574 (3d Cir. 2015).

None of this Court’s concerns from Jevic are at issue in the instant case. In fact, contrary

to what occurred in Jevic, the priority skipping gift settlement made by 4th Street has the opposite

effect—it does not result in a final disposition and is likely the only means of preventing High

Rocks from being forced to convert the instant proceedings to chapter 7. The policy goals of the

Bankruptcy Code do not support the conversion from chapter 11 proceedings, which favor

reorganization, to chapter 7 proceedings, which result in liquidation of the company and its assets.

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While the Petitioner contends that, as a senior creditor, it is entitled to receive the $2 million that

were gifted to the Committee, Jevic does not bar settlements that further the policy goals of the

Bankruptcy Code so long as they do not result in a final disposition. Court approval of the

Committee Settlement in the instant case to allow the Committee to pursue its claims against

Skyline does not leave Highway in a better or worse position than if 4th Street were not permitted

to gift its personal money to the Committee—it would allow the Committee to potentially recover

additional proceeds from which they were deprived as a result of Skyline’s faulty construction

work. For this Court to prevent the Committee from doing so only to allow the Petitioner to stay

in what is, at worst, the same position it started in would run contrary to the goals of the Code to

promote fairness. Not only that, but additionally, if the Committee Settlement were not approved,

High Rocks would be forced to convert to a chapter 7 bankruptcy, which would leave the Petitioner

in the same position it is currently in.

Further, in Jevic, Justice Breyer made it clear in this Court’s decision that while this Court

was eliminating gift settlements as part of a final disposition, deviations from the absolute priority

rule may nonetheless still be permitted so long as it contributes to reorganization efforts and

furthers the policy interests of the Bankruptcy Code. See Czyzewski v. Jevic Holding Corp., 137

S.Ct. 973, 986 (2017). This express approval by the Court supports the foundational bankruptcy

goal of allowing chapter 11 companies the realistic opportunity to have a successful

reorganization. This also supports the idea that when a gift settlement is fair and equitable, as is

uncontested in the case at bar furthering the policy goals of the Bankruptcy Code, such as

encouraging reorganization in chapter 11 proceedings, should be prioritized. If not for this

additional discretion provided to bankruptcy courts, judges are essentially held to ruling with their

hands tied behind their backs because they cannot have the flexibility necessary to further

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reorganization attempts, even when they seek to interpret and employ the law in a mutually

beneficial and long-accepted manner.

Finally, policy goals of the Bankruptcy Code, especially those disfavoring conversion of

bankruptcy proceedings to chapter 7 claims, support the approval of the Committee Settlement,

which is the only viable means of allowing creditors recourse against Skyline in order to recover

the losses incurred. As recognized in the opinion below, the settlement would benefit all parties

involved in the case before this Court. The Thirteenth Circuit also acknowledged the slim chance

of a successful reorganization for High Rocks. Therefore, absent the approval of this settlement,

High Rocks would have no other option but to pursue a disfavored conversion to chapter 7

proceedings.

While the record is clear that a successful reorganization is likely not possible for High

Rocks, the structured dismissal by way of the Committee Settlement is the only plausible way for

High Rocks to avoid conversion of its chapter 11 case to chapter 7. Until Jevic, the Bankruptcy

Code only applied the prohibition of priority skipping gifts to chapter 11 reorganization plans, and

did not extend this prohibition to settlements, as in the instant case. While the scope of proceedings

to which the absolute priority rule applies has been expanded, the policy goals to support the

continuation of priority skipping gifts when the limiting factors established by this Court in Jevic

(non-final dispositions and in furtherance of Code policy goals) support Court approval of the

Committee Settlement. It is important to note that this Court in Jevic did not apply its holding, or

even dicta, to the type of gift settlements in the case at bar, but rather limited its holding to the

distribution of estate assets.

The Bankruptcy Court for the Eastern District of Tennessee interpreted Jevic one month

following the opinion’s release. In re Fryar, 2017 WL 1489822 (Bankr. E.D. Tenn. Apr. 25, 2017).

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As one of the first post-Jevic decisions interpreting this Court’s dicta, the bankruptcy court did not

approve the settlement by the debtor where the settlement involved the sale of estate property to a

secured creditor, effectively skipping in priority IRS liens that should have been paid first. Id. at

5. The court in Fryar supported its denial of settlement based on the debtor’s failure to offer facts

regarding why the cash settlement entering the estate could contribute to a reorganization plan

under chapter 11 and did not provide any insight as to why the settlement should have been paid

out of priority in the first place. Id. at 6.

The instant case is highly distinct from Fryar: where the parties in Fryar were unable to

articulate the reason for the deviation from the absolute priority rule; here, the Bankruptcy Code

policy considerations favor the gift settlement here. While it is undisputed that the absolute priority

rule has long been recognized as the most important factor in balancing whether a settlement is

fair and equitable, when the absolute priority rule is not followed, it is not dispositive of an

impermissible settlement. Especially when, as in the instant case, it is not disputed that the gift

settlement by 4th Street to the Committee adheres to the fair and equitable standard set forth by

TMT Trailer Ferry. This not only furthers but adheres to the policies of the Bankruptcy Code, such

as the significance for potential reorganization under a chapter 11 bankruptcy. While Jevic

supports the idea that this Court is moving away from relying only on the fair and equitable

standard from TMT Trailer Ferry and emphasizes the need to justify priority skipping gifts with

the policy goals of the Bankruptcy Code, the principles of fair, equitable distributions and

outcomes of the bankruptcy proceedings are furthered by the Committee Settlement, which the

Thirteenth Circuit recognized in the opinion below.

Even in Fryar, the court did not disallow priority skipping gifts under all circumstances.

Rather, the court based its holding on the exception in Jevic requiring a compelling policy reason

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for the priority skipping in order to allow the settlement to go forward. Here, it is clear that absent

the priority skipping gift settlement by 4th Street additional litigation against the general

contractor, Skyline, will not be possible to pursue. Further, absent this gift settlement, there is

likely no alternative option for High Rocks that does not result in converting its chapter 11 case to

a chapter 7 case. This would not only run contrary to the policy goals of the Bankruptcy Code, but

would also effectively result in a final disposition, which runs contrary to both the policy objectives

of the Bankruptcy Code as well as contrary to the objective goals of the Petitioner as part of this

bankruptcy proceeding. Of the three possible outcomes of a chapter 11 case—court approval of a

reorganization plan, structured dismissal of the case, and conversion to chapter 7 proceedings—

approval of a reorganization plan champions the policy goals of the Code, however, similar to the

facts before this Court, where it is undisputed that a plan for reorganization is not possible, and a

chapter 7 conversion, which is a last choice resolution of proceedings, is inevitable, this Court

should approve the Committee Settlement.

This case is comparable to Iridium with regard to furthering the Bankruptcy Code’s policy

goals because the Committee Settlement benefits all parties by sparing all parties from expending

the additional time and money required of a conversion to chapter 7. While the Petitioner has been

placed in an unfair situation of holding an administrative lien against a company facing bankruptcy

proceedings, the Petitioner has no legal right or stake in the personal property of 4th Street in order

to recover its $2 million lien. If 4th Street was distributing estate assets to the Committee in

violation of the absolute priority rule, the Petitioner would have a stronger argument in light of

Jevic as to their entitlement to the funds. However, this Court narrowly tailored its opinion in Jevic

to cover only estate assets and did not extend its holding to any and all assets of the estate owner.

In the absence of a rule holding differently by either this Court—which expressly failed to do so

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last year in Jevic—or Congress, the Petitioner’s contention that it is entitled to the $2 million

Committee Settlement proceeds is meritless.

The Petitioner urges this Court to dismiss the traditional notions of whether a gift is fair

and equitable in favor of bolstering the absolute priority rule, but the Petitioner has already

conceded the settlement does qualify as fair and equitable following the TMT Trailer Ferry factors.

In addition, this has never been the position taken by this Court regarding gift settlements of non-

estate property, even in its limited Jevic decision. This Court should not deviate from the traditional

acceptance by bankruptcy courts of gift settlements based on the Petitioner’s unfounded assertions.

As part of a fair and objective settlement, a settlement must also further the objectives of

the Bankruptcy Code. These objectives focus on the successful reorganization of the bankrupt

company. In the instant case, absent the Committee settlement at issue, this chapter 11 case would,

in all likelihood, face no alternative but to be converted to a chapter 7 proceeding focused on

liquidation. Were this to happen, the Code’s objective of successful reorganization would not be

furthered. In addition, this settlement occurs early in the High Rocks proceedings and precedes the

entirety of the pending Skyline litigation, the claims for which would not be able to proceed absent

this gift. Therefore, the policy arguments central to the concerns outlined by this Court in Jevic are

not at issue here, and as a result, this Court should approve the gift settlement by 4th Street to

further the interests of all the involved parties as well as further the policy concerns of the

Bankruptcy Code.

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CONCLUSION

The provisions before this Court may coexist and, further, be read in harmony.

Accordingly, to preserve the sense and purpose of a § 363 sale, this Court should read the two

allegedly conflicting statutes in such a way so as to give its intended effect to each. Section 365(h)

distinctly applies where a debtor lessor remains in possession of its property and rejects a lease,

and is inapplicable where the debtor lessor sells property subject to an interest, such as a leasehold,

free and clear of that interest pursuant to § 363. This outcome, although unfortunate for the

Petitioner, is justified given the priority of the Highway Lease, the Petitioner’s failure to seek the

relief provided within § 363, but also a plain reading of the statutory text. Congress had the

opportunity to change the language of § 365, specifically the effect of a § 363 sale on a lease, but

abstained from doing so, even at the time of the 1994 amendments. Hence, this Court should affirm

the decision of the Thirteenth Circuit and not limit High Rocks’ ability to sell its property free and

clear of the Highway Lease pursuant to § 363(f), notwithstanding the protections given to lessees

under § 365(h) because such protections are not absolute.

While this Court has extended the absolute priority rule to settlements in the face of

legislative silence, this Court’s decision in Jevic was narrowly crafted and should not be protracted

to encompass gift settlements of non-estate assets. Although it is a highly persuasive factor in

determining the fairness and appropriateness of a bankruptcy distribution, it is just that—a factor.

Despite the fact that the settlement in this case was nonconsensual, it would be unreasonable

because it was a gift of non-estate assets. For this Court to intervene would essentially allow the

Petitioner a right to $2 million of 4th Street’s personal money that has never been comingled with

estate property. Further, this invasion of autonomy over distribution of personal assets separate

from the estate would be a violation of the equitable principles that have long been the goals of the

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Bankruptcy Code. Finally, the fact that the Committee Settlement does not result in a final

distribution and is, as the Thirteenth Circuit noted, just the beginning of what will be an ongoing

litigation should the Committee be enabled to pursue their claims against Skyline, supports

approval of the settlement by this Court. Disallowing a gift settlement that is beneficial to all

parties involved by either providing payment or protects the remaining parties from expending

resources on fruitless proceedings does not condone the values of fairness and equity that are so

prevalent in the Code. For these reasons, this Court should approve the Committee Settlement and

affirm the decision of the Thirteenth Circuit Court of Appeal.

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A

Appendix A

11 U.S.C. § 361—Adequate protection. When adequate protection is required under section 362, 363, or 364 of this title [11 USCS § 362, 363, or 364] of an interest of an entity in property, such adequate protection may be provided by—

(1) requiring the trustee to make a cash payment or periodic cash payments to such entity, to the extent that the stay under section 362 of this title [11 USCS § 362], use, sale, or lease under section 363 of this title [11 USCS § 363], or any grant of a lien under section 364 of this title [11 USCS § 364] results in a decrease in the value of such entity's interest in such property; (2) providing to such entity an additional or replacement lien to the extent that such stay, use, sale, lease, or grant results in a decrease in the value of such entity's interest in such property; or (3) granting such other relief, other than entitling such entity to compensation allowable under section 503(b)(1) of this title [11 USCS § 503(b)(1)] as an administrative expense, as will result in the realization by such entity of the indubitable equivalent of such entity's interest in such property.

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Appendix B 11 U.S.C. § 363(e)—Use, sale or lease of property.

(e) Notwithstanding any other provision of this section, at any time, on request of an entity that has an interest in property used, sold, or leased, or proposed to be used, sold, or leased, by the trustee, the court, with or without a hearing, shall prohibit or condition such use, sale, or lease as is necessary to provide adequate protection of such interest. This subsection also applies to property that is subject to any unexpired lease of personal property (to the exclusion of such property being subject to an order to grant relief from the stay under section 362).

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C

Appendix C 11 U.S.C. § 363(f)—Short title. (f) The trustee may sell property under subsection (b) or (c) of this section free and clear of any interest in such property of an entity other than the estate, only if)—

(f)(1) applicable nonbankruptcy law permits sale of such property free and clear of such interest; (f)(2) such entity consents; (f)(3) such interest is a lien and the price at which such property is to be sold is greater than the aggregate value of all liens on such property; (f)(4) such interest is in bona fide dispute; or (f)(5) such entity could be compelled, in a legal or equitable proceeding, to accept a money satisfaction of such interest.

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Appendix D 11 U.S.C. § 365(h)—Executory contracts and unexpired leases.

(h)(1)(A) If the trustee rejects an unexpired lease of real property under which the debtor is the lessor and)—

(1)(A)(i) if the rejection by the trustee amounts to such a breach as would entitle the lessee to treat such lease as terminated by virtue of its terms, applicable nonbankruptcy law, or any agreement made by the lessee, then the lessee under such lease may treat such lease as terminated by the rejection; or (1)(A)(ii) if the term of such lease has commenced, the lessee may retain its rights under such lease (including rights such as those relating to the amount and timing of payment of rent and other amounts payable by the lessee and any right of use, possession, quiet enjoyment, subletting, assignment, or hypothecation) that are in or appurtenant to the real property for the balance of the term of such lease and for any renewal or extension of such rights to the extent that such rights are enforceable under applicable nonbankruptcy law.

(h)(1)(B) If the lessee retains its rights under subparagraph (A)(ii), the lessee may offset against the rent reserved under such lease for the balance of the term after the date of the rejection of such lease and for the term of any renewal or extension of such lease, the value of any damage caused by the nonperformance after the date of such rejection, of any obligation of the debtor under such lease, but the lessee shall not have any other right against the estate or the debtor on account of any damage occurring after such date caused by such nonperformance. (h)(1)(C) [omitted] (h)(1)(D) [omitted]

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Appendix E 11 U.S.C. § 1129(b)(2)(C)—Confirmation of a Plan.

(b)(2)(C) With respect to a class of interests)—

(b)(2)(C)(i) the plan provides that each holder of an interest of such class receive or retain on account of such interest property of a value, as of the effective date of the plan, equal to the greatest of the allowed amount of any fixed liquidation preference to which such holder is entitled, any fixed redemption price to which such holder is entitled, or the value of such interest; or (b)(2)(C)(ii) the holder of any interest that is junior to the interests of such class will not receive or retain under the plan on account of such junior interest any property.