09 B 49094, 11 A 2395
This matter involves the former principals of Brown’s Chicken & Pasta (“Debtor”), the franchisor of Brown’s Chicken restaurants in the Chicago area. Following the dissolution of the principals’ business relationship, litigation ensued and a judgment was entered against the Debtor in the amount of $882,000,which led to the Debtor’s bankruptcy filing in 2009.
At issue in this adversary proceeding is what property was sold in a section 363 sale of Debtor’s assets. In Count I, the Plaintiff accuses the Defendants of conversion of equipment purchased in the sale, valued at $25,582.25.  The Defendants claims that although the equipment was mistakenly included in Debtor’s schedules, it had previously been sold, and therefore, was not property of the bankruptcy estate. In Count II, Plaintiff requests declaratory relief, arguing that it properly assumed and accepted a 15-year franchise agreement between the Debtor and franchisee, Joli Inc. The Defendants counter that a subsequent 15-month franchise agreement is the operative document which was been terminated in accordance with its terms.
As to Count I, the Court ruled that Plaintiff justifiably relied on the representation in Schedule B that the equipment listed therein belonged to the Debtor. The Court noted that Schedule B was never amended to reflect the purported change in ownership, and concluded that the equipment was sold to Plaintiff in the section 363 sale.
As to Count II, the Court expressed doubts as to the authenticity of the shorter, 15-month franchise agreement, and concluded that the 15-year term franchise agreement had been properly assumed and assigned by the Plaintiff in accordance with the requirements of the Bankruptcy Code.

12 B 49219 (jointly administered)
The Sierra Club filed a motion seeking entry of an order confirming that the automatic stay was not in effect due to the police power exception of Bankruptcy Code section 362(b)(4), or, in the alternative, granting relief from the automatic stay to continue a regulatory action pending against Debtor, Midwest Generation, LLC before the Illinois Pollution Control Board. The Court held that the police power exception was not applicable, noting that the Sierra Club is not a “governmental unit” as defined by Section 101(27) of the Bankruptcy Code. The Court also noted that neither the Illinois Attorney General, nor the Illinois EPA intervened in the proceeding initiated by the Sierra Club. The Court determined that cause existed to lift the stay, after employing a balancing test as instructed by the Seventh Circuit in In re Fernstrom,938 F.2d 731, 735 (7th Cir. 1991). The court also considered the impact of the alleged environmental violations on the residents of Illinois.

11 B 51502

Evans Construction Company (“Evans”) filed a secured Mechanics Lien claim in the amount of $398,937.00 which represented amounts that were owed directly to Evans’ subcontractors. The Lender, Debtor's successor, objected to the claim, asserting a setoff for amounts paid directly to subcontractors and for amounts paid to correct construction work alleged to be defective. The Court reduced Evans claim to reflect amounts proven to be paid directly to subcontractors. However, after hearing the testimony of several witnesses, the Court determined that the Lender’s assertion that Evans produced faulty work was not supported by the evidence, as the defects complained of were explicitly contracted for by the parties.

09 B 42237

In this Chapter 13 proceeding, the Court granted the Debtor’s motion for sanctions, after a Mortgagee continued to collect the mortgage payments from both the Debtor and the Trustee despite the Court’s approval of a loan modification agreement. The Court’s opinion highlights the importance of parties examining whether loan modifications necessitate a subsequent chapter 13 plan amendment to accurately provide for treatment of mortgage arrears.

11 B 40944 (jointly administered)

In this memorandum opinion, the Court denied confirmation of the Debtor’s Third Amended Plan of Reorganization. The Court noted that to satisfy the Bankruptcy Code’s requirement that the Debtor’s Plan be fair and equitable, a plan must propose an interest rate adequate to assure the realization of the Bank’s claim. In this case, the Court determined that the interest rate advanced by the Debtor did not sufficiently capture the risk that the Debtor would not satisfy the Bank’s claim. The Court also determined that the Plan was not feasible because the Debtor failed to prove that the property would increase in value enough to give the Debtor sufficient equity to facilitate refinancing at the end of 7 years to fund a balloon payment to the Bank. Also, relying on the Seventh Circuit’s decision in In re Castleton Plaza, LP, No. 12-2639, 2013 WL 537269, and Bankruptcy Code Section 101(31)(B), the Court held that the nature of the plan warrants application of the absolute priority rule as the plan gave the Debtor’s insider preferential access to an investment opportunity in the Reorganized Debtor without allowing others to compete for that opportunity. The Court also granted the Bank’s request for relief from the automatic stay because the Debtor failed to show that there is a reasonable possibility of a successful reorganization.

11 B 40944 (jointly administered)

In this memorandum opinion, the Court denied confirmation of the Debtor’s Amended Plan of Reorganization. The Court noted that to satisfy the Bankruptcy Code’s requirement that the Debtor’s Plan be fair and equitable, a plan must propose an interest rate adequate to assure the realization of the Bank’s claim. In this case, the Court determined that the interest rate advanced by the Debtor did not sufficiently capture the risk that the Debtor would not satisfy the Bank’s claim. The Court also determined that the Plan was not feasible because the Debtor failed to prove that the property would increase in value enough to give the Debtor sufficient equity to facilitate refinancing at the end of 7 years to fund a balloon payment to the Bank. The Court also granted the Bank’s request for relief from the automatic stay because the Debtor failed to show that there is a reasonable possibility of a successful reorganization.