Corporate Reorganizations
10/30/2009 1:41:00 PM EST
Clear Channel Outdoor, Inc. v. Knupfer (In re PW, LLC), 391 B.R. 25 (B.A.P. 9th Cir. 2008)
Professor of Law, Golden Gate University in San Francisco
Channel Outdoor, Inc. v. Knupfer, a case from the bankruptcy appellate panel for the Ninth Circuit that found that outside a plan of reorganization, 11 U.S.C. § 363(f) does not permit a secured creditor to credit bid its debt and purchase estate property, taking title free and clear of valid, nonconsenting junior liens.
Excerpt:
This case was remanded by the Bankruptcy Appellate Panel for the Ninth Circuit "to allow the parties to identify a qualifying proceeding under nonbankruptcy law (if one exists) that would enable them to strip Clear Channel's lien and make the sale of PW's property to DB free and clear under § 363(f)(5)." As such, the matter is not over.
However, is there any nonbankruptcy law that would permit the senior lienor or the debtor to strip away the junior's lien? Lien stripping is a function of bankruptcy law, not state law, which is not what 11 U.S.C. § 363(f)(5) demands. California's fair value provisions (Code Civ. Proc. §§ 726 and 580a) do reduce debts but perform their function only in the context of a foreclosure proceeding, which did not happen here. (And any foreclosure sale here would probably be conducted by the senior, which would make PW a sold out junior, not subject to fair value unless it became the high bidder at the senior sale).
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