U.S. Bank N.A. v. Village at Lakeridge, LLC

U.S. Bank N.A. v. Village at Lakeridge, LLC
Supreme Court of the United States
Decided March 5, 2018
Full case name	U.S. Bank N.A. v. Village at Lakeridge, LLC
Docket no.	15-1509
Citations	583 U.S. ___ ( more )
Holding
Clear error is the proper standard for review of a determination that a purchaser was not a non-statutory insider for purposes of approving a cramdown plan of reorganization.
Court membership
Chief Justice John Roberts Associate Justices Anthony Kennedy  · Clarence Thomas Ruth Bader Ginsburg  · Stephen Breyer Samuel Alito  · Sonia Sotomayor Elena Kagan  · Neil Gorsuch
Case opinions
Majority	Kagan, joined by unanimous
Concurrence	Kennedy
Concurrence	Sotomayor, joined by Kennedy, Thomas, Gorsuch

U.S. Bank N.A. v. Village at Lakeridge, LLC, 583 U.S. ___(2018), was a United States Supreme Court case in which the court held that clear error is the proper standard for review of a determination that a purchaser was not a non-statutory insider for purposes of approving a cramdown plan of reorganization. ^{[1] [2]}

Background

Lakeridge was a corporate entity with a single owner, MBP Equity Partners. When Lakeridge filed for Chapter 11 bankruptcy, it had a pair of substantial debts: It owed U.S. Bank over $10 million and MBP another $2.76 million. Lakeridge submitted a reorganization plan, proposing to impair the interests of both U.S. Bank and MBP. U.S. Bank refused the offer, thus blocking Lakeridge's option for reorganization through a fully consensual plan. Lakeridge then turned to the so-called "cramdown" plan option for imposing a plan impairing the interests of a non-consenting class of creditors. Among the prerequisites for judicial approval of such a plan is that another impaired class of creditors has consented to it. But, crucially, the consent of a creditor who is also an "insider" of the debtor does not count for that purpose. The Bankruptcy Code's definition of an insider "includes" any director, officer, or "person in control" of the entity. Courts devised tests for identifying other, so-called "non-statutory" insiders, focusing, in whole or in part, on whether a person's transactions with the debtor were at arm's length. ^[1]

MBP (an insider of Lakeridge) could not provide the partial agreement needed for a cramdown plan, and Lakeridge's reorganization was thus impeded. MBP sought to transfer its claim against Lakeridge to a non-insider who could agree to the cramdown plan. Kathleen Bartlett, an MBP board member and Lakeridge officer, offered MBP's claim to Robert Rabkin, a retired surgeon, for $5,000. Rabkin purchased the claim and consented to Lakeridge's proposed reorganization. U.S. Bank objected, arguing that Rabkin was a non-statutory insider because he had a "romantic" relationship with Bartlett and the purchase was not an arm's-length transaction. The Bankruptcy Court rejected U.S. Bank's argument. The Ninth Circuit Court of Appeals affirmed. Viewing the Bankruptcy Court's decision as one based on a finding that the relevant transaction was conducted at arm's length, the Ninth Circuit held that that finding was entitled to clear-error review, and could not be reversed under that deferential standard. ^[1]

Opinion of the court

The Supreme Court issued an opinion on March 5, 2018. ^[1]

References

1. U.S. Bank N.A. v. Village at Lakeridge, LLC,No. 15-1509 , 583 U.S. ___(2018).
2. Mann, Ronald (March 5, 2018). "Opinion analysis: Justices approve deferential review of bankruptcy-court determinations on "insider" status". SCOTUSblog. Retrieved July 28, 2025.

External links

• Text of U.S. Bank N.A. v. Village at Lakeridge, LLC,No. 15-1509, 583 U.S. ___(2018) is available from: Justia

This article incorporates written opinion of a United States federal court. As a work of the U.S. federal government, the text is in the public domain .