               Case: 14-11590       Date Filed: 03/12/2015      Page: 1 of 23


                                                                                 [PUBLISH]

                 IN THE UNITED STATES COURT OF APPEALS

                           FOR THE ELEVENTH CIRCUIT
                             ________________________

                                    No. 14-11590
                              ________________________

         D.C. Docket Nos. 3:12-cv-00511-MW-EMT; 11-bkc-31637-WSS

In Re: SEASIDE ENGINEERING & SURVEYING, INC.,

                                                             Debtor.
_________________________________________________________________

SE PROPERTY HOLDINGS, LLC,

                                                                       Claimant-Appellant,

                                           versus

SEASIDE ENGINEERING & SURVEYING, INC.,

                                                                       Defendant-Appellee.

                              ________________________

                      Appeal from the United States District Court
                          for the Northern District of Florida
                            ________________________

                                     (March 12, 2015)

Before MARTIN and ANDERSON, Circuit Judges, and COTE,* District Judge.

_________

*Honorable Denise Cote, United States District Judge for the Southern District of New York,
sitting by designation.
              Case: 14-11590     Date Filed: 03/12/2015    Page: 2 of 23




ANDERSON, Circuit Judge:

      SE Property Holdings, LLC, and affiliated entity Vision-Park Properties,

LLC, (collectively “Vision”) appeal the district court’s order upholding decisions

in the bankruptcy restructuring proceedings of Seaside Engineering and Surveying,

LLC (“Seaside” or “Debtor”). After careful review of the record, and with the

benefit of oral argument, we affirm. In doing so, we provide guidance to the

Circuit’s bankruptcy courts with respect to a significant issue: i.e., the authority of

bankruptcy courts to issue non-consensual, non-debtor releases or bar orders, and

the circumstances under which such bar orders might be appropriate.

                                 I. BACKGROUND

      Seaside is a civil engineering and surveying firm that conducts forms of

technical mapping. Seaside provided services to, among other clients, the U.S.

Army Corps of Engineers. Seaside’s principal shareholders prior to all bankruptcy

litigation were John Gustin, James Mainor, Ross Binkley, James Barton, and

Timothy Spears. The principals branched out from their work as engineers and

entered the real estate development business, forming Inlet Heights, LLC, and

Costa Carina, LLC. These wholly separate entities borrowed money from Vision

with personal guaranties from the principals. Inlet Heights and Costa Carina

defaulted on the loans, and Vision filed suit to recover amounts under the

guaranties.

                                           2
               Case: 14-11590       Date Filed: 03/12/2015      Page: 3 of 23


       Gustin filed for Chapter 7 bankruptcy protection for himself. Mainor and

Binkley followed suit. All were appointed Chapter 7 trustees. Gustin, Mainor, and

Binkley listed their Seaside stock as non-exempt personal property in their required

filings. In April 2011, the Chapter 7 trustee in the Gustin case conducted an action

to sell Gustin’s shares of Seaside stock. Gustin bid $95,500.00, and Vision

defeated the bid with a purchase price of $100,000.00. Seaside attempted to block

sale of Gustin’s stock to Vision, but the bankruptcy court confirmed the sale.

Following the sale of Gustin’s stock, Seaside filed for Chapter 11 bankruptcy

protection on October 7, 2011.1

       Seaside proposed to reorganize and continue operations as the entity Gulf

Atlantic, LLC (“Gulf”), an entity managed by Gustin, Mainor, Binkley, and

Bowden, and owned by four members, the respective irrevocable family trust of

each manager. The outside equity holders would receive promissory notes with

interest accruing at a rate of 4.25% in exchange for their interest in Seaside and

thus be excluded from ownership in Gulf. The bankruptcy court approved the

Second Amended Plan of Reorganization (“Second Amended Plan” or

“Reorganization Plan”), over objection of Vision, valuing Seaside at $200,000.00.

The district court affirmed the bankruptcy court.


1
       It is worth emphasizing here that Vision was never an unsecured creditor as to Seaside.
Vision was an unsecured creditor as to Inlet Heights, LLC, and Costa Carina, LLC. Vision was
only an equity holder in Seaside.
                                               3
              Case: 14-11590     Date Filed: 03/12/2015   Page: 4 of 23


                                     II. DISCUSSION

      Vision raises myriad issues on appeal. The arguments all essentially reduce

to Vision’s objections to the bankruptcy court’s valuation and to the composition

of the reorganized entity under the Second Amended Plan of Reorganization. We

address each argument in turn.

      A. Valuation of Seaside

      Vision argues that the bankruptcy court improperly valued Seaside under a

forced-sale analysis as opposed to a going-concern analysis. Vision continues that

even under a forced-sale analysis, the bankruptcy court selected an inadequate

discount rate by considering impermissible factors—particularly the risk of critical

employees leaving the firm—and inadmissible expert testimony. The valuation of

Seaside is a mixed question of law and fact. In re Ebbler Furniture & Appliances,

Inc., 804 F.2d 87, 89 (7th Cir. 1986). Selection of a valuation method is a legal

matter subject to de novo review, and findings made under that standard are facts

subject to clear error review. Id.

      We disagree with Vision that the bankruptcy court valued Seaside using a

forced-sale method. To begin, the bankruptcy court explicitly stated that “the

correct method of valuation of the [D]ebtor is that as a going concern.” The

bankruptcy court also considered future losses, which are necessary to a discounted

cash flow analysis, the core of a going-concern valuation. Most telling, the


                                           4
                Case: 14-11590        Date Filed: 03/12/2015       Page: 5 of 23


bankruptcy court discussed and selected a discount rate, the critical input to

calculate the present value of a business based on a cash flow.

       Having established use of the proper valuation method, the bankruptcy court

committed no error in considering the risk of losing key employees in selecting a

discount rate. “[A]ll relevant factors to property value must be considered to arrive

at a just valuation of a property.” In re Webb MTN, LLC, 420 B.R. 418, 435

(Bankr. E.D. Tenn. 2009). Seaside’s civil engineering and mapping operations

rely upon human expertise, and its client base relies upon established relationships.

The loss of key employees could equate to a complete deterioration of Seaside’s

value. Employee retention is certainly a relevant risk if not the key risk in

calculating the discount rate in a case like this. The bankruptcy court also has

discretion to weigh expert testimony and select portions to accept or reject. Id.

Vision’s argument is that the bankruptcy court did just this, and therefore the

argument is unavailing. To reiterate, the bankruptcy court committed no error in

valuing Seaside.

       B. The Non-debtor Release or Bar Order 2

       As part of the Reorganization Plan, the bankruptcy court approved releases

of claims against non-debtors:


2
        Previous decisions of this Circuit have referred to non-debtor releases as “bar orders.”
E.g. In re Munford, 97 F.3d 449 (11th Cir. 1996). The terms are used interchangeably in this
opinion.
                                                 5
              Case: 14-11590    Date Filed: 03/12/2015   Page: 6 of 23


      [N]one of the Debtor, . . . Reorganized Debtor, Gulf Atlantic . . . (and
      any officer or directors or members of the aforementioned [entities])
      and any of their respective Representatives (the “Releasees”) shall
      have or incur any liability to any Holder of a Claim against or Interest
      in Debtor, or any other party-in-interest … for any act, omission,
      transaction or other occurrence in connection with, relating to, or
      arising out of the Chapter 11 Case, the pursuit of confirmation of the
      Amended Plan as modified by the Technical Amendment, or the
      consummation of the Amended Plan as modified by this Technical
      Amendment, except and solely to the extent such liability is based on
      fraud, gross negligence or willful misconduct.

Reorganization Plan Art. IX.C. The district court upheld the propriety of these

non-debtor releases. Although this Circuit has considered the propriety of such a

release by a bankruptcy court, it has not done so recently. The issue warrants

significant discussion.

      1. History of Non-Debtor Releases in the Eleventh Circuit

      This Circuit has spoken at least once on the validity of non-debtor releases in

bankruptcy restructuring plans. We approved a release of claims against a non-

debtor in In re Munford, 97 F.3d 449 (11th Cir. 1996). There, the debtor sued

several defendants alleging breach of fiduciary duties related to a leveraged buy

out. Id. at 452. One defendant offered to settle the claims but denied liability and

conditioned its offer of settlement on issuance by the bankruptcy court of a

protective order enjoining the non-settling defendants from pursuing contribution

or indemnity claims against the settling defendant. Id. In order to make the

settlement possible and to fund the bankruptcy estate, the bankruptcy court issued a


                                          6
                Case: 14-11590         Date Filed: 03/12/2015        Page: 7 of 23


protective order barring the non-settling defendants from seeking contribution or

indemnification from the settling defendant. Id. We held that 11 U.S.C. §105(a)3

gives bankruptcy courts authority to issue any order, process, or judgment that is

necessary or appropriate to carry out the provisions of the Bankruptcy Code,

including the bar order in that case. We upheld the non-debtor release because

the settling defendant “would not have entered into the settlement agreement”

without the bar order and because the bar order was “integral to settlement in an

adversary proceeding.” Munford, 97 F.3d at 455.

       Munford is the controlling case here, indicating that this Circuit permits non-

debtor releases at least under some circumstances.4 However, the facts of this case


3
        “The court may issue any order, process, or judgment that is necessary or appropriate to
carry out the provisions of this title. No provision of this title providing for the raising of an
issue by a party in interest shall be construed to preclude the court from, sua sponte, taking any
action or making any determination necessary or appropriate to enforce or implement court
orders or rules, or to prevent an abuse of process.” 11 U.S.C. § 105(a).
4
        Munford thus places this Circuit within the majority view discussed below. Although the
Fifth Circuit in In re Vitro S.A.B. DE CV, 701 F.3d 1031, 1061 (2012), cited the Eleventh
Circuit case of In re Jet Florida Systems, Inc., 883 F.2d 970 (1989), as being consistent with the
minority view that non-consensual, non-debtor releases were prohibited by 11 U.S.C. §524(e),
the Fifth Circuit citation was misplaced. Our Jet Florida case did not involve a non-debtor
release. Rather, it involved the usual injunction against actions against the debtor itself. The
case involved a suit by a tort claimant against a debtor, after the discharge of the debtor, seeking
to establish the liability of the debtor for the tort in order to obtain recovery against the debtor’s
insurer. We held that the injunction pursuant to 11 U.S.C. §524(a) arising from the discharge of
the debtor applied only with respect to the personal liability of the debtor. Id. at 973. In so
holding, we quoted from Collier as follows:

       The provisions of 524(a) apply only with respect to the personal liability of the
       debtor. When it is necessary to commence or continue a suit against a debtor in
       order, for example, to establish liability of another, perhaps a surety, such suit
       would not be barred. Section 524(e) was intended for the benefit of the debtor
                                                  7
                Case: 14-11590         Date Filed: 03/12/2015        Page: 8 of 23


differ from those considered in Munford. Instead of the settlement context in

Munford, here the releases prevent claims against non-debtors that would

undermine the operations of, and doom the possibility of success for, the

reorganized entity, Gulf. Other Circuits have addressed substantively similar

releases, which we now consider.

       2. Non-debtor Releases in Sister Circuits

       Other circuits are split as to whether a bankruptcy court has the authority to

issue a non-debtor release and enjoin a non-consenting party who has participated

fully in the bankruptcy proceedings but who has objected to the non-debtor release

barring it from making claims against the non-debtor that would undermine the

operations of the reorganized entity. Collier Bankruptcy Practice Guide5 reports

the circuit split as follows. The authors indicate, as the minority view, that the




       but was not meant to affect the liability of third parties or to prevent establishing
       such liability through whatever means required.

Id. at 973 (quoting 3 R. Babitt, A. Herzog, R. Mabey, H. Novikof, & M. Shinfeld, Collier on
Bankruptcy, ¶524.01 at 524-16 (15th ed. 1987) (emphasis added in Eleventh Circuit opinion)).
Jet Florida held that the tort claimant could proceed with suit against the debtor to establish the
fact of liability for purposes of the insurance coverage; and that, as a practical matter, the insurer
would be required to defend because the debtor, protected from personal liability, would be free
to default. Jet Florida, 883 F.2d at 976. Thus, nothing in Jet Florida addresses the issue before
us – i.e., the authority of bankruptcy courts to issue a non-consensual, non-debtor release. And,
contrary to the citation of the Fifth Circuit, nothing in Jet Florida suggests that the Eleventh
Circuit is aligned with the minority view discussed below.
5
     5-84 Collier Bankruptcy Practice Guide ¶ 84.02[1][c][v] (Alan N. Resnick & Henry J.
Sommer eds., 2014).


                                                  8
               Case: 14-11590        Date Filed: 03/12/2015      Page: 9 of 23


Ninth and Tenth Circuits prohibit such bar orders.6 Our research reveals that the

Fifth Circuit is also in the minority with respect to this issue. In In re Vitro S.A.V.

DE CV, 701 F.3d 1031, 1061 (2012), the Fifth Circuit interpreted its prior

precedent, saying that it “seem[s] broadly to foreclose non-consensual non-debtor

releases in permanent injunctions.” The opinions for these minority circuits base

their conclusion on 11 U.S.C. §524(e), which provides in relevant part:

“[D]ischarge of a debt of the debtor does not affect the liability of any other entity

on, or the property of any other entity for, such debt.” Collier cites the majority of

the circuits as holding that such releases/injunctions are permissible, under certain

circumstances, reporting the Second, Third, Fourth, Sixth, and Seventh Circuits as




6
        With respect to the Ninth Circuit, Collier cites In re Lowenschuss, 67 F.3d 1394, 1401-02
(9th Cir. 1995), cert. denied, 517 U.S. 1243 (1996), and In re American Hardwoods, Inc., 885
F.2d 621, 625-26 (9th Cir. 1989). With respect to the Tenth Circuit, Collier cites In re Western
Real Estate Fund, Inc., 922 F.2d 592, 601 (10th Cir. 1990).
                                                9
               Case: 14-11590        Date Filed: 03/12/2015        Page: 10 of 23


so holding, 7 and the First, Eleventh, and D.C. Circuits as indicating that they agree

with the “pro-release” circuits. 8

       3. Eleventh Circuit Law is Consistent with the Majority View

       As indicated in Part II.B.1 above, we believe that our Munford case places

this Circuit within the majority rule on this issue. As noted above, in Munford, we

held that §105(a) provided authority for the bankruptcy court to enter the bar order

in that case, where the settling defendant provided funds for the bankruptcy estate,

but would not have entered into the settlement in the absence of such bar order,

and where the bankruptcy court found that the bar order was fair and equitable. In

particular, we respectfully disagree with the position of the minority circuits with

respect to §524(e). As noted, that section, in relevant part, provides that the

“discharge of a debt of the debtor does not affect the liability of another entity on

… such debt.” We agree with the Seventh Circuit in Airadigm: “The natural

7
        Collier cites as support for this proposition: In re Drexel Burnham Lambert Group, Inc.,
960 F.2d 285, 292 (2d Cir. 1992); In re Continental Airlines, 203 F.3d 203, 214 (3d Cir. 2000);
In re A.H. Robbins Co., Inc., 880 F.2d 694, 700-02 (4th Cir. 1989); In re Dow Corning Corp.,
280 F.3d 648, 658 (6th Cir. 2002); In re Specialty Equip. Cos., 3 F.3d 1043, 1047 (7th Cir.
1993). Our research reveals that the Third Circuit in Continental Airlines expressly declined to
decide whether or not there ought to be a blanket rule prohibiting all non-consensual releases and
permanent injunctions of non-debtor obligations. Rather, the Third Circuit assumed the most
flexible standard for testing the validity of such non-debtor releases, and held that the findings of
fact below did not support such a bar order under that standard. 203 F.3d at 213-18. Our
research also reveals that the Seventh Circuit case, In re Airadigm Communications, Inc., 519
F.3d 640, 655-58 (7th Cir. 2008), more squarely supports the majority position than does the
case cited by Collier.
8
       For this proposition, Collier cites In re Munford, Inc., 97 F.3d 449 (11th Cir. 1996); In re
Monarch Life Ins. Co., 65 F.3d 973, 984-85 (1st Cir. 1995); and In re AOV Industries, 792 F.2d
1140, 1152 (D.C. Cir. 1986).
                                                 10
              Case: 14-11590     Date Filed: 03/12/2015    Page: 11 of 23


reading of this provision does not foreclose a third-party release from a creditor’s

claims.” 519 F.3d 640, 656 (2008). Pursuant to §524(e), the discharge of the

debtor’s debt does not itself affect the liability of a third party, but §524(e) says

nothing about the authority of the bankruptcy court to release a non-debtor from a

creditor’s claims. As the Airadigm court noted, if Congress had meant to limit the

powers of bankruptcy courts, it would have done so clearly, as it did in other

instances, or it would have done so by creating requirements for plan confirmation

as in 11 U.S.C. §1129(a) (“The court shall confirm a plan only if the following

requirements are met ….”).

      Consistent with the majority view, we agree that §105(a) codifies the

established law that a bankruptcy court “applies the principles and rules of equity

jurisprudence.” Airadigm, 519 F.3d at 659 (quoting Pepper v. Litton, 308 U.S.

295, 304, 60 S.Ct. 238, 244 (1939)). We also agree, however, with the majority

view that such bar orders ought not to be issued lightly, and should be reserved for

those unusual cases in which such an order is necessary for the success of the

reorganization, and only in situations in which such an order is fair and equitable

under all the facts and circumstances. The inquiry is fact intensive in the extreme.

      Like the Fourth Circuit in Behrmann v. National Heritage Foundation, 663

F.3d 704, 712 (2011), we commend for the consideration of bankruptcy courts the

factors set forth by the Sixth Circuit in Dow Corning Corp., 280 F.3d at 658.


                                           11
              Case: 14-11590    Date Filed: 03/12/2015   Page: 12 of 23


There, the Sixth Circuit established a seven-factor test to guide bankruptcy courts,

as follows:

      [W]hen the following seven factors are present, the bankruptcy court
      may enjoin a non-consenting creditor’s claims against a non-debtor:
      (1) There is an identity of interests between the debtor and the third
      party, usually an indemnity relationship, such that a suit against the
      non-debtor is, in essence, a suit against the debtor or will deplete the
      assets of the estate; (2) The non-debtor has contributed substantial
      assets to the reorganization; (3) The injunction is essential to
      reorganization, namely, the reorganization hinges on the debtor being
      free from indirect suits against parties who would have indemnity or
      contribution claims against the debtor; (4) The impacted class, or
      classes, has overwhelmingly voted to accept the plan; (5) The plan
      provides a mechanism to pay for all, or substantially all, of the class
      or classes affected by the injunction; (6) The plan provides an
      opportunity for those claimants who choose not to settle to recover in
      full and; (7) The bankruptcy court made a record of specific factual
      findings that support its conclusions.

Id. Again, we agree with the Fourth Circuit in Behrmann that bankruptcy courts

should have discretion to determine which of the Dow Corning factors will be

relevant in each case. 663 F.3d at 712. The factors should be considered a non-

exclusive list of considerations, and should be applied flexibly, always keeping in

mind that such bar orders should be used “cautiously and infrequently,” id. at 712,

and only where essential, fair, and equitable. Munford, 97 F.3d at 455.

      Having set forth the foregoing standard, we turn next to review the

bankruptcy court’s application of the Dow Corning factors.

      4. Application of the Dow Corning Factors

      Recognizing the existing split among the circuits as to whether a third-party
                                         12
             Case: 14-11590     Date Filed: 03/12/2015   Page: 13 of 23


release is permissible for non-debtors, but then relying on decisions of other

Florida bankruptcy courts, the bankruptcy court applied the Dow Corning factors

in a manner consistent with this opinion. We review a bankruptcy court’s approval

of non-debtor releases for abuse of discretion. In re Munford, 97 F.3d 449, 456

(11th Cir. 1996). Vision argues that this release satisfies none of the Dow Corning

factors. We disagree.

             a. Factor One: An identity of interests between the debtor and the
             third party, usually an indemnity relationship, such that a suit against
             the non-debtor is, in essence, a suit against the debtor or will deplete
             the assets of the estate.

      The bankruptcy court concluded that this factor favored Seaside and favored

inclusion in the Reorganization Plan of the non-debtor release. The bankruptcy

court concluded that Gulf would deplete its assets continuing to defend against the

voluminous litigation. The releasees in this case include Gustin, Mainor, Binkley,

Bowden, and other former principals of Seaside who will be the key employees of

the reorganized entity, Gulf. The reorganized entity’s business is completely

dependent upon the skilled labor of the releasees, its professional surveyors and

engineers, as was the former business of the Debtor. These releasees would also

be defendants in any further litigation and, in the absence of the bar order, would

expend their time in defense of litigation as opposed to focusing on their




                                          13
               Case: 14-11590        Date Filed: 03/12/2015       Page: 14 of 23


professional duties for the reorganized entity. Applying this first factor flexibly, 9

we agree with the bankruptcy court that this factor favors approving the non-debtor

release. Time equates to money for the engineers. The principals’ preoccupation

with additional lawsuits will interrupt the labor-intensive surveying, leading to a

deterioration of the estate as Gulf loses valuable relationship-based work contracts.

               b. Factor Two: The non-debtor has contributed substantial assets to
               the reorganization.

       The bankruptcy court stated that “[n]one of the releases [sic] contributed any

new value to the reorganized debtor other than the contribution of their labor.” As

other findings of the bankruptcy court make clear, the contribution of their services

to the reorganized entity is the very “life blood of the reorganized debtor.” Doc.

474-1 at 47-48 (emphasis in original). We conclude that this factor too favors

Seaside.

               c. Factor Three: The injunction is essential to reorganization, namely,
               the reorganization hinges on the debtor being free from indirect suits
               against parties who would have indemnity or contribution claims
               against the debtor.

       The bankruptcy court noted the close relationship between the first factor

and this factor. The bankruptcy court found that the bar order was absolutely

essential. It found: “To say that this case has been highly litigious would be an

9
        In Munford itself there was more identity as between the settling defendant and the non-
settling defendants than between the settling defendant and the debtor. However, the gist of
factor one – i.e., in the absence of the bar order, there will be a depletion of the assets of the
debtor – was present. The same is true in this case.
                                                14
             Case: 14-11590      Date Filed: 03/12/2015    Page: 15 of 23


understatement.” Doc. 474-1 at 46. It found: “Without [the bar order] it would be

doubtful that the engineers and surveyors would ever be able to perform their

professional work, complete contracts and create receivables necessary for the life

blood of the reorganized debtor.” Id. at 47-48. The court also found that the time

and efforts expended by Vision “would appear disproportionate to the value of

Vision’s equity interest.” Id. at 48. We agree that, without the bar order, the

litigation would likely continue, bleeding Gulf dry and dashing any hope for a

successful reorganization. We conclude that this factor weighs heavily in favor of

inclusion of the non-debtor release.

             d. Factor Four: The impacted class, or classes, has overwhelmingly
             voted to accept the plan.

      The bankruptcy court noted that Vision did reject this plan, as did two of the

bankruptcy trustees (for Mainor and Binkley). However, the bankruptcy court

noted that all other classes of creditors, whether impaired or not, have unanimously

accepted the Reorganization Plan. Significantly, the court found that the equity

holders rejecting the Plan will be paid the full value of their interests under the

Plan. We cannot conclude that this factor favors Vision.

             e. Factor Five: The plan provides a mechanism to pay for all, or
             substantially all, of the class or classes affected by the injunction.

      The bankruptcy court again noted that Vision will be paid in full for its share

of Seaside. This factor weighs heavily in favor of the releases.


                                           15
              Case: 14-11590    Date Filed: 03/12/2015   Page: 16 of 23


              f. Factor Six: The plan provides an opportunity for those claimants
              who choose not to settle to recover in full.

      The bankruptcy court stated that this factor was inapplicable. We cannot

conclude that the bankruptcy court abused its discretion in this regard. Other than

its claims for payment for the full value of its equity interest in the Debtor—which

of course is to be paid in full under the Plan—Vision’s identification of any other

claims is vague. To the extent we can identify such other claims that Vision may

be asserting, we conclude that they were made by Vision in challenging the

Reorganization Plan and were rejected.

              g. Factor Seven: The bankruptcy court made a record of specific
              factual findings that support its conclusions.

      The bankruptcy court made thorough factual findings in reaching its

decision. Its findings are amply supported by the evidence. The bankruptcy

court’s extensive consideration of this case weighs heavily against any abuse of

discretion.

      5. Additional Considerations Pursuant to Munford

      Whether or not the bankruptcy court had specifically in mind the “fair and

equitable” requirement of Munford, 97 F.3d at 455, it went on to further discuss

considerations relevant to such a finding. The bankruptcy court referred to this

case as a “death struggle” and recognized the apparently disproportionate

expenditure of time for what Vision claimed to be a company valued at


                                         16
               Case: 14-11590       Date Filed: 03/12/2015       Page: 17 of 23


$960,000.00. Also very telling of the fairness and equity of the releases is that the

bankruptcy court required the Debtor to voluntarily cease litigation of its claims for

sanctions against Vision. This requirement prevented an asymmetrical benefit for

Seaside from the Reorganization Plan. Finally, the release itself is narrowly

limited in scope to claims arising out of the Chapter 11 case10 and does not include

claims arising out of fraud, gross negligence, or willful misconduct. See Airadigm,

519 F.3d at 657 (the Seventh Circuit viewed a very similar bar order as “narrow: it

applies only to claims ‘arising out of or in connection with’ the reorganization

itself and does not include ‘willful misconduct.’ … This is not ‘blanket

immunity.’”).

       6. Summary

       We conclude that the bankruptcy court did not abuse its discretion in

approving the non-debtor releases. The releases are fair and equitable, and wholly

necessary to ensure that Gulf may continue to operate as an entity. This case has

been a death struggle, and the non-debtor releases are a valid tool to halt the fight.

       C. Bad Faith

       Vision argues that Seaside proposed the Reorganization Plan in bad faith in

10
        Vision argues that an additional provision of the Second Amended Plan serves as a broad
release. “The treatment provided herein is in full satisfaction of all claims and interest such
Holder has against the Debtor, the Reorganized Debtor, the Officers, Directors and Shareholders
of the Debtor and the Members of the Reorganized Debtor.” Seaside concedes that this
provision is to be considered no broader with respect to non-debtors than the Bar Order quoted in
Part II.B above.


                                               17
             Case: 14-11590      Date Filed: 03/12/2015    Page: 18 of 23


contravention of the good faith requirement of 11 U.S.C. § 1129(a)(3). Vision

characterizes the plan as intended “for the sole and exclusive benefit of its

insiders.” In re Davis Heritage GP Holdings, LLC, 443 B.R. 448, 461 (Bankr.

N.D. Fla. 2011).

      The parties dispute the proper standard of review of the bad faith

determination. Vision argues that the bankruptcy court refused to follow the law

and allowed outside factors to influence its decision, so this is an issue of law to be

reviewed de novo, citing In re Fielder, 799 F.2d 656, 657 (11th Cir. 1986). Seaside

argues that this is an attempt to convert the standard of review and that controlling

precedent requires this Court to use the clearly erroneous standard in reviewing the

totality of the circumstances. When read in context, Fielder is clear. “This court

as an appellate court gives deference to all findings of fact by the fact finder if

based upon substantial evidence, but freely examines the applicable principles of

law to see if they were properly applied and freely examines the evidence in

support of any particular finding to see if it meets the test of substantiality.” Id.

      “While the Bankruptcy Code does not define the term, courts have

interpreted ‘good faith’ as requiring that there is a reasonable likelihood that the

plan will achieve a result consistent with the objectives and purposes of the Code.”

In re McCormick, 49 F.3d 1524, 1526 (11th Cir. 1995). Those purposes include

preserving jobs in the community, allowing the business to continue to operate


                                           18
             Case: 14-11590      Date Filed: 03/12/2015    Page: 19 of 23


instead of liquidation, and achieving a consensual resolution between debtors and

creditors. In re United Marine, Inc., 197 B.R. 942, 947 (Bankr. S.D. Fla. 1996).

“Bad faith exists if there is no realistic possibility of reorganization and the debtor

seeks merely to delay or frustrate efforts of secured creditors.” Id. (citing In re

Albany Partners, Ltd., 749 F.2d 670, 674 (11th Cir. 1984)).

      The Reorganization Plan benefits more than just the Seaside insiders.

Seaside’s non-shareholder employees will maintain their jobs; other creditors will

receive compensation over time; and the Corps of Engineers will continue to

receive engineering services. The Plan falls well within the purposes of the

Bankruptcy Code and is therefore proposed in good faith. Simply because one

creditor is dissatisfied is insufficient to show bad faith. Furthermore, with Vision

as a shareholder, Seaside risked losing its small-business status, which would have

eliminated a vital credit line, thus completely dooming the company. This

consideration justifies Seaside’s desire to reorganize Gulf without Vision as a

shareholder. See In re Texaco Inc., 84 B.R. 893, 907 (Bankr. S.D.N.Y. 1988)

(concluding a plan that enables to bring current, and resume future payments on,

obligations signals good faith). The plan to remove Vision from control is not just

some nefarious plot. Moreover, the record indicates that the key employees of the

business would not continue to serve – the very life blood of the business – if

Vision had a substantial role in the reorganized entity.


                                           19
                Case: 14-11590        Date Filed: 03/12/2015        Page: 20 of 23


       D. Fairness, Equity, and Discrimination in the Reorganization Plan

       Relying upon both 11 U.S.C. §1123(a)(4) (“A plan shall – … (4) provide the

same treatment for each claim or interest of a particular class”) and 11 U.S.C.

§1129(b)(1) (a provision commonly known as the “cram down” provision), Vision

argues that the Plan of Reorganization was unfair and inequitable in that it

discriminated against Vision as a stockholder of the Debtor, in comparison to other

stockholders of the Debtor. First, Vision argues that the Plan violated

§1129(b)(2)(C)(i) (providing that each equity interest holder must receive the full

value of its interest). The gist of this argument is that the bankruptcy court

undervalued the equity interests, and therefore Vision did not receive full value for

its stock. This argument merges with Vision’s valuation objection, which we

disposed of earlier in this opinion.

       Vision also argues that the Plan was discriminatory in that other

stockholders of the Debtor received stock in the reorganized entity, while it did

not. The bankruptcy court held that Vision received full value for its stock interest,

and therefore §1129(b)(2)(C)(i) was satisfied, and thus there was no

discrimination.11 Thus, the bankruptcy court concluded that there was no unfair

discrimination. Especially in the unusual circumstances of the instant case, we

11
        The bankruptcy court pointed to the obvious fact that §1129(b)(2)(C) can be satisfied in
either of two alternative ways: pursuant to (i) by paying the holder of the equity interest its full
value, or by satisfaction of (ii) (the absolute priority rule). The bankruptcy court held that,
because §1129(b)(2)(C)(i) was satisfied, it need not address §1129(b)(2)(C)(ii).
                                                 20
             Case: 14-11590     Date Filed: 03/12/2015    Page: 21 of 23


agree. Our research has uncovered no cases in which an objecting holder of an

equity interest – who has been paid in full for the value of his interest – could

prohibit a successful reorganization by insisting on becoming a stockholder in the

reorganized entity. In none of the cases cited by Vision was an objecting equity

holder paid the full value of its equity interest under the provisions of the

Reorganization Plan.

      E. Interest Rate on Promissory Notes Exchanged Pursuant to the Second
      Amended Restructuring Plan

      Vision did not receive an immediate cash payment for its interest in Seaside;

rather, Vision received promissory notes accruing with an interest rate of 4.25%.

Vision argues that this rate does not adequately compensate for the highly

prospective nature of the notes. This Court reviews the adequacy of the interest

rate for clear error. In re Brice Rd. Devs., 392 B.R. 274, 280 (B.A.P. 6th Cir.

2008).

      The Supreme Court adopted the formula approach for determining the

interest rate payable to creditors in bankruptcy proceedings. Till v. SCS Credit

Corp., 541 U.S. 465, 478-79, 124 S. Ct. 1951, 1961 (2004). “Taking its cue from

ordinary lending practices, the approach begins by looking to the national prime

rate . . . . Because bankrupt debtors typically pose a greater risk of nonpayment

than solvent commercial borrowers, the approach then requires a bankruptcy court

to adjust the prime rate accordingly.” Id. Here, the bankruptcy court applied this
                                          21
             Case: 14-11590     Date Filed: 03/12/2015    Page: 22 of 23


formula, adding a 1% adjustment to the prime rate of 3.25%. The 1% adjustment

is within the range suggested by the Supreme Court in Till, 124 S. Ct. at 1962, and

therefore the bankruptcy court committed no clear error.

      F. Exams Pursuant to Bankruptcy Rule 2004

      Vision contends that the bankruptcy court abused its discretion by allowing

Seaside to take Bankruptcy Rule 2004 exams of Vision officers. See In re Piper

Aircraft Corp., 362 F.3d 736, 738 (11th Cir. 2014) (concluding that this Court

reviews any discovery order for abuse of discretion). This argument is wholly

without merit. The bankruptcy court has wide discretion with respect to such

discovery matters. A broad inquiry was necessary here to establish, for example,

that Vision’s policies may result in continued litigation, thus bolstering the case for

the non-debtor releases.

      G. Constitutionality of the Bankruptcy Decision

      Vision’s initial brief has wholly failed to articulate a constitutional claim of

arguable merit. Even if Vision had adequately asserted a takings claim, the

extinguishing of a property interest through bankruptcy proceedings—even if the

creditor receives nothing—does not constitute a taking. In re Morel, 983 F.2d 104,

105 (8th Cir. 1992).

                                III. CONCLUSION

      The bankruptcy court committed no reversible error by approving the


                                          22
            Case: 14-11590     Date Filed: 03/12/2015    Page: 23 of 23


Second Amended Plan.

     AFFIRMED. 12




12
     Seaside’s Motion to Dismiss Appeal as Moot is DENIED.
                                         23
