                                                                NOT PRECEDENTIAL

                      UNITED STATES COURT OF APPEALS
                           FOR THE THIRD CIRCUIT
                              ________________

                                     No. 13-3354
                                  ________________

                In re: COASTAL BROADCASTING SYSTEMS, INC.,
                                                      Debtor

                          Wilbur E. Huf, Jr.; Edwin Rosenfeld,
                                                        Appellant
                                  ________________

                      Appeal from the United States District Court
                              for the District of New Jersey
                        (D.C. Civil Action No. 1-12-cv-05682)
                       District Judge: Honorable Renee M. Bumb
                                   ________________

                                 Argued June 10, 2014

             Before: AMBRO, GREENBERG, and BARRY, Circuit Judges

                             (Opinion filed: June 23, 2014)

Joseph M. Garemore, Esquire (Argued)
Brown & Conner
360 Haddon Avenue
P.O. Box 539
Westmont, NJ 08108

      Counsel for Appellants

Andrea Dobin, Esquire (Argued)
Trenk, DiPasquale, Della Fera & Sodono
427 Riverview Plaza
Trenton, NJ 08611

Ira R. Deiches, Esquire
Deiches & Ferschmann
25 Wilkins Avenue
Haddonfield, NJ 08033

       Counsel for Appellee
                                     ________________

                                         OPINION
                                     ________________

AMBRO, Circuit Judge

       This is an appeal from a decision of the District Court affirming confirmation of a

plan of reorganization under Chapter 11 of the Bankruptcy Code. For the reasons that

follow, we affirm in all respects.

                                            I.

       A. Prior to December 2008 the debtor, Coastal Broadcasting Systems, Inc.

(“Coastal”), was owned and operated by seven shareholders though chiefly by appellants

Edwin Rosenfeld and Wilbur E. Huf, Jr.1 In December 2008, as part of a reorganization

of the company, Coastal redeemed the shares held by six of the seven shareholders.

Rosenfeld and Huf’s shares were redeemed in exchange for promissory notes totaling

approximately $1.7 million. The restructuring also included a refinancing component

with Coastal’s secured creditor, Sturdy Savings Bank (“Sturdy”), wherein Sturdy

provided loans to Coastal.

       As part of the reorganization, Coastal, Huf, Rosenfeld, Sturdy, and others signed a

Subordination and Intercreditor Agreement (the “Agreement”). Pursuant to the

undisputed terms of the Agreement, Huf and Rosenfeld’s promissory notes were

1
 Messrs. Rosenfeld and Huf collectively are referred to below by their individual names
or simply as the “Objectors.”
                                            2
subordinated to Sturdy’s “Senior Debt.”2 The Agreement further provides that, although

Huf and Rosenfeld held “Subordinated Debt,” they would continue to receive payments

from Coastal and could file suit and accelerate the Subordinated Debt if Coastal fell

behind in payments.3

        There are provisions of the Agreement that deal with Coastal’s reorganization and

are the central focus of this appeal. These provisions purportedly assign Huf and

Rosenfeld’s rights to repayment and voting rights to Sturdy. They provide in relevant

part:

        [Section 3.1] [U]pon or in connection with any . . . reorganization of
        [Coastal], . . . any payment, dividend or distribution of any kind . . . which
        would otherwise be payable or deliverable with respect to the Subordinated
        Debt, shall be paid or delivered directly to [Sturdy] for application [to] . . .
        the Senior Debt . . . .

        [Section 3.2] If any proceeding described in Section 3.1 is commenced,
        [Sturdy] is irrevocably authorized (in its own name or in the names of
        [Rosenfeld and Huf] or otherwise), . . . to demand, sue for, collect and
        receive all such payments, dividends and distributions referred to in
        Section 3.1, . . . file claims, proofs of claim and take such other actions
        (including, without limitation, voting the Subordinated Debt) as it may
        deem necessary or advisable. [Sturdy] is granted power of attorney by

2
  Section 2.1 provides in relevant part: “[Rosenfeld and Huf] subordinate[] all
Subordinated Debt and all claims and demands arising therefrom to all the Senior
Debt. . . . Except as otherwise provided in Section 2.2 below, until all of the Senior Debt
is paid[,] . . . [Coastal] will not make, and [Rosenfeld and Huf] will [not] demand or
accept, . . . payment of any kind . . . of all or any part of the Subordinated Debt without
the prior written consent of Bank.” App. at 49.
3
 Section 2.2 states in relevant part: “[S]cheduled payments of principal and/or interest
pursuant to the terms and conditions of the Subordinated Notes may be made by [Coastal]
and accepted by [Rosenfeld and Huf,] . . . and [Coastal’s] failure to so pay upon
[Rosenfeld and Huf’s] demand shall entitle [them] to demand and accelerate the
Subordinated Debt, [and] institute any court proceedings against [Coastal,] . . . to collect
any Subordinated Debt . . . .” Id. at 50.
                                               3
       [Rosenfeld and Huf] with full power of substitution to execute and file such
       documentation and take any other action [Sturdy] may deem advisable to
       accomplish the foregoing, and to protect [Sturdy’s] interest in the
       Subordinated Debt and its right of enforcement thereof. Such power . . . is
       irrevocable.

App. at 51-52.

       After the 2008 reorganization, Coastal struggled to meet its liabilities, including

the substantial payments to Rosenfeld, Huf, and the other former shareholders. Coastal

sought relief from Huf and Rosenfeld in the rescheduling of the cash drain of the

payments. They refused to bargain and instead filed an action in the Superior Court of

New Jersey seeking recovery of over $1.6 million. Uncertainty over this litigation, along

with moderate revenues, led Coastal in January 2011 to seek financial reorganization

under Chapter 11.

       B. Coastal’s plan of reorganization included five different classes of claims.

Sturdy was classified alone in Class I as a secured creditor owed over $1.2 million. The

Objectors and the other former shareholders were placed in Class IV. All other general

unsecured creditors were placed in Class III. The disclosure statement provided that

Class III would share pro rata in a distribution of $100,000 but that Class IV would

receive nothing per the Agreement. The plan also noted that, because all of Coastal’s

assets were worth less than the over $1.2 million owed to Sturdy, all unsecured claims

would receive nothing in the event of a liquidation.

       The Objectors made several objections to confirmation of the plan, including that:

their claims were impaired (thus entitling them to vote); they were improperly classified



                                             4
in a separate class from other unsecured creditors; and the plan was not feasible under 11

U.S.C. § 1129(a)(11). The objections did not discuss the implications of the Agreement.

         In March 2012 Coastal filed a certification of balloting indicating that Class III,

the only class Coastal considered impaired, had voted in favor of the plan. The

Bankruptcy Court held a confirmation hearing on the plan, during which time the Court

questioned (1) whether, in the event the Bankruptcy Court found the Objectors’ claims

were impaired, Sturdy was entitled to vote their claims under § 3.2 of the Agreement, and

(2) if so, whether Sturdy actually would vote in favor of the plan. Sturdy stated that it

would.

         Following the hearing, the Bankruptcy Court asked the parties to address whether

Sturdy was entitled to vote on behalf of the Objectors under § 3.2 of the Agreement. In

response, Rosenfeld and Huf made only one argument: under the plain language of the

Agreement the voting rights were not assigned to Sturdy because that provision only

applied in instances of liquidation, not reorganization.

         In July 2012 the Bankruptcy Court issued its opinion. The Court concluded that,

while the Objectors’ claims were properly classified in their own class, Coastal’s plan

improperly designated the claims as unimpaired. Though the claims were impaired, the

Court determined that the plan could still be confirmed under § 1129(a). It reasoned that

§ 3.2 unambiguously entitled Sturdy to vote the Objectors’ debt, and, because Sturdy had

represented that it would vote the Objectors’ claims in favor of the plan, Sturdy could be

deemed to have voted for confirmation of the plan. The Court then confirmed the plan

under § 1129(a).

                                                5
       Rosenfeld and Huf appealed to the District Court and renewed their arguments

about feasibility, classification, and the plain language of the Agreement.4 In addition,

they presented two arguments that were not before the Bankruptcy Court: (1) even if the

Agreement entitled Sturdy to vote their claims, the Agreement violated the Bankruptcy

Code; and (2) Sturdy could not be deemed to have voted for the plan under § 1126(g).5

The District Court affirmed the decision of the Bankruptcy Court on the three grounds

raised previously. The Court also held that the new arguments about the Agreement and

§ 1126(g) were waived and without merit.

       Rosenfeld and Huf have appealed the District Court’s decision. That Court had

jurisdiction pursuant to 28 U.S.C. § 158(a)(1). We have jurisdiction pursuant to 28

U.S.C. §§ 158(d)(1) and 1291.

                                             II.

       A. “Because the District Court in this case sat as an appellate court reviewing a

final order of the Bankruptcy Court, our review of its determination is plenary.” In re

O’Brien Envtl. Energy, Inc., 188 F.3d 116, 122 (3d Cir. 1999) (citing In re Trans World

Airlines, Inc., 145 F.3d 124, 130 (3d Cir. 1998)). “In reviewing the decision of the

4
 Rosenfeld and Huf obtained new counsel for their appeals to the District Court and to
our Court. Appellate counsel appears not to have been involved in the proceedings
before the Bankruptcy Court.
5
  Section 1126(g) provides that “a class is deemed not to have accepted a plan if such
plan provides that the claims or interests of such class do not entitle the holders of such
claims or interests to receive or retain any property under the plan on account of such
claims or interests.” 11 U.S.C. § 1126(g). Rosenfeld and Huf argued that because their
class received nothing under the plan, they were “deemed” to have rejected the plan
under § 1126(g) and Sturdy could not override that provision by voting in favor of the
plan.
                                              6
Bankruptcy Court, we exercise the same standard of review as the District Court, that is,

we review the Bankruptcy Court’s legal determinations de novo, its factual findings for

clear error, and its exercise of discretion for abuse thereof.” Id.

       B. The Objectors raise the same arguments on appeal that were rejected by the

Bankruptcy Court and the District Court: (1) the Agreement does not assign their voting

rights to Sturdy; (2) the plan classification scheme was improper; and (3) the plan was

not feasible. To the extent the Objectors raise other arguments not raised before the

Bankruptcy Court, they are waived. See In re Kaiser Grp. Int’l Inc., 399 F.3d 558, 565

(3d Cir. 2005). The Objectors attempt to circumvent the waiver by claiming that they

had no opportunity to raise these arguments because the Bankruptcy Court only first

raised the Agreement at the close of the confirmation hearing. However, that Court

provided the parties the opportunity to brief whether the Agreement authorized Sturdy to

vote the Objectors’ shares. The Objectors filed a letter in which their sole argument was

that the plain language of the Agreement applied only to a liquidation, not a

reorganization.

          1. The Bankruptcy Court and the District Court held that the Agreement

plainly allowed Sturdy to vote the Objectors’ claims. The enforceability of the voting

assignment in the Subordination Agreement is a question of law subject to de novo

review. In re Handel, 570 F.3d 140, 141 (3d Cir. 2009). The Objectors renew their

argument that § 3.2 is limited to liquidation, not reorganization.6 Coastal contends that


6
 The Objectors also argue (1) that because there has been no event of default of Coastal’s
obligations to Sturdy, they are still entitled to payments; and (2) that the Agreement was
                                              7
the Agreement provides that Sturdy has the right to vote their debt in this Chapter 11

reorganization.

       The Agreement must be construed under New Jersey law, see Transportes Ferreos

de Venezuela II CA v. NKK Corp., 239 F.3d 555, 560 (3d Cir. 2001), under which

contracts are interpreted according to their plain language, see Travelers Indemnity Co. v.

Dammann & Co., 594 F.3d 238, 255 (3d Cir. 2010). Here the Agreement plainly allows

Sturdy to vote the Objectors’ debt where there is a reorganization. Section 3.2 provides

that “[i]f any proceeding described in Section 3.1 is commenced, [Sturdy] is irrevocably

authorized (in its own name or in the names of [Rosenfeld and Huf] or otherwise), . . . to

. . . take such other actions (including, without limitation, voting the Subordinated Debt)

as it may deem necessary or advisable.” App. at 52 (emphasis added). Section 3.1

specifically lists “reorganization” as a triggering event. Here, Coastal has petitioned for

reorganization under Chapter 11—the very title of that Chapter. To argue otherwise is a

word warp of clear contract language.

           2. The Objectors also argue that the Bankruptcy Court improperly allowed

them to be put into a class separate from the other unsecured creditors. The plan created

five classes. Class III was composed of general unsecured creditors whereas Class IV

was composed only of the Objectors and other former shareholders. The Bankruptcy

executed under questionable circumstances. These issues were never raised before the
Bankruptcy Court and also are waived. See In re Kaiser Grp. Int’l Inc., 399 F.3d at 565.
Moreover, both arguments are unpersuasive. As to the former, § 3.1 of the Agreement
clearly provides that in the event of a “reorganization . . . any payment. . . which would
otherwise be payable or deliverable with respect to the Subordinated Debt[] shall be paid
or delivered directly to [Sturdy] for application [to] . . . the Senior Debt . . . .” As to the
latter, there is nothing in the record supporting a claim of questionable circumstances.
                                               8
Court held that, because the Objectors were subject to the Agreement, separate

classification was proper. We agree.7

       Section 1122(a) provides that “a plan may place a claim or an interest in a

particular class only if such claim or interest is substantially similar to the other claims or

interests of such class.” 11 U.S.C. § 1122(a). Although not explicit in § 1122, a

corollary to that rule is that the “grouping of similar claims in different classes” is

permitted so long as the classification is “reasonable.” In re Jersey City Med. Ctr., 817

F.2d 1055, 1061 (3d Cir. 1987).

       As the District Court explained, there is nothing unreasonable about placing the

Objectors in a separate class from the other unsecured creditors because their claims,

unlike the other unsecured claims, were uniquely subject to the Agreement. Moreover, as

that Court noted, because Sturdy was allowed to vote the Objectors’ debt, any error in the

classification scheme was harmless: Sturdy would have voted to approve the Objectors’

claims regardless of the classification and would have agreed to less favorable treatment

than the other claims in the class had the claims been in Class III.




7
  The Objectors argue for a mixed standard of review, whereby facts are reviewed for
clear error and legal issues de novo. See In re Greystone III Joint Venture, 995 F.2d
1275, 1281 n.7 (5th Cir. 1992). Coastal argues that we should apply the abuse-of-
discretion standard. See In re W.R. Grace & Co., 729 F.3d 311, 326 (3d Cir. 2013) (“The
Bankruptcy Court has ‘broad discretion’ to decide if a plan satisfies [§ 1122(a)], and we
will uphold a plan’s classification scheme so long as it is ‘reasonable’ and does not
‘arbitrarily designate classes.’”) (quoting In re Jersey City Med. Ctr., 817 F.2d 1055,
1061 (3d Cir. 1987)). We would affirm the classification scheme under either standard of
review.

                                               9
          3. The District Court affirmed the Bankruptcy Court’s determination that the

plan was feasible. The latter’s determination that a plan is feasible is reviewed for clear

error, In re DBSD N. Am. Inc., 634 F.3d 79, 106 (2d Cir. 2011), and should not be

overturned unless the factual findings are “completely devoid of a credible evidentiary

basis or bear[] no rational relationship to the supporting data,” Shire U.S., Inc. v. Barr

Labs, Inc., 329 F.3d 348, 352 (3d Cir. 2003) (internal quotation marks and citation

omitted). The Objectors argue that those Courts were wrong and that the plan was not

feasible. This argument also fails.

       Section 1129(a)(11) codifies the feasibility requirement and requires a

demonstration by the plan proponent that “[c]onfirmation of the plan is not likely to be

followed by the liquidation, or the need for further financial reorganization, of the debtor

or any successor to the debtor under the plan, unless such liquidation or reorganization is

proposed in the plan.” 11 U.S.C. § 1129(a)(11). The Objectors’ sole argument is that,

because Coastal had a low monthly profit margin, the plan was not feasible. However,

the Bankruptcy Court determined that the income was sufficient, and Coastal provides no

compelling reason to believe that determination was clearly erroneous.

                                      *   *   *    *   *

       We thus affirm in all respects.




                                              10
