SUBCHAPTER V OF CHAPTER 11 | NONCONSENSUAL § 1191(B) CONFIRMATION | 2021–2022
Reperesented a restaurant operating business in a Subchapter V Chapter 11 case filed August 31, 2021 in the U.S. Bankruptcy Court for the Northern District of California. Oakland Division.. The filing reorganized the debtor’s pre-petition liabilities — over $365,456.29 in scheduled general unsecured debt, including a Private Attorneys General Act (“PAGA”) claim filed by former restaurant employees. PAGA claims are representative actions under California Labor Code § 2698 et seq. that allow aggrieved employees to recover civil penalties on behalf of the State, and they carry notoriously difficult exposure for small restaurant operators because penalties scale with pay-period violations and the State is the real party in interest for most of the recovery.
The firm obtained confirmation of a Chapter 11 plan on May 24, 2022. Unlike a consensual § 1191(a) confirmation, this plan was confirmed nonconsensually over creditor opposition under 11 U.S.C. § 1191(b) — the Subchapter V cramdown provision, which permits confirmation without a consenting impaired class so long as the plan satisfies the “fair and equitable” standard and commits the debtor’s projected disposable income to plan payments. The confirmed plan provided a 30% dividend to general unsecured claims.
Result: Nonconsensual Sub V plan confirmed under § 1191(b) (May 24, 2022); 30% dividend to general unsecured claims; PAGA and other pre-petition liabilities restructured
U.S. Bankruptcy Court, Northern District of California
