However, bankruptcy courts in the Circuit are already interpreting the opinion as a license to apply Till in chapter 11 cramdowns over the objection of the secured creditor. See, e.g., the May 24, 2013 decision of the bankruptcy court in Austin, In re LMR, LLC, reproduced on Weil's website). (Although LMR is another hotel owner in Texas, nothing about the reasoning of either Grand Prairie or LMR supplies any basis to think the approach is limited to that kind of debtor. But the coincidence is remarkable that the other modern Fifth Circuit case on chapter 11 plan interest rates, In Re T-H Limited Partnership, is also a case involving an owner of multiple hotels.). I write this post frankly to argue against that trend. I don't think the Till approach is correct at all, but setting that aside, a deep dive into the record and briefs in Texas Grand Prairie has unearthed some facts about Texas Grand Prairie that did not make it into the Fifth Circuit opinion that I think make it a particularly bad vehicle to reach any grand conclusions about cramdown interest rates.
In particular, from the briefs and record, I learned that the 5% interest rate crammed down on the lender compared to a 1.9% rate that would have resulted had the contract rate been reinstated (although the contract rate was a floating rate and the 5% was fixed). Since the dissent in Till advocated a presumption in favor of the contract rate, which would then be adjusted up or down based on a variety of factors, one can see that the plurality approach probably resulted in the Texas Grand Prairie getting a higher (albeit fixed) rate than under the Till dissent's approach.
Secondly, the lender's expert had conceded the plan was feasible, if barely so (I am puzzled as to why the objector's expert gave such an opinion; there is no requirement to have an opinion on more than one issue and, although experts cannot be controlled at the end of the day, trial counsel normally manage to keep their side's experts from volunteering opinions that are not helpful to their client's case). That seems to me to have harmed the lender's case, because it undercut its claims about the level of risk in the plan. Even the plurality in Till says in a couple of places that plans with high risks of default ought not be confirmed and on appeal you would like to be able to argue as forcefully as possible that the plan you're challenging was one such plan.
Last, the appellant framed its challenge, not as an issue of law related to the interest rate methodology, which would be reviewed de novo, but as a challenge to the admissibility and weight to be given the debtor's expert's testimony, which of course is reviewed for abuse of discretion (it attempted to repair that mistake in its reply brief but, as one of my professional friends who later became a federal circuit judge once told me, "we don't have time to read reply briefs"). Challenging the expert's methodology is not the same as challenging the Till plurality's methodology. I would hope that future courts considering Texas Grand Prairie as a precedent would recognize this and accordingly recognize that it did not really involve a properly framed challenge to the Till plurality's methodology and not misconstrue it as an endorsement of Till.
At the same time, there are some aspects of the case that might have been litigated differently to produce a different result. As alluded to above, the Fifth Circuit opinion says that "Both parties stipulated that the applicable rate should be determined by applying the “prime-plus” formula endorsed by a plurality of the Supreme Court in Till...." But the odd thing is that I don't see any reference in any of the briefs to such a stipulation. What I do see is a very strained interpretation of Till by the creditor-appellant that may have confused the panel and contributed to the decision in the debtor's favor.
The appellant's brief makes a chest-thumping proclamation that Till requires "objective analysis" of "market evidence" and "ordinary lending practices" in formulating an interest rate. So, in that sense, the creditor-appellant is definitely saying that Till governs and maybe that is what the opinion means by a stipulation. But the appellant has Till all wrong. Its brief makes virtually no mention of the "prime plus" formula. While I wish Till had said what the appellant claimed it said, because that is what the law should be, Till's plurality opinion explicitly rejects incorporating market evidence, stating in the first paragraph of Section III of that opinion:
"For example, the coerced loan approach requires bankruptcy courts to consider