## Facts

- Figter Ltd. filed for Chapter 11 and owned Skyline Terrace, a 198-unit apartment complex in Los Angeles.
- Teachers Insurance and Annuity Association of America held a $15.6 million note secured by a first deed of trust on the property and $1.4 million in cash collateral.
- Figter proposed a plan paying Teachers’ secured claim in full at a disputed interest rate and paying general unsecured creditors (Class 3) 80% of their claims.
- Teachers opposed Figter’s plan and initially proposed its own plan offering Class 3 creditors 90% and transferring the property and cash collateral to Teachers, premised on its claim being partly unsecured.
- The bankruptcy court later valued the property at $19.3 million and found Teachers’ total claim (about $17.96 million) fully secured; Teachers did not pursue its plan after that valuation.
- Teachers then purchased 21 of 34 Class 3 unsecured claims at 100 cents on the dollar, offering the same purchase terms to all Class 3 creditors (not all accepted).
- Figter objected and sought designation of Teachers’ votes, asserting Teachers bought the claims in bad faith to defeat confirmation.
- The bankruptcy court found Teachers bought the claims in good faith and could vote each acquired claim; the district court affirmed.

## Issues

1. Whether Teachers’ purchase and voting of unsecured claims to oppose Figter’s plan lacked “good faith” under 11 U.S.C. § 1126(e), requiring designation of its votes.
2. Whether Teachers could vote each purchased unsecured claim separately within the unsecured creditor class.

## Decision

- The Ninth Circuit affirmed.
- The court held the bankruptcy court did not clearly err in finding Teachers acted in good faith under § 1126(e).
- The court held Teachers could vote each acquired unsecured claim separately in the class.

## Legal Principles

- Under 11 U.S.C. § 1126(e), a court may designate a creditor’s plan vote only if the acceptance or rejection was not in good faith.
- “Good faith” in this context is narrow; creditors may vote in their economic self-interest and may buy claims to influence confirmation, including to block a plan.
- Bad faith generally requires an ulterior motive unrelated to the creditor’s role as a creditor (e.g., malice, harassment, or pursuit of a non-creditor advantage).
- A good-faith determination under § 1126(e) is a factual question reviewed for clear error.
- Absent designation for bad faith, a transferee holding multiple allowed claims in a class may vote each claim separately, consistent with claim-transfer procedures.

## Conclusion

The Ninth Circuit upheld the refusal to designate Teachers’ votes, ruling that purchasing unsecured claims at full value to obtain voting strength and oppose a plan was permissible creditor self-interest without proof of an improper motive, and that the creditor could cast separate votes for each acquired claim.


In re Figter Ltd., 118 F.3d 635 (9th Cir. 1997)