## Facts

- On January 31, 2008, Harmony Holdings, LLC (Harmony) filed a voluntary Chapter 11 petition.
- Harmony’s bankruptcy schedules listed the claims of Barney Ng and R.E. Loans, LLC (the creditors) as disputed.
- On June 13, 2008, Harmony filed suit against Ng and R.E. Loans concerning the claims, placing the validity and amount of the creditors’ asserted rights at issue in adversary proceedings.
- The adversary proceedings were expected to be complicated and protracted and unlikely to be resolved before a vote on any reorganization plan.
- On July 23, 2008, Harmony filed a Chapter 11 plan.
- On August 27, 2008, Ng and R.E. Loans moved for temporary allowance of their claims for the limited purpose of voting on the plan, and Harmony objected.
- The court held a motions hearing on September 18, 2008, at which Ng testified about the basis and full value of the creditors’ claims.
- The parties and the court recognized that, without a temporary voting allowance, plan solicitation and confirmation could be delayed while the claim litigation proceeded.

## Issues

1. Whether, under Federal Rule of Bankruptcy Procedure 3018(a), the bankruptcy court should temporarily allow Ng’s and R.E. Loans’ disputed claims for the limited purpose of voting on Harmony’s Chapter 11 plan.
2. Whether temporary allowance at the filed amounts was an appropriate case-management measure where waiting for the adversary proceedings to conclude would likely delay administration of the Chapter 11 case.

## Decision

- The court granted the creditors’ motion to temporarily allow the disputed claims for voting purposes.
- The court temporarily allowed Ng’s and R.E. Loans’ claims in the filed amounts, solely to permit voting on the Chapter 11 plan.
- The court made clear that the temporary allowance was limited to plan voting and did not finally determine the validity, priority, or amount of the claims for distribution purposes.

## Legal Principles

- When a claim is objected to, the court may temporarily allow the claim in an amount it deems proper for the purpose of accepting or rejecting a plan. Fed. R. Bankr. P. 3018(a).
- Temporary allowance for voting is a procedural tool designed to keep plan solicitation and confirmation from being stalled by unresolved claim disputes; it does not resolve the underlying objection or related adversary litigation.
- The court has discretion to set a voting amount based on the record presented at the temporary-allowance hearing, without conducting a full merits trial on claim allowance.
- Estimation concepts reflected in 11 U.S.C. § 502(c) support using approximate, time-sensitive valuation methods where full liquidation of a disputed claim would likely cause delay in case administration.
- A temporary voting allowance does not bind later adjudication of the claim’s allowance, amount, or enforceability; the claim may later be allowed, reduced, subordinated, or disallowed after full litigation.

## Conclusion

The court temporarily allowed Ng’s and R.E. Loans’ disputed claims at their filed amounts for the limited purpose of voting on Harmony’s Chapter 11 plan, reasoning that the related adversary proceedings were unlikely to conclude before plan voting and that a provisional voting allowance would prevent delay without deciding the ultimate merits of the claims.


In Re Harmony Holdings, LLC, 395 B.R. 350 (2008)