## Facts

- Indianapolis Downs, LLC and Indiana Capital Corp. operated a combined horse racing track and casino in Indiana and filed Chapter 11 in the District of Delaware.
- The debtors negotiated a postpetition restructuring support agreement (RSA) with certain creditors and stakeholders who also provided financing and plan support.
- The debtors proposed a modified second amended joint plan of reorganization supported by the RSA.
- A group of insiders and equity/debt holders objected and moved to designate and disregard votes of RSA signatories under 11 U.S.C. § 1126(e), alleging improper solicitation before approval of a disclosure statement.
- Objectors also challenged confirmation, including equal treatment within a class due to payment of certain professional fees to RSA parties, feasibility tied to a transaction requiring regulatory approvals, administrative-claim “cap” language, corporate authority to propose the plan, and the scope of third-party releases.
- The U.S. Trustee and some supporting parties also objected to aspects of the release and compensation provisions.

## Issues

1. Whether execution of a postpetition, pre-disclosure statement RSA constituted impermissible “solicitation” under § 1125 warranting vote designation under § 1126(e).
2. Whether plan provisions reimbursing professional fees of certain plan-supporting creditors violated § 1123(a)(4)’s equal-treatment requirement.
3. Whether the plan satisfied confirmation requirements under § 1129, including feasibility under § 1129(a)(11).
4. Whether provisions described as administrative or professional “caps” improperly limited allowance or payment of administrative expenses.
5. Whether the plan’s third-party releases and exculpation provisions were permissible in scope and supported by consideration.

## Decision

- The court denied the motion to designate votes under § 1126(e).
- The court held the RSA and related negotiations did not amount to improper solicitation under § 1125 and did not show bad faith.
- The court overruled confirmation objections and confirmed the modified plan.
- The court found the plan provided equal treatment within classes because claim recoveries were uniform and fee reimbursements reflected separate compensatory/administrative payments, not enhanced claim treatment.
- The court found the plan feasible based on evidence supporting the likelihood of consummating the underlying transaction and obtaining required approvals.
- The court construed disputed “cap” language as budgeting/payment limitations within particular arrangements, not limits on the court’s authority to allow administrative claims.
- The court approved releases and exculpation provisions as sufficiently tailored and supported by the record.

## Legal Principles

- In the Third Circuit, “solicitation” under § 1125 is construed narrowly; negotiations and support agreements are generally permissible so long as parties are not improperly asked to cast plan votes without a court-approved disclosure statement.
- Vote designation under § 1126(e) requires a showing of bad faith or conduct inconsistent with the Code’s disclosure and voting protections.
- Section 1123(a)(4) requires equal treatment of claims within a class as to distributions on account of the claims; separate payments reimbursing professional fees or expenses may be permissible when grounded in administrative-expense concepts (including substantial contribution) and not structured as differential claim recoveries.
- Feasibility under § 1129(a)(11) is satisfied by evidence showing a reasonable assurance the plan will succeed without likely liquidation or further reorganization.
- Plan language affecting administrative expenses may be upheld when interpreted as payment or budgeting terms rather than an impermissible restriction on allowance of administrative claims.
- Non-debtor releases and exculpation provisions may be approved when appropriately limited, supported by consideration, and justified by the record as tied to plan implementation.

## Conclusion

The bankruptcy court declined to designate votes of RSA signatories, holding the RSA was not improper solicitation under the Third Circuit’s narrow § 1125 standard, and confirmed the reorganization plan after finding equal treatment, feasibility, and the challenged administrative-expense and release provisions satisfied the Bankruptcy Code’s confirmation requirements.


In re Indianapolis Downs, LLC, 486 B.R. 286 (Bankr. D. Del. 2013)