Fifth Circuit Rules "Till" Not Mandatory, Reviews for Clear Error

On behalf of Macdonald Fernandez LLP on Thursday, June 27, 2013.

In Wells Fargo Bank, N.A. v. Texas Grand Prairie Hotel Realty, LLC, No. 11-11109 (5th Cir. Mar. 1, 2013), the United States Court of Appeals for the Fifth Circuit reviewed a bankruptcy court's determination of the "cram down" rate, which is the rate of interest paid after confirmation of a chapter 11 plan on account of a non-consenting secured claim, for clear error. Wells Fargo Bank had argued that the appellate panel should conduct de novo review. Although the parties agreed that the "prime-plus" formula established for all chapter 13 cases in Till v. SCS Credit Corp., 541 U.S. 465 (2004) should apply (in which the court starts with the prime rate and adjusts for risk factors), the Fifth Circuit declined to adopt a uniform standard for chapter 11 cases. The Ninth Circuit has not ruled on the appropriate standard and whether it should be applied uniformly.