Huntington Banks v. Felcor/Lax Holdings L P

MEMORANDUM **

The materiality of alleged omissions and misrepresentations in a Disclosure Statement are “measured by an objective standard drawn from the definition of ‘adequate information’ at § 1125(a) that asks what the ‘hypothetical reasonable investor typical of holders of claims or interests of the relevant class’ would want to know in order to make an informed judgment about the plan.” Official Comm. of Unsecured Creditors v. Michelson (In re Michelson), 141 B.R. 715, 725 (Bankr. E.D.Cal.1992) (quoting 11 U.S.C. § 1125 (a)). Under this standard, Appellants are correct that knowledge of the founder and general partner’s intent to cash out immediately following confirmation of the Plan might reasonably have influenced their decision whether to approve the Plan. The possibility that the general partner might assign its interests at some point in the indeterminate future is distinctly different from the certainty that such a transfer is about to occur.

The capital call presents a closer question. Appellants were undoubtedly on notice that a capital call could — and very likely would — be expected of them. Because a court might well have determined that the anticipated…