On July 6, 2012, the US Bankruptcy Appellate Panel of the Ninth Circuit Court of Appeals (BAP) in In re Windmill Durango Office, LLC affirmed the decision of the US Bankruptcy Court for the District of Nevada to:

The debtor, Windmill Durango Office, LLC, owned real property which it purchased with the proceeds of a $16.5 million secured loan from lenders that were ultimately closed by the FDIC. The FDIC sold the loan to Beal Bank.

The debtor filed a Chapter 11 bankruptcy petition on August 17, 2010 in which Beal Bank was the only secured creditor. The debtor proposed and the bankruptcy court approved an amended disclosure statement and plan of reorganization. Beal Bank voted to reject the plan while the two unsecured creditors voted to accept the plan. Seeking to prevent confirmation of the proposed plan, Beal Bank bought the claim of one of the unsecured creditors. It also sought permission to withdraw the unsecured creditor's vote accepting the plan and submitted a substitute ballot rejecting the plan under Federal Rule of Bankruptcy Procedure 3018(a) (Rule 3018(a)). Beal Bank admitted that it purchased the claim to block plan confirmation because the debtor was seeking a cramdown of Beal Bank's secured claim under section 1129(b)(2)(B) of the Bankruptcy Code and needed at least one impaired accepting class to confirm its plan.

The debtor opposed the ballot motion, arguing that Beal Bank failed to satisfy the Rule 3018(a) requirement that a creditor show "cause" to change or withdraw an acceptance or rejection of the plan. The bankruptcy court concurred.

Rule 3018(a) allows a creditor to change or withdraw an acceptance or rejection of a plan only on a showing of "cause," but does not provide guidance on what constitutes cause. The bankruptcy court found that the withdrawal of a vote for the purposes of blocking a plan confirmation did not satisfy the cause requirement. The bankruptcy court also stated that allowing the creditor to change a vote to block confirmation of a proposed plan was improperly motivated and "did the process violence" because it is not appropriate for creditors to wait until plans are balloted and then decide what claims they are going to buy.

At issue before the BAP was whether the bankruptcy court abused its discretion in denying Beal Bank's motion to change the vote cast on account of its purchased unsecured claim.

On appeal, the BAP admitted that it was a close question, but ultimately affirmed the bankruptcy court's decision to deny the change of vote and confirm the cramdown plan, stating that "cause" under Rule 3018(a) requires "something more than a mere change of heart."

This decision does not resolve the question of what constitutes "cause" under Bankruptcy Rule 3018(a). It leaves open the possibility that another court may conceivably reach the opposite conclusion when presented with the same issue. Given this uncertainty, a creditor who wants to control the outcome of a plan confirmation should acquire a controlling position in the case before voting begins. If it waits until after voting, it may be difficult for the creditor to meet the cause requirement and change any vote that was already cast on account of its acquired claims.