Sunrise Village, an idyllic shopping center in Puyallup, Wash., was financed with an unremarkable $75 million commercial loan. But the retail outlet might end up being the epicenter of another pitched battle for distressed debt holders trying to uphold traditional creditor rights in Chapter 11 bankruptcies.

A federal district court in Washington recently upheld a bankruptcy court ruling disallowing three hedge funds controlling portions of the shopping center's defaulted loan from voting on a reorganization plan that the owners — known as Meridian Sunrise Village — sought to pursue.

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