659 B.R. 641
Bankr. S.D.N.Y.2024Background
- GOL Linhas Aéreas Inteligentes S.A. and related debtors filed Chapter 11 petitions in SDNY in January 2024 and continued operating as debtors-in-possession.
- As part of their restructuring, the Debtors sought approval of settlements (Stipulations) with aircraft lessors, resolving disputes related to leases and payments.
- Each Stipulation included a "Lockup Provision" binding lessors to support any future Chapter 11 plan embodying the Stipulation terms, even though no disclosure statement or plan had yet been filed.
- The Official Committee of Unsecured Creditors and the U.S. Trustee objected, arguing this lockup was an impermissible pre-disclosure statement solicitation.
- The bankruptcy court approved the economic terms of each Stipulation but struck the Lockup Provision, finding it violated Bankruptcy Code §1125(b).
Issues
| Issue | Plaintiff's Argument (Committee/UST) | Defendant's Argument (Debtors) | Held |
|---|---|---|---|
| Lockup = Impermissible Solicitation | Lockup binds votes before disclosure; violates §1125(b) | Lockup is conditioned on disclosure, routine in district | Lockup is impermissible solicitation |
| Adequacy of Plan Information | No plan or disclosure statement exists; insufficient info | Lessors are sophisticated and know settlement terms | Lack of info makes lockup unenforceable |
| Availability of "Outs" or Decision Freedom | No meaningful "outs" to withdraw if plan differs | Conditions suffice (disclosure approval, ratios) | Outs are illusory; counterparty trapped |
| Standard of Review | Should not defer to business judgment for plan voting right | Business judgment and settlements are entitled to deference | Code rights cannot be overridden for certainty |
Key Cases Cited
- Protective Comm. for Indep. S’holders of TMT Trailer Ferry, Inc. v. Anderson, 390 U.S. 414 (bankruptcy court must find settlements fair and equitable)
- Motorola v. Off. Comm. of Unsecured Creditors (In re Iridium Operating LLC), 478 F.3d 452 (outlines seven factors for approving bankruptcy settlements)
- Myers v. Martin (In re Martin), 91 F.3d 389 (settlements are favored in bankruptcy)
- Century Glove, Inc. v. First Am. Bank of New York, 860 F.2d 94 (solicitation should be narrowly read to not discourage negotiations)
- JPMorgan Chase Bank, N.A. v. Charter Communs. Operating, LLC (In re Charter Communs.), 419 B.R. 221 (business judgment is entitled to deference, but rights under the Code are protected)