In Re Bigler LP
442 B.R. 537
Bankr. S.D. Tex.2010Background
- Debtors filed Third Amended Chapter 11 Plan Oct 1, 2010 containing injunctions and exculpations for non-debtors.
- Ashley Elizabeth Scianna Arora Investment Trust and Stephanie Elizabeth Scianna Investment Trust objected Oct 27, 2010, challenging Articles 12.1, 12.2, 12.4 as violations of the Code.
- Debtors replied Nov 1, 2010 arguing releases can be valid under §1123(b)(3)(A) and citing Pacific Lumber and related cases.
- A hearing was held Nov 3, 2010; Court declined to confirm the Plan due to offending provisions.
- Court issued an order Nov 9, 2010 giving Debtors a deadline to file a fourth amended plan curing deficiencies.
- Debtors negotiated with the Trusts, filed the Fourth Amended Plan and Agreed Findings; Court ultimately confirmed the Fourth Amended Plan.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Article 12.1's broad releases violate §524(e) or can be saved under §1123(b)(3)(A) | Arora/ Scianna Trusts: releases exceed permissible scope under Pacific Lumber. | Debtors: releases can be valid settlements under §1123(b)(3)(A) with consideration. | Article 12.1 narrowed to valid §1123(b)(3)(A) settlement; overly broad text invalid as drafted. |
| Whether Article 12.2 injunctions impermissibly discharge or enjoin non-debtors besides the Purchaser | Trusts: injunctions improperly discharge Debtors and enjoin claims against estate/property and Committee and Liquidating Trust. | Debtors/Intervenors: Pacific Lumber supports limited immunity for committees; broader injunctions may be improper. | Injunction as applied to Debtors, Committee, and Liquidating Trust is impermissible; only limitations for Committee allowed. |
| Whether Article 12.4.1 exculpation is permissible | Trusts: exculpation for acts during bankruptcy contrary to Pacific Lumber. | Debtors: exculpation limited or confined; may be permissible with consent and scope. | 12.4.1 impermissible under Pacific Lumber as broad exculpation for acts during case. |
| Whether Article 12.4.2 release of certain pre/post-petition actors is permissible | Trusts: releases target non-consenting parties; broad release problematic. | Debtors: 12.4.2 is permissible as a settled release of estate-related claims for consideration. | 12.4.2 permissible; is an acceptable settlement under §1123(b)(3) applicable to consents. |
| Whether Article 12.4.3 releases for Committee and others are permissible | Trusts: releases gross negligence/ outside scope violation not allowed. | Debtors: some protections may be permissible; but must align with Pacific Lumber. | 12.4.3 as drafted impermissible for Debtors; acceptable for Committee only if limited to within-duty actions. |
Key Cases Cited
- Bank of New York Trust Co. v. Official Unsecured Creditors Comm. (In re Pacific Lumber), 584 F.3d 229 (5th Cir. 2009) (restricts non-debtor releases under §524(e))
- Highland Capital Mgmt. LP v. Chesapeake Energy Corp. (In re Seven Seas Petroleum, Inc.), 522 F.3d 575 (5th Cir. 2008) (supports limited immunity for committees within bankruptcy)
- Feld v. Zale Corp. (In re Zale Corp.), 62 F.3d 746 (5th Cir. 1995) (limits on discharge and informs interpretation of releases)