17 F.4th 1326
11th Cir.2021Background
- Willie Jackson, a paraplegic who uses a wheelchair, was struck by a hotel valet and sued the valet, valet company, and later sought to add Le Centre (hotel property owner), Master Tenant, and AJS in Kentucky state court.
- Le Centre filed Chapter 11 before it was added; its disclosure statements and plans proposed releases and a discharge injunction that would extend to certain non-debtor affiliates (initial plans listed Le Centre and AJS; a later amendment broadened the released parties).
- The Jacksons’ counsel received the disclosure statements and plans (actual notice), but Le Centre did not provide a separate conspicuous Rule 2002(c)(3) notice describing the injunction and identifying released entities in the form the rule contemplates.
- The bankruptcy court confirmed the Third Amended Plan, found notice sufficient, and enjoined claims released under the plan; the court also denied the Jacksons’ request to proceed nominally against released non-debtors to reach insurers, citing indemnity agreements.
- The district court affirmed; on appeal the Eleventh Circuit considered (1) whether the notice satisfied due process and (2) whether the bankruptcy court abused its discretion by barring nominal suits against released non-debtors.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether bankruptcy notice complied with due process (Rule 2002(c)(3)) | Jacksons: Le Centre failed to give the conspicuous, separate Rule 2002(c)(3) notice, so due process was violated | Le Centre: Jacksons’ counsel received actual notice (plans & disclosure statements) of the releases; any procedural defect was forfeited | Held: Actual notice satisfied due process (Espinosa controlling); failure to give Rule-form notice did not void confirmation; issue forfeited by failure to object |
| Whether court should allow nominal suits against released non-debtors to reach insurers (modify injunction) | Jacksons: § 524(e) / equity permit nominal suits to reach insurers; insurers are the real targets | Le Centre/AJS/Master Tenant: Indemnity agreements mean nominal suits would create indemnity claims that could burden the debtor and impair the plan | Held: Bankruptcy court did not abuse discretion in barring nominal suits — indemnity provisions create a substantial risk of economic burden on debtor, so injunction modification denied |
Key Cases Cited
- Mullane v. Cent. Hanover Bank & Tr. Co., 339 U.S. 306 (1950) (due-process notice standard: notice reasonably calculated to apprise interested parties)
- United Student Aid Funds, Inc. v. Espinosa, 559 U.S. 260 (2010) (actual notice can satisfy due process despite procedural notice-rule violations; failure to object forfeits challenge)
- In re Spring Valley Farms, Inc., 863 F.2d 832 (11th Cir. 1989) (due-process violation where required rule notice of bar date was not provided)
- SE Prop. Holdings, LLC v. Seaside Eng’g & Surveying, Inc., 780 F.3d 1070 (11th Cir. 2015) (bankruptcy courts may release non-debtor third parties under § 105(a) in appropriate plans)
- SuVicMon Dev., Inc. v. Morrison, 991 F.3d 1213 (11th Cir. 2021) (standards for allowing nominal suits against discharged debtors: plaintiff must need the nominal defendant to recover from third party and suit must not impose economic burden on debtor)
- Munford v. Munford, Inc., 97 F.3d 449 (11th Cir. 1996) (§ 105(a) permits bankruptcy courts to enter orders necessary to carry out the Bankruptcy Code)