ownership interest in the newly formed acquiring company. However, the Kaiser/Teledyne plan did
Instead, Teledyne partnered with
another purchaser and ended up buying the debtor’s assets under a confirmed plan of reorganization. Prior to the entry of the confirmation order, Kaiser already had sued Teledyne in a state court action asserting a violation of the Cooperation Agreement. However, neither Teledyne nor Kaiser informed the bankruptcy court of the pending state court action or the brewing dispute between Teledyne and Kaiser over equity ownership. As such, the bankruptcy court never considered any aspect of the dispute when it confirmed the debtor’s plan to sell its assets to Teledyne.
Nor did the bankruptcy court need to consider Kaiser’s lawsuit against Teledyne in connection with confirmation. When a debtor’s assets are sold to a third party during a bankruptcy proceeding, it will not necessarily operate to bar each and every claim that could be asserted between non- debtors tangentially involving the property sold. The dispute between Kaiser and Teledyne simply did not arise out of the same nucleus of operative facts decided by the bankruptcy court at the confirmation hearing, nor would it have merited consideration in
connection bankruptcy Bankruptcy bankruptcy
with any of the confirmation factors courts must consider pursuant to Code Section 1129.4 In explaining a court’s scope of review in deciding
to confirm a plan of reorganization, Circuit Court of Appeals explained:
The confirmation process in a Chapter 11 case is primarily an inquiry into the viability of the proposed plan and the disposition of the debtor’s assets, not the conduct of unrelated third parties, let alone third parties such as Kaiser that are not creditors and have no prior relationship
U.S.C. Section 1129(a), sets forth the criteria that a court must consider in deciding whether to confirm a plan. Facts relating to these criteria are the only facts that necessarily are put at issue by the confirmation process.
4 Unless otherwise stated, all references to the Bankruptcy Code refer to Title 11 of the United States Code.
Piper Aircraft, 244 F.3d at 1300.
determining that Teledyne was not
the dispute between relevant to any of the
confirmation factors court, the Court determination that
considered by the
Teledyne was a
necessarily may have interest.
consider the manner in which Teledyne squeezed Kaiser out of an ownership Rather, the “good-faith” inquiry for
purposes of confirming a Chapter 11 plan requires the bankruptcy court to focus on the terms of the plan
surrounding the plan. Leasing Corp., 49 F.3d
1524, 1526 (11th
delve into the past business
relationship between potential third-party
bidders,” in deciding to confirm the plan.
Aircraft, 244 F.3d
Further, neither of
parties raised the issue to the bankruptcy court.
such, Teledyne could the later litigation.
The decision in Piper Aircraft is particularly analogous to the current dispute between WCI and
Here, Wright convinced a representative of
WCI to sign prior to Lost was not then
the Confidentiality Agreement months Key filing this Chapter 11 case. WCI interested in buying the Property, and,
with the departure of
the two WCI employees with
agreement Champion Property.
when, after the approached WCI
bankruptcy filing, about buying the
By the time of the confirmation hearing on the debtor’s Third Amended Plan on October 9, 2003, however, both the debtor and WCI knew about the existence of the Confidentiality Agreement. WCI had a copy of the agreement. However, no party informed the Court of the existence of the Confidentiality Agreement, and Wright took no action to try to stop the sale of the Property to WCI. As such, the Court must assume they did not think the agreement’s existence impacted confirmation or WCI’s decision to proceed forward with the sale.
Wright admittedly wore many hats during the pendency of Lost Key’s bankruptcy. He was a broker for the debtor. He was affiliated with more than one potential purchaser of the Property and expected to receive an equity position with the acquiring entity. He also was related to an entity that purchased a large secured debt encumbering the Property. Without doubt, Wright was involved in