X hits on this document

31 views

0 shares

0 downloads

0 comments

6 / 7

ownership interest in the newly formed acquiring company. However, the Kaiser/Teledyne plan did

not succeed.

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

whether Eleventh

to confirm a plan of reorganization, Circuit Court of Appeals explained:

the

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

with the

debtor.

The

Bankruptcy

Code,

at

11

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.

6

Piper Aircraft, 244 F.3d at 1300.

Kaiser

In and

determining that Teledyne was not

the dispute between relevant to any of the

confirmation factors court, the Court determination that

considered by the

bankruptcy

concluded that

even the

Teledyne was a

good-faith

purchaser

did

not

require

the

bankruptcy

court

to

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

itself

and

the

totality

of

the

circumstances

surrounding the plan. Leasing Corp., 49 F.3d

McCormick v.

Banc One

1524, 1526 (11th

Cir. 1995).

The

bankruptcy

court

certainly

had

no

obligation

to

delve into the past business

Kaiser

and

Teledyne

,

“two

relationship between potential third-party

bidders,” in deciding to confirm the plan.

Piper

Aircraft, 244 F.3d

at 1300.

Further, neither of

parties raised the issue to the bankruptcy court.

the As

such, Teledyne could the later litigation.

not

claim

any

collateral

bar

to

The decision in Piper Aircraft is particularly analogous to the current dispute between WCI and

Wright.

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

knowledge

of

the

Confidentiality

Agreement,

probably

did

not

know

of

the

existence

of

the

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

Document info
Document views31
Page views31
Page last viewedMon Dec 05 11:14:11 UTC 2016
Pages7
Paragraphs723
Words5313

Comments