BKY 05-30073.United States Bankruptcy Court, D. Minnesota.
October 15, 2005
ORDER DETERMINING CERTAIN UNCONTESTED REQUIREMENTS FOR CONFIRMATION OF DEBTOR’S PLAN
GREGORY KISHEL, Bankruptcy Judge
This Chapter 11 case came on before the Court on March 30, 2005, for hearing on various issues raised in the proceedings on confirmation of the Debtor’s plan of reorganization.[1]
Appearances were noted in the record. In addition to putting contested issues of law before the Court for determination, counsel for the Debtor requested the Court to make determinations regarding certain uncontested[2] provisions of the Debtor’s proposed “First Amended” plan, to the extent those provisions meet specific confirmation requirements under the Bankruptcy Code. Consistent with the goal of resolving as many of the issues as possible prior to the confirmation hearing in this case, this order is entered to memorialize determinations as to whether certain uncontested provisions of the plan satisfy certain confirmation requirements.
I. Plan and Proponent Compliance — Applicable Provisions.
The Bankruptcy Code provides in pertinent part that: “The court shall confirm a plan
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only if all of the following requirements are met: (1) The plan complies with the applicable provisions of this title. (2) The proponent of the plan complies with the applicable provisions of this title.” 11 U.S.C. §§ 1129(a)(1) and (2). The court has a duty to determine whether a Chapter 11 plan meets all the requirements necessary for confirmation — even those provisions to which creditors have not objected. In re E.I. Parks No. 1 Ltd. Partnership, 122 B.R. 549, 558 (Bankr. W.D. Ark. 1990). Certain uncontested provisions of the plan do indeed satisfy the specific confirmation requirements, as follows.
II. The Plan Complies with Section 1121(a).
The Debtor is eligible to be a debtor under Chapter. 11 U.S.C. § 109(d). In addition, 11 U.S.C. § 1121(a) provides that “[t]he debtor may file a plan with a petition commencing a voluntary case, or at any time in a voluntary case or an involuntary case.” The Debtor did file a plan and has thus complied with § 1121(a), because the Debtor is a proper proponent of a plan.
III. The Plan Complies with Certain Provisions of Section 1123.
The plan satisfies the following requirements and provisions of 11 U.S.C. § 1123:
A. Plan Specifies Unimpaired Classes [11 U.S.C. § 1123(a)(2)] 11 U.S.C. § 1123(a)(2) requires that “(a) Notwithstanding any otherwise applicable nonbankruptcy law, a plan shall — . . . (2) specify any class of claims or interests that is not impaired under the plan[.]” Article IV of the plan specifies that Classes 1-A, 1-B, 2-A, 3-A and 4 are unimpaired under the plan, thereby satisfying § 1123(a)(2).
B. Treatment of Impaired Classes [11 U.S.C. § 1123(a)(3)] 11 U.S.C. § 1123(a)(3) requires that the contents of the plan “(3) specify the treatment of any class of claims or interests that is impaired under the plan[.]” Article IV, section 4.1 of the plan designates Class 3-B as impaired. Article III, section 3.5 specifies the treatment of the claims in that Class. Thus, the plan satisfies § 1123(a)(3).
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C. Provision for Inclusion in Charter [§ 11 U.S.C. § 1123(a)(6)] 11 U.S.C. § 1123(a)(6) requires that the plan “provide for the inclusion in the charter of the debtor, if the debtor is a corporation, or of any corporation referred to in paragraph (5)(B) or (5)(C) of this subsection, of a provision prohibiting the issuance of nonvoting equity securities, and providing, as to the several classes of securities possessing voting power, an appropriate distribution of such power among such classes, including, in the case of any class of equity securities having a preference over another class of equity securities with respect to dividends, adequate provisions for the election of directors representing such preferred class in the event of default in the payment of such dividends[.]” Article 10.3 of the plan provides that the Amended Certificate of Incorporation of the Reorganized Debtor shall provide for the inclusion of a provision prohibiting the issuance of nonvoting equity securities. Thus, the plan satisfies the requirements of § 1123(a)(6).
D. Impairment/Non-Impairment of Claims [11 U.S.C. § 1123(b)(1)] 11 U.S.C. § 1123(b)(1) provides that a plan may “impair or leave unimpaired any class of claims, secured or unsecured, or of interests[.]” The plan impairs Classes 3-B, and leaves Classes 1-A, 1-B, 2-A, 3-A, and 4 unimpaired. Article IV of the plan designates Class 3-B as impaired. Article III, section 3.5 specifies the treatment of the claims in that Class. Article IV of the plan specifies that Classes 1-A, 1-B, 2-A, 3-A and 4 are unimpaired under the plan. These plan provisions are appropriate and they are not inconsistent with the applicable provisions of the Bankruptcy Code.
E. Treatment of Executory Contracts [11 U.S.C. § 1123(b)(2)] 11 U.S.C. § 1123(b)(2) provides that a plan may “subject to section 365 of this title, provide for the assumption, rejection, or assignment of any executory contract or unexpired lease of the debtor not previously rejected under such section[.]” Article VIII, section 8.1 of the plan provides that, except as may be provided in a separate order of the court, all executory contracts
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and unexpired leases of Debtor, including existing employment contracts, are to be assumed on the date the court’s order confirming the plan becomes a final order. Article II, section 2.1(c) of the plan provides that allowed claims arising under any executory contracts or unexpired leases that are assumed by the Debtor will be paid according to the terms of any order of the court approving assumption of such contract or lease, or such other terms as may be agreed upon between the holders of such claims and the Debtor. These plan provisions are appropriate and they are not inconsistent with the applicable provisions of the Bankruptcy Code.
F. Modification of Holders of Claims [11 U.S.C. § 1123(b)(5)] 11 U.S.C. § 1123(b)(5) provides that a plan may “modify the rights of holders of secured claims, other than a claim secured only by a security interest in real property that is the debtor’s principal residence, or of holders of unsecured claims, or leave unaffected the rights of holders of any class of claims[.]” Plan sections 3.1 through 3.6[3] provide for modifications of the rights of holders of Asbestos Claims in Class 3-B, and leaves unaffected the rights of the holders of Allowed Claims in Classes 1-A, 1-B, 2-A, and 3-A, and Interests in Class 4, except for consensual subordinations of liens by members of Class 2-A. These plan provisions are appropriate and they are not inconsistent with the applicable provisions of the Bankruptcy Code.
IV. The Plan Complies with Certain Provisions of Section 1129.
The plan satisfies the following requirements and provisions of 11 U.S.C. § 1129:
A. No Rate Changes [11 U.S.C. § 1129(a)(6)] 11 U.S.C. § 1129(a)(6) provides that “[a]ny governmental regulatory commission with jurisdiction, after confirmation of the plan, over the rates of the debtor has approved any rate change provided for in the plan, or such rate change is expressly conditioned on such approval.” There is no governmental regulatory commission that would have jurisdiction, after confirmation of the plan,
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over the rates charged by the Debtor. Thus, the requirement of § 1129(a)(6) is satisfied.
B. Provision for Treatment of Administrative Expense Claims and Priority Tax Claims [11 U.S.C. § 1129(a)(9)] 11 U.S.C. § 1129(a)(9) provides:
Except to the extent that the holder of a particular claim has agreed to a different treatment of such claim, the plan provides that —
(A) with respect to a claim of a kind specified in section 507(a)(1) or 507(a)(2) of [the Bankruptcy Code], on the effective date of the plan, the holder of such claim will receive on account of such claim cash equal to the allowed amount of such claim;
(B) with respect to a class of claims of a kind specified in section 507(a)(3), 507(a)(4), 507(a)(5), 507(a)(6), or 507(a)(7) of [the Bankruptcy Code], each holder of a claim of such class will receive —
(i) if such class has accepted the plan, deferred cash payments of a value, as of the effective date of the plan, equal to the allowed amount of such claim; or
(ii) if such class has not accepted the plan, cash on the effective date of the plan equal to the allowed amount of such claim; and
(C) with respect to a claim of a kind specified in section 507(a)(8) of [the Bankruptcy Code], the holder of such claim will receive on account of such claim deferred cash payments, over a period not exceeding six years after the date of assessment of such claim, of a value, as of the effective date of the plan, equal to the allowed amount of such claim.
Article II, section 2.1(a) of the plan provides that: “Allowed administrative expense claims specified in Code § 507(a)(1), and post-petition claims incurred in the ordinary course of Debtor’s business and fees of Debtor’s professionals, shall be paid in full in cash on the Effective Date, or on such other date as the Court may fix, or in the ordinary course of business as the claims mature, or upon such other terms as may be agreed upon by the holders of such claims and Debtor.” Thus, the treatment of administrative expense claims under Article II, section 2.1(a) of the plan satisfies the requirements of §§ 1129(a)(9)(A) and (B).
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Article II, section 2.1(b) of the plan provides that: “Allowed claims of Governmental Units specified in Code § 1129(a) and 507(a)(8) shall be paid in full in cash on the Effective Date.” Thus, the treatment of priority tax claims under Article II, section 2.1(b) of the plan satisfies the requirements of § 1129(a)(9)(C).
C. Payment of Fees [11 U.S.C. § 1129(a)(12)] 11 U.S.C. § 1129(a)(12) requires that “[a]ll fees payable under section 1930 of title 28, as determined by the court at the hearing on confirmation of the plan, have been paid or the plan provides for the payment of all such fees on the effective date of the plan.” Article II, section 2.1(d) of the plan provides that: “Fees payable by Debtor under 28 U.S.C. § 1930 or to the Clerk of Bankruptcy Court will be paid in full in cash on the Effective Date. After confirmation, the Debtor shall continue to pay quarterly fees to the Office of the United States Trustee and to file quarterly reports with the Office of the United States Trustee until this case is closed by the Court, dismissed or converted. This requirement is subject to any amendments to 28 U.S.C. § 1930(a)(6) that Congress makes retroactively applicable to confirmed Chapter 11 cases.” As a result, payment all fees payable under 28 U.S.C. § 1930, or any additional fees as may be determined by the court, is provided for under Article II, section 2.1(d) of the plan. Thus, the plan satisfies the requirements of 11 U.S.C. § 1129(a)(12).
D. Continuation of Retiree Benefits [11 U.S.C. § 1129(a)(13)] 11 U.S.C. § 1129(a)(13) mandates that “[t]he plan provide for the continuation after its effective date of payment of all retiree benefits, as that term is defined in section 1114 of [the Bankruptcy Code], at the level established pursuant to subsection (e)(1)(B) or (g) of section 1114 of [the Bankruptcy Code], at any time prior to confirmation of the plan, for the duration of the period the debtor has obligated itself to provide such benefits.” The Debtor has no obligation to pay “retiree
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benefits.”[4] Thus, the § 1129(a)(13) requirement is satisfied.
E. Proper Principal Purpose of Plan [11 U.S.C. § 1129(d)] 11 U.S.C. § 1129(d) requires that “[n]otwithstanding any other provision of this section, on request of a party in interest that is a governmental unit, the court may not confirm a plan if the principal purpose of the plan is the avoidance of taxes or the avoidance of the application of section 5 of the Securities Act of 1933. In any hearing under this subsection, the governmental unit has the burden of proof on the issue of avoidance.” The Debtor’s purposes in commencing this case were to establish an asbestos trust and to obtain the benefits of 11 U.S.C. § 524(g); thus, the principal purpose of the plan is unrelated to tax or securities matters, particularly because the Debtor is not a publicly-held company. Article VI, section 6.1 of the plan provides that:
On the Effective Date, the Trust shall be established in accordance with the Plan Documents pursuant to the Confirmation Order. The Trust shall be a “designated settlement fund” within the meaning of section 468B
of the IRC and a “qualified settlement fund” within Treasury Regulation section 1.468B-2. The purpose of the Trust shall be to, among other things, (a) direct the liquidation, resolution, payment, and satisfaction of all Asbestos Claims in accordance with the Plan, the Trust Distribution Procedures, and the Confirmation Order; (b) preserve, hold, manage, and maximize the Trust Assets for use in paying and satisfying Allowed Asbestos Claims; (c) prosecute, settle, and manage the disposition of the Asbestos In-Place Insurance Coverage; and (d) prosecute, settle, and manage Asbestos Insurance Actions. The Trust Distribution Procedures shall provide for the estimation and payment or disallowance of Asbestos Claims pursuant to the terms of the Plan Documents. The Trust shall be administered by persons who are independent of the Debtor. The Debtor shall not hold any beneficial interest in the income or corpus of the Trust.
The plan’s establishment and implementation of such trust is appropriate and it is not inconsistent with the applicable provisions of the Bankruptcy Code. Thus, the plan has a proper purpose under § 1129(d).
V. The Plan Complies with Certain Requirements of Section 524(g).
The plan complies with the following provisions and requirements of
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11 U.S.C. § 524(g):
A. Debtor’s Status as Defendant in Asbestos Actions; Trust’s Assumption of Liabilities [11 U.S.C. § 524(g)(2)(B)(i)(I)] 11 U.S.C. § 524(g)(2)(B)(i)(I) requires that “the injunction is to be implemented in connection with a trust that, pursuant to the plan of reorganization — (I) is to assume the liabilities of a debtor which at the time of entry of the order for relief has been named as a defendant in personal injury, wrongful death, or property-damage actions seeking recovery for damages allegedly caused by the presence of, or exposure to, asbestos or asbestos-containing products[.]” The Debtor has been named as a defendant in personal injury, wrongful death, or property-damage actions seeking recovery for damages allegedly caused by the presence of, or exposure to, asbestos or asbestos-containing products.[5] Thus, § 524(g)(2)(B)(i)(I) has been satisfied.
B. Use of Trust’s Assets or Income to Pay Claims and Demands [11 U.S.C. § 524(g)(2)(B)(i)(IV)] 11 U.S.C. § 524(g)(2)(B)(i)(IV) requires that the trust “is to use its assets or income to pay claims and demands[.]” The trust created under the plan is to use its assets or income to pay claims and demands. Thus, the § 524(g)(2)(B)(i)(IV) requirement has been met.
C. Terms of the Injunction [11 U.S.C. § 524(g)(2)(B)(i)(IV)(aa)] 11 U.S.C. § 524(g)(2)(B)(i)(IV)(aa) requires that “the terms of the injunction proposed to be issued under paragraph (1)(A), including any provisions barring actions against third parties pursuant to paragraph (4)(A), are set out in such plan and in any disclosure statement supporting the plan[.]” As part of the process of seeking confirmation of the plan, the terms of the injunctions proposed to be issued pursuant to § 524(g)(1)(A), including any provisions barring actions against third parties pursuant to paragraph (4)(A), are set out in the plan and in the disclosure statement supporting the plan. Accordingly, the plan satisfies the requirement of § 524(g)(2)(B)(i)(IV)(aa).
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D. Appointment of Futures Representative [11 U.S.C. § 524(g)(4)(B)(i)] 11 U.S.C. § 524(g)(4)(B)(i) requires that “[s]ubject to subsection (h), if, under a plan of reorganization, a kind of demand described in such plan is to be paid in whole or in part by a trust described in paragraph (2)(B)(i) in connection with which an injunction described in paragraph (1) is to be implemented, then such injunction shall be valid and enforceable with respect to a demand of such kind made, after such plan is confirmed, against the debtor or debtors involved, or against a third party described in subparagraph (A)(ii), if — (i) as part of the proceedings leading to issuance of such injunction, the court appoints a legal representative for the purpose of protecting the rights of persons that might subsequently assert demands of such kind[.]” Article I, section 1.83 of the plan provides that Thomas Carey, or such other individual appointed by the court, shall serve as the Legal Representative who is responsible for protecting the rights of persons that might subsequently assert future demands. In turn, Article VI, section 6.6 of the plan provides that Thomas Carey will continue to serve as the Legal Representative. Thus, the § 524(g)(4)(B)(i) requirement has been met.
ORDER
On the basis of the rulings just memorialized,
IT IS HEREBY DETERMINED AND ORDERED:
1. That, as to its First Amended Plan, the Debtor has met the following requirements of Title 11 or otherwise has made provision in accordance with them: 11 U.S.C. §§ 1121(a), 1123(a)(2), 1123(a)(3), 1123(a)(6), 1123(b)(1), 1123(b)(2), 1123(b)(5), 1129(a)(6), 1129(a)(9), 1129(a)(12), 1129(a)(13), 1129(d), 524(g)(2)(B)(i)(I), 524(g)(2)(B)(i)(IV), 524(g)(2)(B) (i)(IV)(aa), and 524(g)(4)(B)(i).
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2. Accordingly, these issues are settled for all further proceedings on confirmation in this case. As long as the Debtor presents to the court a plan that contains the same provisions and language found adequate in this order, it will not be put to the burden of making a factual and legal presentation that goes to any of them.
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