Monarch Life v. Ropes & Gray
This text of Monarch Life v. Ropes & Gray (Monarch Life v. Ropes & Gray) is published on Counsel Stack Legal Research, covering Court of Appeals for the First Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.
Bluebook
Monarch Life v. Ropes & Gray, (1st Cir. 1995).
Opinion
USCA1 Opinion
November 22, 1995 UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
____________________
No. 94-2173
MONARCH LIFE INSURANCE COMPANY, ET AL.,
Appellants,
v.
ROPES & GRAY,
Appellee.
____________________
No. 94-2200
MONARCH LIFE INSURANCE COMPANY, ET AL.,
Appellees,
v.
ROPES & GRAY,
Appellant.
____________________
ERRATA SHEET
The opinion of this Court, issued September 13, 1995, is amended
as follows:
p.9, 1, l.14: "(Bankr. D.D.C. 1992))." in place of "(Bankr. D.
Colo. 1992))."
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
____________________
No. 94-2173
MONARCH LIFE INSURANCE COMPANY, ET AL.,
Appellants,
v.
ROPES & GRAY,
Appellee.
____________________
No. 94-2200
MONARCH LIFE INSURANCE COMPANY, ET AL.,
Appellees,
v.
ROPES & GRAY,
Appellant.
____________________
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Frank H. Freedman, Senior U.S. District Judge] __________________________
____________________
Torruella, Chief Judge, ___________
Cyr and Stahl, Circuit Judges. ______________
____________________
3
Bruce E. Baty, with whom Christopher D. Schneider, Morrison & _____________ _________________________ ___________
Hecker, Charles K. Bergin, Jr., and Robinson, Donovan, Madden & Barry, ______ ______________________ __________________________________
P.C. were on brief for Monarch Life Insurance Company. ____
John K. Villa, with whom Nicole K. Seligman, Philip J. Deutch, ______________ __________________ ________________
Williams & Connolly, Charles S. Cohen and Egan, Flanagan and Cohen, ____________________ _________________ __________________________
P.C. were on brief for Ropes & Gray. ____
____________________
September 13, 1995
____________________
2
CYR, Circuit Judge. Following an unsuccessful CYR, Circuit Judge. ______________
intermediate appeal to the district court, Monarch Life Insurance
Co. ("Monarch Life") continues to press its challenge to a
bankruptcy court order enjoining its prosecution of a legal
malpractice action in Massachusetts Superior Court against its
former counsel, the law firm of Ropes & Gray. The bankruptcy
court determined that the Monarch Life action violated a
permanent injunction incorporated in the confirmed reorganization
plan of its parent corporation, Monarch Capital Corporation
("Monarch Capital"). We now affirm the district court on the
ground that Monarch Life is collaterally estopped from asserting
a state court challenge to the bankruptcy court's jurisdiction to
enter the permanent injunction incorporated in the confirmed
reorganization plan.
I I
BACKGROUND BACKGROUND __________
Monarch Capital, incorporated as a holding company in
1968, marketed life and disability insurance through Monarch
Life, its wholly-owned Massachusetts subsidiary,1 and developed
real estate through another group of subsidiaries ("real estate
subsidiaries"). Ropes & Gray provided simultaneous legal
representation to Monarch Capital and its subsidiaries, including
Monarch Life. In 1985, Monarch Capital established a Short-Term
____________________
1For simplicity sake, "Monarch Life" includes appellants
Springfield Life Insurance Company and First Variable Life
Insurance Company.
3
Investment Pool ("STIP"), a common bank account into which
Monarch Capital's subsidiaries agreed to make daily deposits of
their excess cash balances. The STIP agreement authorized
Monarch Capital to borrow needed funds from the STIP at an
interest rate more favorable than the market rate, and permitted
the subsidiaries to recoup their STIP deposits on demand.
Beginning in 1987, Monarch Capital's real estate
subsidiaries began experiencing serious cash flow problems due to
an abrupt economy-wide decline in real estate values. In order
to prop up its failing real estate subsidiaries, Monarch Capital
began to borrow heavily from the STIP deposits contributed by
Monarch Life. By 1990, Monarch Life's outstanding STIP
"advances" to Monarch Capital approximated $175 million. When
Monarch Life learned the extent of Monarch Capital's borrowings,
it unilaterally cancelled its participation in the STIP. Shortly
thereafter, Monarch Life discharged Ropes & Gray as its counsel.
Free access — add to your briefcase to read the full text and ask questions with AI
USCA1 Opinion
November 22, 1995 UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
____________________
No. 94-2173
MONARCH LIFE INSURANCE COMPANY, ET AL.,
Appellants,
v.
ROPES & GRAY,
Appellee.
____________________
No. 94-2200
MONARCH LIFE INSURANCE COMPANY, ET AL.,
Appellees,
v.
ROPES & GRAY,
Appellant.
____________________
ERRATA SHEET
The opinion of this Court, issued September 13, 1995, is amended
as follows:
p.9, 1, l.14: "(Bankr. D.D.C. 1992))." in place of "(Bankr. D.
Colo. 1992))."
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
____________________
No. 94-2173
MONARCH LIFE INSURANCE COMPANY, ET AL.,
Appellants,
v.
ROPES & GRAY,
Appellee.
____________________
No. 94-2200
MONARCH LIFE INSURANCE COMPANY, ET AL.,
Appellees,
v.
ROPES & GRAY,
Appellant.
____________________
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Frank H. Freedman, Senior U.S. District Judge] __________________________
____________________
Torruella, Chief Judge, ___________
Cyr and Stahl, Circuit Judges. ______________
____________________
3
Bruce E. Baty, with whom Christopher D. Schneider, Morrison & _____________ _________________________ ___________
Hecker, Charles K. Bergin, Jr., and Robinson, Donovan, Madden & Barry, ______ ______________________ __________________________________
P.C. were on brief for Monarch Life Insurance Company. ____
John K. Villa, with whom Nicole K. Seligman, Philip J. Deutch, ______________ __________________ ________________
Williams & Connolly, Charles S. Cohen and Egan, Flanagan and Cohen, ____________________ _________________ __________________________
P.C. were on brief for Ropes & Gray. ____
____________________
September 13, 1995
____________________
2
CYR, Circuit Judge. Following an unsuccessful CYR, Circuit Judge. ______________
intermediate appeal to the district court, Monarch Life Insurance
Co. ("Monarch Life") continues to press its challenge to a
bankruptcy court order enjoining its prosecution of a legal
malpractice action in Massachusetts Superior Court against its
former counsel, the law firm of Ropes & Gray. The bankruptcy
court determined that the Monarch Life action violated a
permanent injunction incorporated in the confirmed reorganization
plan of its parent corporation, Monarch Capital Corporation
("Monarch Capital"). We now affirm the district court on the
ground that Monarch Life is collaterally estopped from asserting
a state court challenge to the bankruptcy court's jurisdiction to
enter the permanent injunction incorporated in the confirmed
reorganization plan.
I I
BACKGROUND BACKGROUND __________
Monarch Capital, incorporated as a holding company in
1968, marketed life and disability insurance through Monarch
Life, its wholly-owned Massachusetts subsidiary,1 and developed
real estate through another group of subsidiaries ("real estate
subsidiaries"). Ropes & Gray provided simultaneous legal
representation to Monarch Capital and its subsidiaries, including
Monarch Life. In 1985, Monarch Capital established a Short-Term
____________________
1For simplicity sake, "Monarch Life" includes appellants
Springfield Life Insurance Company and First Variable Life
Insurance Company.
3
Investment Pool ("STIP"), a common bank account into which
Monarch Capital's subsidiaries agreed to make daily deposits of
their excess cash balances. The STIP agreement authorized
Monarch Capital to borrow needed funds from the STIP at an
interest rate more favorable than the market rate, and permitted
the subsidiaries to recoup their STIP deposits on demand.
Beginning in 1987, Monarch Capital's real estate
subsidiaries began experiencing serious cash flow problems due to
an abrupt economy-wide decline in real estate values. In order
to prop up its failing real estate subsidiaries, Monarch Capital
began to borrow heavily from the STIP deposits contributed by
Monarch Life. By 1990, Monarch Life's outstanding STIP
"advances" to Monarch Capital approximated $175 million. When
Monarch Life learned the extent of Monarch Capital's borrowings,
it unilaterally cancelled its participation in the STIP. Shortly
thereafter, Monarch Life discharged Ropes & Gray as its counsel.
During that same year, Monarch Capital borrowed an additional
$235 million from a group of financial institutions (hereinafter:
"the 235 Banks"), pledging its capital stock in Monarch Life as
collateral for the loan.
In May 1991, the Massachusetts Insurance Commissioner
placed Monarch Life in receivership. The receiver in turn filed
an involuntary chapter 11 petition against Monarch Capital.
After seven months of negotiation, the principal creditors of
Monarch Capital the 235 Banks and Monarch Life proposed a
plan of reorganization ("Plan"), which purported to settle or
4
release a tangle of "complex" claims and cross-claims held by and
against Monarch Capital, its subsidiaries, and other creditors.
In re Monarch Capital Corp., No. 91-41379-JFQ, slip op. at 9 _____________________________
(Bankr. D. Mass. June 25, 1992).2 These included Monarch Life's
claim that Monarch Capital, acting in concert with the 235 Banks,
had used the STIP to deplete Monarch Life's coffers, thereby
placing Monarch Life in violation of state insurance
regulations.3 In consideration of their mutual agreement to
release claims and to make financial contributions to fund the
Plan, the Plan proponents insisted on the inclusion of a
permanent injunction to protect them from future lawsuits arising
from or related to claims settled under the Plan.
The injunction ultimately included in the order
confirming the Plan provides as follows:
In addition to the discharge provided by
Section 1141 of the Bankruptcy Code and to
supplement the discharge provisions of
Article VI.A of the Plan, this Order
constitutes an injunction against all persons ___ _______
(other than the FDIC as Receiver) from taking
any of the following actions (other than an
____________________
2Ropes & Gray was scheduled as a creditor in the chapter 11
proceeding, but asserted no claim against Monarch Capital.
3The Plan also provided, inter alia, that (1) Monarch _____ ____
Capital would separate its insurance business (thereby creating
the "Life Group") from its real estate business (thereby creating
the "New Realty Group"); and (2) the 235 Banks would release
their guaranty claims against Monarch Capital's subsidiaries in
connection with the 1990 loan to Monarch Capital, and agree to
share the Monarch Life capital stock which had been pledged as
collateral for the 1990 loan with Monarch Capital's unsecured
creditors. Upon confirmation of the Plan in June 1992, the 235
Banks became Monarch Life's "parent" by acquiring a clear
majority of Monarch Life stock, and Monarch Life emerged from
receivership.
5
action brought to enforce any right or
obligation under the Plan or the Settlement
Agreement):
a. commencement or continuation of any ____________ __ ____________ __ ___
action or proceeding arising from or ______ __ __________ _______ ____ __
related to a claim against [Monarch _______ __ _ _____ _______
Capital] against or affecting or [sic]
any property of [Monarch Capital], or
any direct or indirect transferee of any
property of, or direct or indirect
successor in interest to, any of the
foregoing . . . ; and ___
b. commencement or continuation of any ____________ __ ____________ __ ___
action or proceeding arising from or ______ __ __________ _______ ____ __
related to a claim against the Debtor of _______ __ _ _____ _______ ___ ______
this Chapter 11 case, the [Monarch Life]
Receivership or the operations of the
Debtor against or affecting any of New
Holding Co., New Realty Co., [Monarch
Life], the Agent, the 235 Banks, the
Trustee, the Creditors' Committee (in
such capacity), the [Monarch Life]
Receiver and their respective officers, ___ _____ __________
directors, employees, attorneys, agents, _________
successors and assigns other than a
claim to enforce obligations under the
Plan or the Settlement Agreement . . .
.4
Id. at 19-20 (emphasis added). ___
After a hearing, at which the parties discussed
whether, and to what extent, Bankruptcy Code 105(a)5 empowers
a bankruptcy court to afford permanent injunctive relief which
effectively grants a "discharge" to parties other than the _____ ____ ___
chapter 11 debtor, the bankruptcy court confirmed the Plan, _______ __ ______
____________________
4Subparagraphs (a) and (b) each list specific exceptions to
the coverage of the injunction; none are material to this appeal.
5Section 105(a) provides in relevant part: "The court may
issue any order, process, or judgment that is necessary or
appropriate to carry out the provisions of this title." 11
U.S.C. 105(a).
6
including the proposed injunction. See id. at 23-27; see also ___ ___ ___ ____
infra Appendix at pp. i-iii (containing relevant excerpts from _____
confirmation order). The bankruptcy court found that absent
prompt confirmation of a chapter 11 plan, Monarch Life likely
would be forced into liquidation. In re Monarch Capital Corp., ____________________________
No. 91-41379-JFQ, slip op. at 18. Monarch Life's receiver
elected not to appeal the confirmation order.
Monarch Life soon discovered documentary evidence
allegedly establishing that Ropes & Gray simultaneously
represented both Monarch Capital and Monarch Life in
circumstances which suggested an inherent conflict of interest.
In May 1993, Monarch Life brought suit in Massachusetts Superior
Court, seeking compensatory damages for Ropes & Gray's alleged
participation in Monarch Capital's private strategy to use
Monarch Life's STIP contributions to prop up Monarch Capital's
moribund real estate investments. Monarch Life alleged, inter _____
alia, that Monarch Capital and Ropes & Gray, in reports to ____
Massachusetts insurance regulators, deliberately concealed the
nature and understated the amount of the STIP "advances" to
Monarch Capital, thereby exposing Monarch Life and its directors
to civil liability for Monarch Life's violation of Massachusetts
insurance laws which require that insurance companies keep on
hand minimum "admitted assets" to cover extant policies. Monarch
Life further alleged that Ropes & Gray had deliberately concealed
from Monarch Life the ongoing use of the STIP by Monarch Capital
to finance its long-term real estate ventures, as well as the
7
fact that Monarch Capital had no realistic prospect of ever
repaying its STIP "advances" had Monarch Life made demand.6
Ropes & Gray filed a motion for civil contempt against
Monarch Life in the bankruptcy court, claiming that its state
court action violated the injunctive provision in the confirmed
Monarch Capital chapter 11 plan. Following a hearing on the
contempt motion, the bankruptcy court determined that (1) the
Monarch Life action was barred by the broad terms of both
subparagraphs (a) and (b) of the injunction included in the Plan,
see supra p. 6; and (2) the doctrine of res judicata precluded ___ _____ ___ ________
Monarch Life from attacking the bankruptcy court's "jurisdiction"
to enter the broad-based injunction. Ropes & Gray v. Monarch _____________ _______
Life Ins. Co. (In re Monarch Capital Corp.), No. 91-41379-JFQ, at _____________ ___________________________
6-7 (Bankr. D. Mass. Oct. 15, 1993). The bankruptcy court held
Monarch Life in civil contempt but refused to impose sanctions
because the terms of the injunctive provision in the confirmed
Plan were not "sufficiently specific and definite" to permit a
finding that the violation had been deliberate or undertaken in
bad faith. Id. at 7. On intermediate appeal, the district court ___
affirmed the bankruptcy court decision. Ropes & Gray v. Monarch ____________ _______
Life Ins. Co. (In re Monarch Capital Corp.), 173 B.R. 31 (D. ______________ _____________________________
____________________
6Ropes & Gray responded that (1) Monarch Capital, as the
parent of Monarch Life, had the unfettered legal right to use its
subsidiaries' assets as it wished; (2) Ropes & Gray had not
learned of the STIP advances until 1989, by which time the
outstanding balances were already significant; and (3) in order
to protect Monarch Life's interests, Ropes & Gray at that time
advised Monarch Capital not to "borrow" any additional STIP
funds.
8
Mass. 1994).7
II II
DISCUSSION DISCUSSION __________
Monarch Life contends, as a matter of law, that the __ _ ______ __ ___
permanent injunctive provision included in the confirmed Plan
cannot extinguish actions against third parties such as Ropes &
Gray, since bankruptcy courts have no "jurisdiction" or power to __ ____________ _____
"discharge" (1) debts other than those of the chapter 11 debtor,
see Brief for Appellants at 12-16 (citing Bankruptcy Code ___
524(e), 11 U.S.C. 524(e) ("[D]ischarge of a debt of the debtor
does not affect the liability of any other entity on, or the
property of any other entity for, such debt."); American ________
Hardwoods, Inc. v. Deutsche Credit Corp. (In re American ________________ ________________________ ________________
Hardwoods, Inc.), 885 F.2d 621, 626 (9th Cir. 1989)), or (2) ________________
debts of any nondebtor such as Ropes & Gray which concededly made
no financial contribution to the Plan, see id. at 16-20 (citing _________ ___ ___
In re Heron, Burchett, Ruckert & Rothwell, 148 B.R. 665, 687 ____________________________________________
____________________
7The district court relied on slightly different grounds.
First, it determined that it would be unfair to invoke res ___
judicata against Monarch Life, which honestly believed that the ________
injunctive provision was not broad enough to bar actions against
parties like Ropes & Gray. Id. at 40-41. The court also ruled ___
that subparagraph (b) was inapposite because Ropes & Gray was no
longer Monarch Life's "attorney" at the time of the confirmation
hearing. Id. at 43-44. Nevertheless, it concluded that subpara- ___
graph (a) of the injunction was broad enough to bar Monarch
Life's state court action against Ropes & Gray. Id. at 44-45. ___
The district court thereupon vacated the order of contempt,
inasmuch as the lack of clarity in the injunctive provision not
only made sanctions unwarranted but also undermined the
bankruptcy court's threshold finding that Monarch Life was a
contemnor. Id. at 46. ___
9
(Bankr. D.D.C. 1992)).
Ropes & Gray counters that Monarch Life is barred,
under the doctrines of res judicata and judicial estoppel, from ___ ________
litigating the scope of the bankruptcy court's power because it
not only knowingly failed to appeal from the order confirming the
chapter 11 Plan, but in its announced role as a Plan proponent it _________
acquiesced in its co-proponents' arguments that the bankruptcy __________
court possessed broad injunctive powers under Bankruptcy Code
105(a). See Stoll v. Gottlieb, 305 U.S. 165, 172 (1938) (unless ___ _____ ________
a party in interest objects, and appeals an erroneous ruling by
the bankruptcy court that it had "jurisdiction" to confirm terms
of plan, the ruling is conclusive in subsequent proceedings);
Republic Supply Co. v. Shoaf, 815 F.2d 1046, 1052-53 (5th Cir. ____________________ _____
1987) (same); cf. Celotex Corp. v. Edwards, 115 S. Ct. 1493, 1499 ___ _____________ _______
(1995) (if bankruptcy court determines that it possesses so-
called "related to" jurisdiction to enjoin under Code 105(a),
and the jurisdictional question remains open for determination,
aggrieved litigant's recourse is by appeal from bankruptcy court
decision, not by collateral attack on bankruptcy court order);
cf. also Maggio v. Zeitz, 333 U.S. 56, 69 (1948) (contempt ___ ____ ______ _____
proceeding is not appropriate vehicle for attacking validity, or
retrying the merits, of the order contravened by alleged
contemnor).
A. Standards of Review A. Standards of Review ___________________
Although the conclusions of law reached by the
bankruptcy court and the district court are subject to de novo __ ____
10
review, the underlying findings of fact by the bankruptcy court
are reviewed only for clear error. Western Auto Supply Co. v. ________________________
Savage Arms, Inc. (In re Savage Indus., Inc.), 43 F.3d 714, 719- _________________ _________________________
20, n. 8 (1st Cir. 1994); In re G.S.F. Corp., 938 F.2d 1467, 1474 __________________
(1st Cir. 1991). The applicability vel non of preclusion ___ ___
principles is a question of law. See, e.g., Gonzalez v. Abreu, ___ ____ ________ _____
27 F.3d 751, 755 (1st Cir. 1994). Since the judgment (viz., the
order confirming the Plan) was rendered by a federal tribunal
the bankruptcy court see FDIC v. Shearson-American Express ___ ____ _________________________
Inc., 996 F.2d 493, 497 (1st Cir. 1993) (bankruptcy court ____
decisions trigger normal res judicata principles) (citing Katchen ___ ________ _______
v. Landy, 382 U.S. 323, 334 (1966)), cert. denied, 114 S. Ct. _____ _____ ______
1054 (1994); see also, e.g., Stoll, 305 U.S. at 170 (finding ___ ____ ____ _____
bankruptcy court order confirming reorganization plan entitled to
res judicata effect); Eubanks v. FDIC, 977 F.2d 166, 170 (5th ___ ________ _______ ____
Cir. 1992) (similar), federal preclusion principles apply. See ___
Blonder-Tongue Lab., Inc. v. University of Ill. Found., 402 U.S. __________________________ _________________________
313, 324-25 (1971); Recoveredge L.P. v. Pentecost, 44 F.3d 1284, ________________ _________
1290 (5th Cir. 1995); Orijas v. Louisiana-Pacific Corp., 31 F.3d ______ _______________________
995, 1010 (10th Cir. 1993); Restatement (Second) of Judgments __________________________________
87. In order to invoke collateral estoppel (issue preclusion),
Ropes & Gray must demonstrate that: (1) both the contempt
proceedings and the confirmation proceedings involved the same ____
issue of law or fact; (2) the parties actually litigated the _____ ________ _________
issue in the confirmation proceedings; (3) the bankruptcy court
actually resolved the issue in a final and binding judgment ________ ________
11
(viz., its confirmation order); and (4) its resolution of that
issue of law or fact was essential to its judgment (i.e., _________
necessary to its holding). See Grella v. Salem Five Cents Sav. ___ ______ ______________________
Bank, 42 F.3d 26, 30 (1st Cir. 1994); Piccicuto v. Dwyer, 39 F.3d ____ _________ _____
37,40 (1stCir. 1994);Restatement (Second)of Judgments 27(1982).8 ________________________________
B. Merits of Issue Preclusion Claim B. Merits of Issue Preclusion Claim ________________________________
____________________
8Monarch Life argues that Ropes & Gray cannot rely on res ___
judicata principles because it filed no chapter 11 claim and, ________
therefore, was not a "party" to the chapter 11 confirmation
proceedings. See, e.g., Apparel Art Int'l v. Amertex Enters. ___ ____ __________________ _______________
Ltd., 48 F.3d 576, 583 (1st Cir. 1995) (claim preclusion normally ____
requires "identicality of parties," or at least privity).
Frequently, however, "res judicata" is used more inclusively, to ___ ________
refer either to claim preclusion or issue preclusion (i.e., ______ __ _____ __________
collateral estoppel). See Grella, 42 F.3d at 30-31 (noting that ___ ______
basis for bankruptcy court decision was unclear, and observing
that labels "res judicata" and "collateral estoppel" are ___ ________
less important than substance of parties' argumentation in light
of factual circumstances) (citing Dennis v. Rhode Island Hosp. ______ ___________________
Trust, 744 F.2d 893, 898 (1st Cir. 1984)); Railway Labor _____ ______________
Executives' Ass'n v. Guilford Transp. Indus., Inc., 989 F.2d 9, _________________ _____________________________
11 n.3 (1st Cir. 1993) (noting confusion prevailing over same
labels); see also Fiumara v. Fireman's Fund Ins. Cos., 746 F.2d ___ ____ _______ ________________________
87, 90 n.1 (1st Cir. 1984) (noting "distinct family resemblance"
between two doctrines). Since Monarch Life seeks to relitigate
only one component "issue" arising from the confirmation order
(viz., the bankruptcy court's jurisdiction or power under
105(a)), the preclusion defense asserted by Ropes & Gray is more
exactly characterized as collateral estoppel ("issue
preclusion").
A party invoking issue preclusion need not show that it was
privy to the first proceeding. See Parklane Hosiery Co. v. ___ _____________________
Shore, 439 U.S. 322, 326-28 (1979) (no "mutuality of parties" _____
rule); Blonder-Tongue Lab., 402 U.S. at 328 (same); Fiumara, 746 ___________________ _______
F.2d at 92; cf. DiPinto v. Sperling, 9 F.3d 2, 4 (1st Cir. 1993) ___ _______ ________
(Rhode Island law). It need only show that "the party against _____ _______
whom issue preclusion will be applied had a fair opportunity to ____ _____ __________ ____ __ _______
litigate the issue fully." Kyricopoulos v. Town of Orleans, 967 ____________ _______________
F.2d 14, 16 (1st Cir. 1992) (Massachusetts law dispenses with
"mutuality" rule) (emphasis added). Of course, even if the
bankruptcy court had based its contempt ruling on claim
preclusion, we would have been free to affirm on any ground
supported by the bankruptcy court record. See La Electronica, ___ _______________
Inc. v. Capo-Roman (In re Electronica, Inc.), 995 F.2d 320, 321 ____ __________ ________________________
n.1 (1st Cir. 1993).
12
1. "Same Issue" 1. "Same Issue" __________
We must first identify the precise issue Monarch Life
sought to "relitigate" in its defense against Ropes & Gray's
motion for civil contempt. We have held that Bankruptcy Code
105(a) confers ample power upon the bankruptcy court to enjoin
the initiation or continuation of judicial proceedings in a
nonbankruptcy forum against nondebtors during the pendency of a
chapter 11 case, where the court reasonably concludes that such
actions would entail or threaten adverse "impact" on the
administration of the chapter 11 estate. See In re G.S.F. Corp., ___ __________________
938 F.2d at 1474. These injunctions serve simply as adjuncts to
the automatic stay, see Bankruptcy Code 362(a), which ___
ostensibly protects only the debtor and its property from ____
creditor "grab-law" tactics after the "race to the courthouse." _____
See Austin v. Unarco Indus., Inc., 705 F.2d 1, 4-5 (1st Cir.), ___ ______ ____________________
cert. dismissed, 463 U.S. 1247 (1983). Since the automatic stay _____ _________
may induce creditors to refocus their recovery efforts upon the
chapter 11 debtor's co-obligors, a temporary injunction is
sometimes needed to protect nondebtors (e.g., a corporate
debtor's principals and managing officers) whose time and energy
should not be diverted to collateral lawsuits and away from the
effort to reorganize the debtor. Like the automatic stay itself,
see Bankruptcy Code 362(c), however, these accessorial ___
injunctions normally lapse at the latest following
confirmation of the chapter 11 plan and the closing of the
chapter 11 case, leaving the nondebtor co-obligor once again
13
exposed to pursuit by the discharged chapter 11 debtor's
creditors.
The more intricate "jurisdictional" question raised by
the confirmation order and contempt proceedings in this case is
whether Congress intended an outer temporal boundary on the
availability of injunctive relief under Bankruptcy Code 105(a).
Since the chapter 11 debtor is the only entity permanently ___________
discharged upon confirmation of a chapter 11 plan, id. 1141(d), ___
its creditors usually are free to pursue all available remedies
against those undischarged entities which were obligated, along
with the chapter 11 debtor, on a prepetition debt. See id. ___ ___
524(e) ("[D]ischarge of a debt of the debtor does not affect the
liability of any other entity on, or the property of any other
entity for, such debt."). Whether the Code likewise empowers
bankruptcy courts to enter permanent injunctions which _________ ___________
effectively confer de facto "discharge" relief upon the chapter __ _____
11 debtor's co-obligors, and if so, under what conditions and
limitations, are the topics of continuing debate and disagreement
in both case law and commentary. See, e.g., Howard C. Buschmann ___ ____
III & Sean P. Madden, The Power and Propriety of Bankruptcy Court ___________________________________________
Intervention in Actions Between Nondebtors, 47 The Business _____________________________________________
Lawyer 913 (1992).
The case law splits along two principal lines. Some
courts hold that section 105(a) does not permit a bankruptcy
court permanently to enjoin post-confirmation lawsuits against
nondebtors, since such an order would directly contravene the
14
"more specific" proscription in section 524(e). See, e.g., ___ ____
AmericanHardwoods, 885F.2d at626; LandsingDiversified Properties- _________________ _______________________________
II v. First Nat'l Bank & Trust Co. (In re Western Real Estate ___ _____________________________ __________________________
Fund, Inc.), 922 F.2d 592, 600-01 (10th Cir. 1990), modified on __________ ________ __
other grounds, 932 F.2d 898 (10th Cir. 1991). The factual cir- _____ _______
cumstances in these cases did not suggest, however, that the
grant of injunctive relief was in any sense integral to the
success of the chapter 11 reorganization. See American ___ ________
Hardwoods, 885 F.2d at 626 (noting no "unusual facts" warranting _________
permanent "discharge" of debtor's loan guarantor).
The second line of cases note that section 524(e)
cannot be construed as an absolute or per se proscription against ________ ___ __
permanent injunctive relief for all nondebtors. See, e.g., In re ___ ____ _____
Heron, Burchette, 148 B.R. at 687 (noting that 524(e) "contains ________________
no language of prohibition and [thus] should not be interpreted __ ________ __ ___________
to limit court's power under 105(a)") (emphasis added). These
courts have formulated various tests for determining when de __
facto "discharges" would not be ultra vires. See, e.g., Menard- _____ _____ _____ ___ ____ _______
Sanford v. Mabey (In re A.H. Robins Co.), 880 F.2d 694, 702 (4th _______ _____ _____________________
Cir.), cert. denied, 493 U.S. 959 (1989), cited with approval in _____ ______ _____ ____ ________ __
In re G.S.F. Corp., 938 F.2d at 1474-75; In re Master Mortgage ___________________ ______________________
Inv. Fund, 168 B.R. 930, 935 (Bankr. W.D. Mo. 1994) (collecting _________
cases). In extraordinary circumstances, it has been held that a
bankruptcy court can grant permanent injunctive relief essential
to enable the formulation and confirmation of a reorganization
plan if, for example, nondebtors who would otherwise contribute
15
to funding the plan will not settle their mutual claims absent
"protection" from potential post-confirmation lawsuits arising
from their prepetition relationship with the chapter 11 debtor.
See, e.g., In re A.H. Robins Co., 880 F.2d at 702. These courts ___ ____ _____________________
have taken into consideration whether (1) the creditors have
overwhelmingly approved the plan, with the injunction; (2) the
plan contemplates full payment of all creditor claims; and (3)
the injunction would affect a relatively small class of
claimants. Id. at 698, 700-702; In re Master Mortgage, 168 B.R. ___ _____________________
at 935.
In this second line of cases, the courts have ascribed
importance to the fact that the cooperation of essential
"contributing" parties may not have been forthcoming, and no
chapter 11 plan may have been practicable, absent an injunctive
provision affording so-called incidental "protection" to __________
nondebtors who do not intend to contribute directly to the ___
chapter 11 plan. For example, if a non-"contributing" party
holds an indirect claim against a would-be "contributing"
party,9 such as a contingent claim for indemnification or
contribution, the potential "contributing" party may decline to
accept, or contribute to, the chapter 11 plan in circumstances
____________________
9Ropes & Gray argues that it "contributed" to Monarch
Capital's chapter 11 plan to the extent it held contingent claims
for indemnification or contribution against Monarch Capital,
which it effectively "released" by refraining from filing a
claim. See supra note 2. For present purposes, however, the ___ _____
term "contributing" parties is used to refer to those entities,
such as the 235 Banks and Monarch Life, which proposed and signed
onto the Plan.
16
where the non-"contributing" party remains free to implead him as
a third-party defendant in a post-confirmation lawsuit. See In ___ __
re A.H. Robins, 880 F.2d at 702. In such circumstances, these _______________
courts have afforded the "incidental protection" of a permanent
injunction by enjoining "direct" actions against the _______ ___
noncontributor in order to protect the contributor from exposure ______________
to indirect liability.
2. Actual Litigation 2. Actual Litigation _________________
Monarch Life represents that it had no inkling during
the confirmation proceedings that any party was contending that
section 105(a) enabled the bankruptcy court to grant the broad-
based "incidental" injunctive relief required to protect a
"noncontributing" party such as Ropes & Gray. In a memorandum
submitted prior to confirmation by the 235 Banks, however, it was _____ __ ____________
plainly stated that
the Injunction must by necessity extend not
only to parties like the 235 Banks or the
[Monarch Life] Receiver who are signatories
to, and gave actual consideration under, the
Settlement Agreement, but also to those
nonsignatory parties such as officers and
directors of those parties . . . . That
consideration will be seriously diminished
and the releases granted the signatories
worthless if the nonsignatories can continue
to be sued, since certain signatory parties
would be directly or indirectly liable to the ________ __ __________ ______ __ ___
parties being sued. Consequently, actions _______ _____ ____
against the nonsignatories will be as
destructive to the settlement as actions
against the signatories.
(Emphasis added.) The 235 Banks memorandum repeatedly adverted
to the problem posed for both "signatories" and "nonsignatories"
unless the latter were insulated by injunctive relief from
17
post-confirmation lawsuits. Moreover, it prominently cited
cases, such as A.H. Robins, supra, involving "incidental" injunc- ___________ _____
tive relief for noncontributing nondebtors holding contingent
claims for indemnification or contribution.
Monarch Life argues, nonetheless, that the 235 Banks
memorandum does not establish that the section 105(a) issue was
"actually litigated," within the meaning of the collateral
estoppel doctrine, since the memorandum was not signed by Monarch
Life and therefore merely represented the 235 Banks' view of the
applicable law. We do not agree.
First, the 235 Banks and Monarch Life through its
receiver held themselves forth in the confirmation proceedings
as joint Plan proponents, frequently sharing responsibility for _____
presenting the merits of discrete portions of the Plan before the
bankruptcy court. See also supra note 3. Monarch Life may ___ ____ _____
disagree with the litigation stance taken by its receiver prior
to confirmation of the Plan, but it does not contend that the
receiver could not bind it for issue preclusion purposes.
Second, there is no reason to suppose that Monarch Life
itself did not expect to benefit nor indeed that it has not in
fact benefited from the protection afforded in response to the
235 Banks' invitation to confer the broadest available "incide-
ntal" protection, upon all noncontributing co-obligors, from
future lawsuits "arising from or related to a claim against
[Monarch Capital] or affecting or [sic] any property of [Monarch
Capital]." Thus, we cannot simply assume that no protected
18
noncontributor held an indirect claim for indemnification or
contribution against Monarch Life. _______ _______ ____
Third, even if Monarch Life had not yet discovered
specific grounds for its asserted cause of action against Ropes &
Gray relating to Monarch Capital's abuse of the STIP, it cannot
plausibly contend that Ropes & Gray's alleged involvement, as
Monarch Capital's counsel during the relevant time period, was so
far removed from Monarch Life's contemplation that it could not
have weighed the strategic advantages and risks involved in
advocating "incidental" injunctive relief prior to confirmation
of the Plan. See, e.g., DeCosta v. Viacom Int'l Inc., 981 F.2d ___ ____ _______ _________________
602, 605-06, 610 (1st Cir. 1992) (court may decide not to apply
collateral estoppel where there has been a "significant" change
in the law or factual circumstances since the first judgment was
entered; and finding no such "significant change"), cert. denied, ____ ______
113 S. Ct. 3039 (1993). Moreover, changed circumstances will
preclude the application of collateral estoppel only if they
might have altered the decision the court made in the first _______
proceeding. See Montana v. United States, 440 U.S. 147, 159 ___ _______ _____________
(1979); EEOC v. American Airlines, 48 F.3d 164, 167 (5th Cir. ____ _________________
1995). And, Monarch Life cannot establish that it would not have
proposed precisely the same injunction, whereby it agreed to
release a number of viable causes of action against third parties
"arising from" claims against Monarch Capital, even if it had
known the particulars of its malpractice claim against Ropes &
Gray in June 1992. Cf. Fiumara v. Fireman's Fund Ins. Cos., 746 ___ _______ ________________________
19
F.2d 87, 91-92 (1st Cir. 1984) (noting that "all of the events
which define the [subsequent] federal complaint occurred in the
period before the [first proceeding] and were at least generally
hinted at during that trial," and "[i]f they were not then
litigated as hotly as plaintiff would now wish, they plainly
could have been").
Finally, and most importantly, the "actual litigation"
component in the collateral estoppel analysis does not require
that Monarch Life be shown to have advocated the broad-based
"incidental" injunction, but only that the "jurisdictional" issue
was squarely raised by the 235 Banks, thus giving Monarch Life a
full and fair opportunity to interpose objection if it disagreed
with the 235 Banks' legal contentions. See Blonder-Tongue Lab., ___ __________________
402 U.S. at 328 (in order to further the interests of finality
and judicial economy, collateral estoppel doctrine requires that
litigant be afforded "one full and fair opportunity for judicial
resolution" of the issue). Therefore, since the section 105(a)
"jurisdictional" issue was expressly broached in the 235 Banks'
memorandum prior to confirmation of the Plan, and by prominent
citation to decisions such as A.H. Robins, supra, Monarch Life's ___________ _____
silence alone satisfied the second criterion under the collateral
estoppel analysis.10
____________________
10Monarch Life argues that the 105(a) order must be
interpreted as enjoining only the noncontributors' cross-claims ____
impleading Plan contributors, not Monarch Life's initiation in
Massachusetts Superior Court of its principal claim against the
noncontributing Ropes & Gray. See Brief for Appellant at 21 ___
(citing Pacor, Inc. v. Higgins, 743 F.2d 984 (3d Cir. 1984)). ___________ _______
Even if this "severability" contention had merit, the district
20
3. Actual Resolution 3. Actual Resolution _________________
Monarch Life argues that a genuine dispute remains as
to whether the "ambiguous" order of confirmation actually
resolved the section 105(a) "jurisdictional" issue "litigated" by ________
the parties prior to confirmation. See Reply Brief for Appellant ___
at 11 (citing Commonwealth of Mass. v. Departmental Grant Appeals _____________________ __________________________
Bd., 815 F.2d 778, 788 (1st Cir. 1987) (party may challenge ___
interpretation of ambiguous injunction not previously interpret-
ed)); see also In re Monarch Capital Corp., 173 B.R. at 41 ___ ____ ______________________________
("Appellants do not challenge the Bankruptcy Court's authority to
enter the Injunction . . . ."). Consequently, it cannot be
presumed that the same issue was before the bankruptcy court both
in the confirmation proceedings and the contempt proceedings.
Its argument begs the question.
Monarch Life asserts a two-pronged attack against the
contempt order. Its first line of attack is that the injunctive
provision in the confirmation order cannot be "expanded" to
encompass Ropes & Gray's contingent obligations because
bankruptcy courts have no power to enter such broad-based __ _____
injunctions under section 105(a). However, it cannot be
considered a conclusive answer to Ropes & Gray's collateral
estoppel defense for Monarch Life to say that it subjectively ____________
____________________
court properly noted that it had been waived by Monarch Life's
failure to raise it in the bankruptcy court contempt proceeding.
See In re Monarch Capital Corp., 173 B.R. at 45 (issues not ___ _____________________________
raised before the bankruptcy court are deemed waived on appeal)
(citing Juniper Dev. Group v. Kahn (In re Hemingway Transp., ___________________ ____ _________________________
Inc.), 993 F.2d 915, 935 (1st Cir.), cert. denied, 114 S. Ct. 303 ____ _____ ______
(1993)).
21
construed the confirmation order more narrowly than its language
and context warranted. See Piccicuto, 39 F.3d at 41 (rejecting ___ _________
argument that prior judgment was ambiguous and used "regrettably
loose language"). Rather, Monarch Life's construction must be
evaluated against the objective import of the language in the
confirmation order itself. As the confirmation order is
dispositive, it is set out at length in the appendix. See infra ___ _____
Appendix pp. i-iii.
Monarch Life mischaracterizes the obvious breadth of _______ _______
the confirmation order as ambiguity. Even a cursory review of _________
the confirmation order demonstrates beyond doubt that the third
criterion in the collateral estoppel analysis has been met. See ___
Grella, 42 F.3d at 30-31 (issue may be actually litigated and ______
resolved "even if it is not explicitly decided," as long as it is
logically necessary to final decision).
Monarch Life emphasizes the fact that the bankruptcy
court distinguished American Hardwoods11 a case in which the ___________________
enjoined action had been against a nondebtor who would not have _____ ___ ____
contributed to the chapter 11 plan and then stated that "the ___________ ___
____________________
11Monarch Life points also to a decision entered earlier in
an unrelated adversary proceeding, wherein the bankruptcy court
denied the chapter 11 trustee's motion to enjoin a suit by
Monarch Capital shareholders against Monarch Life. It considers
that decision probative because it noted the bankruptcy court's
concern that such an injunction might exceed the limitations set
forth in American Hardwoods. See In re Monarch Capital Corp., __________________ ___ ____________________________
No. 91-41379-JFQ (Bankr. D. Mass. Apr. 8, 1992). We do not
agree. First, the proposed injunction involved there was not
part of thus could not be "essential" to the reorganization
plan. Further, the bankruptcy court expressly distinguished
American Hardwoods in its final order of confirmation. __________________
22
persons protected by the [Monarch Capital] Injunction have con- _______ _________
tributed substantial amounts to the Plan . . . ." (Emphasis
added.) But the bankruptcy court did not say that Plan contribu-
tors, such as the 235 Banks and Monarch Life, were the only ____
entities "protected" by the injunction. Rather, it said that
this injunctive protection was the reason for entering a perma- ______
nent injunction. Moreover, in distinguishing American Hardwoods, __________________
where protection for contributors was not at issue, the bankrupt- ___
cy court cited with approval several decisions like A.H. ____
Robins, supra (and provided plain parenthetical descriptions) ______ _____
holding that section 105(a) empowers bankruptcy courts to grant
permanent injunctions not only against actions asserting claims
directly against plan contributors, but "incidental" injunctions ________
protecting plan contributors from indirect claims for indemnifi- ________ ______
cation and contribution, at least where such protection is deemed
"essential" to the success of a reorganization plan. See infra ___ _____
Appendix at p. i.
By citing A.H. Robins, supra, and cases of its kind, ___________ _____
the bankruptcy court plainly signaled its endorsement of the Plan
proponents' request for a broad injunction extending "incidental"
protection to all noncontributors who might otherwise implead
Plan contributors as third-party defendants in subsequent state
court actions. The bankruptcy court then made the required
predicate findings for a broad "incidental" injunction as enumer-
ated in A.H. Robins. It found that (1) the injunction was ____________
"essential" to garner the Plan contributors' cooperation in
23
Monarch Capital's reorganization, and (2) Monarch Capital's
creditors overwhelmingly had approved the injunctive provision.
See infra Appendix at p. ii. Monarch Life cannot turn a blind ___ _____
eye to the plain import of the injunctive provision in the
confirmation order, then under the guise of an alleged "ambigu-
ity" attempt to relitigate the "jurisdiction" of the court to
enter the injunction.
Finally, this is not a conventional "preclusion" case,
wherein the court is required to interpret a first judgment which
was entered by a different tribunal. Even though our interpreta- _________
tion of the confirmation order essentially presents a question of
law, see United States v. O'Rourke, 943 F.2d 180, 186 (2d Cir. ___ _____________ ________
1991), the bankruptcy court in this case was interpreting its own
order of confirmation. We think customary appellate deference is
appropriate in these circumstances with respect to the bankruptcy
court's determination that the confirmation order was suffi-
ciently broad to confer "incidental" protection to noncontribut-
ing parties like Ropes & Gray.12 Similarly, because the bank-
____________________
12See, e.g., In re Weber, 25 F.3d 413, 416 (7th Cir. 1994) ___ ____ ___________
(noting that bankruptcy court's interpretation of its own confir-
mation order is entitled to same deference as generally accorded
courts construing their own judgments); William B. Schnach ____________________
Retirement Trust v. Unified Capital Corp. (In re Bono Dev., ________________ ______________________ __________________
Inc.), 8 F.3d 720, 721-22 (10th Cir. 1993) (same; interpreting ____
bankruptcy court's "superpriority" order); Texas N.W. Ry. Co. v. __________________
Diamond Shamrock Ref. & Mktg. Co. (In re Chicago, Rock Island & __________________________________ _____________________________
Pac. R.R. Co.), 865 F.2d 807, 810-11 (7th Cir. 1988) (same; _______________
construing bankruptcy court's order approving sale); Ranch House ___________
of Orange-Brevard, Inc. v. Gluckstern (In re Ranch House of ________________________ __________ _______________________
Orange-Brevard, Inc.), 773 F.2d 1166, 1168 (11th Cir. 1985) _____________________
(same; confirmation order); see also generally Farmhand, Inc. v. ___ ____ _________ ______________
Anel Eng'g Indus., Inc., 693 F.2d 1140, 1146 (5th Cir. 1982) _________________________
(noting that district courts are entitled to deference in inter-
24
ruptcy court was directly engaged in the give-and-take of the
confirmation proceedings and had the better vantage point for
determining whether the parties had been fairly apprised of the
"jurisdictional" issue, we likewise think it prudent to accord
some deference to its determination that the section 105(a) issue
was "actually litigated." See Ranch House of Orange-Brevard, ___ _______________________________
Inc. v. Gluckstern (In re Ranch House of Orange-Brevard, Inc.), ____ __________ ___________________________________________
773 F.2d 1166, 1168 (11th Cir. 1985) ("The bankruptcy judge who
has presided over the case from its inception is in the best
position to clarify any apparent inconsistencies in the court's
rulings."); supra Section II.B.2. _____
Notwithstanding the numerous warning signals, Monarch
Life elected to treat the obvious breadth of the injunctive
provision as ambiguity. The record remains clear, nonetheless,
that the bankruptcy court's "jurisdiction" to enjoin enforcement
of Monarch Life's claims against the noncontributing Ropes & Gray
was actually litigated and that Monarch Life therefore was re-
quired, but failed, to object to the confirmation order and/or
appeal from the section 105(a) injunctive provision included in
it.
4. Essentiality 4. Essentiality ____________
It follows, a fortiori, from our determination that the _ ________
confirmation order included an "incidental" injunction, that the
bankruptcy court's ruling on its section 105(a) "jurisdiction"
____________________
preting own orders); Securities and Exch. Comm'n v. Sloan, 535 ____________________________ _____
F.2d 679, 681 (2d Cir. 1976) (same), cert. denied, 430 U.S. 966 _____ ______
(1977).
25
was essential to the effectiveness and validity of the injunctive
provision. See Stoll, 305 U.S. at 171-72 ("Every court in ___ _____
rendering a judgment tacitly, if not expressly, determines its
jurisdiction over . . . the subject matter.").
III III
CONCLUSION CONCLUSION __________
We therefore hold that the issue of the bankruptcy
court's power to enter its so-called "incidental" injunction was
precluded, having been conclusively resolved in the confirmation
order which Monarch Life neither opposed nor appealed. Though
there is conflicting authority on the "jurisdictional" reach of
section 105(a), the confirmation order cited precedent for a
broad-based "incidental" injunctive provision. Cf. Restatement ___ ___________
(Second) of Judgments 29 cmt. j (1980) (court may refuse to _____________________
invoke collateral estoppel if first judgment was "patently
incorrect"). Accordingly, Monarch Life cannot now argue that the
confirmation order is not subject to this broad construction. We
express no view on the soundness of the precedents cited in the
confirmation order, nor on their applicability to the particular
Plan proposed by Monarch Life.13 The proper recourse for ad-
____________________
13Ropes & Gray cross-appeals from the bankruptcy court's
refusal to award it compensatory damages for Monarch Life's
contempt. See Brief for Appellee at 48 (citing Perker v. United ___ ______ ______
States, 153 F.2d 66, 70 (1st Cir. 1946) (noting that "complainant ______
is entitled as a matter of right to an order in civil contempt
imposing a compensatory fine")). As the district court noted,
however, the level of specificity needed to ground a finding of
contempt is not susceptible to precise quantification. We find
no abuse of discretion in the bankruptcy court's implicit deter-
mination that Monarch Life did not commit such an egregious
26
dressing those questions was by direct appeal from the order of
confirmation.
Finally, the confirmation order enjoined all post-
confirmation lawsuits "arising from" or "related to" claims
against Monarch Capital. See supra p. 6. The complaint filed ___ _____
against Ropes & Gray in Massachusetts Superior Court by Monarch
Life alleges a joint scheme by Monarch Capital and Ropes & Gray
to abuse the STIP account at Monarch Life's expense plainly a
claim "arising from" Monarch Life's STIP claim against Monarch
Capital. We agree with the district court that it was not
unreasonable to expect that Ropes & Gray might attempt to assert
cross-claims against parties who "contributed" to the Monarch
Capital Plan, or cross-claims which ultimately would "affect"
Monarch Capital's property in the hands of its "direct or indi-
rect transferee[s]" or "successor[s] in interest." See supra p. ___ _____
6; see also In re Monarch Capital Corp., 173 B.R. at 45 (reject- ___ ____ ___________________________
ing Monarch Life's argument that there is absolutely no conceiv-
able ground upon which Ropes & Gray might assert a cross-claim in
the superior court action). Thus, it is academic whether the
injunction also "protects" Ropes & Gray as Monarch Life's former ______
"counsel."
The judgment of the district court is affirmed. The The judgment of the district court is affirmed. The _______________________________________________________
parties shall bear their own costs. parties shall bear their own costs. __________________________________
____________________
contempt as would compel the imposition of sanctions. See, e.g., ___ ____
Johnston Envtl. Corp. v. Knight (In re Goodman), 991 F.2d 613, ______________________ ______ _____________
620 (9th Cir. 1993) (noting that bankruptcy court has discretion
to award no damages if it finds contempt insufficiently "egre-
gious").
27
APPENDIX APPENDIX ________
Section 105 of the Bankruptcy Code grants the
Court broad equitable power to issue any order, process
or judgment that is necessary or appropriate to carry
out the provisions of Title 11. In re Old Orchard __________________
Investment Co., 31 Bankr. 599, 601 (W.D. Mich. 1983); ______________
Menard-Sanford v. Mabey (In re A.H. Robins Co.), 880 ______________ _____ _______________________
F.2d 694, 702 (4th Cir. 1989), cert. denied, 110 S. Ct. _____ ______
376 (1989) (affirming power of bankruptcy court to
enjoin suits permanently against nondebtors in a plan,
where there existed certain indemnification rights
against the debtor); In re Energy Co-op, Inc., 886 F.2d ________________________
921 (7th Cir. 1989) (permanent injunction issued pursu-
ant to settlement agreement); MacArthur Co. v. Johns- _____________ ______
Manville Corp. (In re Johns-Manville Corp.) 837 F.2d 89 ______________ __________________________
(2d Cir. 1988), cert. denied, 488 U.S. 868 (1988) _____ ______
(permanent injunction may be issued against actions
against an insurer as part of settlement incorporated
in a chapter 11 plan notwithstanding claims that this
impermissibly discharged a nondebtor); see In re CCA ___ __________
Partnership, 70 Bankr. 696 (Bankr. C.D. Cal. 1985) ___________
(judgment creditor enjoined from enforcing claims
against debtor's individual partners).
Section 105 grants bankruptcy courts "ample power
to enjoin actions excepted from the automatic stay
which might interfere in the rehabilitative process,
whether in a liquidation or in a reorganization case."
In re Johns Manville Corp., 26 Bankr. 420, 425 (Bankr. __________________________
S.D.N.Y. 1983), quoting Collier on Bankruptcy 362.05 _______ _____________________
(15th ed. 1982). Further, bankruptcy courts "may issue
or extend stays to enjoin a variety of proceedings
which will have an adverse impact on the debtor's
ability to formulate a Chapter 11 plan." In re Johns ____________
Manville Corp., 40 Bankr. 219, 226 (S.D.N.Y. 1984). ______________
Under section 105, this Court has the power to
issue injunctions which prevent proceedings against
nondebtor third parties where pursuit of such actions
would materially and adversely affect the estate or
creditor recoveries under a plan of reorganization.
See Codfish Corp. v. FDIC (In re Codfish Corp.), 97 ___ ______________ ____ ____________________
B.R. 132, 135 (Bankr. D.P.R. 1988) (injunctions appro-
priate where there is clear and convincing evidence
"that the estate would be substantially and adversely
affected by the continuance of such an action"); In re _____
Monroe Well Serv., Inc., 67 B.R. 746, 751 (Bankr. E.D. _______________________
Pa. 1986) (injunctions appropriate to avoid anticipated
adverse impact on bankruptcy estate); G.S.F. Corp., 938 ____________
F.2d [1464,] 1474 [(1st Cir. 1991) (adverse impact on
debtor's estate required for injunction against third
i
party actions).
This Court has the power to approve the releases
and issue the Injunction with respect to the Trustee,
Temporary Receiver and creditors' Committee for matters
in connection with the chapter 11 case. In re Drexel _____________
Burnham Lambert Group, Inc., 138 B.R. [723, 753 (Bankr. ___________________________
S.D.N.Y. 1992)].
Where an injunction allows a settlement that forms
the basis of a chapter 11 plan to take effect, where
the entire settlement and hence the plan hinges on the
parties being free from the very claims that the in-
junction would prohibit, courts will order the injunc-
tive relief. See, e.g., In re A.H. Robins Co., Inc., ___ ____ ____________________________
880 F.2d 694 (4th Cir.), cert. denied, 493 U.S. 959 _____ ______
(1989); MacArthur Co., 837 F.2d [at 89]; SEC v. Drexel _____________ ___ ______
Burnham Lambert, Inc. (In re Drexel Burnham Lambert ______________________ _______________________________
Group, Inc.), 130 B.R. 910, 928 (S.D.N.Y. 1991), aff'd, ___________ _____
960 F.2d 285 (2d Cir. 1992); UNARCO Bloomington Factory __________________________
Workers v. UNR Indus., Inc., 124 B.R. 268 (N.D. Ill. _______ ________________
1990); Republic Supply Co. v. Shoaf, 815 F.2d 1046, ____________________ _____
1050 (5th Cir. 1987).
The opinion of the Court of Appeals in the Ninth
Circuit in In re American Hardwoods, 885 F.2d 621 (9th _________________________
Cir. 1989) is inapposite. In that case, guarantors
were protected by the provisions of a plan, although
they apparently provided no contribution to that plan.
The injunction was not shown to be essential to the
plan. The court also notes that section 524(e), on
which the Ninth Circuit relies, does not by its terms
preclude the entry of injunctive relief in favor of
nondebtors making plan contributions, particularly
where as here, creditors have overwhelmingly consented
to it. ... In this case, the persons protected by the
Injunction have contributed substantial amounts to the
Plan, creditors have agreed to the Injunction in order
to get these payments, and the Injunction is the only
basis on which to build, confirm and effectuate the
Plan.
Recent cases following American Hardwoods are ___________________
distinguishable from the facts of this case on similar
grounds. See, e.g., In re Western Real Estate Fund, ___ ____ _______________________________
922 F.2d 592 (10th Cir. 1990). In Western, an attorney _______
was not enjoined from collecting all fees for work done
on behalf of the debtor. In that case, the fees at
issue were owed by a nondebtor third party who did not
contribute to the debtor's plan. The attorney was
allowed to collect against that third party. In In re _____
Rohnert Park Auto Parts, Inc., 113 B.R. 610 (9th Cir. ______________________________
ii
BAP 1990), a creditor was time barred from asserting a
claim in the debtor's bankruptcy. The creditor was
enjoined by the bankruptcy court from collecting
against a nondebtor third party who was liable for the
debt. The [court] did not uphold that plan provision.
However, the nondebtor third party had not contributed
to the funding of the plan, nor was the injunction
shown essential to that plan. In this case, however,
the persons protected by the Injunction are the princi-
pal contributors of consideration to the Plan. Those
persons would not contribute without the Injunction.
Therefore, Western Real Estate and Rohnert Park Auto, ____________________ __________________
like American Hardwoods, are inapposite. __________________
In re Monarch Capital Corp., No. 91-41379-JFQ, slip op. at 23-27 ____________________________
(Bankr. D. Mass. June 25, 1992).
iii
Related
RecoverEdge L.P. v. Pentecost
44 F.3d 1284 (Fifth Circuit, 1995)
Equal Employment Opportunity Commission v. American Airlines, Inc.
48 F.3d 164 (Fifth Circuit, 1995)
Stoll v. Gottlieb
305 U.S. 165 (Supreme Court, 1938)
Maggio v. Zeitz
333 U.S. 56 (Supreme Court, 1948)
Katchen v. Landy
382 U.S. 323 (Supreme Court, 1966)
Parklane Hosiery Co. v. Shore
439 U.S. 322 (Supreme Court, 1979)
Montana v. United States
440 U.S. 147 (Supreme Court, 1979)
Celotex Corp. v. Edwards
514 U.S. 300 (Supreme Court, 1995)
DiPinto v. Sperling
9 F.3d 2 (First Circuit, 1993)
Gonzalez Abreau v. Banco Central
27 F.3d 751 (First Circuit, 1994)
Apparel Art International, Inc. v. Amertex Enterprises Ltd.
48 F.3d 576 (First Circuit, 1995)
Margaret Austin, Etc. v. Unarco Industries, Inc.
705 F.2d 1 (First Circuit, 1983)
In Re Pacor, Inc. v. John Higgins, Jr. And Louise Higgins
743 F.2d 984 (Third Circuit, 1984)
Robert B. Dennis, Etc. v. Rhode Island Hospital Trust National Bank, Robert B. Dennis, Etc. v. Rhode Island Hospital Trust National Bank
744 F.2d 893 (First Circuit, 1984)
In Re Ranch House Of Orange-Brevard, Inc.
773 F.2d 1166 (Eleventh Circuit, 1985)
REPUBLIC SUPPLY CO., Plaintiff-Appellee, v. Joseph SHOAF, Defendant-Appellant
815 F.2d 1046 (Fifth Circuit, 1987)
In Re American Hardwoods, Inc., Debtor. American Hardwoods, Inc. v. Deutsche Credit Corporation
885 F.2d 621 (Ninth Circuit, 1989)
Kevin M. Abel Abel & Busch, Inc. v. Honorable Lee R. West, Judge of the United States District Court for the Western District of Oklahoma
932 F.2d 898 (Tenth Circuit, 1991)
In Re G.S.F. CORPORATION, Debtor, Chase Commercial Corporation, Appellant
938 F.2d 1467 (First Circuit, 1991)
Eubanks v. Federal Deposit Insurance Corporation
977 F.2d 166 (First Circuit, 1992)
Cite This Page — Counsel Stack
Bluebook (online)
Monarch Life v. Ropes & Gray, Counsel Stack Legal Research, https://law.counselstack.com/opinion/monarch-life-v-ropes-gray-ca1-1995.