Monarch Life v. Ropes & Gray ( 1995 )


Menu:
  • 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






Document Info

Docket Number: 94-2173

Filed Date: 9/13/1995

Precedential Status: Precedential

Modified Date: 9/21/2015

Authorities (38)

In Re Savage Industries, Inc., Debtor. Western Auto Supply ... , 43 F.3d 714 ( 1994 )

Seaport Automotive Warehouse, Inc. v. Rohnert Park Auto ... , 23 Collier Bankr. Cas. 2d 259 ( 1990 )

Celotex Corp. v. Edwards , 115 S. Ct. 1493 ( 1995 )

In Re Master Mortgage Investment Fund, Inc. , 31 Collier Bankr. Cas. 2d 240 ( 1994 )

In Re American Hardwoods, Inc., Debtor. American Hardwoods, ... , 885 F.2d 621 ( 1989 )

br-eubanks-md-and-bonnie-b-eubanks-v-federal-deposit-insurance , 977 F.2d 166 ( 1992 )

Securities & Exchange Commission v. Drexel Burnham Lambert ... , 130 B.R. 910 ( 1991 )

macarthur-company-and-western-macarthur-company-v-johns-manville , 837 F.2d 89 ( 1988 )

Robert B. Dennis, Etc. v. Rhode Island Hospital Trust ... , 744 F.2d 893 ( 1984 )

in-re-ranch-house-of-orange-brevard-inc-debtor-ranch-house-of , 773 F.2d 1166 ( 1985 )

in-the-matter-of-chicago-rock-island-and-pacific-railroad-company-debtor , 865 F.2d 807 ( 1988 )

In the Matter of Randy WEBER and Christian Weber, Debtors-... , 25 F.3d 413 ( 1994 )

in-re-david-goodman-dba-sfd-imports-sendo-stores-brass-discount , 991 F.2d 613 ( 1993 )

Gonzalez Abreau v. Banco Central , 27 F.3d 751 ( 1994 )

Katchen v. Landy , 86 S. Ct. 467 ( 1966 )

Apparel Art International, Inc. v. Amertex Enterprises Ltd. , 48 F.3d 576 ( 1995 )

Paul J. Grella, Trustee v. Salem Five Cent Savings Bank , 42 F.3d 26 ( 1994 )

In Re Pacor, Inc. v. John Higgins, Jr. And Louise Higgins , 743 F.2d 984 ( 1984 )

In Re Monroe Well Service, Inc. , 67 B.R. 746 ( 1986 )

In Re G.S.F. CORPORATION, Debtor, Chase Commercial ... , 938 F.2d 1467 ( 1991 )

View All Authorities »