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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 amen

as follows:

p.9,

1, l.14:

Colo. 1992))."

"(Bankr. D.D.C. 1992))."

in place of "(Bankr.

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.


______________

____________________

Bruce E. Baty,
_____________

with whom

Christopher D. Schneider, Morrison


_________________________ ________

Hecker, Charles K. Bergin, Jr., and Robinson, Donovan, Madden & Bar
______ ______________________
_______________________________
P.C. were on brief for Monarch Life Insurance Company.
____
John K. Villa, with whom
______________

Nicole K. Seligman,
__________________

Philip J. Deut
______________

Williams & Connolly, Charles S. Cohen and Egan, Flanagan and Coh
____________________ _________________
_______________________
P.C. were on brief for Ropes & Gray.
____

____________________

September 13, 1995


____________________

CYR,
CYR,

Circuit Judge.
Circuit Judge.
______________

Following

an

unsuccessful

intermediate appeal to the district court, Monarch Life Insurance

Co. ("Monarch

bankruptcy

Life")

court

order enjoining

malpractice action

former counsel,

continues

to

press its

its

prosecution

in Massachusetts Superior

the law firm

of Ropes &

challenge

of a

Court against

Gray.

to

legal

its

The bankruptcy

court

determined

that

the

Monarch

Life

action

violated

permanent injunction incorporated in the confirmed reorganization

plan

of

its

parent corporation,

("Monarch Capital").

We now

ground that Monarch Life

Monarch

Capital

affirm the district

Corporation

court on

the

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

1968,

marketed life

and

disability

a holding company

insurance through

in

Monarch

Life, its

wholly-owned Massachusetts subsidiary,1

real estate

through another group of

subsidiaries").

Ropes

&

Gray

and developed

subsidiaries ("real estate

provided

simultaneous

legal

representation to Monarch Capital and its subsidiaries, including

Monarch Life.

In 1985, Monarch Capital established a

Short-Term

____________________

1For
Springfield

simplicity sake,
Life

Insurance

"Monarch
Company

Insurance Company.

Life" includes
and

First

appellants

Variable

Life

Investment

Pool

("STIP"),

Monarch Capital's

their

excess

Monarch

common bank

account

subsidiaries agreed to make

cash

balances.

Capital to

borrow

The

STIP

needed funds

into

daily deposits of

agreement

from

interest rate more favorable than the market

which

authorized

the STIP

at

an

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.

to prop up its failing real estate subsidiaries, Monarch

began to

Monarch

borrow heavily

Life.

By

from the

1990,

STIP deposits

Monarch

Life's

In order

Capital

contributed by

outstanding

STIP

"advances" to

Monarch Capital

Monarch Life learned the

approximated $175 million.

extent of Monarch Capital's borrowings,

it unilaterally cancelled its participation in the STIP.

thereafter, Monarch Life discharged Ropes &

During

that same

When

year, Monarch

Shortly

Gray as its counsel.

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

placed

an

Monarch Life in receivership.

involuntary

After

1991, the Massachusetts

chapter

seven months

Monarch Capital

11 petition

of negotiation,

the 235

Insurance Commissioner

The receiver in turn filed

against

Monarch

the principal

Banks and Monarch Life

Capital.

creditors of

proposed

plan

of reorganization

("Plan"), which

purported to

settle or

release a tangle of "complex" claims and cross-claims held by and

against Monarch

Capital, its subsidiaries, and

In re Monarch Capital Corp.,


_____________________________

(Bankr.

No. 91-41379-JFQ,

D. Mass. June 25, 1992).2

other creditors.

slip op.

at 9

These included Monarch Life's

claim that Monarch Capital, acting in concert with the 235 Banks,

had used

the STIP

placing

Monarch

to deplete

Life

in

regulations.3

In

release claims

and to make

Plan,

the

Plan

Monarch

Life's coffers,

violation

consideration

of

of their

state

thereby

insurance

mutual agreement

financial contributions to

proponents

insisted

on

the

to

fund the

inclusion

of

permanent injunction to protect them from future lawsuits arising

from or related to claims settled under the Plan.

The

injunction

ultimately

included

in

the

confirming the Plan provides as follows:

In

addition

to

Section 1141
supplement
Article

the discharge

provided

by

of the Bankruptcy

Code and

to

the
VI.A

discharge
of

the

provisions

Plan,

this

of
Order

constitutes an injunction against all persons


___ _______
(other than the FDIC as Receiver) from taking
any

of the following

actions (other than an

order

____________________

2Ropes & Gray was scheduled as a creditor

in the chapter 11

proceeding, but asserted no claim against Monarch Capital.

3The
Capital

Plan

also

provided,

would separate its

inter alia,
_____ ____

that

(1)

Monarch

insurance business (thereby creating

the "Life Group") from its real estate business (thereby creating
the

"New Realty

their guaranty
connection
share

Group"); and

with the 1990 loan

for the

creditors.

Upon confirmation of

majority of

1990 loan

Monarch

Life's

Monarch Life

would release

subsidiaries in

to Monarch Capital,

the Monarch Life capital

became

235 Banks

claims against Monarch Capital's

collateral

Banks

(2) the

stock which had


with Monarch

and agree to

been pledged as

Capital's unsecured

the Plan in June 1992, the


"parent"

by

stock, and Monarch

receivership.

acquiring

Life emerged

235

clear

from

action

brought

to

obligation under

enforce

any

the Plan or

right

or

the Settlement

Agreement):

a. commencement or
____________ __
action
______
related
_______

or
__

continuation of
____________ __

proceeding
__________

to
__

a
_

claim
_____

Capital] against or
any

property

any
___

arising from
_______ ____
against
_______

[Monarch

affecting or

of [Monarch

or
__

[sic]

Capital], or

any direct or indirect transferee of any


property

of,

successor in

or

direct

interest

or

to, any

indirect
of

the

continuation of
____________ __

any
___

foregoing . . . ; and
___

b. commencement or
____________ __
action
______

or
__

proceeding
__________

arising from
_______ ____

or
__

related to a claim against the Debtor of


_______ __ _ _____ _______ ___ ______
this Chapter 11 case, the [Monarch Life]

Receivership

or

Debtor against
Holding

Co.,

Life],

the

Trustee,
such

the operations

of the

or affecting any

of New

New Realty
Agent, the

the

235

Banks, the

Creditors' Committee

capacity),

Receiver and
___

Co., [Monarch

the

[Monarch

(in
Life]

their respective officers,


_____ __________

directors, employees, attorneys, agents,


_________
successors

and

assigns

claim to enforce
Plan or

other

than

obligations under

the

the Settlement Agreement .

. .

.4

Id. at 19-20 (emphasis added).


___

After

hearing,

whether, and to what extent,

a bankruptcy

court to

effectively

grants

chapter
_______

debtor, the
______

11
__

at

which

the

parties

Bankruptcy Code

105(a)5

afford permanent injunctive

"discharge"

bankruptcy

to parties

court

discussed

empowers

relief which

other
_____

than
____

confirmed the

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


issue any

order,

appropriate
U.S.C.

to

process,
carry out

relevant part:

or

judgment that

the provisions

of

"The
is

court may

necessary

this title."

or

11

105(a).

including

the proposed injunction.

See id. at
___ ___

23-27; see also


___ ____

infra Appendix
_____

confirmation

at pp.

order).

prompt confirmation

91-41379-JFQ,

The

of a

would be forced into

No.

i-iii (containing relevant

bankruptcy court

chapter 11

liquidation.

slip

op. at

excerpts from

found that

absent

plan, Monarch Life

likely

In re Monarch Capital Corp.,


____________________________

18.

Monarch

Life's receiver

elected not to appeal the confirmation order.

Monarch

allegedly

Life

soon

establishing

represented

circumstances

both

discovered

that

Monarch

Ropes

&

Capital

which suggested an

participation

Monarch

evidence

simultaneously

Monarch

Life

in

inherent conflict of interest.

compensatory damages

in

Gray

and

In May 1993, Monarch Life brought suit in

Court, seeking

documentary

Capital's

Massachusetts Superior

for Ropes &

private

Gray's alleged

strategy

to

use

Monarch Life's

STIP contributions

moribund real

estate investments.

alia,
____

that Monarch

Massachusetts

nature

and

Capital

insurance

laws which

Monarch Life

and Ropes

amount

Monarch Capital, thereby exposing

insurance

Monarch Capital's

&

alleged, inter
_____

Gray, in

regulators, deliberately

understated the

to civil liability for

to prop up

of the

STIP

reports

to

concealed the

"advances" to

Monarch Life and its directors

Monarch Life's violation of Massachusetts

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

to finance its

long-term real

STIP by Monarch Capital

estate ventures, as

well as

the

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

Monarch Life

in the

court action

violated the injunctive provision

Monarch

contempt

bankruptcy court,

Capital chapter

motion, the

11 plan.

claiming that its

Following

bankruptcy court

contempt against

state

in the confirmed

a hearing

determined that

on the

(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.

Monarch Life

in civil contempt

because the terms

Plan

15, 1993).

finding that the

bad faith.

affirmed

but refused to

of the injunctive

were not "sufficiently

The bankruptcy court

Id. at 7.
___

impose sanctions

provision in the

specific and definite"

violation had been deliberate

held

confirmed

to permit a

or undertaken in

On intermediate appeal, the district court

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'
learned

assets

of the

STIP

outstanding balances
to

as it

wished; (2)

advances until

Monarch

1989,

& Gray

by which

were already significant; and

protect Monarch Life's interests,

advised

Ropes

Capital not

to

funds.

Ropes & Gray

"borrow"

had not
time

the

(3) in order

at that time

any additional

STIP

Mass. 1994).7

II
II

DISCUSSION
DISCUSSION
__________

Monarch Life

permanent

contends, as
__

injunctive provision

cannot extinguish actions

a matter
_ ______

included in

of law,
__ ___

that the

the confirmed

against third parties such

as Ropes &

Gray, since bankruptcy courts have no "jurisdiction" or


__ ____________

"discharge"

see
___

Plan

power to
_____

(1) debts other than those of the chapter 11 debtor,

Brief for

Appellants at

524(e), 11 U.S.C.

12-16

(citing Bankruptcy

524(e) ("[D]ischarge

Code

of a debt of the debtor

does not

affect the liability

property

of

any

Hardwoods, Inc.
________________

other

v.

of any

entity

other entity

for,

such

debt.");

Deutsche
Credit Corp.
________________________

Hardwoods, Inc.), 885


________________

F.2d 621,

626 (9th

on, or

the

American
________

(In re American
________________

Cir. 1989)),

or (2)

debts of any nondebtor such as Ropes & Gray which concededly made

no financial contribution to
_________

the Plan, see id. at


___ ___

In re Heron, Burchett, Ruckert & Rothwell,


____________________________________________

16-20 (citing

148 B.R.

665, 687

____________________

7The district
First,

court relied

it determined

judicata against
________

that

on slightly

it would

be

different grounds.

unfair to

Monarch Life, which honestly

injunctive provision was not broad enough to bar


parties like Ropes &
that

Gray.

Id. at 40-41.
___

The

invoke

res
___

believed that the

actions against

court also ruled

subparagraph (b) was inapposite because Ropes & Gray was no

longer Monarch Life's "attorney" at

the time of the confirmation

hearing.
graph

(a)

Id. at 43-44.
___
of the

Nevertheless, it concluded that subpara-

injunction was

Life's state court action


The

district

only

made

sanctions

vacated

the

unwarranted

court's threshold

contemnor.

Id. at 46.
___

finding

but

bar Monarch

Id. at
___

order of

of clarity in the injunctive

bankruptcy

(Bankr. D.D.C. 1992)).

enough to

against Ropes & Gray.

court thereupon

inasmuch as the lack

broad

also

44-45.

contempt,

provision not
undermined

that Monarch

Life was

the

Ropes

under

& Gray

counters

that Monarch

the doctrines of res judicata


___ ________

litigating

the scope of the

Life is

barred,

and judicial estoppel, from

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
__________

court possessed

105(a).

its co-proponents'

broad injunctive powers under

plan, the

(1938) (unless

objects, and appeals an erroneous

the bankruptcy court that it

ruling is

ruling by

had "jurisdiction" to confirm terms

conclusive in

Republic Supply Co. v. Shoaf,


____________________
_____

bankruptcy

Bankruptcy Code

See Stoll v. Gottlieb, 305 U.S. 165, 172


___ _____
________

a party in interest

of

arguments that the

subsequent proceedings);

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

called "related to" jurisdiction

and the jurisdictional

cf.
___

by collateral

also Maggio
____ ______

v.

the

merits,

of

so-

105(a),

determination,

by appeal from bankruptcy court

attack on bankruptcy

Zeitz, 333
_____

proceeding is not appropriate

retrying

to enjoin under Code

question remains open for

aggrieved litigant's recourse is

decision, not

it possesses

U.S.

56, 69

court order);

(1948)

(contempt

vehicle for attacking validity, or

the

order

contravened

by

alleged

contemnor).

A.
A.

Standards of Review
Standards of Review
___________________

Although

bankruptcy

the

conclusions

court and the district

of

law

reached

court are subject

by

the

to de novo
__ ____

10

review, the

underlying findings of fact by

are reviewed only for

clear error.

the bankruptcy court

Western Auto Supply Co.


________________________

Savage Arms, Inc. (In re Savage Indus., Inc.),


_________________ _________________________

v.

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.

27 F.3d 751, 755 (1st Cir. 1994).

order

Since the

judgment (viz., the

confirming the Plan) was rendered by a federal tribunal

the bankruptcy

Inc.,
____

See, e.g., Gonzalez v. Abreu,


___ ____ ________
_____

996

court

F.2d

see FDIC v.
___ ____

493,

497

(1st

Cir.

Shearson-American Express
_________________________

1993)

(bankruptcy court

decisions trigger normal res judicata principles) (citing Katchen


___ ________
_______

v.

1054

Landy, 382 U.S.


_____

(1994); see
___

323, 334 (1966)),

also, e.g.,
____ ____

cert. denied, 114


_____ ______

Stoll, 305
_____

U.S. at

S. Ct.

170 (finding

bankruptcy court order confirming reorganization plan entitled to

res judicata effect);


___ ________

Cir. 1992)

Eubanks v.
_______

FDIC, 977 F.2d


____

166, 170

(similar), federal preclusion principles

apply.

(5th

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


______
_______________________

995, 1010 (10th

87.

Ropes

Cir. 1993); Restatement (Second) of Judgments


__________________________________

In order to invoke

&

Gray must

proceedings and

issue
_____

of law

issue in

F.3d

collateral estoppel (issue preclusion),

demonstrate

that:

the confirmation

or fact;

(2) the

(1)

the

contempt

proceedings involved

the same
____

parties actually
________

the confirmation proceedings; (3)

actually resolved
________ ________

the

both

issue in

11

litigated the
_________

the bankruptcy court

final and

binding

judgment

(viz., its confirmation

order); and (4)

issue

was

of

law

or fact

necessary to its holding).

essential
_________

its resolution of

to

its judgment

that

(i.e.,

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


________________________________

B.
B.

Merits of Issue Preclusion Claim


Merits of Issue Preclusion Claim
________________________________

____________________

27(1982).8

8Monarch

Life argues that Ropes

judicata principles
________
therefore,

was

proceedings.

because it

not a

"party"

See, e.g.,
___ ____

& Gray cannot

filed no chapter
to the

rely on res
___

11 claim

and,

chapter

11 confirmation

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

or
__

either
______

collateral

estoppel).

basis for
that

to claim

preclusion

"res
___

decision was unclear,

judicata" and "collateral


________

less important than substance


of factual
Trust,
_____

F.2d

Executives' Ass'n
_________________
11

n.3 (1st

893,

898

Cir. 1993)

two doctrines).

are

(1st

Dennis v. Rhode Island Hosp.


______
___________________
Cir.

1984));

Railway Labor
______________

989 F.2d 9,

(noting confusion prevailing


v. Fireman's Fund Ins. Cos.,
________________________

87, 90 n.1 (1st Cir. 1984)

only one

estoppel"

v. Guilford Transp. Indus., Inc.,


_____________________________

labels); see also Fiumara


___ ____ _______

between

and observing

of parties' argumentation in light

circumstances) (citing

744

(i.e.,

See Grella, 42 F.3d at 30-31 (noting that


___ ______

bankruptcy court

labels

issue preclusion
_____ __________

over same

746 F.2d

(noting "distinct family resemblance"


Since Monarch

component "issue"

Life seeks to relitigate

arising from the

confirmation order

(viz.,

the

105(a)),

bankruptcy court's

jurisdiction

or

power under

the preclusion defense asserted by Ropes & Gray is more

exactly

characterized

as

collateral

estoppel

("issue

preclusion").
A
privy

party invoking issue preclusion need not show that it was


to

the first

Shore, 439 U.S.


_____

proceeding.

322, 326-28

See
___

Parklane Hosiery Co. v.


_____________________

(1979) (no

"mutuality of

rule); Blonder-Tongue Lab., 402 U.S. at 328 (same);


___________________
F.2d

Fiumara, 746
_______

at 92; cf. DiPinto v. Sperling, 9 F.3d 2, 4 (1st Cir. 1993)


___ _______
________

(Rhode Island law).

It need only

whom issue preclusion will


____ _____ __________ ____
litigate
F.2d

parties"

be applied had a fair


__ _______

the issue fully."

14, 16

"mutuality"

had

preclusion,

we

would have

supported by

opportunity to

(Massachusetts law

rule) (emphasis
court

against
_______

Kyricopoulos v. Town of Orleans, 967


____________
_______________

(1st Cir. 1992)

bankruptcy

show that "the party


_____

based

added).

Of

its

contempt

been free

the bankruptcy court

to

record.

dispenses with

course,

even if

ruling

affirm on
See
___

12

claim

any ground

La Electronica,
_______________

Inc. v. Capo-Roman (In re Electronica, Inc.), 995 F.2d


____
__________ ________________________
n.1 (1st Cir. 1993).

on

the

320, 321

1.
1.

"Same Issue"
"Same Issue"
__________

We must

sought

first identify the precise

to "relitigate"

in

its defense

issue Monarch Life

against Ropes

motion for civil contempt.

We have held that

105(a)

upon the bankruptcy

the

confers ample power

initiation

or continuation

nonbankruptcy forum

of

judicial

& Gray's

Bankruptcy Code

court to enjoin

proceedings in

against nondebtors during the

pendency of a

chapter 11 case,

actions

would

where the court reasonably concludes

entail

or

threaten

adverse

administration of the chapter 11 estate.

938 F.2d at 1474.

the

automatic

ostensibly

These injunctions

stay,

protects

creditor "grab-law"

See
___

see
___

only
____

debtor

Code

and

its

tactics after the "race


_____

dismissed, 463 U.S. 1247 (1983).


_________

may induce creditors

chapter

sometimes

11

debtor's

needed

to

protect

the

362(a),

which

property

from

to the courthouse."

1, 4-5 (1st Cir.),

Since the automatic stay

to refocus their recovery efforts

co-obligors,

on

See In re G.S.F. Corp.,


___ __________________

Austin v. Unarco Indus., Inc., 705 F.2d


______
____________________

cert.
_____

"impact"

serve simply as adjuncts to

Bankruptcy

the

that such

temporary

nondebtors

(e.g.,

upon the

injunction

is

corporate

debtor's principals and managing

should not be diverted

officers) whose time and energy

to collateral lawsuits and away

effort to reorganize the debtor.

see
___

Bankruptcy

Code

normally

lapse

confirmation

of the

chapter

chapter

11 case,

Like the automatic stay itself,

362(c),

injunctions

leaving

from the

however,

at

11 plan

the

and

the nondebtor

13

these

accessorial

latest

following

the closing

co-obligor once

of

the

again

exposed

to

pursuit

by

the

discharged

chapter

11

debtor's

creditors.

The more intricate

the

"jurisdictional" question raised by

confirmation order and contempt

whether

Congress

intended an

proceedings in this case is

outer

temporal

boundary on

availability of injunctive relief under Bankruptcy Code

Since

the

chapter

11 debtor

is

the

only entity

discharged upon confirmation of a chapter 11 plan, id.


___

its creditors usually

are free to pursue

against those undischarged

with

the chapter 11

105(a).

permanently
___________

1141(d),

all available remedies

entities which were obligated,

debtor, on a

the

prepetition debt.

along

See id.
___ ___

524(e) ("[D]ischarge of a debt of the debtor does not affect

the

liability of any other

entity

entity on, or the

for, such debt.").

bankruptcy

courts

effectively confer

11 debtor's

to

Whether

enter

property of any

the Code

permanent
_________

likewise empowers

injunctions
___________

de facto "discharge" relief


__ _____

co-obligors, and

if so, under

other

which

upon the chapter

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

courts hold

case law splits

that section

along two principal

105(a) does

not

permit a

lines.

Some

bankruptcy

court

permanently to

nondebtors,

since such

enjoin post-confirmation

an order

lawsuits against

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


__________

other grounds, 932


_____ _______

cumstances in

grant

success

of

592, 600-01 (10th Cir. 1990),

F.2d 898 (10th Cir. 1991).

these cases

did not

injunctive relief

of

the

chapter

Hardwoods, 885 F.2d at 626


_________

was in

11

suggest,

any

modified on
________ __

The factual cir-

however, that

sense integral

reorganization.

See
___

the

to the

American
________

(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

courts

facto
_____

have formulated

various

105(a)") (emphasis added).

tests for

determining when

"discharges" would not be ultra vires.


_____ _____

694, 702 (4th

cert. denied, 493 U.S. 959 (1989), cited with approval in


_____ ______
_____ ____ ________ __

In re G.S.F. Corp., 938 F.2d at


___________________

Inv. Fund, 168 B.R.


_________

cases).

1474-75; In re Master Mortgage


______________________

930, 935 (Bankr. W.D. Mo.

to enable

1994) (collecting

In extraordinary circumstances, it has been held that a

bankruptcy court can grant permanent

plan if,

de
__

See, e.g., Menard___ ____ _______

Sanford v. Mabey (In re A.H. Robins Co.), 880 F.2d


_______
_____ _____________________

Cir.),

These

the formulation

injunctive relief essential

and confirmation of

for example, nondebtors who

a reorganization

would otherwise contribute

15

to

funding the plan will

"protection"

from their

from

not settle their

potential post-confirmation

prepetition relationship with the

See, e.g., In re A.H. Robins Co., 880


___ ____ _____________________

have

taken into

mutual claims absent

consideration

overwhelmingly approved

plan contemplates full

chapter 11 debtor.

F.2d at 702.

whether (1)

the plan,

lawsuits arising

These courts

the creditors

with the injunction;

payment of all

have

(2) the

creditor claims; and

(3)

the

injunction

claimants.

would

affect

relatively

small

Id. at 698, 700-702; In re Master Mortgage,


___
_____________________

class

of

168 B.R.

at 935.

In this second line of

importance

to

"contributing"

the

fact

that

parties may

chapter 11 plan may have

provision

affording

nondebtors

who

chapter

holds

party,9

do

such

as

of

to

against

contingent

claim

no

injunctive

"protection"

to

directly to

the

contribute

if a

essential

forthcoming, and

incidental
__________

example,

claim

cooperation

have been

so-called

For

indirect

the

been practicable, absent an

not intend
___

11 plan.

an

not

cases, the courts have ascribed

non-"contributing" party

would-be

for

"contributing"

indemnification

or

contribution, the potential

accept, or

"contributing" party may

contribute to, the

chapter 11 plan

decline to

in circumstances

____________________

9Ropes

&

Gray

argues

that it

"contributed"

to

Monarch

Capital's chapter 11 plan to the extent it held contingent claims


for

indemnification

which
claim.
term

it

or

contribution against

effectively "released"
See supra
___ _____

note 2.

by

refraining

For present

"contributing" parties is used to

Monarch

Capital,

from filing

purposes, however, the

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

re A.H. Robins, 880


_______________

in a post-confirmation lawsuit.

F.2d at 702.

In such circumstances, these

courts have

afforded the "incidental protection"

injunction

by

enjoining

noncontributor in order to
______________

See In
___ __

"direct"

actions

of a permanent

against
_______

the
___

protect the contributor from exposure

to indirect liability.

2.
2.

Actual Litigation
Actual Litigation
_________________

Monarch Life

the confirmation

represents that it had

proceedings that any party

section 105(a) enabled

no inkling during

was contending that

the bankruptcy court to

grant the broad-

based

"incidental"

"noncontributing"

injunctive

relief

required

party such as Ropes

to

& Gray.

protect

In a memorandum

submitted prior to confirmation by the 235 Banks, however, it was


_____ __ ____________

plainly stated that

the Injunction must


only

to parties

by necessity extend

like the

[Monarch Life] Receiver


to,

who are

or the

signatories

and gave actual consideration under, the

Settlement

Agreement,

but

nonsignatory

parties

such

directors of

those parties

consideration
and

235 Banks

not

the

will

releases

also

the

worthless if the nonsignatories


to be

sued, since certain

those

as officers
. .

be seriously
granted

to

and
That

diminished
signatories
can continue

signatory parties

would be directly or indirectly liable to the


________ __ __________ ______ __ ___
parties
_______

being
_____

against

the

destructive

sued.
____

Consequently, actions

nonsignatories
to

the

settlement

against the signatories.

will
as

be

as

actions

(Emphasis added.)

The 235 Banks

to the problem posed

unless

memorandum repeatedly adverted

for both "signatories" and "nonsignatories"

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

memorandum does not establish

"actually

litigated,"

within

the 235

that the section 105(a) issue

the

meaning

of

the

Banks

was

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

receiver

235 Banks and

Monarch Life

through its

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
____ _____

disagree with the litigation

note

3.

Monarch Life

stance taken by its

may

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

fact benefited

235 Banks'

ntal"

future

nor indeed that it has not in

from the protection afforded in response to the

invitation to confer the

protection,

upon

lawsuits "arising

all

from

broadest available "incide-

noncontributing

or related

[Monarch Capital] or affecting or [sic]

Capital]."

Thus,

we cannot

simply

18

to

co-obligors, from

a claim

against

any property of [Monarch

assume that

no

protected

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

plausibly

contend that

Capital's abuse of the STIP,

Ropes &

Gray's alleged

it cannot

involvement, as

Monarch Capital's counsel during the relevant time period, was so

far removed from

have

weighed

Monarch Life's contemplation that it

the strategic

advantages

advocating "incidental" injunctive

and

could not

risks involved

relief prior to

in

confirmation

of the Plan.

See,
___

602, 605-06, 610

e.g., DeCosta v. Viacom Int'l Inc.,


____ _______
_________________

(1st Cir. 1992) (court may

collateral estoppel

in

where there has been

981 F.2d

decide not to apply

a "significant" change

the law or factual circumstances since the first judgment was

entered; and finding no such "significant change"), cert. denied,


____ ______

113 S. Ct.

preclude

might

3039 (1993).

the application

have

proceeding.

altered the
_______

See
___

(1979); EEOC v.
____

1995).

proposed

Moreover,

of

changed circumstances

collateral estoppel

decision the

Montana v.
_______

court

United States,
_____________

American Airlines,
_________________

only if

will

they

made in

the first

440 U.S.

147, 159

48 F.3d 164,

167 (5th

Cir.

And, Monarch Life cannot establish that it would not have

precisely the

same

injunction, whereby

it agreed

to

release a number of viable causes of action against third parties

"arising

from" claims

known the particulars

Gray in

June 1992.

against Monarch

of its malpractice

Capital, even if

it had

claim against Ropes

&

Cf. Fiumara v. Fireman's Fund Ins. Cos., 746


___ _______
________________________

19

F.2d 87, 91-92 (1st

which define

Cir. 1984) (noting

that "all of the

the [subsequent] federal complaint

events

occurred in the

period before the [first proceeding] and were at

hinted

at during

litigated as

that

hotly

trial," and

as plaintiff

"[i]f

would now

least generally

they were

not

wish, they

then

plainly

could have been").

Finally,

component in

that

and most importantly, the "actual litigation"

the collateral

Monarch Life

be shown

estoppel analysis does

not require

to have

broad-based

advocated the

"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

with the 235

402

Banks' legal contentions.

U.S. at 328

(in order to further

and judicial economy, collateral

it disagreed

See Blonder-Tongue Lab.,


___ __________________

the interests of finality

estoppel doctrine requires that

litigant be afforded "one full and

resolution" of the

issue).

"jurisdictional" issue

memorandum prior to

fair opportunity for judicial

Therefore, since the

section 105(a)

was expressly broached in

the 235 Banks'

confirmation of the

citation to decisions such as

Plan, and by

prominent

A.H. Robins, supra, Monarch Life's


___________ _____

silence alone satisfied the second criterion under the collateral

estoppel analysis.10
____________________

10Monarch

Life argues

that

interpreted as

enjoining only the


____

impleading Plan

contributors, not

Massachusetts Superior
noncontributing

Ropes &

(citing Pacor, Inc.


___________
Even if

the

105(a) order

Monarch Life's initiation

See Brief
___

v. Higgins,
_______

this "severability"

in

claim against the

for Appellant

743 F.2d 984

(3d Cir.

contention had merit,

20

be

noncontributors' cross-claims

Court of its principal


Gray.

must

at 21

1984)).

the district

3.
3.

Actual Resolution
Actual Resolution
_________________

Monarch Life

to

whether

the

argues that a genuine

"ambiguous"

order

of

dispute remains as

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

interpretation of ambiguous injunction not

ed));

see
___

may challenge

previously interpret-

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

contempt order.

provision

in

asserts a two-pronged attack

Its first line

the confirmation

encompass

Ropes

bankruptcy

courts

&

Gray's

have

no
__

against the

of attack is that the injunctive

order

cannot

contingent

power
_____

to

be "expanded"

obligations

enter

such

to

because

broad-based

injunctions

considered

under

section

105(a).

conclusive answer

estoppel defense

for Monarch

to

However,

Ropes

Life to

it

& Gray's

say that it

cannot

be

collateral

subjectively
____________

____________________

court

properly noted that it

failure to
See
___

had been waived

by Monarch Life's

raise it in the bankruptcy court contempt proceeding.

In re Monarch Capital Corp., 173


_____________________________

B.R. at

45 (issues

raised before the bankruptcy

court are deemed waived

(citing

v. Kahn
____

Juniper Dev. Group


___________________

not

on appeal)

(In re Hemingway Transp.,


_________________________

Inc.), 993 F.2d 915, 935 (1st Cir.), cert. denied, 114 S. Ct. 303
____
_____ ______
(1993)).

21

construed the confirmation order

and context warranted.

See Piccicuto, 39 F.3d at


___ _________

argument that prior judgment

loose language").

evaluated

Rather,

order

itself.

41 (rejecting

was ambiguous and used "regrettably

Monarch Life's construction

against the objective

confirmation

more narrowly than its language

import of

As

the

must be

the language

confirmation

dispositive, it is set out at length in the appendix.

in the

order

is

See infra
___ _____

Appendix pp. i-iii.

Monarch

the

Life mischaracterizes

confirmation order as ambiguity.


_________

the obvious
_______

Even a

breadth of
_______

cursory review of

the confirmation

criterion

order demonstrates beyond doubt

that the third

in the collateral estoppel analysis has been met.

Grella, 42 F.3d
______

at 30-31

(issue may be

actually litigated

See
___

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

court distinguished American Hardwoods11


___________________

enjoined action had been

contributed to the
___________

the bankruptcy

a case in

against a nondebtor who would


_____

chapter 11 plan

and then

which the

not have
___ ____

stated that "the


___

____________________

11Monarch Life points also to a decision entered


an

unrelated adversary proceeding,

denied

the chapter

11

earlier in

wherein the bankruptcy court

trustee's motion

to

enjoin a

suit

by

Monarch Capital shareholders against


that decision

Monarch Life.

probative because it noted

It considers

the bankruptcy court's

concern that such an injunction might exceed the limitations


forth
No.

in American Hardwoods.
__________________
91-41379-JFQ (Bankr.

agree.
part of
plan.

First,

See In re Monarch Capital Corp.,


___ ____________________________

D. Mass.

the proposed

Apr. 8,

the

1992).

injunction involved

thus could not be "essential" to


Further,

set

bankruptcy court

We do

not

there was

not

the reorganization

expressly

distinguished

American Hardwoods in its final order of confirmation.


__________________

22

persons protected
_______ _________

by the [Monarch Capital]

Injunction have con-

tributed substantial

added.)

the Plan

. .

. ."

(Emphasis

But the bankruptcy court did not say that Plan contribu-

tors, such

entities

amounts to

as the

235 Banks

"protected" by the

this injunctive protection was

nent injunction.

and

Monarch Life,

injunction.

were the

Rather, it

only
____

said that

the reason for entering a


______

perma-

Moreover, in distinguishing American Hardwoods,


__________________

where protection for contributors was not at issue, the bankrupt___

cy

court cited

Robins, supra
______ _____

holding that

with

(and provided

decisions

like

A.H.
____

plain parenthetical descriptions)

section 105(a) empowers bankruptcy

permanent injunctions

directly
________

approval several

not only against

courts to grant

actions asserting claims

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

Plan contributors

court actions.

noncontributors who

might

as third-party defendants in

The bankruptcy

court

otherwise implead

subsequent state

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

creditors

overwhelmingly had approved

See infra
___ _____

Appendix at p. ii.

eye

to the

plain

import of

(2)

Monarch

the injunctive provision.

Monarch Life cannot

the

confirmation order, then under the

Capital's

turn a blind

injunctive provision

guise of an alleged

in

the

"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

ciently broad to confer "incidental"

ing

parties like Ropes &

Gray.12

order was

suffi-

protection to noncontribut-

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 confirmation order is entitled to same
courts

construing

Retirement Trust
________________
Inc.), 8 F.3d
____

their
v.

own

deference as generally accorded


judgments);

William B. Schnach
____________________

Unified Capital Corp.


______________________

720, 721-22 (10th

(In re Bono Dev.,


__________________

Cir. 1993) (same;

bankruptcy court's "superpriority" order);

interpreting

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.

construing bankruptcy court's order approving


of Orange-Brevard, Inc.
________________________
Orange-Brevard, Inc.),
_____________________

v.

(same; confirmation order); see


___

(noting that district

sale); Ranch House


___________

Gluckstern (In re Ranch House of


__________ _______________________

773 F.2d

Anel Eng'g Indus., Inc., 693


_________________________

1988) (same;

1166,

1168

(11th Cir.

1985)

also generally Farmhand, Inc. v.


____ _________ ______________
F.2d 1140,

1146 (5th

Cir. 1982)

courts are entitled to deference in inter-

24

ruptcy

court was

confirmation

determining

directly engaged in

proceedings and

had the

the give-and-take

better vantage

whether the parties had been

"jurisdictional" issue,

we likewise

of the

point for

fairly apprised of the

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

position to

the case from

its inception

is in

clarify any apparent inconsistencies

the best

in the court's

rulings."); supra Section II.B.2.


_____

Notwithstanding the numerous

Life

elected

provision as

to treat

ambiguity.

the

obvious breadth

The record

that the bankruptcy court's

warning signals,

of

Monarch

the injunctive

remains clear, nonetheless,

"jurisdiction" to enjoin enforcement

of Monarch Life's claims against the noncontributing Ropes & Gray

was

actually litigated and

that Monarch Life

quired, but

failed, to object

appeal from

the section 105(a) injunctive

it.

4.
4.

Essentiality
Essentiality
____________

therefore was re-

to the confirmation

order and/or

provision included in

It follows, a fortiori, from our determination that the


_ ________

confirmation order included an

bankruptcy court's ruling

"incidental" injunction, that the

on its

section 105(a)

"jurisdiction"

____________________

preting own

orders); Securities and Exch. Comm'n v.


____________________________

F.2d 679, 681 (2d

Cir. 1976) (same), cert. denied,


_____ ______

(1977).

25

Sloan, 535
_____

430 U.S. 966

was essential to the effectiveness and validity of the injunctive

provision.

See
___

Stoll,
_____

305 U.S.

rendering a

judgment tacitly,

at

171-72 ("Every

if not expressly,

court

in

determines its

jurisdiction over . . . the subject matter.").

III
III

CONCLUSION
CONCLUSION
__________

We

therefore hold

court's power to enter

precluded,

section

the issue

of the

bankruptcy

its so-called "incidental" injunction was

having been conclusively resolved in the confirmation

order which Monarch Life

there is

that

neither opposed nor appealed.

conflicting authority on the

105(a), the

confirmation

Though

"jurisdictional" reach of

order cited

precedent for

broad-based "incidental"

(Second) of Judgments
_____________________

invoke

collateral

incorrect").

injunctive provision.

29 cmt.

estoppel

if

Cf. Restatement
___ ___________

j (1980) (court

may refuse

first

was

judgment

"patently

Accordingly, Monarch Life cannot now argue that the

confirmation order is not subject to this broad construction.

express

to

no view on the soundness of

confirmation order, nor on

Plan proposed by

We

the precedents cited in the

their applicability to the particular

Monarch Life.13

The proper

recourse for

ad-

____________________

13Ropes
refusal

to

contempt.

& Gray
award it

cross-appeals from
compensatory

the bankruptcy

damages

court's

for Monarch

Life's

See Brief for Appellee at 48 (citing Perker v.


___
______

United
______

States, 153 F.2d 66, 70 (1st Cir. 1946) (noting that "complainant
______
is entitled
imposing a

as a matter of

right to an order

compensatory fine")).

in civil contempt

As the district

court noted,

however, the level of


contempt
no

specificity needed to ground a

is not susceptible to precise

finding of

quantification.

We find

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,

confirmation

the

lawsuits

confirmation

"arising

from"

order enjoined

or

all

"related to"

post-

claims

against Monarch

Capital.

against Ropes & Gray

See supra
___ _____

We

complaint filed

from" Monarch

agree with

Monarch

by Monarch Capital and Ropes

to abuse the STIP account at

Capital.

The

in Massachusetts Superior Court by

Life alleges a joint scheme

claim "arising

p. 6.

the

Monarch Life's expense

Life's STIP claim

district court

& Gray

plainly a

against Monarch

that

it was

not

unreasonable

to expect that Ropes & Gray might attempt to assert

cross-claims

against parties

Capital Plan,

or cross-claims

Monarch Capital's property in

rect transferee[s]"

who

"contributed" to

which

ultimately would

"affect"

the hands of its "direct

or indi-

or "successor[s] in interest."

6; see also In re Monarch Capital Corp., 173 B.R.


___ ____ ___________________________

ing

the Monarch

See supra p.
___ _____

at 45 (reject-

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

injunction also "protects" Ropes &

academic whether

the

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.


Johnston Envtl. Corp. v. Knight
______________________
______

(In re Goodman),
_____________

620 (9th Cir. 1993) (noting that bankruptcy court


to

award no damages

if it finds

gious").

27

See, e.g.,
___ ____

991 F.2d 613,

has discretion

contempt insufficiently "egre-

APPENDIX
APPENDIX
________

Section

105 of

the

Bankruptcy

Code grants

the

Court broad equitable power to issue any order, process


or judgment
out

that is necessary or

the provisions

Investment Co.,
______________
Menard-Sanford v.
______________

of Title

11.

31 Bankr. 599, 601

appropriate to carry
In re Old Orchard
__________________
(W.D. Mich. 1983);

Mabey (In re A.H. Robins Co.), 880


_____ _______________________

F.2d 694, 702 (4th Cir. 1989), cert. denied, 110 S. Ct.
_____ ______
376

(1989) (affirming

enjoin
where

power

of

bankruptcy court

to

suits permanently against nondebtors in a plan,


there

existed

certain

indemnification

rights

against the debtor); In re Energy Co-op, Inc., 886 F.2d


________________________

921 (7th Cir. 1989) (permanent injunction issued pursuant to

settlement agreement); MacArthur Co.


_____________

v. Johns______

Manville Corp. (In re Johns-Manville Corp.) 837 F.2d 89


______________ __________________________
(2d

Cir.

1988), cert.
_____

(permanent injunction
against an insurer
in a

denied,
______
may

488

be issued

Partnership,
___________
(judgment

(1988)

against

actions

as part of settlement

chapter 11 plan notwithstanding

impermissibly

U.S. 868

claims that this

discharged a nondebtor);
70 Bankr.

creditor

696

(Bankr.

enjoined

from

incorporated

see In re CCA
___ __________
C.D. Cal.

enforcing

1985)
claims

against debtor's individual partners).

Section 105 grants


to

enjoin

which

actions

bankruptcy courts "ample power

excepted from

might interfere

in the

whether in a liquidation

the

automatic stay

rehabilitative process,

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

to

extend stays

which

will

have an

ability to formulate a

enjoin a
adverse

variety of
impact

proceedings

on the

Chapter 11 plan."

debtor's

In re Johns
____________

Manville Corp., 40 Bankr. 219, 226 (S.D.N.Y. 1984).


______________

Under
issue

section 105,

injunctions

which

nondebtor third parties


would

this Court

materially and

creditor recoveries
See Codfish Corp. v.
___ ______________

has the

power to

prevent proceedings

against

where pursuit of such

actions

adversely affect
under

a plan

of

the

estate or

reorganization.

FDIC (In re Codfish Corp.),


____ ____________________

B.R. 132, 135 (Bankr. D.P.R. 1988) (injunctions


priate

where there

"that the estate


affected by

is clear

and convincing

would be substantially

97

approevidence

and adversely

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)

debtor's estate required

(adverse impact on

for injunction against

third

party actions).

This Court
and issue

has the power to

approve the releases

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

the entire settlement and hence


parties being free

from the very

take effect, where

the plan hinges on the


claims that the

junction would prohibit, courts will order


tive relief.
880 F.2d

See,
___

694 (4th

in-

the injunc-

e.g., In re A.H. Robins Co., Inc.,


____ ____________________________
Cir.), cert.
_____

(1989); MacArthur Co., 837 F.2d


_____________

denied, 493 U.S.


______

959

[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.
_______
1990);

UNR Indus., Inc.,


________________

124 B.R. 268

(N.D. Ill.

Shoaf, 815
_____

F.2d 1046,

Republic Supply Co. v.


____________________

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.

were protected

by the

was not

shown to

which

the Ninth Circuit relies, does

nondebtors

making

where as here,

notes that

be essential

The

the entry

of injunctive
plan

plan, although

contribution to that plan.

plan.

preclude

court also

case, guarantors

provisions of a

they apparently provided no


The injunction

In that

to the

section 524(e),

on

not by its terms

relief in

contributions,

favor of

particularly

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 get these
basis
Plan.

to the Injunction in order

payments, and the Injunction

on which

to build,

confirm and

is the only

effectuate the

Recent

cases

following

American Hardwoods
___________________

distinguishable from the facts


grounds.

See, e.g.,
___ ____

are

of this case on similar

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
issue

of the debtor.

that case, the

fees at

were owed by a nondebtor third party who did not

contribute
allowed

In

to the

debtor's

plan.

The attorney

to collect against that third party.

Rohnert Park Auto Parts, Inc.,


______________________________

ii

was

In In re
_____

113 B.R. 610 (9th Cir.

BAP 1990), a creditor was time barred from asserting


claim

in the

enjoined

by

debtor's bankruptcy.
the

bankruptcy

court

against a nondebtor third party who


debt.

creditor was

from

collecting

was liable for the

The [court] did not uphold that

However, the
to

The

plan provision.

nondebtor third party had not contributed

the funding

of the

shown essential to

plan, nor

that plan.

In

was

the injunction

this case, however,

the persons protected by the Injunction are the principal contributors


persons

would not

of consideration to the
contribute without

Plan.

Those

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

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