Harper v. The Oversight Committee (In re Conco, Inc.)

Case Type:
Case Status:
16-6166 (6th Circuit, Apr 28,2017) Published
Concluding that the mere interpretation of a confirmed plan by a bankruptcy constitute did not constitute either a modification of the confirmed chapter 11 plan or the application of the Bankruptcy Code, the Court of Appeals held that the Bankruptcy Court did not abuse its discretion in concluding that the plan prohibited the sale of equity interests in the debtor for a stated period of time.
Procedural context:
Stock owners sought a declaration as to whether a confirmed chapter 11 plan barred sale of the stock of the reorganized debtor post confirmation. The bankruptcy court, interpreting the language of the plan, concluded that it did. The district court affirmed and appeal was taken by the stock owners and proposed stock purchaser.
In the course of Conco's chapter 11 case, Delfasco made several attempts to purchase control of Conco's equity. Although the Creditor Committee initially raised an objection under the absolute priority rule to Conco's proposed chapter 11 plan, they withdrew their objection after Conco significantly increased the proposed distribution to creditors, which included a portion of the company's net operating profit for three years after confirmation. Following plan confirmation, trustees of the company's Employee Stock Option Plan (ESOP) sought clarification whether the plan barred the sale of the ESOP-owned stock to Delfasco. The Court of Appeals disagreed with the bankruptcy court's conclusion that the language of the plan was unambiguous, but nevertheless concluded that the bankruptcy court correctly interpreted the Creditor Committee's abandonment of its absolute priority rule objection to demonstrate the parties' intent not to permit the sale of the company's stock to a third party.
Daughtrey, Sutton, and Donald.

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