An opinion by Bankruptcy Judge Carl L. Bucki might be read, incorrectly, to mean that Purdue precludes preliminary injunctions stopping suits against nondebtors.
There has not been much written or said about the effect of a class action of creditors. Can a class action obtain a class vote on a chapter 11 plan that supplants the votes of individual creditors? If so, then does class counsel and the class representative supplant the creditors committee and its counsel as the party with whom the debtor must negotiate a consensual plan? Does it matter if the class action was pending prepetition or whether a new class action was commenced as an adversary proceeding under the Bankruptcy Rules? Does it matter if the class is or was certified? What about a defendant class (as the debtor sought to be formed among parties sued by the debtor in the MA Telex Free case), rather than a plaintiff class - does that matter to any of these issues?
I was involved in a chapter 11 case representing a putative class. There is very little law on this subject. Academically, there is some analysis fo the similarities between a non-bankruptcy class action case and a bankruptcy case, but very little in the way of case law. Going forward, I always look for opportunities to assert a class action to test some or all of these issues, particularly whether the class can file a class claim.
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In In re Smith, [1] the Third Circuit reminded consumer bankruptcy practitioners of the wrath of res judicata. The debtor owned an encumbered rental property with an assignment of rents to her mortgage lender. The debtor’s proposed chapter 13 plan included a cramdown of the mortgage lender’s claim that reduced the secured portion of the claim from $150,000 to $95,000 — the value of the collateral. The plan further provided that the payment of rents would pay down the secured portion of the lender’s claim.
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The Second Circuit shows how a properly structured leveraged refinancing avoids attack as a fraudulent transfer despite the Supreme Court’s effort at narrowing the ‘safe harbor.’
