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Extra Stern

posted by Stephen Lubben

For those of you on the West Coast and others who are not obssessing about the huricane, I give you some further thoughts on the Supreme Court's decision in Stern v. Marshall, this time in the context of the Inkeeper's chapter 11 case. Up now at Dealbook.

Comments

As is typical in this context, the contract at issue in Innkeepers contains the following language (at page 5) so, coupled with the retention of jurisdiction language in the confirmed plan, which the buyer did not contest, I don't think there is a Stern issue:

Jurisdiction; Waiver of Jury Trial. Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of
the Innkeepers Bankruptcy Court, in any action or proceeding arising out of or relating to this
Amended and Restated Commitment Letter, the Term Sheet, the other Investment Documents, the
Fixed/Floating Rate Auction, and the construction and enforcement of the Bidding Procedures Order,
including the qualification of bids thereunder. Each of the parties acknowledges and agrees that any controversy which may arise under this Amended and Restated Commitment Letter, the Amended and Restated Term Sheet, the other Investment Documents, the Fixed/Floating Rate Auction or the Bidding Procedures Order is likely to involve complicated and difficult issues, and therefore each such party hereby irrevocably and unconditionally waives any right such party may have to a trial by jury in respect of any litigation directly or indirectly arising out of or relating to (a) this Amended and Restated Commitment Letter, the Amended and Restated Term Sheet, or the other Investment Documents, (b) the breach, termination or validity of this Amended and Restated Commitment Letter, the Amended and Restated Term Sheet, the other Investment Documents, (c) the Fixed/Floating Rate Auction, or (d) the construction and enforcement of the Bidding Procedures Order, including the qualification of bids thereunder.

Does Stern v Marshall put an end to anti-successor liability injunctions in non-plan sales?
How can the bk court enjoin what it lacks jurisdiction to hear?

Re Robert's question: I don't think Stern itself precludes the use of the court's power under 363(f). A further case might.

Thank you Stephen for the comment.

I am appealing this very issue, ie. does the bankruptcy court’s “all writs” power create authority to enjoin successor liability actions which would attempt to recover claims stripped off assets sold pursuant to 363(f).

I filed my successor liability action in state court, which was immediately removed to bankruptcy court and dismissed.

Interestingly, on removal the buyer and the bk court avoided arguing the validity or application of the anti-successor liability injunction in the sale order and instead argued that 363(f) alone bars my state court action.

Fortunately, I found Stern v Marshall in time to seek reconsideration, which the bk court denied without comment.

My case represents yet an even broader application of 363(f) to strip unsecured claims off assets without a valid injunction, adequate protection, or discharge extinguishing those claims.

I think I will stay clear of the BAP on this appeal and instead ask the “guardian of individual liberty” to enforce the High Court’s curtailment of bankruptcy court subject matter jurisdiction.

The comments to this entry are closed.

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