CONFIRMING A CHAPTER 11 PLAN

A. Disclosure and Voting

Acceptances or rejections of a plan may not be solicited until after creditors have been provided a written disclosure statement that has been approved by the court, after notice and hearing, as containing adequate information.¹ § 1125(b). One court has held that a creditor violated the anti-solicitation provision of § 1125(b) by attaching a draft plan and disclosure statement to its objection to the debtor's disclosure statement and then serving such objection on all creditors.² Because no disclosure statement had yet been approved, the central issue was whether the mere distribution of a draft alternative plan constituted a "solicitation" for purposes of § 1125(b). The opinion recognized that "the leading case" is Century Glove,³ in which the Third Circuit held that only "a specific request for an official vote" constitutes a solicitation for purposes of § 1125, and that a majority of courts have adopted that narrow definition.⁴ The court rejected that narrow definition because it regarded it as inconsistent with the policy of § 1121 to "allow the debtor a reasonable time to obtain confirmation of a plan without the threat of a competing plan."⁵ In essence, the court held that during exclusivity, parties opposing the debtor's plan should be limited to "pointing out failings which they perceive to be present in the debtor's plan."⁶ Once one disclosure

For recommended contents of disclosure statements, see In re Malek, 35 B.R. 443 (Bankr. E.D. Mich. 1983); In re A.C. Williams Co., 25 B.R. 173 (Bankr. N.D. Ohio 1982). Although §§ 1125(d) &

(e) exempt this disclosure from compliance with securities laws, it may not provide immunity from allegations of fraud or other securities laws. See, e.g., In re Public Service Company of New Hampshire, 43 F.3d 763 (1st Cir. 1995); Jacobsen v. AEG Capital Corp., 50 F.3d 1493 (9th Cir. 1995).

² In re Clamp-All Corporation, 233 B.R. 198 (Bankr. D. Mass. 1999).

³ Century Glove v. First American Bank of New York, 860 F.2d 94 (3d Cir. 1988).

⁴ 233 B.R. at 205.

⁵ Id. at 207-08.

⁶ The court noted that finding an appropriate remedy was even "more problematic." Id. at 209. After rejecting both contempt sanctions and disqualificaitons of the creditor's vote on the debtor's plan, the court concluded that the remedy best designed to rectify the wrong was to equitably subordinate the creditor's claims to all other noninsider unsecured claims, noting that "the court's expression of disapproval" of the creditor's interference "with a negotiation between the debtor and its credtors" "must be unequivocal." Id. at 211.

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