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precludes bribery, extortion and any undisclosed compensation in connection with soliciting votes on a plan. If the law referred to must be a law that forbids the "means" of the "proposal" of a plan, it is difficult to determine what other kinds of law might be included, particularly since most securities laws are excluded by Code. §§ 1125(e) &1145.43 Possibly antitrust laws that would preclude a conspiracy that could be effectuated through a plan might be included, or other laws regulating the relationship between the proponent and the debtor.44
State laws governing corporate or partnership structure probably should not be included because they relate to the substance of a plan rather than the means of its proposal, and the substantive restructuring should be governed by Chapter 11 rather than state law.45
Payments made or promised for services and expenses in or in connection with the case or plan or incident to the case must be approved by the court or subject to its approval as reasonable, if such payments are made or promised by the plan proponent, by the debtor, or by a person issuing securities or acquiring property under the plan. § 1129(a)(4). The specific confirmation requirement of court approval rather than just disclosure became effective with the 1984 amendments. The requirement is not limited to payments from assets of the estate, but requires court approval of any payments by the proponent, the debtor or by persons issuing securities or acquiring property under the plan.46 The Fifth Circuit has held this provision may apply to payment of expenses incurred in the confirmation process, even if paid from non-estate funds, but after-the-fact court approval is sufficient.47 The provision
2002).
43
In re Sovereign Group 1984-21 Ltd., 88 B.R. 325, 328 & 331 (Bankr. D. Colo. 1988)("Section 1129(a) (3) relates to the manner in which a plan is proposed and not its substantive provisions.").
44
See, e.g., In re Texas Extrusion Corp., 844 F.2d 1142, 1160 (5th Cir. 1988) (antitrust conspiracy claims found factually unsupported); In re Koelbl, 751 F.2d 137, 139 (2d Cir. 1984) (although "forbidden by law" includes state law, the court found insufficient evidence that the plan proponent, an employee of the debtor, violated the New York law of an employee's duty of loyalty to his employer).
45
See, e.g., In re Acequia, 787 F.2d 1352, 1360 (9th Cir. 1986)(issue of state law governing shareholder voting rights not reached). Cf. In re Sovereign Group 1984-21, Ltd., 88 B.R. 325 (D. Colo. 1988) (although the court rejected the argument that § 1129(a) (3) requires compliance with substantive partnership law, it nevertheless held that partnership law had to be complied with as to replacement of a general partner by a plan of reorganization, rejecting the argument that § 1129 preempts any contrary state law).
46
In re Chapel Gate Apartments, Ltd., 64 B.R. 569, 573 (Bankr. N.D. Tex. 1986); In re Southern Industrial Banking Corporation, 41 B.R. 606, 610-11 (Bankr. E.D. Tenn. 1984).
47
In re Cajun Elec. Power Coop, 150 F.3d 503 (5th Cir. 1998).
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