In Re: Continental Airlines, Inc.

Opinions of the United
2000 Decisions States Court of Appeals
for the Third Circuit

2-1-2000

In Re: Continental Airlines, Inc.
Precedential or Non-Precedential:

Docket 98-5509

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Filed February 1, 2000

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 98-5509

IN RE: CONTINENTAL AIRLINES and
CONTINENTAL AIRLINES HOLDINGS, INC.,
Debtors

M. BARNETT GILLMAN; ALAN FREBERG; FRANK
DEBORA; STUART E. WECHSLER; ANDREW D.
FRIEDMAN; WECHSLER SKIRNICK HARWOOD HALEBIAN
& FEFFER; ZACHARY ALAN STARR; GOODKIND
LABATON & RUDOFF

v.

CONTINENTAL AIRLINES;
CONTINENTAL AIR HOLDINGS, INC.

THOMAS E. ROSS, Trustee

M. Barnett Gillman, Alan Freberg, Frank Debora
*Frank Sachs and *Lloyd Pressel Co., Inc.
Appellants

*(Pursuant to F.R.A.P. 12a)

On Appeal from the United States District Court
for the District of Delaware
(D.C. Civil No. 93-cv-00319)
(District Judge: The Honorable Joseph J. Farnan, Jr.)

Argued: September 13, 1999

Before: GREENBERG, SCIRICA, and RENDELL,
Circuit Judges

(Filed: February 1, 2000)

Andrew D. Friedman, Esq.
[ARGUED]
Wechsler, Harwood, Halebian
& Feffer
488 Madison Avenue
New York, NY 10022
Counsel for Appellants

Robert S. Brady, Esq. [ARGUED]
 Laura D. Jones, Esq.
Young, Conaway, Stargatt & Taylor
P. O. Box 391
Rodney Square North, 11th Floor
Wilmington, DE 19899-0391
Counsel for Appellee

OPINION OF THE COURT

RENDELL, Circuit Judge:

In this bankruptcy-related appeal, we consider the
validity of a provision in Continental Airlines' plan of
reorganization that released and permanently enjoined
shareholder lawsuits against certain of Continental Airlines'
present and former directors and officers who were not
themselves in bankruptcy. The Bankruptcy Court made no
specific findings regarding its jurisdiction, substantive legal
authority, or factual basis to justify this provision. The
District Court nonetheless upheld the provision. We will
reject Continental Airlines' contention that claim preclusion
and the doctrine of equitable mootness prevent us from
considering the merits of this appeal. We will reverse the
District Court's order approving the validity of this
provision, which is legally and factually insupportable.

I.

Appellants are plaintiffs in several securities fraud class
action lawsuits brought against directors and officers of
Continental Airlines Holdings, Inc. Plaintiffs' class actions
allege that the D&O defendants caused Continental Airlines
Holdings to issue false and misleading statements of

2

material facts in violation of, inter alia, section 10(b) of the
Securities Exchange Act of 1934, Rule 10b-5, and common
law. On December 3, 1990, Continental Holdings and
affiliated entities ("Continental Debtors") filed petitions for
relief under chapter 11 of the Bankruptcy Code in the
District of Delaware.1

The nature of this appeal requires that we provide a
detailed summary of the chain of events in the bankruptcy
case. The Continental Debtors brought an adversary
proceeding on January 17, 1991 to prevent Plaintiffs' class
actions against the non-debtor D&O defendants from
interfering with the Continental Debtors' reorganization
process. The Bankruptcy Court temporarily enjoined
Plaintiffs' pursuit of their class actions on February 2,
1991. That order was affirmed on appeal on June 28, 1993.
See In re Continental Airlines, 177 B.R. 475 (D. Del. 1993).
The District Court decision noted that the injunction could
have been more narrowly crafted to permit some portion of
Plaintiffs' class actions to continue, but Plaintiffs did not
avail themselves of the opportunity to participate in the
drafting of the Bankruptcy Court order. Id. at 482.
Plaintiffs' class actions remained pending, but inactive,
during the reorganization proceedings.

On December 1, 1992, the Bankruptcy Court approved a
settlement between the Continental Debtors, their D&Os,
and D&O liability insurers. See Supp. App. B33, B43.
Under this Tripartite Settlement, "The Debtors, Insureds
and the Insurers will provide releases to each other." Supp.
App. 36. The Continental Debtors released "any and all
claims, demands, and causes of action of any kind . . .
against the present or former officers or directors of the
_________________________________________________________________

1. The Continental Debtors are not named defendants in Plaintiffs' class
actions. Some Plaintiffs nonetheless filed a class "proof of claim" on the
basis of their class action complaints in the Continental Airlines
Holdings bankruptcy case. The proof of claim states that the amount of
the claim is "unspecified, but in excess of several million dollars."
Joint

App. A528 - A530. A memorandum supplementing the proof of claim
form states that "[t]he debtors were, at the time of the filing of the
petition initiating this case, and are still liable to the claimants and
the
class, in a sum not presently determinable, but believed to exceed
$5,000,000." Id.

3

Continental Debtors . . . which arose prior to the date of
this settlement and release." Supp. App. B47. The D&O
liability insurers were released from "any and all demands,
claims, and causes of action . . . that they or any of them
had, now have, or may have against the Insurers" in
exchange for providing $5 million to the Continental
Debtors to settle the Continental Debtors' claims and
potential claims against their D&Os. Supp. App. B57 - B58.
In turn, the D&Os released their claims against the
Continental Debtors. Supp. App. 63-64. The Tripartite
Settlement was binding "upon the signatories hereto and all
other insured persons and entities under the Policies, and
their respective successors, assigns, heirs, and estates."
Supp. App. B60. This Tripartite Settlement makes no
reference to Plaintiffs' class actions, and Plaintiffs did not
object to the settlement or appeal the order approving the
settlement.

The Continental Debtors later filed a plan of
reorganization, amended several times, which contained a
provision releasing and permanently enjoining a broader
range of claims, including Plaintiffs' class actions against
the non-debtor D&O defendants:

12.4 Release of Certain Claims and Actions

(a) On the Effective Date, in order to further the
rehabilitation of the Debtors, any and all claims and
causes of action, now existing or hereafter arising,
against any present or former officer or director of any
of the Debtors or any of the Debtors' professional
advisors arising out of or related to such Person's
actions or omissions to act in his or her capacity as an
officer or director of the Debtors or as a member of any
committee, or as a fiduciary of any pension or
employee benefit plan, or as such an advisor, relating
to the Debtors at any time through the Confirmation
Date, are irrevocably waived, released and
relinquished, and each of the Debtors, its Creditors,
and Equity Holders and all other persons is enjoined
from asserting any such claim or cause of action in any
court or forum. . . .

(b)(ii) Various claims, including the Stockhol der Actions,
also have been asserted or threatened against certain

4

present or former directors of the Debtors including
claims arising out of intercompany transactions that
occurred and decisions that were made prior to
December 3, 1990 . . . The Debtors have maintained a
directors and officers liability insurance policy and the
insurer under such policy, following approval by the
Bankruptcy Court on December 1, 1992, paid $5
million in final settlement in final settlement of all
claims (excepting only the L/S Claims). The
Confirmation Order shall . . . . provide that all Persons
shall thenceforth be permanently enjoined, stayed and
restrained from pursuing or prosecuting any such
actions against any person so released.

Joint App. A247 - A248 (emphasis added). According to the
Continental Debtors, subsection (b)(ii) applies to Plaintiffs
because their actions fall within the definition of
"stockholder actions" under S 1.168 of the plan. See Brief
for Appellees at 11, n4.

Plaintiffs filed detailed objections to section 12.4 on at
least five occasions. Plaintiffs in the consolidated class
actions filed objections on December 30, 1992 and
February 17, 1993. Joint App. A354, A505. Plaintiffs in the
Gillman class action filed objections on December 30, 1992
and February 17, 1993. Joint App. A373, A523. Plaintiffs
also filed a letter brief reply on April 12, 1993. Joint App.
A467. In these objections, Plaintiffs complained that the
plan impermissibly "purports to release all claims held by
the Class against certain third party non-debtors who are
not before this court. . . . The releases will not be voluntary.
. . . The plan seeks to effectively discharge obligations of
non-debtors over the objections of creditors." Joint App.
A511-A512. In response to Plaintiffs' objections, the
Continental Debtors stated that Plaintiffs' objection:

[R]elates only to Section 12(b)(ii) of the Plan . . . Section
12(b)(ii) is entirely historical in nature and refers only
to certain already-settled derivative litigation which was
property of the Debtors' estates. All of the litigation
referred to in Section 12.4(b)(ii) and in Objection No. 6
was settled under a settlement agreement approved by
this Court pursuant to Bankruptcy Rule 9019 on
December 1, 1992. These objectors did not object to

5

this Court's order approving that settlement, nor did
they appeal therefrom. The order has long since
become final and the settlement payment of $5 million
has been made. These objectors have slept on their
right to object to the Settlement; their complaint about
the proposed Order is moot.

Joint App. A484.

The Bankruptcy Court overruled Plaintiffs' objections to
the Continental Debtors' disclosure statement because no
one was present to prosecute them. See Supp. App. B364
- B365.2 Plaintiffs' objections to the Continental Debtors'
plan of reorganization itself were not addressed at the plan
confirmation hearing. Plaintiffs' counsel did not respond
when the Bankruptcy Court announced Plaintiffs'
opportunity to present their objections, matters no. 24 and
25, at the plan confirmation hearing on April 7, 1993. See
Third Supp. App. B1625 (Bankruptcy Court calling Freberg
and Gillman objections, with no response, and continuing
onward). In Plaintiffs' April 9, 1993 letter-brief reply,
Plaintiffs notified the Bankruptcy Court and the
Continental Debtors that "Class Plaintiffs submit this letter-
brief reply to the Debtors' brief in support of the Plan
because they may not be able to personally attend the
confirmation hearing on the date and time that the Class
Plaintiffs' objections are called for oral argument." Joint
App. A467, fn1. The Bankruptcy Court approved
Continental Debtors' plan of reorganization on April 16,
1993. Plaintiffs filed an appeal on June 28, 1993 seeking a
reversal of the order confirming the Continental Debtors'
plan. Plaintiffs did not seek a stay of the confirmation order
pending appeal.

More than five years later, on September 30, 1998, the
District Court issued a memorandum opinion and order
affirming the Bankruptcy Court's confirmation order. In
upholding the validity of the release and permanent
injunction of Plaintiffs' claims against the non-debtor D&O
defendants, the District Court first assessed the relevance
_________________________________________________________________

2. A disclosure statement must be filed, approved, and circulated in
connection with a plan of reorganization to provide adequate information
regarding the effects of a plan of reorganization. See 11 U.S.C. S 1125.

6

of 11 U.S.C. S 524(e), which states generally that a
discharge of a debtor's obligations in bankruptcy does not
relieve non-debtor parties of liability for debts. The District
Court declined to adopt a per se rule that section 524(e)
prohibits non-debtor releases and permanent injunctions
due to the District Court's belief that such a rule would be
inconsistent with bankruptcy courts' broad equitable
powers. The District Court next noted that several courts
have relied on 11 U.S.C. S 105(a) in upholding the validity
of non-consensual releases and permanent injunctions that
are essential to the confirmation of a plan of reorganization.
Section 105(a) authorizes courts to take actions"necessary
or appropriate" to carry out the provisions of Title 11 of the
United States Code.

Although the District Court acknowledged that
involuntary releases of non-debtor parties are regarded with
disfavor in general, the District Court also stated that a
confirmed and implemented plan of reorganization should
be disturbed for only "compelling reasons" and found no
compelling reason to modify the Continental Debtors' plan
based on the Plaintiffs' objections. The District Court
reasoned that the Plaintiffs did not object to or appeal the
Tripartite Settlement, which the Court perceived as the
operative document governing Plaintiffs' rights. At the same
time, the District Court considered the release and
permanent injunction of Plaintiffs' lawsuits to be a"key
element" of the Continental Debtors' reorganization because
the Continental Debtors were obliged to indemnify the
D&Os, and thus Plaintiffs' lawsuits ultimately would
diminish the funds available for the Continental Debtors'
creditors and would burden the reorganized Continental
Debtors with litigation. The District Court did not refer to
any factual evidence in the record to support its conclusion
that the release and permanent injunction were key to the
Continental Debtors' reorganization or that the Continental
Debtors would be unduly burdened. Rather, the District
Court presumed that the reorganized Continental Debtors
and their management would be distracted post-
confirmation by discovery and litigation. The District Court
also based its affirmance on its view that Plaintiffs' lawsuits
would implicate the Continental Debtors' D&O liability
insurance policy, and thus affected property of the

7

Continental Debtors' bankruptcy estate. On October 30,
1998, Plaintiffs filed the instant appeal from the District
Court's order.

II.

Our jurisdiction to review this appeal is based on 28
U.S.C. SS 158(d) and 1291. We exercise plenary review over
the District Court's decision to affirm the Bankruptcy
Court's order. See Interface Group-Nevada, Inc. v. Trans
World Airlines (In re Trans World Airlines, Inc.), 145 F.3d
124, 130 (3d Cir. 1998). We use the same standards to
review the Bankruptcy Court's confirmation order as did
the District Court; we therefore "review the Bankruptcy
Court's legal determinations de novo, its factualfindings for
clear error, and its exercises of discretion for abuse
thereof." Manus Corp. v. NRG Energy, Inc. (In re O'Brien
Environmental Energy, Inc.), 188 F.3d 116, 122 (3d Cir.
1999) (citing Interface Group-Nevada, 145 F.3d at 131).

The Continental Debtors contend that we should not
address the merits of Plaintiffs' claim because of claim
preclusion and equitable mootness. We first will address,
and reject, these arguments.

Claim Preclusion

The Continental Debtors argue that Plaintiffs' objections
to the plan are precluded by virtue of Plaintiffs' failure to
object to the Tripartite Settlement. Claim preclusion
requires a final judgment on the merits in a prior suit
involving the same parties, or their privities, and a
subsequent suit based on the same cause of action. See
CoreStates Bank, N.A. v. Huls America, Inc., 176 F.3d 187,
194 (3d Cir. 1999) (citing Board of Trustees of Trucking
Employees Welfare Fund, Inc. v. Centra, 983 F.2d 495, 504
(3d Cir. 1992)); Sanders Confectionary Products, Inc., v.
Heller Financial, Inc., 973 F.2d 474, 480 (6th Cir. 1992).
Claim preclusion commonly occurs when a party fails to
raise issues in the plan confirmation process that could
have been addressed in that forum, or fails to appeal the
confirmation order; in such instances, a collateral attack on
 8

the validity of a provision of that plan, such as a non-
debtor release or injunction, often has been unsuccessful.3

In the instant appeal, the Continental Debtors do not
contend that we should bar Plaintiffs' appeal for failure to
prosecute their objections at the Continental Debtors' plan
confirmation hearing. Rather, their claim preclusion
argument is premised on the fact that Plaintiffs did not
object to or appeal the Bankruptcy Court's order approving
the Tripartite Settlement. This argument amounts to little
more than sleight of hand. Hardly a clear barrier as urged
by the Continental Debtors, the Tripartite Settlement
resolves only claims between the Continental Debtors, their
D&Os, and the D&O liability insurers, see, e.g., Supp. App.
B36, B47, B60, and does not appear to affect Plaintiffs'
claims at all. Although the Tripartite Settlement might have
affected Plaintiffs' rights had their lawsuits been derivative,4
the Continental Debtors do not argue on appeal that
Plaintiffs' claims are derivative and we find nothing in the
Tripartite Settlement to suggest that it implicated Plaintiffs'
direct claims against the non-debtor D&O defendants.
Thus, Plaintiffs' failure to object to or appeal from the
Tripartite Settlement does not bar their appeal from the
Bankruptcy Court's order confirming the Continental
Debtors' plan of reorganization.
_________________________________________________________________

3. See, e.g., In re Szoskek, 886 F.2d 1405, 1414 (3d Cir. 1989) (declining
to reverse confirmation of chapter 13 plan when appellant failed to object
to confirmation order). See also Monarch Life Ins. Co. v. Ropes and Gray,
65 F.3d 973, 983 (1st Cir. 1995) ("the issue of the bankruptcy court's
power to enter its so-called `incidental' injunction was precluded, having
been conclusively resolved in the confirmation order which Monarch Life
neither opposed nor appealed. . . . The proper recourse for addressing
these questions was by direct appeal from the order of confirmation");
Republic Supply Co. v. Shoaf, 815 F.2d 1046, 1052-1054 (5th Cir. 1987)
(holding that Republic's cause of action for enforcement of the guaranty
was barred by confirmation order that Republic did not appeal) (citing
Stoll v. Gottlieb, 305 U.S. 165, 177 (1938) (holding that party may not
collaterally attack the jurisdiction of a court when that question already
has been decided)).

4. One of Plaintiffs' class actions, the Gillman action, originally was
filed
as a derivative action, but that action was dismissed on jurisdictional
grounds and was re-filed in a different venue as a class action.

9
Equitable Mootness

We similarly reject the Continental Debtors' argument
that we should dismiss Plaintiffs' appeal here for"equitable
mootness" as we did in a previous appeal that arose out of
the Continental Debtors' bankruptcy. See In re Continental
Airlines, 91 F.3d 553 (3d Cir. 1996) ("Continental 1996").
Under the doctrine of equitable mootness, an appeal should
be dismissed, even if the court has jurisdiction and could
fashion relief, if the implementation of that relief would be
inequitable. Id. at 559 [citations omitted]. Following the
lead of other circuits, we noted in Continental 1996 that "[i]f
limited in scope and cautiously applied, this doctrine
provides a vehicle whereby the court can prevent
substantial harm to numerous parties." Id.

The appeals dismissed in Continental 1996 had an
"integral nexus" with the feasibility of the Continental
Debtors' plan of reorganization. See id. at 564. In that case,
Collateral and Certificate Trustees were appealing orders of
the Bankruptcy Court that denied the Trustees' motion for
adequate protection, confirmed the Continental Debtors'
plan of reorganization, and denied a motion for the
establishment of a cash deposit of $123,479,287. Id. at
555. We identified the prudential factors other courts have
considered to evaluate equitable mootness, including
whether the plan has been substantially consummated or
stayed, whether the requested relief would affect the rights
of other parties, whether the requested relief would affect
the success of the plan, and the public policy of affording
finality to bankruptcy judgments. Id. at 560.

The Continental Debtors established a record in
Continental 1996 that "an essential factor in that decision
[of investors to rely on the confirmation order] was the
bankruptcy court's disallowance of the Trustees' adequate
protection claim." Id. at 562-563; see also id. at 564 (citing
record establishing that investors would not close
transaction if Trustees received requested relief). At the
same time, we found:

The Trustees have not presented us with any
arguments which would weigh against all of the
prudential considerations that dictate that this

10

consummated reorganization must be left in place. . .
To convince a court to take the action sought by the
Trustees which would undermine the basis for the
Investors' decision to proceed, the Trustees would have
to proffer a powerful reason indeed. They have not even
attempted to do so.
Id. at 566. Thus, we concluded in Continental 1996 that "we
can see no prudential considerations that would support an
attempt by an appellate court, district or court of appeals,
to fashion even a limited remedy for the Trustees." Id. at
567. Accordingly, we found that the District Court did not
abuse its discretion when the Court dismissed the
Continental 1996 appeals. Id.

We face a very different situation in the instant appeal.
We note that the Continental Debtors' brief to the District
Court did not raise equitable mootness. The Continental
Debtors later submitted a letter to the District Court
enclosing another court decision that itself happens to
mention equitable mootness among many other issues, see
Third Supp. App. B2353 et seq., but the Continental
Debtors' cover letter to the District Court does not bring
this issue specifically to the District Court's attention.
Thus, the Continental Debtors did not properly preserve the
equitable mootness argument for appeal. Even if they had
properly preserved the issue, however, the Continental
Debtors established no record before the District Court, or
before us, regarding the application of the equitable
mootness doctrine to the particular facts and
circumstances of Plaintiffs' appeal. Unlike their posturing of
this issue in Continental 1996, they provide no evidence
that investors and creditors, in deciding whether to support
the Continental Debtors' plan, ever considered Plaintiffs'
claims against the non-debtor D&Os in class actions worth
a few million dollars, arguably a nominal amount given an
airline reorganization of this magnitude.5 No evidence or
_________________________________________________________________

5. See, e.g., Third Supp. App. B1830 (disclosure statement listing assets
and liabilities of Continental Debtors in amount exceeding $4.6 billion);
Third Supp. App. B1701, 1702 (Continental Debtors' counsel describing
$6.5 billion of enterprise value); Third Supp. App. B1703 (noting that
plan would be feasible even with another $100 million of debt); Joint
App. A381 (memorandum in support of plan confirmation stating that
Debtors will emerge from bankruptcy with approximately $610 million of
shareholder equity and approximately $550 million of cash).

11

arguments have been presented that Plaintiffs' appeal, if
successful, would necessitate the reversal or unraveling of
the entire plan of reorganization. Accord In re Chateaugay
Corp., 167 B.R. 776, 780 (S.D.N.Y. 1994) (distinguishing
the Second Circuit's equitable mootness decision arising
from the Chateaugay bankruptcy and stating that"[i]t is
difficult to conceive how a potential liability of, at most,
several million dollars could unravel the Debtors'
reorganization, which involved the transfer of billions of
dollars, and which has resulted in the revival of Debtors
into a multibillion dollar operation with $200 million in
working capital . . . appellees have made no showing that
it would `knock the props out from under the authorization
for every transaction that has taken place and create an
unmanageable, uncontrollable situation for the Bankruptcy
Court.' ") (citing Chateaugay Corp. v. LTV Steel Co., 10 F.3d
944, 952 (2d Cir. 1993)). Apparently, the Continental
Debtors have chosen to rest on the record established in
Continental 1996. Yet, much of that record is entirely
inapposite to the facts and circumstances of Plaintiffs'
appeal.

In balancing the policy favoring finality of bankruptcy
court judgments -- particularly reorganization plans --
against other considerations, we note as well that the
equities here would not dictate dismissal. Plaintiffs, who
have never had their day in court, have been forced to
forfeit their claims against non-debtors with no
consideration in return. Even if successful, Plaintiffs'
appeal should not threaten the entire reorganization.
Moreover, Plaintiffs are not responsible for the extensive
delay in this appeal; the District Court issued its opinion
upholding the Bankruptcy Court's confirmation order more
than five years after Plaintiffs' appealed that confirmation
order.

We conclude that the key ingredients necessary for
dismissal that led to our dismissal of Continental 1996 --
specific presentation of this issue to the Court below, an
evidentiary record, and equitable considerations-- are
lacking here. Consequently, we will examine the merits of
this appeal.

12

Validity of non-debtor release and permanent injunction

At issue in this appeal is a provision releasing and
permanently enjoining Plaintiffs' actions against the
Continental Debtors' D&Os who have not formally availed
themselves of the benefits and burdens of the bankruptcy
process. Plaintiffs argue that section 12.4(b)(ii) of the
Continental Debtors' plan impermissibly releases and
permanently enjoins their class actions against non-debtors
without notice to individual class members and without
consent or consideration, violating 11 U.S.C. S 524(e) by
relieving non-debtor parties of liabilities. Although Plaintiffs
acknowledge that 11 U.S.C. S 105(a) has been used by
some courts to enjoin actions against non-debtors when
necessary or appropriate to enforce or implement court
orders, Plaintiffs question the legal and factual basis for the
District Court's finding of need and propriety in this
particular instance.

Section 524(e) of the Bankruptcy Code makes clear that
the bankruptcy discharge of a debtor, by itself, does not
operate to relieve non-debtors of their liabilities. See Copelin
v. Spirco, Inc., 182 F.3d 174, 182 (3d Cir. 1999) (citing First
Fidelity Bank v. McAteer, 985 F.2d 114, 118 (3d Cir. 1993)).
The Bankruptcy Code does not explicitly authorize the
release and permanent injunction of claims against non-
debtors, except in one instance not applicable here. 6
Section 105(a) of the Bankruptcy Code supplements courts'
specifically enumerated bankruptcy powers by authorizing
orders necessary or appropriate to carry out provisions of
the Bankruptcy Code. However, section 105(a) has a limited
scope. It does not "create substantive rights that would
otherwise be unavailable under the Bankruptcy Code."
United States v. Pepperman, 976 F.2d 123, 131 (3d Cir.
1992). Accord Internal Revenue Service v. Kaplan , 104 F.3d
589, 597 (3d Cir. 1997). See generally Norwest Bank
Worthington v. Ahlers, 485 U.S. 197, 206 (1988) (court's
equitable powers "must and can only be exercised within
the confines of the Bankruptcy Code").
_________________________________________________________________

6. See 11 U.S.C. S 524(g) (establishing procedure for resolving asbestos
claims).

13

We have not ruled previously on the validity of provisions
in chapter 11 plans of reorganization releasing and
permanently enjoining third party actions against non-
debtors.7 We will review briefly the relevant decisions from
other circuits, leading us to the inescapable conclusion
that, in this appeal, the release and permanent injunction
of Plaintiffs' lawsuits are legally and factually
insupportable.

The Courts of Appeals for the Ninth and Tenth Circuits
have held that non-debtor releases and permanent
injunctions are impermissible. "The bankruptcy court has
no power to discharge the liabilities of a nondebtor
pursuant to the consent of creditors as part of a
reorganization plan." Underhill v. Royal, 769 F.2d 1426,
1432 (9th Cir. 1985). "Section 524(e) precludes discharging
the liabilities of nondebtors." Resorts Internat'l v.
Lowenschuss (In re Lowenschuss), 67 F.3d 1394, 1402 (9th
Cir. 1995) (affirming district court's decision vacating global
release provision). These courts find a release and
permanent injunction to be indistinguishable from a
bankruptcy discharge. See American Hardwoods, Inc. v.
Deutche Credit Corp., 885 F.2d 621, 626 (9th Cir. 1989).
See also Landsing Diversified Properties - II v. First Nat'l
Bank & Trust Co. of Tulsa (In re Western Real Estate Fund,
Inc.), 922 F.2d 592, 601 (10th Cir. 1990) (vacating
injunction, following American Hardwoods with respect to
permanent injunctions of claims against non-debtor),
modified by Abel v. West, 932 F.2d 898 (10th Cir. 1991).8
_________________________________________________________________

7. Our decision in McAteer occasionally is cited for the proposition that
the Bankruptcy Code does not permit the release of obligations of non-
debtor parties, but McAteer, a chapter 13 case with a unique set of facts,
does not address the validity of a specific provision in a chapter 11 plan
of reorganization that permanently enjoins actions against non-debtor
parties. See McAteer, 985 F.2d at 118.

8. Quite a few courts have followed the lead of the Ninth and Tenth
Circuits. See, e.g., In re Davis Broadcasting, Inc., 176 B.R. 290, 292
(M.D. Ga. 1994) (finding that non-debtor injunction violated section
524(e) and thus exceeded power and authority of bankruptcy court, even
though Plaintiffs did not take any action to have non-debtor injunction
removed from plan); Bill Roderick Distrib., Inc. v. A.J. Mackay Co. (In re
A.J. Mackay Co.), 50 B.R. 756, 764 (D. Utah 1985) (deleting provisions

14

Other circuits have adopted a more flexible approach,
albeit in the context of extraordinary cases. In Drexel and
Manville, the Court of Appeals for the Second Circuit
upheld plans of reorganization containing releases and
permanent injunctions of widespread claims against co-
liable parties, but those plans also provided consideration
to parties who would be enjoined from suing non-debtors.
See Securities and Exchange Commission v. Drexel Burnham
Lambert Group, Inc. (In re Drexel Burnham Lambert Group,
Inc.), 960 F.2d 285, 293 (2d Cir. 1992); Kane v. Johns-
Manville Corp. (In re Johns-Manville Corp.), 843 F.2d 636,
640, 649 (2d Cir. 1988). In Robins, the Court of Appeals for
the Fourth Circuit likewise upheld non-debtor releases that
were necessary to reorganization and were accompanied by
consideration for mass tort claimants, provided in part by
the non-debtors. See Menard-Sanford v. Mabey (In re A.H.
Robins Co.), 880 F.2d 694, 702 (4th Cir. 1989). A central
focus of these three reorganizations was the global
settlement of massive liabilities against the debtors and co-
liable parties. Substantial financial contributions from non-
_________________________________________________________________

of confirmed plan that shield non-debtor party from liability); In re
Future
Energy Corp., 83 B.R. 470, 486 (Bankr. S.D. Ohio 1988) ("clear weight of
decisional authority supports the proposition that Chapter 11 plans
which call for the release of nonparties (such as guarantors) from
liability upon obligations of the debtor are violative of S 524(e)"); In
re
L.B.G. Properties, Inc., 72 B.R. 65, 66 (Bankr. S.D. Fla. 1987) (holding
that section 524(e) prohibits plan provision releasing two non-debtor
guarantors); In re Scranes, Inc., 67 B.R. 985, 989 (Bankr. N.D. Ohio
1986) (holding that provision in confirmed plan of reorganization does
not release the liabilities of a non-debtor guarantor); In re Bennett
Paper

Corp., 68 B.R. 518, 520 (Bankr. E.D. Mo. 1986) (disapproving disclosure
statement for failure to inform creditors that non-debtor release
provision is impermissible); In re Eller Bros., Inc., 53 B.R. 10, 12
(Bankr.
M.D. Tenn. 1985) (denying confirmation because forcing FDIC to release
non-debtor guarantors violates section 524(e)). Accord In re Keller, 157
B.R. 680, 686 (Bankr. E.D. Wash. 1993) (refusing to confirm plan
compelling creditor to release liens against property of non-debtor, which
violates section 1129(a)(1) just like provisions that release claims
against
non-debtors). See also In re Digital Impact, Inc., 223 B.R. 1, 14 (Bankr.
N.D. Okla. 1998) (holding that court has neither jurisdiction nor
affirmative substantive authority under Bankruptcy Code to release
obligations of non-debtors).

15

debtor co-liable parties provided compensation to claimants
in exchange for the release of their liabilities and made
these reorganizations feasible.9

In AOV, the Court of Appeals for the D.C. Circuit found
that a plan provision releasing the liabilities of non-debtors
was unfair because the plan did not provide additional
compensation to a creditor whose claim against non-debtor
was being released, see In re AOV Indus., Inc., 792 F.2d
1140, 1154 (D.C. Cir. 1986), thus indicating that it is
necessary to provide adequate consideration to a
claimholder being forced to release claims against non-
debtors.

The Court of Appeals for the Fifth and Eleventh Circuits
have addressed the issue of non-debtor releases in the
context of settlement agreements. In Zale, the Fifth Circuit
reversed the approval of a settlement among a debtor, the
debtor's D&Os, and the creditors' committee that
permanently enjoined a variety of existing and potential
claims against the settling defendants on the ground that
_________________________________________________________________

9. Courts generally have not construed the more permissive view of the
Second and Fourth Circuits to give them "unfettered discretion to
discharge non-debtors from liability." Chateaugay, 167 B.R. at 780
(noting that bankruptcy courts have permanently enjoined future
lawsuits against non-debtors only when essential to plan confirmation).
Some courts presiding over cases with less "unusual" facts have been
reluctant to expand the holdings of these cases. E.g., In re Market Square
Inn, Inc., 163 B.R. 64, 66-67 (Bankr. W.D. Pa. 1994) (in finding non-
debtor release impermissible, distinguishing cases with in which
feasibility of reorganization hinges on resolution of massive claims). As
a

result, according to one Bankruptcy Court, "few cases have actually
allowed or upheld non-consensual permanent injunctions without
pointing to some other Bankruptcy Code provision or authorization
under state law. . . . Many cases which are cited for the proposition that
the bankruptcy court may issue permanent injunctions were, in fact,
decided on other grounds." In re Sybaris Clubs Internat'l, Inc., 189 B.R.
152, 158 (Bankr. N.D. Ill. 1995). See generally In re Master Mortgage
Investment Fund, Inc., 168 B.R. 930, 937 (Bankr. W.D. Mo. 1994)
(explaining that a permanent injunction limiting the liability of non-
debtor parties is "a rare thing" that should not be considered absent "a
showing of exceptional circumstances" in which several key factors are
present). Accord Greenblatt v. Richard Potasky Jeweler, Inc. (In re
Richard

Potasky Jeweler, Inc.), 222 B.R. 816, 826-828 (S.D. Ohio 1998).

16

the injunction impermissibly discharged non-debtor
liabilities. See Feld v. Zale Corp. (In re Zale Corp.), 62 F.3d
746, 760 (5th Cir. 1995). In reaching this decision, the
Court distinguished Drexel and Manville by explaining that
"in those cases, however, the courts upheld permanent
injunctions of third party claims because while the
injunction permanently enjoined the lawsuits, it also
channeled those claims to allow recovery from separate
assets and thereby avoided discharging the nondebtor. . . .
The injunction at issue in this case provided no alternative
means for Feld and NUFIC to recover from CIGNA for their
offensive contract rights." Id. at 760-761. In Munford,
the Eleventh Circuit affirmed a district court's ruling
that 11 U.S.C. S 105 and Fed. R. Civ. P. 16 authorized a
bankruptcy court to permanently enjoin nonsettling
defendants from asserting contribution and indemnification
claims against a defendant consulting firm when the
permanent injunction was integral to the debtor's
settlement with the consulting firm and the bar order was
fair and equitable. See Matter of Munford, Inc., 97 F.3d 449,
455 (11th Cir. 1996).10

Plaintiffs do not ask us to establish a blanket rule
prohibiting all non-consensual releases and permanent
injunctions of non-debtor obligations. Given the manner in
which the issue has been presented to us, we need not
establish our own rule regarding the conditions under
_________________________________________________________________
10. Interestingly, several courts of appeals have refused to overturn non-
debtor releases and permanent injunctions based on grounds other than
the merits. In two of these cases, parties collaterally attacked the
confirmation orders instead of appealing them directly. See Monarch Life
Ins. Co., 65 F.3d at 983; Shoaf, 815 F.2d at 1052-1053 (citing Stoll v.
Gottlieb, 305 U.S. at 177). In the oft-cited Specialty Equipment decision,
the Seventh Circuit stated that consensual releases, at the very least, do
not run afoul of 11 U.S.C. S 524(e), but the appeal was dismissed as
moot and not on the merits. See In re Specialty Equipment Co., 3 F.3d
1043, 1049 (7th Cir. 1993). This dicta in Specialty Equipment
nonetheless has called into question the vitality of an earlier Seventh
Circuit decision interpreting the precursor to section 524(e), section 16
of the Bankruptcy Reform Act of 1898, and concluding that the statute
specifically prohibited the discharge of non-debtor guarantors, regardless
of a provision in a plan of reorganization. See Union Carbide Corp. v.
Newboles, 686 F.2d 593, 595 (7th Cir. 1982) (per curiam).

17

which non-debtor releases and permanent injunctions are
appropriate or permissible. Establishing a rule would
provide guidance prospectively, but would be ill-advised
when we can rule on Plaintiffs' appeal without doing so.11
Considering the instant appeal in the context of the case
law we have reviewed, we conclude that the provision in the
Continental Debtors' plan releasing and permanently
enjoining Plaintiffs' lawsuits against the non-debtor D&O
defendants does not pass muster under even the most
flexible tests for the validity of non-debtor releases. The
hallmarks of permissible non-consensual releases--
fairness, necessity to the reorganization, and specific
factual findings to support these conclusions-- are all
absent here.

Bankruptcy Court

The Bankruptcy Court never specifically addressed the
release and permanent injunction of Plaintiffs' claims.
Thus, the order confirming the Continental Debtors' plan of
reorganization and releasing and permanently enjoining
Plaintiffs' claims was not accompanied by any findings that
_________________________________________________________________

11. Several of the Bankruptcy Courts in our Circuit have stated that
non-debtor releases are permissible only if consensual, at least with
respect to direct (as opposed to derivative) claims. See, e.g., In re
Zenith
Electronics Corp., 241 B.R. 92, 111 (Bankr. D. Del. 1999) (holding that
releases of non-derivative third-party claims against non-debtor "cannot
be accomplished without the affirmative agreement of the creditor
affected"); In re Arrowmill Dev. Corp., 211 B.R. 497, 506-507 (Bankr.
D.N.J. 1997) ("Where the creditor consents to the release, and
presumably receives consideration in exchange for that agreement, it has
not been forced by virtue of the discharge provisions of the code. . .
[A]s

the settlements arise by agreement and not by operation of law, they do
not run afoul of section 524(e)"); In re West Coast Video Enterprises,
Inc.,
174 B.R. 906, 911 (Bankr. E.D. Pa. 1994) (refusing to enforce releases
with respect to movants who did not vote on plan because "each creditor
bound by the terms of the [non-debtor] release must individually affirm
same, either with a vote in favor of a plan including such a provision, or
otherwise"). None of these cases, of course, involved the mass litigation
found in Robins, Manville, or Drexel. Because the release and permanent
injunction of Plaintiffs' claims are so clearly invalid under any
standard,

we need not speculate on whether there are circumstances under which
we might validate a non-consensual release that is both necessary and
given in exchange for fair consideration.

18

the release was fair to the Plaintiffs and necessary to the
Continental Debtors' reorganization.12 Without such
findings, a release and permanent injunction cannot stand
on their merits under any of the standards set forth in the
case law of other circuits.

District Court

In attempting to salvage the release and permanent
injunction of Plaintiffs' claims, the District Court did not
discuss the lack of findings of the Bankruptcy Court, but
instead made its own findings. As previously mentioned,
the District Court cited section 105(a) as a basis for
upholding the validity of non-consensual releases and
permanent injunctions that are essential to plan
confirmation. The District Court required, but could not
find, "compelling reasons" to disturb the Continental
Debtors' plan based on the Plaintiffs' objections,
particularly because the Plaintiffs did not object to or
appeal the Tripartite Settlement. The District Court also
considered the release and permanent injunction of
Plaintiffs' claims to be a "key element" of the Continental
Debtors' reorganization because the Continental Debtors
were obliged to indemnify the D&Os and thus would
ultimately bear the burden of Plaintiffs' lawsuits. The
District Court concluded that the Plaintiffs' actions against
the non-debtor D&O defendants implicated the Continental
Debtors' D&O liability insurance policy, and thus affected
property of the Continental Debtors' bankruptcy estate.
_________________________________________________________________
12. We also note, with some concern, that the Bankruptcy Court
apparently never examined its jurisdiction to release and permanently
enjoin Plaintiffs' claims against non-debtors. Although bankruptcy
subject matter jurisdiction can extend to matters between non-debtor
third parties affecting the debtor or the bankruptcy case, see 28 U.S.C.
S 1334; Celotex Corp. v. Edwards, 514 U.S. 300, 308 n. 5 (1995), a court
cannot simply presume it has jurisdiction in a bankruptcy case to
permanently enjoin third-party class actions against non-debtors. We
must remain mindful that bankruptcy jurisdiction is limited, as is the
explicit grant of authority to bankruptcy courts. See 28 U.S.C. SS 157,
1334; Northern Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S.
50 (1982). We do not treat this very significant issue more fully,
however,

because the record does not permit us to resolve this issue and the
parties have not raised and discussed it in their appellate briefs.

19

In making these findings, the District Court assumed
facts not of record and drew superficial analogies based on
inapposite case law. Contrary to the conclusion of the
District Court and the arguments of the Continental
Debtors, Manville, Robins, and Drexel do not support the
validity of the release and permanent injunction of
Plaintiffs' claims based on the record before us. First,
unlike the courts in these cases, the District Court did not
discuss whether the release and permanent injunction were
fair to Plaintiffs and were given in exchange for reasonable
consideration. Indeed, the Continental Debtors have not
disputed Plaintiffs' contention that Plaintiffs received no
consideration in exchange for having their lawsuits
permanently enjoined.13 On this basis alone, Manville,
Drexel, and Robins are inapplicable.

With respect to the District Court's view of the necessity
of the release and permanent injunction, we find nothing in
the record to even imply that the success of the Continental
Debtors' reorganization bore any relationship to the release
and permanent injunction of Plaintiffs' class actions. Unlike
in cases such as Manville, Drexel, and Robins, we have
found no evidence that the non-debtor D&Os provided a
critical financial contribution to the Continental Debtors'
plan that was necessary to make the plan feasible in
exchange for receiving a release of liability for Plaintiffs'
claims. Nor did Plaintiffs' lawsuits themselves propel the
Continental Debtors into bankruptcy;14 far from being the
_________________________________________________________________

13. Some, but not all, of the Plaintiffs who were included in the proof of
claim filed in the Continental Holdings case may have received five cents
on the dollar. See Addendum to Supp. App. However, this distribution
was on behalf of their "creditor" status with respect to Continental
Airlines Holdings, not in exchange for the release of their claims against
non-debtors.

14. According to the Continental Debtors' disclosure statement
describing their plan of reorganization, their bankruptcy was precipitated
by a recession and changes in fuel costs and flight demand, leaving the
Continental Debtors with "a fourth quarter 1990 operating loss of
approximately $300 million, no access to capital markets and only $87
million in cash." Third Supp. App. B1844 - B1845. See also Third Supp.
App. B2042 (describing other precipitating factors, such as heavy losses
resulting from service difficulties incurred in the integration of
affiliate
operations).

20

tail wagging the dog, we find it difficult to conceive that
Plaintiffs' lawsuits were anything more than a flea.

We also take issue with the District Court's unsupported
conclusion that the Continental Debtors' obligation to
indemnify its D&Os transforms the release and permanent
injunction of Plaintiffs' claims against non-debtor D&O
defendants into a "key element" of the Continental Debtors'
reorganization.15 We have stated previously that federal
courts disfavor indemnity for federal securities law
violations, calling into question the enforceability of these
obligations. See Eichenholtz v. Brennan, 52 F.3d 478, 484-
486 (3d Cir. 1995) (holding that the district court did not
abuse its discretion in extinguishing indemnification claims
running counter to policies underlying securities laws). See
also Laventhol, Krekstein, Horwath & Horwath v. Horwitch,
637 F.2d 672, 676 (9th Cir. 1980) (upholding district
court's dismissal of indemnity claim, which "would
undermine the statutory purpose of assuring diligent
performance of duty and deterring negligence"); Globus v.
Law Research Serv. Inc., 418 F.2d 1276, 1288 (2d Cir.
1969) (agreeing with the lower court that "to tolerate
indemnity under these circumstances would encourage
flouting the policy of the common law and the securities
_________________________________________________________________

15. The Continental Debtors elected to retain their contractual
obligation, under bylaws and "assumed" employment contracts, see 11
U.S.C. S 365(a), to indemnify their officers and directors. The
Continental

Debtors' by-laws specifically provide only for director and officer
indemnification "to the fullest extent permitted by applicable statute."
Joint Supp. App. B2; DEL. CODE. ANN. tit. 8 S 145. Delaware law permits
indemnification of corporate directors and officers for liability if they
acted "in good faith and in a manner which the person reasonably
believed to be in or not opposed to the best interests of the
corporation."

DEL. CODE. ANN. tit. 8 S 145(a). The statutory obligation to reimburse for
actual and reasonable defense costs arises if the director or officer was
"successful on the merits or otherwise in defense" of an action, and
advancement of expenses is not required. Id.S 145(c); see Advanced
Mining Systems v. Fricke, 623 A.2d 82, 85 (Del. Ch. 1992) (absent by-law
provisions establishing mandatory advancement, requiring that board
consider corporation's interests before providing such advancement);
Havens v. Attar, No. 15134, 1997 WL 55957 at *14 (Del. Ch. Jan. 30,
1997) (granting preliminary injunction to prevent board from advancing
litigation expenses).

21

act"); Lucas v. Hackett Assoc., Inc., 18 F. Supp. 2d 531,
535-538 (E.D. Pa. 1998) (holding that party was not
entitled to indemnity for federal securities law violations,
including those "clothed as state law tort claims," but
declining to enter an order barring a state court from
proceeding on an indemnity claim premised solely on state
law) (citing In re Sunrise Securities Litigation, 793 F. Supp.
at 1306, 1321 (E.D. Pa. 1992)); Raychem Corp. v. Fed. Ins.
Co., 853 F. Supp. 1170, 1176 (N.D. Cal. 1994) ("Federal
courts have held that those held liable for violations of
certain provisions of the federal securities laws, including
the anti-fraud provisions of the 1934 Act, may not recover
indemnification"); Greenwald v. American Medcare Corp.,
666 F. Supp. 489, 493 (S.D.N.Y. 1987) (interpreting
Delaware law, stating that "no party who has himself
knowingly and wilfully violated the federal securities laws
may obtain indemnity from another violator of those laws,"
but finding that party should have opportunity to show
whether he was at fault).

We find no evidence in the record before us supporting
the possibility or probability of D&O indemnification as a
factual or legal matter. Even if the D&O defendants'
obligations culminating from Plaintiffs' class actions were
indemnifiable, the fact that the reorganized Continental
Airlines might face an indemnity claim sometime in the
future, in some unspecified amount, does not make the
release and permanent injunction of Plaintiffs' claims
"necessary" to ensure the success of the Continental
Debtors' reorganization.

Similarly unsupported is the District Court's conclusion
that the non-debtor release and permanent injunction were
warranted because Plaintiffs' lawsuits ultimately might
implicate the D&O liability insurance policy, which was
property of the Continental Debtors' bankruptcy estate
under 11 U.S.C. S 541(a). One cannot assume too quickly
that the proceeds of this policy are property of the estate
when the non-debtor D&Os, not the Continental Debtors,
are the direct beneficiaries of the policy. We previously have
recognized, albeit in a different context, that the proceeds
from a insurance policy should be evaluated separately
from the debtor's interest in the policy itself. See McAteer,

22

985 F.2d at 117 (stating in a chapter 13 case that
"[o]wnership of a life insurance policy, such as involved
here, does not necessarily entail ownership of the proceeds
of that policy"). Other courts of appeals have disagreed as
to the circumstances under which the proceeds of a D&O
policy can be considered property of the estate, 16 but the
analysis has been fact-intensive in any event. Such an
analysis never took place in the District Court or the
Bankruptcy Court. Even assuming that the proceeds are
property of the estate, this by itself does not justify a
permanent injunction of Plaintiffs' actions against the
insured non-debtor D&O defendants as necessary for the
reorganization of the Continental Debtors.

We do not dispute that, some day in the future, the
reorganized Continental Debtors may face litigation or
experience some financial ramification based on liabilities of
the D&Os as a result of the indemnity obligation or the
D&O liability insurance policy. However, we cannot accept
the District Court's conclusion that a purported"identity of
interest" between the Continental Debtors and the non-
debtor D&O defendants, forged by the indemnity obligation
or the D&O liability insurance policy, established the
necessity of releasing and permanently enjoining Plaintiffs'
claims, nor does this identity of interest speak to the
_________________________________________________________________

16. Compare In re Louisiana World Exposition, Inc., 832 F.2d 1391, 1401
(5th Cir. 1987) (engaging in fact-specific analysis and finding that
corporate debtor had no ownership interest in proceeds of D&O liability
policy, which belonged to the D&Os) with Minoco Group of Companies,
Ltd. v. First State Underwriters Agency (In re Minoco Group of Companies,
Ltd.), 799 F.2d 517, 519 (9th Cir. 1986) (Noting that "the estate is worth
more with the policy than without the policy,"finding that D&O
indemnity policy protected debtor against indemnity claims and was
property of corporation's bankruptcy estate, thus insurer was stayed
from terminating policy); Pintlar Corp. v. Fidelity and Casualty Co. of
New

York, 124 F.3d 1310, 1313 (9th Cir. 1997) (distinguishing Minoco,
concluding that court could not enjoin insurers' state court action for
declaratory relief that would threaten only liability portion of D&O
coverage). See also First Central Financial Corp. v. Lipson (In re First
Central Financial Corp.), 238 B.R. 9, 16 (Bankr. E.D.N.Y. 1999) ("While
a majority of courts consider a D&O policy estate property [citations
omitted], there is an increasing view that a distinction should be drawn
when considering treatment of proceeds under such policies").

23

fairness of the release and permanent injunction that we
construe cases such as Manville, Drexel, or Robins to
require.17 We conclude that granting permanent injunctions
to protect non-debtor parties on the basis of theoretical
identity of interest alone would turn bankruptcy principles
on their head. Nothing in the Bankruptcy Code can be
construed to establish such extraordinary protection for
non-debtor parties.

In summary, we find, based on the record before us, that
the Bankruptcy Court and District Court lacked a sufficient
evidentiary and legal basis to authorize the release and
permanent injunction of Plaintiffs' claims under any of the
standards adopted by courts that have evaluated non-
debtor releases and permanent injunctions. Under these
circumstances, the release and permanent injunction
amounted to nothing more than a lockstep discharge of
non-debtor liability and fall squarely into the section 524(e)
prohibition.

III.

For the foregoing reasons, we reverse the District Court's
order. Based on our determination that the provision
releasing and permanently enjoining Plaintiffs' claims is
legally insupportable, we need not reach two remaining
issues raised by Plaintiffs relating to Due Process and
violation of Rule 23 of the Federal Rules of Civil Procedure.
_________________________________________________________________

17. Cases cited by the Continental Debtors to support their argument
that identity of interest justifies a permanent injunction, see Brief for
Appellees at 30, actually involve the entry of a temporary injunction or
extension of the automatic stay during the pendency of a bankruptcy
case, which is quite a different matter. Although some courts may
consider identity of interest when deciding whether to grant a permanent
injunction, that factor is not considered in a vacuum; rather, it must be
supported by actual record facts in evidence, and accompanied by other
key considerations, e.g., whether the non-debtors made substantial
contributions to the reorganization, whether the injunction is essential
to

reorganization, whether affected parties overwhelmingly have agreed to
accept the proposed treatment, and whether the plan pays all or
substantially all of the affected parties' claims. See Master Mortgage
Inv.
Fund, 168 B.R. at 935.

24

A True Copy:
Teste:

Clerk of the United States Court of Appeals
for the Third Circuit

25