11th Circuit Upholds Bar Order

Chapter 11 practitioners in particular will want to review In re Superior Homes & Investments, LLC., 2013 US App Lexis 11860 (11th Cir. June 10, 2013).

The Court held that the bankruptcy court in the Middle District of Florida did not abuse its discretion and upheld a Compromise and Bar Order. The Bar Order enjoined creditors from pursuing their state court remedies against non-debtors.

A Chapter 11 Trustee was appointed in this case after the filing of an involuntary petition. The Trustee entered a settlement which prevented creditors from suing non-debtor defendants in state court who were subject to fraudulent transfer claims. The 11th Circuit rejected creditors argument that the bankruptcy court did not have subject matter jurisdiction over the state court litigation against the non-debtor defendants. The Court also rejected the creditor’s objection to the Compromise that they would only receive a 2% disbursement.

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