Article preview
What’s Done Is Done: Bankruptcy Court Rejects Attempt to Reopen Chapter 11 Case to Reallocate Value – In re NorthEast Gas Generation, LLC (Bankr. D Del)
Scott C. Shelley, Of Counsel, Paul Hastings LLP, New York, USASynopsis
In NorthEast Gas, the court rejected a request to reopen a chapter 11 case to permit the reorganised company to increase the amount of debt reinstated under its chapter 11 plan. The court premised its ruling on the well-established principle that once a chapter 11 plan is confirmed and substantially consummated, the
Bankruptcy Code prohibits modification of the plan.
The reorganised debtors had characterised the relief they sought as a permissible adjustment to the allowed amount of a claim. Despite that characterisation, and the fact that no stakeholder had objected, the Court determined that the relief requested would effect a reallocation of value under the plan, which constituted an impermissible, post-consummation plan modification.
NorthEast Gas makes clear that once a plan has been substantially consummated, the plan is final, and courts will not countenance attempts to modify the plan to reallocate value. In dicta, the court noted that a post-consummation modification may be permitted if the confirmed plan already includes a mechanism to implement the modification. Going forward, parties seeking optionality may be incentivised to include such mechanisms in their chapter 11 plans.
Copyright 2006 Chase Cambria Company (Publishing) Limited. All rights reserved.