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Circuit Judges.
______________
____________________
whether the
based
The question
bankruptcy court
"successor
presented on appeal
properly enjoined
product-line liability"
action
a state-law
in
an Alaska
liability
on
all
unfiled
claims
relating
to
products
relief
was
11 debtor.
On
the injunction.
improvidently
intermediate appeal,
As we
granted,
conclude that
we
affirm
the
February
Industries"),
1988,
Savage Industries,
Massachusetts firearms
for
the
District
Inc.
manufacturer, commenced
of
Massachusetts
and
obtained
possession.
sell substantially
bankruptcy
("Debtor
court
all
its
approved
corporate assets
the
proposed
sale
to
in
Arms.1
The
July
1989.
____________________
terms
and Arms,
___ ____
of contingent
subsequently
____________
nor made
product
negotiated
__________
provision for
between
_______
the
liability claims
Debtor
______
interests of
against Debtor
Industries.2
On November 1, 1989,
their asset
for
certain
transfer agreement,
pending
_______
product liability
claims
assumed liability
against
Debtor
claims
relating to
firearms manufactured
by
Debtor Industries
____________________
2The order approving the sale provided as follows:
ORDERED, that [DEBTOR] INDUSTRIES . . . is
hereby authorized to enter into and conclude
within sixty (60) days of this Order becoming
final
and
non-appealable
a
Definitive
Agreement (the "Agreement") with SAVAGE ARMS,
INC. ("Purchaser") providing for the sale and
transfer of its real property and certain of
its
tangible
and intangible
assets to
Purchaser and the assumption by Purchaser of
certain secured and priority liabilities as
set forth in this Order . . . .
3Section 2(b) of
pertinent part:
the Asset
Transfer Agreement
states, in
ceased
to
operate
consummated.
manufacture
immediately
after the
asset
transfer
the
identical
lines
of
was
took up the
firearms
previously
in
May
1989,
shortly
before
______
Debtor
transfer
liability
was
consummated,
action against
Debtor Industries
brought
in an
products
Alaska state
court.
retail
distributor which
Taylor the
Arms as a
defendant, in
liability"
manufacture
the identical
Debtor Industries.
under
Western Auto
filed a
Alaska
law
by
firearms theretofore
or an apportionment of
defective
due course
allegedly
continuing
to
manufactured by
either indemnification
to Debtor
____________________
expressly set
hereof . . . .
forth in
Schedule
or Section
4(f)
Industries.4
In
chapter
June
11
1991,
liquidation
the
bankruptcy
plan,
which
proceeds began
made
no
confirmed
the
provision
for
asset-transfer
court
to
with Debtor
be
Industries.
disbursed under
the
District
injunctive
Arms
Auto in the
of
commenced this
adversary proceeding
Massachusetts,
requesting
Court for
declaratory
and
____________________
Debtor Industries'
assets "free
to Arms by Debtor
asset transfer.
B.
B.
Arms asserted
and clear"
that
of all
Industries prior to
the chapter 11
The Injunction
The Injunction
______________
tion once the asset transfer had been consummated, the bankruptcy
court enjoined further prosecution
action
concluded that
any
hostile "claim"
transfer
agreement
which
jurisdiction to enjoin
contravened the
approved
by
terms of
the bankruptcy
the asset
court
in
the
Taylor (In
______ __
_____________________
D. Mass. Oct. 5, 1992).
Mooney Aircraft), 730 F.2d 367 (5th Cir. 1984) (bankruptcy court
________________
lacks
jurisdiction to enjoin
were
to
adopt
liability" doctrine,
court reasoned
a
common
law
that
"successor
even
assuming
product-line
the Western
as
Industries
it
which
constituted
arose
tort
before
______
either
"claim"
the
against
chapter
11
Debtor
asset
transfer or the
order confirming
the chapter 11
plan.
Savage
______
v.
1986)).
from
the
circumventing
obtaining
full
successor.
all-assets transfer,
relief essential
the
Bankruptcy
recovery
plan
from
the
bankruptcy
to prevent
Code
Arms, the
Western Auto
priority
chapter
court
scheme
11
by
debtor's
could be dealt
_____ __ _____
chapter 11
considered injunctive
from
transferred
assets,5
the
and clear of
bankruptcy
confirmed
ruled
that
____________________
5Section 363(f) provides:
(f) The trustee may sell property under subsection (b)
or (c) of this section free and clear of any interest
in such property of an entity other than the estate,
only if
(1)
(2)
(3)
(4)
(5)
the
the
such
might "chill"
Savage Arms,
____________
that
all-asset sales
See
___
Id.
___
(In re
_____
Paris Indus. Corp.), 132 B.R. 504, 508 n.7 (D. Me. 1991).
__________________
Western
Auto
took
to enjoin
an
intermediate
appeal
to
the
prosecution
of the
Alaska state
court
____________________
Bankruptcy Code
363(f), 11 U.S.C.
363(f).
The
jurisdiction
bankruptcy
to enjoin
"successor liability"
court
reasoned
further prosecution
that
the
of the
requisite
state court
power to enforce
scheme and
Code themes:
the
hereinafter discussed,
Code priority
7Even though the bankruptcy court did not do so, Arms has
devoted considerable attention to the precise statutory source of
the bankruptcy court's "jurisdiction" to enjoin prosecution of
the Alaska state court action. See, e.g., 28 U.S.C.
157(a),
___ ____
1334; Bankruptcy Code
105(a), 11 U.S.C.
105(a).
Further,
Arms suggests that it may opt to rescind the chapter 11 asset
transfer if found liable as Debtor Industries' "successor." But
___
see Zerand-Bernal Group v. Cox, 23 F.3d 159, 164 (7th Cir. 1994)
___ ___________________
___
(rescission of all-asset sale which formed "core and premise" of
chapter 11 plan is precluded 180 days after confirmation of
plan). Western Auto responds that the bankruptcy court lacked
jurisdiction because by the time Savage sought injunctive relief
the reorganization plan had been confirmed and substantially all
chapter 11 estate assets had been distributed to creditors.
Therefore, the Alaska state court action could have had no
conceivable effect on the administration of the chapter 11 case.
______
See, e.g., In re G.S.F. Corp., 938 F.2d 1467, 1475 (1st Cir.
___ ____
___________________
1991). We need not address these jurisdictional questions, as we
conclude that the bankruptcy court misapprehended the effect of
its July 1989 order approving the asset transfer to Arms.
See
___
infra Section II.B.
_____
A.
A.
liability
encouraged
more
actions
are
enjoined,
lucrative
state-court
claimants will
11 remedies in
recoveries
be
favor of the
conceivably
available
this concern
to be unwarranted.
real, given the
For
one
nature of
the
4.
be
Trucks,
885
liability if the
chapter 11
F.2d
90,
remedy.
95
(3d
See,
___
Cir.
claimant failed to
e.g., Conway
____ ______
1989)
v.
(applying
_____________
Pennsylvania
law). Yet
more
conclusively, the
"circumvention"
concern
present
context since
attempt was
_______
there is
no
record indication
to Taylor or
that any
Western Auto as
502(c), 11 U.S.C.
502(c).
We
see
___
enlarge upon
Under
the Bankruptcy
Reform
Act of
1978
in a
____________________
adversely affected by the
injunction.
deliberate
departure
from
its
forerunners
virtually
all
the bankruptcy
& n.10
Comm. on the
Rep. No. 95-595, 95th Cong., 1st Sess. 4, 89-91, 99, 107 (1977)).
Under the Code,
in possession or
trustee
heard before
______
See, e.g.,
___ ____
and
___
a
_
their interests
Bankruptcy Code
hearing, may
_______
use,
363(b) ("The
sell,
Fed. R. Bankr. P.
2002(a)(2)
interest"); see
___
(20
not only
adversely affected.
or lease,
other
_____
11 case).
than
____
in the
__ ___
days'
notice
by
mail to
1109(b) ("parties
chapter
may be
in interest"
have "right
"parties
in
1109(b), 11 U.S.C.
to be
heard" in
in interest" encompasses
but any
Trust Co. v. McGee (In re Hutchinson), 5 F.3d 750, 756 (4th Cir.
_________
_____ _________________
1994);
is appropriate
___________
Bankruptcy Code
"[N]otice .
in the
__ ___
particular
__________
102(1), 11 U.S.C.
69 B.R.
515, 519
. ."
added);
Fed.
R. Bankr. P
the Code
bankruptcy court,
a proposed disposition of
See In re
___ _____
B.R.
1019,
1021
In re Northern Star
____________________
(E.D.N.Y.
1984)
(hearing
_______
P.
Code
102(1)
is
founded in
fundamental
____________________
Inc., 759 F.2d 1440, 1449 (9th Cir. 1985); In re Garland Corp., 6
____
___________________
B.R. 456, 459 (Bankr. 1st Cir. 1980) ("The right to be heard 'has
Auto,
339
U.S. 306,
as "parties
in
314 (1950)).
interest,"
Since
Taylor and
were never
afforded
the privately
negotiated terms
678,
asset transfer
of the
1991) (Bankruptcy
Code) (chapter
F.2d
11 claim
(noting that
363.13, at 363-43
for finality
________
in
purchased
subject
727(a)(1), 1141(a),
to
the
(d)(3), 11
lien");
U.S.C
held to
Bankruptcy
Code
727(a)(1), 1141(a),
(d)(3);
see
___
claim
assuming
that the
constituted
an
Western Auto
"interest"
in
successor
the
Debtor
13
Industries chapter
11 assets
transferred
Bankruptcy Code
Zerand-Bernal Group v.
____________________
(Posner,
to Arms
it
102(1), 11 U.S.C.
Cox, 23
___
and that
F.3d 159,
164 (7th
363(f) cannot
Cir. 1994)
be employed to
see
___
could not be
extinguished absent
particular
U.S.C.
its claim
circumstances.
1109(a); Fed.
See
___
Bankruptcy Code
R. Bankr. 2002(a)(2),
1109(a),
11
2002(k), 6004(a);
(burden
appropriate notice).
Arms
in possession to establish
concedes
retailers
of
agreement
itself disclosed
Furthermore,
that
have
been
on notice
that
the asset
transfer
product
liability
as wholesalers or
forty-four
There is no
its firearms.
Debtor
to retailers or wholesalers of
that
consummated, see
___
of firearms
(hence,
14
particular distributors)
future
claims.
indemnification
These
candidates for
unresolved
factual
parties to
to their intention
to
Even
concededly
made
no
attempt to
provide
notice
by
(direct mail
(Bankr. D.
creditors).
As
particular
it
was
never
circumstances"
determined
for
Debtor Industries
claimants like
"appropriate
and
any legitimate
Code priority
Furthermore, it
"notice
and
function served by
negotiation of
hearing" requirement
that
an
to
Auto, it
would
the asset
entire
threatened
the Bankruptcy
transfer agreement.
Arms
disruption to
their private
the
in
in
prescribed by
the Bankruptcy
were we to presume, as
_______
Arms belatedly
class of
future
product
liability
15
claimants
. . ,"
Bankruptcy Code
102(1)(A), 11
U.S.C.
102(1)(A).
B.
B.
bankruptcy
court
basis
court expressed
successor
chapter 11
additional
liability
asset bidding
for
injunctive
the concern
that
actions
proceed
to
relief,
the
permitting statewould
"chill"
"free and
their mutual
363(f),
but see
___ ___
Zerand-Bernal Group,
___________________
Arms
23 F.3d at
transfer to
The failure
Bankruptcy Code
of
the
asset
between Debtor
to afford
102(1) and
transfer
appropriate notice
pursuant to
agreement
terms
privately
negotiated
a legitimate basis
See
___
In re Federal
_____________
served by disclosure
parties in interest
debtor and
[in an
jurisdictional "no
and
injunction to
1991) ("The
essential purpose
all-asset sale] is
others having
parties
not make");
C.D. Cal.
(noting that a
entirely at
to ensure
that
the mercy of
the
the debtor.");
alike
can
avoid
this
extant agreement
containing
______
extinguished product liability claims).
approving the asset transfer to Arms
provision
which
102,
11 U.S.C.
102, and,
in problematic
circumstances, by
opportunity
circumstances.
822-23
mere
for
hearing
appropriate
in
the
particular
stamp" under
Bankruptcy
Code
362(d),
363(b),
have been
approved by [the
court]"), rev'd
_____
on
__
express
363(f) enables
no
view
as to
whether
Bankruptcy
Code
at 164.
We
transfer conducted
hold only
under
that the
the auspices
parties to
of
an all-asset
chapter 11
are
not
the prosecution of
product-line liability
when the
notice
action
against an
the bankruptcy
that the
of the all-asset
court must
transferee
transfer, nor of
102(1), prior
particular successor
all-asset
successor
Moreover, even
a state-law based
to dispensing
ascertain, at
injunctive
the threshold,
a genuine
18
threat
to
the legitimate
operation
provisions
of the
in an agreement
of the
negotiated between
As there was no
the chapter
of a
11
threshold showing in
permanent
injunctive relief.
See supra
___ _____
notes
& 8.
The
The
district
The
district
_______________
19