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1600 Hicks Road LLC v. EH National Bank (In re: 1600 Hicks Road LLC)

22 B 13205, 23 A 00016
Chapter 11 debtor asked the court to enter a preliminary injunction halting a creditor’s state court proceedings against its principals.  The state court litigation was based on the principals’ guarantee of a deficiency claim against the debtor.  HELD: 11 U.S.C. § 105(a) supports the bankruptcy court’s power to enter an injunction in order to protect its jurisdiction.  Many bankruptcy courts have used this power to enjoin litigation against a non-debtor.  To obtain such an injunction, the debtor had to prove a likelihood of a successful reorganization and that the injunction would serve the public interest.  First, it is not a high burden to show a reasonable likelihood of success in reorganization, and the debtor met this burden.  Debtor had already proposed a plan that depended on the principals being able to focus on their management and operation of debtor’s tenant.  Rent from this tenant would fund the plan and enable the debtor to pay its creditors in full.  Without the injunction, the principals’ attention would be diverted; this would jeopardize the proposed reorganization.  Second, it is in the public interest to maintain the tenant’s business and to allow the reorganization to proceed; doing so would benefit all parties in interest.  Debtor also established that failure to enjoin the creditor would result in irreparable harm and that it had an inadequate remedy at law, the remaining elements necessary for a preliminary injunction.

Friday, March 17, 2023