Opinion
Bankruptcy Nos. 05-06782-JM11 through 05-06786-JM11 (Jointly Administered).
February 7, 2006
MEMORANDUM DECISION
On December 22 and December 23, 2005, the Court held hearings regarding confirmation of the debtor' ("Debtors") plan of reorganization ("Plan"). At the conclusion of the hearing on December 23, 2005, the Court ruled that the Plan would be confirmed. The order on confirmation ("Confirmation Order") was entered that same date.
OFSI Fund 11, LLC ("OFSI") has filed a motion to amend the Confirmation Order ("Motion"). OFSI contends that an indemnification provision in ¶ X of the Confirmation Order, and a related provision in the Plan (¶ 11.05), were ordered stricken by the Court. It also argues that the indemnification provisions would improperly limit its rights against third parties.
The Court has considered the Motion, as well as an objection to the Motion filed by the Senior Lenders and a reply filed by OFSI. The Court also provided OFSI with time to obtain a transcript of the hearings. The Court has reviewed the portions of the transcript which OFSI believes are pertinent to this issue.
At the hearing on confirmation, the Court ordered that the Plan and Confirmation Order needed to be amended so that the so-called exculpation provision in ¶ 11.03 of the Plan would not be any broader than what is already provided for under the current law. The Court explained that the Plan and Confirmation Order could not bar third party creditors from asserting claims against other creditors.
The indemnification provision, however, does not act as a bar against third party creditors from asserting claims against other creditors. It simply provides that the Debtors will indemnify various parties if they are sued in connection with the formulation and implementation of the Plan, as well as related activities. This provision does not violate the requirements for plan confirmation under Bankruptcy Code Section 1129 (a), and it is not prohibited by existing case law.
Furthermore, a review of the transcript confirms that the Court did not require the plan proponent to strike the indemnification provision. For these reasons, the Court will not amend the Confirmation Order as requested by OFSI.
The Motion is DENIED.