Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Century Glove Inc. v. First American Bank of New York

filed: October 25, 1988.


Appeal from the United States District Court For the District of Delaware, D.C. Civil No. 87-00403, District Judge - Honorable Jane R. Roth.

Gibbons, Chief Judge, Higginbotham and Hunter Circuit Judges.

Author: Hunter


HUNTER, Circuit Judge:

1. Century Glove, Inc. ("Century Glove"), a debtor seeking reorganization under the federal bankruptcy laws, seeks review of a district court order dismissing sanctions imposed on its creditors. Century Glove claims that one of its creditors, First American Bank ("FAB"), unlawfully solicited the votes of other creditors, in violation of 11 U.S.C. § 1125. The bankruptcy court agreed, imposing sanctions against FAB and invalidating another creditor's rejection of Century Glove's plan. On appeal, the district court reversed, holding FAB's action lawful. Century Glove now appeals to this court. We will affirm the order of the district court.


2. Century Glove filed its petition seeking reorganization in bankruptcy on November 14, 1985. On August 1, 1986, Century Glove filed its reorganization plan, along with a draft of the disclosure statement to be presented along with the plan. Arguing that Century Glove's largest claimed assets are speculative lawsuits (including one against FAB), FAB presented a copy of an alternative plan to the unsecured creditors' committee. FAB advised that it would seek court approval to present its plan as soon as possible. The committee ultimately rejected the plan in favor of that of the debtor. On December 2, 1986, the bankruptcy court approved Century Glove's disclosure statement. A copy of the plan, the statement, and a sample ballot were then sent to Century Glove's creditors entitled to vote on the plan's acceptance.

3. Between December 12 and December 17, 1986, an attorney for FAB, John M. Bloxom, telephoned attorneys representing several of Century Glove's creditors. Among these creditors were Latham Four Partnerships ("Latham Four") and Bankers Trust New York Corporation ("BTNY").*fn1 Bloxom sought to find out what these creditors thought of the proposed reorganization, and to convince them to vote against the plan. He said that, while there was no other plan approved for presentation, and thus no other plan "on the table," FAB had drafted a plan and had tried to file it. The creditors' attorneys then asked for a copy of the plan, which FAB provided. The copies were marked "draft" and covering letters stated that they were submitted to the creditors for their comments. The draft did not contain certain information necessary for a proper disclosure statement, such as who would manage Century Glove after reorganization.

4. With a copy of its draft plan, FAB also sent to Latham Four a copy of a letter written to the unsecured creditors' committee by its counsel. In the letter, dated August 26, 1986, counsel questioned the committee's endorsement of the Century Glove plan, arguing that the lawsuits which Century Glove claims as assets are too speculative. As stated, the committee endorsed the plan anyway. Upset with this decision, one of its members sent a copy of the letter to a former officer of Century Glove. The officer then sent a copy, unsolicited, to FAB. Uncertain whether the letter was protected by an attorney-client privilege, FAB asked the committee member whether he had disclosed the letter voluntarily. He said that he had, and furnished a second copy directly to FAB. FAB attached this letter to a motion before the bankruptcy court seeking to have the committee replaced. The bankruptcy court later held the letter a privileged communication.

5. BTNY had made a preliminary decision on September 12, 1986, to reject Century Glove's plan. It reaffirmed this decision on December 15, when it received a copy of the plan and disclosure. Counsel for BTNY spoke with Bloxom the next day, December 16, 1986, and Bloxom mailed a letter confirming the call, but by mistake Bloxom did not send a draft of the alternate plan until December 17. On that day, counsel for BTNY prepared its ballot rejecting Century Glove's plan, and informed Bloxom of its vote.

6. After receiving the several rejections, Century Glove petitioned the bankruptcy court to designate, or invalidate, the votes of FAB, Latham Four and BTNY. Century Glove argued that FAB had acted in bad faith in procuring these rejections.


7. The bankruptcy court held that FAB had violated 11 U.S.C. § 1125(b), which allows solicitation of acceptance or rejections only after an approved disclosure statement has been provided the creditor. Though a statement had been filed and provided, the bankruptcy court stated that:

solicitations . . . must be limited by the contents of the plan, the disclosure statement, and any other court-approved solicitation material. The solicitee may not be given information outside of these approved documents.

The bankruptcy court found that FAB violated the section by providing additional materials such as copies of its draft plan.

8. The bankruptcy court also concluded that FAB had violated "the spirit of § 1121(b), since FAB was apparently seeking approval of a plan which was not yet filed and which it could not file. . . ."*fn2 This "impropriety" was "heightened" by the absence from the FAB plan of such information as "who will manage the debtor." The bankruptcy court also found "improper" the disclosure by FAB of the August 26, 1986 letter to the creditors' committee. The court found that FAB's ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.