Saturday, December 1, 2012

In re Fairchild Aircraft Corp. case brief

In re Fairchild Aircraft Corp. (Bankr. WD Tex. 1995) (Manville with Standing after plane crash)

Facts: Homeowners seek an order determining that the π’s are not bound by reorg. Plan and to pursue prepetition claims against US Home. April 15 USH filed petitions. The court set December 23 1991 as the Bar order for all claims to be filed. On May 24 1993 the plan was confirmed. The homeowners hired someone who told them their houses didn’t meet the insurance standards. On August 1996 the π’s sent a demand letter to USH. USH responded that the confirmation order enjoined litigation on their claims. Π’s brought this motion because they were not given formal notice of bankruptcy. USH argues that the creditors received constructive notice by publication and the claims are barred under §1141(d). 
Issue: Did the claimant receive sufficient notice of the bankruptcy?

Holding: Yes! They were unknown creditors. This case turns on the legal duty owed by the debtor. Since there was no law they violated or standard, they were not put on notice essential.

Analysis: Discharge presumes that all creditors bound by the plan have been given notice sufficient to satisfy due process. Adequate notice depends on the facts and circumstances of each case. Due process is met if notice is “reasonably calculated to reach all interested parties, reasonably conveys all of the required information, and permits a reasonable amount of time for response.” When a creditor is unknown to the debtor, publication notice of the claims bar date may satisfy DP. If a creditor is known to the debtor, notice by publication is not constitutionally reasonable, and actual notice of the relevant bar dates must be afforded to the creditor. Here, the debtor sent out national publications as well as local. Were the creditors known? Known = actual knowledge or reasonably ascertainable by the debtor. Unknown = a creditor whose “interests are either conjectural or future or, although they could be discovered upon investigation, do not in due course of business come to knowledge of the debtor.”

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