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Century Glove v. First American Bank of New York

United States Court of Appeals for the Third Circuit
860 F.2d 94 (1988)


Facts

In November 1985, Century Glove, Inc. (Century) (plaintiff) filed a Chapter 11 bankruptcy petition. On August 1, 1986, Century submitted a plan of reorganization and a draft disclosure statement. At a meeting of the unsecured creditors committee, First American Bank of New York (FAB) (defendant) argued against approval of Century’s plan and submitted a draft plan of its own. The creditors committee supported Century’s plan over FAB’s. On December 2, 1986, the bankruptcy court approved Century’s disclosure statement. Copies of the plan, the statement, and a proposed ballot were submitted to Century’s creditors. In mid-December, FAB contacted other creditors of Century, including Latham Four Partnerships (Latham Four) (defendant) and Bankers Trust New York Corporation (BTNY) (defendant). FAB sought to persuade those creditors to vote against the plan. In doing so, it sent them copies of FAB’s plan, in draft form, for their comments. FAB also gave to Latham Four a copy of a privileged communication from counsel for the unsecured creditors committee to the committee, in which counsel questioned the committee’s support for Century’s plan. After being contacted by FAB, Latham Four voted against Century’s plan. BTNY had already decided, in September 1986, to reject the plan. It formally did so on December 17, the same day that FAB sent it a draft copy of its alternative plan and a day after FAB counsel spoke with BTNY’s counsel about the vote. Century petitioned the bankruptcy court to designate, meaning to disqualify, the votes of FAB, Latham Four, and BTNY on the grounds that FAB unlawfully, and in bad faith, solicited the votes of the other creditors. The bankruptcy court ruled in favor of Century except with respect to BTNY’s vote. The court also imposed monetary sanctions upon FAB. Upon appeal, the district court affirmed the decision as to BTNY but reversed the decisions as to Latham Four and FAB, including the sanctions. Century appealed.

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Holding and Reasoning (Hunter, J.)

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