In re Allegheny International, Inc.

118 B.R. 282 (1990)

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In re Allegheny International, Inc.

United States Bankruptcy Court for the Western District of Pennsylvania
118 B.R. 282 (1990)

Facts

[Editor’s Note: The casebook The Law of Mergers and Acquisitions (Dale A. Oesterle & Jeffrey J. Haas eds., 5th ed. 2018) gives the citation for this case as 118 Bankr. Rep. 282. However, the correct Bluebook-style citation, as used here, is 118 B.R. 282.] In its Chapter 11 bankruptcy case, Allegheny International, Inc. (Allegheny) (debtor) filed its reorganization plan on December 29, 1989. At that time, Japonica Partners, L.P. (Japonica) did not have any ownership or debt interest in Allegheny, but Japonica desired to file a competing reorganization plan and acquire control of Allegheny. To obtain the right to file a reorganization plan as a party in interest, Japonica purchased $2,712 worth of Allegheny public debentures. Immediately following the purchase of debentures, Japonica filed a reorganization plan on January 24, 1990 under which Japonica would acquire control of Allegheny. Japonica offered $6.42 per share, while Allegheny’s plan offered $7.00. Beginning February 23, 1990, Japonica started purchasing (as well as making tender offers for) the claims of various creditors. Japonica acquired enough claims in various classes to vote against and defeat Allegheny’s plan. The bankruptcy court set March 30, 1990 as the last day to vote on Allegheny’s reorganization plan, and by that time, Japonica had caused enough votes from the purchased claims to be voted against Allegheny’s plan to effectively block the plan’s approval. Allegheny filed a motion in bankruptcy court to invalidate Japonica’s votes pursuant to § 1126(e) of the United States Bankruptcy Code, which allowed for votes to be designated (i.e., disqualified) if not obtained or made in good faith.

Rule of Law

Issue

Holding and Reasoning (Cosetti, J.)

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