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In re Caesars Entertainment Operating Co. (Caesars Entertainment Operating Co. v. BOKF, N.A.)

United States Court of Appeals for the Seventh Circuit
808 F.3d 1186 (7th Cir. 2015)


Caesars Entertainment Operating Company (CEOC) (plaintiff) owned and operated casinos. Caesars Entertainment Corporation (CEC) was CEOC’s principal owner. CEOC borrowed a substantial amount of money and issued notes guaranteed by CEC to the lenders. CEOC began experiencing financial troubles, and CEC began selling CEOC’s assets and terminating its guaranties on the notes. The lenders who had received the CEC-guaranteed notes, including BOKF, N.A. (defendant), brought actions against CEC to challenge the termination of the guaranties. The lenders alleged damages totaling $12 billion. CEOC declared bankruptcy and asserted in the bankruptcy proceeding that CEC had fraudulently transferred CEOC’s assets at less than their fair value, leaving CEOC with massive debt and preventing recovery by CEOC’s creditors. CEOC was concerned that the lenders’ lawsuits could hinder CEOC’s restructuring effort, because the potential damages owed by CEC could drain CEC of capital needed for the restructuring and improperly allow the plaintiff lenders to recover ahead of CEOC’s more senior creditors. Accordingly, CEOC asked the bankruptcy judge to enjoin the lenders’ lawsuits against CEC until a bankruptcy examiner could assess the bankruptcy claims. The bankruptcy judge said that he did not have authority to issue the injunction under Section 105(a) of the Bankruptcy Code, 11 U.S.C. § 105(a), because the claims in the lenders’ lawsuits did not arise out of the same acts by CEC that CEOC was challenging in the bankruptcy proceeding. CEOC appealed the bankruptcy judge’s ruling in federal district court, but the district court agreed that the injunction was inappropriate. CEOC appealed to the United States Court of Appeals for the Seventh Circuit.

Rule of Law


Holding and Reasoning (Posner, J.)

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