In re Clamp-All Corp.
United States Bankruptcy Court for the District of Massachusetts
233 B.R. 198 (1999)

- Written by Solveig Singleton, JD
Facts
Section 1121 of the Bankruptcy Code (code) gave a debtor the exclusive right to file a reorganization plan during the first 120 days following the initiation of a Chapter 11 proceeding. The code’s legislative history stated that this time frame was intended to give the debtor a chance to propose a plan of reorganization without interference from creditors or others. Section 1125 of the code required a written disclosure statement to be approved by the court before votes were solicited for or against a debtor’s reorganization plan. Section 1125(b) disallowed solicitation of votes on a reorganization plan until the court had approved a disclosure statement. To avoid the spread of misinformation, Bankruptcy Rule 3017(a) limited distribution of unapproved proposed disclosure statements. Clamp-All Corporation (debtor), a firm that made steel couplings for plumbing fixtures, filed a Chapter 11 bankruptcy petition. Anthony Foresta and Caliber Consulting Corporation (Caliber) (creditors), Foresta’s consulting firm, were Clamp-All’s largest creditors. Clamp-All filed a reorganization plan and proposed disclosure statement. Under Clamp-All’s plan, many unsecured creditors would be paid within a year of the plan’s effective date. Before the court approved Clamp-All’s disclosure statement, Foresta and Caliber filed objections to Clamp-All’s proposal, attaching to the filing a proposed alternative disclosure statement and plan. Copies of the filing were sent to all creditors. Under the alternative plan, all creditors would be paid in full on the plan’s effective date. Clamp-All argued that Foresta and Caliber’s distribution of the alternative plan violated the exclusivity period and amounted to a solicitation of votes in violation of the code and Rule 3017. Foresta and Caliber argued that “solicitation” should be read more narrowly to prohibit only explicit requests for votes.
Rule of Law
Issue
Holding and Reasoning (Boroff, J.)
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