In re Marvel Entertainment Group, Inc.

Marvel Entertainment Group, Inc. and affiliated entities (collectively, Marvel) (debtors) filed for Chapter 11 bankruptcy in December 1996 and continued to run Marvel as debtors-in-possession. Both before and after Marvel’s bankruptcy filing, entities controlled by Carl Icahn (collectively, the Icahn interests) (creditors) had purchased prepetition debt claims and bonds issued by holding companies that held all or substantially all of Marvel’s stock. In the bankruptcy proceeding, an official bondholders’ committee and indenture trustee acted on behalf of the Icahn interests. A group of Marvel creditors that held over $600 million in debt claims secured by Marvel’s assets (collectively, the lenders) (creditors) had disputes with the Icahn interests during the bankruptcy proceeding with respect to a bankruptcy financing plan and control of Marvel’s board of directors. In June 1997, the Icahn interests took control of Marvel, meaning that the Icahn interests were simultaneously operating as the debtor-in-possession of Marvel and as the creditors of the holding companies that controlled Marvel. The Icahn-controlled debtor-in-possession was unable to obtain necessary agreements from the lenders to move forward with reorganization, and in October 1997, the Icahn-controlled debtor-in-possession sued the lenders and other Marvel creditors in district court, alleging the existence of a conspiracy between the lenders, the former Marvel board, and another Marvel affiliate to sabotage the debtor-in-possession’s reorganization efforts. The bankruptcy cases were transferred to the district court, and the lenders moved under 11 U.S.C. § 1104 for the appointment of a trustee, given the acrimonious relationship between the Icahn interests and the lenders. The district court granted the motion, and the Icahn interests and Marvel appealed.