Section 9.81 Effect of Confirmation on Parties Without Notice

LibraryBankruptcy Practice (2007 Ed. + 2015 Cum Supp)

5. (§9.81) Effect of Confirmation on Parties Without Notice

Although 11 U.S.C. § 1141(a) does not condition the binding effect of the plan, the discharge of claims, or the extinguishment of interests only on proper notice to affected parties, lack of notice of the case to these parties violates the Due Process clause of the United States Constitution. U.S. Const. amend. V. See Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306, 314 (1950); City of New York v. N.Y., N.H. & H.R. Co., 344 U.S. 293 (1953); Broomall Indus., Inc. v. Data Design Logic Sys., Inc., 786 F.2d 401 (Fed. Cir. 1986).

Courts have held that a creditor must have notice of the confirmation hearing, rather than mere notice of the case or order, for its claim to be discharged. See Reliable Elec. Co. v. Olson Constr. Co., 726 F.2d 620 (10th Cir. 1984). But see In re Medaglia, 52 F.3d 451 (2nd Cir. 1995) (notice of case sufficient).

The type of notice that is appropriate varies depending on the status of the creditor. See Jones v. Chemetron Corp., 212 F.3d 199 (3rd Cir. 2000) (mass tort creditor not born yet at time of notice; claim not barred). But see In re Charter Co., 113 B.R. 725 (M.D. Fla. 1990) (creditor claim barred). Section 1141(d)(2) and 11 U.S.C. § 523(a)(3) combine to create an exception to dischargeability for claims known to the debtor whose holders do not receive notice of the bankruptcy proceeding. This applies to individual debtors only.

2015 SUPPLEMENT (§9.81)

5. (§9.81) Effect of Confirmation on Parties Without Notice

Add the following after the citation to City of New York in the first paragraph in the original chapter:

DPWN Holdings (USA), Inc. v. United Air Lines, Inc., 747 F.3d 145, 150 (2nd Cir. 2014) (a claim cannot be discharged if the claimant is denied due process because of lack of adequate notice); Sanchez v. Nw. Airlines, Inc., 659 F.3d 671 (8th Cir. 2011);

Add the following after the citation to Broomall Indus., Inc. at the end of the first paragraph in the original chapter:

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