In re Adelphia Communications Corp.
| Decision Date | 24 January 2007 |
| Docket Number | Nos. 02-41729, M47 (SAS).,s. 02-41729, M47 (SAS). |
| Citation | 361 B.R. 337 |
| Parties | In re ADELPHIA COMMUNICATIONS CORPORATION, et al., Debtors, ACC Bondholder Group, Appellants, v. Adelphia Communications Corporation, et al., Appellees. |
| Court | U.S. District Court — Southern District of New York |
Weil, Gotshal & Manges LLP, By: Martin J. Bienenstock, Brian S. Rosen, Richard W. Slack, Vernon S. Broderick, New York, NY, Melanie Gray, Sylvia Mayer, Houston, Texas, for ACC Bondholder Group.
Stutman, Treister & Glatt P.C., By: Isaac M. Pachulski, Stephan M. Ray, Los Angeles, CA, Co-Counsel for ACC Bondholder Group.
Willkie Farr & Gallagher LLP, By: Marc Abrams, Myron Trepper, Roger D. Netzer, Paul V. Shalhoub, Brian E. O'Connor, Terence K. McLaughlin, Rachel Strickland, New York, NY, for Debtors and Debtors in Possession.
Kasowitz, Benson, Torres & Friedman LLP, By: David M. Friedman, Adam L. Shiff, Howard W. Schub, New York, NY, for Official Committee of Unsecured Creditors.
Klee, Tuchin, Bogdanoff & Stern LLP, By: Edward T. Attanasio, Los Angeles, CA, for Official Committee of Unsecured Creditors.
Morgenstern Jacobs & Blue LLC, By: Gregory A. Blue, Eric B. Fisher, New York, NY, for Official Committee of Equity Security Holders.
Sheppard Mullin Richter & Hampton LLP, By: David J. McCarty, Los Angeles, CA, for U.S. Bank National Association, as Indenture Trustee in Respect of Arahova Notes.
Seward & Kissel LLP, By: Arlene R. Alves, New York, NY, for Law Debenture Trust Company of New York, as ACC Senior Notes Trustee.
White & Case LLP, By: J. Christopher Shore, New York, NY, for Ad Hoc Committee of Arahova Noteholders.
Fried Frank Harris Shriver & Jacobson LLP, By: Gary Kaplan, New York, NY, for W.R. Huff Asset Management Co., L.L.C.
Haynes and Boone, LLP, By: Robin E. Phelan, Judith Elkin, New York, NY, for Bank of America, N.A., as Administrative Agent for the Century Cable Lenders.
Bracewell & Giuliani, LLP, By: Jennifer Feldcher, New York, NY, for Ad Hoc Committee of Non-Agent TCI and Parnassos Lenders.
Simpson Thacher & Bartlett LLP, By: Peter Pantaleo, Elisha D. Graff, New York, NY, for Wachovia Bank, N.A., as
Administrative, Agent for the UCA Lenders.
Goodwin Procter LLP, By: Michael K. Isenman, Washington, D.C., By: Gina Lynn Martin, Boston, MA, By: Allan S. Brilliant, New York, NY, for Highfields Capital Management and Tudor Investment Corporation.
Pachulski Stang Ziehl Young Jones & Weintraub P.C. LLP, By: Dean Ziehl, New York, NY, By: Richard Pachulski, Los Angeles, CA, for Ad Hoc Bondholders' Committee (a/k/a Committee II).
Clifford Chance U.S. LLP, By: Andrew Brozman, James Moyle, New York, NY, for Calyon New York Branch.
Clifford Chance U.S. LLP, By: Angelique Shingler, New York, NY, for Bank of N.Y.
Cadwalader Wickersham & Taft LLP, By: Kathryn L. Turner, New York, NY, for Perry Capital, LLC.
Sidley Austin LLP, By: Lee S. Attanasio, New York, NY, for Fort Myers Noteholders.
Cole, Schotz, Meisel, Forman & Leonard, P.A., By: John H. Drucker, New York, NY, for Class Action Plaintiffs.
Kramer Levin Naftalis & Frankel LLP, By: Kenneth H. Eckstein, Jeffrey S. Trachtman, New York, NY, for Frontier-Vision Ad Hoc Committee.
Milbank, Tweed, Hadley & McCloy LLP, By: James C. Tecce, New York, NY, for JPMorgan Chase Bank.
Kirkland & Ellis LLP, By: Richard L. Wynne, Michael I. Gottfried, Los Angeles, CA, for Ad Hoc Committee of Lenders.
Cleary, Gottlieb, Steen & Hamilton, By: Lindsee P. Granfield, Luke A. Barefoot, Jane Kim, New York, NY, for Certain Investment Banks.
Satterlee, Stephens, Burke & Burke, LLP, By: Christopher R. Belmonte, New York, NY, for Prestige Communications.
Shearman & Sterling, LLP, By: Marc B. Hankin, New York, NY, for Rembrandt Technologies, L.P.
Kleinberg, Kaplan, Wolff & Cohen, PC, By: David Parker, New York, NY, for Elliot Associates, LP and John Pike.
Kelley, Drye & Warren, LLP, By: Geoffrey W. Castello, Parsippany, NJ, for Wilmington Trust Co.
Dorsey & Whitney, LLP, By: Katherine A. Constantine, Minneapolis, MN, for U.S. Bank, N.A., as Indenture Trustee.
Wilmer, Cutler, Pickering, Hale & Dorr, LLP, By: Joel Millar, New York, NY, for Credit Suisse and Royal Bank of Scotland.
Luskin, Tern & Eisler, LLP, By: Michael Luskin, New York, NY, for The Bank of Nova Scotia.
Farrell Fritz, P.C., By: Louis A. Scarcella, Uniondale, NY, for Associated Electric & Gas.
Brown Rudnick Berlack Israels, LLP, By: Steven D. Pohl, New York, NY, for Ad Hoc Trade Claims Committee.
Baker Botts, LLP, By: Eric Soderlund, Dallas, TX, for Verizon Media Ventures.
The present dispute arises out of the approximately 230 jointly administered chapter 11 cases of Adelphia Communications Corporation ("ACC") and its subsidiaries (collectively, the "Debtors"). The ACC Bondholder Group1 now moves, pursuant to Federal Rule of Bankruptcy Procedure 8005, for a stay pending appeal and for an expedited appeal with respect to the Bankruptcy Court's confirmation order (the "Confirmation Order") approving the First Modified Fifth Amended Joint Chapter 11 Plan (the "Plan").2
The application for a stay of an order confirming a chapter 11 reorganization plan in a highly litigated and complex bankruptcy proceeding presents a classic clash of competing interests, all of which have merit. Without a stay, it is extremely unlikely that Appellants will ever be able to have meaningful appellate review of the rulings of the Bankruptcy Court, a non-Article III court, and in any event, a lower court. The ability to review decisions of the lower courts is the guarantee of accountability in our judicial system.3 In other words, no single judge or court can violate the Constitution and laws of the United States, or the rules that govern court proceedings, with impunity, because nearly all decisions are subject to appellate review. At the end of the appellate process, all parties and the public accept the decision of the courts because we, as a nation, are governed by the rule of law. Thus, the ability to appeal a, lower court ruling is a substantial and important right.
On the other hand, a stay of a confirmation order in one of the longest-running and most complex bankruptcies in our history threatens grave harm to thousands of parties who have been waiting for more than four years to obtain sizeable distributions from a group of bankrupt estates. After grueling negotiations, a plan of reorganization and a settlement of many ancillary disputes has been reached. The Plan was put to the vote of creditors and overwhelmingly approved. The Plan was subject to searching review by the Bankruptcy Court, which approved it in a lengthy decision. The inability to consummate the Plan resulting from a stay of that order could cause the estates to incur more than a billion dollars in additional costs or could even cause the Plan to collapse. This is not a risk that should be taken lightly.
In sum, as set forth above, two weighty interests are at stake. The right to review of lower court decisions clashes with the right of the majority of creditors to receive their distributions. Weighing these competing interests is one of the most difficult tasks this Court has yet confronted. This is so because the stay application, so to speak, is the ball game.4 Without permitting Appellants an opportunity for full briefing and a hearing on the merits of the appeal, this Court's decision on the stay may well eliminate Appellants' right to challenge the lower court's ruling. Nonetheless, many courts have confronted this dilemma and guidelines have been developed to assist the Court in its task. After a careful review in the limited time available of all of the submissions and arguments, I am granting a stay pending appeal only upon a condition requiring the posting of a very substantial bond.
These chapter 11 cases, which were are "among the most challenging — and contentious — in bankruptcy history,"6 have been litigated for more than four and a half years in the Bankruptcy Court. Various disputes arose among the creditors as to how the ultimate value of the estate would be allocated, including how to resolve the Intercompany Claims (claims between and among the various debtors), fraudulent transfer actions, and other inter-debtor causes of action (collectively, the "Inter-Creditor Dispute").
In August 2005, the Bankruptcy Court established a process to resolve the Inter-Creditor Dispute by which the Debtors and the Official Committee of Unsecured Creditors (the "Creditors Committee") were ordered to remain neutral and several unofficial committees of creditors were deputized to litigate the Inter-Creditor Dispute (the "MIA [Motion in Aid of Confirmation] Litigation") on behalf of the debtors (the "MIA Order").7 The twenty-three member Ad Hoc Committee of ACC Senior Noteholders (the "ACC Noteholders Committee") was one such committee; it was deputized as an authorized litigant on behalf of ACC.8 The MIA Order explicitly reserved the Debtors' right to "seek[ ] to compromise" one or more issues in the Inter-Creditor Dispute, but the authorized litigants had the right to object to any such compromise as well as to assert that the Debtors had no authority to compromise those issues.9
Previously, in April 2005, ACC had entered into definitive sale agreements with Time Warner and Comcast (the "Buyers") to purchase substantially all of the Debtors' U.S. assets with cash and Time Warner Cable, Inc. ("TWC") stock (the "Sale"). Under the agreements, the Sale was to be implemented as part of a plan of reorganization and that plan had to become effective by a date certain. In November 2005 a plan was proposed that provided for the implementation of the Sale. However, multiple creditors pressed multiple objections, and the plan could not garner the requisite support among the creditor classes when it was put to a vote. With the deadline to consummate the Sale fast...
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