- There is an identity of interests between the debtor and the third party, usually an indemnity relationship, such that a suit against the non-debtor is, in essence, a suit against the debtor or will deplete the assets of the estate;
- The non-debtor has contributed substantial assets to the reorganization;
- The injunction is essential to reorganization, namely, the reorganization hinges on the debtor being free from indirect suits against parties who would have indemnity or contribution claims against the debtor;
- The impacted class, or classes, has overwhelmingly voted to accept the plan;
- The plan provides a mechanism to pay for all, or substantially all, of the class or classes affected by the injunction;
- The plan provides an opportunity for those claimants who choose not to settle to recover in full; and
- The bankruptcy court made a record of specific factual findings that support its conclusions.
Summary: National Heritage Foundation, Inc. ("NHF") filed a Chapter 11 reorganization including provisions in its plan that prevented claim not only against NHF, but also its officers, directors and employees (among others), for acts or omissions arising prior to the reorganization. The bankruptcy court affirmed these release provisions, finding that these release provisions were "essential" to the reorganization. On appeal, Berhman contended that the plan was not proposed in good faith and was "a sham perpetrated by NHF’s officers and directors to secure immunity for their fraudulent and misleading conduct...." As the bankruptcy court had specifically found that NHF had filed this case for a "legitimate and honest purpose", the Court of Appeals held that there was no clear error on which to reverse this factual finding. Turning to the extent of the release, the Court of Appeals held that 11 U.S.C. § 524(e) notwithstanding, a release provision should be granted "cautiously and infrequently" and looked to the factors enunciated in Class Five Nev. Claimants v. Dow Corning Corp. (In re Dow Corning Corp.), 280 F.3d 648 (6th Cir. 2002):