Chemtura Corporation

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U.S. BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
_______________________________________
)
In re: 	) 	Chapter 11
)
CHEMTURA CORPORATION, et al., 	)
) 	Case No. 09-11233 (REG)
)
Debtors. 	) 	Jointly Administered
_______________________________________)
DECISION ON REQUEST FOR WAIVERS OF
STAYS UNDER FED.R.BANKR.P. 3020(e) AND
SIMILAR RULES
By letter submitted to me yesterday, Pentair has objected to the plan supporters’
provision in the proposed Confirmation Order waiving the normal 14-day stay of
effectiveness under Fed.R.Bankr.P. 3020(e) and other, similar, provisions—permitting
the Plan to go effective immediately. The Debtors responded later the same day. 	After
considering the two submissions, I’m sustaining Pentair’s objection, but only in part. In
the exercise of my discretion, I’m invoking the authority given to me under Bankruptcy
Rule 3020(e) and the other applicable rules1 to shorten the duration of the stay of
effectiveness for which those rules provide, but I won’t eliminate it entirely. The
Confirmation Order will be stayed to the extent, but only the extent, of permitting it to go
effective after 12 noon on Monday, November 8, five calendar days from now. The
reasons for this exercise of discretion follow.
1 	The others are Fed.R.Bankr.P. 6004(h), which applies to most uses, sales, or leases of property,
and Rule 7062, captioned “Stay of Proceedings to Enforce a Judgment,” which makes
Fed.R.Civ.P. applicable in adversary proceedings. Rule 7062 is not applicable in contested
matters like this one unless the court directs otherwise, see Fed.R.Bankr.P. 9014(c), and at least
since 1999, has been inapplicable to confirmation orders except in instances (which I have never
seen) where the bankruptcy court might direct otherwise. See 10 Collier ¶7062.01 (15th ed. rev.
2009). Rule 3020(e) applies instead. Id.
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Pentair is right in its contention that the plan supporters didn’t ask for the waiver
before or at the time of the hearing on confirmation. While some might argue that this
would have been presumptuous, I think “best practices,” at the least, would have been to
put this issue on the table early, setting forth the reasons why any delay in effectiveness
would be prejudicial to creditors, other stakeholders, and/or the estate, or articulating
other reasons why the normal stay duration would be inappropriate. Nevertheless, the
way by which the plan supporters approached the issue was the norm, and Pentair was
not denied due process. And at least where, as here, any objectors got due process, we
are talking about a matter in which I unquestionably have discretion, and am free to
determine in whatever manner I consider to be most in the interests of justice.
In their letter responding to Pentair and in support of the requested waiver, the
Debtors make three points. Two lack merit. The third has considerable merit—but while
it supports shortening the stay, it doesn’t support eliminating it entirely.
The Debtors’ first point is that Section 15.1 of the Plan explicitly contemplates the
waiver of the stays, by providing that the Plan “will be immediately effective upon the
occurrence of the Effective Date,” notwithstanding Rules 3020(e) and the others. This is
circular. The Effective Date could not take place until the Confirmation Order became
effective in the first place, and the latter could not occur until the passage of time for
which Rules 3020(e) and 6004(h) provide, as modified by any direction to the contrary
that I would have the power to issue.
The Debtors’ second point is that while Section 12.5 of the Plan provides for a
“final order” requirement (providing in substance that the Plan couldn’t go effective until
the Confirmation Order has become a “final order,” as defined in the Plan), this
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requirement can be waived—and that the plan supporters with waiver authority all will
waive it. With due respect, other than expressing the preference of the plan supporters
that the plan go effective promptly (which I’d assumed), this tells me nothing. Plan
supporters customarily draft their plans this way, and customarily waive final order
requirements as soon as they’re permitted to, because they’re well aware of the caselaw
involving equitable and statutory mootness. In most cases (and/or with respect to most
issues), the effectiveness of the plan will moot appeals from the confirmation order.
Though in a case (which I’ve never seen) where plan supporters are unwilling to waive
their final order rights, that unwillingness could be quite relevant to any 3020(e) waiver
request, we don’t have that situation here.
The Debtors’ third point is by far their most persuasive, and ultimately informs
the exercise of my discretion on this issue. The Debtors observe that there are significant
costs to the Debtors’ estates in delaying the effectiveness of the plan—pointing out that
interest alone on the allowed claims would cost the estate approximately $230,000 per
day. And they note that the interest expense is in addition to other administrative costs
and expenses that the Debtors would continue to incur if the effective date were delayed.
To my mind, these are serious concerns, especially when weighed against the concerns of
an entity, like Pentair, most of whose claim has been disallowed, and whose chances of a
successful appeal on the claims disallowance issue would in my mind be remote.
However, I believe that I should be wary of wholly denying any party at least an
opportunity to seek a stay to avoid the mooting of its appeal. I thus will shorten the
3020(e) period, but won’t totally eliminate it. I recognize that permitting this time could
cost the estate money if the Plan could become effective sooner (a matter that’s not clear
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to me), and that granting any longer stay, especially if unbonded, would cost the estate
and its stakeholders a great deal of money. But since the five day stay I will authorize is
not likely to have a material adverse effect on the estate, I consider the limited waiver for
which I am providing to be best in the interests of justice.
The Confirmation Order entered today has language added to it consistent with
this Decision.
Dated: New York, New York 	s/Robert E. Gerber
November 3, 2010 	United States Bankruptcy Judge
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