## Facts

- Caesars Entertainment Operating Company, Inc. (CEOC), a casino operator, issued billions of dollars in notes that were guaranteed by its parent, Caesars Entertainment Corporation (CEC).
- As CEOC’s finances deteriorated, CEC attempted to reduce or eliminate its guaranty exposure through transactions including asset transfers and purported termination of the guarantees.
- Noteholders and trustee representatives filed multiple “guaranty suits” in state and federal courts against CEC (a non-debtor), seeking approximately $12 billion based on the terminated guarantees.
- CEOC and certain subsidiaries filed Chapter 11 petitions in the Northern District of Illinois and asserted estate claims against CEC, including that CEC caused CEOC to transfer valuable assets for less than fair value.
- CEOC sought a preliminary injunction in the bankruptcy court to temporarily stay the guaranty suits until 60 days after a court-appointed examiner issued a report, arguing the suits would impair plan funding and upset creditor equality.

## Issues

1. Whether 11 U.S.C. § 105(a) authorizes a bankruptcy court to temporarily enjoin creditor suits against a non-debtor affiliate when the suits threaten the debtor’s Chapter 11 reorganization.
2. Whether statutory authority under § 105(a) requires that the third-party litigation arise from the same acts as the debtor’s estate claims.

## Decision

- The Seventh Circuit vacated the district court’s order affirming the bankruptcy court’s denial of the injunction and remanded.
- The court held that § 105(a) provides statutory authority for a bankruptcy court to issue a temporary injunction staying the guaranty suits against CEC if necessary or appropriate to carry out the Bankruptcy Code.
- The court rejected the categorical view that such relief is unavailable unless the third-party suits involve precisely the same conduct as the estate’s claims.
- The court did not require that an injunction be entered; it held only that the bankruptcy court had authority to consider the request under the correct legal standard.

## Legal Principles

- Bankruptcy Code § 105(a) empowers bankruptcy courts to issue orders “necessary or appropriate” to carry out the Code, including limited injunctive relief affecting non-debtors when tied to protecting the reorganization process.
- A bankruptcy court may consider enjoining third-party litigation when it is closely connected to the bankruptcy case and would likely impair reorganization objectives, including preserving a key settlement or funding source and preventing unequal creditor outcomes.
- A temporary, case-management stay tied to defined milestones (such as an examiner’s report) can fall within § 105(a) when it supports an efficient resolution of the bankruptcy and does not conflict with specific Code provisions.

## Conclusion

The Seventh Circuit held that § 105(a) authorizes a bankruptcy court to temporarily stay creditor guaranty suits against a non-debtor parent where the litigation threatens the debtor’s reorganization, and it remanded for further consideration of whether injunctive relief should issue on the facts.


In re Caesars Ent. Operating Co., 808 F.3d 1186 (7th Cir. 2015)