## Facts

- Fairchild Aircraft Corporation (FAC) manufactured and sold commuter aircraft before filing for Chapter 11 protection.
- FAC’s confirmed Chapter 11 plan provided for a sale of substantially all assets to Fairchild Aircraft Incorporated (FAI) under an asset purchase agreement.
- The asset purchase agreement purported to exclude FAI’s assumption of product-liability obligations tied to FAC aircraft manufactured and sold before the bankruptcy.
- The confirmation order included broad injunctive language intended to bar creditors and claimants from pursuing certain actions after confirmation.
- The plan did not identify, notify, or represent unknown future tort victims and did not establish a mechanism (e.g., trust or representative) for later-arising product-injury liabilities.
- Approximately three years after confirmation, a prepetition-manufactured FAC aircraft crashed, causing fatalities and injuries.
- The victims’ representatives and related parties sued FAI in non-bankruptcy courts under successor-liability theories.
- FAI filed an adversary proceeding seeking a declaration that the plan, confirmation order, and sale documents barred the tort suits and requesting an injunction to stop the litigation.
- The defendants challenged the adversary proceeding and, after preliminary rulings, the parties filed cross-motions for summary judgment.

## Issues

1. Whether the bankruptcy court had jurisdiction after confirmation to interpret and enforce its confirmation order and related injunction as to suits filed against the asset purchaser.
2. Whether post-confirmation accident victims held “claims” under 11 U.S.C. § 101(5) as of plan confirmation based solely on prepetition manufacture and sale of the aircraft.
3. Whether the plan injunction, confirmation order, and asset purchase agreement could bar or enjoin successor-liability tort suits by persons who were uninjured and unidentified at confirmation.
4. Whether due process principles (notice and an opportunity to be heard) prevented enforcement of the discharge or injunction against such future tort claimants.

## Decision

- The court held it had authority to interpret and enforce its own confirmation order, but that authority did not permit extinguishing rights of parties not bound by the bankruptcy case.
- The court concluded the post-confirmation crash victims did not have prepetition “claims” within § 101(5) because they had no injury at confirmation and lacked a sufficient prepetition relationship to the debtor giving rise to a cognizable right to payment.
- The court refused to construe the plan injunction, confirmation order, or sale terms as barring the successor-liability suits against FAI.
- The court held that, even if the rights were treated as “claims,” the absence of meaningful notice or representation for unknown future claimants would defeat enforcement on due process grounds.
- The court denied FAI’s request for declaratory and injunctive relief, allowing the non-bankruptcy tort litigation to proceed.

## Legal Principles

- A bankruptcy court may interpret and enforce its confirmation order, but enforcement cannot bind non-creditors whose rights were not “claims” at confirmation.
- A “claim” under 11 U.S.C. § 101(5), though broad, requires more than a purely hypothetical future injury; some limiting principle such as a prepetition relationship or contact is necessary to treat a later-injured person as a creditor at confirmation.
- Plan injunctions and sale-related provisions cannot eliminate state-law tort rights of persons who were unknown, uninjured, and not represented in the bankruptcy process at the time of confirmation.
- Due process limits the reach of discharge and injunction provisions; binding parties requires constitutionally adequate notice and an opportunity to be heard (or a substitute mechanism providing representation for future claimants).
- Where later-injured persons are not bound by the bankruptcy discharge, successor-liability questions remain for adjudication under applicable non-bankruptcy law in the forums hearing the tort suits.

## Conclusion

The court held that individuals injured in a post-confirmation crash of a prepetition-manufactured aircraft did not hold dischargeable bankruptcy “claims” at the time of confirmation and were not bound by the plan injunction or sale terms; accordingly, FAI could not use the confirmation order to enjoin their successor-liability actions in other courts.


In re Fairchild Aircraft Corp., 184 B.R. 910 (Bankr. W.D. Tex. 1995)