## Facts

- Marvel Entertainment Group, Inc. and subsidiaries filed Chapter 11 and operated as debtors-in-possession.
- Three Perelman-controlled holding companies owned about 80% of Marvel’s common stock and issued roughly $894 million in bonds secured by pledged Marvel shares and holding-company stock.
- Marvel and the holding companies filed separate Chapter 11 cases; the holding companies defaulted on the bonds.
- In the holding companies’ bankruptcy cases, the bankruptcy court lifted the automatic stay to permit bondholders to foreclose on the pledged Marvel stock.
- After foreclosure, the bondholders sought to vote the acquired shares to replace Marvel’s board of directors.
- In Marvel’s own Chapter 11 case, Marvel commenced an adversary proceeding seeking injunctive relief to block the shareholder vote, arguing the automatic stay in Marvel’s case prohibited voting without further stay relief.
- The bankruptcy court in Marvel’s case barred the bondholders from voting the shares absent additional relief from the automatic stay.
- The Official Bondholders Committee and the indenture trustee appealed to the district court.

## Issues

1. Whether the automatic stay in Marvel’s Chapter 11 case barred bondholders who foreclosed on pledged stock from voting the shares to replace Marvel’s board without further stay relief.
2. Whether the district court could hear the appeal despite the absence of a separately entered judgment and whether the bankruptcy court’s order was appealable.

## Decision

- The district court exercised appellate jurisdiction, holding the lack of a separate judgment did not defeat review and the order was appealable as presenting a controlling legal question.
- The district court reversed the bankruptcy court’s order to the extent it prevented the bondholders from voting the shares.
- The court held the automatic stay did not prohibit the bondholders’ exercise of shareholder voting rights to elect a new board absent a showing of clear abuse.

## Legal Principles

- The automatic stay under 11 U.S.C. § 362 primarily protects the estate from collection activity and improper control over estate property; it does not, without more, bar ordinary shareholder voting.
- Shareholders have a core right to elect directors; bankruptcy does not generally suspend corporate voting rights or insulate incumbent management from a lawful shareholder vote.
- A bankruptcy court may restrict shareholder voting only upon a showing of clear abuse, such as use of voting power for improper purposes that threatens the debtor’s reorganization.
- A statutory amendment will not be read to curtail established shareholder voting practice absent clear textual or legislative direction.

## Conclusion

The district court held that bondholders who became shareholders through foreclosure could vote their shares to replace the debtor’s board during Chapter 11, and that the automatic stay could not be used to block the vote absent evidence of clear abuse threatening reorganization.


In re Marvel Ent. Grp., Inc. v. Chase Manhattan Bank, 209 B.R. 832 (D. Del. 1997)