Debtor and guarantors filed a motion for temporary restraining order (“TRO”) requesting the Court to enjoin collection efforts against non-debtor guarantors until the final hearing on confirmation of Debtor’s chapter 11 plan. The plan contained a temporary injunction that would enjoin the creditor’s collection efforts against non-debtor third-party guarantors while Debtor made plan payments. The Court held a final evidentiary hearing on short notice and treated the request for TRO as a motion for preliminary injunction. After determining that it has authority to approve a temporary plan injunction, the Court reviewed the various tests courts apply to determine whether to approve such an injunction and then applied a modified traditional injunction standard. The Court concluded that it would not approve the proposed temporary plan injunction and therefore would not grant a preconfirmation injunction as a bridge to the plan injunction. The Court found that Debtor’s proposed plan would satisfy at most about one-third of the guaranteed obligation, the creditor’s sole recourse to recover the balance is to enforce the unsecured third-party guaranty, and there is a reasonable likelihood of irreparable harm to the creditor if the Court granted the requested injunctive relief. The Court ruled that the injunction should not issue even if it meant that Debtor would be unable to confirm a plan.

Guarantors of Debtor’s note did not have their liability reduced by the bankruptcy limitations on the amount of the allowed claim against the Debtor. Bankruptcy limitations on the allowed amount of a claim (such as limitations on post-petition interest or lease rejection damages) change the Debtor’s liability for the debt but do not affect the underlying indebtedness, which is what the Guarantors guaranteed. The Guarantors’ liability was also not reduced by the language of the guaranty, which stated that the Guarantors guaranteed the debt of the Debtor; Tenth Circuit precedent rejected such argument. Finally, parol evidence was not admissible to construe the guaranty because the Guarantors’ offer of proof regarding what evidence would show did not demonstrate a patent nor latent ambiguity. Thus, the Guarantors are liable for the full amount that would have been owed by the Debtor under non‑bankruptcy law had no bankruptcy case been filed.

Defendants moved to exclude Plaintiff’s expert witness from testifying at trial, arguing that the expert was being paid a contingent fee, which disqualified him from testifying. Defendants also argued that the expert’s testimony should be excluded under the Daubert “junk science” rule. The Court overruled the contingent fee argument and deferred ruling on the Daubert argument until the conclusion of trial.

adv

Debtor sought to vacate and reschedule the final hearing on the United States Trustee’s motion to convert or dismiss debtor’s chapter 11 case and related deadlines so that Debtor could pursue a newly filed Rule 60(b) motion to set aside foreclosure judgment filed in the state court foreclosure action. The Court denied the motion for a 45-day extension since it will just cause further delay in the bankruptcy case and likely be an insufficient time for Debtor to obtain a ruling on whether the state court foreclosure judgment is void or should be set aside, which, under the Rooker-Feldman doctrine, is an issue this Court may not consider. Debtor has had several years within which to seek to set aside the state court foreclosure judgment, and the basis for the “new developments” was known to Debtor since at least March of 2022.