Minnesota Judge Shows Disclosure Statement Wisdom

The case for The Archdiocese of St. Paul and Minneapolis, No. 15-30125 (Bankr. D. Minn.) has been an extremely contentious one.   The Debtor and the Official Committee of Unsecured Creditors have different ideas on how to compensate sexual abuse claims and have submitted competing plans.    Not surprisingly, both parties objected to the other's disclosure statement.    The orders entered by Judge Robert Kressel show remarkable wisdom about how the disclosure statement process works in the real world.    

In ruling upon the Debtor's Disclosure Statement, Judge Kressel wrote:

I find that the debtor’s disclosure statement does contain adequate information and there would be virtually no benefit to providing additional information to creditors. Based on my observation of the dynamics in this case, it is extremely unlikely that the unsecured creditors, especially those that have claims for being sexually victimized by employees or associates of the debtor, will base their vote in any way on the information contained in the disclosure statement. Therefore, requiring additional information makes no sense.

 Order Approving Debtor's Disclosure Statement Dated and Filed December 19, 2016, Dkt. #902 (emphasis added).

In ruling upon the Committee's Disclosure Statement, the Court said:

I find that the creditors committee’s proposed disclosure statement does contain adequate information and there would be virtually no benefit to providing additional information to creditors. The  objections focus primarily on the confirmability of the creditors committee’s plan–objections which I prefer to address as part of the plan confirmation process. There are objections to various factual statements made in the disclosure statement for which little factual basis is provided. However, because voting for or against the committee’s plan will not be based in any meaningful way on the contents of the disclosure statement, I am inclined to allow the disclosure statement to go ahead as filed.

Order Approving Creditors' Committee's disclosure Statement Dated and Filed December 19, 2016, Dkt. #903 (emphasis added)..   

When I first started practicing, I would often receive voluminous objections to disclosure statements which would begin "This disclosure statement fails to meet even the minimum standard for adequate information under 11 U.S.C. Sec. 1125" followed by a long list of items claimed to be lacking.   These objections were usually filed by a secured creditor who had already decided to vote against the plan and was simply trying to delay the debtor from proceeding to confirmation.

What I find refreshing in Judge Kressel's orders is the recognition that in a highly litigated case, the dueling parties are not going to cast their ballots based on the information in the other side's disclosure statement.   While disclosure statements ensure that all creditors receive a minimum amount of information about a plan, there will be many cases were "requiring additional information makes no sense" and the parties just need to get to confirmation.   This pair of orders shows remarkable common sense.