Section 105 of the Bankruptcy Code provides in part as follows: "The court may issue any order, process or judgment that is necessary or appropriate to carry out the provisions of this title."¹ The utilization of a bankruptcy court's equitable powers under §105(a) is discretionary and must be "'carefully honed in light of the facts of the case, applicable precedent and appropriate policy.'"² The immediate predecessor to §105 of the Code, §2a(15) of the Bankruptcy Act of 1898, provided that courts of bankruptcy could "make such orders, issue such process and enter such judgments in addition to those specifically provided for, as may be necessary for the enforcement of the provisions of this Act...."³ In turn, §2a(15) of the Bankruptcy Act of 1898 derived from the federal All Writs Act.⁴

Consequently, §105 of the Code can trace its lineage directly to the All Writs Act. Indeed, the legislative history to §105 expressly provides that it "is similar in effect" to the All Writs Act, and was included in the Code "for the sake of continuity from current law and ease of reference, and to cover any powers traditionally exercised by a bankruptcy court that are not encompassed by the All Writs [Act]."⁵ As one commentator has noted, "§105 was originally intended to operate as the bankruptcy-specific gap-filling power because it was feared the general gap-filling powers of the All Writs Act might be insufficient."⁶

As previously noted, the language of §105 of the Code empowers a bankruptcy court to issue injunctive relief.⁷ When determining whether to issue an injunction under §105, courts generally require the moving party to satisfy the four-prong standard for the issuance of a preliminary injunction under Federal Rule of Civil Procedure 65.⁸ The traditional pre-requisites for the issuance of a preliminary injunction are (1) a substantial likelihood that the movant will prevail on the merits, (2) a substantial threat that the movant will suffer irreparable injury if the injunction is not granted, (3) that the threatened injury to the movant outweighs the threatened harm an injunction may cause the party opposing the injunction and (4) that the granting of the injunction will not dis-serve the public interest.⁹ In In re G-I Holdings Inc., the official committee of asbestos claimants of G-I Holdings filed a motion seeking injunctive relief—namely, to prevent the debtor's indirect, nondebtor subsidiary from paying regularly scheduled debt instruments owed to other nondebtor parties.

Conclusions of In re G-I Holdings Inc.

The U.S. Bankruptcy Court for the District of New Jersey agreed with the committee that it had the authority to issue the requested injunction under either the All Writs Act or §105 of the Code, or both;¹⁰ however, the bankruptcy court declined to issue the injunction sought by the committee under either provision. With respect to the All Writs Act, the bankruptcy court concluded that the adversary proceeding initiated by the committee against BMCA and the various noteholder defendants did not present an instance where the bankruptcy court needed to act in order to protect the integrity of its jurisdiction.¹¹ As the court further determined, there was no need to issue the injunction "to prevent the defeat or impediment" of its jurisdiction to fully adjudicate the adversary proceeding.¹² In reaching this conclusion, the court observed that there was no related or parallel state court proceeding that could affect the committee's ability to prosecute its avoidance action against BMCA and the noteholder defendants.¹³ In addition, the court observed that the payment of BMCA's notes would not affect the committee's ability to pursue its fraudulent conveyance action.¹⁴ While the bankruptcy court noted that the payment of the outstanding notes may provide the noteholders with an affirmative defense of "mootness" against any future liability, this potentiality was not a strong enough justification for the bankruptcy court to exercise its equitable powers under the All Writs Act.¹⁵ As the bankruptcy court specifically stated: "A possible future, valid defense is simply too speculative a concern to prompt this court to exercise its discretion and grant the extraordinary remedy of enjoining a nondebtor's ordinary business decisions...."¹⁶

With respect to the committee's request for an injunction pursuant to §105 of the Code, the bankruptcy court concluded that an injunction was not necessary to protect the property and assets of the debtor, G-I Holdings.¹⁷ Contrary to the situation where a debtor undisputably has a property interest to be protected by the bankruptcy court, the $150 million scheduled to be repaid by BMCA was not owned by G-I Holdings, and it had not yet been "unquestionably" established that G-I Holdings had any property interest in the $150 million.¹⁸ Further, because the notes were issued by BMCA, a nondebtor entity, and the $150 million constituted a repayment of debt in the ordinary course of business by a nondebtor—and not a utilization of assets of G-I Holdings' bankruptcy estate—the court declined to grant the committee its requested relief under §105 of the Code.¹⁹ Moreover, recognizing that it could only exercise its equitable powers under §105 within the confines of the Code, the bankruptcy court also noted that "[w]hile the committee invokes the avoidance powers contained within the Code as the authority for the court to issue an injunction...substance over form demonstrates otherwise."²⁰ On this note, the bankruptcy court stated as follows: "[t]he issuance of the requested injunction under §105(a) is not 'necessary' for the committee 'to carry out' the avoidance provisions of the Bankruptcy Code. Rather, in essence the committee is asking this court to enjoin a nondebtor entity from conducting normal business transactions by preventing the repayment of regularly scheduled debt instruments to nondebtor third parties."²¹

Does a Bankruptcy Court Have Equitable Powers under Both §105 and the All Writs Act?

Although the bankruptcy court in In re G-I Holdings Inc. acknowledged that it had the ability to fashion equitable relief under both the All Writs Act and §105 of the Code, there is presently a disagreement among authorities on this issue. Generally speaking, the cause of this disagreement stems from the intersection between the enactment of the Bankruptcy Reform Act in 1978, the legislative history behind §105, and the subsequent amendments to the Code through the Bankruptcy Amendments and Federal Judgeship Act of 1984.

The legislative history to the Bankruptcy Reform Act of 1978 contemplated that the bankruptcy courts were to be "brought within the terms of the All Writs Statute" and given "full injunctive power."²² Specifically, §213 of the Bankruptcy Reform Act provided as follows:

This section amends §451 of title 28, Definitions. It amends the definitions of court and judge of the United States to include bankruptcy courts and bankruptcy judges. This will have the effect of making the generally applicable provisions of title 28 applicable to bankruptcy courts and to bankruptcy judges, the same as they apply to all other judges and courts established under title 28.²³

In turn, 28 U.S.C. §451 provides, in relevant part, as follows: "[t]he term 'court of the United States' includes the Supreme Court of the United States, courts of appeals, district courts...and any court created by Act of Congress the judges of which are entitled to hold office during good behavior."²⁴ In essence, the Bankruptcy Reform Act of 1978 amended 28 U.S.C. §451 by including bankruptcy courts in the definition of "courts of the United States." As noted, §105 was included in the Bankruptcy Reform Act of 1978 for purposes of "continuity from current law and ease of reference, and to cover any powers traditionally exercised by a bankruptcy court that are not encompassed by the All Writs Statute."²⁵

This jurisdictional grant was subsequently declared unconstitutional by the U.S. Supreme Court in Northern Pipeline Construction Co. v. Marathon Pipe Line Co.²⁶ In response, Congress sought to remedy the constitutional defect by passing the Bankruptcy Amendments and Federal Judgeship Act of 1984.²⁷ Significantly, the Bankruptcy Amendments and Federal Judgeship Act of 1984 repealed §213 of the 1978 Bankruptcy Reform Act.²⁸ As a result of the repeal of §213 of the Bankruptcy Reform Act of 1978, one noted authority has concluded that "[t]his took bankruptcy courts out of the All Writs Act, and left §105 as the sole remaining authority for the exercise by the court of the kinds of powers granted under the All Writs statute."²⁹ At least one bankruptcy court has agreed with this analysis, stating that "§105 of the Bankruptcy Code...exists as the sole authority for the exercise by the court of the kinds of powers granted under the All Writs Statute."³⁰

In direct contrast, however, several courts have concluded that a bankruptcy court still has the authority to issue an injunction under both the All Writs Act and §105 of the Code.³¹ Those courts finding that a bankruptcy court can issue an injunction under the All Writs Act, in addition to §105 of the Code, do not account for their conclusions in light of the repeal of §213 of the Bankruptcy Reform Act in 1984. As Profs. Steve H. Nickles and David G. Esptein aptly note, as a result of the repeal of §213 of the Bankruptcy Reform Act in 1984, "the connection between 105 and the All Writs Statute is completely empty."³²

Other than the Eighth Circuit Court of Appeals in EEOC v. Rath Packing Co.,³³ which acknowledged a bankruptcy court's ability to issue equitable relief under both the All Writs Act and §105 of the Code, no other reported decision of a federal circuit court of appeals addresses this issue. However, in a passing footnote in the dissenting opinion of Justice Stevens in Celotex Corp. v. Edwards,³⁴ Justice Stevens noted that the "1984 amendments [to the Code] also repealed the authorization of bankruptcy judges to act pursuant to the All Writs Act."³⁵ And although Justice Stevens's passing observation is entitled to great deference, because the U.S. Supreme Court was not directly addressing the intersection between §105, the All Writs Act and the effects of the 1984 amendments upon a bankruptcy court's equitable powers, it remains uncertain whether a bankruptcy court can utilize the All Writs Act.

The thorny intersection between §105, the All Writs Act and the effects of the 1984 amendments upon a bankruptcy court's equitable powers can be harmonized without offending statutory language or congressional intent. It is safe to assume that the enactment of §213 of the Bankruptcy Reform Act, which in turn amended 28 U.S.C. §451 to include a bankruptcy court as a "court of the United States," was in furtherance of Congress's goal of providing the bankruptcy courts with "pervasive jurisdiction over all matters pertaining to bankruptcy cases and disputed matters arising in pending bankruptcy cases."³⁶ When Title II of the Bankruptcy Reform Act of 1978 was declared unconstitutional by the U.S. Supreme Court in Northern Pipeline Construction Co. v. Marathon Pipeline Co., it was axiomatic that Congress needed to repeal §213 through the 1984 amendments to the Code.

However, while the repeal of §213 of the Bankruptcy Reform Act negated the amendment to 28 U.S.C. §451 (and the broad grant of jurisdictional authority of a bankruptcy court), it is not necessarily true that this caused the bankruptcy courts to be stripped of the ability to order equitable relief under the All Writs Act. As the All Writs Act specifically provides: "[t]he Supreme Court and all courts established by Act of Congress may issue all writs necessary or appropriate in aid of their respective jurisdictions and agreeable to the usages and principles of law."³⁷ Bankruptcy courts are created under Article I of the Constitution pursuant to Congress's substantive authority over bankruptcies.³⁸ Clearly, then, the creation of the bankruptcy courts is the result of an "Act of Congress," and accordingly, the bankruptcy courts may use the All Writs Act as well as §105 of the Code in fashioning equitable relief.³⁹ But the parameters of the All Writs Act and §105 should be applied differently. That is, a bankruptcy court should attempt to utilize §105 of the Code in the first instance in granting relief, so long as the remedy sought can be attributed to carrying out the provisions of the Code. If the remedy cannot be tied to a provision of the Code, then secondarily a bankruptcy court should be able to utilize the All Writs Act, such as in situations where enjoining ongoing state court litigation is necessary to protect the jurisdiction of the bankruptcy court or to help prevent the devolution of the reorganization process.⁴⁰

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Footnotes

1 11 U.S.C.A. §105(a) (West 2006).

2 In re Charles & Lillian Brown's Hotel Inc., 93 B.R. 49, 55 (Bankr. S.D.N.Y. 1988) (citing Lesser v. A-Z Assocs. (In re Lion Capital Group), 44 B.R. 690, 701 (Bankr. S.D.N.Y. 1984)).

3 The Bankruptcy Act of 1898, §2a(15) (repealed 1978).

4 Bogart, supra note 3 at 799.

5 H.R. Rep. No. 95-595, at 316-17 (1978), as reprinted in 1978 U.S.C.C.A.N. 5963, 6273-6274.

6 Bogart, supra note 3 at 802. See also 2 Collier on Bankruptcy |105.01[2] (15th ed. rev. 2004) ("§105 gives the bankruptcy court the power to fill in gaps and further the statutory mandates of Congress in an efficient manner").

7 Technologies Int'l. Holdings Inc. v. Commonwealth of Ky. (In re Technologies Int'l. Holdings Inc.), 234 B.R. 699, 715 (Bankr. E.D. Ky. 1999) (citation omitted). See also Aimtree Co. v. AT&T Corp. (In re Aimtree Co.), 202 B.R. 154, 157 n.2 (D. Kan. 1996) ("because a request for injunctive relief under §105 is akin to a request for a preliminary injunction, the party seeking the relief must satisfy the requirements of Fed. R. Civ. P. 65") (citations omitted). But see Beck v. Fort James Corp. (In re Crown Vantage Inc.), 421 F.3d 963, 975 (9th Cir. 2005) (holding that the usual preliminary injunction standard does not apply to injunctions issued by a bankruptcy court pursuant to §105 of the Code).

8 See Am. Imaging Servs. Inc. v. Eagle-Picher Indus. Inc. (In re Eagle-Picher Indus. Inc.), 963 F.2d 855, 858 (6th Cir. 1992).

9 Yukos Oil Co. v. Russian Fed'n. (In re Yukos Oil Co.), 320 B.R. 130, 135 (Bankr. S.D. Tex. 2004) (citation omitted).

10 Official Comm. of Asbestos Claimants of G-I Holdings Inc. v. Bldg. Materials Corp. of Am. (In re G-I Holdings Inc.), 327 B.R. 730, 743-44 (Bankr. D. N.J. 2005).

11 Id. at 742.

12 Id.

13 Id.

14 Id.

15 Id. at 743.

16 Id.

17 Id. at 744. In reaching this conclusion, the bankruptcy court was guided by the following determination of the U.S. Court of Appeals for the Third Circuit in In re International Power Securities Corp.: "[bankruptcy courts] are empowered to issue an injunction in a summary proceeding when necessary to prevent the defeat or impairment of their exclusive jurisdiction or to protect the property and assets of a bankrupt wherever situation. The power of a bankruptcy court to protect by injunction the subject matter of its jurisdiction is inherent in the court as a virtual court of equity and exists as well by virtue of Sec. 2, sub. a(1) of the Bankruptcy Act, 11 U.S.C.A. §11, sub. a(15), and the 'all writs' provision of Sec. 262 of the Judicial Code, 28 U.S.C.A. §377 [Revised Judicial Code 28 U.S.C.A. §1651]." 170 F.2d 399, 402 (3d Cir. 1948).

18 327 B.R. at 744.

19 Id.

20 Id. at 745.

21 Id.

22 H.R. Rep. No. 95-595, at 12 (1978), as reprinted in 1978 U.S.C.C.A.N. 5963, 5973.

23 H.R. Rep. No. 95-595, at 437 (1978), as reprinted in 1978 U.S.C.C.A.N. 5963, 6392.

24 28 U.S.C.A. §451 (West 2006).

25 H.R. Rep. No. 95-595, at 317 (1978), as reprinted in 1978 U.S.C.C.A.N. 5963, 6274.

26 458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982).

27 See Cain P'ship, Ltd. v. Pioneer Inv. Servs. Co. (In re Pioneer Inv. Servs. Co.), 946 F.2d 445, 448 (6th Cir. 1991).

28 2 Collier on Bankruptcy |105.LH[4] (15th ed. rev. 2004). See also Pub. L. No. 98-353 (1984).

29 See 2 Collier on Bankruptcy |105.LH[3] (15th. ed. rev. 2004).

30 Gnidovec v. Alwan (In re Alwan Bros. Co.), 105 B.R. 886, 895 n.10 (Bankr. C.D. Ill. 1989).

31 See, e.g., EEOC v. Rath Packing Co., 787 F.2d 318, 325 (8th Cir. 1986) ("§105 gives the bankruptcy court the power to issue orders necessary or appropriate to carry out the provisions of Title 11. The All Writs Act...authorizes bankruptcy courts to issue stays"); GATX Terminals Corp. v. A. Tarricone Inc. (In re A. Tarricone Inc.), 77 B.R. 430, 433 (Bankr. S.D.N.Y. 1987) ("pursuant to 11 U.S.C. §105(a), the bankruptcy court has the power to issue orders necessary or appropriate to carry out the provisions of Title 11. The All Writs Act...also authorizes bankruptcy courts to issue stays"); In re Mayhew, No. 90-60141, 1994 WL 16006013, at *3 (Bankr. S.D. Ga. July 25, 1994) ("this court has the authority under both 28 U.S.C. §1651...and the Bankruptcy Code §105 to issue any order in aid of its jurisdiction"); In re Optical Technologies Inc., 261 B.R. 781, 784 (Bankr. M.D. Fla. 2001).

32 Nickles, Steve H. and Esptein, David G., "Another Way of Thinking About §105(a) and Other Sources of Supplemental Law Under the Bankruptcy Code," 3 Chap. L. Rev. 7, 15 (2000).

33 787 F.2d 318 (8th Cir. 1986).

34 514 U.S. 300, 115 S.Ct. 1493, 131 L.Ed.2d 403 (1995). The specific issue in Celotex was whether a §105 injunction issued by the bankruptcy court could enjoin judgment creditors from immediate execution against sureties on a supersedeas bond posted by the debtor in another federal district court.

35 Id. at 328 n.16, 115 S.Ct. at 1509 n.16, 113 L.Ed.2d 403 (citing Collier's on Bankruptcy).

36 1 Collier on Bankruptcy |1.02[2] (15th ed. rev. 2004).

37 28 U.S.C.A. §1651 (West 2006).

38 Caldwell v. Unified Capital Corp. (In re Rainbow Magazine Inc.), 77 F.3d 278, 283 (9th Cir. 1996).

39 See In re Optical Technologies Inc., 261 B.R. 781, 784 (Bankr. M.D. Fla. 2001).

40 Compare Nickles & Epstein, supra note 32 at 15 ("we believe that the All Writs Statute still applies to bankruptcy courts, but only indirectly or derivatively as units of the federal district courts").