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the plan before confirmation, and in the meantime had filed another suit seeking “consequential damages”
for violation of the arbitration agreement. When he refused to dismiss that suit after receiving notice of the
confirmed plan, the family sought injunctive relief and sanctions before the bankruptcy court.
The family invoked 11 U.S.C. § 105, which provides that a bankruptcy court “may issue any
order, process, or judgment that is necessary or appropriate to carry out the provisions of” the
Bankruptcy Code. It maintained that Miller's new suit was "related to" the specifically-released actions
and thus barred by the release in the plan.

The bankruptcy court agreed and enjoined Miller. He appealed, but the district court eventually
affirmed. That prompted the appeal to the Seventh Circuit, focusing on the
contention Miller could not be bound by the plan because he was not a
creditor or other formal party in the bankruptcy. Relying on In re Airadigm
Comm., Inc., 519 F.3d 640 (7th Cir. 2008), the Court of Appeals found
that § 105 provided the bankruptcy court with "residual authority" to
enter orders affecting third parties. Moreover, it said, this “'residual
authority”' was consistent with a bankruptcy court's “'traditionally broad'
equitable powers". Under those principles, it said, the bankruptcy court had
authority to release the claims against the family members. That being decided, the court sustained the
injunction without serious analysis of whether the injunction, as opposed to the release, was proper.
Several points should be noted. First, Ingersoll ignores the principles that
“whatever equitable powers remain in the bankruptcy courts must and can only be
exercised within the confines of the Bankruptcy Code” and when there is an applicable
Code provision it controls (Norwest Bank v. Ahlers, 485 U.S. 197, 206 (1988)). 11
U.S.C. § 1123(b)(6) permits a bankruptcy court to include in a plan “any other provision
not inconsistent with the applicable provisions of” the Code. If the issue was propriety
of the plan provision, that and other provisions governing what is proper in a plan – not
§ 105 or general equitable principles – would seem to have been controlling.
Second, the court emphasized it was “not saying” that a plan “purporting to
release a claim like Miller's is always – or even normally – valid.” Such a release
cannot amount to "'blanket immunity' for all times, all transgressions, and all omissions", it said. Rather,
such a release provision must be "narrowly tailored and critical to the plan as a whole." The court found
those tests met in “the unique circumstances of this case”, although there was a dearth of analysis as to
why the releases of the non-debtor individuals were “critical” to the plan for the corporate debtors
(particularly since the plan had become one for liquidation).

Third, while Ingersoll teaches that the facts that the family members were nondebtors and that
Miller was not a creditor of the bankruptcy estate were not dispositive; it relies heavily on the fact
that Miller received notice and an opportunity to object to the plan.
Finally, the court found a "broader lesson" in the case: "Good advocacy does not exist in a vacuum, it
must be balanced with a willingness to compromise, to behave reasonably, and sometimes, to leave well
enough alone . . . . What started as a simple fee dispute ended as a multi-year, multi-court monster that,
as far as we can tell, benefited no one." A fair inference is that the court’s belief that the long-running
litigation should be put to an end was the real “equitable” consideration supporting the result.

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