Originally Published in The Metropolitan Corporate Counsel, May 2012 - Volume 20, No. 5.
Claim estimation is another weapon in the arsenal of a debtor seeking to push its agenda or plan through the bankruptcy court. While not new, post-Stern v. Marshall, estimation may allow a bankruptcy court effectively to adjudicate claims over which it has no jurisdiction. Creditors (particularly those with large unliquidated or contested claims) should plan ahead to ensure that their claims are resolved in the right forum, with sufficient due process, and that their ballots are counted despite the lodging of a claim objection.
Bankruptcy courts have the power to estimate claims of creditors in cases under §502(c), title 11, chapter 11 of the United States Code (the “Code”) for purposes of allowance, and under Rule 3018 of the Federal Rules of Bankruptcy Procedure (the “Rules”) for temporary allowance for purposes of voting on a plan of reorganization. The Code and Rules are silent regarding, among other things, the sufficiency of evidence and burden of proof necessary to estimate a claim; the appropriate discovery period; and whether following estimation a full litigation of the claim is appropriate to protect the due process rights of the claimant. There also is no rule limiting a bankruptcy court’s authority as to the type of claim to be estimated, such that claims requiring a jury trial or class action claims, or claims for which relief from the automatic stay may have been granted, may be subject to estimation.
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