(Westlaw) A Jacksonville, Florida-based engineering recruiting business can include a provision in its Chapter 11 plan imposing a temporary injunction to shield its owner from lawsuits during the plan, a bankruptcy judge has ruled.
In re Engineering Recruiting Experts LLC, No. 24-3292, 2025 WL 2506031 (Bankr. M.D. Fla. Sept. 2, 2025).
Overruling an objection from the U.S. Trustee to confirmation of Engineering Recruiting Experts LLC’s proposed plan, U.S. Bankruptcy Judge Jason A. Burgess of the Middle District of Florida on Sept. 2 determined that a recent U.S. Supreme Court ruling did not prohibit temporary third-party injunctions.
Plan protects owner
Christopher McHatton is Engineering’s owner, the opinion said.
After filing for Chapter 11 relief, the company proposed a plan that paid unsecured creditors $55,000 over five years from contributions that included $25,000 from McHatton personally.
The plan called for extending the automatic stay to protect McHatton during the bankruptcy if he remained with the company.
“Mr. McHatton is the debtor’s founder, managing member, sole shareholder, and only employee that brings in new clients and business,” Judge Burgess said.
Temporary injunction allowed
The U.S. Trustee objected that the plan’s injunction was contrary to Harrington v. Purdue Pharma LP, 603 U.S. 204 (2024), in which the U.S. Supreme Court held that the Bankruptcy Code does not authorize Chapter 11 plans to impose a permanent injunction that extinguishes claims against nondebtor third parties without the claimants’ consent.
Noting that the Supreme Court said its decision was narrow, Judge Burgess concluded that it was limited to nonconsensual third-party permanent releases rather than temporary injunctions.
Judge Burgess said Purdue Pharma involved Bankruptcy Code Section 1123(b)(6), 11 U.S.C.A. A7 1123(b)(6), which is a catchall phrase allowing plans to include any “appropriate provision not inconsistent with the applicable provisions” of the Bankruptcy Code.
The protection provided for McHatton in Engineering’s proposed plan was based on code Section 1123(a)(5), 11 U.S.C.A. A7 1123(a)(5), which the Supreme Court did not consider in Purdue Pharma.
Judge Burgess found Section 1123(a)(5) to be distinguishable from Section 1123(b)(6).
“Section 1123(a) outlines mandatory provisions to be included in a plan,” the judge said.
Section 1123(a)(5) says “a plan shall provide adequate means for the plan’s implementation” and then provides a nonexclusive list of examples.
“Unlike the catchall provision in Section 1123(b)(6), which follows a detailed and descriptive list, Section 1123(a)(5) begins with a mandate and includes examples of providing ‘adequate means for the plan’s implementation.'” Judge Burgess said.
Under the circumstances presented by Engineering’s plan, the judge found that protecting McHatton was necessary for the plan’s successful implementation.
He then found that issuing the temporary injunction was warranted because McHatton and Engineering had such a shared identity that a suit against McHatton was essentially a suit against Engineering, and any third-party action against McHatton would have an adverse impact on Engineering’s ability to reorganize.
The judge also said that Engineering established a substantial likelihood that it would complete its proposed plan and receive a discharge.
He found that Engineering would be irreparably harmed if the injunction was not issued, and that such harm outweighed the harm the injunction would cause to third parties.
“Given the plan provisions that will toll the applicable statute of limitations, the creditors will be able to pursue their claims against Mr. McHatton when the debtor receives a discharge after completing the five-year unsecured payment schedule,” Judge Burgess said.
The five-year delay may be beneficial to creditors because a successful reorganization may enable McHatton to be better situated to pay his debts, he added.
Finally, the court said the proposed injunction would serve the public interest by facilitating Engineering’s continued operations.
Bryan Mickler of Mickler & Mickler in Jacksonville, Florida, represented the debtor.
By David J. Light, Esq.