Though 11 U.S.C.S. § 105(a) does not give the bankruptcy court carte blanche, the court cannot, for example, take an action prohibited by another provision of the Bankruptcy Code, it grants the extensive equitable powers that bankruptcy courts need in order to be able to perform their statutory duties.
Caesars Entertainment Operating Company, which the parties call CEOC, owns and operates a chain of casinos. It was the leading debtor in a Chapter 11 bankruptcy proceeding. CEOC in its bankruptcy proceeding asserted claims against Caesars Entertainment Corp. (CEC), alleging that CEC caused CEOC to transfer highly valuable assets to CEC at less than fair value, leaving CEOC saddled with billions of dollars of debt. Thus, the transfers had allegedly been fraudulent transfers and were part of a scheme by CEC to snatch CEOC's most valuable assets while ensuring that the guaranty plaintiffs could not recover on their notes.
CEOC asked the bankruptcy judge to enjoin the guaranty suits until 60 days after a bankruptcy examiner, appointed by the judge to make an independent assessment of the bankruptcy claims, completed his report. However, the bankruptcy judge, seconded by the district judge, to whom CEOC appealed the first judge's ruling, refused to issue the injunction on the ground that the bankruptcy court lacked authority to do so.
Did the bankruptcy court lack statutory authority to enjoin litigation?
The Court held that the bankruptcy court and district court erred in finding that the bankruptcy court lacked statutory authority to enjoin litigation against a non-debtor under 11 U.S.C.S. § 105(a) unless it arose out of the "same acts" of the non-debtor that gave rise to disputes in the bankruptcy proceeding.