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American Apparel Objection Filed

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According to the U.S. Bankruptcy Court docket, the U.S. Trustee assigned to American Apparel case filed an objection to the Company’s Joint Plan of Reorganization.

The Trustee asserts, “A Chapter 11 plan may not be confirmed unless the Court can find that the plan complies with the provisions of 11 U.S.C. sections 1129 (a). A plan proponent bears the burden of proof with respect to each and every element of 11 U.S.C. sections 1129 (a). The Plan is not confirmable because it contains an exculpation provision that is contrary to applicable law in this District. The exculpation provision contained in Article IX D of the Plan is overbroad and thus impermissible. It provides exculpation to all of the parties listed in the definition of ‘Released Parties’: ‘(i) the Debtors, (ii) the Creditors’ Committee, (iii) the members of the Creditors’ Committee, (iv) the Indenture Trustee, (v) the Prepetition Agent, (vi) the Supporting Parties, (vii) the DIP Agent, (viii) the DIP Lenders and (ix) the Representatives of each of the parties enumerated in the preceding clauses (i), (ii), (iii), (iv), (v), (vi), (vii) and (viii); provided that any Excluded Party, any Entity that objects to Confirmation of, or votes to reject, the Plan or any of their respective Representatives, in each cases, shall not be a Released Party.’ The list of parties receiving exculpation should be limited to those parties who served in the capacity of estate fiduciaries, i.e., estate professionals and the Debtor’s directors and officers.”

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