A Plan’s Temporary Injunction Is Permissible, Despite Purdue Pharma (In re Miracle Restaurant)

Debtor’s Subchapter V Plan provides for:

payment in full of all claims at the end of its three-years term, through a new loan to be guaranteed by Debtor’s insiders; and
a temporary injunction, during the three-years term of the Plan, against creditors suing those same insiders on pre-petition guarantees.

Creditor objects to the temporary injunction, insisting on its right to sue on the pre-petition guarantees.

The Bankruptcy Court approves the temporary injunction and confirms the Plan, over Creditor’s objection, in In re Miracle Restaurant Group, LLC, Case No. 24-11158, Eastern Louisiana Bankruptcy Court (decided May 13, 2025; Doc. 326).

What follows is an attempt to summarize the In re Miracle Restaurant opinion.

Background

Debtor operates Arby’s franchises in Illinois, Indiana, Texas, Mississippi, and Louisiana—Debtor leases each location and owns no real property.

Due to pandemic-related difficulties, Debtor files a voluntary Subchapter V petition. During the bankruptcy, Debtor:

closes six restaurants;
attempts, unsuccessfully, to sell its other restaurant franchises; and
then, renegotiates leases at nine locations and continues operating at those locations, generating income to fund a Subchapter V Plan.

Temporary Injunction

Article X of Debtor’s Plan provides:

“all [creditors] are enjoined from taking . . . any action to prosecute or collect any debt or claim against any guarantor . . . ; provided however, . . . the discharge under 11 U.S.C. § 1192 shall not apply to any third party guarantor.”

Under such provision, the prohibition against creditors suing pre-petition guarantors is temporary—lasting only until the earlier of, (i) the three-years term of the Plan expires, or (ii) Debtor defaults on Plan payments.

Thus, the confirmed Plan provides a temporary, non-debtor injunction to facilitate a successful implementation of the payment in full provisions of Debtor’s Plan.

Objection and Ruling

The objecting Creditor insists that the temporary injunction is prohibited by:

Harrington v. Purdue Pharma L.P. (In re Purdue Pharma), 603 U.S. 204, 227 (2024); and
Highland Capital Management Fund Advisors, L.P. v. Highland Capital Management, L.P. (In re Highland Capital Management, L.P.), 132 F.4th 353 (5th Cir. 2025).

The Bankruptcy Court rejects such argument. Here’s why.

Purdue Pharma

The U.S. Supreme Court’s Purdue Pharma opinion does not prevent bankruptcy courts from confirming plans with temporary, non-consensual, non-debtor injunctions.

The Purdue Pharma opinion explicitly limits its ruling to a narrow question:

“we hold only that the bankruptcy code does not authorize a release and injunction that, as part of a plan of reorganization under Chapter 11, effectively seeks to discharge claims against a nondebtor without the consent of affected claimants” (emphasis added); and
“The question we face thus boils down to whether a court in bankruptcy may effectively extend to nondebtors the benefits of a Chapter 11 discharge usually reserved for debtors” (emphasis added).

Purdue Pharma does not prohibit bankruptcy courts from temporarily enjoining a creditor’s collection efforts against non-debtors, as part of a bankruptcy plan.

What the Supreme Court definitively holds in Purdue Pharma, instead, is only this:

bankruptcy courts may not confirm a plan that non-consensually releases nondebtors from liability;
bankruptcy injunctions, though not in themselves releases, can similarly act to permanently shield nondebtors from liability; and
the Bankruptcy Code does not authorize a release and injunction that, as part of a plan, seeks to discharge claims against a nondebtor without consent of the affected creditor.

What the In re Miracle Restaurant Plan provides is different: only a temporary protection to enable the payment in full of creditors under Debtor’s Plan—not a release or a permanent shield from liability.

Highland Capital

The Fifth Circuit’s Highland Capital opinion does not address temporary, non-consensual, non-debtor injunctions entered at confirmation to facilitate the successful implementation of a plan.

The Highland Capital opinion discusses an injunction contained in a bankruptcy plan that the Fifth Circuit did approve in a prior bankruptcy case. That plan injunction was designed to protect the debtor, the unsecured creditors’ committee and its members, and the independent directors (the “Protected Parties”) as follows:

“no Enjoined Party may commence or pursue a claim or cause of action of any kind against any Protected Party that arose or arises from or is related to the Chapter 11 Case . . . without the Bankruptcy Court (i) first determining . . . that such claim . . . represents a colorable claim . . . against a Protected Party and (ii) specifically authorizing such Enjoined Party to bring such claim or cause of action” (132 F.4^th at 355-56); and

In approving that prior injunction, the Fifth Circuit explained:

“we need not evaluate whether the bankruptcy court would have jurisdiction under every conceivable claim falling under the widest interpretation of the gatekeeper provision”; and
“We leave that to the bankruptcy court in the first instance” (132 F.4th at 358–59).

Consequently, the Highland Capital case provides no impediment to approval of the temporary injunction in the In re Miracle Restaurant case.

Temporary Injunctions Explained

Temporary injunctions issued by bankruptcy courts are proper in “unusual circumstances.” Illustrations of such circumstances, from the Fifth Circuit in a prior case (Feld v. Sale Corp. (In re Zale Corp), 62 F3d 746 (5th Cir. 1995)), include:

when the nondebtor and the debtor enjoy such an identity of interests that the suit against the nondebtor is essentially a suit against the debtor; and
when the third-party action will have an adverse impact on the debtor’s ability to accomplish reorganization.

Temporary Injunctions Applied

The Bankruptcy Court rules that the In re Miracle Restaurant Debtor has satisfied both (i) the In re Zale test of “unusual circumstances,” and (ii) the traditional four-prong test governing issuance of temporary injunctions. Here’s how.

—In re Zale Test

Based on the record, the Court finds the following facts:

Debtor’s CEO guaranteed payment of Debtor’s prepetition debts and will continue managing Debtor’s day-to-day operations post-confirmation and ensuring that Debtor will make all Plan payments;
Debtor’s part-owner (and an affiliated company) provided significant prepetition capital to Debtor and guaranteed payment of Debtor’s prepetition debts;
the Plan proposes 36 months of payments generated by operations to creditors with balloon payments at month 36 to pay off the balance of unpaid secured debt, tax debt, and administrative claims;
Debtor must fund the balloon payments at the end of the three-year Plan term by getting a new loan, and the financial commitment and backing of Debtor’s CEO, Debtor’s part-owner and the affiliated company (the “Insiders”) is critical to getting the new loan; and
if Creditor sues any of the Insiders on their guaranties, the Insiders will not be able to help get the new loan for making the balloon payments to creditors.

Given such findings:

Debtor and the Insiders have an identity of interest so that a suit against any Insider is essentially a suit against Debtor;
Debtor’s CEO is vital to Debtor’s successful reorganization—a guaranty action against the CEO would divert the CEO’s time, attention, and resources away from Debtor’s reorganization efforts;
Debtor’s ability to obtain the new loan to pay creditors at the end of the three-years Plan term would be negatively affected by a guaranty action against any of the Insiders; and
Debtor has satisfied the In re Zale “unusual circumstances” test warranting the issuance of a temporary, non-debtor injunction to facilitate the successful implementation of the Plan.

–Traditional Four-Prong Test

The record in this case also satisfies the traditional four-prong preliminary injunction test, consisting of:

a substantial likelihood of success on the merits;
a substantial threat of irreparable injury if the injunction is not issued;
the threatened injury if the injunction is denied outweighs the threatened harm the injunction may cause to the party opposing the injunction; and
the issuance of an injunction will not disserve the public interest.

First Factor. The likelihood of success factor, when applied to a temporary plan injunction, turns on whether the plan is likely to succeed. Here, no one objected to the Plan’s feasibility, Debtor has downsized, Debtor provides a working capital reserve, and Debtor provides realistic and attainable projections. And this Court already determined at the confirmation hearing that the Plan—including the new loan requirement at month 36—is feasible.

Second Factor. The threat of irreparable injury factor is supported by the record: Debtor’s opportunity to successfully reorganize would be jeopardized by Creditor pursuing its guarantee claims.

Third Factor. The weighing of injuries and harm supports confirmation: under Debtor’s confirmed Plan, Creditor will be paid in full within the Plan’s three-year term. If Debtor defaults on its Plan payments, the injunction expires and Creditor is free to pursue guarantee actions against Insiders for the full amounts owed. The only harm to Creditor is that it may be forced to accept Plan payment terms it does not like—that harm is minimal compared to the harm the Debtor faces (an inability to reorganize) if the temporary injunction is not granted.

Fourth Factor. The public interest factor is supported by the record:

the public has an interest in allowing businesses to reorganize instead of liquidate; and
the temporary injunction against Creditor protects Debtor’s numerous other creditors and their rights to receive equitable distributions under the Plan

Thus, temporarily enjoining Creditor from proceeding with guaranty actions for debt that is being paid through the Plan is not a distortion of Congressional purpose.

Conclusion

The In re Miracle Restaurant ruling is on appeal, of course.

But the ruling and its rationale make sense.

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