In re Mpf Holding U.S. Llc

443 B.R. 736

In re MPF HOLDING U.S. LLC, et al., Debtors.

No. 08–36084.

United States Bankruptcy Court, S.D. Texas, Houston Division.

Feb. 28, 2011.

Courtney Smart Lauer, Vinson & Elkins LLP, Dallas, TX, Bobbitt D. Noel, Jr., Ginny Abagail Maslin, Harry Allen Perrin, Vinson & Elkins LLP, Matthew Scott Okin, Okin Adams & Kilmer LLP, Houston, TX, for Debtors.

AMENDED ¹ MEMORANDUM OPINION RELATING TO MOTION OF AKER PUSNES AS FOR AN ORDER ENFORCING THE TERMS OF CONFIRMATION ORDER

[Docket Nos. 510, 514, 515, 516, 517, 519, 523, 526, & 533]

JEFF BOHM, Bankruptcy Judge.

I. Introduction

The Court issues this Memorandum Opinion to address an issue litigated with increasing frequency: how much detail must a plan contain to enable a post-confirmation trustee (or reorganized debtor) to prosecute claims against third-parties that arose prior to confirmation? Stated differently, under 11 U.S.C. § 1123(b)(3)(B),² how precise must a plan's “reservation and enforcement” provision be so that after a court confirms the plan, the litigation trustee (or reorganized debtor) will have standing to prosecute the claims that exist as of the confirmation date?

In the case at bar, counsel for numerous parties heavily negotiated the language in the confirmed plan, not the least of which was counsel for the debtors and counsel for the unsecured creditors' committee. After confirmation, the litigation trustee brought numerous suits against multiple defendants to recover alleged preferential transfers. One of these defendants has filed a motion to enforce the confirmed plan in the main case, arguing that the plan's language forbids such suits; other defendants have filed joinders supporting this motion. Moreover, in the respective adversary proceedings initiated by the litigation trustee, some of these same defendants have filed motions to dismiss.³ The Court held a hearing on December 17, 2010 on all of these motions, at which time parties introduced certain exhibits and engaged in oral arguments; no parties adduced testimony. The Court then issued an oral ruling on January 6, 2011, concluding that: (1) the language in the plan does not satisfy the standard established by the Fifth Circuit for reserving causes of action; (2) therefore, the litigation trustee has no standing to prosecute the suits; and (3) accordingly, this Court has no subject matter jurisdiction over these suits, and they must be dismissed. ⁴

This Memorandum Opinion now memorializes this ruling, and in greater detail than the Court did during its oral ruling, on how it arrived at its decision. To the extent that this Court's oral findings of fact and conclusions of law in any way conflict with this Memorandum Opinion's written findings and conclusions, the latter shall govern. To the extent that the Court's oral findings and conclusions address issues not covered in this Memorandum Opinion, these oral findings and conclusions shall supplement the written findings and conclusions set forth herein.

II. Procedural and Factual Background

1. On September 24, 2008, the Debtors filed their voluntary Chapter 11 bankruptcy petition. [Doc. No. 1].⁵

2. On June 14, 2010, this Court entered an Order Approving Debtors' Amended Disclosure Statement (As Modified) and Confirming Debtors' Amended Joint Plan of Reorganization (as Modified). [Doc. No. 401].

3. The Debtor's Amended Joint Plan of Reorganization (the Plan) contains certain language releasing claims and preserving claims. [Doc. No. 392].

4. The Plan allows for the appointment of a litigation trustee (the Litigation Trustee) to oversee and administer a post-confirmation litigation trust. [Doc. No. 392, p. 10]. The purpose of this trust is to liquidate claims in order to pay allowed unsecured claims pursuant to the Plan.

5. Since confirmation of the Plan, the Litigation Trustee has filed lawsuits against several defendants for preferences. [ See, e.g., Doc. Nos. 446, 459, 477, 485 & 521].

6. On November 8, 2010, Aker Pusnes AS (Aker), one of several preference defendants, filed its Amended Motion for an Order Enforcing the Terms of Confirmation Order (the Aker Motion). [Doc. No. 510].The following preference defendants filed joinders to the Aker Motion: Mustang Engineering Ltd., Worldwide Oilfield Machine, Inc., KCA Deutag Drilling, Ltd., and InOcean AS (hereinafter, Aker and the other defendants who have filed joinders are collectively referred to as the Defendants). [Doc. Nos. 514, 515, 519, & 523].

7. On November 29, 2010, the Litigation Trustee filed his Objection to (I) the Aker Motion, (II) the Joinder of Mustang Engineering Ltd. to the Aker Motion, and (III) the Joinder of Worldwide Oilfield Machine, Inc. to the Aker Motion (the Objection). [Doc. No. 516]. That same day, the Litigation Trustee also filed his brief in support of the Objection in both the main case and in the adversary proceeding where Aker is a defendant. [Doc. No. 517].

8. On November 29, 2010, the Litigation Trustee also filed his (I) Response to Joinder of Mustang Engineering Ltd. to the Aker Motion and (II) Supplemental Response to the Aker Motion. [Doc. No. 518].

9. On December 7, 2010, Aker filed its Reply in Support of the Aker Motion. [Doc. No. 526]. On December 14, Mustang Engineering, Ltd. filed its Reply in Support of Joinder to the Aker Motion. [Doc. No. 527].

10. On December 17, 2010, this Court held a hearing on, among other things, the Aker Motion, at which time certain exhibits were introduced and oral arguments were made; no testimony was adduced. The Court took the matter under advisement on December 17, 2010, and permitted the parties to file additional briefing. The parties proceeded to file supplemental briefs on December 28 and 29, 2010. [Doc. Nos. 539–543].

11. On January 6, 2011, this Court issued an oral ruling and entered an Order on Motion of Aker Pusnes AS for an Order Enforcing the Terms of the Confirmation Order and Ordering Dismissal of Certain Adversary Proceedings without Prejudice (the Aker Order).

12. On January 14, 2011, the Aker Order was entered on the docket. [Doc. No. 556]. Following the entry on the docket of the Aker Order, this Court has dismissed the adversary proceedings brought by the Litigation Trustee on the grounds that this Court lacks subject matter jurisdiction to adjudicate these disputes.

III. Conclusions of Law

A. Jurisdiction and Venue

The Court has jurisdiction over this contested matter pursuant to 28 U.S.C. §§ 1334(b) and 157(a). This dispute is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(L) because the dispute relates to the Plan—specifically, to the interpretation and execution of the Plan. The Fifth Circuit has consistently held that a bankruptcy court has post-confirmation jurisdiction over matters “that bear on the interpretation or execution of the debtor's plan.” Bank of La. v. Craig's Stores of Tex., Inc. (In re Craig's Stores of Tex., Inc.), 266 F.3d 388, 390 (5th Cir.2001); In re U.S. Brass Corp., 301 F.3d 296, 304 (5th Cir.2002); Newby v. Enron Corp. (In re Enron Corp. Sec.), 535 F.3d 325, 335 (5th Cir.2008). Additionally, this proceeding is a core proceeding under the general “catch-all” language of 28 U.S.C. § 157(b)(2). See In re Southmark Corp., 163 F.3d 925, 930 (5th Cir.1999) ( “[A] proceeding is core under section 157 if it invokes a substantive right provided by title 11 or if it is a proceeding that, by its nature, could arise only in the context of a bankruptcy case.”) De Montaigu v. Ginther (In re Ginther Trusts) Adv. No. 06–3556, 2006 WL 3805670, at *19 (Bankr.S.D.Tex. Dec.22, 2006) (holding that an “[a]dversary [p]roceeding is a core proceeding under 28 U.S.C. § 157(b)(2) even though the laundry list of core proceedings under § 157(b)(2) does not specifically name this particular circumstance”). Finally, venue is proper pursuant to 28 U.S.C. §§ 1408 & 1409.

B. The Issue in the Dispute at Bar is Whether the Plan has Properly Preserved the Preference Suits that the Litigation Trustee has Brought Against the Defendants.

While the parties raised many issues at the December 17, 2010 hearing, this Court primarily focuses on one issue—namely, whether the Plan effectively preserves pre-confirmation causes of action for the Litigation Trustee to prosecute post-confirmation.

How much detail must a plan contain to enable a post-confirmation trustee (or reorganized debtor) to prosecute claims against third-parties that arose prior to confirmation? Courts have differed on how specific the reservation provision in a plan must be. Rifken v. CapitalSource Fin., LLC (In re Felt Mfg. Co.), 402 B.R. 502, 516 (citing Connolly v. City of Houston (In re W. Integrated Networks, LLC), 329 B.R. 334, 338 (Bankr.D.Colo.2005)) (describing two approaches to “rights of reservations” in chapter 11); 7 Collier on Bankruptcy, P 1123.02[3][b], at 123–23 (noting disagreement over the specificity required to preserve claims). Three approaches have developed.

Some courts find that broad, categorical language is sufficient to preserve causes of action. See, e.g., P.A. Bergner & Co. v. Bank One (In re P.A. Bergner & Co.), 140 F.3d 1111, 1117 (7th Cir.1998) (“[W]hile there might be some logic in requiring ‘specific and unequivocal’ language to preserve claims belonging to the estate ... the statute itself contains no such requirement.”); Kmart Corp. v. Intercraft Co. (In re Kmart Corp.), 310 B.R. 107, 124 (Bankr.N.D.Ill.2004) (“[A] categorical reservation can effectively avoid the res judicata bar.”); In re Weidel, 208 B.R. 848, 853 (Bankr.M.D.N.C.1997).

Other courts have taken a more middle-ground approach, based on the nuances of the plan language and the procedural history of the bankruptcy case. See, e.g., Elk Horn Coal Co., LLC v. Conveyor Mfg. & Supply, Inc. (In re Pen Holdings, Inc.), 316 B.R. 495, 504 (Bankr.M.D.Tenn.2004) (stating that the reservation provision in a plan must be evaluated within the context of each case and in relation to the particular claims at issue).

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