IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 18-40575

In the Matter of: LINN ENERGY, L.L.C.; BERRY PETROLEUM 

COMPANY, L.L.C.; LINNCO, L.L.C.; LINN ACQUISITION COMPANY, 

L.L.C.; LINN ENERGY FINANCE CORPORATION; LINN ENERGY 

HOLDINGS, L.L.C.; LINN EXPLORATION & PRODUCTION MICHIGAN, 

L.L.C.; LINN EXPLORATION MIDCONTINENT, L.L.C.; LINN 

MIDSTREAM, L.L.C.; LINN MIDWEST ENERGY, L.L.C.; LINN 

OPERATING, INCORPORATED; MID-CONTINENT I, L.L.C.; MIDCONTINENT II, L.L.C.; MID-CONTINENT HOLDINGS I, L.L.C.; MIDCONTINENT HOLDINGS II, L.L.C.,

Debtors

OKLAHOMA STATE TREASURER, Unclaimed Property Division, 

Appellee

v.

LINN OPERATING, INCORPORATED, 

Appellant

Appeal from the United States District Court

for the Southern District of Texas

Before DAVIS, JONES, and DENNIS, Circuit Judges.

EDITH H. JONES, Circuit Judge:

The district court held that the bankruptcy court erred in dismissing a

post-confirmation attempt by the Oklahoma State Treasurer (“Treasurer”) to 

obtain the right to unclaimed royalty payments owed by the oil and gas debtor. 

United States Court of Appeals

Fifth Circuit

FILED

June 19, 2019

Lyle W. Cayce

Clerk

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No. 18-40575

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Because the Treasurer sat on its rights during the entire Chapter 11 process, 

res judicata bars its claim. We REVERSE the district court judgment and 

reinstate the bankruptcy court’s DISMISSAL of the Treasurer’s case.

I. BACKGROUND

Linn Energy, LLC (“Linn”) is an oil and gas company that operates in 

Texas and Oklahoma. In May 2016, Linn and fourteen affiliated entities filed 

voluntary petitions for relief under Chapter 11 of the Bankruptcy Code. The 

bankruptcy court set a deadline requiring all “Proofs of Claims” from “[a]ll 

governmental units holding claims . . . that arose . . . prior to the Petition Date” 

to be filed by November 7, 2016. The Treasurer timely filed three proofs of 

claim on August 29 for “unknown/contingent” amounts, which it described as 

“unsecured.” The Treasurer stated that it had filed the claim pursuant to 

Oklahoma’s “unclaimed property law,” and that it was “acting as a conservator 

or custodian on behalf of the classes of persons . . . who have failed to claim 

property owing to them for the statutory period of abandonment.”

In November 2016, Linn filed a report with the Treasurer indicating that 

it possessed $956,212.72 in unclaimed property but did not transfer those 

assets to the Treasurer. The Treasurer contends that Linn was required by 

state law to deliver the unclaimed-property funds when it filed the report, but 

it did not then file an adversary complaint demanding that Linn turn over the 

funds. Significantly, on December 5, the Texas Comptroller filed an adversary 

complaint against Linn for unclaimed property owed to Texas residents after 

Linn disclosed $1.5 million in unclaimed-property holdings to that agency. See 

Complaint for Turnover and Payment of Unclaimed Property and Related 

Relief, In re Linn Energy, LLC, No. 16-06023 (Bankr. S.D. Tex. Dec. 5, 2016), 

ECF No. 1.

On December 19, Linn sent all claimants in the bankruptcy case—

including the Treasurer and the Texas Comptroller—a ballot for voting on its 

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proposed Plan of Reorganization (“the Plan”). The Treasurer did not vote, but 

the Texas Comptroller filed an objection to confirmation because the Plan 

purported to distribute the unclaimed property assets of Texas residents, as 

unsecured assets, among parties other than the Comptroller.1 On January 27, 

2017, the bankruptcy court entered an order confirming the Plan, but the order

expressly authorized the Texas Comptroller to pursue its claims for unclaimed 

property.

Several features of the Plan are critical here. First, a section titled 

“Preservation of Royalty and Working Interests” provided that “any right to 

payment from a Royalty and Working interest, if any, shall be treated as a 

Linn General Unsecured Claim under this Plan and shall be subject to any 

discharge and/or release provided hereunder.” Second, the vesting clause 

stated that, except as otherwise provided in the Plan, “all property in each 

Estate, all Causes of Action, and any property acquired by any of the Linn 

Debtors pursuant to the Plan shall vest in [Linn], free and clear of all Liens, 

Claims, charges, Interests, or other encumbrances” once the Plan became final. 

Finally, the Plan’s discharge provision stated that, pursuant to Section 1141(d) 

of the Bankruptcy Code, and except as otherwise stated by the Plan, “the 

distributions, rights, and treatment that are provided in the Plan shall be in

complete satisfaction, discharge, and release, effective as of the Effective 

Date[ ] of Claims[,] . . . Interests, and Causes of Action of any nature 

whatsoever.” That section of the Plan further enjoins any parties to the 

proceedings from commencing or continuing a claim related to the bankruptcy 

estate after the Plan received final approval.

 

1 See Texas Comptroller of Public Accounts Objection to Confirmation of the Linn Plan 

[Dkt. No. 1333] and the Berry Plan [Dkt. No. 1390], In re Linn Energy, LLC, No. 16-60040 

(Bankr. S.D. Tex. Jan. 17, 2017), ECF No. 1548.

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All parties to the bankruptcy case had fourteen days in which to appeal 

the order, see Fed. R. Bankr. P. 8002, and on the final day of the appeal period, 

a group of claimants moved for reconsideration and relief from the order.2 

After the claimants agreed to a stipulation with Linn, the motion for 

reconsideration was withdrawn with prejudice on March 6.3 Thereafter, no 

claimant appealed the order or moved for reconsideration, and the 

confirmation became final on March 20.

About two months later, Linn objected to the Treasurer’s proofs of claim 

for “unknown contingent” unclaimed property, asserting that it was not liable 

for such claims and that the Bankruptcy Code preempted state unclaimed 

property laws. The Treasurer responded to the objection and then filed an 

adversary complaint against Linn. The Treasurer asserted that Linn 

possessed, but did not own, $965,216.72 in unclaimed property consisting of 

investors’ mineral royalties from Linn’s Oklahoma oil and gas operations and 

that Linn was required by Oklahoma law to turn over the funds to the 

Treasurer.

Linn moved to dismiss the Treasurer’s adversary complaint pursuant to

Bankruptcy Rule 7012(b)(6), analogous to Fed. R. Civ. P. 12(b)(6), asserting 

that the claim violated the Plan’s injunction, vesting, and discharge provisions 

and was barred by the principles of res judicata and preemption. The 

Treasurer re-emphasized that the unclaimed property never belonged to Linn. 

 

2 See James H. Niven’s, Charles E. Hinkle’s, and Bianchi Family Ltd. Partnership’s 

Motion for Reconsideration of Purported Disallowance of Claims; Relief from the 

Confirmation Order; or, in the Alterative, to Alter or Amend Cure Amount in the 

Confirmation Order, In re Linn Energy, LLC, No. 16-60040 (Bankr. S.D. Tex. Feb. 10, 2017), 

ECF No. 1691.

3 See Stipulation and Agreed Order Between Debtors James H. Niven, Charles E. 

Hinkle, and Bianchi Family Ltd. Partnership, In re Linn, LLC, No. 16-60040 (Bankr. S.D. 

Tex. Mar. 6, 2017), ECF No. 1779.

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Consequently, it never became part of the bankruptcy estate and could not be

governed by the Plan. After a hearing, the bankruptcy court sided with Linn.

Granting the motion to dismiss, the court concluded that the Treasurer had 

“received more than adequate due process,” and that its complaint amounted 

to a prohibited “collateral attack” on the confirmed Plan.

The Treasurer appealed to the district court, which reversed the 

bankruptcy court’s dismissal on the grounds that the unclaimed property never 

became part of the bankruptcy estate, and therefore the bankruptcy court did 

not have jurisdiction to adjudicate its status. Linn moved for rehearing, but 

the district court denied the motion. Linn timely appealed.

II. STANDARD OF REVIEW

This court reviews “the decision of a district court sitting as an appellate 

court in a bankruptcy case by applying the same standards of review to the 

bankruptcy court’s findings of fact and conclusions of law as applied by the 

district court.” In re Lopez, 897 F.3d 663, 668 (5th Cir. 2018) (internal 

quotation marks and citations omitted). As such, this court acts “as a second 

review court” and reviews the bankruptcy court’s conclusions of law de novo 

and its findings of fact for clear error. Id. (internal quotation marks and 

citations omitted).

III. DISCUSSION

Linn advances four arguments challenging the district court’s decision. 

First, Linn argues that, contrary to the district court’s determination, the 

unclaimed property is part of the bankruptcy estate and subject to the Plan.4 

 

4 The Treasurer spends a significant portion of its brief asserting that Linn waived 

this argument because, allegedly, Linn did not raise the issue until its motion for rehearing 

in the district court. That argument is belied both by Linn’s briefs and by the Treasurer’s 

own briefs in the bankruptcy court. In response to Linn’s motion to dismiss the Treasurer’s 

adversary complaint, for example, the Treasurer argued that judicial estoppel should prevent 

Linn from claiming that the unclaimed property was part of the bankruptcy estate because 

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Second, Linn argues that the bankruptcy court correctly determined that the 

Plan and ensuing Confirmation Order constitute a final judgment that the 

Treasurer may not collaterally attack, and that the principles of res judicata 

bar the Treasurer’s untimely adverse complaint. Third, Linn argues that the 

Treasurer had no “right to payment” under Oklahoma’s unclaimed property 

laws as of the date of the bankruptcy petition and, therefore, the Bankruptcy 

Code barred the Treasurer’s claims. Finally, Linn argues that, to the extent 

that the Bankruptcy Code and Oklahoma’s unclaimed property law are in 

tension with one another, the Bankruptcy Code preempts Oklahoma state law.

This court need not address the merits of Linn’s first, third, and fourth 

arguments because Linn’s second argument is correct—the bankruptcy court’s 

approval of the Plan and the ensuing confirmation order constitute a final 

judgment that may not be collaterally attacked.

In Travelers Indemnity Co. v. Bailey, the Supreme Court held that final 

bankruptcy orders (i.e., orders that are affirmed upon direct review, or, as in 

this case, not appealed or contested) become “res judicata to the parties and 

those in privity with them, not only as to every matter which was offered and 

received to sustain or defeat the claim or demand, but as to any other 

admissible matter which might have been offered for that purpose.” 

557 U.S. 137, 152, 129 S. Ct. 2195, 2205 (2009) (internal quotation marks and 

citation omitted). The Court explicitly held that this principle applies “whether 

or not [the orders were] proper exercises of bankruptcy court jurisdiction and 

power” at the time they became final. Id.

 

“only after” the bankruptcy court entered the confirmation order “did [Linn] change positions 

and claim that the Admitted Unclaimed Property is property of the estate.” Whatever the 

history of Linn’s positions in the bankruptcy proceedings before the final order was entered, 

it is clear that Linn has argued from the outset in this litigation that the unclaimed property 

funds were property of the bankruptcy estate. Accordingly, the argument is not waived.

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Thus, when parties to a bankruptcy case have been given “a fair chance 

to challenge [a] [b]ankruptcy [c]ourt’s subject-matter jurisdiction” or a 

provision of a plan approved by the bankruptcy court during the case and fail 

to do so, they cannot challenge the court’s order later through a collateral 

attack. Id. at 153, 129 S. Ct. at 2206. This court has repeatedly recognized the 

collateral bar established by Travelers. See, e.g., In re Davis Offshore, L.P., 

644 F.3d 259, 265 (5th Cir. 2011) (“Travelers held that a bankruptcy court’s 

plan confirmation order cannot, after it becomes final, be collaterally attacked 

by parties to the case or those in privity with them on grounds that it exceeded 

the bankruptcy court’s jurisdiction.”).

Here, the Plan submitted by Linn to claimants clearly stated that 

unclaimed mineral royalties would be treated as unsecured debt, that upon the 

Plan’s approval all remaining property would vest in Linn, and that no parties 

could bring further claims against Linn after the Plan became final. Despite 

ample opportunity provided by the Bankruptcy Code and the court’s 

procedures, the Treasurer neither voted on the Plan nor contested its 

treatment of the unclaimed property in question. That the Treasurer had a 

fair chance to challenge the Plan’s disposition of unclaimed property in 

Oklahoma is highlighted by the fact that a similarly-situated party, the Texas 

Comptroller, did object to the Plan’s treatment of unclaimed property in Texas 

and successfully excluded that property from the Plan.

The Treasurer cites Pearlman v. Reliance Insurance Co., 371 U.S. 132,

135–36, 83 S. Ct. 232, 234 (1962), which held that the former Bankruptcy Act 

does not permit bankruptcy trustees to distribute the property of other 

persons. While that proposition is sound as a general principle, the Treasurer’s

reliance on Pearlman in this case is misplaced. Pearlman evaluated the 

legality of a bankruptcy plan on direct review; here, the Treasurer had an 

opportunity to challenge the Plan in the normal course of proceedings (as the 

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Texas Comptroller did) but did not avail itself of that opportunity. Travelers, 

decided decades after Pearlman, explicitly precludes collateral attacks on final 

bankruptcy orders by parties to the proceedings “whether or not [they] were 

proper exercises of bankruptcy court jurisdiction and power” in the first 

instance.5 557 U.S. at 152, 129 S. Ct. at 2205. To hold otherwise would upend 

the need for finality in the judicial system, because “this sort of collateral 

attack cannot be squared with res judicata and the practical necessity served 

by that rule. It is just as important that there should be a place to end as that 

there should be a place to begin litigation.” Id. at 154, 129 S. Ct. at 2206 

(internal quotation marks and citation omitted).

In short, the Treasurer asks this court to “tunnel back” into a completed 

proceeding “for the purposes of reassessing prior jurisdiction de novo.” Id.

(internal quotation marks and citation omitted). We decline to do so. Because 

the Treasurer failed to participate in the bankruptcy case and object to or

appeal the Plan’s disposition of the Oklahoma unclaimed property in the 

normal course, its challenge is too late now. The bankruptcy court’s dismissal 

of the Treasurer’s adversary complaint based on res judicata was correct

IV. CONCLUSION

For the foregoing reasons, this court REVERSES the district court’s 

reversal of the judgment entered by the bankruptcy court. The bankruptcy 

court’s decision to DISMISS the Treasurer’s complaint is reinstated.

 

5 This court has no occasion to rule on the propriety of the bankruptcy plan to the 

extent it purported to distribute unclaimed property that the debtor held as a trustee for 

others, but as the treatment of the Texas unclaimed property rights demonstrates, there is 

reason for skepticism.

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