* Pursuant to Local Rule 47.5, the court has determined

that this opinion should not be published and is not precedent

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

_____________________

Nos. 95-10694 & 95-10695

_____________________

In the Matter of: BERRYMAN PRODUCTS, INC.

 Debtor

----------------------------------------------

BERRYMAN PRODUCTS, INC.

 Appellee

v.

NATIONWIDE MUTUAL INSURANCE COMPANY

 Appellant

 BERRYMAN PRODUCTS, INC., ex rel. Nationwide

Mutual Insurance Company

 Plaintiff-Appellant

v.

ROBERT H BLANKENSHIP; TRUMAN BLANKENSHIP;

MAURICE BLANKENSHIP; ED BLANKENSHIP; PATRICIA

WYATT; GAIL PARMAN

 Defendants-Appellees 

_________________________________________________________________

Appeal from the United States District Court

for the Northern District of Texas 

_________________________________________________________________

June 13, 1996

Before KING, WIENER, and BENAVIDES, Circuit Judges.

PER CURIAM:*
except under the limited circumstances set forth in Local Rule

47.5.4.

2

Nationwide Mutual Insurance Company appeals the district

court’s reversal of the bankruptcy court’s order authorizing it

to bring certain avoidance actions on behalf of Berryman

Products, Inc., and Berryman Products of Delaware, Inc., and the

district court’s concomitant dismissal of those avoidance

actions. We affirm.

I. BACKGROUND

Berryman Products, Inc. (“BPI”) is a manufacturer of

automotive products located in Arlington, Texas, and is a wholly

owned subsidiary of Berryman Products of Delaware, Inc. (“BPD”). 

In 1986, Robert Blankenship accepted an unsecured note (“BPD

note”) in the amount of $2.9 million from BPD to finance the sale

of BPI and BPD to Blankenship’s children. According to BPI, the

BPD note was initially unsecured because First City National Bank

of Arlington (“First City”) held a lien on nearly all of BPI’s

assets pursuant to a concurrently executed loan and security

agreement. BPI states that these loan documents provided that,

once the First City loan was paid, Blankenship would then receive

a security interest in BPI’s assets to collateralize the BPD

loan. In 1991, the First City loan was paid and the BPD note was

refinanced, this time giving Blankenship a lien on BPI’s assets. 

In March 1993, Blankenship took an additional security interest

in BPI’s inventory.
 

1Hunt is a distributor of BPI’s products in California and

is insured by Nationwide Mutual Insurance Company (“Nationwide”).

 

2The judgment was reversed on appeal and remanded for a new

trial, which is still pending. Hart died during the appeal.

3

In 1990, Matt Van Hart filed suit in California state court

against several defendants, including BPI and C.P. Hunt Company,

Inc. (“Hunt”),1 alleging that one of BPI’s products was partially

responsible for the automobile accident that rendered him a

quadriplegic. In 1993, after a jury trial, judgment was entered

on the jury’s verdict awarding damages in excess of $7.5 million

against BPI and Hunt, jointly and severally. Nationwide

subsequently settled with Hart for $6 million.2

On March 18, 1993, BPI and BPD (collectively, the “debtors”)

filed a joint petition for reorganization under Chapter 11 of the

Bankruptcy Code in the United States Bankruptcy Court for the

Northern District of Texas in Fort Worth. Nationwide filed a

proof of claim for $6 million based on its claim for contribution

from BPI for the amount paid in the Hart settlement. In a letter

to the debtors’ counsel dated May 4, 1994, Nationwide asserted

its belief that the 1991 refinancing of the BPD note and 1993

agreement giving Blankenship a security interest in BPI’s

inventory were fraudulent and preferential transfers, and

therefore, avoidable. Nationwide then stated that, if the

debtors were unwilling or unable to bring actions to avoid these

transfers, Nationwide would seek standing to bring the actions on

the debtors’ behalf. The debtors responded in a letter dated May

13, 1994, declaring their intent not to pursue avoidance actions
4

against Blankenship because they believed that such actions would

have no legal merit and would be a waste of the estate’s assets. 

The debtors acknowledged that Nationwide could seek standing to

bring the avoidance actions against Blankenship on the debtors’

behalf. These letters were included in the debtors’ Second

Amended Disclosure Statement, which was filed and approved on

June 2, 1994.

On June 7, 1994, Nationwide filed a motion seeking authority

to bring the avoidance actions on the debtors’ behalf. On July

1, 1994, Nationwide filed an amended motion. Specifically,

Nationwide sought authority to bring actions against Blankenship

based on the 1991 refinancing agreement, the 1993 security

interest in the debtors’ inventory, and certain post-petition

transfers to Blankenship in the amount of $500,000. Nationwide

also sought authority to bring actions against the debtors’

officers and directors personally for payments of dividends and

the repurchase of shares.

On July 10, 1994, the bankruptcy court held a confirmation

hearing on the debtors’ First Amended Joint Plan of

Reorganization, which the debtors had filed on May 6, 1994, and

had modified on July 1, 1994. With respect to avoidance actions,

the Plan contained the following provisions:

12.1. Generally. Unless expressly waived or released

by the Debtors, Reorganized BPD or Reorganized BPI

shall retain any cause of action, including but not

limited to avoidance or recovery actions under sections

542, 543, 544, 545, 547, 548, 549, 550, 551, and 553 of

the Bankruptcy Code, or may litigate any other causes

of action, rights to payments, or Claims that may

belong or have belonged to the Debtors. If Reorganized
5

BPD or Reorganized BPI is successful in its prosecution

of a cause of action pursuant to this section, the

recovery shall be for the benefit of the Unsecured

Creditors. Persons subject to a successful avoidance

action may file a Claim, as appropriate, within such

time as is established by the Bankruptcy Court.

. . . .

15.1. Retention of Jurisdiction. Pursuant to sections

1334 and 157 of title 28 of the United States Code, the

Bankruptcy Court shall retain exclusive jurisdiction of

all matters arising in, arising under, and related to

the Chapter 11 Cases and the Plan, for the purposes of,

sections 105(a) and 1142 of the Bankruptcy Code, and

for, among other things, the following purposes:

. . . .

(j) To enable Reorganized BPD or Reorganized BPI

to prosecute any and all proceedings which may be

brought to set aside liens or encumbrances and to

recover any transfers, assets, properties or damages to

which the Debtors may be entitled under applicable

provisions of the Bankruptcy Code or any other federal,

state or local laws, including causes of action,

controversies, disputes and conflicts between the

Debtors and any other party, including but not limited

to, any causes of action or objections to claims,

preferences of [sic] fraudulent transfers and

obligations or equitable subordination.

The bankruptcy court entered an order confirming this plan on

July 29, 1994. Nationwide appealed from the confirmation order

to the United States District Court for the Northern District of

Texas. That appeal is pending. 

On August 30, 1994, the bankruptcy court held a hearing on

Nationwide’s motion for authority to bring the avoidance actions

on the debtors’ behalf. At the conclusion of this hearing, the

court orally granted Nationwide’s motion. On September 14, 1994,

the court entered a written order to this effect (the

“Authorization Order”).
6

On September 23, 1994, the reorganized debtors filed a

motion for rehearing of the Authorization Order. The bankruptcy

court held a hearing on this motion for rehearing on December 5,

1994, and entered an order denying the motion on December 14,

1994. Having been authorized to bring the avoidance actions,

Nationwide filed a complaint asserting those claims in the United

States District Court for the Northern District of Texas on

January 11, 1995.

The reorganized debtors appealed the Authorization Order to

the United States District Court for the Northern District of

Texas. On June 16, 1995, the district court entered a judgment

reversing the Authorization Order. In an accompanying Memorandum

Opinion and Order, the court noted that the confirmed Plan gave

the authority to bring avoidance actions only to the reorganized

debtors and did not give the bankruptcy court the authority to

appoint another entity to bring such actions on behalf of the

debtors. Accordingly, the court reasoned, the rule of res

judicata precluded the bankruptcy court from making such an

appointment in a subsequent collateral proceeding; rather,

Nationwide should have raised the issue at the confirmation

hearing or could raise it in its direct appeal of the

confirmation order. Alternatively, the district court held that

Nationwide did not meet its burden of proof at the hearing on the

Authorization Order because it did not adduce any evidence on the

issues of whether the avoidance actions presented colorable

claims and whether the debtors unjustifiably refused to pursue
7

such actions. Having reversed the Authorization Order, the

district court then dismissed the avoidance actions filed by

Nationwide in the same court. Nationwide appeals the district

court’s reversal of the Authorization Order and the dismissal of

its avoidance actions against Blankenship. Those appeals were

consolidated in this court.

 

II. DISCUSSION

A. Standard of Review

Although the bankruptcy appellate process makes this court

the second level of review, we perform the identical task as the

district court. Heartland Fed. Sav. & Loan Ass’n v. Briscoe

Enters., Ltd., II (In re Briscoe Enters., Ltd., II), 994 F.2d

1160, 1163 (5th Cir.), cert. denied, 114 S. Ct. 550 (1993). We 

review findings of fact by the bankruptcy court under the clearly

erroneous standard and decide issues of law de novo. Henderson

v. Belknap (In re Henderson), 18 F.3d 1305, 1307 (5th Cir.),

cert. denied, 115 S. Ct. 573 (1994); Haber Oil Co. v. Swinehart

(In re Haber Oil Co.), 12 F.3d 426, 434 (5th Cir. 1994).

B. Analysis

It is well settled that an order issued by a bankruptcy

court confirming a plan has res judicata effect as to questions

that could have been raised in the confirmation process. 

Republic Supply Co. v. Shoaf, 815 F.2d 1046, 1050-54 (5th Cir.

1987); Christopher v. American Universal Ins. Group, Inc. (In re
8

Christopher), 148 B.R. 832, 837 (Bankr. N.D. Tex. 1992), aff’d,

28 F.3d 912 (5th Cir. 1994). At this time, there is a valid,

confirmed plan in this case. The fact that the confirmation

order is being appealed does not defeat its res judicata effect. 

See Sage v. United States, 908 F.2d 18, 26 (5th Cir. 1990).

The Plan provides that the reorganized debtors retain any

cause of action, including avoidance actions, and that the

bankruptcy court retains jurisdiction to enable the reorganized

debtors to bring those actions. The debtors filed the Plan on

May 6, 1994, more than two months prior to the July 10

confirmation hearing. Thus, Nationwide had adequate notice that

the Plan gave the authority to bring any avoidance actions only

to the reorganized debtors. Moreover, Nationwide knew prior to

the confirmation hearing that the debtors did not intend to bring

the avoidance actions at any time. The debtors stated this

expressly in a letter to Nationwide dated May 13, and in their

Second Amended Disclosure Statement, which was filed and approved

on June 2.

 Nationwide did take some action prior to confirmation with

respect to the avoidance actions by filing a motion on June 7

that sought authorization to bring those actions on behalf of the

debtors. This motion and the subsequent amended motion, however,

did not request expedited disposition of the motion prior to

confirmation. In fact, the hearing on the amended motion for

authorization was not held until one month after the confirmation

order was entered. Nationwide apparently made no attempt to have
9

the confirmation hearing continued or to stay the confirmation

order pending the disposition of its motion. Further, the motion

requests authorization to bring the actions on behalf of the

debtors without acknowledging that, after confirmation, the

debtors would no longer exist and that the Plan grants the

authority to bring avoidance actions in the reorganized debtors. 

Given that all creditors had notice via the disclosure statement

that the debtors unequivocally did not intend to bring the

avoidance actions and that Nationwide could have sought

disposition of its motion before the Plan became effective, the 

bankruptcy court’s post-confirmation appointment of Nationwide to

bring avoidance actions on the reorganized debtors’ behalf was 

foreclosed by the res judicata effect of the Plan. Accordingly,

the bankruptcy court erred in entering the Authorization Order.

We do not hold that a bankruptcy court may never enter an

post-confirmation order respecting the right of non-debtor to

bring avoidance actions. Rather, we limit our ruling to the

facts of this case. Nationwide had notice prior to the

confirmation hearing that the Plan granted the authority to bring

any avoidance actions post-confirmation to the reorganized

debtors and that the debtors had no intent to bring such actions. 

Nationwide had the opportunity to object to this aspect of the

Plan at the confirmation hearing, and indeed, it may be raising

this issue in its appeal of the confirmation order; however, that

lawsuit is not before us. Alternatively, Nationwide could have

taken steps to have the bankruptcy court decide its motion for
10

authorization to bring the avoidance actions before entry of the

confirmation order. It did not do so. Instead, it chose to

undertake what is, in effect, a post-confirmation collateral

attack on one aspect of the Plan. Under these circumstances, we

believe that the bankruptcy court erred in indulging such an

attack by entering the Authorization Order. The district court

correctly reversed this order and dismissed the avoidance actions

that the bankruptcy court had improperly authorized Nationwide to

bring. 

 

III. CONCLUSION

For the foregoing reasons, we AFFIRM the district court’s

reversal of the bankruptcy court’s order authorizing Nationwide

to bring any avoidance actions on the debtors’ behalf and the

dismissal of the avoidance actions filed by Nationwide pursuant

to that order.