2007 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

1-24-2007

In Re: Onco Inv Co

Precedential or Non-Precedential: Non-Precedential

Docket No. 05-4857

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Recommended Citation

"In Re: Onco Inv Co " (2007). 2007 Decisions. Paper 1750.

http://digitalcommons.law.villanova.edu/thirdcircuit_2007/1750
NOT PRECEDENTIAL

IN THE UNITED STATES COURT 

OF APPEALS

FOR THE THIRD CIRCUIT

 

NO. 05-4857

 

 IN RE: ONCO INVESTMENT COMPANY, ET AL.

MW POST PORTFOLIO FUND LTD.; DB DISTRESSED

OPPORTUNITIES FUND LTD.; POST OPPORTUNITY

FUND L.P.; POST TOTAL RETURN FUND L.P.; HFR

DS OPPORTUNITY MASTER TRUST; OPPORTUNITY FUND LLC;

MW POST OPPORTUNITY OFFSHORE FUND LTD.; SOUTH

DAKOTA INVESTMENT COUNCIL; CONCORDIA MAC29 LTD; JME OFFSHORE 

OPPORTUNITY FUND LTD; OFFSHORE OPPORTUNITY 

FUND II LTD; RESTORATION CAPITAL MANAGEMENT LLC;

RESTORATION HOLDINGS LTD.; LITESPEED MASTER FUND;

MW POST PORTFOLIO FUND LTD, ET AL.,

Appellants

v.

NORTHWEST BANK MINNESOTA, NATIONAL ASSOCIATION

as Indenture Trustee for the 10% Senior Subordinate Notes Due

February 1, 2009 of Oglebay Norton Company also known as Wells

Fargo Bank MN National Association; OGLEBAY NORTON COMPANY;

DEPOSITORY TRUST COMPANY

Appellees

 

On Appeal From the United States 

District Court

For the District of Delaware 

(D.C. Civil Action Nos. 04-cv-01543, 04-cv-01544, 04-cv-01545, 04-cv-01546)

District Judge: Hon. Sue L. Robinson

 
2

Argued: November 8, 2006

BEFORE: SCIRICA, Chief Judge, McKEE and

STAPLETON, Circuit Judges

(Opinion Filed January 24, 2007)

 

Brian A. Sullivan

Amy D. Brown

Werb & Sullivan

300 Delaware Avenue - 13 Floor th

P.O. Box 25046

Wilmington, DE 19899

 and

Bruce Bennett

James O. Johnston (Argued)

Joshua M. Mester

Hennigan, Bennett & Dorman

865 South Figueroa Street - Suite 2900

Los Angeles, CA 90017

 Attorneys for Appellants

William Weintraub

Laura D. Jones

Pachulski, Stang, Ziehl, Young, Jones & Weintraub

919 North Market Street - 16 Floor th

P.O. Box 8705

Wilmington, DE 19801

 and

Richard W. Reinthaler

Dianne F. Coffino (Argued)

Dewey Ballantine

1301 Avenue of the Americas

New York, NY 10019

 Attorneys for Appellees Wells Fargo Bank, National Association

 and Oglebay Norton Company
3

Daniel J. DeFranceschi

Richards, Layton & Finger

One Rodney Square

P.O. Box 551 Wilmington, DE 19899

 and Heather Lennox

Jones Day 901 Lakeside Avenue

Cleveland, Ohio 44114

 Attorneys for Appellee Oglebay Norton Company

Mark E. Felger

Jeffrey R. Waxman

Cozen & O’Connor

1201 Market Street - Suite 1400

Wilmington, DE 19801

 and

Gregg M. Mashberg (Argued)

Proskauer Rose

1585 Broadway

New York, NY 10036

 Attorneys for Appellee Depository Trust Co.

 

OPINION OF THE COURT

 

STAPLETON, Circuit Judge:

Appellants are holders of Senior Notes issued by Oglebay Norton Company

(“Oglebay”) under a Senior Secured Note Purchase Agreement (“Senior Noteholder

Agreement”). After Oglebay filed for Chapter 11 bankruptcy, appellants commenced this

adversary proceeding in the Bankruptcy Court to contest their treatment under Oglebay’s

proposed plan of reorganization. In addition to Oglebay, appellants named as defendants
 Appellants do not challenge the District Court’s mootness finding with respect to their 1

claim for declaratory relief.

4

Wells Fargo Bank (“Wells Fargo”), in its capacity as Indenture Trustee for holders of

certain subordinated notes that Oglebay had issued, and Depository Trust Company

(“DTC”), in its capacity as disbursing agent for property to be distributed to the

subordinated noteholders under the plan. Appellants sought three forms of relief: (1) a

declaration against all defendants that no distributions could be made to subordinated

noteholders under the plan unless and until Oglebay fulfilled all of its obligations to

appellants; (2) an order requiring Wells Fargo and DTC to turnover any property they

received from Oglebay for the benefit of the subordinated noteholders, to the extent

necessary to satisfy Oglebay’s obligations to appellants; and (3) money damages against

Wells Fargo and DTC in the amount of the value of any property they received from

Oglebay for the benefit of the subordinated noteholders. 

The Bankruptcy Court ruled against appellants on the merits of their claims in both

the adversary and Chapter 11 proceedings, and subsequently confirmed Oglebay’s

proposed plan of reorganization. Appellants thereafter appealed the Bankruptcy Court’s

final judgment in the adversary proceeding to the District Court, but chose not to appeal

the Confirmation Order entered by the Bankruptcy Court in the Chapter 11 proceeding. 

The District Court dismissed the appeal on constitutional mootness grounds, and this

timely appeal followed. We will affirm the judgment of the District Court for essentially 1

the same reasons set forth in its well-reasoned opinion.
5

We agree with the District Court that appellants’ claims for turnover and money

damages against Wells Fargo are moot. Because Wells Fargo was replaced by DTC in

the chain of property distribution, it never received any property under the Plan for the

benefit of the subordinated noteholders. We also agree with the District Court that

appellants’ turnover claim against DTC is moot because DTC has, in accordance with the

Plan, already distributed all of the property at issue to the subordinated noteholders. 

Although appellants successfully negotiated with Oglebay to include a “savings clause” 

in the Plan which appellants insist was intended to preserve their right to litigate this

appeal, a jurisdictional defect such as mootness cannot be overcome by agreement of the

parties. See In re DiGiorgio, 134 F.3d 971, 974-75 (9th Cir. 1998).

Finally, while we would not characterize appellants’ claim for money damages

against DTC as “non-justiciable,” as did the District Court, we agree with its observation

that appellants have failed to state a damage claim against DTC upon which relief can be

granted. Simply put, appellants have failed to identify the source of the duty DTC is

alleged to have violated. They insist that DTC had a duty to turn over the property it

received on account of the subordinated noteholders (or pay the equivalent amount in

money damages) to appellants under the Senior Noteholder Agreement. DTC was not a

party to the Senior Noteholder Agreement, however, and its responsibility under the Plan

was limited to making distribution in accordance with the final, court-approved Plan, a

task which it concededly performed.
6

Contrary to appellants’ argument, the savings clause of the Plan did not create or

preserve any liability on the part of DTC. That clause provided: “Notwithstanding

anything to the contrary contained in this Section XI.C. [relating to the termination of

certain subordination rights and settlement of related claims and controversies], any and

all rights, arguments and defenses relating to the subordination provisions contained in

the [Indenture] are expressly preserved solely for the holders of [the Senior Notes and a

class of the subordinated noteholders], the Debtors, the Reorganized Debtors, the

Indenture Trustee and the Creditors’ Committee and shall be enforced in accordance with

a Final Order of the Bankruptcy Court resolving the parties’ respective rights under such

subordination provisions.” App. at 118. “Final Order” is defined in the Plan as follows: 

an order or judgment of the Bankruptcy Court, or other court of competent

jurisdiction, as entered on the docket in the Chapter 11 Cases or the docket

of any other court of competent jurisdiction, that has not been reversed,

stayed, modified or amended, and as to which the time to appeal or seek

certiorari or move for a new trial, reargument or rehearing has expired, and

no appeal or petition for certiorari or other proceedings for a new trial,

reargument or rehearing has been timely taken, or as to which any appeal

that has been taken or any petition for certiorari that has been timely filed

has been withdrawn or resolved by the highest court to which the order or

judgment was appealed or from which certiorari was sought or a new trial,

reargument or rehearing shall have been denied or resulted in no

modification of such order. 

App. at 99.

The savings clause envisioned the following chronology of events: (a) appellants’

subordination rights and arguments would be finally resolved and enforced by court

order; (b) the entry of a final order resolving appellants’ subordination rights and
7

arguments would cut off the savings clause; (c) the Plan would be consummated; and (d) 

DTC would receive and distribute property in accordance with the Plan. Events in fact

unfolded in accordance with this chronology. Appellants affirmatively chose to raise the

subordination issues in the Chapter 11 proceeding, as well as the adversary proceeding,

and the Bankruptcy Court proceeded to adjudicate the merits of those issues in both

proceedings. It then issued an order in the Chapter 11 proceeding resolving those issues

and confirming the Plan. That order became final when the appellants failed to appeal it,

and DTC then, quite properly, distributed the property it received in accordance with the

final, court-approved plan. Appellants have identified no basis for imposing damage

liability on DTC, and we perceive none.

The judgment of the District Court will be affirmed.