UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

LARKEN MANAGEMENT,

INCORPORATED,

Plaintiff-Appellant,

and

LARKEN HOTELS LIMITED

PARTNERSHIP,

No. 97-2625

Plaintiff,

v.

SMWNPF HOLDINGS, INCORPORATED;

SHEET METAL WORKERS' NATIONAL

PENSION FUND,

Defendants-Appellees.

LARKEN MANAGEMENT,

INCORPORATED,

Plaintiff-Appellee,

and

LARKEN HOTELS LIMITED

PARTNERSHIP,

No. 98-1057

Plaintiff,

v.

SMWNPF HOLDINGS, INCORPORATED;

SHEET METAL WORKERS' NATIONAL

PENSION FUND,

Defendants-Appellants.

Appeals from the United States District Court

for the Eastern District of Virginia, at Alexandria.

Claude M. Hilton, Chief District Judge.

(CA-96-1574-A)
Argued: October 28, 1998

Decided: November 30, 1998

Before WILKINSON, Chief Judge, and LUTTIG and

MOTZ, Circuit Judges.

_________________________________________________________________

Affirmed by unpublished opinion. Judge Luttig wrote the opinion, in

which Chief Judge Wilkinson and Judge Motz joined.

_________________________________________________________________

COUNSEL

ARGUED: L. Richard Williams, GRANT, WILLIAMS, LAKE &

DANGERFIELD, P.C., Phoenix, Arizona, for Appellant. John

O'Brien Clarke, Jr., HIGHSAW, MAHONEY & CLARKE, P.C.,

Washington, D.C., for Appellees. ON BRIEF: Mark C. Dangerfield,

GRANT, WILLIAMS, LAKE & DANGERFIELD, P.C., Phoenix,

Arizona; Mark Fox Evans, REID & PRIEST, L.L.P., Washington,

D.C., for Appellant.

_________________________________________________________________

Unpublished opinions are not binding precedent in this circuit. See

Local Rule 36(c).

_________________________________________________________________

OPINION

LUTTIG, Circuit Judge:

Larken Management, Inc. ("LMI") appeals a district court verdict

denying its claim to a hotel that appellee SMWNPF Holdings, Inc.

("Holdings") owns. Holdings cross-appeals the district court's denial

of its counterclaim for attorney's fees and other litigation costs. For

the reasons that follow, we affirm.

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I.

Holdings owns a Doubletree hotel in Nashville, Tennessee, which

it purchased in 1991. Holdings is a wholly owned subsidiary of the

Sheet Metal Workers' National Pension Fund ("Fund"), which at the

time was a partner with LMI's predecessor (Larken Properties, Inc.)

and with Larken, Inc., in Larken Holdings Limited Partnership

("LHLP"). Ed Williams, former manager of investments at the Fund,

was then Vice-President of Holdings. Stewart DeVore and Meg Carrell were the chief lawyers for the Larken entities.

LHLP had originally planned to purchase the Doubletree, with the

Fund contributing financing. But in July 1991, LHLP missed an interest payment on a previous loan from the Fund, raising concerns about

its financial viability. At an August 23, 1991, meeting of Williams,

DeVore, and officials of Larken Properties, the parties agreed to modify the deal so that Holdings would take title to the Doubletree.

DeVore drafted an Assignment Agreement to carry out this modification. Williams objected to several clauses, particularly ones stating

that Holdings would hold the Doubletree in trust for LHLP and eventually convey it to LHLP. DeVore thus prepared a second draft omitting the "in trust" and "convey" language. The sale closed in

September, with Holdings taking title to the Doubletree. Williams,

however, signed the first draft, by mistake he claims.

Years passed, and Holdings continued to hold the Doubletree without protest from LHLP. Even though LHLP was managing the hotel,

it claims that it "lost track of the Doubletree" and failed to notice its

rights under the Assignment Agreement that Williams had actually

signed.

In 1994, LHLP filed for bankruptcy. In its comprehensive list of

assets, which it was required to file with the bankruptcy court, LHLP

failed to list the Doubletree. In its disclosure statement, LHLP stated

that under the Reorganization Plan "title to all of the Hotels and all

of the Cash Flow will be delivered to" various LHLP creditors, such

that "no present assets will remain with the reorganized Debtor." As

part of the Plan, the Fund's interest in LHLP ended. The Fund and

LHLP also, pursuant to the Plan and the bankruptcy judge's order,

entered into a Release of most of their claims against each other. The

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judge's final order, which took effect in September 1994, provided,

pursuant to 11 U.S.C. § 1141, that "[t]he Debtor, all holders of Claims

and Interests and all other parties in interest are hereby bound by the

Plan."

Over a year and a half later, in April 1996, after"discovering" the

signed Assignment Agreement, LHLP asked the bankruptcy court to

reopen the Plan to allow it to list its claim to the Doubletree. The

bankruptcy judge denied the motion.

In January 1997, Holdings sued DeVore and Carrell in federal

court in Texas, alleging that they had represented Holdings, not

LHLP, in the Doubletree deal, and that they had committed malpractice and breached fiduciary duties in allowing Williams' "mistake."

On October 6, 1997, that court granted summary judgment against

Holdings on the malpractice claim, holding that DeVore and Carrell

were LHLP's attorneys and, in the alternative, that they acted reasonably. SMWNPF Holdings, Inc. v. DeVore , No. 4:97-CV-033-A (N.D.

Tex. 1997).

Fifteen days later, following a bench trial, the district court issued

its decision in the suit before us, which LMI had filed in November

1996 on behalf of LHLP. The court found numerous grounds for

rejecting LMI's claim to the Doubletree: res judicata, based on the

bankruptcy Plan; the Release; judicial estoppel; equitable estoppel;

and ERISA. The court also rejected LMI's state-law fraud claim as

barred by the statute of limitations and failing on the merits. Finally,

the court rejected Holdings' counterclaim for attorney's fees and

other litigation costs as "damages" for breach of the Release, and

refused as "moot" LMI's motion to file DeVore as supplemental

authority.

II.

With regard to the res judicata effect of the bankruptcy Plan, we

affirm on the reasoning of the district court. LHLP could have raised

its claim to the Doubletree during the bankruptcy proceeding; it did

not; and LMI has offered no good reason for this failure. See generally In re Varat Enterprises, 81 F.3d 1310 (4th Cir. 1996); Sure-Snap

Corp. v. State Street Bank & Trust Co., 948 F.2d 869 (2d Cir. 1991).

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Res judicata is no less appropriate as a consequence of the bankruptcy court's denial of the motion to reopen the Plan. The bankruptcy court held that its denial of the motion barred "reopening the

Chapter 11 case to pursue the potential Doubletree Hotel claim in this

Court." Because of the "limited scope" of the hearing on the motion

to reopen, which "prevented the parties from fully litigating" res judicata and related issues, the court stated that its order "should not be

interpreted to preclude Debtor from pursuing any cause of action for

recovery of the Doubletree Hotel in any other jurisdiction." This ruling merely states that the denial of the motion to reopen should not

be treated as preclusive, because the hearing on that motion had been

limited. It says nothing about the res judicata effect of the Plan itself.

On the contrary, and as the district court found, in order to deny the

motion to reopen, the bankruptcy court necessarily had to find that

LHLP could have raised its claim to the Doubletree during the bankruptcy proceeding.

With regard to the meaning of the Release, which the district court

held bars LMI's suit for the Doubletree, we also affirm on the reasoning of the district court. As to Holdings' counterclaim for breach of

the Release, we agree with the district court that the American Rule

bars an award of attorney's fees and other litigation costs as "damages" for such a breach, unless the release provides for them. See

Bunnett v. Smallwood, 793 P.2d 157, 162 (Colo. 1990). It is simple

for parties to include such a clause in a release, and the American

Rule prevents haggling over whether a breach is"obvious," as the

alternative rule requires. See Artvale, Inc. v. Rugby Fabrics Corp.,

363 F.2d 1002, 1008 (2d Cir. 1966) (holding that where release is

silent regarding attorney's fees for a breach, court will allow them

"only for suits brought in obvious breach or otherwise in bad faith").

Other rules already provide remedies for bad faith suits. See Fed. R.

Civ. P. 11. Because the Release is silent on attorney's fees, the district

court properly ruled against Holdings.

We see no reason to reach the issues of judicial estoppel, equitable

estoppel, and ERISA, since both res judicata and the Release suffice

to defeat LMI's claim. With regard to LMI's state-law fraud claim,

to the extent that res judicata and the Release do not bar it, we affirm

on the reasoning of the district court.

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Finally, we reject LMI's assertion that DeVore , issued two weeks

before the district court's decision, bolsters its claim via collateral

estoppel. Although the district court should have considered the possible preclusive effect of DeVore, its failure to do so does not undermine its judgment.

LHLP argues that the court in DeVore held (1) that DeVore and

Carrell had no reason to know of Williams' alleged mistake and (2)

that Williams did not make a mistake. We agree that the court made

the first holding, but that does not alter the res judicata effect of the

bankruptcy Plan or the force of the Release.

We disagree with LMI's claim that the Texas court made the second holding. On the contrary, it did not reach the issue of whether

Williams made a mistake, nor did it need to. The court stated that

DeVore and Carrell

knew that Williams had in his possession both versions of

the agreement. They knew [Holdings] anticipated reconveying the Doubletree to LHLP in the near future. They knew

that . . . the document he signed was short, to the point, and

needed no explanation. The [ ] language that Williams has

recently testified that he specifically reviewed was surrounded by the trust and conveyance language . . . .[DeVore

and Carrell] could reasonably have believed that Williams's

execution of the [first] assignment agreement was consistent

with the way the transaction was supposed to occur.

This passage considers only the perspective of DeVore and Carrell,

not that of Williams. The only issue before the court was the reasonableness of DeVore and Carrell's behavior, and that was all that it

decided. Because issue preclusion requires that an issue "have been

actually determined in the prior proceeding," Ramsay v. INS, 14 F.3d

206, 210 (4th Cir. 1994), we cannot find preclusion on this issue, even

assuming that such would be relevant.

CONCLUSION

For the reasons stated herein, we affirm the judgment of the district

court.

AFFIRMED

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