NOT FOR PUBLICATION

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

In re:

CPESAZ LIQUIDATING, INC., fka 

Community Provider of Enrichment 

Services, Inc.; NDS LIQUIDATING, 

INC., fka Novelles Developmental 

Services, Inc.; CPESCA LIQUIDATING, 

INC., fka CPES California, Inc.,

Debtors.

BAP Nos. CC-22-1156-FSG

 CC-22-1157-FSG

 (Related Appeals)

Bk. No. 9:20-bk-10554-DS

MEMORANDUM*

ROBERT BENNETTI; LINDA 

MARIANO; LINKI PEDDY; CHARLES 

FOUST, JR.; CPES, INC., Employee Stock 

Ownership Plan and Trust Participants,

Appellants,

v.

OXFORD RESTRUCTURING 

ADVISORS LLC,

Appellee.

Appeal from the United States Bankruptcy Court

for the Central District of California

Deborah J. Saltzman, Bankruptcy Judge, Presiding

Before: FARIS, SPRAKER, and GAN, Bankruptcy Judges.

* This disposition is not appropriate for publication. Although it may be cited for 

whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential 

value, see 9th Cir. BAP Rule 8024-1.88

FILED

JUN 2 2023

SUSAN M. SPRAUL, CLERK

U.S. BKCY. APP. PANEL

OF THE NINTH CIRCUIT
2

INTRODUCTION

The chapter 111 debtors created an employee stock ownership plan, 

or ESOP, under which the debtors contributed cash and shares of their 

stock to a trust for the benefit of their employees. Former employees of the 

debtors asserted claims against the debtors based on their rights in the 

ESOP. The bankruptcy court disallowed their claims, holding that the 

employees had rights against the ESOP trust but that those rights did not 

give them any claim against the debtors.

The employees fail to establish an entitlement to payment from the 

debtors: the debtors were not obligated to the employees under the ESOP, 

and the employees’ claims were duplicative of claims asserted by the ESOP 

trustee. We therefore AFFIRM.

FACTS

A. Prepetition events

Community Providers of Enrichment Services, Inc. (“CPES”) and its 

subsidiaries, Novelles Developmental Services, Inc. and CPES California, 

Inc. (collectively, the “Debtors”),

2 provided behavioral health services in 

1 Unless specified otherwise, all chapter and section references are to the 

Bankruptcy Code, 11 U.S.C. §§ 101-1532, and all “Rule” references are to the Federal 

Rules of Bankruptcy Procedure.

2 During the course of the bankruptcy case, the Debtors changed their names: 

CPES became CPESAZ Liquidating, Inc.; Novelles Developmental Services, Inc., 

became NDS Liquidating, Inc.; and CPES California, Inc. became CPESCA Liquidating, 

Inc. To minimize confusion, we will largely disregard the name change. 
3

California and Arizona. The latter two entities were wholly-owned 

subsidiaries of CPES. CPES was an S corporation; in order to maintain that 

status, CPES could not have more than 100 shareholders. 26 U.S.C. § 1361.

CPES created an ESOP for the benefit of all three companies’

employees. Appellants Robert Bennetti, Linda Mariano, Linki Peddy, and 

Charles Foust, Jr. (the “ESOP Participants”)3 are participants in the ESOP.

The ESOP was governed by the CPES Employee Stock Ownership 

Plan (“ESOP Plan”) and CPES Employee Ownership Trust Agreement

(“ESOP Agreement”). Under these documents, CPES created a trust that 

held all of CPES’s stock. The ESOP trust is operated by a trustee and a 

committee, both of which are selected by CPES’s board of directors.

Section 13 of the ESOP Plan provided for distributions to plan 

participants as directed by the ESOP committee. The distributions may be 

made in CPES stock, cash, or both. However, because CPES was an S 

corporation, distributions could be restricted to cash payments:

(b) . . . [W]hile CPES is an S Corporation, the 

distribution of a Participant’s Capital Accumulation may be 

made entirely in cash without granting him the right to 

demand distribution in shares of CPES Stock. Alternatively, 

CPES Stock may be distributed subject to the requirement that 

it be immediately resold to CPES under payment terms that 

3 The ESOP Participants purport to include the named parties as well as ninetytwo other individuals. Neither the notice of appeal nor the ESOP Participants’ briefs 

identifies these ninety-two individuals. We express no opinion on the question whether 

one may prosecute an appeal on behalf of unnamed appellants.
4

comply with Section 14.(b).

(Emphasis added.)

Section 19 of the ESOP Plan provided that, upon termination of the 

plan, “the Accounts of the affected Participants . . . will become fully vested 

as of that date . . . . A complete discontinuance of Employer Contributions 

shall be deemed to be a termination of the Plan for this purpose.” Plan 

termination could trigger distribution of participants’ benefits.

CPES appointed Miguel Paredes of Prudent Fiduciary Services, LLC 

as trustee of the ESOP (“ESOP Trustee”).

B. The chapter 11 case

In 2020, the three Debtors filed chapter 11 petitions. The bankruptcy 

court later approved the sale of the Debtors’ assets.4

The bankruptcy court approved an amended joint plan of 

reorganization (“Liquidation Plan”) in May 2021.5 The Liquidation Plan 

called for liquidating the Debtors, which would result in a 100% payout to 

unsecured creditors and a surplus for the ESOP, as stockholder of CPES.

6

4 No party appealed the sale order, and the sale has been consummated.

5 We affirmed the confirmation order. Bennetti v. CPESAZ Liquidating, Inc. (In re 

CPESAZ Liquidating, Inc.), BAP No. CC-21-1123-LGT, 2022 WL 2719642 (9th Cir. BAP 

Sept. 2 2022). The ESOP Participants appealed the ruling to the Ninth Circuit, where it is 

pending.

6 The Liquidation Plan placed the equity interest in CPES held by the ESOP in

Class 6. It provided that equity interests would be paid a pro rata dividend once 

unsecured claims were paid in full. It also stated that “the ESOP Trustee shall retain 

responsibility, standing, and authority to commence, prosecute and settle lawsuits or 

actions on behalf of the holders of beneficial interests to the Equity Interest in the 
5

Appellee Oxford Restructuring Advisors, LLC was appointed liquidating 

trustee of the CPES Liquidating Trust (the “Liquidating Trustee”).

C. The proofs of claim

In the meantime, on September 29, 2020, dozens of ESOP participants 

filed proofs of claim for various dollar amounts. The proofs of claim were 

filed with a claims agent and later filed under seal.7

The following day, the ESOP Trustee, on behalf of the ESOP, filed 

two proofs of claim. The first claim asserted an unsecured claim for 

$255,150, for “all amounts due to the ESOP related to participant 

distributions that were made based on the prior 2018 stock value.” He 

stated that, based on his review, CPES had inflated the valuation of its 

stock in 2018, that distributions to ESOP participants based on that 

valuation had been too large, and that as a result, the ESOP had less assets 

for the other participants than it should have had.

In the second claim, the ESOP Trustee asserted that the ESOP held 

100% of CPES’s shares and that “the ESOP, on behalf of the participants, 

asserts a proof of interest for its equity interests in the Debtor. The ESOP, 

on behalf of the participants, also asserts a proof of claim for all amounts 

due to the ESOP related to its equity interests in the Debtor.”

ESOP.”

7 Counsel for the ESOP Participants acknowledge that they did not provide us 

with copies of their proofs of claim in their excerpts of record. We have also been unable 

to locate the proofs of claim on the bankruptcy court’s claims register or docket.
6

D. The omnibus objections

The Liquidating Trustee filed a pair of omnibus objections8 to the 

ESOP Participants’ proofs of claim. It argued that the ESOP Participants’ 

proofs of claim did not support claims against the Debtors, because the 

ESOP Participants had rights against only the ESOP trust. It also argued 

that the ESOP Participants’ claims were duplicative of the ESOP Trustee’s 

claims and lacked sufficient information.

The ESOP Participants opposed the omnibus objections. They argued 

that the Debtors had an obligation to repurchase company stock 

distributed to plan participants and beneficiaries under 26 U.S.C. 

§ 409(h)(1)(B), and that the ESOP participants are entitled to exercise a 

“put” option and force the Debtors to repurchase the company stock under

26 U.S.C. § 409(h)(4). They acknowledged that this requirement does not 

apply to S corporations such as CPES “if such plan provides that the 

participant entitled to a distribution has a right to receive the distribution 

in cash . . . .” 26 U.S.C. § 409(h)(2).

The ESOP Participants argued that the termination of the ESOP 

triggered the Debtors’ repurchase obligations. They concluded that their 

8 In bankruptcy parlance, an objection to multiple claims is called an “omnibus 

objection.” See Rule 3007(d) (“[O]bjections to more than one claim may be joined in an 

omnibus objection if all the claims were filed by the same entity, or the objections are 

based solely on the grounds that the claims should be disallowed, in whole or in part, 

because: . . . (1) they duplicate other claims; . . . (7) they are interests, rather than 

claims[.]”).
7

rights under the Debtors’ repurchase obligations are “at parity” with 

unsecured creditors under Arizona state law.

They also argued that their proofs of claim provided sufficient 

information and were not duplicative of the ESOP Trustee’s claims.

The bankruptcy court sustained the objections, holding that the ESOP 

Participants held no claims against the Debtors. It noted that “(1) the

Debtors are S corporations, which exempts them from the requirements of 

26 U.S.C. § 409(h)(1), and (2) the ESOP Participants were never given debt

instruments of any kind . . . .” It explained that, because “CPES Stock is 

held in the CPES ESOP and is never distributed directly to ESOP 

Participants, it does not appear that the Debtor owes any direct obligation 

to the Participants . . . .”

The bankruptcy court summarized:

There is not a “put” option in the CPES ESOP. The 

Debtors are not required to repurchase stock held by ESOP 

Participants because ESOP Participants do not hold stock under 

the CPES ESOP. The Debtor contributes cash to the ESOP or 

repurchases stock held in the ESOP Trust, which allows the 

ESOP to fund distributions. The ESOP Participants simply have 

not shown that this is a direct obligation of the Debtors. 

Accordingly, the claim must be disallowed.

The court also held that the ESOP Participants’ claims were 

duplicative of the ESOP Trustee’s claims. It agreed with the Liquidating 

Trustee “that the ESOP Trustee is the only party with the authority to sue, 

defend, compromise, arbitrate, or settle any suit or legal proceeding or any 
8

claim due it or on which it may be liable . . . .” However, it disagreed with 

the Liquidating Trustee’s position that the claims lacked sufficient

information.

The bankruptcy court entered orders sustaining the Liquidating 

Trustee’s two omnibus objections. The ESOP Participants timely appealed.

JURISDICTION

The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and 

157(b)(2)(B). We have jurisdiction under 28 U.S.C. § 158.

ISSUE

Whether the bankruptcy court erred in disallowing the ESOP 

Participants’ claims.

STANDARDS OF REVIEW

In the claim objection context, we review the bankruptcy court’s legal 

conclusions de novo and its findings of fact for clear error. Lundell v. Anchor 

Constr. Specialists, Inc. (In re Lundell), 223 F.3d 1035, 1039 (9th Cir. 2000). 

“De novo review requires that we consider a matter anew, as if no 

decision had been made previously.” Francis v. Wallace (In re Francis), 505 

B.R. 914, 917 (9th Cir. BAP 2014).

Factual findings are clearly erroneous if they are “illogical, 

implausible, or without support in the record.” Retz v. Samson (In re Retz), 

606 F.3d 1189, 1196 (9th Cir. 2010). If two views of the evidence are 

possible, the court’s choice between them cannot be clearly erroneous. 

Anderson v. City of Bessemer City, 470 U.S. 564, 574 (1985).
9

DISCUSSION

A. The ESOP Participants do not have any enforceable claim against 

the Debtors.

The bankruptcy court held that the ESOP Participants do not have 

any rights against the Debtors and so do not have any enforceable claims 

against the Debtors. We agree; the ESOP Participants’ rights under the 

ESOP do not make them unsecured creditors of the Debtors.

The Bankruptcy Code defines a “claim” as a “right to payment,

whether or not such right is reduced to judgment, liquidated, unliquidated, 

fixed, contingent, matured, unmatured, disputed, undisputed, legal, 

equitable, secured, or unsecured[.]” § 101(5)(A).

It is not enough that a creditor have a right to payment. The creditor 

must also have a right to payment that is enforceable against the debtor or 

the debtor’s property. § 502(b)(1). In other words, an obligation that a third 

party owes, and the debtor does not owe, is not an allowed claim.

The ESOP Participants assert that they have rights against the 

Debtors pursuant to the Tax Code, the ESOP Plan, Arizona law, and the 

Employee Retirement Income Security Act of 1974, as amended (“ERISA”).

They are wrong.

First, the ESOP Participants contend that the Tax Code mandates that 

CPES owes them a “repurchase” or “put” obligation, whereby CPES must 

repurchase the ESOP Participants’ stock following termination of the plan.

The Tax Code requires that, in certain situations, an ESOP must 
10

provide that a participant “has a right to require that the employer 

repurchase employer securities under a fair valuation formula.” 26 U.S.C.

§ 409(h)(1)(B). However, this requirement is inapplicable if the employer is

an S corporation,9 26 U.S.C. § 409(h)(2)(B)(ii)(II), and if “such plan provides 

that the participant entitled to a distribution has a right to receive the 

distribution in cash,” subject to an exception not relevant here, 26 U.S.C. 

§ 409(h)(2)(B)(i). This limitation is important because an S corporation may 

not have more than 100 shareholders. If more than 100 parties become 

owners of the corporation’s stock, the corporation loses substantial tax 

benefits. See 26 U.S.C. § 1362(d)(2)(A) (termination of S corporation status); 

Taproot Admin. Servs., Inc., 679 F.3d at 1110-11 & n.1 (noting that, “[t]o 

receive such favorable tax treatment under the statute, a small business 

corporation must first meet all of the eligibility requirements before 

electing S corporation status[,]” and that “any subsequent violation of one 

or more of the eligibility rules automatically terminates a corporation’s S 

status”).

The parties agree that CPES is an S corporation. As such, the ESOP 

need only provide the ESOP Participants a right to receive the distributions 

9 Most corporations are treated as separate taxable entities that pay income tax on 

their own income. An “S corporation” under 26 U.S.C. § 1361 is not a separately taxable 

entity; rather, the corporation’s income is “passed through” to its shareholders. See

Taproot Admin. Servs., Inc. v. Comm'r, 679 F.3d 1109, 1110 (9th Cir. 2012) (“[A]n S 

corporation’s profits pass through directly to its shareholders on a pro rata basis and are 

reported on the shareholders’ individual tax returns. In this way, an S corporation 

serves as a conduit through which income flows to its shareholders.” (cleaned up)).
11

in cash. Here, the ESOP Plan provides for this situation: “Distribution . . . 

will be made in shares of CPES Stock, cash or a combination of both. . . . 

[W]hile CPES is an S Corporation, the distribution of a Participant’s Capital 

Accumulation may be made entirely in cash without granting him the right 

to demand distribution in shares of CPES Stock.” In other words, consistent 

with the Tax Code, the ESOP Plan provides that the Debtors’ employees 

have no right to receive distribution in the form of stock.10

The ESOP Participants acknowledge that S corporations may 

distribute cash in lieu of stock.11 Rather, they seem to argue that the ESOP’s 

distribution of cash is the legal equivalent of the employer’s repurchase of 

shares from the ESOP Participants. They cite no authority for this novel 

proposition, and we reject it. The employees had the right to receive cash 

distributions from the ESOP trust; they had no right to receive any cash 

payment from CPES.

Similarly, the ESOP Participants point out that the ESOP Plan 

provides that they are to receive their vested benefits following the 

termination of the plan.12 They conclude that, “whether in the form of 

10 Section 14(b) of the ESOP Plan discusses a “put option.” However, this section 

explicitly does not apply to distribution of capital accumulation as discussed in section 

13(b), which allows the ESOP to forego a distribution in stock because it is an S 

corporation.

11 As the bankruptcy court pointed out, the ESOP Participants conceded that 

CPES was not permitted to make any distribution directly to the ESOP Participants.

12 The ESOP Participants argue that the ESOP terminated at the latest on the 

petition date, thus triggering the stock repurchase obligation. We need not decide if or 
12

shares of [CPES] or cash [funded by CPES], the Participants are entitled to 

payment from [CPES] under the ESOP.”

The ESOP Participants misconstrue the ESOP Plan. Termination of 

the ESOP triggers certain distribution rights, but section 19 of the ESOP 

Plan does not require that those distributions be made in the form of CPES 

stock. The ESOP Participants are entitled to a cash distribution, but that 

distribution comes from the ESOP, not the Debtors.

Therefore, the ESOP Participants did not have a right to any payment 

from the Debtors (as opposed to the ESOP). As such, they could not 

properly assert a proof of claim against the Debtors. The cases they rely on 

do not convince us otherwise and, in any event, are not binding.

In re Indian Jewelers Supply Co., 604 B.R. 408 (Bankr. D.N.M. 2019), is 

readily distinguishable. That case similarly concerned the treatment of the 

claims of three ESOP participants against their employer, a chapter 11 

debtor, whose shares were held in an ESOP trust for the employees. Id. at 

410. However, unlike this case, the employees did have the right to receive 

stock, and they had a “put” option which, if exercised, would require the 

employer to buy the stock directly from the employees. Id. at 411. The first 

claimant was allowed to assert a claim because she held a promissory note

issued to the claimant when she exercised her “put” option, id. at 415-16; 

the second claimant’s distributions were improperly refused by the debtor, 

when the ESOP terminated, because the Debtors had no obligation to buy stock from, or 

distribute cash to, the ESOP Participants upon plan termination.
13

who did not allow the claimant to exercise his “put” option, id. at 416; and 

the third claimant was “trying to collect his retirement benefits from the 

Debtor,” id. at 417. None of these situations are applicable to this appeal: in 

this case, it is the ESOP, not the Debtors, that distributes retirement benefits 

to the ESOP Participants.

Merrimac Paper Co. v. Harrison (In re Merrimac Paper Co.), 420 F.3d 53 

(1st Cir. 2005), is similarly unavailing. As in Indian Jewelers, the relevant 

ESOP plan provided that the vested portion of an employee’s individual 

account would be distributed to him in the form of stock, and he could 

enforce a “put” option. The claimant held a promissory note issued by the 

debtor for the value of the redeemed shares; this gave the claimant a right 

to payment against the debtor and entitled him to assert an unsecured 

claim. The ESOP Participants here do not have similar rights against the 

Debtors.

The ESOP Participants next argue that Arizona law provides that 

they are on parity with unsecured creditors. They cite Arizona Revised 

Statutes § 10-640(F), which provides that “[a] corporation’s indebtedness 

to a shareholder incurred by reason of a distribution made in accordance 

with this section is at parity with the corporation’s indebtedness to its 

general, unsecured creditors . . . .” (Emphasis added.) This statute is of no 

moment. As discussed above, the Debtors were not indebted to the ESOP 

Participants due to stock distributions or otherwise; rather, CPES funds the 

ESOP with company stock and cash, and only the ESOP has obligations to 
14

make distributions to the employees.

Finally, the ESOP Participants assert that they were entitled to bring 

their claims under 29 U.S.C. § 1132(a). That section creates certain private 

rights of action in favor of plan participants, beneficiaries, and fiduciaries. 

But none of those private rights of action allows the ESOP Participants to 

assert rights to payment against the Debtors. 

For example, section 1132(a)(1)(B) allows a participant or beneficiary 

to bring a civil action “to recover benefits due to him under the terms of his 

plan, to enforce his rights under the terms of the plan, or to clarify his 

rights to future benefits under the terms of the plan.” But as we have 

explained, under the terms of this ESOP plan, the ESOP trust owes benefits 

to the participants; the Debtors do not.

Similarly, section 1132(a)(2) permits a participant or beneficiary to 

sue “for appropriate relief under section 1109 of this title.” Section 1109 in 

turn makes plan fiduciaries “personally liable to make good to such plan

any losses to the plan” caused by a breach of duties under ERISA, “and to 

restore to such plan any profits of such fiduciary which have been made 

through use of assets of the plan by the fiduciary . . . .” 29 U.S.C. § 1109(a) 

(emphases added). By its terms, the statute obligates the fiduciary to make 

the plan (i.e., the ESOP trust) whole and does not create a payment 

obligation to plan participants. 

Finally, 29 U.S.C. § 1132(a)(4) authorizes a participant or beneficiary

to sue “for appropriate relief in the case of a violation of section 1025(c) or 
15

1032(a) of this title[.]” Those sections require the “administrator” or “plan 

administrator” of the plan to provide certain notices and statements to 

participants and beneficiaries. CPES was the plan administrator of the 

ESOP Plan, so it owed a duty directly to the ESOP Participants to provide 

the required reports and statements. The ESOP Participants say in their 

briefs that they did not receive all required statements and reports, but as 

far as we can tell from the record, their proofs of claim did not assert claims 

based on that failure.13

In short, ERISA does not give the ESOP Participants a right to 

payment from the Debtors and does not transform them into unsecured 

creditors of the Debtors.

The ESOP Participants rely on LaRue v. DeWolff, Boberg & Associates, 

Inc., 552 U.S. 248 (2008), to support their position that they are entitled to 

allege claims for breach of fiduciary duty directly against the Debtors 

under ERISA. In that case, the U.S. Supreme Court held that individual 

plan participants could assert claims on behalf of a benefits plan. Id. at 256. 

But LaRue is inapplicable. In that case, the employer had allegedly 

breached fiduciary duties to the plan. The Court stated that, because the 

appeal arose out of a motion to dismiss, “we must assume that respondents 

13 As we explain in the following section, we cannot review the proofs of claim 

themselves because the ESOP Participants did not include them in their excerpt of 

record and we have been unable to locate them on the bankruptcy court’s docket. The 

lengthy excerpt from the proofs of claim in the ESOP Participants’ reply brief does not 

assert a claim based on the failure to provide reports and statements. 
16

breached fiduciary obligations defined in § 409(a) . . . .” Id. at 252. In this 

case, however, the Debtors do not owe the ESOP or the ESOP Participants 

any fiduciary duty. Rather, the ESOP Plan provides that “[t]he members of 

the Committee14 shall be the named fiduciaries with authority to control 

and manage the operation and administration of the Plan.” The ESOP 

Participants do not point to any law or agreement imposing fiduciary 

duties on the Debtors.15

B. The ESOP Participants’ claims were duplicative of the ESOP 

Trustee’s claims.

The ESOP Participants argue that the bankruptcy court erred in 

holding that their claims were duplicative of the ESOP Trustee’s claims. We 

14 According to the ESOP Plan, the Administrative Committee “is appointed by 

the Board of Directors.”

15 The definition of a “fiduciary” under ERISA provides:

[A] person is a fiduciary with respect to a plan to the extent (i) he exercises 

any discretionary authority or discretionary control respecting 

management of such plan or exercises any authority or control respecting 

management or disposition of its assets, (ii) he renders investment advice 

for a fee or other compensation . . . , or (iii) he has any discretionary 

authority or discretionary responsibility in the administration of such 

plan.

29 U.S.C. § 1002(21)(A); see also Johnson v. Couturier, 572 F.3d 1067, 1076 (9th Cir. 2009) 

(The Ninth Circuit has “recognized that where members of an employer’s board of 

directors have responsibility for the appointment and removal of ERISA trustees, those 

directors are themselves subject to ERISA fiduciary duties, albeit only with respect to 

trustee selection and retention.”). The ESOP Participants have not demonstrated that 

the Debtors fall within this definition. The ESOP Participants believe that the ESOP 

Trustee, the Debtors’ officers and directors, and possibly others breached fiduciary 

duties to them, but they do not show that the Debtors owed them any such duty.
17

discern no error.

The ESOP Participants have not included the proofs of claim in their 

excerpts of record or directed us to where we can find them in the record.

Because we do not have the proofs of claim before us, we cannot review

them. See Brown v. State Bar of Ariz. (In re Bankr. Petition Preparers Who Are 

Not Certified Pursuant to Requirements of Ariz. Sup. Ct.), 307 B.R. 134, 144 (9th 

Cir. BAP 2004) (“We need not examine the record beyond that provided in 

the excerpts.”); Kritt v. Kritt (In re Kritt), 190 B.R. 382, 387 (9th Cir. BAP

1995) (“The appellants bear the responsibility to file an adequate record, 

and the burden of showing that the bankruptcy court’s findings of fact are 

clearly erroneous. Appellants should know that an attempt to reverse the 

trial court’s findings of fact will require the entire record relied upon by the 

trial court be supplied for review.” (cleaned up)). Therefore, the record on 

appeal does not permit us to compare their claims with the ESOP Trustee’s 

claims.

Even if we were to rely on the ESOP Participants’ unverified 

representation of what they asserted in the proofs of claim, we would 

discern no error. The ESOP Participants allegedly asserted unsecured 

claims against the Debtors for the dollar amount of their ESOP account 

balances as of the end of 2018. They also apparently asserted “claims for 

the failure of the members of the [CPES’s] Board of Directors, and the 

ESOP Board of Trustees or Committee and/or the ESOP Trustee, to ensure 

a proper valuation of the shares of [CPES’s] capital stock.”
18

As we have explained, we reject the proposition that the ESOP 

Participants had a right to payment from the Debtors based on the dollar 

amounts in the individual accounts as of 2018 as unsecured debt. 

The claims against the Debtors for breach of fiduciary duty relating to 

the stock valuation is duplicative of the ESOP Trustee’s first claim. He 

asserted a claim for $255,150 based on allegations that the 2018 valuation 

overstated the value of the stock held by the ESOP. This appears to be the 

same claim as that asserted by the ESOP Participants, even if the dollar 

amounts differ.

Furthermore, the ESOP Trustee was solely empowered to bring these 

claims under the ESOP Agreement and Liquidation Plan. Section C of the 

ESOP Agreement provides that the ESOP Trustee has the power to:

(8) sue, defend, compromise, arbitrate or settle any suit or legal

proceeding or any claim due it or on which it may be liable;

(9) exercise any of the powers of any owner with respect to the 

Trust Assets; and

(10) perform all acts which the Trustee shall deem necessary or

appropriate and exercise any and all powers and authority of 

the Trustee under this Trust Agreement.

Similarly, the Liquidation Plan provided that “the ESOP Trustee shall 

retain responsibility, standing, and authority to commence, prosecute and 

settle lawsuits or actions on behalf of the holders of beneficial interests to 

the Equity Interest in the ESOP.” The ESOP Participants cannot usurp the 
19

ESOP Trustee’s powers to exercise the rights of the ESOP.16

The ESOP Participants complain, in summary, that the ESOP 

Trustee’s claims do not protect their rights. However, any claim recovered 

by the ESOP Trustee benefits the ESOP trust, which in turn benefits the 

ESOP Participants. Conversely, the ESOP Participants’ strategy of 

sustained litigation diminishes the assets available for distribution. As 

counsel conceded at oral argument, the ESOP Participants are only entitled 

to receive the fair market value of the CPES stock; needless litigation that 

wastes estate assets is contrary to the ESOP Participants’ interests.

17

CONCLUSION

The bankruptcy court did not err in sustaining the Liquidating 

Trustee’s omnibus objections. We AFFIRM.

16 The ESOP Participants argue that the plan confirmation order preserved their 

right to sue the Debtors. But the order only protected the ESOP Participants’ rights to 

assert claims “to the extent any such claims or causes of action exist.” In other words, 

the confirmation order only permitted them to retain existing causes of action; the 

bankruptcy court held (and we agree) that they had no causes of action against the 

Debtors. The confirmation order did not create any new claim.

17 The ESOP Participants maintain that their proofs of claim provided sufficient 

information to support their claims. We do not understand why the ESOP Participants 

are arguing this point because the bankruptcy court agreed with them.