Opinion ID: 201116
Heading Depth: 2
Heading Rank: 2

Heading: Whether the Receiver Has The Right To Bring The Avoidance Action

Text: 15 Reiterating its argument before the bankruptcy and district courts, Fleet contends that the liquidating plan (Plan) did not preserve the right of Gray to bring this avoidance action. We, like the bankruptcy and district courts, find this argument lacking in merit. 16 Review is de novo. Brandt v. Repco Printers and Lithographics, Inc. (In re Healthco Int'l, Inc.), 132 F.3d 104, 107 (1st Cir.1997) (stating, [w]hether such an appeal comes to us by way of the district court or the [Bankruptcy Appellate Panel], our regimen is the same: we focus on the bankruptcy court's decision, scrutinize that court's findings of fact for clear error, and afford de novo review to its conclusions of law.). Pursuant to section 1141 of the Bankruptcy Code, the confirmation of a plan of reorganization binds the debtor and any entity issuing securities or acquiring property under the plan to the provisions of the plan and, except as otherwise provided in the plan, precludes parties from raising claims or issues that could have or should have been raised before confirmation but were not. See 11 U.S.C. §§ 1141(a) and (b); 8 Lawrence P. King et al., Collier on Bankruptcy ¶ 1141.02 (15th rev. ed.2003). Moreover, section 1123(b)(3)(B) of the Bankruptcy Code states that a plan may provide for the retention and enforcement by the debtor, by the trustee, or by a representative of the estate appointed for such purpose of any claim or interest. 6 Several circuits have concluded that, pursuant to sections 1123 and 1141, confirmation of a plan is given res judicata effect, which bars a debtor or trustee from bringing avoidance actions not expressly reserved in the plan. See, e.g., P.A. Bergner & Co. v. Bank One, Milwaukee, N.A. (In re P.A. Bergner & Co.), 140 F.3d 1111, 1117-18 (7th Cir.1998); McFarland v. Leyh (In re Texas Gen. Petroleum Corp.), 52 F.3d 1330, 1335 n. 4 (5th Cir.1995); Harstad v. First American Bank (In re Harstad), 39 F.3d 898, 903 (8th Cir.1994); In re Mako, 985 F.2d 1052, 1056 (10th Cir.1993). The requirement that retention of the avoidance powers be clear serves to protect the unsecured creditors and to ensure that post-confirmation avoidance proceedings are for their benefit. In re Mako, 985 F.2d at 1056 (10th Cir.1993). 17 Assuming, without deciding, that we follow the reasoning of these decisions, Fleet's argument fails because the Plan expressly provides that Gray has the right to pursue avoidance actions: 18 The Liquidating Supervisor, under the supervision of the Post-Effective Date Committee ... is authorized to investigate, prosecute and, if necessary, litigate, any Cause of Action [the definition of which expressly includes avoidance actions] ... on behalf of the Debtor and shall have standing as an Estate representative to pursue any Causes of Action and Claim objections, whether initially filed by the Debtor or the Liquidating Supervisor.... 19 Fleet contends that this language does not preserve the right to pursue claims as it fails specifically to mention the claim against Fleet. Compare D & K Props. Crystal Lake v. Mut. Life Ins. Co. of N.Y., 112 F.3d 257, 260-61 (7th Cir.1997) (stating, [a] blanket reservation that seeks to reserve all causes of action reserves nothing.). We disagree. See Bergner, 140 F.3d at 1117 (stating, [t]he courts that have spoken of the need for `specific' and `unequivocal' language have focused on the requirement that plans unequivocally retain claims of a given type, not on any rule that individual claims must be listed specifically.) (citations omitted); Harstad, 39 F.3d at 903 (ruling that debtors should have specifically reserved the right to pursue claims of this sort postconfirmation.); Cohen v. TIC Fin. Sys. (In re Ampace Corp.), 279 B.R. 145, 160 (Bankr.D.Del. 2002) (stating, the Bankruptcy Code contemplates that debtors may seek confirmation of their plans prior to litigating all avoidance actions ... [t]herefore, in my opinion, a general reservation in a plan of reorganization indicating the type or category of claims to be preserved should be sufficiently specific to provide creditors with notice that their claims may be challenged post-confirmation.) (citations omitted). The cases upon which Fleet primarily relies involve provisions of a far more general nature. See D & K Properties Crystal Lake, 112 F.3d at 259 (plan purported to reserve all causes of action existing in favor of the Debtor.); Harstad, 39 F.3d at 902 (plan purported to reserve any right of Debtors to recover assets pursuant to the provisions of the Bankruptcy Code.). The Plan, we believe, adequately preserves Gray's right to bring avoidance actions.