Opinion ID: 3072049
Heading Depth: 2
Heading Rank: 2

Heading: The Second Anti-Lothian Document Orders

Text: In its Orders 2338 and 2333, respectively, the bankruptcy court denied the Second Anti-Lothian Document’s 9024 Motion to Set Aside the Settlements and granted the Debtor’s Motion to Dismiss the Second Anti-Lothian Document. The bankruptcy court held the Confirmed Plan to be final and assumed the 9024 Motion was an attempt to relitigate what already was or should have been litigated by the AHC claimants. The court rejected the document, in part, as barred by 180-day limitation period for revoking fraudulent plan/confirmation orders.2 11 U.S.C. § 1144. Likewise, the district court relied on limitations in affirming the bankruptcy court, invoking § 1144 as its one “fatal” arrow. 1 An amendment to FRBP 8002 took effect on December 1, 2009, changing the appeal notice deadline to fourteen days. The notice here would have been out of time, though, even under the new rule. 2 The bankruptcy court offered five reasons for rejecting Appellants’ motions here: (1) lack of standing; (2) limitations; (3) res judicata; (4) collateral estoppel; and (5) judicial estoppel. 5 Case: 11-51082 Document: 00512121946 Page: 6 Date Filed: 01/23/2013 No. 11-51082 Appellants raise several challenges to this reasoning. First, it is argued that the Second Anti-Lothian Document is not an attempt to revoke the Confirmed Plan but merely asks for a modification in which fraudulent transfers and illicit fees are returned to the estate. Also, because the plan itself made room for the initial 9024 Motion by the AHC, the current “attack” on the biased transactions at issue (the Nawab and Frio settlements) is merely in keeping with that carve-out. Any delays in the filing could be excused by newly discovered evidence about the conflicts of interest and the fact that, even if the Appellants are not part of the AHC (two of them were—the MYG Trust and the Herzberg Family Trust), the Second Anti-Lothian Document’s claim is “related to” those brought in the AHC 9024 Motion.3 These arguments fail for multiple reasons. To begin, the district court was correct to doubt Anti-Lothian’s standing. Even if we accept the dubious proposition that the Second Anti-Lothian Document merely sought modification of the plan, only the plan’s proponents or the debtor may modify a confirmed plan. 11 U.S.C. § 1127. Anti-Lothian is neither. Permission was not sought from the bankruptcy court to bring a derivative action on the debtor’s behalf, Louisiana World Exposition v. Fed. Ins. Co., 858 F.2d 233, 252–53 (5th Cir. 1988), nor was futility claimed to excuse such failure. Anti-Lothian thus lacks the requisite standing to make a motion to modify the Confirmed Plan. More definitively, the Second Anti-Lothian Document fails based on limitations; potential excuses for its lateness are unavailing. 11 U.S.C. § 1144, which allows revocation of a fraudulent bankruptcy plan, requires that relief be 3 Section 6.9 of the Confirmed Plan reserved rights to the Debtor to pursue any and all claims related to the AHC Motion. 6 Case: 11-51082 Document: 00512121946 Page: 7 Date Filed: 01/23/2013 No. 11-51082 sought within 180 days of confirmation. The one-year limit on Rule 60(b) motions provided in Bankruptcy Rule 9024 is expressly subject to the § 1144 limit. FED. R. BANKR. P. 9024(3). The Second Anti-Lothian Document4 was filed more than a year after the plan was confirmed. Treated as a motion to revoke confirmation under § 1144, as the district court held, the document is plainly untimely. But even if it is a cognizable Rule 9024 motion, it was filed beyond the rules’s one-year deadline. Moreover, the First Anti-Lothian Document cannot be relied on to rescue the filing date since that motion was dismissed and no appeal was filed. Appellants ask this court to consider excusing the normal limitations on attacking bankruptcy plans because of their recently acquired evidence concerning fraud. Though the “newness” of Appellant’s evidence is doubtful, any form of tolling is precluded by the text of both potential avenues for dealing with fraud in this context. Section 1144 and Rule 9024, the latter encompassing Rule 60(b)(3), each explicitly treat fraud. It would make little sense to toll the limitations period of rules designed to deal with fraud because fraud was present. Alternatively, the carve-out in the Confirmed Plan cannot be used to bring this action for several reasons. First, the plan only preserves AHC’s Rule 9024 Motion, the one in existence at the time of the confirmation. Plan § 6.9. Second, while the Debtor possesses a reservation of rights related to the AHC motion, Appellants do not. Id. Even if we were to assume that the meaning of “related to [a specifically named motion]” in Plan § 6.9 can be stretched to include future 4 The district court held that the Second Anti-Lothian Document sought, in substance, either a revocation or a dramatic modification of the confirmation order. While that appears to be correct, the question is unnecessary for us to answer. 7 Case: 11-51082 Document: 00512121946 Page: 8 Date Filed: 01/23/2013 No. 11-51082 motions (we doubt that it should), Appellants do not have the authority to bring suit to defend the Debtor’s reserved rights. The better interpretation of the plan is that the settlement of the AHC motion extinguished claims related to it. In sum, the district court would have been on solid ground in rejecting the Second Anti-Lothian document for any number of reasons. Even if further evidence of the conflicts of interest emerged post-confirmation, there was enough in the winter of 2008 for the AHC to obtain a carve-out in the plan to pursue a 9024 Motion and ultimately a monetary settlement (favorable to Israel Grossman, among others) related to the Nawab and Frio Compromise Orders. The carve-out in the plan did not have in mind the scenario of piece-mealing of redundant 9024 claims. Once a bankruptcy plan is confirmed, § 1144 sets the length of time available to challenge it—even when fraud is involved.5