Opinion ID: 571457
Heading Depth: 2
Heading Rank: 2

Heading: Scope of Bankruptcy Hearing: Preclusive Effect

Text: 23 In judging the preclusive effect of a prior judgment for res judicata purposes, we decide first, whether the holding constituted a final judgment on the merits, and then, whether the action was brought before a court of competent jurisdiction. In re Teltronics Services, Inc., 762 F.2d 185, 190 (2d Cir.1985). Although appellants do not contest that the findings of the bankruptcy court for the Southern District of Florida constituted a final judgment, Stoll v. Gottlieb, 305 U.S. 165, 170-71, 59 S.Ct. 134, 136-37, 83 L.Ed. 104 (1938), of which we are entitled to take judicial notice, Oneida Motor Freight, Inc. v. United Jersey Bank, 848 F.2d 414, 416, n. 3 (3rd Cir.), cert. denied, 488 U.S. 967, 109 S.Ct. 495, 102 L.Ed.2d 532 (1988), they nonetheless deny the proceeding's preclusive effect. 24 Although Sure-Snap takes the standard set forth in Restatement (Second) of Judgments, § 30, as proof that a reorganization hearing is conclusive only with regard to non-property related issues which were actually litigated, the well-established rule in Miller v. Meinhard-Commercial Corp., 462 F.2d 358, 360 (5th Cir.1972), asserts that any attempt by the parties or those in privity with them to relitigate any of the matters that were raised or could have been raised therein is barred under the doctrine res judicata. (Emphasis supplied). See also In re Webb, 932 F.2d 155, 158 (2d Cir.1991). In response to appellants' characterization of a bankruptcy reorganization hearing as a limited, in rem proceeding, we note that these same case authorities, and the statute regulating Chapter 11 proceedings, 11 U.S.C. § 1141(a), provide for a confirmation plan to bind its debtors and creditors as to all the plan's provisions, and all related, property or non-property based claims which could have been litigated in the same cause of action. 25 Appellants' further claim that their unliquidated tort claims did not constitute core proceedings, has no bearing on their preclusion. The provisions cited, 28 U.S.C. § 157(b) and § 1334(b), set out the general jurisdictional parameters conferred on bankruptcy courts; they do not delimit where the actions should be brought in circumstances such as these. Deciding whether the lender liability claims were core, would in any case have been a question reserved for the bankruptcy judge to determine. § 157(b)(3). 26 Lastly, the judgment in Matter of Howe, 913 F.2d 1138 (5th Cir.1990), is instructive in disposing of appellants' assertion that their right to bring the lender liability claims vested in them following confirmation, by virtue of the controlling bankruptcy statute and the judge's comment at the modification hearing. Subsection (b) of 11 U.S.C. § 1141 provides only that [e]xcept as otherwise provided in the plan or the order confirming the plan, the confirmation of a plan vests all of the property of the estate in the debtor. As the appellees point out, no presumption of right can be inferred from this limited directive, since, even assuming the unliquidated claims technically vested in Sure-Snap, they did so only subject to the res judicata bar. As in Howe, where the reorganization plan explicitly reserved [to the debtors] the right to prosecute 'any claims of action' which ... were not previously litigated to a final judgment, id. at 1141, and yet the subsequent bringing of the action was still barred, we hold here that the judge's colloquy was not dispositive of appellants' allegedly reserved right.