Opinion ID: 3011030
Heading Depth: 3
Heading Rank: 2

Heading: Each of the named Respondents herein shall be

Text: and are deemed to be holders of Disputed Class 8 claims against [Spirco] as provided in the confirmed Plan of Reorganization; 12 3. In the event that Respondents, or any one of them, obtain a final Order of Court in the aforesaid Litigation establishing Innovo group, Inc. liability [sic] for the Debtors obligations, then such Respondent shall be deemed to have an Allowed Class 8 claim payable pursuant to the terms of the confirmed Plan of Reorganization. Appellants' App. at 193-94. The plain language in the Reorganization Plan and the Order classifying claims reveals that judgments entered against Innovo individually, without reference to Spirco's liability, do not fall within any of these provisions. Second, the Tennessee state judgment does not indicate that Innovo's liability was contingent on Spirco's liability. The Bankruptcy Court's faulty analysis is evident in its characterization of Spirco's motion to enforce the terms of the Reorganization Plan. The Bankruptcy Court premised its decision on the statement that debtor Spirco, Inc. has moved for an order enforcing the provision of its confirmed plan of reorganization which prohibits respondent Wayne Copelin from continuing his efforts in another forum to collect from Innovo Group, Inc. on a pre-petition debt owed by debtor and guaranteed by Innovo. Spirco, 201 B.R. at 746. The Tennessee state court, however, found that Innovo was independently liable, not liable as a guarantor.3 Because Spirco's Reorganization Plan and the classification of claims by their terms do not apply to Copelin's state court judgment against Innovo, Stoll v. Gottlieb, 305 U.S. 165, 59 S. Ct. 83 (1938), Chicot County Drainage District v. Baxter State Bank, 308 U.S. 371, 60 S. Ct. 317 (1940), and In re Szostek, 886 F.2d 1405, 1408-10 (3d Cir. 1989), are not controlling. As explained, the Reorganization Plan expressly limits the discharge of Innovo's obligations to those claims and interest against Spirco upon which [Innovo] is liable by guaranty or otherwise, as established by (a) the entry of afinal Order upon motion filed by Debtor or Class 8 Claimant, or (b) written acknowledgment of [Innovo]. Appellants' App. at _________________________________________________________________ 3. Innovo concedes that the Tennessee state court found Innovo separately liable to Copelin. 13 65, Article II(H); Appellee's App. at 23, Article X(D). There is no indication that Innovo's liability on the Tennessee state court judgment arises from either of these two situations. Moreover, the Reorganization Plan makes it clear that despite the merger of Spirco and Innovo, Innovo is not the debtor; therefore, Innovo's protections under Spirco's Reorganization Plan are limited. Appellee's App. at 23, Article X(C); Article X(D). Finally, reading the plan to allow a general discharge of Innovo is incorrect. Generally, independent obligations of a parent corporation are not discharged by its subsidiary's bankruptcy absent a general discharge provision. To the contrary, the general rule of First Fidelity Bank v. McAteer, 985 F.2d 114 (3d Cir. 1993), controls. In McAteer, we said: While it is true that the bankruptcy court's confirmation of the amended plan binds the debtor and all creditors vis-a-vis the debtor, it does not follow that a discharge in bankruptcy alters the right of the creditor to collect from third parties. Section 524(e) specifically limits the effect of a discharge. It provides that . . . discharge of a debt of the debtor does not affect the liability of any other entity on, or the property of any other entity for, such debt. This section assures creditors that the discharge of a debtor will not preclude them from collecting the full amount of a debt from co-debtors or other liable parties. Id. at 118 (quoting 11 U.S.C. S 524(e)) (emphasis added). In sum, the District Court did not err by determining that Copelin's claim against Innovo does not qualify as a Class 8 claim. There is no evidence that Innovo's liability on the Employment Agreement is contingent on Spirco's liability. Further, the release provision is limited in scope. When read in context with other provisions of the plan, it is clear that this discharge provision is limited to those claims and obligations upon which Innovo's liability results from claims and interest against Spirco or Innovo's status as guaranty or otherwise, as established by (a) the entry of a final Order upon motion filed by Debtor or Class 8 Claimant, or (b) written acknowledgment of [Innovo]. Appellants' App. at 65; Appellee's App. at 23. We hold that 14 the state court judgment rendered against Innovo does not fall within the plain terms of Spirco's Plan of Reorganization. We will affirm the District Court's denial of Spirco's motion to enjoin Copelin's enforcement of the state court judgment.4