Court Opinion

ID: 156251
Source: CourtListenerOpinion
Date Created: 2010-08-14 04:35:24+00
Date Added: 2024-06-11T09:42:11.519397
License: Public Domain

F I L E D
                                                       United States Court of Appeals
                                                               Tenth Circuit
                 UNITED STATES COURT OF APPEALS
                                                              APR 23 1998
                        FOR THE TENTH CIRCUIT
                                                          PATRICK FISHER
                                                                   Clerk

In re: AMERICAN FREIGHT
SYSTEM, INC.,

            Debtor,

In re: ANUHCO, INC., formerly                  No. 97-3296
known as American Carriers, Inc.,        (D.C. No. 95-4069-SAC)
                                                (D. Kan.)
            Debtor.                   (214 B.R. 914 & 205 B.R. 290)

AMERICAN FREIGHT SYSTEM,
INC.,

            Plaintiff-Appellant,

v.

NORMAN R. POWELL,

          Defendant-Appellee.
____________________________

NORMAN R. POWELL,

            Plaintiff-Appellee,

v.

AMERICAN FREIGHT SYSTEM,
INC.,

            Defendant-Appellant,
         and

    ANUHCO, INC.,

               Defendant.

                            ORDER AND JUDGMENT *

Before PORFILIO, BARRETT, and HENRY, Circuit Judges.

        After examining the briefs and appellate record, 1 this panel has determined

unanimously that oral argument would not materially assist the determination of

this appeal. See Fed. R. App. P. 34(a); 10th Cir. R. 34.1.9. We, therefore, grant

the parties’ joint motion to expedite this appeal and order the appeal submitted

without oral argument.

*
      This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
1
       We GRANT American Freight System’s motion to strike materials appellee
submitted to this court, which had not been previously submitted to the district
court. See John Hancock Mut. Life Ins. Co. v. Weisman, 27 F.3d 500, 506 (10th
Cir. 1994).

                                          -2-
      Debtor-appellant American Freight System, Inc. (AFS) appeals the district

court’s determination that, although it was contrary to the Bankruptcy Code, see

11 U.S.C. §§ 327, 1129(a)(4), paragraph 26 of the bankruptcy court’s order

confirming the plan of reorganization excused Appellee Norman R. Powell from

having to obtain the requisite bankruptcy court approval of an alleged

post-confirmation incentive compensation agreement with AFS. See American

Freight Sys., Inc. v. Powell (In re American Freight Sys., Inc.), 205 B.R. 290,

301-02, 305 (D. Kan. 1996). Because we conclude that paragraph 26 does not

apply to appellee’s post-confirmation employment, which was connected

exclusively with the implementation of the confirmed reorganization plan, he was

required to obtain bankruptcy court approval of any compensation agreement. His

failure to do so precludes his claims to enforce such an agreement. We, therefore,

reverse the district court’s decision.

I.    PROCEEDINGS

      The bankruptcy court entered its order confirming the reorganization plan

on June 10, 1991. Appellee, who had held various positions with AFS, including

president and chief executive officer, vice president and general counsel, alleged

that subsequent to the confirmation of the plan, he entered into a verbal

employment agreement with AFS. In addition to his salary and benefits based

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upon his position at AFS, he asserted the existence of an agreement through

which he would receive an incentive bonus based upon a percentage of the

pre-confirmation accounts receivable that he collected as part of AFS’s

implementation of the confirmed plan of reorganization. See American Freight

Sys., Inc., 205 B.R. at 293. Under the plan, the proceeds from those accounts

receivable were to be used to pay creditors. The bankruptcy court never

considered or approved any such incentive compensation agreement. See id.

      In 1994, appellee filed an action in Kansas state court, asserting tort and

contract claims based upon the alleged incentive agreement. AFS and the other

defendants removed that action to the bankruptcy court. See 28 U.S.C. § 1452(a).

Several months earlier, AFS had filed a separate action in the bankruptcy court,

requesting a declaratory judgment that appellee did not have an enforceable

incentive agreement. The bankruptcy court consolidated these two actions.

      The bankruptcy court held that, even assuming the existence of an incentive

agreement between appellee and AFS, appellee could not recover under the terms

of the agreement because he had failed to obtain the bankruptcy court’s approval,

as required under 11 U.S.C. §§ 327, 1129(a)(4). The district court reversed that

determination, holding that, while § 327 and § 1129 did require bankruptcy court

authorization of such employment and compensation, even post-confirmation,

paragraph 26 of the bankruptcy court’s confirmation order excused appellee from

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this requirement. See In re American Freight Sys., Inc., 205 B.R. at 301-02, 305.

Because appellee, under paragraph 26, was thus not required to obtain bankruptcy

court approval of his compensation agreement, the lack of approval would not

preclude him from asserting his state law tort and contract claims against AFS.

The district court then remanded the removed litigation to state court, see 28

U.S.C. § 1452(b), and stayed AFS’s declaratory judgment action, abstaining in

deference to the state court litigation pursuant to Colorado River Water

Conservation District v. United States, 424 U.S. 800 (1976). See American

Freight Sys., Inc. v. Powell (In re American Freight Sys., Inc.), 214 B.R. 914,

924-26 (D. Kan. 1997). AFS appeals only the district court’s decision holding

that the lack of bankruptcy court approval does not preclude appellee’s state law

tort and contract claims.

II.   APPELLATE JURISDICTION

      Appellee asserts that this court lacks appellate jurisdiction because the

district court’s decision was not a final order resolving all claims against all

parties. See 28 U.S.C. §§ 158(d), 1291; 2 see also Farmers Home

2
       Both § 158 and § 1291 provide this court with overlapping appellate
jurisdiction over final decisions of the district court acting in review of
bankruptcy court determinations. See Connecticut Nat’l Bank v. Germain, 503
U.S. 249, 253 (1992).

                                          -5-
Admin. v. Buckner (In re Buckner), 66 F.3d 263, 265 (10th Cir. 1995). This

court, however, does have jurisdiction to review the district court’s decision

addressing whether the lack of bankruptcy court approval precluded appellee’s

state law claims, entered prior to the remand order and while the district court had

control of this action. See City of Waco v. United States Fidelity & Guar. Co.,

293 U.S. 140, 142-43 (1934); see also Armstrong v. Alabama Power Co., 667

F.2d 1385, 1387 (11th Cir. 1982); Southeast Mortgage Co. v. Mullins, 514 F.2d

747, 748-49 (5th Cir. 1975).

       The consolidation of the federal declaratory judgment action with the

removed state court action, and the subsequent decision of the federal district

court to stay the federal action, based upon Colorado River abstention, does not

otherwise divest this court of appellate jurisdiction. Such a stay order would

itself be final and appealable, because the stay effectively puts the litigants out of

federal court. See Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460

U.S. 1, 8-10 (1983).

III.   MERITS

       The district court determined that paragraph 26 of the confirmation order,

contrary to § 327 and § 1129(a)(4), relieved appellee of any obligation to obtain

approval of his alleged incentive compensation agreement. See In re American

                                          -6-
Freight Sys., Inc., 205 B.R. at 301-02, 305. The interpretation of a confirmation

order is a legal determination, see Colonial Auto Ctr. v. Tomlin (In re Tomlin),

105 F.3d 933, 941 (4th Cir. 1997), which we review de novo, see Yellow Cab

Coop. Ass’n v. Metro Taxi, Inc. (In re Yellow Cab Coop. Ass’n), 132 F.3d 591,

596 (10th Cir. 1997). See also Dais-Naid, Inc. v. Phoenix Resource Cos. (In re

Texas Int’l Corp.), 974 F.2d 1246, 1247 (10th Cir. 1992) (reviewing legal

question of interpretation of reorganization plan de novo).

      Paragraph twenty-six of the confirmation order states, in pertinent part, that

“[f]ees and other charges with respect to post-confirmation attorney and other

professional services authorized by and provided to the Debtors, or any of them,

or Reorganized AFS or Reorganized [American Carriers, Inc.], are not subject to

approval of the Court.” Appellee’s App., ex. E at 17. Read in conjunction with

the rest of the order, the reorganization plan, and the disclosure statement, see In

re Sugarhouse Realty, Inc., 192 B.R. 355, 363 & n.15 (E.D. Pa. 1996); M&I

Thunderbird Bank v. Birmingham (In re Consolidated Water Utils., Inc.), Nos.

AZ-96-1417-MERBO, 93-06643-PHX-GBN, 1998 WL 61876, at *2 (B.A.P. 9th

Cir. Jan. 9, 1998), however, it is clear that this provision refers only to

post-confirmation professional services unrelated to the implementation of the

approved plan of reorganization. These documents clearly anticipate that AFS

would incur such expenses, post-confirmation, through the operation of its

                                           -7-
continuing business, apart from its implementation of the reorganization plan.

Consistent with bankruptcy law, such fees and expenses would not be subject to

court approval. See Heartland Fed. Sav. & Loan Ass’n v. Briscoe Enters., Ltd., II

(In re Briscoe Enters., Ltd., II), 138 B.R. 795, 809 (N.D. Tex. 1992), rev’d on

other grounds, 994 F.2d 1160 (5th Cir. 1993).

      These documents also clearly anticipate, however, that the bankruptcy court

would continue to oversee the fees and expenses incurred, both pre- and

post-confirmation, during the administration and implementation of the confirmed

plan. Paragraph twenty-six does not excuse the requisite bankruptcy court

approval of these expenses. See In re Melridge, Inc., 108 B.R. 748, 750-51

(D. Or. 1989). Rather, reading the confirmation order as a whole, and in

conjunction with the confirmed reorganization plan, and interpreting these

documents, where possible, to be consistent with each other, see, e.g., In re

Sugarhouse Realty, Inc., 192 B.R. at 365, and with the requirements of the

bankruptcy code, see id. at 368-69; see also In re Minick, 63 B.R. 440, 445

(Bankr. D.D.C. 1986), these documents required bankruptcy court approval of the

alleged incentive compensation agreement. See In re Melridge, Inc., 108 B.R. at

750-51 (§ 327 required court approval of post-confirmation expenses incurred in

disputes related to consummation of reorganization plan). Because appellee did

not obtain the bankruptcy court’s approval of his alleged incentive compensation

                                         -8-
agreement, he may not seek to enforce that agreement. See, e.g., DeRonde v.

Shirley (In re Shirley), 134 B.R. 940, 943-45 (B.A.P. 9th Cir. 1992).

      The judgment of the United States District Court for the District of Kansas

is REVERSED, and the case is REMANDED to the district court for proceedings

consistent with this order and judgment.

                                                   Entered for the Court

                                                   John C. Porfilio
                                                   Circuit Judge

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