Collins v. J&N Restaurant Associates, Inc., 3:15-cv-00178

Background

In January 2012 John and Nicolina Mendolia sold real property and deposited $51,900 of the net proceeds into three closely held corporate Arby’s franchisor debtors (J&N, Endvest, Upfront) so those debtors could pay their supplier, Willow Run.
The three Franchise Defendants filed chapter 11 petitions on January 19, 2012; the Mendolias filed chapter 7 on February 16, 2012, and Collins was appointed chapter 7 trustee the next day.
The Trustee filed an adversary complaint on February 14, 2014 seeking to avoid and recover the $51,900 as a fraudulent transfer under 11 U.S.C. § 548 (an administrative expense/avoidance claim belonging to the chapter 7 estate).
The Franchise Defendants’ joint chapter 11 plan (confirmed March 11, 2013) defined Administrative Expense Claims and contained broad discharge, revesting, and merger provisions; no separate administrative-claim bar date was set.
The bankruptcy court granted summary judgment for the Franchise Defendants, holding the Trustee’s post-petition, pre-confirmation administrative expense avoidance claim was discharged under 11 U.S.C. § 1141(d)(1)(A); the district court affirmed.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether a post-petition, pre-confirmation administrative expense avoidance claim is discharged by confirmation under § 1141(d)(1)(A)	Trustee: claim not discharged at confirmation because plan lacked a clear administrative-claim bar date and required payment of administrative expenses	Franchise Defs: § 1141(d)(1)(A) discharges any debt that arose before confirmation, including administrative expense claims, unless plan/order provides otherwise	Held: Discharged — § 1141(d)(1)(A) covers post‑petition/pre‑confirmation administrative claims when the plan deals with such claims and claimant had notice/opportunity to be heard.
Whether absence of an express administrative-claim bar date prevents discharge	Trustee: without a bar date his claim remains viable and should be paid per disclosure/plan terms	Franchise Defs: confirmation can operate as a timeliness bar; courts may impose bar dates and plan terms govern treatment	Held: No bar date required; confirmation and plan terms can preclude tardy administrative claims; Trustee had notice but did not pursue pre-confirmation relief.
Whether § 546 statute of limitations governs timeliness over discharge	Trustee: § 546(a) two‑year window governs avoidance suit timing	Franchise Defs: § 546 is procedural; discharge under § 1141 operates regardless of § 546 timing once plan confirmed	Held: § 546 is procedural and does not enlarge substantive rights; confirmation discharge may preclude claim before statute expires.
Whether plan terms impermissibly expand § 1141(d) or violate § 1129(a) by extinguishing administrative claims	Trustee: plan attempts to expand discharge beyond statutory limits and conflicts with administrative‑claim priority/payment rules	Franchise Defs: plan defined and dealt with administrative claims; Trustee had notice and could have sought relief pre‑confirmation	Held: Plan terms were permissible and consistent with § 1141(d) and confirmation process; Trustee’s challenge rejected.

Key Cases Cited

In re WorldCom, Inc., 546 F.3d 211 (2d Cir.) (confirmation order discharges debtor from pre-confirmation claims)
In re Kalikow, 602 F.3d 82 (2d Cir.) (confirmed reorganization plan discharges pre-confirmation claims)
First Fidelity Bank, N.A. v. Hooker Invs., Inc., 937 F.2d 833 (2d Cir.) (claims-bar dates and finality necessary for reorganization)
Picard v. Fairfield Greenwich Ltd., 762 F.3d 199 (2d Cir.) (overview of avoidance actions and trustee’s exclusive standing to pursue them)