445 B.R. 277
Bankr. S.D.N.Y.2011Background
- Debtors in Chapter 11 moved to enforce Plan and Confirmation Order against Highland Capital, who sued in state court over Exit Financing allocations.
- Plan § 12.1 and Confirmation Order confer exclusive Bankruptcy Court jurisdiction over disputes related to the Plan, including exculpation and discharge questions.
- Exit Financing involved a Term Loan and Asset-Based Revolving Facility; Highland was a non-party bidder/recipient and did not receive an allocation.
- Highland asserted breach of contract and tort claims arising from its exclusion from the Exit Financing and related communications before and after plan confirmation.
- Administrative expense bar date (June 29, 2010) passed with Highland not filing a claim; Plan and Confirmation Order discharged and enjoined pre-confirmation liabilities.
- Court stayed Highland’s state court action and held certain claims barred or sua sponte retained for in-court adjudication, with UBS claims proceeding in this Court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Exclusive jurisdiction over Highland’s NY state claims | Highland contends state court handles its claims; Exit Facility documents govern, not exclusive jurisdiction. | Bankruptcy Court retains exclusive jurisdiction under Plan §12.1 and Confirmation Order; state court cannot adjudicate. | Bankruptcy Court has exclusive jurisdiction; state court action stayed and to be heard here. |
| Administrative expense bar date and discharge | Highland’s claim accrued after Effective Date; not barred by bar date. | Claim arose pre-confirmation and falls within disallowed/Discharged administrative claims. | Highland’s claim was an administrative expense pre-confirmation and is barred/discharged. |
| Exculpation under Plan § 11.7 and applicability to UBS | Exculpation applies only to pre-confirmation actions; UBS not protected for post-confirmation conduct. | Exculpation covers acts or omissions in connection with Exit Financing; UBS is protected. | Exculpation applies broadly to acts related to the listed matters; UBS may be protected depending on facts; not dispositive of all issues. |
| Effect of good faith finding (Finding FF) on UBS liability | Finding FF conclusively exculpates UBS. | Finding FF relates to solicitation/1125(e) issues, not a blanket exculpation for all disputes. | Finding FF is not dispositive of UBS’s liability; UBS could still be subject to challenge in this Court. |
| Scope of Confirmation Order ¶ 22 and “Exit Facility Documents” | Paragraph 22 excludes retention of jurisdiction over enforcement of Exit Facility Documents; state court may adjudicate. | Paragraph 22 does not extend to non-contractual claims or pre-existing documents; this Court retains jurisdiction. | Retention of jurisdiction is intact for enforcement of the Plan/Confirmation Order; Highland’s claims belong here. |
Key Cases Cited
- In re Petrie Retail, Inc., 304 F.3d 223 (2d Cir. 2002) (bankruptcy court retains post-confirmation jurisdiction to enforce its orders)
- Dalton v. Educational Testing Serv., 87 N.Y.2d 384 (N.Y. 1995) (implied covenant of good faith breached when discretion is exercised in bad faith)
- Ely-Cruikshank Co., Inc. v. Bank of Montreal, 81 N.Y.2d 399 (N.Y. 1993) (accrual of contract claims date of breach under New York law)
- Travelers Indem. Co. v. Bailey, 556 U.S. 137 (U.S. 2009) (clear framework for interpreting and enforcing bankruptcy orders)
- In re General Motors Corp., 407 B.R. 463 (Bankr. S.D.N.Y. 2009) (explanation of exclusive jurisdiction and 363-related considerations)