In Re MPF Holding U.S. LLC
443 B.R. 736
Bankr. S.D. Tex.2011Background
- MPF Holding U.S. LLC and affiliates filed Chapter 11; plan provides for a Litigation Trust to pursue post-confirmation claims.
- Litigation Trustee filed several preference actions against third-parties after plan confirmation.
- Aker Pusnes AS moved to enforce the Confirmation Order alleging the plan reserved no post-confirmation actions against it.
- Court held that the plan’s reservation language failed the Fifth Circuit’s 'specific and unequivocal' standard to preserve pre-confirmation claims for post-confirmation prosecution.
- Court analyzed conflicting authorities (Fifth Circuit United Operating and National Benevolent versus Eighth Circuit Harstad; Northern District of Texas Manchester/Texas Wyo Drilling; Ice Cream as supporting).
- Court concluded the Plan’s retention language is not specific and unequivocal and dismissed the related adversary proceedings for lack of standing.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the Plan properly preserve pre-confirmation actions for post-confirmation prosecution? | Lauri/ Litigation Trustee argues preservation language is sufficient. | Defendants contend the plan lacks specificity and unequivocality. | No; plan fails the 'specific and unequivocal' test. |
| What does 'specific and unequivocal' mean in this context? | Plan language sufficiently identifies target actions and basis. | Reservation must name defendants and basis and mandate post-confirmation filing. | Must name defendants and basis and state definite post-confirmation filing. |
| Can generic reservation language preserve claims for post-confirmation enforcement? | Categorical reservations can preserve rights. | Generic language is insufficient under United Operating and Harstad. | Generic language insufficient. |
| Do novation/assumption and release provisions affect the reservation? | Novations do not release the claims. | Novations and releases render claims extinguished or tentative. | Ambiguity created by releases/novations defeats unequivocal preservation. |
| Should disclosure statements be considered in evaluating retention clauses? | Disclosure statements can illuminate preservation issues. | Plan language alone should determine preservation; disclosure has limited role. | Disclosure statement can affect interpretation; in this case it does not cure ambiguity. |
Key Cases Cited
- In re United Operating, LLC, 540 F.3d 351 (5th Cir. 2008) (retention must be specific and unequivocal to preserve pre-confirmation actions)
- In re National Benevolent Ass'n of the Christian Church v. Weil, Gotshal & Manges, LLP, 333 Fed.Appx. 822 (5th Cir. 2009) (confirms specific and unequivocal requirement for preservation)
- Harstad v. First American Bank, 39 F.3d 898 (8th Cir. 1994) (rejects generic reservations; requires clear, unambiguous language)
- In re Ice Cream Liquidation, Inc., 319 B.R. 324 (Bankr. D. Conn. 2005) (supports specificity of preservation language; cited as authority by Fifth Circuit)