In re Plusfunds Group, Inc.
492 B.R. 202
Bankr. S.D.N.Y.2013Background
- Harbour Trust seeks to reopen PlusFunds Group’s chapter 11 to extend the SPhinX Trust term.
- The Plan created the Trust to liquidate Causes of Action for the Trust beneficiaries.
- Trust Term would end September 20, 2012 unless extended under Section 10.3.
- The Second Amendment added a mechanism to seek initial extension within 150 days post-Termination Date.
- Aaron Defendants object to reopening and to extension; Trustee argues for cause and administration of assets.
- Court previously closed the case in December 2010 and examines whether reopening is appropriate under §350(b) and related standards.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to object to reopening | Aaron Defendants have standing as parties in interest | Aaron Defendants lack direct financial stake; at most indirect impact | Aaron Defendants lack standing to object to reopening |
| Whether case should be reopened to administer assets | Reopening needed to administer the Causes of Action | Assets were known; wind-up duties and limited effect of reopening | No sufficient cause to reopen for administration of assets |
| Whether cause exists to reopen under §350(b) | For cause to allow extension and preserve Trust | No concrete benefit; non-bankruptcy forum can resolve issues | No cause to reopen; case remains closed |
| Appropriateness of non-bankruptcy forum to resolve Trust issues | District Court can adjudicate Trust viability and Causes of Action | State/non-bankruptcy forum better suited; tax implications unresolved | Non-bankruptcy court appropriate for the Trust issues; reopening not necessary |
| Effect of Second Amendment and tax considerations | Second Amendment cures timing issues to extend term | Patch may have tax consequences; issues can be addressed non-bankruptcy | Issues surrounding Second Amendment and tax can be addressed non-bankruptcy; reopening not warranted |
Key Cases Cited
- In re Teligent, Inc., 640 F.3d 53 (2d Cir.2011) (standing in 1109(b) and direct interest analysis)
- In re Refco Inc., 505 F.3d 109 (2d Cir.2007) (standing limitations for party in interest)
- In re Innkeepers USA Trust, 448 B.R. 131 (Bankr.S.D.N.Y.2011) (broad reading of 1109(b) with limitations on derivative rights)
- Easley-Brooks, 487 B.R. 400 (S.D.N.Y.2013) (six-factor test for reopening case)
- In re Otto, 311 B.R. 43 (Bankr.E.D.Pa.2004) (guidance on §350(b) thresholds)
- In re Sweeney, 275 B.R. 730 (Bankr.W.D.Pa.2002) (reopening context in derivative actions)
- In re Riazuddin, 363 B.R. 177 (Bankr. D. Colo.2007) (standing in motion to reopen in related action)
- In re Ionosphere Clubs, Inc., 101 B.R. 844 (Bankr.S.D.N.Y.1989) (indirect interests and standing considerations)