In re Residential Capital, LLC, 508 B.R. 838

Background

James Marshall obtained a mortgage (refinanced 2007); GMAC Mortgage LLC (GMACM) serviced the loan until transferring servicing in 2008; Marshall died in 2010 and his son Yosef Le Roi Mustafanos became estate representative.
EverBank filed a judicial foreclosure in Oregon (May 2012); Mustafanos filed counterclaims alleging misconduct in loan origination, servicing, securitization, and foreclosure, later naming Ally Financial Inc. (AFI).
ResCap and related debtors filed Chapter 11 on May 14, 2012; a bar date for non-governmental proofs of claim was set in 2012; Mustafanos did not file any proof of claim.
The debtors’ Second Amended Joint Chapter 11 Plan was confirmed Dec. 11, 2013 and became effective Dec. 17, 2013; the Plan included a $2.1 billion AFI contribution and broad third‑party release and injunction provisions releasing AFI from claims “arising from or related in any way to the Debtors.”
Mustafanos received notice of the Plan and Confirmation Order but did not object or file a claim; he later amended his state‑court counterclaim (Feb. 2014) and then sought relief from the automatic stay to pursue claims against GMACM, ResCap, and AFI.
The Liquidating Trust and AFI opposed relief; AFI asked the bankruptcy court to enforce the Plan’s third‑party release and injunction against Mustafanos.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether stay should be lifted to permit litigation against debtors GMACM/ResCap	Mustafanos sought stay relief to pursue foreclosure‑related claims and counterclaims in state court	Debtors/Liquidating Trust argued claims were precluded because Mustafanos failed to file a proof of claim and the confirmed Plan discharged such claims	Denied — stay not lifted; claims against GMACM/ResCap discharged by the Plan and litigation would be futile
Whether AFI (non‑debtor) is protected by the Plan’s third‑party release and injunction	Mustafanos asserted counterclaims against AFI alleging liability derivative of GMACM/ResCap misconduct; argued he could proceed in state court	AFI argued the Plan’s Third Party Release and injunction bar any claims against AFI "arising from or related in any way to the Debtors," and sought enforcement	Granted — Court enforced the third‑party release and injunction; Mustafanos enjoined from prosecuting claims against AFI and ordered to dismiss with prejudice within 14 days
Whether bankruptcy court has jurisdiction/authority to enforce post‑confirmation injunctions/releases	Mustafanos implicitly challenged enforcement by proceeding in state court	AFI asserted bankruptcy court retained jurisdiction to interpret and enforce its confirmation order and injunction	Held that the court has authority to enforce its own confirmation order and enjoin actions that threaten plan integrity
Whether third‑party release met Second Circuit standards	Mustafanos contended (implicitly) that release should not bar his claims	AFI and debtors argued release was essential to plan feasibility (AFI contribution was lynchpin); court considered Metromedia/Johns‑Manville factors	Held that the record established the release was important and appropriately scoped; the release was enforceable against Mustafanos

Key Cases Cited

Johns‑Manville Corp. v. Chubb Indem. Ins. Co., 600 F.3d 135 (2d Cir. 2010) (bankruptcy court may enjoin non‑debtor claims that directly affect the res of the estate)
Drexel Burnham Lambert Group, Inc. v. Krudcik, 960 F.2d 285 (2d Cir. 1992) (a court may enjoin a creditor from suing a third party if injunction is important to the reorganization plan)
Metromedia Fiber Network, Inc. v. Lumenis, 416 F.3d 136 (2d Cir. 2005) (non‑debtor releases are permissible only if release is important to the plan and scope is necessary to the plan)
Varat Enterprises, Inc. v. Howland, 81 F.3d 1310 (4th Cir. 1996) (plan confirmation operates as final judgment for res judicata purposes)
Sonnax Industries, Inc. v. Tri Component Prods. Corp., 907 F.2d 1280 (2d Cir. 1990) (factors for evaluating cause to lift automatic stay)
Travelers Indemnity Co. v. Bailey, 557 U.S. 137 (2009) (bankruptcy courts retain jurisdiction to interpret and enforce prior orders)