469 F.Supp.3d 505
E.D. Va.2020Background
- Alpha Natural Resources filed chapter 11; the debtors retained McKinsey as turnaround advisor and submitted Rule 2014 disclosures. The Bankruptcy Court approved McKinsey's employment and later confirmed the Plan.
- Mar-Bow (a purchaser of a small slice of ANR debt) repeatedly objected that McKinsey's Rule 2014 disclosures were inadequate and sought disgorgement/sanctions.
- The Bankruptcy Court rejected Mar-Bow's objections and approved McKinsey's fee applications; the district court (Mar-Bow I & II) dismissed Mar-Bow's prior appeals for lack of bankruptcy appellate standing; the Fourth Circuit affirmed and the Supreme Court denied certiorari.
- Mar-Bow then filed a Rule 60(d) motion in the bankruptcy court alleging fraud on the court and seeking disgorgement of fees/profits and other relief; the Bankruptcy Court denied the Rule 60(d) motion for lack of standing.
- Mar-Bow appealed the denial of the Rule 60(d) motion (and related orders). The district court analyzed whether Mar-Bow satisfied the bankruptcy appellate standing/person-aggrieved test and whether prior rulings (law of the case) controlled.
Issues
| Issue | Mar-Bow's Argument | McKinsey's Argument | Held |
|---|---|---|---|
| Whether Mar-Bow had bankruptcy appellate standing ("person aggrieved") to appeal denial of its Rule 60(d) motion | Mar-Bow: as a creditor it retained standing; fraud-on-the-court claims and equitable remedies make its injury redressable (including potential disgorgement and discretionary distributions) | McKinsey: Mar-Bow lacks a direct pecuniary stake; Plan fixed recoveries so any disgorged funds would not inure to Mar-Bow; must meet person-aggrieved test | Held: Mar-Bow lacks bankruptcy appellate standing — no direct pecuniary interest; appeal dismissed |
| Whether law of the case bars re‑litigation of standing and related rulings | Mar-Bow: prior appeals addressed appellate (not bankruptcy) standing; fraud-on-the-court claim is new and may fall outside prior holdings | McKinsey: prior rulings rejecting Mar-Bow’s pecuniary interest and enforcing person-aggrieved standard control | Held: Law of the case applies to legal issues previously decided (including requirement to meet person-aggrieved test); no applicable exception here |
| Whether fraud-on-the-court allegations exempt Mar-Bow from standing requirements | Mar-Bow: courts have a duty to address fraud on the court and may fashion equitable relief; thus standing requirements should not bar consideration | McKinsey: fraud claims do not eliminate Article III or bankruptcy appellate standing requirements | Held: Fraud-on-the-court allegations do not excuse standing; Mar-Bow must still show a direct pecuniary stake and did not do so |
| Whether Mar-Bow could challenge Bankruptcy Court’s acceptance of McKinsey’s certification about the settlement distribution | Mar-Bow: certification acceptance should be reviewable because of alleged conflict and possible benefit to McKinsey | McKinsey: Mar-Bow lacks standing to object; certification was appropriate | Held: Mar-Bow lacked standing to challenge certification; Bankruptcy Court correctly accepted it |
Key Cases Cited
- In re Urban Broad. Corp., 401 F.3d 236 (4th Cir. 2005) (appellant must be a "person aggrieved" — direct pecuniary effect required for bankruptcy appeals)
- In re Clark, 927 F.2d 793 (4th Cir. 1991) (person‑aggrieved test continues to be applied post‑repeal of statutory standing provision)
- Kane v. Johns‑Manville Corp., 843 F.2d 636 (2d Cir. 1988) (policy basis for limiting bankruptcy appellate standing to avoid endless appeals)
- TFWS, Inc. v. Franchot, 572 F.3d 186 (4th Cir. 2009) (law of the case doctrine governs issues decided earlier in same litigation)
- Christianson v. Colt Indus. Operating Corp., 486 U.S. 800 (1988) (finality and efficiency underpin law of the case and refusal to relitigate decided issues)
- In re DBSD N. Am., Inc., 634 F.3d 79 (2d Cir. 2011) (application of person‑aggrieved test in context of creditor harmed by plan confirmation)
- Lujan v. Defs. of Wildlife, 504 U.S. 555 (1992) (Article III standing: injury‑in‑fact and redressability requirements)
- Clapper v. Amnesty Int'l USA, 568 U.S. 398 (2013) (speculative chains of events do not satisfy Article III standing)
- Steel Co. v. Citizens for a Better Env't, 523 U.S. 83 (1998) (psychic satisfaction or deterrence alone does not redress an Article III injury)