877 F.3d 246
6th Cir.2017Background
- Mountain Glacier LLC filed for Chapter 11 while an arbitration with Nestlé Waters was pending; the automatic stay halted arbitration.
- Mountain Glacier’s disclosure statement listed the arbitration counterclaim against Nestlé Waters as an unliquidated asset and identified the arbitration forum (Chicago, IL).
- Mountain Glacier’s plan of reorganization stated that its claims would be transferred to the "Reorganized Debtor" and included a broad "retention of claims" provision retaining "each and every . . . cause of action whatsoever."
- After confirmation and exit from bankruptcy, Mountain Glacier sought to resume arbitration; Nestlé Waters objected, arguing the plan failed to sufficiently reserve the prepetition claim and that res judicata barred restart.
- Bankruptcy and district courts sided with Mountain Glacier; Nestlé Waters appealed to the Sixth Circuit, which reviews legal conclusions de novo.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a debtor’s plan sufficiently reserves prepetition claims for post-confirmation litigation | Mountain Glacier: its disclosure and plan identified the arbitration claim and transferred it to the reorganized debtor | Nestlé Waters: reservation was too general (a "blanket reservation") and lacked specificity; capitalization differences show different meanings | The reservation was sufficient; creditors could identify the claim and evaluate potential recovery; transfer provision alone was adequate |
| Whether Browning requires naming defendants or detailing factual bases to preserve claims | Nestlé Waters: Browning imposes stringent specificity requirements beyond the statute | Mountain Glacier: Browning does not override statutory text; only notice sufficient for creditors is required | Browning does not mandate naming defendants or factual detail; it requires enough notice for creditors to identify and evaluate claims |
| Whether capitalization/terminology ambiguity in the plan defeats the reservation | Nestlé Waters: lower-cased "causes of action" vs. capitalized "Causes of Action" shows different scopes, making retention ambiguous | Mountain Glacier: context shows the broad retention naturally includes the defined Causes of Action; transfer provision independently preserved the claim | Ambiguity resolved in favor of a natural reading; even without that, transfer provision sufficed to preserve the claim |
| Whether creditors lacked opportunity to seek more detail about reserved claims | Nestlé Waters: creditors were entitled to clearer notice and could be prejudiced | Mountain Glacier: creditors had notice via disclosure, and could have objected or sought more information but did not; Nestlé was the counterparty and had full information | Creditors had adequate notice; absence of objections supports sufficiency of reservation |
Key Cases Cited
- Browning v. Levy, 283 F.3d 761 (6th Cir.) (discusses limits on overly general reservations of rights in bankruptcy plans)
- P.A. Bergner & Co. v. Bank One, Milwaukee, N.A. (In re P.A. Bergner & Co.), 140 F.3d 1111 (7th Cir.) (Section 1123(b)(3) does not require specific magic words to reserve claims)
- McMillan v. LTV Steel, Inc., 555 F.3d 218 (6th Cir.) (standard of review for bankruptcy legal conclusions)
- Harstad v. First Am. Bank, 39 F.3d 898 (8th Cir.) (Section 1123(b)(3) is a notice provision ensuring creditors know of claims that could enlarge the estate)
- D & K Props. Crystal Lake v. Mut. Life Ins. Co. of N.Y., 112 F.3d 257 (7th Cir.) (broad reservations can be upheld if explicit and creditors had chance to object)
- Henson v. Santander Consumer USA Inc., 137 S. Ct. 1718 (Sup. Ct.) (courts must apply statutory text as written and not rewrite statutes)
- Cohens v. Virginia, 19 U.S. (6 Wheat.) 264 (U.S.) (discusses limits of precedent beyond holdings)
Decision: Affirmed.