ROSSCO Holdings, Incorporated v. Michael Mc, 613 F. App'x 302

Background

Plaintiffs (Ross, Ross Trust, Rossco) were guarantors on hotel loans; lender foreclosed and filed proofs of claim for deficiencies in related Chapter 11 cases.
Defendants (bankruptcy counsel) allegedly told Plaintiffs an agreed settlement order would revive Plaintiffs’ right to challenge post-foreclosure deficiencies; California bankruptcy court later held it did not.
As a result, large deficiency claims were allowed (later reduced by settlement) and Plaintiffs sued Defendants for negligent misrepresentation and malpractice in district court.
Defendants moved to dismiss under Rule 12(b)(1), asserting Plaintiffs’ confirmed Chapter 11 plans did not specifically reserve the malpractice/misrepresentation claims, so Plaintiffs lacked standing.
The district court applied Fifth Circuit precedent and dismissed for lack of standing; Plaintiffs appealed and sought a limited remand after a California bankruptcy court order opined (under Ninth Circuit BAP precedent) the plan reserved the claims.
The Fifth Circuit affirmed dismissal and denied remand, holding the confirmed plans did not specifically and unequivocally reserve the claims and Plaintiffs waived reliance on Ninth Circuit law and other new arguments.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Did the district court lack jurisdiction to interpret confirmed bankruptcy plans (i.e., did it improperly modify confirmation orders)?	District court could not interpret/contradict California bankruptcy court’s confirmation order;-only the issuing bankruptcy court may modify.	District court may interpret plans to resolve a Rule 12(b)(1) standing challenge; interpretation is not modification.	Jurisdiction proper: interpretation to decide standing is allowed; not a forbidden modification.
Which circuit law governs interpretation of a bankruptcy plan confirmed in another circuit? (Fifth v. Ninth)	Plaintiffs argued Ninth Circuit approach would validate their reservation and preserve standing.	Defendants applied Fifth Circuit precedent requiring specific and unequivocal reservation.	Plaintiffs waived choice-of-law argument by not raising it below; court did not address applying Ninth Circuit law.
Did the confirmed plans specifically and unequivocally reserve the malpractice and negligent-misrepresentation claims under 11 U.S.C. § 1123(b)(3)(B)?	Plaintiffs contended plan language (including general revesting/vest provisions) preserved claims.	Defendants contended plans made no specific reservation of the claims at issue; generic revesting/blanket language insufficient.	Held: Plans did not specifically and unequivocally reserve those claims; generic/blanket provisions insufficient; Plaintiffs lack standing.
Should the case be remanded based on the California bankruptcy court’s later order?	Plaintiffs sought limited remand so district court could reconsider in light of the bankruptcy court’s view that Ninth Circuit law supports reservation.	Defendants argued no modification occurred and Fifth Circuit law still governs; bankruptcy order did not change the confirmed plans.	Denied: bankruptcy court’s order did not modify plans and does not alter application of Fifth Circuit precedent.

Key Cases Cited

In re SI Restructuring Inc., 714 F.3d 860 (5th Cir. 2013) (§ 1123(b)(3)(B) reservation must be specific and unequivocal)
In re United Operating, LLC, 540 F.3d 351 (5th Cir. 2008) (blanket reservations of "any and all claims" are insufficient)
In re MPF Holdings US LLC, 701 F.3d 449 (5th Cir. 2012) (standing questions reviewed de novo; courts may interpret plans to determine standing)
Torch Liquidating Trust v. Stockstill, 561 F.3d 377 (5th Cir. 2009) (debtor’s estate includes causes of action; confirmation changes who may pursue them)
In re Tex. Wyo. Drilling, Inc., 647 F.3d 547 (5th Cir. 2011) (reservation effective where plan identifies nature of claims and class of potential defendants)
United Student Aid Funds, Inc. v. Espinosa, 559 U.S. 260 (U.S. 2010) (plan confirmation is a final judgment)