303 F.3d 308 | 3rd Cir. | 2002
FUENTES, Circuit Judge:(cid:13) Wyatt R. Haskell appeals from the order of the District(cid:13) Court enforcing its previous confirmation order(cid:13) ("Confirmation Order") of a bankruptcy reorganization plan(cid:13) ("Reorganization Plan") for Bruno’s, Inc., an Alabama-based(cid:13) company that operates a chain of supermarkets in the(cid:13) southeastern United States. The order specifically enjoins(cid:13) the prosecution of certain fraudulent transfer claims(cid:13) asserted by Haskell in Alabama state court. The District(cid:13) Court further ordered that, as a result of Haskell’s violation(cid:13) of the Confirmation Order, he is to pay the costs associated(cid:13) with obtaining the enforcement order. As a holder of $2.45(cid:13) million in Bruno’s subordinated notes, Haskell argues that(cid:13) the Reorganization Plan and the Confirmation Order do not(cid:13) bar him from pursuing direct fraudulent transfer claims(cid:13) under the Alabama Uniform Fraudulent Transfer Act(cid:13) ("AUFTA"), Ala. Code, S 8-9A-1, et. seq.(cid:13) Because the fraudulent transfer claims asserted by(cid:13) Haskell in Alabama state court were extinguished by the(cid:13) Reorganization Plan and Confirmation Order, and because(cid:13) Haskell continued to prosecute the Alabama action in(cid:13) violation of the Confirmation Order, we will affirm the(cid:13) District Court’s enforcement order in all respects.(cid:13) I.(cid:13) Bruno’s operates a chain of about 200 supermarkets in(cid:13) the southeastern United States. In 1995, affiliates of(cid:13) Kohlberg, Kravis, Roberts & Co., LP ("KKR") acquired an(cid:13) 83.33% interest in Bruno’s in a leveraged recapitalization,(cid:13) which was financed by an equity contribution of $250(cid:13) million by KKR, a revolving credit and term loan facility(cid:13) provided by a group of banks (the "Banks"), and the(cid:13) issuance by Bruno’s of $400 million in notes due in 2005(cid:13) pursuant to an indenture. The indenture provides that the(cid:13) noteholders’ claims are fully subordinated to the payment(cid:13) in full of the claims of the senior lenders. The total(cid:13) 3(cid:13) financing of the leveraged recapitalization was(cid:13) approximately $1.25 billion.(cid:13) From November 1997 through March 1999, Haskell(cid:13) purchased $2.45 million in principal amount of(cid:13) subordinated notes, at an average cost of 20 to 22 cents on(cid:13) the dollar, or $490,000 to $539,000 in the aggregate.(cid:13) On February 2, 1997, facing difficulty meeting payment(cid:13) obligations from the recapitalization and in paying its(cid:13) suppliers and other creditors, Bruno’s and its affiliates1(cid:13) (collectively "Debtors") filed a voluntary petition for relief(cid:13) under Chapter 11 of the Bankruptcy Code. As of that filing(cid:13) date, Bruno’s owed approximately $462 million to the(cid:13) Banks, $135 million to trade vendors, suppliers, and other(cid:13) secured creditors, and $421 million on the subordinated(cid:13) notes. In February 1998, the Bankruptcy Trustee appointed(cid:13) a nine-member "Official Unsecured Creditor’s Committee"(cid:13) (the "Committee"), which comprised four representatives of(cid:13) the Banks, three representatives of the trade vendors, and(cid:13) two representatives of the subordinated noteholders.(cid:13) During the spring of 1999, the Committee and subgroups(cid:13) of the Committee convened several times to develop the(cid:13) Reorganization Plan for the Debtors.(cid:13) In March 1999, the Debtors’ attorneys determined that(cid:13) legal claims arising from the leveraged recapitalization,(cid:13) primarily fraudulent transfer claims, were not viable(cid:13) against any of its participants. Although the Committee(cid:13) initially voted to preserve these causes of action in the plan,(cid:13) it reversed its position in May 1999 and, with the support(cid:13) of the trade vendor representatives and the Banks, voted to(cid:13) support the plan releasing the claims. Haskell, W.R. Huff(cid:13) Asset Management Co., L.L.C. ("Huff "), a holder of $290(cid:13) million in Bruno’s subordinated notes, and HSBC Bank(cid:13) USA ("HSBC"), the indenture trustee for the subordinated(cid:13) notes, objected to these releases and successfully moved for(cid:13) the appointment of an independent examiner to evaluate(cid:13) the claims. The examiner found, however, that the claims(cid:13) _________________________________________________________________(cid:13) 1. The affiliates are PWS Holding Corp., Food Max of Mississippi, Inc.,(cid:13) A.F. Food Stores, Inc., BR Air, Inc., Food Max of Georgia, Inc., Food Max(cid:13) of Tennessee, Inc., FoodMax, Inc., Lakeshore Foods, Inc., Bruno’s Food(cid:13) Stores, Inc., Georgia Sales Co., and SSS Enterprise, Inc.(cid:13) 4(cid:13) were "not promising," were "limited and speculative," and(cid:13) that "significant defenses" were available to each of the(cid:13) principal participants, the former shareholders, the Banks,(cid:13) the subordinated noteholders, and KKR in the(cid:13) recapitalization. The examiner thus concluded that the(cid:13) fraudulent transfer claims were "extremely difficult to(cid:13) justify" in the face of "the multiple legal and factual(cid:13) obstacles to any substantial fraudulent transfer or illegal(cid:13) distribution recovery by the Debtors." Accordingly, under(cid:13) the Reorganization Plan, these legal claims were(cid:13) extinguished and the potential targets of any prosecution of(cid:13) these claims were, in effect, released.(cid:13) On August 5, 1999, Haskell commenced an action in(cid:13) Alabama state court ("Haskell Alabama Action") on behalf of(cid:13) himself and similarly situated noteholders, asserting claims(cid:13) under the AUFTA, alter-ego claims, conspiracy claims, and(cid:13) breach of fiduciary duty claims. The defendants in the(cid:13) Haskell Alabama Action consist primarily of participants in(cid:13) the leveraged recapitalization, including co-appellee The(cid:13) Chase Manhattan Bank ("Chase"), which served as(cid:13) administrative agent for the senior lenders to Bruno’s in the(cid:13) leveraged recapitalization. In response, Bruno’s invoked the(cid:13) automatic stay under 11 U.S.C. S 362 of the Bankruptcy(cid:13) Code, and the prosecution of the Haskell Alabama Action(cid:13) was suspended.(cid:13) The final Reorganization Plan explicitly makes reference(cid:13) to the Haskell Alabama Action, providing:(cid:13) 9.3 Claims Extinguished.(cid:13) (a) As of the Effective Date, any and all avoidance(cid:13) claims accruing to the Debtors and Debtors in(cid:13) Possession under sections 502(d), 544, 545, 547, 548,(cid:13) 549, 550, and 551 of the Bankruptcy Code, including,(cid:13) without limitation, all of the claims that are asserted in(cid:13) the Haskell Alabama Action and the Huff Alabama(cid:13) Action, shall be extinguished whether or not then(cid:13) pending.(cid:13) (b) As of the Effective Date, any and all alter-ego or(cid:13) derivative claims accruing to the Debtors and Debtors(cid:13) in Possession, including, without limitation, all of the(cid:13) claims that are asserted or could be asserted in the(cid:13) 5(cid:13) Haskell Alabama Action and the Huff Alabama Action,(cid:13) shall be extinguished whether or not then pending.(cid:13) App. IV, at 773 (emphasis added). Haskell, together with(cid:13) Huff and HSBC, objected to the confirmation of the plan,(cid:13) specifically opposing the plan’s release and extinguishment(cid:13) provisions. However, after a three-day hearing, the District(cid:13) Court approved the Debtors’ Reorganization Plan and(cid:13) issued the Confirmation Order on December 30, 1999.(cid:13) Making specific reference to the Haskell Alabama Action(cid:13) and creditors’ claims against nondebtor third parties,(cid:13) Paragraphs 50, 51, and 52 of the District Court’s(cid:13) Confirmation Order provide:(cid:13) 50. As of the Effective Date, any and all avoidance(cid:13) claims owned by or vested in the Debtors and Debtors(cid:13) in Possession under sections 502(d), 544, 545, 547,(cid:13) 548, 549, 550 and 551 of the Bankruptcy Code,(cid:13) including, without limitation, all of the avoidance(cid:13) claims that are owned by or vested in the Debtors and(cid:13) Debtors in Possession pursuant to the Bankruptcy(cid:13) Code and applicable provisions of law and that are(cid:13) asserted or could be asserted in the Haskell Alabama(cid:13) Action and the Huff Alabama Action, shall be(cid:13) extinguished whether or not then pending.(cid:13) 51. As of the Effective Date, any and all alter-ego or(cid:13) derivative claims owned by or vested in the Debtors(cid:13) and Debtors in Possession, including, without(cid:13) limitation, all of the alter-ego or derivative claims that(cid:13) are owned or vested in the Debtors and Debtors in(cid:13) Possession pursuant to the Bankruptcy Code and(cid:13) applicable provisions of law and that are asserted or(cid:13) could be asserted in the Haskell Alabama Action and(cid:13) the Huff Alabama Action, shall be extinguished whether(cid:13) or not then pending.(cid:13) 52. Nothing contained in paragraphs 50 or 51 of this(cid:13) Confirmation Order or in Sections 9.3(a) and 9.3(b) of(cid:13) the Plan shall be construed to extinguish, limit or bar(cid:13) any direct, personal and non-derivative claim which(cid:13) may be asserted against nondebtor third parties by(cid:13) creditors in their individual capacity or for the benefit(cid:13) of other similarly situated creditors; provided , however,(cid:13) 6(cid:13) that, notwithstanding the foregoing, creditors may not(cid:13) assert against nondebtor third parties any claims that(cid:13) are owned by or vested in the Debtors and Debtors in(cid:13) Possession and extinguished pursuant to Sections 9.3(a)(cid:13) and 9.3(b) of the Plan (as such Section is incorporated(cid:13) in paragraphs 50 and 51 of this Confirmation Order).(cid:13) App. VIII, at 2027-28 (emphasis added). The clear language(cid:13) of the Confirmation Order specifically provides that the(cid:13) fraudulent transfer claims asserted in the Haskell Alabama(cid:13) Action are extinguished pursuant to Section 9.3 of the(cid:13) Reorganization Plan and cannot be asserted by creditors(cid:13) against third parties. Further, Paragraph 54 of the(cid:13) Confirmation Order permanently enjoins:(cid:13) all entities who have held, hold or may hold Claims(cid:13) against or Equity Interests in any or all of the Debtors(cid:13) from . . . commencing or continuing in any manner any(cid:13) action or other proceeding of any kind with respect to(cid:13) any claims and Causes of Action that are extinguished(cid:13) or released pursuant to the Plan or this Confirmation(cid:13) Order, including, without limitation, the claims(cid:13) extinguished pursuant to Section 9.3 of the Plan . .. .(cid:13) App. VIII, at 2029.(cid:13) Huff and HSBC appealed from the District Court’s order(cid:13) confirming the Reorganization Plan, challenging three(cid:13) separate releases of legal claims included in the plan.(cid:13) Haskell did not join in that appeal. On September 18, 2000,(cid:13) we affirmed the District Court’s Confirmation Order in In re(cid:13) PWS Holding Corp., 228 F.3d 224 (3d Cir. 2000). 2(cid:13) _________________________________________________________________(cid:13) 2. In PWS Holding Corp., we observed that the District Court concluded(cid:13) that the claims were extinguished for the following three reasons:(cid:13) First, [the District Court] was persuaded by the Examiner’s(cid:13) conclusion that there was a low likelihood of recovery on the claims.(cid:13) . . . Second, the Court concluded that the potential cost to the(cid:13) estate of prosecuting the action and defending and paying(cid:13) indemnification claims, cross claims, and counterclaims arising out(cid:13) of the prosecution was high. Third, the Court believed that there(cid:13) was some likelihood that the Banks and the subordinate(cid:13) noteholders, as participants in the leveraged recapitalization, would(cid:13) be estopped from recovering on the claims.(cid:13) 7(cid:13) On January 10, 2000, Haskell moved for an order to alter(cid:13) or amend the Confirmation Order so as to require deletion(cid:13) of the extinguishment and injunctive provisions pertaining(cid:13) to the claims asserted in the Haskell Alabama Action. At a(cid:13) hearing on January 20, 2000, the District Court denied(cid:13) Haskell’s motion to alter or amend. Because Haskell then(cid:13) resumed the prosecution of the Haskell Alabama Action,(cid:13) the Debtors filed a motion on April 3, 2000 to enforce the(cid:13) Confirmation Order and specifically to enjoin Haskell’s(cid:13) prosecution of extinguished claims. On April 26, 2000,(cid:13) Haskell filed an amended and restated complaint in the(cid:13) Haskell Alabama Action. The restated complaint alleges(cid:13) seven counts, including four premised upon the argument(cid:13) that the leveraged recapitalization was a fraudulent transfer(cid:13) under Alabama state law.3(cid:13) On December 7, 2000, the District Court granted the(cid:13) Debtors’ motion to enforce the Confirmation Order of(cid:13) December 30, 1999 and to enjoin the prosecution in the(cid:13) Haskell Alabama Action of the four counts premised upon(cid:13) Haskell’s fraudulent transfer claims. The District Court(cid:13) further ordered that Haskell pay the costs, including(cid:13) reasonable attorneys’ fees, associated with that proceeding.(cid:13) Haskell timely appeals from the December 7, 2000 order(cid:13) of the District Court.(cid:13) II.(cid:13) The District Court had jurisdiction to hear and determine(cid:13) _________________________________________________________________(cid:13) 228 F.3d at 239. We ultimately found that "[t]he Examiner’s and the(cid:13) District Court’s conclusions that the claims were unlikely to succeed and(cid:13) were potentially costly to pursue are legally and factually supported." Id.(cid:13) at 242.(cid:13) 3. Count I of the restated complaint alleges fraudulent transfer claims(cid:13) under the AUFTA. Count IV claims that the defendants breached their(cid:13) fiduciary duties to the subordinated noteholders by approving the(cid:13) leveraged recapitalization. Count V alleges that the defendants conspired(cid:13) to cause Bruno’s to make fraudulent transfers. Finally, Count VI asserts(cid:13) that the defendants joined and rendered substantial assistance in(cid:13) causing Bruno’s to violate the AUFTA by making fraudulent transfers.(cid:13) 8(cid:13) the Debtors’ motion to enforce the Confirmation Order(cid:13) pursuant to 28 U.S.C. S 1334. We exercise jurisdiction(cid:13) under 28 U.S.C. S 1291. Although we review a district(cid:13) court’s factual findings only for clear error, we exercise(cid:13) plenary review over any legal determinations. Official Comm.(cid:13) of Unsecured Creditors v. R.F. Lafferty & Co., Inc. , 267 F.3d(cid:13) 340, 346 (3d Cir. 2001); In re O’Dowd, 233 F.3d 197, 201-(cid:13) 02 (3d Cir. 2000).(cid:13) III.(cid:13) Fraudulent conveyance law aims "to make available to(cid:13) creditors those assets of the debtor that are rightfully a part(cid:13) of the bankruptcy estate, even if they have been transferred(cid:13) away." Buncher Co. v. Official Comm. of Unsecured Creditors(cid:13) of GenFarm Ltd. P’ship IV, 229 F.3d 245, 250 (3d Cir. 2000)(cid:13) (citing In re Cybergenics Corp., 226 F.3d 237, 241-42 (3d(cid:13) Cir. 2000)). The Uniform Fraudulent Transfer Act, as(cid:13) adopted in Alabama, provides that the transfer of an asset(cid:13) or an interest in an asset is fraudulent as to a creditor if (1)(cid:13) "the debtor made the transfer without receiving a(cid:13) reasonably equivalent value in exchange for the transfer"(cid:13) and (2) the debtor "[w]as engaged or was about to engage in(cid:13) a business or a transaction for which the remaining assets(cid:13) of the debtor were unreasonably small in relation to the(cid:13) business or transaction" or "[i]ntended to incur, or believed(cid:13) or reasonably should have believed that he or she would(cid:13) incur, debts beyond his or her ability to pay as they became(cid:13) due." Ala. Code 1975, S 8-9A-4. Among the remedies that(cid:13) the AUFTA affords creditors is the "[a]voidance of the(cid:13) transfer to the extent necessary to satisfy the creditor’s(cid:13) claim." Ala. Code 1975, S 8-9A-7.(cid:13) Both the Reorganization Plan and the Confirmation Order(cid:13) specifically identify "all avoidance claims" asserted in the(cid:13) "Haskell Alabama Action," such as those available under(cid:13) the AUFTA, as "extinguished." Haskell points out, however,(cid:13) that the AUFTA provides a direct right of action to creditors,(cid:13) and not to the grantors of a fraudulent conveyance. 4(cid:13) _________________________________________________________________(cid:13) 4. The following are the relevant provisions of the AUFTA that describe a(cid:13) creditor’s remedies:(cid:13) 9(cid:13) Because the AUFTA claims do not belong to Bruno’s(cid:13) bankruptcy estate, Haskell argues that the extinguishment(cid:13) provisions in the Reorganization Plan and Confirmation(cid:13) Order do not bar him from prosecuting fraudulent transfer(cid:13) claims in the Haskell Alabama Action. The fatal flaw in(cid:13) Haskell’s argument, however, is that it fails to consider(cid:13) properly the interplay between claims under the AUFTA and(cid:13) the Bankruptcy Code.(cid:13) The relevant provision of the Bankruptcy Code in this(cid:13) case is 11 U.S.C. S 544(b). Section 544(b) provides that,(cid:13) upon commencement of a case under the Bankruptcy Code,(cid:13) a trustee or debtor in possession "may avoid any transfer of(cid:13) an interest of the debtor in property or any obligation(cid:13) incurred by the debtor that is voidable under applicable law(cid:13) by a creditor holding an unsecured claim that is allowable"(cid:13) under the Bankruptcy Code.5 11 U.S.C. S 544(b). In other(cid:13) _________________________________________________________________(cid:13) S 8-9A-7. Remedies of creditors.(cid:13) (a) In an action for relief against a transfer under this chapter, the(cid:13) remedies available to creditors, subject to the limitations in Section(cid:13) 8-9A-8, include:(cid:13) (1) Avoidance of the transfer to the extent necessary to satisfy the(cid:13) creditor’s claim . . . .(cid:13) S 8-9A-8 Defenses, liability, and protection of transferee.(cid:13) . . .(cid:13) (b) Except as otherwise provided in this section, to the extent a(cid:13) transfer is voidable in an action by a creditor under Section 8-9A-(cid:13) 7(a)(1), the creditor may recover judgment for the value of the asset(cid:13) transferred, as adjusted under subsection (c), or the amount(cid:13) necessary to satisfy the creditor’s claim, whichever is less, or(cid:13) judgment for conveyance of the asset transferred. The judgment may(cid:13) be entered against:(cid:13) (1) The first transferee of the asset or the person for whose benefit(cid:13) the transfer was made . . . .(cid:13) Ala. Code 1975, SS 8-9A-7 and 8-9A-8.(cid:13) 5. Although S 544(b) does not make reference to the "debtor in(cid:13) possession," the Bankruptcy Code generally gives the "debtor in(cid:13) possession" the powers and duties of a trustee. 11 U.S.C. S 1107(a).(cid:13) Thus, the two terms are "essentially interchangeable." In re Cybergenics(cid:13) Corporation, 226 F.3d 237, 243 (3d Cir. 2000).(cid:13) 10(cid:13) words, S 544(b) places the debtor in possession in the shoes(cid:13) of its creditors, giving it the right to prosecute individual(cid:13) creditors’ fraudulent transfer claims for the benefit of the(cid:13) bankruptcy estate. This provision of the Bankruptcy Code(cid:13) is consistent with its objective of equitable distribution. See(cid:13) N.L.R.B. v. Martin Arsham Sewing Co., 873 F.2d 884, 888(cid:13) (6th Cir. 1989) (noting that "[t]o allow a creditor of the(cid:13) bankrupt to pursue his remedy against third parties on a(cid:13) fraudulent transfer theory would undermine the(cid:13) Bankruptcy Code policy of equitable distribution by(cid:13) allowing the creditor ‘to push its way to the front of the line(cid:13) of creditors’ " (quoting In re Cent. Heating & Air(cid:13) Conditioning, Inc., 64 B.R. 733, 737 (N.D. Ohio 1986)); see(cid:13) also Moore v. Bay, 284 U.S. 4, 5 (1931) (observing that(cid:13) what is recovered for benefit of bankrupt’s estate is to be(cid:13) distributed in equal parts among allowed unsecured claims(cid:13) that lack priority).(cid:13) Haskell contends that he has the right to assert his(cid:13) fraudulent transfer claims despite the language inS 544(b).(cid:13) He frames the issue in terms of ownership, focusing upon(cid:13) whether the fraudulent transfer claims belong to the(cid:13) Debtors. He makes reference to our previous decision in In(cid:13) re Cybergenics Corp., 226 F.3d 237 (3d Cir. 2000), in which(cid:13) we stated, "The fact that section 544(b) authorizes a debtor(cid:13) in possession . . . to avoid a transfer using a creditor’s(cid:13) fraudulent transfer action does not mean that the(cid:13) fraudulent transfer action is actually an asset of the debtor(cid:13) in possession . . . ." Id. at 243. Since creditors’ actions(cid:13) under the AUFTA are not assets belonging to the Debtors,(cid:13) as Cybergenics makes clear, Haskell reasons that they are(cid:13) direct, non-derivative claims and, thus, unaffected by the(cid:13) extinguishment provisions in the Reorganization Plan and(cid:13) Confirmation Order. A closer analysis of our decision in(cid:13) Cybergenics demonstrates the flaws in Haskell’s argument.(cid:13) In Cybergenics, the debtor in possession, Cybergenics(cid:13) Corp., had sold all of its assets to a third party after filing(cid:13) for bankruptcy. Id. at 239. Subsequent to that, a group of(cid:13) Cybergenics’ unsecured creditors sought leave from the(cid:13) Bankruptcy Court to bring a fraudulent transfer action on(cid:13) behalf of the bankruptcy estate.6Id. at 240. Those named(cid:13) _________________________________________________________________(cid:13) 6. We note that the creditors in Cybergenics sought to bring a fraudulent(cid:13) transfer action under S 544(b) on behalf of the bankruptcy estate,(cid:13) 11(cid:13) as defendants in the creditors’ suit argued that the(cid:13) creditors could not bring the action because any fraudulent(cid:13) transfer claims had been transferred in Cybergenics’ asset(cid:13) sale. Id. Agreeing that such claims had been sold in the(cid:13) asset sale, the District Court dismissed the creditors’(cid:13) complaint for lack of subject matter jurisdiction under(cid:13) Federal Rule of Civil Procedure 12(b)(1). Id. at 240-41. We(cid:13) reversed the dismissal, holding that the fraudulent transfer(cid:13) claim was never an asset of Cybergenics, the debtor in(cid:13) possession. Id. at 245. Expounding on the debtor’s power to(cid:13) avoid fraudulent transfers, we explained:(cid:13) The power to avoid the debtor’s prepetition transfers(cid:13) and obligations to maximize the bankruptcy estate for(cid:13) the benefit of creditors has been called a "legal fiction"(cid:13) by one court. It puts the debtor in possession "in the(cid:13) overshoes" of a creditor. This attribute is no more an(cid:13) asset of Cybergenics as debtor in possession than it(cid:13) would be a personal asset of a trustee, had one been(cid:13) appointed in this case. Much like a public official has(cid:13) certain powers upon taking office as a means to carry(cid:13) out the functions bestowed by virtue of the office or(cid:13) public trust, the debtor in possession is similarly(cid:13) endowed to bring certain claims on behalf of, and for(cid:13) the benefit of, all creditors.(cid:13) Cybergenics, 226 F.3d at 243-44 (internal citations(cid:13) omitted).(cid:13) In arguing that his claims as a noteholder were not(cid:13) extinguished under the Reorganization Plan and(cid:13) Confirmation Order, Haskell fixates upon our conclusion in(cid:13) Cybergenics that fraudulent transfer claims do not(cid:13) _________________________________________________________________(cid:13) whereas, in this case, Haskell seeks to bring his claims directly under(cid:13) the AUFTA, not derivatively through the debtor’s power to assert(cid:13) fraudulent transfer claims under S 544(b). After the Supreme Court’s(cid:13) holding that only a trustee or debtor-in-possession is empowered to(cid:13) invoke S 506(c) of the Bankruptcy Code in Hartford Underwriters Ins. Co.(cid:13) v. Union Planters Bank, N.A., 530 U.S. 1, 9 (2000), there is some doubt(cid:13) as to whether a creditor can act derivatively in the debtor’s stead to(cid:13) invoke S 544(b). However, because Haskell does not seek to invoke(cid:13) S 544(b), we are not confronted by that issue in this case.(cid:13) 12(cid:13) constitute assets of the debtor in possession. In doing so,(cid:13) however, he neglects to consider the well-established rule(cid:13) under S 544(b) that we reaffirmed in Cybergenics, namely,(cid:13) that "a debtor in possession is empowered to pursue . . .(cid:13) fraudulent transfer claims for the benefit of all creditors."(cid:13) Id. at 245. Unlike in Cybergenics, the debtor in possession(cid:13) in this case, after thoroughly investigating and evaluating(cid:13) the potential fraudulent transfer claims, explicitly(cid:13) extinguished all such claims in its Reorganization Plan. The(cid:13) District confirmed the Reorganization Plan in its December(cid:13) 7, 1999 order, which we then affirmed in PWS Holding(cid:13) Corp., 228 F.3d at 250. Much as a party might decide to(cid:13) resolve a claim by reaching an out-of-court settlement,(cid:13) Bruno’s resolved the fraudulent transfer claims here by(cid:13) extinguishing them. In contrast, the debtor in Cybergenics(cid:13) merely completed a sale of its assets. It did not exercise its(cid:13) power under S 544(b) to resolve potential fraudulent(cid:13) transfer claims, as did the debtor in this case.(cid:13) Haskell had the opportunity to contest the(cid:13) extinguishment of the fraudulent transfer claims, but his(cid:13) objections were overruled by the District Court through its(cid:13) Confirmation Order, from which he did not file an appeal.(cid:13) Because Bruno’s validly and effectively extinguished all(cid:13) potential fraudulent transfer claims arising from the(cid:13) leveraged recapitalization, Haskell is precluded from now(cid:13) prosecuting those claims in Alabama state court. They have(cid:13) been resolved.(cid:13) Accordingly, we will affirm the District Court’s order(cid:13) enforcing its previous Confirmation Order and enjoining(cid:13) Haskell from continuing to prosecute the AUFTA-related(cid:13) claims asserted in the Haskell Alabama Action. Because we(cid:13) agree with the District Court that Haskell violated the(cid:13) Confirmation Order, we will also affirm the District Court’s(cid:13) order that he pay the costs associated with obtaining the(cid:13) enforcement order.(cid:13) IV.(cid:13) For the foregoing reasons, we will affirm the order of the(cid:13) District Court in all respects.(cid:13) 13(cid:13) A True Copy:(cid:13) Teste:(cid:13) Clerk of the United States Court of Appeals(cid:13) for the Third Circuit(cid:13) 14
