estate and the lenders. Accordingly, the lenders could not assert pre-existing security interests in estate property (i.e., cash on hand) because the settlement agreement overrode those security agreements.
On appeal, the Fifth Circuit reversed, concluding that the claims asserted were not property of the estate and thus not released by the plan. In reaching this conclusion, the court recognized that the claims asserted by the bondholders asserted direct injuries allegedly caused directly by each defendant. The court recognized that the injury alleged by the bondholders, in fact, was not a generalized grievance that could be advanced by the estate on behalf of all creditors. Under that logic, the successor trustee lacked standing to assert the bondholders' claims because the claims were not property of the estate. See Caplin v. Marine Midland Grace Trust Co., 406 U.S. 416, 92 S.Ct. 1678, 32 L.Ed.2d 195 (1972). "That the bondholders' claims and the estate's claims may have arose out of the same series of events does not link them in such a way that the release of one set of claims [i.e., the estate's claims] acts as a release of the other [i.e., the bondholders' claims]." The dismissal was thus vacated, and the case was remanded with instruction to remand to state court for further proceedings.
* Lang v. Schropp (In re Brook Valley VII, Joint Venture), 496 F.3d 892 (8th Cir. Aug. 2007)
Constructive trust was an appropriate remedy against the insiders of the chapter 11 debtor. Days after filing the voluntary petition, the insiders of the chapter 11 debtor in possession consented to a lift stay order and allowed the debtor's property to be sold through a foreclosure sale. The insiders then secretly and successfully bid on the property in the foreclosure sale at a price well below its reasonable market value. After the case was converted, the chapter 7 trustee filed suit against the insiders to recoup the value lost by the insiders' conduct, including the pre-foreclosure cash flow from the property, the appreciation in value of