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when the conduct giving right to the cause of action occurs. In other words, the "close nexus" test is not limited to post-confirmation conduct but only to post-confirmation disputes.
54
* Morrow v. Microsoft Corp., 499 F.3d 1332 (Fed. Cir. Sept. 2007) (Moore, J. ),rehearing and rehearing en banc denied.
Litigation trust lacked constitutional standing to sue for patent infringement. Think twice before splitting up the debtor's rights through a liquidation plan. A chapter 11 debtor's liquidation plan created three separate trusts, though only two are relevant to this case. The creditors' trust received all of the debtor's causes of action, which included to right to sue Microsoft for allegedly infringing one of the debtor's patents. A separate trust, created solely for administrative and wind-up purposes, received actual legal title to the patent and held all rights in the patent other than the right to sue for infringement. The creditors' trust filed the infringement action in the district court, and the district court granted summary judgment in favor of Microsoft, finding no infringement. The creditors' trust appealed, and Microsoft crossappealed. The Federal Circuit, looking to the patent statutes for answers, recognized three categories of infringement plaintiffs: (1) those who can sue in their own name; (2) those who hold less than all rights in the patent but can sue if the true patent owner is joined in the action; and (3) those who cannot participate in the litigation at all. The court determined that the creditors' trust held nothing more than the right to sue, and found it detrimental to the trust's standing that it held no exclusionary rights, such as the right to issue licenses or to enter into sublicense agreements. Said the court, without sufficient exclusionary rights, the trust did not suffer an injury in fact under patent law. Constitutional standing, however, requires injury in fact. Holding the mere right to sue, said the court of appeals, was not sufficient to suffer injury in fact, and therefore, the creditors' trust lacked constitutional standing to sue for the infringement. The court reversed and vacated the district court's order of non-infringement and found no need reach the merits in the absence of constitutional standing.
* In re Shenango Group Inc., 501 F.3d 338 (3d Cir. Sept. 2007) (Smith, J.)
The Third Circuit chimes in on "related to" jurisdiction and the significance of plan trusts. In yet another installment of the Pacor line of cases out of the Third Circuit regarding "related to" jurisdiction in the context of disputes arising post-confirmation, the court distinguished this case from In re Resort International, Inc., 372 F.3d 154 (3d Cir. 2004).55 In this case, the Third Circuit affirmed the bankruptcy court's finding of "related to" jurisdiction over the post-confirmation dispute because: (1) the reorganized debtor was actually a party to the dispute; (2) resolution of the dispute required the court to interpret provisions of a confirmed plan of reorganization; (3) the reorganized debtor was potentially liable to the claimants; and
54 Circuit Judge Prost filed a separate dissenting opinion, noting that the litigation trust should fall within the second category and have standing to bring the action as long as the administrative trust was joined in the action.
55
In Resort International, the Third Circuit held that there was no "related to" jurisdiction because the debtor was not a party to the dispute, having assigned its rights in litigation to the litigation trust. Additionally, the court found that the beneficiaries of the litigation trust no longer held claims against the estate.
