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rationale is also distinguishable. In City of Waco the Supreme Court plainly feared that "a party might fall between two stools - on the one hand, unable to obtain federal appellate review of a dismissed claim; on the other hand, unable to have a state court reconsider that claim on remand because the decision was a final and preclusive one under the extant doctrine." Here, that fear does not exist since "[i]nterlocutory decisions in remanded claims made by the district court prior to remand remain open to review and revisions in a state court; such orders carry no preclusive effect."
Facts: Worldcom, Inc. and its subsidiaries (the "Debtors") moved to enforce the their plan of reorganization (the "Plan") and confirmation order against Elliot Levin, the chapter 7 trustee (the "Trustee") for OneStar Long Distance, Inc. ("OneStar"). OneStar received notice of the Worldcom bankruptcy, received all the relevant materials, and filed five proofs of claim against the Debtors' estates. The Plan was confirmed on October 31, 2003 (the "Worldcom Confirmation Order Date") and became effective on April 20, 2004 (the "Worldcom Effective Date"). Between the Worldcom Confirmation Order Date and the Worldcom Effective Date, on December 31, 2003 (the "OneStar Petition Date"), certain creditors of OneStar filed an involuntary proceeding against OneStar and on February 3, 2004, an order was entered in an Indiana Bankruptcy Court converting OneStar's bankruptcy to a voluntary chapter 11 case. After OneStar's assets were sold, it re-converted to a case under chapter 7 and the Trustee was appointed. Before and after the OneStar Petition Date, a subsidiary of the Debtors provided telecommunication services to OneStar pursuant to an agreement between the parties and for which OneStar paid Worldcom. All payments WorldCom received were after Worldcom filed its bankruptcy. On August 16, 2005, the Trustee filed an adversary proceeding seeking to avoid and recover transfers under §§ 547, 549, and 550. According to the Trustee, Worldcom received $981,242.95 after the Debtors' petition date, during OneStar's preference period but before the Worldcom Confirmation Order Date; $1,490,615.07 was received during the OneStar preference period and between the Worldcom Confirmation Order Date and Worldcom Effective Date; and, lastly, $100,000 was received between the OneStar Petition Date and the Worldcom Effective Date.
Issues: "Whether a bankruptcy trustee seeking to pursue an avoidance action is bound by the notice of the confirmation order that the debtor received in another bankruptcy case, when the debtor received the notice before it became a debtor by its filing of a bankruptcy case while it was a creditor in that other bankruptcy case."
Rules: (1) Post Confirmation/ Pre Effective Date Claims: LTV Steel Co. v. Shalala (In re Chateaugay Corp.), 53 F.3d 478 (2d Cir. 1995) does not stand for the proposition that claims under the Code are only prepetition claims. Under a number of sections of the Bankruptcy Code, the Trustee's claims, which arose postpetition in Worldcom's case, satisfy the definition of claims under the Plan and the Code. (2) Section 1141(a) identifies parties that are bound by a confirmed plan of reorganization, which includes creditors of the debtor. "As a successor to OneStar's interests, the OneStar Trustee is bound by any judgments to the extend OneStar is bound... But as the representative of the estate... 'the Trustee is not simply the successor in interest to the Debtor: he represents the interest of all creditors of the Debtor's bankruptcy estate." "Although the Trustee is bound by the Worldcom Plan in pursuing causes of action derivative of OneStar's rights and interests, such binding effect does not apply to the OneStar Trustee's pursuit of causes of actions for the benefit of the estate's creditors."
(3) Res judicata - as a "binding final order, a confirmation order prohibits those parties bound under § 1141(a) or their privies from relitigating any matter that was or could have been raised at confirmation." There are four elements to res judicata: "(1) the prior decision was a final judgment on the merits, (2) the litigants were the same parties [or in privity], (3) the prior court was of competent jurisdiction, and (4) the causes of action were the same." In the Second Circuit, parties are in privity if: "(1) there is 'substantial identity of the incentives of the earlier party with those of
