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continuation of an interest in property to be effective against an entity that acquires rights in such property before the date of the perfection or continuation, i.e., holders of mechanics or materialmen's liens that date back, by statute, to the first date of service or supply. E.g., In re Parr Meadows Racing Ass'n, 880 F.2d 1540 (2d Cir. 1989); In re APC Constr., Inc., 132 B.R. 690 (D. Vt. 1991); In re Enron Corp., 294 B.R. 232 (Bankr. S.D.N.Y. 2003).
Under Federal Rule of Bankruptcy Procedure 6001, the person or entity seeking to uphold the postpetition transfer challenged under section 549 bears the burden of proof. Section 549 contains its own statute of limitations. The trustee must commence an action under section 549 to a void a postpetition transfer prior to the earlier to occur of: (i) two years after the date of the subject transfer, or (ii) the closing or dismissal of the case.
IV. PLAN, PLEADING AND PROCESS ISSUES.
The following section discusses plan confirmation, pleading and process issues involved in the assertion of avoidance actions. In particular, this section will discuss the effect of confirmation of a Chapter 11 plan on the ability to assert claims under Chapter 5 of the Bankruptcy Code. In addition, this section discusses the issues of recovery of transfers under section 550, including whether such recovery will benefit the estate as required by section 550. Finally, this section will consider certain pleading and process issues in connection with the assertion of litigation by bankruptcy trustees and by successors to the debtor in possession.
B. Retention of Avoidance Actions in a Plan of Reorganization.
Res judicata (also known as claim preclusion) refers to the preclusive effects former litigation may have on present or future actions (i.e., whether and when former litigation will bar future litigation). See Migra v. Warren City Sch. Dist. Bd. of Educ., 465 U.S. 75, 77 n.1 (1984). The doctrine may preclude a party from bringing an action that was or could have been asserted in prior litigation. When an action could have been, but was not, raised in prior litigation the doctrine of claim preclusion may bar the subsequent action. The basic principle of res judicata is that "a right, question or fact distinctly put in issue and directly determined by a court of competent jurisdiction . . . cannot be disputed in a subsequent suit between the same parties." Montana v. United States, 440 U.S. 147, 153 (1979).
A claim may potentially be precluded by res judicata or claim preclusion where there has been: (1) a final judgment on the merits in a prior suit; (2) involvement of the same
