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adopting this approach, these courts specifically reject the claim that a section 1123 reservation of rights will only be sufficient where it puts potential individual defendants on notice that the debtor may pursue a claim against them. Id.; In re Kmart Corp., 310 B.R. at 120 ("The disclosure and notice afforded by a section 1123(b)(3) retention provision . . . is directed towards the estate's creditors, not the potential defendants on the reserved claims."). Where courts adopt this creditor focus in analyzing section 1123, they are generally more likely to hold that broad general reservations of avoidance action rights in a section 1123 retention clause are sufficient to retain the avoidance actions, because individual notice to potential defendants is not required. See, e.g., Cohen v. TIC Fin. Sys. (In re Ampace), 279 B.R. 145 (Bankr. D. Del. 2002); In re Pen Holdings, Inc., 316 B.R. 495.
In the Pen Holdings case, the reservation of rights clause stated that "all rights and/or claims of the Post Confirmation Debtors relating to Avoidance Actions are hereby preserved [and] retained." In re Pen Holdings, Inc., 316 B.R. at 497. Analyzing two earlier Sixth Circuit cases that found insufficient reservations of rights (outside of the context of avoidance actions), the court reasoned that "a general reservation of 'causes of action' is not specific enough . . . to avoid the res judicata effect of confirmation." Id. at 503. The court held nonetheless that the reservation of avoidance actions was sufficient in that case because instead of being a mere blanket reservation of "all causes of action," the plan specifically reserved avoidance actions. Id. The court cautioned, however, that the case was very close. The debtor did not include a line item for preference actions in its liquidation analysis, but did list payments made within the preference period. Ultimately, this weight of factors tipped in favor of retention of claims. However, the court was still reluctant in coming to its conclusion: "This is a close case. The . . . Plan is . . . hardly a model for S 1123(b) analysis. Better language could have been drafted, but as written the . . . Plan preserved [Avoidance Actions]. . . ." Id. at 504.
The court in Kmart arguably had an easier time in holding that a clause in the plan that "waive[d] all Avoidance Claims as of the Effective Date; . . . provided, however, that such waiver does not include Avoidance Claims against Persons who are parties to Causes of Action involving the Debtors . . . on the Effective Date." In re Kmart Corp., 310 B.R. at 114 (citations are emphasis omitted). In Kmart, the debtors waited until after the date of the deadline for objections to the plan and the time for voting on the plan (but before the confirmation hearing) before informing the defendants (who also held large claims) that they would be sued on a preference claim before the effective date. Id. at 111. The court held that the retention provision was sufficient to protect the avoidance actions from the res judicata bar. Id. at 124. Citing the Seventh Circuit decision in P.A. Bergner & Co. v. Bank One (In re P.A. Bergner & Co.), 140 F.3d 1111, 1117 (7th Cir. 1998), where the court noted that "[w]hile there might be some logic in requiring 'specific and unequivocal' language to preserve the claims belonging to the estate that have never been raised, the statute itself contains no such requirement," the Kmart court reasoned that
