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Holding: The district court held that the Bankruptcy Code expressly allowed the liquidating agent to stand in the shoes of a creditor to avoid and recover fraudulent transfers and the Wagoner rule did not limit that power. The liquidating agent under a confirmed plan brought claims against the debtor's professional advisors for aiding and abetting, as well as fraudulent transfers, in relation to a leveraged buyout. The debtor's management diverted corporate assets, and their advisors allegedly helped them do it. The court found that the liquidating agent had standing to bring the same claims the debtor could have brought. However, the Wagoner rule provides that claims against a third-party for defrauding a debtor corporation with the cooperation of the debtor's management belong to the debtor's creditors, not the guilty corporation. The court reasoned that the liquidating agent's claims belonged to the debtor's creditors under the Wagoner rule. However, 11 U.S.C. § 544(b) expressly provided the liquidating agent with the power to stand in the shoes of creditors in bringing the fraudulent transfer claims.
x. In re Gulf States Long Term Acute Care of Covington, LLC, 487 B.R. 713 (Bankr. E.D. La. 2013)
Issue: Whether specific terms of retention of claims in a debtor's plan adequately reserved certain claims for the disbursing agent under the plan to assert against the defendants.
Holding: The bankruptcy court held that the plan language reserving "[a]ll such claims and causes of actions" referred only to the fraudulent transfer claims immediately preceding such language. The court also held that the plan's general reservation of "[a]ny and all claims and causes of action which may have been asserted by the Debtor prior to the Effective Date, other than those released by the Debtor under the terms and conditions of the Plan," sufficiently reserved causes of action that the debtor possessed, and did not specifically release, against noncreditors. Three years after the debtor's plan was confirmed, the disbursing agent under the plan sought to set aside certain of the plan's releases due to fraud. The court granted the disbursing agent's motion in part and denied it in part, which allowed the disbursing agent to pursue some of its claims against certain parties. Of particular importance, the court found that the section in the plan on avoidance actions stated that the debtor had made no transfers that could have been preferential transfers. The plan also stated the debtor had certain transfers that could potentially be attacked as fraudulent. The court held that the language reserving "[a]ll such claims and causes of actions" referred only to the fraudulent transfer claims, which immediately preceded such language, and not to any preference actions. The court also explained that the language reserving or releasing claims against the debtor's creditors needs to be specific and unequivocal to provide proper notice to those voting on the plan. However, notice is not important to parties that were not creditors of the debtor and did not vote on the plan. Therefore, the court found that the plan's general reservation of claims, not specifically released, was sufficient to reserve claims against noncreditors.
©2014 William L. Norton III
