Iberiabank v. Bradford Geisen

Case: 14-11473 Date Filed: 01/23/2015 Page: 1 of 19
[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 14-11473
________________________
D.C. Docket Nos. 9:13-cv-80635-KMM; 09-bkc-38395-EPK
IN RE: FFS DATA, INC.,
Debtor.
_____________________________________________________
IBERIABANK,
Plaintiff - Appellant,
versus
BRADFORD GEISEN,
FFS DATA, INC.,
Defendants - Appellees.
________________________
Appeal from the United States District Court
for the Southern District of Florida
________________________
(January 23, 2015)
Case: 14-11473 Date Filed: 01/23/2015 Page: 2 of 19
Before TJOFLAT, JILL PRYOR and COX, Circuit Judges.
JILL PRYOR, Circuit Judge:
This appeal concerns the proper interpretation of a release of claims in the
bankruptcy reorganization plan of appellee FFS Data, Inc. (“FFS”). Appellant
Iberiabank appeals the district court’s decision affirming the bankruptcy court’s
order that Iberiabank’s claims against appellee Bradford Geisen were released.
After careful consideration of the briefs and record, and with the benefit of oral
argument, we affirm.
I. FACTUAL BACKGROUND
In June 2007, Iberiabank’s predecessor made a $10.6 million loan (the
“Loan”) to Siena Realty Associates, LLC (“Siena”). Mr. Geisen and FFS, among
others, guaranteed the Loan, which was additional funding for a build out of the
building FFS leased from Siena. Mr. Geisen, president and 100% shareholder of
FFS, owned a 48% interest in Siena. The Loan was secured by a mortgage on real
property owned by Siena. In December 2009, FFS filed for Chapter 11 bankruptcy
protection. Shortly before FFS filed for bankruptcy, Siena was in default for
nonpayment of the Loan. Based on FFS’s guaranty, Iberiabank became a general
unsecured creditor in FFS’s bankruptcy. Iberiabank filed a claim in the bankruptcy
proceeding for approximately $10.6 million, the full amount of the outstanding
Loan guaranteed by FFS. FFS filed its original Chapter 11 plan of reorganization
2
Case: 14-11473 Date Filed: 01/23/2015 Page: 3 of 19
on April 22, 2010. On October 13, 2010, FFS circulated a draft amended
reorganization plan.
The next day, Iberiabank entered into a forbearance agreement concerning
the Loan with Siena, Mr. Geisen, and the other guarantors of the Loan. Iberiabank
agreed to forbear from exercising its remedies with respect to the Loan and the
guaranties for 90 days to provide Siena and the guarantors an opportunity to sell
the real property with the mortgage securing the Loan for approximately $5.4
million. If the property sold, Iberiabank would be permitted to proceed with an
action against the guarantors for any remaining deficiency.
Two days later, on October 16, 2010, FFS filed its amended reorganization
plan (the “Plan”) with the bankruptcy court. To resolve their dispute over the
amount of Iberiabank’s claim, FFS and Iberiabank entered into a Settlement
Agreement on November 12, 2010. The Settlement Agreement provided
Iberiabank with an allowed Class 6 general unsecured claim for $2 million. The
Settlement Agreement did not mention Iberiabank’s claims against Mr. Geisen or
Mr. Geisen’s personal obligations. The bankruptcy court approved the Settlement
Agreement in December 2010. Under the Plan, Mr. Geisen contributed $750,000
to the bankruptcy estate and agreed to release more than $1 million in unsecured
claims held against the estate. In addition, BG Funding, Inc., an entity Mr. Geisen
owned in part, used a $1 million tax refund to purchase a secured claim against the
3
Case: 14-11473 Date Filed: 01/23/2015 Page: 4 of 19
bankruptcy estate and then agreed to concessions on the secured claim, which
allowed the bankruptcy estate to provide payouts to some unsecured creditors. In
return, the creditors agreed to a “general release of Bradford Geisen” in § 8.13 of
the Plan:
8.13 Discharge of Debtor and Insider
In exchange for releasing the Insider Claims 1 totaling
$1,000,817.30, and providing the New Value Payment, 2 all holders of
Claims agree to a general release of Bradford Geisen.
. . . [T]he rights afforded herein shall be in exchange for and in
complete satisfaction, discharge and release of Claims and Equity
Interests of any nature whatsoever . . . against the Debtor and Debtor
In Possession, the Estate, any of the assets or properties under the
Plan, or its officer and/or director, Bradford Geisen. Except as
otherwise provided herein, (i) on the Effective Date, all such claims
against the Debtor and its officer and/or director, Bradford Geisen,
and Equity Interest in the Debtor shall be satisfied, discharged, and
released in full, and (ii) all persons shall be precluded and enjoined
from asserting against the Reorganized Debtor, its successors, its
assets or properties, or its officer and/or director Bradford Geisen any
other or further Claims or Equity Interests based upon any act,
omission, transaction or other activity of any kind or nature that
occurred prior to the Confirmation Date . . . .
Debtor’s Am. Plan of Reorganization 30, In re FFS Data, Inc., No. 09-38395
(Bankr. S.D. Fla. Oct. 16, 2010), ECF No. 243.
1
“Insider Claims” refers to various unsecured claims, held by Mr. Geisen and two other related
entities, which Mr. Geisen released. Debtor’s Am. Plan of Reorganization 8.
2
The “New Value Payment” refers to the $750,000 that Mr. Geisen contributed to the
bankruptcy estate. Id. at 9.
4
Case: 14-11473 Date Filed: 01/23/2015 Page: 5 of 19
Section 8.15 of the Plan released a narrower set of claims relating to the
Debtor, bankruptcy, or Plan against the Released Parties, 3 which included the
Debtor and related persons and affiliates:
8.15 Release by Holders of Impaired Claims
This Plan . . . is a full and final settlement compromise of all the
Claims and causes of action . . . that the Debtor holders of Claims
against the Debtor and Equity Interest in the Debtor may have against
any of the Released Parties pursuant to Sections 1123(b)(3) and (6) of
the Bankruptcy Code and Bankruptcy Rule 9019. In consideration of
the obligations of the Debtor and the Reorganized Debtor under this
Plan . . . and Bradford Geisen’s agreement to release the Insider
Claims totaling $1,000,817.30, and providing the New Value
Payment, the Debtor and each holder of a Claim against or Equity
Interest in the Debtor shall be deemed to forever release, waive, and
discharge all Claims . . . against the Released Parties . . . in any way
relating to the Debtor, the Chapter 11 case or the conduct thereof, of
this Plan.
Id. at 31 (emphasis omitted).
Iberiabank did not attend the confirmation hearing or object to the Plan. On
March 21, 2011, the bankruptcy court entered an order confirming the Plan. No
party appealed the confirmation order.
In July 2012, Iberiabank commenced collection efforts in state court against
the Loan’s six individual guarantors, including Mr. Geisen, because a deficiency
remained when the collateral securing the Loan was sold. Mr. Geisen responded
3
“Released Parties” includes “the Debtor and each of its respective current and former directors,
officers, employees, representatives, members, affiliates, agents, counsel, financial advisors, and
professionals.” Id. at 10.
5
Case: 14-11473 Date Filed: 01/23/2015 Page: 6 of 19
that the Plan released him from his personal guaranty of the Loan. On March 29,
2013, Iberiabank reopened the bankruptcy case and moved for a determination that
its claims against Mr. Geisen were not released. After a hearing, the bankruptcy
court denied Iberiabank’s motion. The bankruptcy court held that “every creditor
of FFS was, in effect, giving a general release to Bradford Geisen, who is the
debtor’s principal.” Tr. of Mar. 18, 2013 Hr’g 32, In re FFS, ECF No. 871.
Sitting as an appellate court, the district court affirmed the bankruptcy court’s
decision. Iberiabank now appeals to this Court.
II. STANDARD OF REVIEW
When reviewing an order of the district court entered in its role as an
appellate court reviewing the bankruptcy court’s decision, this Court independently
examines the factual and legal determinations of the bankruptcy court, applying the
same standards of review as the district court. IBT Int’l, Inc. v. Northern (In re
Int’l Admin. Servs., Inc.), 408 F.3d 689, 698 (11th Cir. 2005). Generally, we
review de novo any determinations of law, whether by the bankruptcy court or
district court, and review the bankruptcy court’s factual findings for clear error. Id.
When reviewing a bankruptcy court’s interpretation of its own order, however,
“our reluctan[ce] to disturb a bankruptcy court’s judgment in this context is akin to
the reluctance we exhibit when exercising abuse of discretion review. Finova
Capital Corp. v. Larson Pharmacy Inc. (In re Optical Techs., Inc.), 425 F.3d 1294,
6
Case: 14-11473 Date Filed: 01/23/2015 Page: 7 of 19
1300 (11th Cir. 2005) (internal quotation marks omitted). Unless it clearly abused
its discretion, “a bankruptcy court’s interpretation of its own order is entitled to
substantial deference.” Id. at 1302-03.
III. DISCUSSION
Iberiabank presents two interrelated issues on appeal. First, Iberiabank
argues that the release of Mr. Geisen under § 8.13 of the Plan does not extend to its
claim against Mr. Geisen based on his personal guaranty. Second, Iberiabank
argues that the confirmation order should not be afforded res judicata effect
because, under a line of Fifth Circuit cases, the release in § 8.13 is not sufficiently
specific. We begin by addressing Iberiabank’s argument that the Plan did not
release Mr. Geisen from his obligations under the guaranty.
A.
The Court follows principles of contract interpretation to interpret a
confirmed plan of reorganization. See Official Creditors Comm. v. Stratford of
Tex., Inc. (In re Stratford of Tex., Inc.), 635 F.2d 365, 368 (5th Cir. Jan. 1981).4
“[T]he plain meaning of a contract’s language governs its interpretation” under
general contract principles. Slater v. Energy Servs. Grp. Int’l, Inc., 634 F.3d 1326,
4
This Court adopted as binding precedent all Fifth Circuit decisions issued prior to October 1,
1981. Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc).
7
Case: 14-11473 Date Filed: 01/23/2015 Page: 8 of 19
1330 (11th Cir. 2011). 5 “A contract term is ambiguous if ‘reasonably susceptible
to more than one interpretation.’” Orkin Exterminating Co. v. FTC, 849 F.2d
1354, 1360 (11th Cir. 1988) (quoting Fabrica Italiana Lavorazione Materie
Organiche, S.A.S. v. Kaiser Aluminum & Chem. Corp., 684 F.2d 776, 780 (11th
Cir. 1982)). An interpretation giving “reasonable meaning to all provisions of a
contract is preferred to one which leaves a part useless or inexplicable.” Doe v.
Princess Cruise Lines, Ltd., 657 F.3d 1204, 1218 (11th Cir. 2011) (citing Golden
Door Jewelry Creations, Inc. v. Lloyds Underwriters Non-Marine Ass’n, 117 F.3d
1328, 1338 (11th Cir. 1997)).
The first sentence of § 8.13 of the Plan states that “all holders of Claims
agree to a general release of Bradford Geisen.” Debtor’s Am. Plan of
Reorganization 30. Section 8.13 goes on to provide that “all such claims,” that is,
“Claims and Equity Interests of any nature whatsoever . . . against the Debtor and
its officer and/or director, Bradford Geisen[,] . . . shall be satisfied, discharged, and
released in full . . . .” Id. It further states that “all Persons shall be precluded and
enjoined from asserting” against the Debtor or Mr. Geisen any claims “based upon
any act or omission, transaction or other activity . . . that occurred prior to the
5
Mr. Geisen argues (and the district court decided) that in interpreting confirmed plans, courts
should apply state law contract principles. Although this Court has not previously held that state
law contract principles apply, we need not decide whether to apply state law contract principles
or federal common law principles because they do not conflict here. See, e.g., Equity Lifestyle
Props., Inc. v. Fla. Mowing & Landscape Serv., Inc., 556 F.3d 1232, 1242 (11th Cir. 2009) (“In
interpreting a contract under Florida law, we give effect to the plain language of contracts when
that language is clear and unambiguous.”) (internal quotation marks omitted).
8
Case: 14-11473 Date Filed: 01/23/2015 Page: 9 of 19
Confirmation Date.” Id. The plain language of § 8.13 thus unambiguously
provides a “general release” of Mr. Geisen for “all . . . claims” by “all Persons”
based upon any event prior to the Plan’s confirmation. Id. Our inquiry should end
here. See Slater, 634 F.3d at 1330.
Nonetheless, Iberiabank argues that the phrase “its officer and/or director”
means that the release is limited to claims brought against Mr. Geisen in his
capacity as an officer and/or director of FFS. Iberiabank further contends that
construing § 8.13 as a general release renders this phrase meaningless.
Reading § 8.13 as a release only of claims against Mr. Geisen in his capacity
as an officer and/or director of FFS is improper for two reasons. First, such an
interpretation conflicts with the plain “general release” of “all . . . claims”
language. Construing § 8.13 as something less than a “general release,” as
Iberiabank urges, renders this language, particularly the first sentence of § 8.13,
meaningless.6 The first sentence further explains that the consideration for the
general release is Mr. Geisen’s release of Insider Claims worth over $1 million and
his $750,000 New Value Payment to the estate. Debtor’s Am. Plan of
Reorganization 30. Nothing in that first sentence or paragraph suggests that all
6
Because we find § 8.13 to be clear and unambiguous, we do not consider extrinsic evidence to
determine its meaning. See Hashwani v. Barbar, 822 F.2d 1038, 1040 (11th Cir. 1987) (“[T]he
introduction of parol or extrinsic evidence to aid in the interpretation of a contract is prohibited,
unless the contract is ambiguous.”); Uranksy v. First Fed. Savings & Loan Assoc., 684 F.2d 750
(11th Cir. 1982).
9
Case: 14-11473 Date Filed: 01/23/2015 Page: 10 of 19
claim holders agreed to release Mr. Geisen only for claims against him in his
capacity as an officer or director of FFS. The “officer and/or director” phrase,
which appears in a separate, subsequent paragraph of § 8.13, also does not contain
any limiting language or reference to claims against Mr. Geisen solely in his
capacity as an officer/director of FFS. To the contrary, § 8.13 refers to “all” claims
“of any nature whatsoever.” Id. Moreover, the underlining of the phrase does not
change its meaning. It merely draws attention to the fact that Mr. Geisen, the
individual being released, is an insider with respect to FFS. We agree with the
district court and the bankruptcy court that the phrase “its officer and/or director”
should be read as “merely descriptive of Geisen’s role at FFS.” Iberiabank v.
Geisen, No. 13-cv-80635-KMM, slip op. at 6 (S.D. Fla. Mar. 4, 2014).
Second, if the release were read as limited to claims against Mr. Geisen
solely in his capacity as an “officer and/or director” of FFS, § 8.15 would cover
such claims, rendering § 8.13 superfluous. Section 8.15 releases a broader group
of parties related to FFS for a narrower class of claims—claims relating to FFS, the
bankruptcy case, or the Plan. Section 8.15 defines “Released Parties” as “the
Debtor and each of its respective current and former directors, officers, employees,
representatives, members, affiliates, agents, counsel, financial advisors, and
professionals.” Debtor’s Am. Plan of Reorganization 10. Section 8.15 necessarily
encompasses claims against Mr. Geisen in his official capacity because he is the
10
Case: 14-11473 Date Filed: 01/23/2015 Page: 11 of 19
Debtor’s “former officer [or] director,” and such claims necessarily would “relat[e]
to the Debtor . . . .” Id. at 31. Section 8.13 therefore becomes “useless or
inexplicable” if read so as to release only claims against Mr. Geisen in his capacity
as “officer and/or director” of FFS. See Princess Cruise Lines, 657 F.3d at 1218.
Our interpretation of § 8.13 as a general release of all claims against Mr.
Geisen is preferred because “a document should be read to give effect to all its
provisions and to render them consistent with each other.” Mastrobuono v.
Shearson Lehman Hutton, Inc., 514 U.S. 52, 63 (1995); see Restatement (Second)
of Contracts § 203(a) (1981) (“[A]n interpretation which gives a reasonable,
lawful, and effective meaning to all the terms is preferred to an interpretation
which leaves a part unreasonable, unlawful, or of no effect.”). Because the
released claims in § 8.13 are not limited to claims relating to FFS, the bankruptcy,
or the Plan, § 8.13 is not redundant of § 8.15. To give effect to all of the terms in
these sections of the Plan, we conclude that § 8.13 is a general release of all claims
against Mr. Geisen, which include claims arising out of his personal guaranty of
the Loan.
B.
Iberiabank next urges us to follow cases from the Fifth Circuit to conclude
that the release in § 8.13 is not sufficiently specific to have res judicata effect.
First, we examine the Supreme Court’s and our own precedent regarding the res
11
Case: 14-11473 Date Filed: 01/23/2015 Page: 12 of 19
judicata effect of bankruptcy orders, and then we examine the line of Fifth Circuit
cases Iberiabank suggests we adopt.7
Res judicata bars litigation of claims that were or could have been raised in a
prior action. Kaiser Aerospace & Elecs. Corp. v. Teledyne Indus., Inc. (In re Piper
Aircraft), 244 F.3d 1289, 1296 (11th Cir. 2001). For res judicata to apply, “(1) the
prior decision must have been rendered by a court of competent jurisdiction; (2)
there must have been a final judgment on the merits; (3) both cases must involve
the same parties or their privies; and (4) both cases must involve the same cause of
action.” Id. A bankruptcy court’s confirmation order that is final and no longer
subject to appeal becomes “res judicata to the parties and those in privity with
them.” Travelers Indemnity Co. v. Bailey, 557 U.S. 137, 152 (2009) (quotation
omitted); In re Optical, 425 F.3d at 1300-02. Confirmation orders that satisfy the
requirements for res judicata are given preclusive effect. See Wallis v. Justice
Oaks II, Ltd. (In re Justice Oaks II, Ltd.), 898 F.2d 1544, 1549-50 (11th Cir. 1990);
see also In re Optical, 425 F.3d at 1300-01. A reorganization plan that is
7
FFS and Mr. Geisen contend that Iberiabank’s res judicata argument is waived because
Iberiabank did not raise it before the district court or bankruptcy court. The Federal Rules of
Bankruptcy Procedure require a party appealing a bankruptcy court ruling to serve a statement of
the issues to be presented on appeal. Fed. R. Bankr. P. 8006. “An issue that is not listed
pursuant to this rule and is not inferable from the issues that are listed is deemed waived and will
not be considered on appeal.” Snap-On Tools, Inc. v. Freeman (In re Freeman), 956 F.2d 252,
255 (11th Cir. 1992) (internal quotation marks omitted). While Iberiabank uses the term res
judicata for the first time in its briefing in this Court, the substance of the issue is clearly
inferable from Iberiabank’s arguments below, which rely upon the same cases.
12
Case: 14-11473 Date Filed: 01/23/2015 Page: 13 of 19
incorporated into a confirmation order has the same res judicata effect. See id. at
1300.
In Travelers Indemnity Co. v. Bailey, the Supreme Court recognized the
finality of bankruptcy court orders and their res judicata effect, holding that they
cannot be collaterally attacked. 557 U.S. at 137. The Court examined the res
judicata effect of a complex reorganization plan that provided payment to holders
of asbestos-related claims. Id. at 140. The “cornerstone” settlement of the
reorganization plan provided that insurers paid $770 million to the bankruptcy
estate, $80 million of which came from the petitioner, Travelers Insurance. Id. at
141. In return for this payment, the creditors released the insurers “from any and
all Policy Claims,” settlement terms that were incorporated into a 1986 order
confirming the reorganization plan. Id. at 141-42. When plaintiffs began bringing
asbestos-related actions against Travelers a decade later, Travelers asked the
bankruptcy court to enjoin the lawsuits based on the release in the 1986 order. Id.
at 143. Because the order “became final on direct review,” the Supreme Court
held it was “res judicata to the parties and those in privity with them, not only as to
every matter which was offered and received to sustain or defeat the claim or
demand, but as to any other admissible matter which might have been offered for
that purpose.” Id. at 152 (internal quotation marks omitted).
13
Case: 14-11473 Date Filed: 01/23/2015 Page: 14 of 19
Similarly, in In re Optical, this Court held that a third-party lessee was
barred from collaterally attacking a bankruptcy confirmation order. 425 F.3d at
1294. The Chapter 11 debtor-lessor leased kiosks to the third-party lessees and
assigned those leases to finance companies. Id. at 1297-98. The third-party
lessees argued that the confirmation order impermissibly modified their leases with
the finance companies. Id. at 1300. This Court found the terms in the
confirmation order to be “plain on their face” and thus enforced the order. Id. at
1304. We explained that challenges to the bankruptcy court’s jurisdiction “could
have been raised by appellants at the time of confirmation,” but were not; thus, the
confirmation order had res judicata effect. Id.
Iberiabank attempts to distinguish Bailey and In re Optical on the ground
that Iberiabank does not contend the bankruptcy court lacked subject matter
jurisdiction to enter the order releasing Mr. Geisen’s guaranty. Even assuming
Iberibank is not challenging whether the bankruptcy court had subject matter
jurisdiction, the res judicata analysis of Bailey and In re Optical still controls. In
Bailey, the Supreme Court rejected an argument that a less stringent res judicata
standard applied when there was a collateral attack challenging the bankruptcy
court’s subject matter jurisdiction. See Bailey, 557 U.S. at 152 (explaining the
bankruptcy court’s order was not “less preclusive because the attack is on the
Bankruptcy Court’s conformity with its subject-matter jurisdiction”). However,
14
Case: 14-11473 Date Filed: 01/23/2015 Page: 15 of 19
neither Bailey nor In re Optical supports Iberiabank’s argument that a less
stringent res judicata analysis applies when a party on collateral attack raises an
issue other than subject matter jurisdiction. Instead, if the four requirements of res
judicata are met here, res judicata bars us from taking any action beyond the
interpretation of the confirmation order’s terms. As discussed above, we conclude
that under principles of contract interpretation, the confirmed Plan contained a
“general release” that released claims based on Mr. Geisen’s guaranty of the Loan.
Thus, as in In re Optical, this case is not truly about res judicata, but, rather, the
interpretation of a reorganization plan. 425 F.3d at 1301. Because Iberiabank
challenges the res judicata effect of the confirmation order based on the fourth
prong of the res judicata test, however, we next must consider whether the claims
at issue involve the same cause of action covered by the confirmation order.
This Court has previously explained that “[c]laims are part of the same cause
of action when they arise out of the same transaction or series of transactions.” In
re Justice Oaks II, 898 F.2d at 1551. The bankruptcy court’s confirmation order
and Iberiabank’s suit on the guaranty arise out of the same series of transactions
related to the Loan. Iberiabank was a creditor in the bankruptcy case because its
predecessor made the Loan to Siena, and, as a result of Siena’s default, Iberiabank
had an unsecured claim against the Debtor, FFS, as guarantor. In the guaranty suit,
Iberiabank sued the guarantors of the Loan other than FFS. The confirmed Plan
15
Case: 14-11473 Date Filed: 01/23/2015 Page: 16 of 19
resolved Iberiabank’s claims against FFS and, as we have concluded, released Mr.
Geisen from his guaranty on the Loan. Although Iberiabank claims that Mr.
Geisen’s guaranty was never discussed as part of the bankruptcy, the FFS guaranty
was at issue in the bankruptcy, and the two guaranties applied to the same
underlying Loan. Additionally, FFS, Mr. Geisen, and Siena were all closely
related. 8 There is little question, then, that the suit against Mr. Geisen based on the
guaranty claim meets the same transaction requirement.
In a final attempt to avoid the res judicata effect of the release in the
confirmation order, Iberiabank urges this Court to adopt a test from the Fifth
Circuit. In three cases decided prior to Bailey, the Fifth Circuit applied an
additional factor to the res judicata analysis in cases interpreting bankruptcy
confirmation plans that release third-party guarantors. In this narrow class of
cases, the Fifth Circuit held that bankruptcy orders are entitled to res judicata effect
only if the release of the third-party guarantor is “sufficiently specific.” FOM P.R.
S.E. v. Dr. Barnes Eyecenter Inc., 255 F. App’x 909, 911, 912 (5th Cir. 2007). In
Republic Supply Co. v. Shoaf, the Fifth Circuit held that a confirmed reorganization
plan expressly providing for the release of a third-party guarantor had a res judicata
effect. 815 F.2d 1046, 1053 (5th Cir. 1987). The Fifth Circuit examined the
language of the release in the confirmed plan, which released all claims against a
8
As noted above, Siena was FFS’s landlord; Mr. Geisen was president and 100% shareholder of
FFS and 48% owner of Siena.
16
Case: 14-11473 Date Filed: 01/23/2015 Page: 17 of 19
group of guarantors but was not a general release. Id. at 1048. The Fifth Circuit
concluded that the claims arose out of the same transaction because the
confirmation order included a release extinguishing the claim against the guarantor
that was the subject of the appeal. Id. at 1053-54.
In In re Applewood Chair Co., the Fifth Circuit applied Shoaf, holding that
“the res judicata effect of an approved reorganization plan” depended on the
substance of the release. Applewood Chair Co. v. Three Rivers Planning & Dev.
Dist. (In re Applewood Chair Co.), 203 F.3d 914, 918 (5th Cir. 2000). Without
discussing whether the release in the plan and the suit on the guaranty involved the
same cause of action or arose out of the same transaction, the Fifth Circuit held
that res judicata did not apply because the release was not specific enough to
release the personal guaranties of the company president and his wife, who was a
shareholder of the debtor. Id. at 919. The court held that a release of the personal
guaranties was not “enumerated or approved by the bankruptcy court.” Id.
In the third case, the Fifth Circuit determined that the release of the third-
party guarantor fell somewhere between the releases in Shoaf and Applewood but
was sufficiently specific to have a res judicata effect. FOM, 255 F. App’x at 909.
The Fifth Circuit held the release to be sufficiently specific because it was an
integral and necessary part of the bankruptcy plan itself, rather than “simply
17
Case: 14-11473 Date Filed: 01/23/2015 Page: 18 of 19
boilerplate language.” Id. at 912. The release also specifically identified the
released party and the claims to be released. Id.
We decline to adopt the test from the Fifth Circuit, a test that was articulated
in cases decided prior to the Supreme Court’s opinion in Bailey. In Bailey, the
Supreme Court held that allowing collateral attacks on a bankruptcy court’s order
“cannot be squared with res judicata and the practical necessity served by that
rule.” 557 U.S. at 145. And, as this Court has stated, creditors cannot later “raise
objections to the actual terms of the [reorganization plan] or the confirmation
order, as these were deemed waived when they failed to object to the
confirmation.” In re Optical, 425 F.3d at 1301.
Even if we were to apply the Fifth Circuit’s test, however, we would
conclude that the release was sufficiently specific to release Mr. Geisen. To
determine whether a release of a third-party guarantor is sufficiently specific, the
Fifth Circuit considers factors including whether the creditor would have known he
was releasing the third-party guarantor, whether the release identifies the released
parties, whether the release identifies the released claims, and whether the release
of those claims was an integral part of the bankruptcy order. See FOM, 255
F. App’x at 912; Applewood, 203 F.3d at 919; Shoaf, 815 F.2d at 1050.
Here, the release clearly identifies Mr. Geisen, stating that “all holders of
Claims agree to a general release of Bradford Geisen.” Debtor’s Am. Plan of
18
Case: 14-11473 Date Filed: 01/23/2015 Page: 19 of 19
Reorganization 30. The release states that it is a “general release” of “all . . .
claims” of “any nature whatsoever,” which certainly would encompass the
guaranty. Id. Iberiabank argues that the release is not specific enough because it
does not expressly reference the guaranty. In FOM, however, the Fifth Circuit
held that a release of “all claims” need not specify that it is releasing a guaranty.
FOM, 255 F. App’x at 912. The release of Mr. Geisen’s guaranty was also an
integral part of the bankruptcy order and the Plan because Mr. Geisen received the
release as consideration for his release of over $1 million in claims held against the
debtor and his personal contribution of $750,000 to the bankruptcy estate.
Although Iberiabank argues that the dollar value of the consideration it received
was minimal, Mr. Geisen unquestionably provided value to the estate and the
creditors. The release was therefore an integral part of the Plan, regardless of the
value of the consideration to any individual creditor.
IV.
For the foregoing reasons, we affirm the district court’s judgment.
AFFIRMED.
19