DocketNumber: Bankruptcy No. 94-60540-S
Citation Numbers: 232 B.R. 899
Judges: Sharp
Filed Date: 3/9/1999
Status: Precedential
Modified Date: 11/22/2022
OPINION
Now before the Court for consideration is the Amended Motion To Approve Joint Prosecution Agreement as Modified filed by Leonard W. Pipkin as Liquidating Trustee of the Reserve Production Liquidating Trust. This opinion constitutes the Court’s findings of fact and conclusions of law required by Federal Rule of Bankruptcy Procedure 7052 and disposes of all issues before the Court.
JURISDICTION
This Court has jurisdiction over the within proceeding pursuant to 28 U.S.C. §§ 157(a) and 1334. This is a core proceeding under 28 U.S.C. § 157(b)(2). In addition, this Court has jurisdiction over the within matter pursuant to 11 U.S.C. § 105, the confirmed Plan of Reorganization and the Order Granting Motion To Reconsider And Vacating Final Decree entered on June 25,1997.
FACTUAL AND PROCEDURAL BACKGROUND
Reserve Production, Inc. (the “Debtor”) filed a voluntary petition initiating this proceeding under Chapter 11 on May 26, 1994. On March 1, 1995, the Court confirmed the First Amended Joint Plan of Reorganization of the Debtor and the Official Committee of Unsecured Creditors (the “Plan”). The Plan created a Liquidating Trust charged with, inter alia, prosecution of certain claims and causes of action on behalf of the bankruptcy estate. Leonard Pipkin, who was accountant for the creditors committee of the pre-confir-mation debtor, was appointed Liquidating Trustee of the Trust. The Plan having been confirmed and all property of the bankruptcy estate, as defined in 11 U.S.C. § 541, having vested in the Liquidating Trust, the case remains open largely for the purpose of the final resolution of pending litigation.
Included among the pending litigation over which this Court retained jurisdiction is adversary proceeding number A95-6030, styled Leonard W. Pipkin, Liquidating Trustee for the Liquidating Trust and as Representative of the Estate of Reserve Production, Inc., and William T. “Bill” Clark v. Larry Sanders, Individually, Larry Sanders, Trustee and Full Boar Oil Tools, Inc. and L & D Properties (“the Adversary”) filed by William T. Bill Clark
This portion of the saga begins with this Court’s entry of an order on August 27, 1996, after a hearing on the merits of the Motion To Approve Compromise Settlement Agreement with William “Bill” Clark, filed by the Liquidating Trustee seeking approval of an agreement. Following argument and proffering of evidence, Sanders’ counsel withdrew the objection to the motion on the record and this Court entered its Order Approving Compromise Settlement Agreement with William T. “Bill” Clark. The terms of the settlement agreement approved by this Court contemplated and expressly included as a condition precedent, entry of an order by the Bankruptcy Court approving the Joint Prosecution Agreement entered into between Clark and the Liquidating Trust on or about January 26, 1996 (the “Joint Prosecution Agreement”). A copy of the Joint Prosecution Agreement was incorporated into the Motion To Approve Compromise Settlement Agreement both by reference and as an exhibit; under Rule 10 of the Federal Rules of Civil Procedure, it is made a part thereof for all purposes.
For whatever reason, on February 9, 1998, the Liquidating Trustee filed his Amended Motion to Approve Joint Prosecution Agreement as Modified seeking this Court’s approval of the Joint Prosecution Agreement and the addendum to same entered into on March 14, 1997, i.e., the date of the hearing on the Compromise Settlement Agreement (the “Motion to Approve”). Thereafter, Larry Sanders, Full Boar Oil Tools, Inc. and ITTZ, Inc. (“the Objecting Parties”) filed a Response to the Amended Motion To Approve Joint Prosecution Agreement and Brief in Opposition To The Approval Of The Joint Prosecution Agreement asking that this Court deny the relief. The Motion to Approve came before the Court pursuant to regular setting and was taken under advisement at the conclusion of the trial on the merits.
DISCUSSION
The Liquidating Trustee asserts that the Joint Prosecution Agreement should be approved because approval of the Joint Prosecution Agreement, which was attached as an exhibit to the Motion To Approve Compromise Settlement Agreement, was inadvertently omitted and it should have been approved with the Compromise Settlement Agreement. The Liquidating Trustee also believes that the Joint Prosecution Agreement should be approved because, in conjunction with the Compromise Settlement Agreement, it reduces the expenses and obligations to be incurred in pursuing the litigation against Sanders, et al. Sanders and the other objecting parties (the “Objecting Parties”) object to the approval of the Joint Prosecution Agreement saying that, if approved it would affect the substantive rights of the parties in violation of Rule 60(a) Fed.R.Civ.P., it constitutes assignment of avoidance actions and because Clark cannot represent the estate, for to do so con
The Court has reviewed the record in this case at length
The Court finds that the Objecting Parties have completely failed to provide evidence of any possible or potential detriment to the estate and its unsecured creditors that would inure as a result of the Court approving the Joint Prosecution Agreement.
The Objecting Parties’ argument fails in additional respects. This Court is of the opinion that the evidence supports a finding that approval of the Joint Prosecution Agreement is the law of the case. On March 14, 1996, during the hearing on the Motion To Approve Compromise Settlement Agreement, the issue was raised as to whether approval of the Joint Prosecution Agreement was properly before that Court as a result of the integration of the motion with its exhibits, i.e., the Joint Prosecution Agreement and the Compromise Settlement Agreement.
Even if the Joint Prosecution Agreement was not found by this Court to have previously been approved, approval of the Joint Prosecution Agreement is appropriate in this case. Courts have historically allowed a creditors committee or appropriately designated party to bring suit on behalf of the estate under two circumstances. Either when a trustee or debtor in possession refuses to act unjustifiably [Unsecured Creditors Committee v. Noyes (In re STN Enter), 779 F.2d 901, 904 (2d. Cir.1985)] or when the trustee lacked funds and therefore refused to file suit. William B. Tanner Co. v. United States (In re Automated Bus. Sys., Inc.), 642 F.2d 200 (6th Cir.1981). Prerequisite are that the suit represents a colorable claim or claims for relief that on appropriate proof would support a recovery. Glinka v. Abraham And Rose Co., Ltd., 199 B.R. 484, 494 (D.Vt.1996) quoting from In re STN Enter., 779 F.2d at 905. If the trustee or debtor has refused to bring the suit, the court should consider whether the action is likely to benefit the estate. Id.
In the case at bar, the debtor transferred the right to prosecute actions on
The Objecting Parties argue that the Liquidating Trustee is not permitted to convey an interest in an avoidance action to Clark, post confirmation, by independent motion after the case has been substantially consummated. This issue, on these specific facts, was tried before the Court on April 10, 1997 and the Court entered its Findings of Fact and Conclusions Of Law Denying Approval Of Compromise And Settlement Agreement And the Addendum.
The issue of the two proposed addenda to the Joint Prosecution Agreement and the First Amended Joint Prosecution Agreement urged under Bill Clark’s Motion To Approve First Amended Joint Prosecution Agreement, filed August 14, 1998, remain, but can be disposed of based upon the law of the case. On March 2, 1998, the Court entered its Findings of Fact and Conclusions Of Law Denying Approval Of (the 2nd) Compromise And Settlement Agreement And the Addendum (the “Findings”). In the Findings, although the Court reserved the issue of whether the Court implicitly approved the Joint Prosecution Agreement
CONCLUSION
For the foregoing reasons, this Court finds that the Amended Motion To Approve Joint Prosecution Agreement should be granted, but that approval of the addenda should be denied. For reasons contained in this Opinion an Order will be entered on same also disposing of Bill Clark’s Motion To Approve First Amended Joint Prosecution Agreement, filed August 14,1998.
. Clark was the original Plaintiff in the Adversary, having been designated the representative of the estate. Leonard Pipkin, as Liquidating Trustee was later substituted as the plaintiff in this action and Clark was allowed to intervene.
. All proceedings in this case prior to March 2, 1998, were conducted before the Honorable C. Houston Abel. After his unfortunate death on that date, the case has continued before this Court.
. The issue of whether the Court implicitly approved the Joint Prosecution Agreement when it approved the Compromise Settlement Agreement was raised again later and was specifically reserved in the Court’s Findings of Fact and Conclusions of Law Denying approval of Compromise and Settlement Agreement Between Liquidating Trust and Bill Clark entered on March 2, 1998. The March 2, 1998 Findings of Fact resolve the Emergency Motion To Approve Compromise Settlement Agreement filed March 14, 1997 with respect to a "new” agreement.
. This was a second compromise and settlement agreement filed after Judge Abel had approved the first one on March 14, 1996.
. Judge Abel’s death prevented him from ever ruling on this reserved issue so this Court has done so in this opinion.