Section 1123 Contents of plan.
Michael Ciesla Trustee of the KLN Liquidating Trust v. Harney Management Partners (In re KLN Steel Products Co., L.L.C.) (Feb. 18, 2014)
Retention and enforcement of claims, section 1123(b)(3)(B)
The defendant, a restructuring consultant, contended that the liquidating trustee did not have standing to pursue preference claims against it because a chapter 11 plan had been confirmed; thus, the bankruptcy estate ceased to exist and the trustee had no ability to pursue claims on the estate’s behalf. The Court first noted that if a plan specifically and unequivocally provides for the retention and enforcement of claims, the claims may survive and be prosecuted. Predictably, the Court then turned to the plan to see if it provided for retention and enforcement of claims, but found the plan to be ambiguous due to conflicting language in two provisions. Ultimately, the Court held that the best reading of the plan and disclosure statement and their attachments was that the liquidating trustee wished to preserve avoidance actions generally and, noting the sophistication of the parties, found that the plan and disclosure statements put the consultant and any other parties in interest on notice that the liquidating trustee might pursue the payments at issue.
WL Cite: Ciesla, Trustee of the KLN Liquidating Trust v. Harney Management Partners (In re KLN Steel Products Co., L.L.C.), 506 B.R. 461 (Bankr. W.D. Tex. 2014)