Issues(s): 1) Whether the claims held by Capstone were pre-petition claims against Power, and 2) Whether finding these pre-petition claims were discharged was a violation of Capstone’s due process rights.
Holding(s): The Fifth Circuit has previously found that a contractual relationship between the debtor and claimant is pre-petition claim consistent with the tests put forth in both Piper and Lemelle. Further, although Power had contact with the project at issue post-confirmation, the basis for liability in the State Court Suit is the work Power completed prior to confirmation date and therefore constitutes as a pre-petition claim. Despite the latency in manifestation of any injury, a finding that Capstone’s claims against Power were discharged by the Confirmation Order does not violate Capstone’s due process rights. Because Capstone received actual notice of Power’s bankruptcy comporting with the constitutional requirements of due process, all pre-confirmation claims relating to Power’s work on the Sam Houston State Project were discharged by the Confirmation Order.
Walser v. TMG (January 25, 2011)
Issues: (1) Is Walser’s Recording Agreement with Debtor’s predecessor-in-interest an executory contract? If so, does it allow Plaintiffs to pursue causes of action against the predecessor’s bankruptcy plan? (2) Did Debtors breach recording contracts with Walser, entitling Plaintiffs to damages? Is rescission a viable remedy? (3) Did Defendants breach a fiduciary duty with Walser? (4) Should the corporate veil be pierced with respect to Defendants, and Defendants be held liable for Plaintiff’s claims against Debtors?
Holding: (1) The Court holds that the Walser contract was an executory contract that Debtors assumed after the predecessor’s bankruptcy and that Walser is prohibited from filing causes of action that relate to the predecessor’s bankruptcy. (2) Defendants are not required to surrender master recordings for breach of contract, and there is not sufficient evidence to establish fraud. The Court finds that the Defendants did breach the contract and that the Defendants failed to properly cure during the period provided for cure. Therefore, contract damages should be awarded to Plaintiffs. Plaintiffs’ rescission claims are barred by both Federal Copyright law and Texas state law. (3) Defendants did not breach a fiduciary duty because Debtors did not owe Walsen a fiduciary duty. (4) The Court finds that Plaintiffs’ contentions to pierce the corporate veil also fail because their claims fail to satisfy the requirements of Tex. Bus. Org. Code § 21.223.