Section 1141 Effect of confirmation (Judge Gargotta)
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.