Lothian Cassidy, L.L.C. v. Lothian Oil, Inc

531 F. App'x 428
CourtCourt of Appeals for the Fifth Circuit
DecidedMay 8, 2013
Docket11-51073
StatusUnpublished
Cited by15 cases

This text of 531 F. App'x 428 (Lothian Cassidy, L.L.C. v. Lothian Oil, Inc) is published on Counsel Stack Legal Research, covering Court of Appeals for the Fifth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Lothian Cassidy, L.L.C. v. Lothian Oil, Inc, 531 F. App'x 428 (5th Cir. 2013).

Opinion

KING, Circuit Judge: *

Appellants/Cross-Appellees — the Anti-Lothian Bankruptcy Fraud Committee, Israel Grossman, and other individuals and entities — challenge a bankruptcy court’s order enjoining their prosecutions of two state-court actions. The bankruptcy court reasoned that the state-court actions violated the plan injunction in the bankruptcy proceeding of debtor Lothian Oil, Inc. and its related corporate entities. The bankruptcy court later entered a contempt judgment against Appellants/Cross-Appel-lees after finding that they had failed to comply with the court’s injunction order. On appeal, the district court affirmed the injunction relating to the later of the two state-court actions, reversed the injunction relating to the earlier one, and reversed the contempt judgment. Appellants/Cross-Appellees appeal the district court’s affirmance of the injunction of the later state-court action. Appellees/Cross-Appellants Belridge Group and the Lothi-an debtors appeal the reversal of the injunction of the earlier state-court action and the reversal of the contempt judgment. For the following reasons, we find that the bankruptcy court did not err in enjoining both state-court actions and imposing sanctions. We accordingly affirm in part and reverse in part the district court’s decision. Further, we remand with instructions to clarify whether an isolated *432 claim in the earlier state-court action can proceed.

I. BACKGROUND

A. Lothian Oil, Inc. Bankruptcy Proceeding

On June 13, 2007, Lothian Oil, Inc., and its associated corporate entities (collectively “Lothian”) filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code. 1 On the same day, Lothian filed motions to approve settlement agreements entered into with Appellee/Cross-Appel-lant Nawab Energy Partners, L.P. (“Na-wab”). The settlements resulted from lawsuits initiated by Lothian to resolve disputes over certain Texas oil and gas properties known as the “Casselman,” “Bohannon,” “Foster,” and “Cowden” properties, on which a group of creditor companies (“Belridge Group”) sought to foreclose. 2 A fifth property — the “Nobles” property — later was purchased by Nawab at a bankruptcy auction. The United States Bankruptcy Court for the Western District of Texas approved the settlement agreements on July 16 (“2007 Compromise Orders”).

On June 27, 2008, the bankruptcy court entered an order confirming the “Second Modified Amended Joint Plan of Liquidation of the Debtors” (“Plan”). The Plan purported to “bind the Debtors and any creditor or equity holder of the Debtor, whether or not the Claim or Interest of such Creditor or equity holder is impaired under the Plan and whether or not such Creditor or equity holder has accepted the Plan.” The Plan contained the following relevant provisions — 6.9 Preservation of Rights of Action:

[T]he Reorganized Debtors shall retain and shall have the exclusive right to enforce any claims, rights and causes of action that the Debtors or the Estates may hold against any entity ...; provided, however, that the Plan does not preclude the rights, if any, of Creditors or Interest Holders to seek authority from the Bankruptcy Court to bring claims of the Estates if not pursued by the Creditors’ Committee, the Debtors or the Plan Administrator by forty-five (45) days prior to the expiration of the statute of limitations for such cause of action.

11.3 Injunction:

[A]ll Persons who ... may be holders of Claims against or Equity Interests in the Debtors ... shall be enjoined from taking any of the following actions against or affecting the Debtors, them Estates, and the Estate Property regarding such Claims or Equity Interests ... to the fullest extent provided under Bankruptcy Code section 524: (i) commencing, conducting, or continuing in any manner, directly or indirectly, any suit, action, or other proceeding of any kind against the Debtors, their Estates, or the Estate Property ...; (v) proceeding in any manner and in any place whatsoever that does not conform to or comply with the provisions of the Plan.

12.1 Exclusive Bankruptcy Court Jurisdiction:

[T]he Bankruptcy Court shall retain and have such jurisdiction over the Bank *433 ruptcy Cases as is legally permissible, including ... [t]o determine all controversies, suits and disputes that may arise in connection with the interpretation, enforcement or consummation of this Plan or any entity’s obligations in connection with the Plan....

On October 80, 2008, Israel Grossman and other Appellants/Cross-Appellees entered into a settlement agreement (“2008 Settlement”) with Lothian releasing it of all claims in exchange for $1,025,000, but also providing that the “[c]laims ... shall be disallowed only as to [Lothian]; to the extent not satisfied by this Agreement, the [c]laims ... may still be asserted against any third party.” The parties dispute the scope of this allowance. The bankruptcy court approved the 2008 Settlement on December 8.

On September 16, 2009, Grossman and the Anti-Lothian Bankruptcy Fraud Committee (“Anti-Lothian Committee”) moved to “clarify or modify” the Plan by setting aside the 2007 Compromise Orders and allegedly fraudulent property transfers (“Anti-Lothian Document”). 3 The Anti-Lothian Document alleged that on April 20, 2007, Belridge Group took control of Lothian’s board of directors and forced Lothian into bankruptcy. As part of the bankruptcy proceeding, Belridge Group purportedly manipulated Lothian into surrendering to Nawab — an entity created by Belridge Group to fraudulently receive the properties — the Casselman, Bohannon, Foster, Cowden, and Nobles properties without commensurate compensation. 4

After hearing arguments on motions related to the Anti-Lothian Document, the bankruptcy court found in Lothian’s favor. The bankruptcy court held that Grossman and the Anti-Lothian Committee lacked standing and that the Anti-Lothian Document was untimely because it fell outside the 180-day limitation period for revoking fraudulent plan confirmation orders. The bankruptcy court also dismissed the challenge as barred by res judicata, collateral estoppel, and judicial estoppel. The district court affirmed. On appeal, this court also affirmed, finding that Grossman and the Anti-Lothian Committee lacked standing. In re Lothian Oil, Inc., 508 Fed.Appx. 352, 354-55 (5th Cir.2013). We reasoned that “only the plan’s proponents or the debtor may modify a confirmed plan” and that “[p]ermission was not sought from the bankruptcy court to bring a derivative action on the debtor’s behalf.” Id. at 356. We further agreed that the Anti-Lothian Document was untimely filed more than a year after the Plan’s confirmation. Id. Notably, we rejected the claim that Grossman and the Anti-Lothian Committee were trying to preserve claims against non-debtors, finding that such claims already were accounted for in the 2007 Compromise Orders. Id. at 357 n. 5.

B.

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531 F. App'x 428, Counsel Stack Legal Research, https://law.counselstack.com/opinion/lothian-cassidy-llc-v-lothian-oil-inc-ca5-2013.