October 2016 - Amazon S3 22, 2016 Distribution of Property of the Estate Ch. 11 Professionals Don't...

October 2016

TABLE OF CONTENTS

Ch. 11 Professionals Don't Have to Disgorge Collected Fees..............4DMJ Assocs. v. Capasso, No. 97-CV-7285 (DLI)(RML), 2016 BL 312408 (E.D.N.Y. Sept. 22, 2016), Court Opinion.............................6

Cunningham v. Energy Future Holdings (In re Energy Future Holdings Corp.), No. 15-1183, Adv. Pro. No. 15-51 (D. Del. Sept. 28, 2016).......38

Carroll v. Prosser (In re Prosser), No. 3:06-30009 (MFW), 2016 BL 295036 (Bankr. D.V.I. Sept. 07, 2016), Court Opinion......................44

Citibank Wins Foreclosure Appeal in Bankruptcy Test.....................49 Biggers v. IRS, No. 1:15-cv-00041, 2016 BL 297125 (M.D. Tenn. Sept. 09, 2016), Court Opinion..........................................................51

Balloon Payments OK in Ch. 13 Plans in Ga....................................59 Ch. 13 Debtors’ Changes to Model Plan Violate Bankruptcy Code.....61Ch. 7 Trustee Has Longer ‘Reach-Back Weapon' in Arsenal..............63

BNA's Bankruptcy Law Reporter™

September 22, 2016

Distribution of Property of the Estate

Ch. 11 Professionals Don't Have to Disgorge Collected FeesBNA Snapshot

• Patient care ombudsman won't get paid for her work in debtors' Ch. 11 case

• Court says it lacks authority to order disgorgement upon insolvency

By Diane Davis

Sept. 20 — Chapter 11 professionals in a bankruptcy case that is later converted to Chapter 7due to insolvency don't have to share a portion of their collected fees with an unpaidprofessional, a bankruptcy court in New Mexico held Sept. 15 ( In re Santa Fe Med. Grp., LLC, 2016 BL 304831, Bankr. D.N.M., No. 15-11247-ta7, 9/15/16).

Judge David T. Thuma of the U.S. Bankruptcy Court for the District of New Mexico concludedthat bankruptcy courts don't have the authority to order disgorgement of fees upon insolvency.

In a typical “disgorgement upon insolvency” case, “a debtor attempts to reorganize in chapter 11, fails, converts to chapter 7,and is administratively insolvent,” the court said. Chapter 11 allows companies (or individuals) to enjoy protections fromcreditors while they seek to reorganize their debt or liquidate pursuant to a plan which must be approved by the bankruptcycourt. In Chapter 7 bankruptcy, however, a debtor's nonexempt assets are liquidated by a trustee, and the proceeds aredistributed to creditors.

In these cases, the Chapter 7 trustee may ask the court to order Chapter 11 professionals to “disgorge” a portion of their paidfees so the recovered fees can be redistributed pro rata among all estate professionals. Courts are divided on whetherdisgorgement is possible: some hold that they have discretion to order disgorgement, others that they must orderdisgorgement, and others that they lack the authority to order disgorgement. This court sided with the latter approach.

Debtor Santa Fe Medical Group, LLC, and three other affiliates employed numerous professionals in their Chapter 11 case,including Tal Young; Lewis Roca Rothgerber Christie; Sturm & Associates; Candice Lee Owens; and Hanlon & Hudson. Thebankruptcy court approved employment applications for all of them, which allowed the debtors to make periodic payments toprofessionals before the fees had been allowed.

Divide Up Fees?

Susan N. Goodman, RN JD, was appointed the Patient Care Ombudsman for each debtor by the court and had combinedfees and costs for all four cases of $62,425 in her final application for compensation. She then asked the court for anequitable apportionment of fees to include her fees. The U.S. Trustee's office supported the motion, but the other Chapter 11professionals opposed it.

The court found that nothing in the Bankruptcy Code gives the court authority to order Chapter 11 professionals to disgorgeupon insolvency. Congress deliberately omitted such a remedy in Bankruptcy Code Sections 726(b) and 330, the court said.

Although some courts use Section 105(a) as a broad license to do equity and create a disgorgement remedy, Law v. Siegel , 134 S.Ct. 1188 (2014), prevents the court from “just doing equity,” the court said. The court found it “troubling” that courts useSection 105 to correct a perceived omission by Congress.

The court said it was “sympathetic to Goodman's plight,” who would receive nothing for her valuable professional services to

Ch. 11 Professionals Don't Have to Disgorge Collected Fees, Bankruptcy Law Reporter (BNA)

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the estate, but most of the options offered wouldn't help in this case. The orders approving the professionals' fee applicationsare all final orders, and that final nature precludes considering ordering disgorgement of fees paid under interim orders, thecourt said. Two firms also had pre-petition retainers, which would prevent Goodman from reaching those funds, the court said.

Scott Kent Brown, II, Justin J. Henderson, Lewis Roca Rothgerber Christie LLP, Phoenix, Ariz., Steven Tal Young,Albuquerque, N.M., represented debtor Santa Fe Medical Group; Spencer Lewis Edelman, Modrall Sperling Roehl, Harris &Sisk PA, Albuquerque, N.M.; Paul M. Fish, Albuquerque, N.M.; Trustee Philip J. Montoya, Albuquerque, N.M.; representedtrustee Philip J. Montoya; Alice Nystel Page, Office of U.S. Trustee, Albuquerque, N.M., represented U.S. trustee RonaldAndazola, Assistant U.S. trustee, Albuquerque, N.M.; Scott Kent Brown, II, Lewis Roca Rothgerber Christie LLP, Phoenix,Ariz., represented The Owens Law Firm P.C., Special Counsel; Spencer Lewis Edelman, Modrall Sperling Roehl, Harris &Sisk PA, Albuquerque, N.M.,; Paul M. Fish, Albuquerque, N.M., represented Unsecured Creditors Committee, CreditorCommittee.

To contact the reporter on this story: Diane Davis in Washington at [email protected]

To contact the editor responsible for this story: Jay Horowitz at [email protected]

For More Information

Full text at: http://www.bloomberglaw.com/public/document/In_re_Santa_Fe_Med_Grp_LLC_No_1511247TA7_2016_BL_304831_Bankr_DNM

Ch. 11 Professionals Don't Have to Disgorge Collected Fees, Bankruptcy Law Reporter (BNA)



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Majority Opinion >

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NEW YORK

DMJ ASSOCIATES, L.L.C., Plaintiff, -against- CARL A. CAPASSO, et al, Defendants, EXXON MOBILCORPORATION and QUANTA RESOURCES CORPORATION, Defendants/Third-Party Plaintiffs, -against- ACE

WASTE OIL, INC., et al, Third-Party Defendants.

97-CV-7285 (DLI)(RML)

September 22, 2016, Filed September 22, 2016, Decided

For Ing-Nan Huang, Movant: Charlotte A. Biblow, LEAD ATTORNEY, Farrell Fritz, P.C., Uniondale, NY.

For Prince Metal, d/b/a PP&M (USA) Inc., Movant: Charlotte A. Biblow, LEAD ATTORNEY, Farrell Fritz, P.C.,Uniondale, NY.

For DMJ Associates, L.L.C., also known as DMJ Associates, L.L., Plaintiff: Barbara Burnett Guibord, LEADATTORNEY, Fognani Guibord & Homsy, Chicago, IL; David Andrew Luttinger, Jr., LEAD ATTORNEY, Zevwik, HortonGuiborda & McGovern, New York, NY; Lea Leadbeater, LEAD ATTORNEY, Fognani Guibord & Homsy, Chicago, IL;Stacey Heather Myers, LEAD ATTORNEY, PRO HAC VICE, Hunsucker Goodstein & Nelson, P.C., Washington, DC;Michael D Goodstein, Hunsucker Goodstein PC, Washington, DC; Paul C. Homsy, Fognani Guibord & Homsy, NewYork, NY.

For Carl A. Capasso, Defendant: Robert Roy Leinwand, LEAD ATTORNEY, Robinson, Brog, Leinwand, Greene,Genovese & Gluck, P.C., New York, NY.

For Basf Corporation, Defendant: David Paul Schneider, LEAD ATTORNEY, PRO HAC VICE, Bressler, Amery &Ross, Florham Park, NJ.

For Chemical Leaman Tank Lines, Inc., Defendant: Bonni Fine Kaufman, LEAD ATTORNEY, Holland & Knight LLP,Washington, DC.

For General Dynamics Corporation, Defendant: Lisa Lebowitz, LEAD ATTORNEY, N.W. Bernstein & Associates, LLC,Rye Brook, NY; Norman Walter Bernstein, LEAD ATTORNEY, N.W. Bernstein & Associates, LLC, Rye Brook, NY.

For Review Supplies, Inc, Defendant: Daniel Eric Katz, LEAD ATTORNEY, Bauman Katz & Grill, LLP, New York, NY.

For Review Supplies, Inc., Defendant: Daniel Eric Katz, LEAD ATTORNEY, Bauman Katz & Grill, LLP, New York, NY.

For Quanta Resource Corporation, Defendant: Allen G. Reiter, LEAD ATTORNEY, Arent Fox LLP, New York, NY;Robin J. Marsico, LEAD ATTORNEY, Siller & Wilk, LLP, New York, NY; Roger Orlando Chao, Arent Fox LLP, NewYork, NY.

For Stanley Works, Inc., Defendant: Irvin M. Freilich, LEAD ATTORNEY, Robertson, Freilich, Bruno & Cohen, LLC,

DMJ Assocs. v. Capasso, No. 97-CV-7285 (DLI)(RML), 2016 BL 312408 (E.D.N.Y. Sept. 22, 2016), Court Opinion



Newark, NJ; William W. Robertson, LEAD ATTORNEY, Robertson, Freilich, Bruno & Cohen, LLC, Newark, NJ.

For Nanco Contracting Corp., Defendant: Daniel Eric Katz, LEAD ATTORNEY, Bauman Katz & Grill, LLP, New York,NY.

For Underground Equipment Co. Ltd., Defendant: Daniel Eric Katz, LEAD ATTORNEY, Bauman Katz & Grill, LLP,New York, NY.

For United Technologies Corporation, Defendant: James Patrick Ray, LEAD ATTORNEY, Robinson & Cole, Hartford,CT; Joey Lee Miranda, LEAD ATTORNEY, Robinson & Cole, LLP, Hartford, CT.

For DaimlerChrysler Corporation, Defendant: Doreen A. Simmons, LEAD ATTORNEY, Hancock & Estabrook, LLP,Syracuse, NY.

For Exxon Mobil Corporation, Defendant: Andrew E. Anselmi, LEAD ATTORNEY, PRO HAC VICE, McCusker,Anselmi, Rosen & Carvelli, PC, Florham Park, NJ.

For Proctor & Gamble Haircare LLC, Defendant: Reed W. Neuman, LEAD ATTORNEY, PRO HAC VICE, NossamanLLP/O'Connor & Hannan, Washington, DC; James P. Ryan, Nossaman LLP/O'Connor & Hannan, Washington, DC.

For Viacom, Inc., Defendant: Susan M. Herald, LEAD ATTORNEY, Babst Calland Clements Zomnir, P.C., Pittsburgh,PA.

For Oil City Petroleum Co., Inc., Defendant: Jonathan Bondy, LEAD ATTORNEY, Wolff & Samson, West Orange, NJ;Joseph Rotolo, LEAD ATTORNEY, Hackensack, NJ.

For Crosman Corporation, Defendant: Danielle Elizabeth Mettler, Hiscock & Barclay LLP, Rochester, NY.

For Kraft Foods Global, Inc., Defendant: Daniel Riesel, LEAD ATTORNEY, Sive, Paget & Riesel, P.C., New York, NY;Steven C. Russo, LEAD ATTORNEY, Sive, Paget & Riesel, P.C., New York, NY.

For Exxon Mobil Corporation, ThirdParty Plaintiff: Andrew E. Anselmi, LEAD ATTORNEY, PRO HAC VICE,McCusker, Anselmi, Rosen & Carvelli, PC, Florham Park, NJ; Jennifer Lynn White, Arent Fox LLP, New York, NY;Maura W. Sommer, McCusker Anselmi Rosen & Carvelli, P.C.; Rosemarie DaSilva, McCusker Anselmi Rosen &Carvelli, Florham Park, NJ.

For Alcan Aluminum Corporation a/k/a Alcan Sheet & Plate, ThirdParty Defendant: John Christopher Tillman, LEADATTORNEY, Novelis Corporation, Atlanta, GA.

For Emhart Teknologies LLC, ThirdParty Defendant: Jerome Muys, LEAD ATTORNEY, Bingham McCutchen LLP,Washington, DC; L. Misha Preheim, LEAD ATTORNEY, Bingham McCutchen LLP, Washington, DC.

For Teledyne Technologies Inc., ThirdParty Defendant: Jerome Muys, LEAD ATTORNEY, Bingham McCutchen LLP,Washington, DC; L. Misha Preheim, LEAD ATTORNEY, Bingham McCutchen LLP, Washington, DC.

For NL Industries, Inc., ThirdParty Defendant: Alexander Nemiroff, LEAD ATTORNEY, Archer & Greiner, Haddonfield,NJ.

For United States Department of the Air Force, ThirdParty Defendant: Sandra Lynn Levy, United States AttorneysOffice, Eastern District of New York, Brooklyn, NY.

For United States Department of the Army, ThirdParty Defendant: Sandra Lynn Levy, United States Attorneys Office,




Eastern District of New York, Brooklyn, NY.

For United States Department of the Coast Guard, ThirdParty Defendant: Sandra Lynn Levy, United States AttorneysOffice, Eastern District of New York, Brooklyn, NY.

For United States Department of the Navy, ThirdParty Defendant: Sandra Lynn Levy, United States Attorneys Office,Eastern District of New York, Brooklyn, NY.

For United States Department of the Navy, ThirdParty Defendant: Sandra Lynn Levy, LEAD ATTORNEY, UnitedStates Attorneys Office, Eastern District of New York, Brooklyn, NY.

For Kraft Foods Global, Inc., ThirdParty Defendant: Daniel Riesel, LEAD ATTORNEY, Sive, Paget & Riesel, P.C.,New York, NY; Jennifer Lynn Coghlan, Sive, Paget & Riesel, P.C., New York, NY.

For Crosman Corp. f/k/a Coleman Airguns, Inc. f/k/a Crosman Arms Company, Inc., ThirdParty Defendant: DanielleElizabeth Mettler, Hiscock & Barclay LLP, Rochester, NY.

For TDY Industries, Inc., ThirdParty Defendant: Duke K. McCall, III, LEAD ATTORNEY, PRO HAC VICE, BinghamMcCutchen, Washington, DC; Joseph J. Barker, LEAD ATTORNEY, Bingham McCutchen LLP, New York, NY;Michael James Ableson, Morgan Lewis & Bokius LLP, New York, NY.

For U.S. Army, ThirdParty Defendant: Sandra Lynn Levy, LEAD ATTORNEY, United States Attorneys Office, EasternDistrict of New York, Brooklyn, NY.

For U.S. Coast Guard, ThirdParty Defendant: Sandra Lynn Levy, LEAD ATTORNEY, United States Attorneys Office,Eastern District of New York, Brooklyn, NY.

For U.S. Department of Defense, ThirdParty Defendant: Sandra Lynn Levy, LEAD ATTORNEY, United StatesAttorneys Office, Eastern District of New York, Brooklyn, NY.

For U.S. Department of the Air Force, ThirdParty Defendant: Sandra Lynn Levy, LEAD ATTORNEY, United StatesAttorneys Office, Eastern District of New York, Brooklyn, NY.

For U.S. Department of the Navy, ThirdParty Defendant: Sandra Lynn Levy, LEAD ATTORNEY, United StatesAttorneys Office, Eastern District of New York, Brooklyn, NY.

For Procter & Gamble Haircare LLC, ThirdParty Defendant: James P. Ryan, Nossaman LLP/O'Connor & Hannan,Washington, DC; Puja Bhatia, Nossaman LLP, Washington, DC.

For TDY Industries, Inc., ThirdParty Defendant: Joseph J. Barker, LEAD ATTORNEY, Bingham McCutchen LLP, NewYork, NY.

For Crown Cork & Seal Company, Inc., ThirdParty Defendant: Thomas J. Perry, Golub & Isabel, P.C..

For Conocophillips, ThirdParty Defendant: Donald J. Fay, Waters McPherson McNeil P.C., Secaucus, NJ; Susan CGieser, Waters, McPherson, McNeill, P.C., Secaucus, NJ.

For Crown Cork & Seal Company, Inc., ThirdParty Defendant: Thomas J. Perry, Golub & Isabel, P.C..

For New York City Transit Authority, ThirdParty Defendant: Gordon J. Johnson, LEAD ATTORNEY, MetropolitanTransportation Authority, New York, NY; Lawrence C. Jenkins, Lawrence C. Jenkins, Sr. Enviromental Counsel, NewYork, NY.




For General Dynamics Corporation, Counter Claimant: Norman Walter Bernstein, LEAD ATTORNEY, N.W. Bernstein& Associates, LLC, Rye Brook, NY.

For BASF Corporation, Counter Claimant: David Paul Schneider, PRO HAC VICE, Bressler, Amery & Ross, FlorhamPark, NJ.

For Exxon Corp., Counter Claimant: Andrew E. Anselmi, LEAD ATTORNEY, PRO HAC VICE, McCusker, Anselmi,Rosen & Carvelli, PC, Florham Park, NJ; Patrick J. Conlon, LEAD ATTORNEY, Exxon Mobil Corporation, Annandale,NJ.

For Quanta Resource Corporation, Counter Claimant: Allen G. Reiter, LEAD ATTORNEY, Arent Fox LLP, New York,NY; Robin J. Marsico, LEAD ATTORNEY, Siller & Wilk, LLP, New York, NY.

For General Dynamics Corporation, Counter Claimant: Norman Walter Bernstein, LEAD ATTORNEY, N.W. Bernstein& Associates, LLC, Rye Brook, NY.

For Stanley Works, Inc., Counter Claimant: Irvin M. Freilich, LEAD ATTORNEY, Robertson, Freilich, Bruno & Cohen,LLC, Newark, NJ; William W. Robertson, LEAD ATTORNEY, Robertson, Freilich, Bruno & Cohen, LLC, Newark, NJ.

For Basf Corporation, Counter Claimant: David Paul Schneider, LEAD ATTORNEY, PRO HAC VICE, Bressler, Amery& Ross, Florham Park, NJ.

For Clairol, Incorporated, Counter Claimant: Reed W. Neuman, LEAD ATTORNEY, PRO HAC VICE, NossamanLLP/O'Connor & Hannan, Washington, DC.

For DMJ Associates, L.L.C., Counter Defendant: David Andrew Luttinger, Jr., LEAD ATTORNEY, Zevwik, HortonGuiborda & McGovern, New York, NY; Michael D Goodstein, Hunsucker Goodstein PC, Washington, DC; Paul C.Homsy, Fognani Guibord & Homsy, New York, NY.





For DMJ Associates, L.L.C., also known as DMJ Associates, L.L., Counter Defendant: David Andrew Luttinger, Jr.,LEAD ATTORNEY, Zevwik, Horton Guiborda & McGovern, New York, NY; Lea Leadbeater, LEAD ATTORNEY,Fognani Guibord & Homsey, Chicago, IL; Michael D Goodstein, Hunsucker Goodstein PC, Washington, DC; Paul C.Homsy, Fognani Guibord & Homsy, New York, NY.

For DMJ Associates, L.L.C., also known as DMJ Associates, L.L., Counter Defendant: David Andrew Luttinger, Jr.,LEAD ATTORNEY, Zevwik, Horton Guiborda & McGovern, New York, NY; Lea Leadbeater, LEAD ATTORNEY,




Fognani Guibord & Homsey, Chicago, IL; Michael D Goodstein, Hunsucker Goodstein PC, Washington, DC; Paul C.Homsy, Fognani Guibord & Homsy, New York, NY.














For Exxon Corp., Cross Claimant: Andrew E. Anselmi, LEAD ATTORNEY, PRO HAC VICE, McCusker, Anselmi,Rosen & Carvelli, PC, Florham Park, NJ; Patrick J. Conlon, LEAD ATTORNEY, Exxon Mobil Corporation, Annandale,NJ.








For General Dynamics Corporation, Cross Claimant: Norman Walter Bernstein, LEAD ATTORNEY, N.W. Bernstein &Associates, LLC, Rye Brook, NY.


For Stanley Works, Inc., Cross Claimant: Irvin M. Freilich, LEAD ATTORNEY, Robertson, Freilich, Bruno & Cohen,LLC, Newark, NJ; William W. Robertson, LEAD ATTORNEY, Robertson, Freilich, Bruno & Cohen, LLC, Newark, NJ.




For Consolidated Edison Company of New York Inc., Cross Claimant: Eric M. Dessen, LEAD ATTORNEY,Consolidated Edison Company of New York, Inc., New York, NY; James J. Dixon, LEAD ATTORNEY, Consolidated




Edison, New York, NY.


For Clairol, Incorporated, Cross Claimant: Reed W. Neuman, LEAD ATTORNEY, PRO HAC VICE, NossamanLLP/O'Connor & Hannan, Washington, DC.






For Basf Corporation, Cross Claimant: David Paul Schneider, LEAD ATTORNEY, PRO HAC VICE, Bressler, Amery &Ross, Florham Park, NJ.





For Carl A. Capasso, Cross Defendant: Robert Roy Leinwand, LEAD ATTORNEY, Robinson, Brog, Leinwand,Greene, Genovese & Gluck, P.C., New York, NY.

For Quanta Resource Corporation, Cross Defendant: Allen G. Reiter, LEAD ATTORNEY, Arent Fox LLP, New York,NY; Robin J. Marsico, LEAD ATTORNEY, Siller & Wilk, LLP, New York, NY.

For Underground Equipment Co. Ltd., Cross Defendant: Daniel Eric Katz, LEAD ATTORNEY, Bauman Katz & Grill,LLP, New York, NY.

For Nanco Contracting Corp., Cross Defendant: Daniel Eric Katz, LEAD ATTORNEY, Bauman Katz & Grill, LLP, NewYork, NY.





For Review Supplies, Inc, Cross Defendant: Daniel Eric Katz, LEAD ATTORNEY, Bauman Katz & Grill, LLP, NewYork, NY.

















For Carl A. Capasso, Cross Defendant: Robert Roy Leinwand, LEAD ATTORNEY, Robinson, Brog, Leinwand,




Greene, Genovese & Gluck, P.C., New York, NY.

















For Alcan Aluminum Corporation a/k/a Alcan Sheet & Plate, Cross Defendant: John Christopher Tillman, LEADATTORNEY, Novelis Corporation, Atlanta, GA.









For Quanta Resource Corporation, Cross Claimant: Allen G. Reiter, LEAD ATTORNEY, Arent Fox LLP, New York,NY.


For Basf Corporation, Cross Defendant: David Paul Schneider, PRO HAC VICE, Bressler, Amery & Ross, FlorhamPark, NJ.

For Chemical Leaman Tank Lines, Inc., Cross Defendant: John P. Dean, LEAD ATTORNEY, Willkie Farr & GallagherLLP, Washington, DC.

For Exxon Corp., Cross Defendant: Andrew E. Anselmi, LEAD ATTORNEY, PRO HAC VICE, McCusker, Anselmi,Rosen & Carvelli, PC, Florham Park, NJ; Patrick J. Conlon, LEAD ATTORNEY, Exxon Mobil Corporation, Annandale,NJ.

For General Dynamics Corporation, Cross Defendant: Norman Walter Bernstein, LEAD ATTORNEY, N.W. Bernstein& Associates, LLC, Rye Brook, NY.

For Stanley Works, Inc., Cross Defendant: Irvin M. Freilich, LEAD ATTORNEY, Robertson, Freilich, Bruno & Cohen,LLC, Newark, NJ.



For Chemical Leaman Tank Lines, Inc., Cross Defendant: John P. Dean, LEAD ATTORNEY, Willkie Farr & GallagherLLP, Washington, DC.


For General Dynamics Corporation, Cross Defendant: Norman Walter Bernstein, LEAD ATTORNEY, N.W. Bernstein




& Associates, LLC, Rye Brook, NY.

For Quanta Resource Corporation, Cross Defendant: Allen G. Reiter, LEAD ATTORNEY, Arent Fox LLP, New York,NY.


For Basf Corporation, Cross Claimant: David Paul Schneider, PRO HAC VICE, Bressler, Amery & Ross, FlorhamPark, NJ.







For Stanley Works, Inc., Cross Claimant: Irvin M. Freilich, LEAD ATTORNEY, Robertson, Freilich, Bruno & Cohen,LLC, Newark, NJ.



For Chemical Leaman Tank Lines, Inc., Counter Claimant: John P. Dean, LEAD ATTORNEY, Willkie Farr & GallagherLLP, Washington, DC.

For DMJ Associates, L.L.C., also known as DMJ Associates, L.L., Counter Defendant: David Andrew Luttinger, Jr.,LEAD ATTORNEY, Zevwik, Horton Guiborda & McGovern, New York, NY; Michael D Goodstein, HunsuckerGoodstein PC, Washington, DC; Paul C. Homsy, Fognani Guibord & Homsy, New York, NY.

For Chemical Leaman Tank Lines, Inc., Cross Claimant: John P. Dean, LEAD ATTORNEY, Willkie Farr & GallagherLLP, Washington, DC.


For Quanta Resource Corporation, Cross Defendant: Allen G. Reiter, LEAD ATTORNEY, Arent Fox LLP, New York,




NY.

For DMJ Associates, L.L.C., also known as DMJ Associates, L.L., Counter Defendant: David Andrew Luttinger, Jr.,LEAD ATTORNEY, Zevwik, Horton Guiborda & McGovern, New York, NY; Michael D Goodstein, HunsuckerGoodstein PC, Washington, DC; Paul C. Homsy, Fognani Guibord & Homsy, New York, NY.



For Review Supplies, Inc, Cross Claimant: Daniel Eric Katz, LEAD ATTORNEY, Bauman Katz & Grill, LLP, New York,NY.

For Nanco Contracting Corp., Cross Claimant: Daniel Eric Katz, LEAD ATTORNEY, Bauman Katz & Grill, LLP, NewYork, NY.

For Underground Equipment Co. Ltd., Cross Claimant: Daniel Eric Katz, LEAD ATTORNEY, Bauman Katz & Grill,LLP, New York, NY.


For Basf Corporation, Cross Defendant: David Paul Schneider, LEAD ATTORNEY, PRO HAC VICE, Bressler, Amery& Ross, Florham Park, NJ.

For Chemical Leaman Tank Lines, Inc., Cross Defendant: Bonni Fine Kaufman, LEAD ATTORNEY, Holland & KnightLLP, Washington, DC; John P. Dean, LEAD ATTORNEY, Willkie Farr & Gallagher LLP, Washington, DC; Richard F.Waddington, LEAD ATTORNEY, Willkie Farr & Gallagher LLP, Washington, DC.





For Quanta Resource Corporation, Counter Claimant: Allen G. Reiter, LEAD ATTORNEY, Arent Fox LLP, New York,NY; Robin J. Marsico, LEAD ATTORNEY, Siller & Wilk, LLP, New York, NY.

For DMJ Associates, L.L.C., also known as DMJ Associates, L.L., Counter Defendant: Barbara Burnett Guibord,LEAD ATTORNEY, Fognani Guibord & Homsy, Chicago, IL; David Andrew Luttinger, Jr., LEAD ATTORNEY, Zevwik,Horton Guiborda & McGovern, New York, NY; Douglas W. Michaud, LEAD ATTORNEY, Fognani Guibord & Homsy,Chicago, IL; ATTORNEY TO BE NOTICED Paul C. Homsy, LEAD ATTORNEY, Fognani Guibord & Homsy, NewYork, NY; Michael D Goodstein, Hunsucker Goodstein PC, Washington, DC.





For Quanta Resource Corporation, Cross Claimant: Allen G. Reiter, LEAD ATTORNEY, Arent Fox LLP, New York,NY; Robin J. Marsico, LEAD ATTORNEY, Siller & Wilk, LLP, New York, NY.



For Stanley Works, Inc., Cross Defendant: Irvin M. Freilich, LEAD ATTORNEY, Robertson, Freilich, Bruno & Cohen,LLC, Newark, NJ; William W. Robertson, LEAD ATTORNEY, Robertson, Freilich, Bruno & Cohen, LLC, Newark, NJ.





For Clairol, Incorporated, Cross Defendant: Reed W. Neuman, LEAD ATTORNEY, PRO HAC VICE, NossamanLLP/O'Connor & Hannan, Washington, DC.

For Basf Corporation, Cross Defendant: David Paul Schneider, LEAD ATTORNEY, PRO HAC VICE, Bressler, Amery& Ross, Florham Park, NJ.


































For Rockwell Automation, Inc., Counter Claimant: Kevin Allen Gaynor, LEAD ATTORNEY, Vinson & Elkins, LLP,Washington, DC.


For Exxon Mobil Corporation, Cross Defendant: Andrew E. Anselmi, LEAD ATTORNEY, PRO HAC VICE, McCusker,Anselmi, Rosen & Carvelli, PC, Florham Park, NJ.

For Proctor & Gamble Haircare LLC, Cross Defendant: Reed W. Neuman, LEAD ATTORNEY, PRO HAC VICE,Nossaman LLP/O'Connor & Hannan, Washington, DC.

For Basf Corporation, Counter Claimant: David Paul Schneider, PRO HAC VICE, Bressler, Amery & Ross, FlorhamPark, NJ.

For Proctor & Gamble Haircare LLC, Counter Claimant: Reed W. Neuman, PRO HAC VICE, NossamanLLP/O'Connor & Hannan, Washington, DC.



For Proctor & Gamble Haircare LLC, Cross Defendant: Reed W. Neuman, PRO HAC VICE, Nossaman LLP/O'Connor& Hannan, Washington, DC.

For Ingersoll-Rand Company, Counter Claimant: Dennis Michael Reznick, LEAD ATTORNEY, Edwards & Angell,LLP, Short Hills, NJ.



For United Technologies Corporation, Counter Claimant: Ross Stuart Katz, LEAD ATTORNEY, Robinson & Cole LLP,New York, NY.








For Ford Motor Company, Counter Claimant: Doreen A. Simmons, Hancock & Estabrook, LLP, Syracuse, NY.




For Stanley Works, Inc., Counter Claimant: John Francis Olsen, Robertson, Freilich, Bruno & Cohen, LLC, Newark,NJ.

For BASF Corporation, Counter Claimant: David Paul Schneider, PRO HAC VICE, Bressler, Amery & Ross, FlorhamPark, NJ.

For Basf Corporation, Counter Claimant: David Paul Schneider, PRO HAC VICE, Bressler, Amery & Ross, FlorhamPark, NJ.

For Exxon Mobil Corporation, Counter Claimant: Andrew E. Anselmi, LEAD ATTORNEY, PRO HAC VICE, McCusker,Anselmi, Rosen & Carvelli, PC, Florham Park, NJ.


For Exxon Corp., Cross Defendant: Andrew E. Anselmi, LEAD ATTORNEY, PRO HAC VICE, McCusker, Anselmi,Rosen & Carvelli, PC, Florham Park, NJ.


For Ingersoll-Rand Company, Counter Claimant: Dennis Michael Reznick, Edwards & Angell, LLP, Short Hills, NJ.






For Ford Motor Company, Counter Claimant: John G. Powers, Hancock & Estabrook, LLP, Syracuse, NY.



For DaimlerChrysler Corporation, Counter Claimant: John G. Powers, Hancock & Estabrook, LLP, Syracuse, NY.




For BASF Corporation, Cross Defendant: David Paul Schneider, PRO HAC VICE, Bressler, Amery & Ross, FlorhamPark, NJ.


For Proctor & Gamble Haircare LLC, Counter Claimant: Reed W. Neuman, PRO HAC VICE, NossamanLLP/O'Connor & Hannan, Washington, DC.




For Stanley Works, Inc., Counter Claimant: John Francis Olsen, Robertson, Freilich, Bruno & Cohen, LLC, Newark,NJ.









For Exxon Corp., Counter Defendant: Andrew E. Anselmi, LEAD ATTORNEY, PRO HAC VICE, McCusker, Anselmi,Rosen & Carvelli, PC, Florham Park, NJ.

For Exxon Mobil Corporation, Counter Defendant: Andrew E. Anselmi, LEAD ATTORNEY, PRO HAC VICE,McCusker, Anselmi, Rosen & Carvelli, PC, Florham Park, NJ.



For Exxon Mobil Corporation, Counter Claimant: Andrew E. Anselmi, LEAD ATTORNEY, PRO HAC VICE, McCusker,Anselmi, Rosen & Carvelli, PC, Florham Park, NJ.





For Proctor & Gamble Haircare LLC, Counter Claimant: Reed W. Neuman, LEAD ATTORNEY, PRO HAC VICE,Nossaman LLP/O'Connor & Hannan, Washington, DC.

For Quanta Resource Corporation, ThirdParty Plaintiff: Allen G. Reiter, LEAD ATTORNEY, Arent Fox LLP, New York,NY; Jennifer Lynn White, Arent Fox LLP, New York, NY; Jill L. Abitbol, Sonnenschein, Nath & Rosenthal LLP, NewYork, NY.

For Exxon Corp., ThirdParty Plaintiff: Andrew E. Anselmi, LEAD ATTORNEY, PRO HAC VICE, McCusker, Anselmi,Rosen & Carvelli, PC, Florham Park, NJ; Maura W. Sommer, McCusker Anselmi Rosen & Carvelli, P.C..

For Alcan Aluminum Corporation a/k/a Alcan Sheet & Plate, ThirdParty Defendant: John Christopher Tillman, LEADATTORNEY, Novelis Corporation, Atlanta, GA; Mark D Kindt, LEAD ATTORNEY, PRO HAC VICE, Mark D. Kindt,Lakewood, OH.

For AVCO Corporation, ThirdParty Defendant: David A. Roth, LEAD ATTORNEY, PRO HAC VICE, Greenbaum,Rowe, Smith & Davis LLP, Woodbridge, NJ; Kathryn V. Hatfield, LEAD ATTORNEY, Schenck, Price, Smith & King,LLP, Morristown, NJ; Douglas S. Zucker, Schenck, Price, Smith & King, LLP, Morristown, NJ.

For Jet-Line Services, Inc., ThirdParty Defendant: Matthew C. Donahue, LEAD ATTORNEY, Eno Boulay Martin &Donahue LLP, Lowell, MA.

For Marlin Firearms Co., ThirdParty Defendant: Christopher Renzulli, Renzulli Law Firm, LLP, White Plains, NY;




Douglas J. Bohn, Renzulli Law Firm LLP, New York, NY.

For Midland Asphalt Corporation, ThirdParty Defendant: Gerard Filitti, LEAD ATTORNEY, Drinker Biddle & ReathLLP, Florham Park, NJ; Michael E. Blaine, LEAD ATTORNEY, Hogan Lovells US LLP, New York, NY.

For Neapco, Inc., ThirdParty Defendant: Timothy E. Corriston, Connell Foley, Roseland, NJ.

For Revere Copper Products, Inc. a/k/a Revere Copper & Brass Incorporated, ThirdParty Defendant: Robert R. Tyson,LEAD ATTORNEY, Bond, Schoeneck & King, PLLC, Syracuse, NY; Thomas R. Smith, LEAD ATTORNEY, Bond,Schoeneck & King, PLLC, Syracuse, NY; James P. Clark, Cullen & Dykman LLP, Garden City, NY; Kate I Reid, BondSchoeneck & King, Syracuse, NY.

For Rexam Beverage Can Company, ThirdParty Defendant: William S Hatfield, LEAD ATTORNEY, Gibbons P.C.,Newark, NJ; Camille V. Otero, GIBBONS, P.C., Newark, NJ.

For River Terminal Development (Scrap Yard Division) a/k/a RTC Properties f/k/a Union Mineral & Alloys Corp.,ThirdParty Defendant: Daniel Riesel, LEAD ATTORNEY, Sive, Paget & Riesel, P.C., New York, NY; Steven C. Russo,LEAD ATTORNEY, Sive, Paget & Riesel, P.C., New York, NY; Jennifer Lynn Coghlan, Sive, Paget & Riesel, P.C.,New York, NY.

For Sunoco, Inc., ThirdParty Defendant: Harold L. Segall, LEAD ATTORNEY, PRO HAC VICE, Beveridge & Diamond,P.C., Washington, DC; Michael G. Murphy, LEAD ATTORNEY, Beveridge & Diamond, PC, New York, NY; Bina R.Reddy, Beveridge & Diamond, PC, Washington, DC; Timothy M. Sullivan, PRO HAC VICE, Beveridge & Diamond,P.C., Washington, DC.

For United States Airforce, ThirdParty Defendant: Sandra Lynn Levy, United States Attorneys Office, Eastern Districtof New York, Brooklyn, NY.

For United States Army, ThirdParty Defendant: Sandra Lynn Levy, United States Attorneys Office, Eastern District ofNew York, Brooklyn, NY.

For United States Coast Guard, ThirdParty Defendant: Sandra Lynn Levy, United States Attorneys Office, EasternDistrict of New York, Brooklyn, NY.

For United States Department of Defense, ThirdParty Defendant: Sandra Lynn Levy, United States Attorneys Office,Eastern District of New York, Brooklyn, NY.

For United States Navy, ThirdParty Defendant: Sandra Lynn Levy, United States Attorneys Office, Eastern District ofNew York, Brooklyn, NY.

For United States of America, ThirdParty Defendant: Sandra Lynn Levy, United States Attorneys Office, EasternDistrict of New York, Brooklyn, NY.

For Wyman-Gordon Company, ThirdParty Defendant: Sean Monaghan, LEAD ATTORNEY, PRO HAC VICE,Schenck Price Smith & King LLP, Florham Park, NJ.

For Rexam Beverage Can Company, Cross Claimant: William S Hatfield, LEAD ATTORNEY, Gibbons P.C., Newark,NJ; Dennis Thomas Kearney, Day Pitney LLP, Parsippany, NJ.

For AVCO Corporation, Cross Defendant: David A. Roth, LEAD ATTORNEY, PRO HAC VICE, Greenbaum, Rowe,Smith & Davis LLP, Woodbridge, NJ; Kathryn V. Hatfield, LEAD ATTORNEY, Schenck, Price, Smith & King, LLP,Morristown, NJ; Douglas S. Zucker, Schenck, Price, Smith & King, LLP, Morristown, NJ.




For Consolidated Container Company, LLC f/k/a Continental Can Company, Cross Defendant: Piret Loone, LEADATTORNEY, Alston & Bird LLP, New York, NY.

For Jet-Line Services, Inc., Cross Defendant: Matthew C. Donahue, Eno Boulay Martin & Donahue LLP, Lowell, MA.

For Midland Asphalt Corporation, Cross Defendant: Gerard Filitti, LEAD ATTORNEY, Drinker Biddle & Reath LLP,Florham Park, NJ; Michael E. Blaine, LEAD ATTORNEY, Hogan Lovells US LLP, New York, NY.

For Peabody Coastal, Cross Defendant: Deborah J. Chadsey, LEAD ATTORNEY, Kavinoky Cook LLP, Buffalo, NY;Anne S. Kenney, Jenner & Block LLP.

For Praxair, Inc. f/k/a Union Carbide Corporation/The Dow Chemical Company, Cross Defendant: Dean S. Sommer,LEAD ATTORNEY, Young, Sommer, Ward, Ritzenberg, Baker & Moore, LLC, Albany, NY.

For Revere Copper Products, Inc. a/k/a Revere Copper & Brass Incorporated, Cross Defendant: James P. Clark,Cullen & Dykman LLP, Garden City, NY.

For Simmonds Precision Products, Inc., Cross Defendant: Edward F. McTiernan, LEAD ATTORNEY, Gibbons, DelDeo, Dolan, Griffinger & Vecchione, Newark, NJ.

For Sunoco, Inc., Cross Defendant: Harold L. Segall, LEAD ATTORNEY, PRO HAC VICE, Beveridge & Diamond,P.C., Washington, DC; Timothy M. Sullivan, LEAD ATTORNEY, PRO HAC VICE, Beveridge & Diamond, P.C.,Washington, DC.

For Coastal Oil New York Inc., Cross Defendant: Timothy M. Sullivan, LEAD ATTORNEY, PRO HAC VICE, Beveridge& Diamond, P.C., Washington, DC.


For Kraft Foods Global, Inc., Cross Defendant: Daniel Riesel, LEAD ATTORNEY, Sive, Paget & Riesel, P.C., NewYork, NY.




For Peabody Coastal, Cross Defendant: Deborah J. Chadsey, LEAD ATTORNEY, Kavinoky Cook LLP, Buffalo, NY;Anne S. Kenney, PRO HAC VICE, Jenner & Block LLP, Chicago, IL.

For Revere Copper Products, Inc. a/k/a Revere Copper & Brass Incorporated, Cross Defendant: James P. Clark,Cullen & Dykman LLP, Garden City, NY.

For Rexam Beverage Can Company, Cross Defendant: William S Hatfield, LEAD ATTORNEY, Gibbons P.C., Newark,NJ.

For River Terminal Development (Scrap Yard Division) a/k/a RTC Properties f/k/a Union Mineral & Alloys Corp., Cross




Defendant: Daniel Riesel, LEAD ATTORNEY, Sive, Paget & Riesel, P.C., New York, NY.

For Simmonds Precision Products, Inc., Cross Defendant: Edward F. McTiernan, LEAD ATTORNEY, Gibbons, DelDeo, Dolan, Griffinger & Vecchione, Newark, NJ.

For Sunoco, Inc., Cross Defendant: Harold L. Segall, LEAD ATTORNEY, PRO HAC VICE, Beveridge & Diamond,P.C., Washington, DC; Timothy M. Sullivan, LEAD ATTORNEY, PRO HAC VICE, Beveridge & Diamond, P.C.,Washington, DC.

For AVCO Corporation, Counter Claimant: David A. Roth, LEAD ATTORNEY, PRO HAC VICE, Greenbaum, Rowe,Smith & Davis LLP, Woodbridge, NJ; Kathryn V. Hatfield, LEAD ATTORNEY, Schenck, Price, Smith & King, LLP,Morristown, NJ; Douglas S. Zucker, Schenck, Price, Smith & King, LLP, Morristown, NJ.

For Exxon Corp., Counter Defendant: Andrew E. Anselmi, LEAD ATTORNEY, PRO HAC VICE, McCusker, Anselmi,Rosen & Carvelli, PC, Florham Park, NJ.

For Quanta Resource Corporation, ThirdParty Plaintiff: Allen G. Reiter, LEAD ATTORNEY, Arent Fox LLP, New York,NY; Jennifer Lynn White, Arent Fox LLP, New York, NY; Roger Orlando Chao, Arent Fox LLP, New York, NY.

For Jet-Line Services, Inc., ThirdParty Defendant: Matthew C. Donahue, Eno Boulay Martin & Donahue LLP, Lowell,MA.

For Midland Asphalt Corporation, ThirdParty Defendant: Michael E. Blaine, LEAD ATTORNEY, Hogan Lovells USLLP, New York, NY.

For Peabody Coastal, ThirdParty Defendant: Keri L. Holleb Hotaling, LEAD ATTORNEY, Jenner & Block LLP,Chicago, IL; Anne S. Kenney, Jenner & Block LLP; Paul Michael Monteleoni, Jenner & Block LLP, New York, NY.

For Rexam Beverage Can Company, ThirdParty Defendant: Nicole Isobel Hyland, LEAD ATTORNEY, Frankfurt KurnitKlein & Selz, New York, NY; Ronald C. Minkoff, LEAD ATTORNEY, Frankfurt Kurnit Klein & Selz, P.C., New York, NY;William S Hatfield, LEAD ATTORNEY, Gibbons P.C., Newark, NJ; Camille V. Otero, GIBBONS, P.C., Newark, NJ.

For River Terminal Development (Scrap Yard Division) a/k/a RTC Properties f/k/a Union Mineral & Alloys Corp.,ThirdParty Defendant: Daniel Riesel, LEAD ATTORNEY, Sive, Paget & Riesel, P.C., New York, NY.

For Sunoco, Inc., ThirdParty Defendant: Timothy M. Sullivan, LEAD ATTORNEY, PRO HAC VICE, Beveridge &Diamond, P.C., Washington, DC.


For Emhart Teknologies LLC, ThirdParty Defendant: Jerome Muys, Sullivan & Worcester LLP, Washington, DC.

For Peabody Coastal, ThirdParty Defendant: Keri L. Holleb Hotaling, Jenner & Block LLP, Chicago, IL; Anne S.Kenney, Jenner & Block LLP.








For NL Industries, Inc., ThirdParty Defendant: Alexander Nemiroff, LEAD ATTORNEY, Archer & Greiner, Haddonfield,NJ.

For United States Department of the Army, ThirdParty Defendant: Sandra Lynn Levy, LEAD ATTORNEY, UnitedStates Attorneys Office, Eastern District of New York, Brooklyn, NY.

For United States Department of the Navy, ThirdParty Defendant: Sandra Lynn Levy, LEAD ATTORNEY, UnitedStates Attorneys Office, Eastern District of New York, Brooklyn, NY.

For Kraft Foods Global, Inc., ThirdParty Defendant: Daniel Riesel, LEAD ATTORNEY, Sive, Paget & Riesel, P.C.,New York, NY.

For Crosman Corp. f/k/a Coleman Airguns, Inc. f/k/a Crosman Arms Company, Inc., ThirdParty Defendant: Thomas FWalsh, LEAD ATTORNEY, Hiscock & Barclay LLP, Rochester, NY.

For NL Industries, Inc., Cross Claimant: Alexander Nemiroff, LEAD ATTORNEY, Archer & Greiner, Haddonfield, NJ.

For River Terminal Development (Scrap Yard Division) a/k/a RTC Properties f/k/a Union Mineral & Alloys Corp., CrossDefendant: Daniel Riesel, LEAD ATTORNEY, Sive, Paget & Riesel, P.C., New York, NY.

For Sunoco, Inc., Cross Defendant: Timothy M. Sullivan, LEAD ATTORNEY, PRO HAC VICE, Beveridge & Diamond,P.C., Washington, DC.

For United States Airforce, Cross Defendant: Kevan Cleary, LEAD ATTORNEY, United States Attorney's Office,Eastern District of New York, Brooklyn, NY.


For Alcan Aluminum Corporation a/k/a Alcan Sheet & Plate, Cross Defendant: Mark D Kindt, LEAD ATTORNEY, PROHAC VICE, Mark D. Kindt, Lakewood, OH.





For Peabody Coastal, ThirdParty Defendant: Allison A. Torrence, Jenner & Block LLP, Chicago, IL; Deborah J.Chadsey, Kavinoky Cook LLP, Buffalo, NY; Keri L. Holleb Hotaling, Jenner & Block LLP, Chicago, IL; Anne S.




Kenney, Jenner & Block LLP.




For United States Department of the Air Force, ThirdParty Defendant: Sandra Lynn Levy, LEAD ATTORNEY, UnitedStates Attorneys Office, Eastern District of New York, Brooklyn, NY.

For United States Department of the Army, ThirdParty Defendant: Sandra Lynn Levy, United States Attorneys Office,Eastern District of New York, Brooklyn, NY.

For United States Department of the Navy, ThirdParty Defendant: Sandra Lynn Levy, United States Attorneys Office,Eastern District of New York, Brooklyn, NY.

For Kraft Foods Global, Inc., ThirdParty Defendant: Daniel Riesel, LEAD ATTORNEY, Sive, Paget & Riesel, P.C.,New York, NY; Jennifer Lynn Coghlan, Sive, Paget & Riesel, P.C., New York, NY.


For Alcan Aluminum Corporation a/k/a Alcan Sheet & Plate, Counter Claimant: John Christopher Tillman, LEADATTORNEY, Novelis Corporation, Atlanta, GA; Mark D Kindt, LEAD ATTORNEY, PRO HAC VICE, Mark D. Kindt,Lakewood, OH.


For Sunoco, Inc., Counter Claimant: Harold L. Segall, LEAD ATTORNEY, PRO HAC VICE, Beveridge & Diamond,P.C., Washington, DC; Michael G. Murphy, LEAD ATTORNEY, Beveridge & Diamond, PC, New York, NY; Timothy M.Sullivan, PRO HAC VICE, Beveridge & Diamond, P.C., Washington, DC.


For Quanta Resource Corporation, Counter Defendant: Allen G. Reiter, LEAD ATTORNEY, Arent Fox LLP, New York,NY; Jill L. Abitbol, Sonnenschein, Nath & Rosenthal LLP, New York, NY.

For Emhart Teknologies LLC, Counter Claimant: Jerome Muys, LEAD ATTORNEY, Bingham McCutchen LLP,Washington, DC; L. Misha Preheim, LEAD ATTORNEY, Bingham McCutchen LLP, Washington, DC.








For Procter & Gamble Haircare LLC, Counter Claimant: James P. Ryan, Nossaman LLP/O'Connor & Hannan,Washington, DC.





For Kraft Foods Global, Inc., Counter Claimant: Daniel Riesel, LEAD ATTORNEY, Sive, Paget & Riesel, P.C., NewYork, NY; Jennifer Lynn Coghlan, Sive, Paget & Riesel, P.C., New York, NY.



For River Terminal Development (Scrap Yard Division) a/k/a RTC Properties f/k/a Union Mineral & Alloys Corp.,Counter Claimant: Daniel Riesel, LEAD ATTORNEY, Sive, Paget & Riesel, P.C., New York, NY; Steven C. Russo,LEAD ATTORNEY, Sive, Paget & Riesel, P.C., New York, NY; Jennifer Lynn Coghlan, Sive, Paget & Riesel, P.C.,New York, NY.



For TDY Industries, Inc., Counter Claimant: Duke K. McCall, III, LEAD ATTORNEY, PRO HAC VICE, BinghamMcCutchen, Washington, DC.


For Marlin Firearms Co., Counter Claimant: Douglas J. Bohn, Renzulli Law Firm LLP, New York, NY.






For Rexam Beverage Can Company, Counter Claimant: William S Hatfield, LEAD ATTORNEY, Gibbons P.C.,Newark, NJ; Camille V. Otero, GIBBONS, P.C., Newark, NJ.

For United States Department of Defense, Counter Claimant: Sandra Lynn Levy, United States Attorneys Office,Eastern District of New York, Brooklyn, NY.

For United States of America, Counter Claimant: Sandra Lynn Levy, United States Attorneys Office, Eastern District ofNew York, Brooklyn, NY.

For United States Department of the Air Force, Counter Claimant: Sandra Lynn Levy, United States Attorneys Office,Eastern District of New York, Brooklyn, NY.

For United States Department of the Army, Counter Claimant: Sandra Lynn Levy, United States Attorneys Office,Eastern District of New York, Brooklyn, NY.

For United States Department of the Coast Guard, Counter Claimant: Sandra Lynn Levy, United States AttorneysOffice, Eastern District of New York, Brooklyn, NY.

For United States Department of the Navy, Counter Claimant: Sandra Lynn Levy, United States Attorneys Office,Eastern District of New York, Brooklyn, NY.



For Neapco, Inc., Counter Claimant: Timothy E. Corriston, Connell Foley, Roseland, NJ.

For Quanta Resource Corporation, Counter Defendant: Allen G. Reiter, LEAD ATTORNEY, Arent Fox LLP, New York,NY; Jennifer Lynn White, Arent Fox LLP, New York, NY; Jill L. Abitbol, Sonnenschein, Nath & Rosenthal LLP, NewYork, NY.




For NL Industries, Inc., Cross Defendant: Alexander Nemiroff, LEAD ATTORNEY, Archer & Greiner, Haddonfield, NJ.

For Kraft Foods Global, Inc., Cross Defendant: Daniel Riesel, LEAD ATTORNEY, Sive, Paget & Riesel, P.C., NewYork, NY; Jennifer Lynn Coghlan, Sive, Paget & Riesel, P.C., New York, NY.

For Cooper Crouse-Hinds, LLC f/k/a Crouse-Hinds Company, Cross Defendant: Monica Youssef Awadalla, LEADATTORNEY, Latham & Watkins LLP, Newark, NJ.




For TDY Industries, Inc., Cross Defendant: Duke K. McCall, III, LEAD ATTORNEY, PRO HAC VICE, BinghamMcCutchen, Washington, DC; Joseph J. Barker, LEAD ATTORNEY, Bingham McCutchen LLP, New York, NY.

For Procter & Gamble Haircare LLC, Cross Defendant: James P. Ryan, Nossaman LLP/O'Connor & Hannan,Washington, DC.

For TDY Industries, Inc., Cross Defendant: Joseph J. Barker, LEAD ATTORNEY, Bingham McCutchen LLP, NewYork, NY.

For Crown Cork & Seal Company, Inc., Cross Defendant: Thomas J. Perry, Golub & Isabel, P.C..

For Conocophillips, Counter Claimant: Donald J. Fay, Waters McPherson McNeil P.C., Secaucus, NJ.

For Exxon Mobil Corporation, Counter Defendant: Andrew E. Anselmi, LEAD ATTORNEY, PRO HAC VICE,McCusker, Anselmi, Rosen & Carvelli, PC, Florham Park, NJ; Rosemarie DaSilva, McCusker Anselmi Rosen &Carvelli, Florham Park, NJ.

For Peabody Coastal, Cross Claimant: Deborah J. Chadsey, Kavinoky Cook LLP, Buffalo, NY; Anne S. Kenney,Jenner & Block LLP.

For Simmonds Precision Products, Inc., Cross Defendant: Edward F. McTiernan, LEAD ATTORNEY, Gibbons, DelDeo, Dolan, Griffinger & Vecchione, Newark, NJ; Susanne Peticolas, LEAD ATTORNEY, Gibbons, P.C., Newark, NJ.

For Long Island Lighting Company, Cross Defendant: Jay W. Freiberg, LEAD ATTORNEY, Katten Muchin ZavisRosenman, New York, NY.

For United States Department of the Air Force, Cross Defendant: Sandra Lynn Levy, United States Attorneys Office,Eastern District of New York, Brooklyn, NY.

For United States Department of the Army, Cross Defendant: Sandra Lynn Levy, United States Attorneys Office,Eastern District of New York, Brooklyn, NY.

For United States Department of the Coast Guard, Cross Defendant: Sandra Lynn Levy, United States AttorneysOffice, Eastern District of New York, Brooklyn, NY.


For NL Industries, Inc., Cross Defendant: Alexander Nemiroff, LEAD ATTORNEY, Archer & Greiner, Haddonfield, NJ.

For Procter & Gamble Haircare LLC, Cross Defendant: James P. Ryan, Nossaman LLP/O'Connor & Hannan,Washington, DC.

For TDY Industries, Inc., Cross Defendant: Joseph J. Barker, LEAD ATTORNEY, Bingham McCutchen LLP, NewYork, NY.

For Crown Cork & Seal Company, Inc., Cross Defendant: Thomas J. Perry, Golub & Isabel, P.C..

For Conocophillips, Cross Defendant: Donald J. Fay, Waters McPherson McNeil P.C., Secaucus, NJ.





For United States Department of the Navy, Cross Defendant: Sandra Lynn Levy, United States Attorneys Office,Eastern District of New York, Brooklyn, NY.



For Peabody Coastal, Counter Claimant: Deborah J. Chadsey, Kavinoky Cook LLP, Buffalo, NY; Anne S. Kenney,Jenner & Block LLP.

For Exxon Mobil Corporation, Counter Defendant: Andrew E. Anselmi, LEAD ATTORNEY, PRO HAC VICE,McCusker, Anselmi, Rosen & Carvelli, PC, Florham Park, NJ; Rosemarie DaSilva, McCusker Anselmi Rosen &Carvelli, Florham Park, NJ.

For Quanta Resource Corporation, Counter Defendant: Allen G. Reiter, LEAD ATTORNEY, Arent Fox LLP, New York,NY.

DORA L. IRIZARRY, Chief United States District Judge.

DORA L. IRIZARRY

MEMORANDUM AND ORDERDORA L. IRIZARRY, Chief Judge:

In the underlying first-party action, plaintiff DMJ Associates, L.L.C. ("DMJ") brought an environmental cleanup costrecovery claim against various defendants, including Exxon Mobil Corporation ("Exxon Mobil") and Quanta ResourcesCorporation ("Quanta"), under § 107 of the Comprehensive Environmental Response, Compensation and Liability Actof 1980 ("CERCLA"), 42 U.S.C. § 9607 , inter alia. Exxon Mobil and Quanta, collectively the third-party plaintiffs("TPPs"), entered into a settlement agreement with DMJ in which the TPPs agreed to pay certain monies to DMJ forits response costs and to remediate conditions at the facility operated by Quanta ("Quanta Facility"). The TPPs thenasserted claims in a third-party action against Revere Copper Products, Inc. ("RCPI") and other third-party defendants("TPDs") in a third amended third-party complaint for response costs and contribution under CERCLA §§ 107 and 113alleging that RCPI and other TPDs transported hazardous materials for disposal or treatment to the Quanta Facilityduring the period beginning in 1972 and extending through 1981. (Third Amended Third-Party Complaint ("TATPC") at¶¶ 2, 12, Dkt. Entry No. 1149.)

On October 27, 1982, RCPI's corporate predecessors filed for bankruptcy in the U.S. Bankruptcy Court for theSouthern District of New York ("BCSDNY"). On May 19, 2014, RCPI filed a motion for a pre-motion conference toseek permission to file the instant motion and, alternatively, request that the matter be referred to the BankruptcyCourt. (See RCPI Motion for Pre-Motion Conference, Dkt. Entry No. 1532.) On August 11, 2014, this Court deniedboth RCPI's motion for a pre-motion conference and its request to refer the case to Bankruptcy Court. (See August11, 2014 Order, Dkt. Entry No. 1543.) In that decision, this Court held that "the TPPs' CERCLA claims did notconstitute valid bankruptcy claims, and, thus, the Bankruptcy Court did not discharge these claims in its ConfirmationOrder." ( Id. at 3.) RCPI filed the instant motion for summary judgment based on discharge in bankruptcy arguing"that the CERCLA claims asserted by [the TPPs] arose out of contamination attributable to the activities of"



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Quanta and its predecessors, which predated RCPI's corporate predecessors filing for bankruptcy. (See RCPI Motionfor Pre-Motion Conference.)

For the reasons set forth below, RCPI's motion for summary judgment based on discharge in bankruptcy is denied.

BACKGROUNDFamiliarity with the facts of the underlying first party action is presumed for purposes of this decision.

I. Corporate History of RCPIRCPI, in its first corporate iteration, "was formed in 1928 by the consolidation of six copper and brass fabricatingcompanies." (Declaration of Allen G. Reiter1 ("Reiter Decl."), Exhibit 11, Revere's Disclosure Statement at 6, Dkt.Entry No. 1573-4.) The firm produced, manufactured, and sold "nonferrous metals and metal products" in highlycompetitive national markets. ( Id)

Prior to the 1982 commencement of bankruptcy proceedings, RCPI's predecessor, Revere Copper Products, Inc.,was a Maryland corporation, incorporated in 1980 as a subsidiary of Revere Copper & Brass Incorporated.(Declaration of Kevin Cleary2 ("Cleary Decl.") at ¶ 2, Dkt. Entry No. 1572-1.) RCPI is a Delaware corporation formedin 1987 that, through a series of corporate reorganizations and other transactions, became the corporate successor bymerger to the old Revere Copper Products, Inc. ("Old RCPI"). (Cleary Decl. at ¶¶ 4-7.)

On October 27, 1982, Old RCPI and Revere Copper & Brass Incorporated ("Old Revere") filed for bankruptcyprotection in the BDSDNY under Chapter 11 of the U.S. Bankruptcy Code. (Declaration of Thomas L. Kennedy3("Kennedy Decl."), Exhibit B, Voluntary Petition for Relief Under Chapter 11, Title 11, United States Code ("RevereBankruptcy Petition"), Dkt. Entry No. 1572.) On July 29, 1985, the BDSDNY confirmed Old RCPI and Old Revere'samended joint plan of reorganization. (Response to Third-Party Plaintiffs' Statement of Additional Material Facts at ¶4, Dkt. Entry No. 1574.)

II. Relationship Between Old RCPI and Old Revere with the TPPsOn July 29, 1980, Quanta purchased the assets of Portland Holding Corporation ("Portland Holding"), whichpreviously had operated under the name Newton Refining Company ("Newton Refining"). (Declaration of Thomas R.Smith4 ("Smith Decl."), Exhibit 14, Operations Analysis, Dkt. Entry No. 1571-4.) Newton Refining was founded byRussell W. Mahler ("Mahler") in 1957 and its business "consisted of recycling liquid oil wastes into fuel oil andlubricating oil." ( Id.) Newton Refining operated multiple re-refining facilities in Syracuse, New York and Long IslandCity, New York, among other cities. ( Id.) "In May, 1976, Mahler sold Newton Refining and its subsidiary companies toAg-Met, Inc., which owned the company until January, 1979." ( Id.) "In 1979 Ag-Met resold certain of the assets toMahler," who established Portland Holding prior to its asset sale to Quanta. ( Id.)

Pursuant to an asset purchase agreement dated April 25, 1980, Quanta was authorized to purchase certain assets ofcompanies owned and operated by Mahler, including Portland Holding, Hudson Oil Refining Corporation, EdgewaterTerminals, Northeast Oil of Syracuse, Casco Equipment Corporation, Polar Industries, and Oil Transfer Corporation(collectively, "the Mahler Companies"). (Smith Decl., Exhibit 4, Deposition of Eugene Prashker5 ("Prashker Dep.") at33:8-34:1, Dkt. Entry No. 1571-3.) When Quanta acquired the Long Island City re-refining facility as part of the MahlerCompanies' asset purchase, Quanta was aware that the property was subject to a consent order by the New YorkState Department of Environmental Conservation ("NYSDEC") compelling it to clean up the waste petroleum productsat the property site. (Smith Decl., Exhibit 5, Prashker Dep. at 82:9-14, Dkt. Entry No. 1571-3.) Subsequent to the assetpurchase, Quanta negotiated its own consent order with NYSDEC. ( Id. at 83:1-3.)

Old RCPI and Old Revere were customers of the Mahler Companies insofar as they employed Mahler Companies totransport their waste oils for disposal to a processing facility in Syracuse, New York. (RCPI's Rule 56.1 Statement at ¶4, Dkt. Entry No. 1571-1.) Some of those wastes were transshipped from the Syracuse facility to the Quanta Facility. (Id.)




III. Quanta BankruptcyIn June of 1980, Straubing & Rubin, an engineering firm, prepared a report detailing some of the environmentaldeficiencies at the Quanta Facility. (Smith Decl., Deposition of Kenneth Mansfield6 ("Mansfield Dep.") at 221:5-225:16,Dkt. Entry No. 1571-3.) From May 7, 1982 through December 1, 1982, the City of New York Department ofEnvironmental Protection ("NYCDEP") took emergency response actions to remove contaminated petroleum wasteproducts containing polychlorinated biphenyls ("PCBs") and other hazardous materials from the Quanta Facility.(Smith Decl., Exhibit 18, Quanta Resources City on Scene Coordinator's Report to the Commissioner, Dkt. Entry No.1571-4.) In a letter dated August 2, 1982, addressed to Quanta, the New York City Department of Health declared theQuanta Facility to be a public nuisance due to the "unsafe and illegal manner" in which hazardous waste oil andsludge is stored. (Smith Decl., Exhibit 24, Dkt. Entry No. 1571-4.) In another letter dated August 24, 1982, addressedto the Commissioner of the NYSDEC, the Commissioner of the NYCDEP deemed the Quanta property site anabandoned and "inactive hazardous waste disposal site" fraught with corroded waste oil storage tanks. (Smith Decl.,Exhibit 26, Dkt. Entry No. 1571-4.)

On November 12, 1980, Quanta entered into an administrative consent order ("AOC") with the NYSDEC that grantedQuanta temporary authority over the Quanta Facility. (Smith Decl., Exhibit 29, Dkt. Entry No. 1571-4.) With thediscovery of significant amounts of PCBs and other hazardous waste materials at the Quanta Facility, Quantaconcluded in the summer of 1981 that operation of its waste oil re-refinery would be unprofitable. ( Id.) Therefore, onOctober 6, 1981, Quanta filed a petition for Chapter 11 bankruptcy. ( Id.) On November 12, 1981, Quanta's Chapter 11bankruptcy petition was converted to a liquidation pursuant to Chapter 7 of the U.S. Bankruptcy Code. ( Id.)

IV. Old Revere and Old RCPI BankruptcyAs noted above, Old Revere, Old RCPI and certain other subsidiaries and affiliates ("the Old Revere Companies")each filed petitions for bankruptcy protection on October 27, 1982. (Kennedy Decl. at ¶ 2.) These bankruptcy petitionswere ordered consolidated and jointly administered by the BDSDNY on October 27, 1982. ( Id. at ¶ 8.) On May 10,1985, the Old Revere Companies provided creditors and equity shareholders with notice of a hearing on approval ofthe Old Revere Companies' disclosure statement and of the hearing on confirmation of the reorganization plan. ( Id. at¶ 12.) On July 29, 1985, the BDSDNY approved the plan for reorganization and signed the Order Confirming the Plan("Confirmation Order"). ( Id. at ¶ 14.) The Confirmation Order was officially entered on July 30, 1985. ( Id.)

On October 10, 2013, RCPI, as the corporate successor to the Old Revere Companies, sought to reopen thebankruptcy proceedings before the BDSDNY asserting that the TPPs' claims against it were discharged pursuant tothe 1985 Confirmation Order. (RCPI Motion for Pre-Motion Conference at 2.) On May 6, 2014, the BDSDNY deniedRCPI's motion to reopen the underlying bankruptcy proceedings. (Declaration of Allen G. Reiter, Exhibit 3, OrderDenying Revere's Motion to Reopen the Bankruptcy Cases, Dkt. Entry No. 1532-2.) RCPI now moves for summaryjudgment before this Court again arguing that the TPPs claims against it constitute pre-petition claims that weredischarged pursuant to the 1985 Confirmation Order.

DISCUSSIONI. Summary Judgment Standard of ReviewSummary judgment is appropriate when "the movant shows that there is no genuine dispute as to any material factand the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a) . "In ruling on a summary judgmentmotion, the district court must resolve all ambiguities, and credit all factual inferences that could rationally be drawn, infavor of the party opposing summary judgment and determine whether there is a genuine dispute as to a material fact,raising an issue for trial." McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184 , 202 (2d Cir. 2007) (internal quotationsomitted). A fact is "material" within the meaning of Rule 56 when its resolution "might affect the outcome of the suitunder the governing law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242 , 248 , 106 S. Ct. 2505 , 91 L. Ed. 2d 202(1986). An issue is "genuine" when "the evidence is such that a reasonable jury could return a verdict for thenonmoving party." Id. To determine whether an issue is genuine, "[t]he inferences to be drawn from the underlyingaffidavits, exhibits, interrogatory answers, and depositions must be viewed in the light most favorable to the party



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opposing the motion." Cronin v. Aetna Life Ins. Co., 46 F.3d 196 , 202 (2d Cir. 1995) (citing United States v. Diebold,Inc., 369 U.S. 654 , 655 , 82 S. Ct. 993 , 8 L. Ed. 2d 176 (1962) (per curiam) and Ramseur v. Chase Manhattan Bank,865 F.2d 460 , 465 (2d Cir. 1989)). "[T]he evidence of the non-movant is to be believed, and all justifiable inferencesare to be drawn in his favor." Anderson, 477 U.S. at 255 . However, "[w]hen opposing parties tell two different stories,one of which is blatantly contradicted by the record, so that no reasonable jury could believe it, a court should notadopt that version of the facts for purposes of ruling on a motion for summary judgment." Scott v. Harris, 550 U.S. 372, 380 , 127 S. Ct. 1769 , 167 L. Ed. 2d 686 (2007).

The moving party bears the burden of "informing the district court of the basis for its motion, and identifying thoseportions of [the record] . . . which it believes demonstrates the absence of a genuine issue of fact." Celotex Corp. v.Catrett, 477 U.S. 317 , 323 , 106 S. Ct. 2548 , 91 L. Ed. 2d 265 (1986) (internal quotations omitted). Once the movingparty has met its burden, "the nonmoving party must come forward with 'specific facts showing that there is a genuineissue for trial.'" Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 , 587 , 106 S. Ct. 1348 , 89 L. Ed. 2d538 (1986) (emphasis omitted) (internal citation omitted). The nonmoving party must offer "concrete evidence fromwhich a reasonable juror could return a verdict in [its] favor." Anderson, 477 U.S. at 256 . The nonmoving party maynot "rely simply on conclusory statements or on contentions that the affidavits supporting the motion are not credible,or upon the mere allegations or denials of the nonmoving party's pleading." Ying Jing Gan v. City of New York, 996F.2d 522 , 532-33 (2d Cir. 1993) (internal citations and quotations omitted). "Summary judgment is appropriate only'[w]here the record taken as a whole could not lead a rational trier of fact to find for the non-moving party.'" Donnellyv. Greenburgh Cent. Sch. Dist. No. 7, 691 F.3d 134 , 141 (2d Cir. 2012) (quoting Matsushita, 475 U.S. at 587 ).

II. The TPPs Claims Were Not Discharged in Bankruptcy"[T]he existence of a valid bankruptcy claim depends on (1) whether the claimant possessed a right to payment, and(2) whether that right arose before the filing of the petition." Pension Benefit Guaranty Corporation v. Oneida Ltd., 562F.3d 154 , 157 (2d Cir. 2009) (internal quotation marks and citation omitted). In order to make such determinations,the courts must look to "the substantive non-bankruptcy law that gives rise to the debtor's obligation." Id .

A claim will be deemed pre-petition when it arises out of a relationship recognized in, for example the lawof contracts or torts. A claim exists only if before the filing of the bankruptcy petition, the relationshipbetween the debtor and the creditor contained all of the elements necessary to give rise to a legalobligation . . . under the relevant non-bankruptcy law.

In re Duplan Corp., 212 F.3d 144 , 152 (2d Cir. 2000).

"CERCLA claims arise for purposes of bankruptcy at the earliest on the date that CERCLA became effective,December 11, 1980." Id. at 151 . Indeed, the court in In re Chateaugay Corp. held that, "where there is no legalrelationship defined at the time of petition, that is, where the statute imposing the liability has not been enacted, itwould be impossible to find even the remotest right to payment." In re Chateaugay Corp., 154 B.R. 416 , 419 (S.D.N.Y.1993).

Here, CERCLA had been enacted prior to the confirmation of Old RCPI's bankruptcy on July 30, 1985. However,Section 113(f) of CERCLA, under which the TPPs brought this action against RCPI, had not yet been enacted at thetime of the hazardous waste releases or even before the 1985 Confirmation Order. Furthermore, the statutory scopeof section 107(a) of CERCLA had not yet permitted suit by private parties to recover cleanup costs from other privateparties. Such suit first was made possible in 2007 by the Supreme Court in United States v. Atlantic Research Corp.,which provided that a potentially responsible party ("PRP") could pursue a § 107 claim for recovery of cleanup costsagainst another PRP. 551 U.S. 128 , 139-141 , 127 S. Ct. 2331 , 168 L. Ed. 2d 28 (2007). Although RCPI contendsthat CERCLA § 107(a) bears the same statutory language as the date of its enactment and permitted private parties topursue contribution claims thereunder at the statute's inception in 1980, the TPPs still were precluded from seekingcontribution claims against Old RCPI under § 107 until the Supreme Court issued its 2007 decision in AtlanticResearch. As the Honorable Robert M. Levy, U.S.M.J., correctly noted in his Report and Recommendation issued on



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July 6, 2015, denying TPD's summary judgment motion as to Count 1 of the TATPC:

Prior to December 2004, when the U.S. Supreme Court decided Cooper Industries, Inc. v. Aviall Services,Inc., 543 U.S. 157 , 125 S. Ct. 577 , 160 L. Ed. 2d 548 (2004), every federal appellate court to address theinterplay of §§ 107 and 113 —including the Second Circuit—held that a PRP could not bring a § 107(a)cost recovery action against another PRP.

(Report and Recommendation ("R & R") at 13, Dkt. Entry No. 1564, adopted on Mar. 31, 2016, Dkt. Entry No. 1608.)However, Cooper Industries merely stood for the proposition that a private party that had not been sued underCERCLA § 106 or § 107(a) cannot obtain contribution under CERCLA § 113(f)(1) from other potentially liable parties.543 U.S. at 168 . Cooper Industries also declined to consider whether a private PRP could recover response costsagainst another private PRP under CERCLA § 107(a)(4)(B) . Id. at 170-71 .

In United States v. Atlantic Research, the Supreme Court held that § 107(a) allows for the recovery of remediationcosts "without any establishment of liability to a third party" where the party seeking recovery has incurred the costsdirectly. 551 U.S. 128 , 139 , 127 S. Ct. 2331 , 168 L. Ed. 2d 28 (2007). Furthermore, Atlantic Research found that "[aPRP's] costs incurred voluntarily are recoverable only by way of § 107(a)(4)(B)." Id. at 139 n. 6. As was born out inthe R & R's exhaustive case law and statutory analysis, the issue of the voluntariness of a PRP's direct costincurrence as a determinant in whether a party may proceed under § 107(a) or § 113(f) remains a contested issue thatthe Supreme Court has not yet definitively decided.

RCPI relies on In re Chateaugay, 944 F.2d 997 (2d Cir. 1991), to support its contention that the TPPs' CERCLAclaims constitute pre-petition claims since they arose out of pre-petition releases or threatened releases of hazardouswaste materials, notwithstanding that the response costs were not incurred until after the bankruptcy. (RCPIMemorandum of Law in Support of Summary Judgment Based Upon Discharge in Bankruptcy ("RCPI Mem. of Law")at 9, Dkt. Entry No. 1572-3.) This reliance is misplaced. Chateaugay is factually distinguishable from the instantmatter. As the TPPs correctly note, in Chateaugay, the U.S. Environmental Protection Agency ("EPA") already hadincurred remediation costs and sought reimbursement at the time of the bankruptcy's confirmation. (TPPs'Memorandum of Law in Opposition to RCPI's Motion for Summary Judgment ("TPPs' Mem. of Law") at 20, Dkt. EntryNo. 1573-7; 944 F.2d at 999-1001 .) Moreover, in Chateaugay, the EPA acknowledged that, although it incurredresponse costs for remediation at a certain number of sites, it was unaware of the full scope of its environmentalclaims. 944 F.2d at 999 . Here, the TPPs lacked knowledge as to the existence of any claim whatsoever at the timeRCPI filed for bankruptcy protection. Furthermore, CERCLA § 107(a) as interpreted by courts at both the time ofRCPI's bankruptcy filing and years later did not afford the TPPs an opportunity to pursue any contribution claims. See United Technologies Corp. v. Browning-Ferris Industries, 33 F.3d 96 , 99 (1st Cir. 1994) (defining contribution as "aclaim by and between jointly and severally liable parties for an appropriate division of the payment one of them hasbeen compelled to make") (internal quotation marks and citation omitted); Consolidated Edison Co. of New York, Inc.v. UGI Utilities, Inc., 423 F.3d 90 , 94 (2d Cir. 2005) (finding that while Section 107(a) permitted certain sued privateparties to sue other parties to recover response costs incurred voluntarily, it did not grant to parties against whomliability has been imposed any express right to sue other parties for contribution). In the instant matter, the TPPs didnot voluntarily incur response costs, but rather were sued by DMJ under CERCLA Section 107(a) . In this capacity,the TPPs were not accorded the statutory authority to sue any PRPs under Section 107(a) until the Supreme Courtrendered its decision in Atlantic Research.

Notwithstanding RCPI's contention that the occurrence and discovery of the environmental contamination prior to thefiling of the bankruptcy petition discharges any claims against it, the issue remains as to whether there were anylegally assertable non-bankruptcy claims against RCPI at the time of the petition's filing. Under Duplan, there were nosuch claims because the relationship between Old RCPI and the TPPs did not contain all of the elements necessaryto give rise to a legal obligation. 212 F.3d at 152 . The elements necessary to give rise to such a legal obligation arosewhen the Supreme Court decided Atlantic Research. Accordingly, the CERCLA § 107 and § 113 claims against RCPIdo not constitute pre-petition claims.



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III. Adequate Notice of Bankruptcy Petition FilingBecause the claims against RCPI are not dischargeable in bankruptcy, it is not necessary for the Court to address theissue of whether the TPPs received adequate notice of the Old Revere Companies' bankruptcy filing. Accordingly, theissue of receipt of adequate notice is moot.

CONCLUSIONAccordingly, RCPI's motion for summary judgment based on discharge in bankruptcy is denied.

SO ORDERED.

Dated: Brooklyn, New York

September 22, 2016

/s/ DORA L. IRIZARRY

Chief Judge

fn 1

Allen G. Reiter is a member of Arent Fox LLP and serves as counsel for Quanta. (Reiter Decl. at ¶ 1.)

fn 2

Kevin Cleary was employed by Revere Copper & Brass Incorporated in various human resources capacities from1975 to 1987 and again from 1989 to 2011. (Cleary Decl. at ¶ 1.)

fn 3

Thomas L. Kennedy is an attorney for RCPI and a senior counsel at the law firm Bond, Schoeneck & King, PLLC.(Kennedy Decl. at ¶ 1.)

fn 4

Thomas R. Smith is an attorney for RCPI and a member of the law firm of Bond, Shoeneck & King, PLLC. (SmithDecl. at ¶ 1.)

fn 5

Eugene Prashker served as a director on the Board of Directors for Quanta as of April 25, 1980. (Prashker Dep. at34:12-17.)

fn 6

Kenneth Mansfield "was employed by the Mahler Companies in 1974, and remained employed by the MahlerCompanies until the sale to Quanta Resources Corporations in July 1980. Following the sale, Mr. Mansfieldcontinued to be employed by Quanta Resources Corporation until 1981." (Smith Decl. at ¶ 12.)




Majority Opinion >

Pagination* BL

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE

In re: ENERGY FUTURE HOLDINGS CORP., et al., Debtors. MICHAEL CUNNINGHAM, JOE ARABIE, ANDMICHELLE ZIEGELBAUM, ON THEIR OWN BEHALF AND ON BEHALF OF SIMILARLY SITUATED, Appellants,

ENERGY FUTURE HOLDINGS CORP., et al., Appellees.

Chapter 11 Bankruptcy Case No. 14-10979 (CSS) (Jointly Administered) Bankruptcy Adv. No. 15-51 Civil Action No.15-cv-1183-RGA (consolidated)

September 28, 2016, Filed September 28, 2016, Decided

For Appellants: Jeanne E. Mirer, Esq. (argued), MIRER MAZZOCCHI SCHALET & JULIEN, PLLC, New York, NY;Daniel K. Hogan, Esq., HOGAN MCDANIEL, Wilmington, DE.

For Appellees: Mark D. Collins, Esq., RICHARDS, LAYTON & FINGER, P.A., Wilmington, DE; Daniel J.DeFranceschi, Esq., RICHARDS, LAYTON & FINGER, P.A., Wilmington, DE; Jason M. Madron, Esq., RICHARDS,LAYTON & FINGER, P.A., Wilmington, DE; Brenton A. Rogers, Esq. (argued), KIRKLAND & ELLIS LLP, Chicago, IL;Mark E. McKane, P.C., Esq., KIRKLAND & ELLIS LLP, San Francisco, CA.

Richard G. Andrews, UNITED STATES DISTRICT JUDGE.

Richard G. Andrews

MEMORANDUM OPINION

/s/ Richard G. Andrews

ANDREWS, U.S. DISTRICT JUDGE:

This is an appeal from a December 16, 2015 order of the Bankruptcy Court denying a motion by Appellants forcertification of a class pursuant to Fed. R. Civ. P. 23 . The appeal is fully briefed. (Civ. Act. No. 15-1218 D.I. 21, Civ.Act. No. 15-1183 D.I. 43, 50).1 The Court heard oral argument on September 9, 2016. (D.I. 67).

For the reasons set forth below, the order of the Bankruptcy Court is AFFIRMED.

I. BACKGROUNDDebtors/Appellees filed voluntary petitions for relief in the United States Bankruptcy Court for the District of Delawareunder Chapter 11 of the Bankruptcy Code. Certain of Debtors' subsidiaries have potential liability related to former

Cunningham v. Energy Future Holdings Corp. (In re Energy Future Holdings Corp.), No. Chapter 11, 2016 BL 320275 (D. Del. Sept.


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employees' "alleged exposure to asbestos in power plants owned, operated, designed, constructed, or maintained, inwhole or in part, by the Debtors' predecessors." (D.I. 43, p. 21). On January 7, 2015, the Bankruptcy Court grantedDebtors' motion to have the court establish a bar date for all asbestos claimants, including unmanifested claimants,those who were exposed to asbestos but who have not yet manifested any symptoms of asbestos-related disease.(Civ. Act. No. 15-1218 D.I. 22-1, pp. 1-8). On July 30, 2015, the Bankruptcy Court issued an order setting a bar date ofDecember 14, 2015 for all asbestos claimants, establishing requirements for proofs of claim for manifested andunmanifested asbestos claimants, and approving notice procedures. ( Id. at pp. 9-22).

On December 1, 2015, Appellants filed a motion with the Bankruptcy Court seeking to have the Court exercise itsdiscretion to apply Federal Rule of Bankruptcy Procedure 7023 to the proceeding and to certify a class of personsholding unmanifested asbestos claims. ( Id. at pp. 23-33). The Bankruptcy Court heard argument on the motion at ahearing on December 16, 2015. (D.I. 46-1, pp. 273-328 ("Hr'g Tr.")).2 The Bankruptcy Court denied the motion. (Civ.Act. No. 15-1218 D.I. 1-1). The court declined to exercise its discretion to apply Rule 7023 . (Hr'g Tr. 82:19-85:1). Inaddition, the court found that the class proof of claim did not meet the superiority requirement of Fed. R. Civ. P. 23(b) .(Hr'g Tr. 85:2-87:2).

II. STANDARD OF REVIEWThe Court has jurisdiction to hear an appeal from a final judgment of the Bankruptcy Court pursuant to 28 U.S.C. §158(a)(1) . On appeal from an order issued by the Bankruptcy Court, the [*2] Court "review[s] the bankruptcy court'slegal determinations de novo, its factual findings for clear error and its exercise of discretion for abuse thereof." In reTrans World Airlines, Inc., 145 F.3d 124 , 131 (3d Cir. 1998). Abuse of discretion is found where a "court's decisionrests upon a clearly erroneous finding of fact, an errant conclusion of law, or an improper application of law to fact."Int'l Union, United Auto., Aerospace & Agr. Implement Workers of Am., UAW v. Mack Trucks, Inc., 820 F.2d 91 , 95(3d Cir. 1987).

Whether to allow a class proof of claim is within the discretion of the bankruptcy court. In re Zenith Labs., Inc., 104B.R. 659 , 664 (D.N.J. 1989); see In re Am. Reserve Corp., 840 F.2d 487 , 488 (7th Cir. 1988). Rule 7023 of theFederal Rules of Bankruptcy Procedure expressly allows class certification in adversary actions, by incorporating Rule23 of the Federal Rules of Civil Procedure . Fed. R. Bankr. P. 7023 . Rule 9014 expands the reach of Rule 7023 to"any stage" in contested matters, at the court's discretion. Fed. R. Bankr. P. 9014(c) .

A court's decision to deny certification of a class is reviewed for abuse of discretion. In re Hydrogen Peroxide AntitrustLitig., 552 F.3d 305 , 312 (3d Cir. 2008).

III. DISCUSSIONAs an initial matter, Appellees question whether Appellants have standing to appeal the denial of the motion at issue.(D.I. 43, p. 17). I decline to decide the issue of standing at this time because I have jurisdiction to decide this appealand will resolve it on other grounds.

A. The Bankruptcy Court's Discretionary Decision not to Apply Fed. R. Bankr. P. 7023The Federal Rules of Bankruptcy Procedure require that appellants file "a statement of the issues to be presented" onappeal. Fed. R. Bankr. P. 8009(a)(1)(A) . The Rules further require that, in opening briefs, appellants again state theissues presented on appeal as well as an argument "contain[ing] the appellant's contentions." Fed. R. Bankr. P.8014(a)(5) , (8) . "[A] district court may, in its discretion, deem an argument waived if it is not presented in accordancewith Rule 801[0 ]." In re Trans World Airlines, Inc., 145 F.3d at 132 .

Appellees argue that Appellants failed to address the Bankruptcy Court's discretionary decision not to apply Rule 7023in their opening brief. (D.I. 43, p. 52). Appellants counter that this was not an independent ground for denying themotion; rather, "the consideration of the superiority issue was the focus of the Court's decision whether to exercise itsdiscretion to certify the class." (D.I. 50, p. 10). According to Appellants, "the Bankruptcy Court merged the ruling aboutits discretion into a ruling on the merits." ( Id. at p. 11).



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Appellants misstate the Bankruptcy Court's ruling. In denying Appellants' motion, Judge Sontchi first discussed thediscretionary decision whether to apply Rule 7023 , concluding, "I will not exercise my discretion to apply Rule 7023 atall to the filing of a class proof of claim here." (Hr'g Tr. 84:24-85:1). He could not have been any clearer. Only afterruling on the question of whether to apply Rule 7023 did he turn to the issue of superiority, reasoning that if he were tocertify a class, and "assum[ing] solely for purposes of this ruling that . . . 23(a) is . . . satisfied," he did not "believe thatin this situation the class action is superior to other available methods." ( Id. at 85:2-17). In other words, theBankruptcy Court's ruling that it would exercise its discretion not to permit the filing of a class proof of claim wasseparate [*3] from its ruling, in the alternative, that if it did apply Rule 7023 , the Court would not certify the proposedclass because class resolution would not be superior to alternative methods of adjudication.

Appellants failed to identify the Bankruptcy Court's decision not to exercise its discretion to apply Rule 7023 as anissue presented on appeal, and then did not argue it in their opening brief. In their reply brief, Appellants again failedto address this issue, arguing only that the issue was not waived because the exercise of discretion was not anindependent ground for denying the motion. (D.I. 50, p. 10). For this reason, it is unnecessary to consider whether theBankruptcy Court abused its discretion in not applying Rule 7023 , as Appellants have waived the argument.

Even if the argument were not waived, there is no evidence that the Bankruptcy Court abused its discretion. As JudgeSontchi noted, "to allow a class proof of claim under the facts and circumstances of this case would beunprecedented." (Hr'g Tr. 83:1-3). This is not a case where there is a previously certified class from pending litigationoutside the Bankruptcy Court proceedings that is coming to the Court to file a proof of claim on behalf of the class. Infact, the proposed class in this case would never litigate anything. Rather, Appellants seek class certification "solelyfor the purposes of filing a proof of claim." ( Id. at 83:11-12). As Judge Sontchi recognized, the purpose of the classproof of claim would be to negate the bar date. ( Id. at 84:15). The Bankruptcy Court recognized it had the power toallow a class proof of claim, and explained why it chose not to do so. The reasons it gave make sense. Therefore, theBankruptcy Court did not abuse its discretion in declining to apply Rule 7023 .

B. Superiority of the Proposed ClassAlthough Appellants' waiver as to the Bankruptcy Court's decision not to apply Rule 7023 is a sufficient andindependent reason to affirm, and, in any event, the Bankruptcy Court's decision was not an abuse of discretion, forthe sake of completeness, and recognizing that there are important issues at stake here, I will address the parties'arguments regarding the Bankruptcy Court's ruling that the class would not be superior to alternative methods ofadjudication.

1. Abuse of Discretion is the Correct Standard of ReviewAppellants argue the Bankruptcy Court committed an error of law, requiring de novo review, when it used "the wrongcomparator in its superiority analysis." (Civ. Act. No. 15-1218 D.I. 21, p. 18). In support of this assertion, Appellantsprovide only a conclusory statement that "whether a class action is superior to other forms of litigation in this context isinherently a question of law." (D.I. 50, p. 11). Appellants claim that the Bankruptcy Court used the bankruptcyproceeding, specifically the setting of a bar date and establishment of a notice procedure, as a comparator rather thanan alternative form of adjudication, and that this was an incorrect legal standard. (Civ. Act. No. 15-1218 D.I. 21, p. 19).

While Appellants are correct that the District Court will [*4] review de novo the question of "whether an incorrect legalstandard has been used," Appellants have not demonstrated that the Bankruptcy Court used an incorrect legalstandard. In re Hydrogen Peroxide Antitrust Litig., 552 F.3d at 312 (quoting In re Initial Pub. Offering Sec. Litig., 471F.3d 24 , 32 (2d Cir. 2006)). On the contrary, the Bankruptcy Court applied precisely the legal standard for whichAppellants appear to argue.

Appellants argue that the Bankruptcy Court committed legal error by using the wrong comparator. (Civ. Act. No.15-1218 D.I. 21, p. 18). The correct comparison for the superiority analysis, Appellants claim, is not the notice and bardate procedure set up by the Bankruptcy Court, but rather individual litigation by future claimants as they manifest,






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beginning with proceedings in the Bankruptcy Court to determine whether their claims were discharged. ( Id. at pp.18-19).

This is an unconvincing argument, however, because the comparator Appellants propose is precisely the comparatorthe Bankruptcy Court used. During the hearing on the Motion, the Bankruptcy Court discussed the comparator it wasusing, finding:

The issue of whether that due process as applied is sufficient to individual claimants is fully preserved.And that's what Grossman's is about. So if there are unmanifested claimants, who don't file a proof ofclaim, who manifest an injury in the future, and who attempt to file some sort of claim and prosecute acause of action against the reorganized [debtors], their ability to argue under Grossman's that the dueprocess I previously approved was insufficient and that their claim should survive, their cause of actionshould survive, that's fully preserved, and that [will] be decided on a fact-by-fact and a case-by-case basisin the future by whatever judge has to decide those issues.

I think that that is sufficient and superior to requiring or allowing the issuance of a . . . class proof of claimin this instance."

(Hr'g Tr. 86:12-87:1). In other words, the Bankruptcy Court expressly considered individual litigation as compared tothe proposed class proof of claim. Appellants have not shown that the Bankruptcy Court applied an incorrect legalstandard. Abuse of discretion is, therefore, the correct standard of review.

2. The Bankruptcy Court Did Not Abuse Its Discretion in Finding the Proposed Class Would Not Be Superior toIndividual LitigationThe superiority consideration requires a court to compare the proposed class "to other available methods for fairly andefficiently adjudicating the controversy." Fed. R. Civ. P. 23(b)(3) . Appellants argue that the proposed class "is clearlysuperior in terms of efficiency and fairness." (Civ. Act. 15-1218 D.I. 21, p. 1). Appellants have not shown, however,that the Bankruptcy Court abused its discretion in its determination that the proposed class was not superior toindividual litigation.

The Bankruptcy Court considered both efficiency and fairness, noting first that it had already established "anelaborate notice procedure" which it deemed successful. (Hr'g Tr. 85:18-21).3 Appellants attempt to rebut this and tosupport their efficiency [*5] argument by arguing that, in the coming decades, "the Courts could conceivably be floodedwith thousands" of suits filed by currently unmanifested claimants. (Civ. Act. 15-1218 D.I. 21, p. 22 (emphasis added)).Appellants provide no support for this claim, however, and an unsubstantiated claim about the potential number offuture lawsuits cannot serve as the basis for finding abuse of discretion on the efficiency prong.

As to fairness, Appellants argue that the Bankruptcy Court "conflated the superiority analysis with the due processanalysis applicable to the confirmation hearing and the entry of the bar date." ( Id. at p. 23). Appellants claim that thealternative to the proposed class would involve the unfair and insurmountable burdens to individual claimants ofhaving to appear in Bankruptcy Court in Delaware to argue that their claims were not discharged. ( Id. at 23-24).

The Bankruptcy Court, as noted above, found that the notice procedure was successful. (Hr'g Tr. 85:18-21). Inaddition, the Court discussed how the due process issue raised by Appellants related to the superiority inquiry.

Under Third Circuit precedent prior to 2010, a claim for the purposes of bankruptcy arose not when the underlying actgiving rise to liability occurred, but when the right to payment arose. Matter of M. Frenville Co., 744 F.2d 332 , 336 (3dCir. 1984). In the context of asbestos claims, a claim arose when the state law tort cause of action accrued, whichwould typically be when the claimant manifested symptoms of an asbestos-related disease. In re Grossman's, Inc.,607 F.3d 114 , 118 (3d Cir. 2010). In other words, potential future claims by those exposed to asbestos but who hadnot manifested symptoms as of the bar date were considered post-petition claims that could not be discharged inbankruptcy. Id. at 119-20 .



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In 2010, however, the Third Circuit overruled the Frenville accrual test. Id. at 121 . For the purpose of discharge ofclaims in bankruptcy, a claim now arises upon exposure rather than upon manifestation of symptoms. Id. at 125 . Asthe Third Circuit recognized when it overruled Frenville, this definition presents due process concerns. Id . In order toprotect unmanifested claimants, the court provided guidance for determining whether a claim has been discharged,directing courts to consider, among other things, whether the claimants received notice of the bar date for submittingproofs of claim in the bankruptcy proceedings. Id. at 127 .

The Bankruptcy Court recognized that this is the law in the Third Circuit and that Appellants appeared to be attackingthe Third Circuit's holding in Grossman's. (Hr'g Tr. 83:22-84:5). The Bankruptcy Court also recognized that allowing a"class proof of claim on behalf of unmanifested claimants" would amount to an end-run around the bar date because"the whole point of the bar date goes away because everybody's covered." ( Id. at 84:14-16).

In fact, certifying the proposed class would have the effect of reinstating the accrual test of Frenville, at least asapplied to the proposed class. In other words, the members of the proposed class would be able to bring suitwhenever [*6] they manifest, regardless of whether they received notice of the bar date, which is precisely theopposite of what the Third Circuit, sitting en banc in Grossman's, held. Grossman's, 607 F.3d at 125 .

This discussion of due process was directly relevant to the issue of fairness as it relates to the current law in thiscircuit. Appellants have not shown that the Bankruptcy Court made any erroneous findings of fact, errors of law, orthat it improperly applied the law to the facts with respect to the superiority inquiry. Therefore, the Bankruptcy Courtdid not abuse its discretion in finding the proposed class would not be superior to individual litigation.

IV. CONCLUSIONFor the reasons set forth herein, the Bankruptcy Court's December 16, 2015 Order denying class certification isAFFIRMED.

An appropriate order will be entered.

ORDER

For the reasons set forth in the accompanying opinion, IT IS HEREBY ORDERED that the Order Denying theAmended Motion for Application of Fed. R. Bankr. P. 7023 to the Proceeding and to Certify a Class Pursuant to Fed.R. Civ. P. 23 (Civ. Act. No. 15-1218-RGA, D.I. 1-1) is AFFIRMED.

Entered this 28 day of September, 2016.

/s/ Richard G Andrews

United States District Judge

fn 1

After Appellants filed their opening brief, the parties stipulated to consolidate the instant appeal (Civ. Act. No.15-1218) with a related appeal (Civ. Act. No. 15-1183) for procedural and administrative purposes only. (Civ. Act.No. 15-1183 D.I. 34). In this opinion, all references to Docket Index numbers will refer to the docket in the leadcase (Civ. Act. No. 15-1183) unless otherwise specified.

fn 2

Further citations to this transcript will refer to the transcript's internal pagination rather than the pagination of the







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document found at D.I. 46-1.

fn 3

Debtors represent that the notice procedure approved by the Bankruptcy Court cost approximately $2.5 million.(D.I. 43, p. 31). The notice procedure consisted of direct mailings to "individuals identified in employee andcontractor records" in addition to known claimants, as well as "a comprehensive publication notice program, usingprint, online media, and other outlets." ( Id. at pp. 31-32).




Majority Opinion >

Pagination* BL

UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF THE VIRGIN ISLANDS

IN RE: JEFFREY J. PROSSER, Debtor. JAMES P. CARROLL, CHAPTER 7 TRUSTEE OF THE ESTATE OFJEFFREY J. PROSSER, Plaintiff, v. DAWN PROSSER, Defendant.

Bankr. No. 3:06-30009 (MFW) Chapter 7 Adv. Pro. No. 11-03005 (MFW)

September 7, 2016, Decided

Mary F. Walrath, United States Bankruptcy Judge.

Mary F. Walrath

OPINION1Before the Court is the Motion to Compel Reimbursement filed by Jeffrey J. Prosser (the "Debtor") against the chapter7 trustee of the Debtor's estate, James Carroll (the "Trustee"). For the reasons set forth below, the Court will deny theMotion .

I. BACKGROUNDOn July 31, 2006, the Debtor filed a chapter 11 bankruptcy petition. On October 4, 2007, the Debtor's casewas converted to chapter 7, and the Trustee was appointed. On February 9, 2011, the Court entered an order(in a separate adversary proceeding) directing the Debtor and his wife, Dawn Prosser ("Mrs. Prosser"), to turnover the Debtor's one-half interest in art work and furnishings. (Springel v. Prosser, 3:07-03010, D.I. 728.) The Courtalso imposed a constructive trust in favor of the Trustee for the benefit of the chapter 7 estate on certain of theProssers' assets, including art work. ( Id.)

On June 21, 2011, the Trustee commenced the above adversary proceeding against Mrs. Prosser seeking theauthority to sell her interest in certain estate property. (Adv. D.I. 1.)2 In that adversary proceeding, the Trustee filed amotion for an order authorizing the sale of certain personal property that was held by the Prossers as tenants by theentirety. (Adv. D.I. 2.) On October 7, 2011, the Court entered an order (the "Sale Order") granting that motion. (Adv.D.I. 26.) Among the assets covered by the Sale Order was a painting by Camille Pissarro (the "Painting").

Previously (in 2008), the Trustee had retained Christie's Inc. ("Christie' s") as broker and auctioneer to value and sellcertain assets of the estate. (D.I. 1454.) At that time, Christie's gave a preliminary estimate of the Painting's value,which ranged between $80,000 and $100,000. (5/9/16 Tr. at 24-25; Ex. TC-10.)

In May 2011, the Trustee delivered the Painting to Christie's pursuant to a consignment agreement under whichChristie's would auction the Painting. (Ex. JP-50.) Despite the entry of the Sale Order, in October 2011, Christie'sdecided to withhold the Painting from auction in order to conduct further research into the Painting's provenance.(5/9/16 Tr. at 49-50.) Christie's also reduced its estimate of the value of the Painting to $70,000 to $90,000. (Ex.

Carroll v. Prosser (In re Prosser), No. 3:06-30009 (MFW), 2016 BL 295036 (Bankr. D.V.I. Sept. 07, 2016), Court Opinion



TC-9.) On May 7, 2014, over two years after taking possession of the Painting, Christie's sent the Trustee a lettersummarizing its research. (Ex. TC-11.) The Christie's letter traced the Painting's history and referenced certain riskfactors associated with the Painting's presence in Europe during World War II. ( Id.) Christie's concluded that therewas a lack of information surrounding the circumstances under which one the Painting's previous owners sold thePainting in 1943. While unable to locate any present-day claims, Christie's informed the Trustee it was "not confidentthat [Christie's] could convey good title to the [P]ainting were it now to be offered for sale." ( Id.)

After [*2] receiving the letter from Christie' s, the Trustee solicited another auctioneer, Auction America, to sell thePainting. (5/9/16 Tr. at 151.) Auction America had been previously retained by the Trustee to "auction and sell thoseitems that are not sufficiently high-end to be sold by Christie' s" and to "liquidate less valuable miscellaneous Assetsthat cannot be sold by Christie' s." (D.I. 3444 & 3504.)

On April 18, 2014, the Trustee filed the Notice of Trustee's Auction of Debtor's Fine Art (the "Sale Notice"). (Adv. D.I.128.) The Sale Notice stated that Auction America would auction the Painting on May 14, 2014. The Sale Notice didnot mention the provenance-related issues identified in the letter from Christie 's.

Auction America marketed the Painting via local newspapers, direct mail, e-mail, internet advertising, and personalphone calls. (5/9/16 Tr. at 151.) The letter from Christie's was posted on Auction America's website, provided topotential bidders, and displayed during the auction. ( Id. at 195-96.) The Painting's ultimate purchaser received theChristie's letter prior to the auction. (Ex. TC-5.) After bidding for the Painting opened at $25,000, competitive bidsresulted in a sale price of $75,000. (5/9/16 Tr. at 165-66.) The sale was concluded on May 14, 2014, and the Trusteefiled a report of the sale on June 18, 2014. (Adv. D.I. 129.)

On July 18, 2014, the Debtor filed a Motion to Compel Reimbursement in the above adversary proceeding. (Adv. D.I.131.) The Motion seeks to surcharge the Trustee for alleged estate losses resulting from a commercially unreasonablesale of the Painting. An evidentiary hearing on the Motion was held on May 9 and 10, 2016. The Court took the matterunder advisement and directed post-trial briefing. Final briefs were submitted on June 9 and 10, 2016. (Adv. D.I. 259 &260.) The matter is ripe for decision.

II. JURISDICTIONThe Court has core jurisdiction over this contested matter. 28 U.S.C. §§ 1334 , 157 (b)(2)(O) .

III. DISCUSSIONA. Legal StandardBoth the Debtor and the Trustee fashion their arguments within the four-part business judgment test applied whenevaluating a sale of a debtor's assets outside the ordinary course of business under section 363(b) . In re Delaware &Hudson Railway Co., 124 B.R. 169 , 176 (D. Del. 1991). However, the sale in this case has already been approved,and the Debtor is not asking the Court to void the sale or return the Painting. Instead, the Debtor is seeking to hold theTrustee personally liable for the Trustee's decision to sell the Painting through Auction America. There are severallayers of analysis the Court must consider before addressing the business judgment rule.

B. Trustee's Personal LiabilityAlthough not clearly articulated, the essence of the Debtor's argument is that the Trustee breached his fiduciary dutiesby conducting a flawed sale of the Painting. Specifically, the Debtor contends that the Trustee breached his duties by:(i) retaining an auctioneer that was neither authorized to sell nor capable of properly marketing the Painting, and (ii)selling the Painting despite purported provenance-related issues.

1. ImmunityAlthough not explicitly raised as a defense, [*3] the Court must first consider whether the Trustee is immune from theDebtor's breach of fiduciary duty claims. Chapter 7 trustees are generally afforded absolute immunity for actions taken



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pursuant to a court order. Phoenician Mediterranean Villa, LLC v. Swope (In re J & S Properties, LLC), 545 B.R. 91 ,103 (Bankr. W.D. Pa. 2015) (citations omitted), aff'd sub nom. Phoenician Mediterranean Villa, LLC v. Swope,No. CV 3:15-268, [2016 BL 242085], 2016 U.S. Dist. LEXIS 97826 , [2016 BL 242085], 2016 WL 4046803 (W.D. Pa.July 27, 2016). To have immunity, the Trustee must establish that: (1) the trustee's acts were within the scope of his orher authority; (2) the debtor had notice of the trustee's proposed acts; (3) the trustee candidly disclosed the proposedacts to the bankruptcy court; and (4) the bankruptcy court approved the trustee's proposed acts. In re Summit Metals,Inc., 477 B.R. 484 , 501 (Bankr. D. Del. 2012) (citing Harris v. Wittman (In re Harris), 590 F.3d 730 , 742 (9th Cir.2009)). See also LeBlanc v. Salem (In re Mailman Steam Carpet Cleaning Corp.), 196 F.3d 1 , 8 (1st Cir. 1999) ("[A]trustee acting with the explicit approval of a bankruptcy court is entitled to absolute immunity, as long as there hasbeen full and frank disclosure to creditors and the court.").

The Debtor argues that the Trustee was required (but failed) to disclose to the Court the provenance-related issuesidentified by Christie' s. If the Debtor's assertion is correct, the Trustee's actions would not be protected by absoluteimmunity. Mailman Steam, 196 F.3d at 8 . In this case, for each asset sale, the Sale Order required the Trustee to fileand serve a sale notice containing "any information material to the sale or a description of where such information canbe obtained by an interested purchaser." (Adv. D.I. 26.) The Debtor contends that Christie's provenance-relatedconcerns were material to the sale and required disclosure to the Court.

The Court disagrees. The provenance-related issues did not reach the level of materiality necessitating disclosure tothe Court; it was enough that it was disclosed to potential buyers. Christie's research did not constitute a legalconclusion and only represented its preliminary (and inconclusive) findings. Moreover, the Trustee did provide theletter from Christie's to Auction America, which provided it to all potential bidders, including the Painting's eventualbuyer. (5/9/16 Tr. at 151; Ex. TC-5.) Accordingly, the Court finds that the Trustee provided adequate disclosure of theprovenance-related issues. Therefore, the Court concludes that the Trustee is afforded absolute immunity frompersonal liability because he acted pursuant to a court order.

2. Fiduciary DutyEven if the Trustee did not have absolute immunity, the Debtor's claims against the Trustee would still fail. When achapter 7 trustee is not afforded absolute immunity, the analysis shifts to whether the trustee breached a fiduciary dutyto a beneficiary of the estate. See Mosser v. Darrow, 341 U.S. 267 , 274 , 71 S. Ct. 680 , 95 L. Ed. 927 (1951) (holdingthat a bankruptcy trustee may be held personally liable for breaches of fiduciary duty) ; Mailman Steam, 196 F.3d at 7(citing Sherr v. Winkler, 552 F.2d 1367 , 1375 (10th Cir. 1977) (holding that a bankruptcy trustee is subject to personalliability for breaches of fiduciary duty when the trustee's actions are [*4] not protected by immunity)).

While courts all recognize a beneficiary's ability to sue a trustee who does not have absolute immunity, they differ onthe appropriate level of culpability required to hold a trustee personally liable. Mailman Steam, 196 F.3d at 7 . See alsoElizabeth H. McCullough, Bankruptcy Trustee Liability: Is There A Method in the Madness?, 15 Lewis & Clark L. Rev.153 (2011) (discussing different legal standards applied to actions seeking to hold bankruptcy trustees personallyliable).

In Mosser, the Supreme Court held that a bankruptcy trustee may be held personally liable to a beneficiary for anintentional breach of fiduciary duty. Mosser, 341 U.S. at 272 . However, the Court in Mosser did not address atrustee's potential liability when lesser levels of culpability are proven (i.e., negligence or gross negligence). Id. See alsoMcCullough, 15 Lewis & Clark L. Rev. at 154-55. Consequently, courts have applied differing standards.Some courts hold trustees personally liable for only willful and deliberate violations. In re Chicago Pacific Corp., 773F.2d 909 , 915 (7th Cir. 1985); Ford Motor Credit Co. v. Weaver, 680 F.2d 451 , 461 (6th Cir. 1982); Sherr v. Winkler,552 F.2d 1367 , 1375 (10th Cir. 1977). Others hold trustees liable for grossly negligent conduct. Dodson v. Huff (In reSmyth), 207 F.3d 758 , 762 (5th Cir. 2000). Still others only require a showing of mere negligence to hold a trusteepersonally liable. See Mailman Steam, 196 F.3d at 7 ; In re Gorski, 766 F.2d 723 , 727 (2d Cir. 1985); Hall v. Perry (Inre Cochise College Park, Inc.), 703 F.2d 1339 , 1357 (9th Cir. 1983); Quinn v. Fidelity & Deposit Co. of Maryland (Inre Sturm), 121 B.R. 443 , 448 (Bankr. E.D. Pa. 1990).



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The Third Circuit has yet to adopt any of these standards. Even if the Court were to adopt the negligence standard --which affords chapter 7 trustees the least protection -- the Court concludes that the Trustee's conduct in this case stillwould not constitute a breach of fiduciary duty.

3. Duty and BreachThe duty to maximize the value of the estate is central to a trustee's fiduciary role. Myers v. Martin (In re Martin), 91F.3d 389 , 394 (3d Cir. 1996). However, a chapter 7 trustee will not always be able to obtain the absolute maximumfrom each sale. To find the perfect buyer for each asset would require a considerable amount of the trustee's time andestate resources. However, section 704 of the Code requires that a trustee act "as expeditiously as is compatible withthe best interests of the parties, 11 U.S.C. § 704 (a)(1) ; Hutchinson, 5 F.3d at 753-54 . As such, a trustee is requiredto balance the objective of value maximization with the need for minimization of costs. Hutchinson, 5 F.3d at 754 .

Moreover, a trustee is not negligent and will not be held personally liable for "acts taken as a matter of businessjudgment in accordance with [a] statutory or other duty. . . ." Smith v. Silverman (In re Smith), 645 F.3d 186 , 191 (2dCir. 2011) (citations omitted). See also Mosser, 341 U.S. at 274 ("Courts are quite likely to protect trustees againstheavy liabilities for disinterested mistakes in business judgment.").

Although part of his argument is under section 363(b) , which is not applicable here, the Debtor does assert that theTrustee's decision to sell the Painting through Auction America did not represent a sound exercise of businessjudgment. The Trustee disagrees and contends that he acted prudently [*5] following Christie's unwillingness toauction the Painting.

In this case, the Painting sat in Christie's possession for almost three years while Christie's researched itsprovenance and ultimately decided it could not sell the Painting. The Trustee then properly exercised his judgment inentrusting the sale of the Painting to Auction America, an auctioneer already retained by the Trustee with a provenrecord.3 The Court finds that the Trustee's decision to sell the Painting through Auction America was an exercise ofhis business judgment and not negligent under any standard.

4. Causation and HarmEven if the Debtor could show that the Trustee's conduct was negligent, he fails to demonstrate any injury caused bythat conduct. The Debtor alleges that the Trustee's negligence resulted in a loss to the estate of at least $925,000. Hebases this figure on a $1 million insurance policy he secured for the Painting in 2007. (Ex. JP-13.) Alternatively, theDebtor asserts that the Painting is worth at least $500,000, the amount he paid for the Painting.

The Trustee responds that the value for which the Debtor bought or insured the Painting does not constitute anappraisal or evidence of the Painting's fair market value. Instead, the Trustee contends that the final sale priceobtained from a properly marketed public auction is the best evidence of the Painting's value. Additionally, the Trusteeasserts that Christie's preliminary estimate of the range of the Painting's value, $70,000 - $100,000, provides furtherevidence that the fair market value was obtained from the Painting's sale (at $75,000).

Because the Painting was sold through a properly marketed auction, and because the Painting's final sale price waswithin the range of Christie's estimates, the Court concludes that the Debtor was not harmed by the sale of thePainting. Therefore, even if the Court were to conclude that the Trustee breached his fiduciary duty, the Debtor's claimwould still fail because he has not proven any damages.

IV. CONCLUSIONFor the reasons set forth above, the Court will deny the Debtor's Motion to Compel Reimbursement.

An appropriate Order follows.



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Dated: September 7, 2016

BY THE COURT:

/s/ Mary F. Walrath

Mary F. Walrath

United States Bankruptcy Judge

fn 1

This Opinion constitutes the findings of fact and conclusions of law of the Court pursuant to Rule 7052 of theFederal Rules of Bankruptcy Procedure .

fn 2

References to the record are: "D.I. #" for pleadings from the main case; "Adv. D.I. #" for pleadings filed in Adv.Proc. No. 3:11-03005.

fn 3

Auction America had sold another painting belonging to the Debtor, which was first at Christie' s. (5/10/16 Tr. at11-12.) At Christie's suggestion, the Trustee sold that painting through Auction America and was able to realize asale price greater than Christie's estimates. ( Id. at 12-14.)



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October 06, 2016

Financial Institutions

Citibank Wins Foreclosure Appeal in Bankruptcy TestBNA Snapshot

• Debtors who surrender property under Bankruptcy Code can't fight foreclosure

• Ruling also speeds process by clarifying power of bankruptcy courts

By Chris Bruce

Oct. 4 — Debtors who surrender property under the Bankruptcy Code can't oppose foreclosureefforts by Citibank, a federal appeals court said Oct. 4 ( Failla v. Citibank, N.A. (In re Failla), 11th Cir., No. 15-15626, 10/4/16).

The ruling by the U.S. Court of Appeals for the Eleventh Circuit eases foreclosures in that circuitin two ways. First, it means that a debtor who discharges mortgage debt by surrenderingproperty under 11 U.S.C. 521(a)(2) can't oppose creditors who then try to foreclose in state

court.

The decision also speeds that process. Judge William Pryor, who wrote for a three-judge panel, said bankruptcy courts canorder debtors who surrender property under Section 521(a)(2) to drop their opposition to foreclosure. The debtors said thebankruptcy court didn't have that authority.

The case involved husband and wife David and Donna Failla, who defaulted on their mortgage in 2009 and filed forbankruptcy in 2011. They agreed to surrender their house to discharge the mortgage debt, but fought Citibank's foreclosureproceeding in state court.

The bankruptcy court, on Citibank's motion, ordered the Faillas to surrender the property, and a district court affirmed.

Bankruptcy Court's Power

Among other points, the Faillas said they need only surrender to the bankruptcy trustee. But the Eleventh Circuit disagreedand upheld both lower courts, saying they have to surrender the property and drop their efforts to stop foreclosure.

“Section 521(a)(2) requires a debtor to either redeem, reaffirm, or surrender collateral to the creditor,” Pryor said. “Havingchosen to surrender, the debtor must drop his opposition to the creditor's subsequent foreclosure action.”

The appeals court also said bankruptcy courts may compel debtors not to fight foreclosure.

“The bankruptcy court had the authority to compel the Faillas to fulfill their mandatory duty under section 521(a)(2) not tooppose the foreclosure action in state court,” Pryor said.

The Faillas were represented by Peter David of the Ticktin Law Group in Deerfield Beach, Fla., and Michael E. Zapin of theLaw Offices of Michael E. Zapin in Boca Raton, Fla.

Citibank was represented by John R. Chiles of Burr & Forman in Fort Lauderdale, Fla., and Jonathan M. Sykes in the firm'sOrlando, Fla., office.

To contact the reporter on this story: Chris Bruce in Washington at [email protected]

Citibank Wins Foreclosure Appeal in Bankruptcy Test, Bankruptcy Law Reporter (BNA)



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To contact the editor responsible for this story: Mike Ferullo at [email protected]


Full text at: http://www.bloomberglaw.com/public/document/Failla_v_Citibank_NA_In_re_Failla_No_1515626_2016_BL_330990_11th_

Citibank Wins Foreclosure Appeal in Bankruptcy Test, Bankruptcy Law Reporter (BNA)



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Majority Opinion >

Pagination* BL

UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF TENNESSEE, NASHVILLE DIVISION

JAMES R. BIGGERS and PAMELA BIGGERS, Plaintiffs, v. INTERNAL REVENUE SERVICE, Defendant.

NO. 1:15-cv-00041

September 9, 2016, Filed

For James R. Biggers, Pamela Biggers, Appellants: J. Robert Harlan, Keith D. Slocum, LEAD ATTORNEYS, Harlan &Associates, Columbia, TN.

For Internal Revenue Service, Appellee: Stephen A. Josey, William Bradley Russell, Jr., LEAD ATTORNEYS,Department of Justice, Washington, DC.

WAVERLY D. CRENSHAW, JR., UNITED STATES DISTRICT JUDGE.

WAVERLY D. CRENSHAW, JR.

MEMORANDUM OPINIONThis is an appeal by Appellants James Robert Biggers ("Biggers" or the "Debtor") and Pamela Lynette Biggers(together, the "Biggers" or the "Debtors") from an order of the United States Bankruptcy Court for the Middle Districtof Tennessee (the "Bankruptcy Court") granting summary judgment to the Internal Revenue Service (the "IRS")1 anddeclaring their tax assessments for 2001, 2002 (with the exception of an overage), 2003, and 2004 asnondischargeable under 11 U.S.C. § 523(a)(1)(B)(i) .2 For the reasons stated below, the decision of the BankruptcyCourt is REVERSED and this case is REMANDED to the Bankruptcy Court for further proceedings consistent with thisopinion.

BackgroundThe undisputed facts of the underlying case are relatively simple. The following background is found in the BankruptcyCourt's memorandum opinion on the cross motions for summary judgment filed by the Biggers and by the IRS:

The [Biggers] did not file federal tax returns for 2001, 2002, 2003 and 2004. The IRS assessed federaltax against [James Biggers] for 2001 on August 23, 2004, for 2002 on February 20, 2006, for 2003 onSeptember 4, 2006, and for 2004 on November 6, 2006.3 Thereafter, on February 15, 2007, the [Biggers]filed their joint tax returns for 2001 through 2004. With the exception of 2002, the [Biggers] reported thatthey owed less tax than the IRS had previously assessed. For 2002, the [Biggers] reported that they owed$15,088 more in tax. The IRS concedes that this overage of $15,088 is dischargeable. The IRS also

Biggers v. IRS, No. 1:15-cv-00041, 2016 BL 297125 (M.D. Tenn. Sept. 09, 2016), Court Opinion


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concedes that [Pamela Biggers'] tax liability is dischargeable because the IRS never assessed federal taxagainst her for these years.

The [Biggers] filed a voluntary chapter 7 petition on December 9, 2009, the IRS was a scheduled creditor.The [Biggers] received a discharge on March 11, 2010.

(Doc. No. 5-14 at 2.)

The IRS argues that these are the only salient facts appropriately considered. The Biggers argue that there aredisputed facts, including, most significantly for purposes of summary judgment, whether the IRS madeadjustments to the tax obligations as a result of or otherwise utilized the late-filed Form 1040s submitted by theBiggers. (See Doc. No. 10-1 (Affidavit of James and Pamela Biggers)).4 Among the other disputed facts is theBiggers' joint Affidavit in support of their motion for summary judgment, which provides some account of theirreasons for not timely filing income tax returns. (See Doc. No. 5-5 (Description DE 10-1) at 2; Doc. No. 5-6(Description DE 13) at 3.) In their Affidavit, the Biggers state:

In 1999, our financial business records were [*2] seized by Gilmore County Bank and those records werenever released. We had to recreate the information to be able to proved [sic] the Defendant with therequired information for the aforementioned tax years. In addition, we moved approximately eleven timesbetween 1999 and 2008.

Between 2004 and 2006 we had engaged JK Harris to assist us with the tax years we had not filed. Theyhad a power of attorney and were communicating with the Defendant regarding our returns. In late 2005,we realized that JK Harris was actually not doing anything for us so [sic] started talking with an account[sic] and the Defendant directly, through an agent named Ross Roy.

(Doc. No. 5-5 at 2.)

The Bankruptcy Court deemed the Biggers' arguments regarding disputed facts as "red herrings." (Doc. No. 5-14 at7.) Relying on the test articulated by the Sixth Circuit in United States v. Hindenlang (In re Hindenlang), 164 F.3d 1029, 1033 (6th Cir. 1999), the Bankruptcy Court held that the "only issue is whether the Form 1040s submitted by the[Biggers] after the IRS had assessed tax liability served any tax purpose or had any effect under the Internal Code."(Doc. No. 5-14 at 7. Because the tax forms for 2001, 2003, and 2004 "all reported a lower liability than the amountoriginally assessed by the IRS", the Bankruptcy Court held that the forms served no purpose, which compelled, as amatter of law, that the tax liability assessed by the IRS against James Biggers for tax years 2001, 2002 (except as tothe reported overage), 2003 and 2004 is nondischargeable as to James Biggers, thereby entitling to the IRS tosummary judgment. (Doc. No. 5-14 at 7-8.)5 Based on this determination, the Bankruptcy Court did not consider eitherthe underlying reasons asserted by the Biggers for the untimely Form 1040s or any action taken by the IRS inconnection with the Form 1040s.

The issue on appeal is whether the Bankruptcy Court correctly determined that James Biggers' federal income taxliabilities for the 2001, 2002 (except as to the overage), 2003, and 2004 tax years are excepted from discharge under§ 523(a)(1)(B) (i), because his Form 1040s for those tax years were not "returns" within the meaning of § 523(a) (*).The Biggers argue that the Bankruptcy Court erroneously concluded that the "hanging paragraph" added to 11 U.S.C.§ 523 in 2005 by the Bankruptcy Abuse Prevention and Consumer Protection Act ("BAPCPA") defining "return" fordischargeability purposes did not change existing pre-BAPCPA law in the Sixth Circuit. The IRS urges the Court toadopt the standard applied by the Bankruptcy Court; namely, that "an untimely income tax form can be a "return" incertain circumstances, but cannot be considered a "return" when it is filed after the Internal Revenue Service [has]already assessed the tax." (Doc. No. 11 at 6-7.)

Standard of ReviewDistrict courts have jurisdiction to hear appeals from final judgments, orders, and decrees of bankruptcy judges. See



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28 U.S.C. § 158(a)(1) . Because there is a bankruptcy appellate panel in the Sixth Circuit, an appellant must elect tohave the appeal heard by the district court. See 28 U.S.C. §158(c)(1) . Appellants James and Pamela Biggers electedto have this appeal heard by the District [*3] Court. (Doc. No. 1 at 2.) On appeal of a bankruptcy court's decisiongranting summary judgment, the district court reviews a bankruptcy court's factual findings for clear error and its legalconclusions de novo. See In re Wells, 561 F.3d 633 , 634 (6th Cir. 2009). Summary judgment is appropriate when therecord shows that there are no genuine issues of material fact and that the moving party is entitled to judgment as amatter of law. Id . (citing Fed.R.Civ.P. 56(c) and Celotex Corp. v. Catrett, 477 U.S. 317 , 322 , 106 S. Ct. 2548 , 91 L.Ed. 2d 265 (1986)).

DiscussionIn general, an individual who files for relief under chapter 7 of the Bankruptcy Code is discharged from all pre-petitiondebt, subject to certain exceptions, including those found in Section 523 of the Bankruptcy Code. See 11 U.S.C. §727(b) . The exception at issue here excludes any debt "with respect to which a return, or equivalent report or notice, ifrequired . . . was not filed or given." 11 U.S.C. § 523(a)(1)(B)(i) .

The parties agree that the Biggers eventually filed a Form 1040 for each of the subject tax years. By the time they didso in 2007 however the IRS had already assessed deficiencies against the Biggers for the entire four-year period. Thedisputed question is whether the Biggers' untimely Form 1040s for tax years 2001, 2002, 2003 and 2004 were"returns" under § 523(a)(1)(B) (i). If not, the tax debts are nondischargeable.6 To answer this question, the Court mustdetermine what constitutes a "return" for purposes of this statutory exception to discharge. This is a question of lawreviewed de novo by this Court. United States v. Hindenlang (In re Hindenlang), 164 F.3d 1029 , 1032 (6th Cir. 1999).

Prior to the 2005 enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act ("BAPCPA"), the term"return" was not defined in the Bankruptcy Code. In the Hindenlang case, which predated BAPCPA, the Sixth Circuitexamined federal tax law and reiterated the definition of "return" set forth in Beard v. Commissioner, 82 T.C. 766 ,1984 WL 15573 (1984), aff'd 793 F.2d 139 (6th Cir. 1986). Hindenlang, 164 F.3d at 1033 . Under the so-called Beardtest, for a Form 1040 to qualify as a return:

(1) it must purport to be a return; (2) it must be executed under penalty of perjury; (3) it must containsufficient data to allow calculation of tax; and (4) it must represent an honest and reasonable attempt tosatisfy the requirements of the tax law.

Id . (citation omitted).

In 2005, BAPCPA added a "hanging paragraph" to Section 523 to define "return" as:

For purposes of this subsection, the term "return" means a return that satisfies the requirements ofapplicable nonbankruptcy law (including applicable filing requirements). Such term includes a returnprepared pursuant to section 6020(a) of the Internal Revenue Code of 1986, or similar State or local law,or a written stipulation to a judgment or a final order entered by a nonbankruptcy tribunal, but does notinclude a return made pursuant to section 6020(b) of the Internal Revenue Code of 1986, or similar Stateor local law.

11 U.S.C. § 523(a) (*).7 Now, to be a "return" for bankruptcy discharge purposes, a document must satisfy therequirements of applicable nonbankruptcy law and be filed in accordance with applicable filing requirements.

As noted by the Bankruptcy Court, courts are divided on whether, under applicable nonbankruptcy [*4] law, everyincome tax return that is filed late is a "return" for discharge purposes. See In re Biggers, 528 B.R. 870 , 872 (Bankr.M.D. Tenn. 2015) (compilation of cases). While the Sixth Circuit has not yet ruled on what constitutes a "return" post-BAPCPA, the First, Fifth, and Tenth Circuits have all concluded that the Beard test no longer applies and § 523(a) (*)excludes from its definition of "return" any untimely form.8 The IRS apparently did not advocate for this result below. Id



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. ("The Court agrees with the IRS and those decisions that define "applicable nonbankruptcy law" as the pre-BAPCPABeard test.")

The IRS suggests that, if this Court is disinclined to follow the Bankruptcy Court's reasoning, it might adopt the FifthCircuit's approach in In re McCoy, namely, that a late-filed tax form cannot be considered a "return" fordischargeability purposes. See Docket No. 11 at 11. This appears to be a reversal of position because in other cases,the IRS expressly advocated against the McCoy result stating "The United States does not adopt this position, whichcreates a harsh result that appears inconsistent with the statute's intent." In re Maitland, 531 B.R. 516 , 519 (Bankr. D.N.J. 2015) (quoting Martin v. Internal Revenue Service (In re Martin), 508 B.R. 717 , 727 n. 14 (Bankr. E.D. Cal.2014)). Indeed, the draconian result of a per se rule excluding from discharge all untimely tax forms cannot bereconciled with the well-established rule that exceptions to discharge are to be strictly construed in favor of the debtor.United States v. Storey, 640 F.3d 739 , 743 (6th Cir. 2011) (citing Hindenlang); see also In re McBride, 534 B.R. 326 ,332-36 (Bankr. S.D. Ohio 2015) (analyzing bright-line approach to meaning of "return"); In re Maitland, 531 B.R. at519-22 (same).9 The Court adopts the sound and thorough reasoning of the bankruptcy courts in theSouthern District of Ohio in theMcBride case and the District of New Jersey in the Maitland case in respectfullydisagreeing with the conclusion that an untimely form can never constitute a "return" under § 523(a) (*). See also In reBriggs, 511 B.R. 707 , 713-15 (Bankr. N.D. Ga. 2014) (analyzing and declining to adopt interpretation of "return" thatexcludes all untimely forms). The Court concludes that "applicable nonbankruptcy law" as used in § 523(a) (*) includespre-BAPCPA case law, which encompasses the Beardtest, as well as any other nonbankruptcy law as to therequirements for a return.

Here, the IRS concedes that the Biggers' late filings satisfy the first three elements of the Beard test. The only issue iswhether the late filings represent an "honest and reasonable attempt to satisfy the requirements of the tax law."Hindenlang, 164 F.3d at 1034 . Pre-BAPCPA, the Sixth Circuit said of this part of the Beard test that "as a matter oflaw ... a Form 1040 is not a return if it no longer serves any tax purpose or has any effect under the Internal RevenueCode." Id . This language has sometimes been construed as establishing a per se rule that an untimely filing cannever be an honest and reasonable endeavor to comply with the tax law. See e.g., In re Payne, 431 F.3d 1055 , 1059(7th Cir. 2000). However, Hindenlang did not necessarily dictate that result, even by its own language, because it leftopen the possibility of circumstances where a Form 1040 filed [*5] after assessment might serve a tax purpose.Hindenlang, 164 F.3d at 1034 n.5 and 1035 n.6.10

Now, under § 523(a)(*), whether a filing satisfies the requirements of a return depends not only on consideration ofHindenlang, the determination must also be informed by any other applicable nonbankruptcy law. A survey of reportedTax Court decisions on when a taxpayer honestly and reasonably attempts to comply with tax law is thereforeinstructive, particularly those decided after Hindenlang. The Bankruptcy Court for the Northern District of Georgiaundertook this examination in the Briggs case:11

The U.S. Tax Court tends to analyze [this] element of the Beard test based on the form and content of thetaxpayer's filing. Walbaum v. C.I.R., T.C. Memo 2013-173 , 106 T.C.M. (CCH) 68 (T.C.2013) (no honestand reasonable attempt where taxpayer's form 1040 was filled out with all zeroes for relevant figures);Diamond v. United States, 107 Fed.Cl. 702 , 706 (Fed.Cl.2012), appeal dismissed (Feb. 26, 2013), aff'd, 530 Fed. Appx. 943 (Fed.Cir.2013), reh'g denied (Oct. 22, 2013), cert. denied, ___ U.S. ___, 134 S. Ct.1344 , 188 L. Ed. 2d 309 , (2014) (taxpayers could not have reasonably believed requirements of tax lawfulfilled where filing withheld information regarding wage and foreign income); Glover v. C.I.R., T.C. Memo2010-228 , 100 T.C.M. (CCH) 342 (T.C.2010) (no honest and reasonable attempt where taxpayer usedincorrect form); Sakkis v. C.I.R., T.C. Memo 2010-256 , 100 T.C.M. (CCH) 459 (T.C.2010) (honest andreasonable attempt where return reported accurate wages, exemptions, and personal information, despiteclaiming frivolous deductions); O'Boyle v. C.I.R., T.C. Memo 2010-149 , 100 T.C.M. (CCH) 14(T.C.2010)aff'd, 464 Fed.Appx. 4 (D.C.Cir.2012) (no honest and reasonable attempt where taxpayers'income figures omitted majority of their taxable income).



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Other tax court cases include an analysis of the taxpayer's subjective intent at the time of filing ... whetherthe taxpayer intended to convey accurate information in the filing. See Laue v. Comm'r, T.C. Memo2012-105 , 103 T.C.M. (CCH) 1575 (T.C.2012) ("[T]he Commissioner should not be forced to accept as areturn a document clearly not intended to provide the required information.") (quoting Coulton v. Comm'r,T.C. Memo2005-199 ); Williams v. Commissioner, 114 T.C. 136 , 143 (2000) (finding that a taxpayer's"denial of tax liability and refusal to self-assess [did] not evidence a reasonable attempt to satisfy hisobligation to file a return under the tax laws"); see also Green v. C.I.R., T.C. Memo 2008-130 , 95 T.C.M.(CCH) 1512 (T.C.2008)aff'd, 322 Fed.Appx. 412 (5th Cir.2009) (noting the disagreement among thebankruptcy courts over whether test for honest and reasonable under the Beard analysis should scrutinizethe debtor's intent and circumstances or the face of the document filed, but declining to adopt a position).But see Mendes v. C.I.R., 121 T.C. 308 , 330 (2003) (Vasquez, J. concurring) (endorsing the per seapproach adopted in Hindenlang).

In re Briggs, 511 B.R. at 718 . In applying the Beard test, the Tax Court has consistently looked to the taxpayer'saction and intent, as well as to the nature of the information provided. Fairly recently, the Tax Court noted that, in acase in which the taxpayer's honesty and reasonableness in attempting to comply with tax laws is the only issue,which often tips the scale against the taxpayer, because of the taxpayer's intentional recording of "uninformativeentries," contains "no information [*6] from which a determination of tax liability can be made." Sakkis v. C.I.R., T.C.Memo 2010-256 , 100 T.C.M. (CCH) 459 , at *7-8 (T.C. 2010) (emphasis in original).

One tax case the Court finds particularly instructive in applying the Beard test in post-assessment circumstances isSwanson v. C.I.R., 121 T.C. 111 (2003), which involved a chapter 7 debtor who failed to file income tax returns, butthen claimed that the tax liabilities assessed by the IRS for those years were dischargeable. In analyzing the Beardrequirements, the Tax Court specifically considered the debtor's intent, as reflected in his actions, and concluded thatthe taxpayer's late filings were not a valid return because "there [was] no evidence that he attempted to file anyreturns on his own initiative or that he cooperated with the Commissioner in a manner that might represent an honestand reasonable attempt to satisfy the requirements of the tax law." Id. at 124 (emphasis added). The court explicitlyconsidered the debtor's subjective intent and actions, including the extent to which an effort was made to provideaccurate and complete income and deductions information.

Additionally, Treasury Regulation § 301.7122-1(d) , which became effective in 2002, requires that any taxpayer whowants to propose a compromise of his tax liability must file a return, even if the IRS has already calculated andassessed the tax due without the taxpayer's help. 26 C.F.R. § 301.7122-1(d) (implemented by Form 656). As noted byJudge Easterbrook in his dissent in In re Payne, 431 F.3d 1055 (7th Cir. 2005), this regulation "tells us that theTreasury Department does think that a taxpayer's post-assessment of all income and deductions is useful." Id. at1060 (Easterbrook, J. dissenting). Judge Easterbrook further canvassed other tax purposes served by the requiredreturn, including that

[t]he taxpayer then will be unable to deny that he had income; the agency will be able to levy on his assetswithout protest that it made up the numbers. A belated return will close off some avenues, narrow thedispute that remains should litigation ensues, and—well, it will facilitate compromise. When both sideshave the same information, settlement is easier to achieve.

Id. at 1060-61. Because any compromise under § 7122 of the Internal Revenue Code depends on the taxpayer'ssubmission of returns in accordance with 26 C.F.R. § 301.7122-1(d) (implemented by Form 656), submission of thereturns has "an effect under the Internal Revenue Code." Hindenlang, 164 F.3d at 1034 . See also Boulez v. C.I.R.,810 F.2d 209 , 213-14 , 258 U.S. App. D.C. 90 (D.C. Cir. 1987) (tax regulations have the force of law). This regulationcould also be regarded as a "filing requirement" within the meaning of § 523(a) (*), further supporting that returns filedpost-assessment are returns for purposes of § 523(a)(1)(B) (i).

Judge Easterbrook's evaluation of the utility of the post-assessment filings is also consistent with the second sentenceof § 523(a) (*), which specifically includes in the definition of return (i) an IRS-prepared return where the



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debtor/taxpayer provides the information to the IRS, but not one where the debtor/taxpayer did not participate and (ii)a written stipulation to a judgment. Put another way, in Hindenlang parlance, inclusion of these documents as returnsunder § 523(a) (*) suggests [*7] that there is a tax purpose served when the amount and collectability of a tax debt canbe established—and therefore made easier for the IRS—as a result of a debtor's cooperation.

ConclusionHaving considered applicable nonbankruptcy law requirements for a return, the Court concludes that thedetermination of the fourth prong of Beard is a subjective test that allows for circumstances in which there can be anhonest and reasonable attempt to comply with the tax law even after assessment by the IRS and even when untimelyforms do not report additional tax liability. Here, the only circumstances considered by the Bankruptcy Court indetermining the honesty and reasonableness of the Biggers' attempt to comply with tax laws was the timing of theForm 1040s and the nonexistence of any additional tax liability. Based on the entirety of the record, the Courtconcludes that the Bankruptcy Court erred. Accordingly, the decision of the Bankruptcy Court is therefore REVERSEDand this case is REMANDED for further proceedings consistent with this decision.

The Court will enter an accompanying order.

/s/ Waverly D. Crenshaw, Jr.


UNITED STATES DISTRICT JUDGE

ORDERThe decision of the Bankruptcy Court is REVERSED and this case is REMANDED for further proceedings consistentwith the Court's Memorandum Opinion.

IT IS SO ORDERED.

/s/ Waverly D. Crenshaw, Jr.


UNITED STATES DISTRICT JUDGE

fn 1

Although the IRS is referred to as the party defendant for ease of reference, "[i]t is a well settled principle that theIRS cannot be sued and the proper party in actions involving federal taxes is the United States of America." In reSmith, 205 B.R. 226 , 227 n.1 (B.A.P. 9th Cir. 1997) (internal citations omitted).

fn 2

Unless otherwise stated, all statutory references herein are to specific sections of the Bankruptcy Code, 11 U.S.C.§§ 101 et seq.

fn 3

The Biggers contend that the assessments were against both James Biggers and Pamela Biggersand if the tax liability is dischargeable as to Pamela Biggers, as conceded by the IRS, is likewise




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dischargeable as to James Biggers. (See Doc. No. 5-6 at 2.) The determination of that disputed fact,even if material, is not necessary to the outcome of this appeal.

fn 4

The IRS maintains that the Biggers cannot raise for the first time on appeal the proper amount of their taxliability. (See Doc. No. 11 at 17.) The Court agrees that the determination of the amount of the Biggers' outstandingtax liability would be a new argument that cannot be considered and resolved for the first time on appeal. See McFarland v. Henderson, 307 F.3d 402 , 407 (6th Cir. 2002) (issues not presented to the trial court but raised forthe first time on appeal are not properly before the appellate court). However, as the Court understands theBiggers' argument, they are not seeking to have this Court determine the amount of their outstanding tax liability,but, rather, to determine whether the IRS made adjustments to the assessed taxes or otherwise ascribed"meaning" to the Biggers' late-filed Form 1040s for purposes of examining the dischargeability of the taxobligations, in whatever amount.

fn 5

The tax form for 2002 reported $15,088 in additional tax liability, which the IRS conceded was subject to discharge.Memorandum Opinion, DE 5-14, at p. 7.

fn 6

As noted, the IRS conceded that the additional tax liability for the 2002 tax year was discharged.

fn 7

Most courts have adopted an asterisk to indicate the "hanging paragraph."

fn 8

See Fahey v. Mass. Dep't of Revenue (In re Fahey), 779 F.3d 1 , 10 (1st Cir. 2015) (2-1 decision); Mallo v. IRS (Inre Mallo), 774 F.3d 1313 , 1321 (10th Cir. 2014); McCoy v. Mississippi State Tax Comm'n (In re McCoy), 666 F.3d924 , 932 (5th Cir. 2012). Notably, both the Fahey case from the First Circuit and the McCoy case from the FifthCircuit dealt with what constitutes a state tax return, a determination that the Sixth Circuit expressly declined toaddress. Hindenlang, 164 F.3d at 1033 n.4.

fn 9

The Court recognizes that the stated purposes of BAPCPA included "restoring personal responsibility and integrityin the bankruptcy system." H.R.Rep. No. 109-31-109th Cong. 1st Sess., 2005 U.S.C.C.A.N. 88. Even with thisstated purpose, though, after BAPCPA exceptions to discharge continue to be narrowly construed "to promote thecentral purpose of the discharge—a fresh start for debtors." In re Leonard, 644 Fed. Appx. 612 (6th Cir. 2016)(internal citation omitted). See also Marrama v. Citizens Bank, 549 U.S. 365 , 367 , 127 S. Ct. 1105 , 1107 , 166 L.Ed. 2d 956 (2007) (principal purpose of the Bankruptcy Code is to grant a fresh start to the honest but unfortunatedebtor). Here, the IRS does not allege any fraud in connection with the Biggers' tax debt. That would be a separatebasis for nondischargeability. 11 U.S.C. § 523(a)(1)(C) .

fn 10

The U.S. Tax Court has described Hindenlang as utilizing a subjective approach to the "honest and reasonableattempt" prong of the Beard test. See Green v. Comm'r, T.C. Memo 2008-130 , 95 T.C.M. (CCH) 1512 at *14 n.13



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(T.C. 2008), aff'd, 322 F. App'x 412 (5th Cir. 2009).

fn 11

The "honest and reasonable attempt" prong of the Beard test is usually referred to in Tax Court cases as the thirdprong due to different ordering.



https://www.bloomberglaw.com/ms/documentdocumentdocumentdocumentdocumentdocument/X1B0B56003?jcsearch=322%20F.%20App'x%20412&summary=yes#jcite



September 15, 2016

Confirmation of Plan

Balloon Payments OK in Ch. 13 Plans in Ga.BNA Snapshot

• Georgia court declines to follow majority rule that balloon payments are prohibited periodic payments

• Debtor's proposed Ch. 13 plan is feasible

By Diane Davis

Sept. 12 — Balloon payments to a creditor holding a claim secured by the debtor's residenceare allowed in a debtor's Chapter 13 plan, a bankruptcy court in Georgia held Sept. 1 ( In reCochran, 2016 BL 288910, Bankr. M.D. Ga., No. 15-52314-AEC, 9/1/16).

Judge Austin E. Carter of the U.S. Bankruptcy Court for the Middle District of Georgia declinedto follow the majority rule that balloon payments in Chapter 13 plans are “periodic payments”prohibited under Bankruptcy Code Section 1325(a)(5)(B)(iii)(l).

According to the court, the plain language of the statute allows for balloon payments.

In Chapter 13 bankruptcy, individuals receiving regular income may obtain debt relief while retaining their property, but to doso, the debtor must propose a plan that uses future income to repay all or a portion of his or her debts over a three to five yearperiod.

Follows Pre-BAPCPA Practice

Prior to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, it was common for some Chapter 13 plans toprovide for backloaded payments such as balloon payments, the court said. In response to creditor concerns, Congressenacted the equal payment provision and a provision extending the concept of adequate protection to post-confirmation planpayments, the court said. The equal payment provision prevents debtors from backloading payments to secured creditors bypaying them other than on a monthly basis, the court said.

Congress had reasons other than prohibiting balloon payments in enacting the equal payment provision, the court said. Thereis no reason to think Congress intended to depart from pre-BAPCPA practice allowing balloon payments, the court said.

Debtor William Cochran proposed a Chapter 13 plan that within the first 12 months after confirmation, he would make aballoon payment that would pay off the balance of secured creditor RREF II PB-GA, LLC (RREF). Until that balloon payment,the debtor would make monthly payments of $2,500. According to the court, RREF is oversecured.

RREF objected to the confirmation of the debtor's Chapter 13 on the grounds that the balloon payment is a prohibited periodicpayment unequal to the preceding adequate protection payments in contravention of Section 1325a)(5)(B)(iii)(l), and theballoon payment renders the plan not feasible. The Chapter 13 trustee didn't oppose confirmation of the plan.

The debtor testified that he planned to transfer his interest in the property to his wife, who would retain a loan in her name torefinance the property. To qualify for the loan, the debtor's auto collision repair business, Cochran Coachworks, Inc., wouldincrease her salary.

The court found the debtor's plan feasible and overruled RREF's objection to confirmation.

Balloon Payments OK in Ch. 13 Plans in Ga., Bankruptcy Law Reporter (BNA)



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Calvin L. Jackson, Warner Robins, Ga., represented debtor William Jackson Cochran; Stephen P. Drobny, Jones Walker LLP,Atlanta, Ga., represented creditor RREF II PB-GA, LLC; Laura Wilson, Office of the Chapter 13 Trustee, Macon, Ga., trustee.




Full text at: http://www.bloomberglaw.com/public/document/In_re_Cochran_No_1552314AEC_2016_BL_288910_Bankr_MD_Ga_Sept_01_20

Balloon Payments OK in Ch. 13 Plans in Ga., Bankruptcy Law Reporter (BNA)




http://www.bloomberglaw.com/ms/public/document/In_re_Cochran_No_1552314AEC_2016_BL_288910_Bankr_MD_Ga_Sept_01_20

http://www.bloomberglaw.com/ms/public/document/In_re_Cochran_No_1552314AEC_2016_BL_288910_Bankr_MD_Ga_Sept_01_20



October 06, 2016

Discharge

Ch. 13 Debtors’ Changes to Model Plan Violate Bankruptcy CodeBNA Snapshot

• Debtors’ additional provisions to Model Plans violate Code

• Each Chapter 13 plan must have a stated length and any variations require a motion to modify

By Diane Davis

Oct. 3 — Changes that five California debtors made to their Chapter 13 bankruptcy Model Plansviolate the Bankruptcy Code and are inconsistent with the rest of the Northern District ofCalifornia, a bankruptcy court in California held Sept. 26 ( In re Escarcega , 2016 BL 316799, Bankr. N.D. Cal., No. 16-50368 SLJ, 9/26/16).

Judges M. Elaine Hammond and Stephen L. Johnson of the U.S. Bankruptcy Court for theNorthern District of California concluded that the debtors can't “foreclose creditors’ and the

Trustee's rights to object by failing to move for modification when necessary.”

Five different debtors made changes to the Model Plans that authorized debtors to pay off their plans and obtain a dischargeat any time after confirmation without having to go through the modification process and without having to pay allowedunsecured claims in full.

Chapter 13 bankruptcy allows individuals receiving regular income to obtain debt relief while retaining their property, but to doso, the debtor must propose a plan that uses future income to repay all or a portion of his debts over a three to five yearperiod.

There has been a long-standing practice in the San Jose Division, the court said, where bankruptcy cases have beenconfirmed without a defined term, that allows no possibility of distribution on allowed claims of general unsecured creditors,and that permits debtors to obtain a discharge before the end of the estimated term without a court order.

The debtors argued that because there was no objection by the trustee or creditors, no minimum plan length is required.Debtors doon't challenge the court's formulation of the Model Plan, but they argue that it is a de facto local rule that isinconsistent and must be invalidated.

Specifically, the debtors have added language to the Model Plans that prohibit the trustee from distributing excess funds.Under the San Jose form plan, any additional funds received above the stated percent or amount were returned to debtorsunless the trustee obtained an order modifying the plan authorizing distribution of the funds. The debtors wanted to perpetuatethis practice.

The Model Plan “substantively abridges the Debtor's rights” by requiring a debtor “to make payments to general unsecuredcreditors in excess of the amounts required by the Bankruptcy Code” when the debtor is entitled to ““propose a zero dollardividend plan,” the court said. According to the debtors, if a plan proposed a zero dollar dividend, there is no further reason forthe creditor to be interested in the plan, unless the creditor has specific knowledge about the finances of the debtor thatcauses the creditor to question it, the court said.

The proper way to handle these issues, the court said, is modify the Chapter 13 plan using Bankruptcy Code Section 1329. “Debtors attempt to construct a plan that authorizes modifications without notice to parties in interest,” eliminates creditor's rightsto object to the modification and “flouts Section 1329,” the court said. The Bankruptcy Code anticipates that a plan may need

Ch. 13 Debtors’ Changes to Model Plan Violate Bankruptcy Code, Bankruptcy Law Reporter (BNA)



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to be modified, the court said.

Each and every Chapter 13 plan will have a “stated length and any substantive variation from that length wil require a motionto modify,” the court concluded.

Norma L. Hammes, Law Offices of Gold and Hammes, San Jose, Calif., represented debtor Dennis Michael Escarcega (No.16-50368); debtor Nanette Marie Sisk (No. 16-50548); and debtor Mark Irvin Candalla (No. 16-50659). James S.K. Shulman,Law Offices of James Shulman, San Jose, Calif., represented Eugene Edward Vick, Debtor (No. 16-50401); and debtor JeriLyle Saldua Mercado (No. 16-50651).




Full text at: http://www.bloomberglaw.com/public/document/In_re_Escarcega_No_1650368_SLJ_2016_BL_316799_Bankr_ND_Cal_Sept_2

Ch. 13 Debtors’ Changes to Model Plan Violate Bankruptcy Code, Bankruptcy Law Reporter (BNA)




http://www.bloomberglaw.com/ms/public/document/In_re_Escarcega_No_1650368_SLJ_2016_BL_316799_Bankr_ND_Cal_Sept_2

http://www.bloomberglaw.com/ms/public/document/In_re_Escarcega_No_1650368_SLJ_2016_BL_316799_Bankr_ND_Cal_Sept_2



September 15, 2016

Trustee as Lien Creditor

Ch. 7 Trustee Has Longer ‘Reach-Back Weapon' in ArsenalBNA Snapshot

• Trustee can use IRS's 10-year recovery period to pursue fraudulent transfer claims

• Using this tactic may ‘improve’ bankruptcy practice

By Diane Davis

Sept. 9 — A Chapter 7 trustee can “step into the shoes” of the Internal Revenue Service andpursue actions that are time-barred under state law, but ones that the IRS could have pursuedunder its 10-year period allowed for collection activities, a bankruptcy court in Florida held Aug.31 ( Mukamal v. Citibank N.A. (In re Kipnis), 2016 BL 284869, Bankr. S.D. Fla., No. 16-01045-RAM, 8/31/16).

Judge Robert A. Mark of the U.S. Bankruptcy Court for the Southern District of Floridaconcluded that Bankruptcy Code Section 544(b) is broad enough to allow the bankruptcy trustee to step into the shoes of theIRS as an unsecured creditor to avoid transfers that occurred in 2005.

The IRS is a creditor in a “significant percentage of bankruptcy cases,” the court noted. The few cases addressing this issuemay be because bankruptcy trustees haven't “realized that this longer reach-back weapon is in their arsenal,” the court said.Widespread use of Section 544(b) to avoid state statutes of limitation would be a “major change in existing practice,” the courtsaid.

Although there is a split of authority on the issue, the bankruptcy court sided with Ebner v. Kaiser (In re Kaiser) , 525 B.R. 697(Bankr. N.D. Ill. 2014), rather than Wagner v. Ultima Holmes, Inc. (In re Vaughan Co.) , 498 B.R. 297 (Bankr. D.N.M.2013). Kaiser found that the clear language in the text of Section 544(b) imposed no limitation on the meaning of “applicable law” or onthe type of unsecured creditor the trustee can choose as a triggering creditor,” the court said. The Vaughan court found thatthe federal government, in defending public rights or servicing the public interest, shouldn't be bound by state law statutes oflimitations, the court said.

“The Kipnis case adds to the majority line of cases authorizing a bankruptcy trustee to utilize the IRS as a ‘triggering creditor'under Section 544(b) to expand the bankruptcy estate's reach to unwind avoidable transfers beyond the standard limitationsperiod found under state law fraudulent transfer statutes,” Corali Lopez-Castro of Miami-based law firm Kozyak Tropin &Throckmortin, told Bloomberg BNA Sept. 8. Lopez-Castro argued the case on behalf of the plaintiff/trustee Chapter 7 TrusteeBarry E. Mukamal.

“The potential impact of the ruling should increase the scope of allegedly avoidable transfers that a bankruptcy trustee maypursue for the benefit of the bankruptcy estate and its creditors,” Lopez-Castro told Bloomberg BNA. “The court in Kipnis wentfurther than other majority line cases when it recognized the policy implications of its decision that trustees might pursue thisremedy on an increased basis and could be a major change in existing practice,” she said.

“We appreciate the Court's ruling and the point the Court made that the ‘Vaughan [decision] may be right in believing thatCongress intended that 544(b) be limited to avoidance actions that only nongovernmental creditors could bring,'” PeterRussin, Meland, Russin, & Budwick, Miami, told Bloomberg BNA Sept. 12. Russin represented the defendant/debtor.

“Perhaps this consideration will find its way to the legislature and bring about a change in the statute's language,” Russin said.“Having said that, we also believe that the trustee's rights standing in the shoes of the IRS under its 10 year ‘collection' period

Ch. 7 Trustee Has Longer ‘Reach-Back Weapon' in Arsenal, Bankruptcy Law Reporter (BNA)



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does not equate to a ‘lookback' period for purposes of fraudulent conveyance actions brought by trustees. We are consideringfiling a motion for reconsideration in that regard,” he said.

Corali Lopez-Castro, and Vincent F. Alexander, Coral Gables, Fla., represented plaintiff/Chapter 7 trustee Barry E. Mukamal;Peter D. Russin, Miami, represented defendant/debtor Analia Kipnis.




Full text at: http://www.bloomberglaw.com/public/document/Mukamal_v_Citibank_NA_In_re_Kipnis_No_1411370RAM_2016_BL_284869_B

Ch. 7 Trustee Has Longer ‘Reach-Back Weapon' in Arsenal, Bankruptcy Law Reporter (BNA)




http://www.bloomberglaw.com/ms/public/document/Mukamal_v_Citibank_NA_In_re_Kipnis_No_1411370RAM_2016_BL_284869_B

http://www.bloomberglaw.com/ms/public/document/Mukamal_v_Citibank_NA_In_re_Kipnis_No_1411370RAM_2016_BL_284869_B


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