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2014 NORTON BANKRUPTCY LAW SEMINAR MATERIALS

Liquidating Chapter 11 Cases and Liquidating Trusts

By William L. Norton III, Shari L. Heyen, David Lander

 

Xantrex Tech., Inc. (In re AstroPower Liquidating Trust), 335 B.R. 309, 323 (Bankr. D. Del. 2005) (noting scope of bankruptcy court's "related to" jurisdiction diminishes after confirmation of chapter 11 plan); In re Gen. Media, Inc., 335 B.R. 66, 73 (Bankr. S.D. N.Y. 2005) ("all courts that have addressed the question have ruled that once confirmation occurs, the bankruptcy court's jurisdiction shrinks"); In re Brown, 300 B.R. 871, 875 (D. Md. 2003) ("jurisdictional analysis shifts . . . after confirmation of a bankruptcy plan."). But see In re Boston Reg'l Med. Ctr., Inc., 410 F.3d 100, 107 (1st Cir. 2005) ("Compass of bankruptcy court's "related to" jurisdiction persists undiminished after plan is confirmed in liquidating Chapter 11 case, in which debtor or trustee commences litigation designed to marshal debtor's assets for benefit of its creditors pursuant to its liquidating plan.").

Some courts have held that post-confirmation "related to" jurisdiction exists only where there is a "close nexus" to the plan or proceeding sufficient to uphold bankruptcy court jurisdiction over the matter. In re Pegasus Gold Corp., 394 F.3d 1189, 1194 (9th Cir. 2005); Resorts, 372 F.3d at 166-67; Railworks, 325 B.R. at 723. In Resorts, the Third Circuit observed:

Whether a matter has a close nexus to a bankruptcy plan or proceeding is particularly relevant to situations involving continuing trusts, like litigation trusts, where the plan has been confirmed, but former creditors are relegated to the trust res for payment on account of their claims. To a certain extent, litigation trusts by their very nature maintain a connection to the bankruptcy even after the plan has been confirmed. The question is how close a connection warrants post-confirmation bankruptcy jurisdiction. Matters that affect the interpretation, implementation, consummation, execution, or administration of the confirmed plan will typically have the requisite close nexus. Under those circumstances, bankruptcy court jurisdiction would not raise the specter of "unending jurisdiction" over continuing trusts.

 

 

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