Anti Lothian Bankruptcy Fraud Committee v. Lothian Oil, Inc. (In re Lothian Oil, Inc.)

Summarized by Colin Robinson , Pachulski Stang Ziehl & Jones LLP
13 years 1 month ago

Citation:

No. 11-51082

Tag(s):

Ruling:

Appellants appeals of three pro hac vice related orders were dismissed because they were untimely. Appellants motion to set aside settlements agreements encompassed in the Debtor's confirmed plan was rejected because the related motions were barred by the 180-day limitation period for revoking fraudulent plan/confirmation orders. Additionally, the appellants lacked standing to modify a confirmed plan. Finally, the District Court's determinations on the remaining motions was affirmed because the appellants failed to sufficiently brief the issues before the Fifth Circuit.

Procedural context:

Appellants, the Anti-Lothian Bankruptcy Fraud Committe and Israel Grossman, appealed adverse rulings by the Bankruptcy Court for the Western District of Texas, which rulings were affirmed by the District Court for the Western District of Texas.

Facts:

The Appellants are a group of unofficial shareholders that challenged settlement agreements reached between the Debtor and two creditors. The settlement agreements, approved by the bankruptcy court, were incorporated into the Debtor's confirmed plan. The appellants initial challenge to the settlement agreements requested that the plan be set aside because of recently-discovered fraud. The initial challenge was dismissed without prejudice and the appellants brought a second motion that asked the bankruptcy court to "clarify or modify" the plan by setting aside the settlement agrements and other fraudulent transfers. The bankruptcy court heard arguments on motions related to the challenge to the settlement agreements together with cross-motions for enforcement of the plan, a motion to disgorge the chief-restructuring officers fees, sanction certain professionals and appoint an impartial trustee. The bankruptcy court ruled against the appellants and in favor of the Debtor on each motion. The district court ruled for appellees on all of the orders entered by the bankruptcy court. On appeal, the Fifth Circuit held that the appellants lacked standing to attempt to modify a confirmed plan because they were not plan proponents and did not seek permission to bring a derivative action on the Debtor's behalf. The appellants attempt to modify the plan was also rejected as untimely because the appellants' challenge was not filed within 180 days of confirmation as required by 11 U.S.C. 1144. The appellants request that the limitations period be tolled because of recently acquired evidence of fraud was also rejected. The Fifth Circuit held that section 1144 establishes the length of time available to challenge a confirmed plan, even when fraud is involved. The appellants failure to sufficiently brief the appeals of the remaining bankruptcy court orders led to affirmance of the district court's determination.

Judge(s):

Jolly, Jones, Graves, Circuit Judges

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