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Galaz v. Katona (In the Matter of Galaz)

Case No. 15-50919 (5th Cir. Oct. 28, 2016)
AFFIRMED bankruptcy court's injunctive relief, concluding that post-confirmation jurisdiction existed, and that the prior settlement order barred the defendant (Galaz) from pursuing claims against a third-party (Oshita). "Even viewed through the narrower lens of post-confirmation bankruptcy jurisdiction, Galaz’s [] claims relate principally to pre-confirmation activity between the parties. There was discord between Oshita and Katona [the debtor] during the reorganization as to the respective ownership interests in WSG. Indeed, that dispute formed the basis of the 2008 Settlement Agreement, which provided funds for Katona to pay off her debts under the plan." The Court concluded for that reason that there was "arising in" jurisdiction over the releases provided in the prior settlement agreement, and that Galaz's efforts to assert control over those released claims fell within the bankruptcy court's "arising in" jurisdiction. Because "arising jurisdiction" existed, the Court held that the bankruptcy court had statutory and constitutional authority to enter final orders on this "core" proceeding. Finally, on the merits, the Court concluded under Texas law that the claim assignments received by Galaz were burdened with the releases previously approved by the bankruptcy court. Because an assignee in Texas cannot receive any greater rights than transferred by the assignor, the Court of Appeals agreed with the lower courts that Galaz was bound by the releases approved by the bankruptcy court and, therefore, barred from pursuing claims against Oshita.
Procedural context:
Appeal from district court, which affirmed the bankruptcy court's ruling that a prior settlement order barred certain claims against a third-party (Oshita) and, thus, the defendant (Galaz) was enjoined from pursuing such claims. Galaz appealed on grounds that the bankruptcy court lacked subject matter jurisdiction, and further appealed on the merits of the decision.
The debtor (Katona) began an adversary proceeding in bankruptcy court to enjoin her former father-in-law (Galaz) from pursuing claims against a third-party individual (Oshita). In support of such injunctive relief, the debtor argued that the claims at issue were released as part of a previous settlement agreement that was approved in contemplation of her bankruptcy plan. Galaz argued that he acquired the claims after the bankruptcy case and was not bound by any prior releases. The bankruptcy court enjoined Galaz from pursuing claims against Oshita, concluding that the settlement approved by the bankruptcy court barred such claims. Galaz appealed.
Clement, Weiner, Costa

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