In re: ESSAR STEEL MINNESOTA, LLC; ESML HOLDINGS, INC.

Case Type:
Business
Case Status:
Reversed and Remanded
Citation:
3rd Cir. No. 20-3002 (3rd Circuit, Aug 25,2022) Published
Tag(s):
Ruling:
The Third Circuit Court of Appeals reversed the bankruptcy court's decision (certified directly from the U.S. District Court) that the bankruptcy court did not have jurisdiction over the debtor's post-confirmation adversary proceeding against its financial advisor relating to the claims for civil contempt, declaratory judgment, and breach of the plan, maintaining the fee had been discharged by the plan and its confirmation order. The Court of Appeals held that the bankruptcy court had jurisdiction to interpret and enforce its own prior confirmation order and discharge injunction.
Procedural context:
Following chapter 11 plan confirmation, the financial advisor filed a lawsuit in the United States District Court for the District of Minnesota and an arbitration in order to recover a fee allegedly owed to it based on pre-confirmation agreements. In response, the reorganized debtor filed an adversary proceeding in the bankruptcy court in the District of Delaware. The financial advisor filed a motion to dismiss on the basis that its claim was not a pre-effective date claim. At oral argument, subject matter jurisdiction was raised. The bankruptcy court took the matter under advisement and subsequently issued a bench ruling that it lacked jurisdiction and dismissed the adversary proceeding.
Facts:
During the bankruptcy, the financial advisor entered into an initial agreement with an affiliate of the plan sponsor under which the financial advisor would assist the affiliate with acquisition of the debtor. The agreement was amended twice during the bankruptcy, with the second amendment being executed the day before the plan's effective date. The second amendment purported to bind the parties after the effective date and was signed on behalf of the affiliate and plan sponsor by the individual who would become the CEO of the reorganized debtor after the effective date. After the effective date, the financial advisor requested payment under the agreement but the plan sponsor and reorganized debtor refused to pay, arguing that the liability was discharged under the confirmed plan because the claim arose prior to the effective date.
Judge(s):
AMBRO, KRAUSE, and BIBAS

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