Wooley v. Haynes & Boone, L.L.P. (In re SI Restructuring Inc.)

Citation:
Case No. 11-51106 (5th Cir. April 18, 2013)
Tag(s):
Ruling:
AFFIRMED bankruptcy's court's denial of a creditor's motion to pursue post-confirmation causes of action on behalf of reorganized Debtor due to a lack of standing to sue and rejected blanket reservation in plan of "any and all claims" because the plan did not specifically reserve the causes of action. The Court acknowledged that while Section 7.7 of the Plan and the broad definition retaining all causes of action for the debtor was unequivocal, it held that blanket reservations of any and all claims are insufficient to reserve specific causes of action. In holding that there was no standing because the blanket reservation was not specific, the Fifth Circuit reaffirmed that a creditor may pursue claims for the debtor-in-possession if the debtor could bring the claim and if three requirements were met: (1) the claim is colorable, (2) the debtor-in-possession refuses unjustifiably to pursue the claim, and (3) the creditor obtains court approval to bring the claim. However, because the plan administrator did not have standing to pursue the claims because they were not specifically retained and set out in the plan, the creditor also did not have standing to sue.
Procedural context:
Creditor filed post-confirmation motion requesting that bankruptcy court allow them to bring derivative actions or actions on behalf of Debtor's estate. The bankruptcy court denied the request because the Plan did not specifically reserve those cause of action. After the district court affirmed, the Wooleys appealed to the Fifth Circuit.
Facts:
Debtor SI Restructuring f/k/a Schlotzsky's Inc. filed for chapter 11 protection. Debtors retained Haynes & Boone LLP as counsel. Unsecured creditors committee (the "Committee") successfully sought to bring adversary claims against the Wooleys, who were creditors. The Wooleys subsequently asked the Committee to pursue various state law claims against Haynes & Boone and five outside directors. During this time, Debtor filed a disclosure statement and plan dividing potential claims into (1) preference and avoidance litigation, and (2) potential litigation using blanket reservation language "of any and all claims." The disclosure statement recognized the Wooleys allegation that additional claims should be asserted by the estates and stated generally that Wooleys retained the right to seek court authority to bring claims on behalf of reorganized debtor. While the adversary was proceeding, the plan was approved. The Wooleys then asked the plan administrator to pursue seven specific causes of action against Haynes & Boone and the independent directors. An agreement was reached in the adversary and the Wooleys agreed to withdraw claims against Debtor in exchange for partial payment of funds and plan administrator's agreement not to oppose motion to seek authority to pursue the seven causes of actions on behalf of reorganized debtor.
Judge(s):
Wiener, Clement, and Prado, Circuit Judges

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