Zardinovsky v. Arctic Glacier Income Fund

Case Type:
Case Status:
17-2522 (3rd Circuit, Aug 20,2018) Published
Bankruptcy court's order dismissing adversary proceeding as barred by plan releases is affirmed. A confirmed plan is res judicata as to all issues decided or which could have been decided at confirmation. Confirmed plans can bar liability for post-confirmation acts. Here, post-confirmation purchasers of stock were bound by the plan's release of liability of the debtor and its officers for post-confirmation acts implementing the plan.
Procedural context:
On appeal from the US District Court for the District of Delaware
Arctic Glacier filed bankruptcy in Canada and received recognition under Chapter 15. That recognition granted the Canadian reorganization plan full effect in the United States. The confirmed plan granted broad discretion to the Monitor (the Canadian analogue to a trustee) to make distributions to creditors and shareholders. Notably, the plan did not incorporate FINRA rules, including rules regarding who is entitled to receive a distribution. The plan contained broad releases that insulated the Debtor and its officers from any claim "in any way related to, or arising out of or in connection with" the bankruptcy. After confirmation, Arctic Glacier paid creditors and published public notice of its intent to make an initial distribution to shareholders as of December 18. Plaintiffs acquired over 12.6 million shares of Arctic Glacier stock between December 16 and January 22. Under FINRA rules, Plaintiffs would have been entitled to the distribution, but Arctic Glacier did not follow FINRA's rules and did not pay Plaintiffs. Plaintiffs sued for negligence, breach of fiduciary duty, securities fraud and common law fraud.
Smith, Hardiman and Bibas (author)

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