IRT Partners, L.P. v. Winn-Dixie Stores, Inc. (In re Winn-Dixie Stores, Inc.)

Summarized by Victoria Kothari , Latham, Shuker, Eden & Beaudine, LLP
14 years 10 months ago

Citation:

No. 09-12237 (11th Cir. Apr. 29, 2011) [Publish]

Tag(s):

11th Circuit

Ruling:

Affirmed. Holding: Res judicata precludes post-confirmation amendments to claim absent some "compelling reason." No compelling reason found where creditors did not contest pre-confirmation claim objections, did not object to plan, and accepted distributions thereunder. Creditor's "reservation of right to amend claim" provision would not be construed to protect in perpetutity creditor's right to amend.

Procedural context:

Appeal from district court order affirming bankruptcy court's decision to sustain debtor's objection to creditor's post-confirmation attempt to amend claims on res judicata grounds.

Facts:

The facts giving rise to this appeal are not unusual. (1) The Chapter 11 Debtor, Winn-Dixie, rejected certain leases. (2) Lessors filed proofs of claim. (3) Debtor filed objections to claims. The claim objections were not contested by Lessors - in fact no appearance was made (and no appeal was filed). The Lessors claims were significantly reduced. Subsequently, Winn-Dixie's plan was confirmed, again without objection by either Lessor, and distributions (new common stock) were made to unsecured creditors. Distributions were made on 12/22/06 and on 1/9/07. On 1/5/07 each lessor filed an Amended Proof of Claim in amounts, which if allowed, would have effectively exchanged each $1.00 of allowed unsecured claim into a claim for $15.92 or $51.94, respectively. Winn-Dixie objected to the Amended Claims and the bankruptcy court held the amended claims were barred by the doctrine of res judicata. Lessors appealed asserting that the 5-prong test from In re International Horizons, Inc., 751 F.2d 1213 (11th Cir.1985) should govern amended claims. The 11th Circuit noted that Internatonal Horizons was not a post-confirmation claim amendment case, and stated that the threshold issue was the preclusive effect of res judicata. The Court noted that the plan "undertook to extinguish all claims, substituting for them a new contractual relationship ... defined by the terms of the plan itself" then asked whether the law permitted such a result. The Court looked to the decision in Holstein v. Brill, 987 F.2d 1268 (7th Cir.1993) wherein the 7th Cir. held, in part, that confirmation of a plan is equivalent to a final judgment. The claim is extinguished and substituted for a final judgment. Therefore, res judicata should preclude post-confirmation amendments absent some "compelling reason." Holstein v. Brill, 987 F.2d at 1270. The 11th Circuit agreed with the court's reasoning and result. Moreover, the Court failed to find any compelling reason for post-confirmation amendment based on the facts of the case. The Lessors tardiness was no excuse. Affirmed.

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