A.P. Liquidating Co. v. Qwest Communications Corp. (In re A.P. Liquidating Co.)

Summarized by J. Debbeler , Bricker Graydon LLP
14 years 10 months ago

Citation:

(6th Circuit, Dec 31,1969)

Tag(s):

6th Circuit

Ruling:

The Sixth Circuit affirmed the bankruptcy court's grant of judgment to Qwest based on partial findings based on its review of the contract and Delaware contract law. The Sixth Circuit affirmed the bankruptcy court's denial of Qwest's motion to dismiss based on lack of standing because creditors committees can be granted derivative standing to pursue a variety of actions on behalf of the debtor or estate and derivative standing is broad enough to allow the committee to initiate adversary proceedings in bankruptcy court in place of the debtor-in-possession or trustee.

Procedural context:

Appeal of the Official Committee of Unsecured Creditors and the liquidating agent of the dismissal of their action for breach of contract under Fed. R. Bankr. P. 7052. Cross-appeal of district court's earlier order vacating the baknruptcy court's dismissal of the same action as barred by res judicata.

Facts:

Debtor and Qwest entered into a contract and one month before Qwest's target date for delivery under the contract and more than a year before Debtor's earliest required payment date, Debtor filed bankruptcy. Debtor filed a plan of reorganization that was confirmed. Qwest filed a timely proof of claim. The committee and liquidating agent commenced an adversary proceeding against Qwest claiming that it breached the contract. Qwest filed a motion to dismiss which was granted by the bankruptcy court because a confirmed bankruptcy plan bars subsequent potential claims unless they are specifically disclosed and reserved in the plan. The district court reversed finding that the plan specifically reserved a right to explore any objection against the proof of claim filed by Qwest, which was reservation enough to defeat res judicata. The district court remanded the action back to bankruptcy court. Qwest moved to dismiss on standing grounds. The bankruptcy court issued a bench ruling rejecting the standing argument and the district court affirmed. A bench trial began and at the close of evidence by the committee and liquidating agent, Qwest moved pursuant to Fed. R. Bankr. P. 7052 for judgment based on partial findings. The bankruptcy court granted Qwest's 7052 motion and the district court affirmed.

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