Opinion
No. 99-44743 (REG)
September 20, 2002
Marc Stuart Goldberg, Esq., Harrington, Ocko Monk, White Plains, N.Y.
Jeffrey L. Solomon, Esq., Steinberg Fineo Berger Barone, P.C., Garden City, N.Y.
DECISION ON MOTION TO EXPUNGE ALLEGEDLY UNDELIVERABLE CLAIM
In this contested matter in a confirmed case under chapter 11 of the Bankruptcy Code, Marc Stuart Goldberg ("Mr. Goldberg"), the disbursing agent ("Disbursing Agent") under the confirmed chapter 11 plan of NutriPlus, LLC ("NutriPlus," or the "Confirmed Debtor"), moves (1) to expunge the previously allowed claim ("Amrion Claim") of Amrion, Inc. ("Amrion"), and (2) for a declaration that under the confirmed chapter 11 plan of NutriPlus (the "Confirmed Plan"), "all property of the Confirmed Debtor, relating to the Amrion Claim, shall be deemed to have reverted to the Confirmed Debtor in accordance with the Confirmed Plan." The Disbursing Agent's motion is opposed by NBTY, Inc. ("NBTY"), the holder or alleged holder of the fights to payment on the Amrion Claim, under a succession of corporate reorganizations and conveyances.
The efforts of the Disbursing Agent here — the former counsel to NutriPlus — to relieve NutriPlus of its duty to make distributions to what is said to be its largest creditor is best described by a word used in this city that translates loosely into "audacity." The Disbursing Agent seeks to effect the forfeiture of the rights to distribution on the Amrion Claim based on a contention that distributions on the Amrion Claim were "returned as undeliverable" (which they plainly were not), and by a contention that the right to the distributions belongs to someone else — even after getting written confirmation by the supposed alternative recipient that it did not intend to receive, or desire, the NutriPlus distributions.
For that reason, the Court considers it unnecessary to consider the obvious alternative — proceedings in the nature of interpleader to allow the alleged alternative recipients to litigate the right to the distributions, and giving the Disbursing Agent comfort that if he delivers future distributions to the party determined by the Court, he and the Confirmed Debtor will be protected. That of course would be far more just than authorizing the requested forfeiture.
The Court rejects the Disbursing Agent' assertions, on both the facts and law, and both prongs of the Disbursing Agent's motion are denied. The following are the Court's Findings of Fact and Conclusions of Law in connection with its determination.
Findings of Fact
The underlying facts, which were put forward principally by state court-style affirmations and exhibits, are undisputed. Hence there was no need for an evidentiary hearing (which also was not requested by either party). Based on those submissions, the Court finds as facts the following.
Like many such affirmations, they mixed true statements of fact, factual arguments and conclusions, and legal argument; they also included statements that were hearsay, and the relevant documents as exhibits. The Court has based its factual findings on the true statements of fact and the relevant documents.
Background
1. On July 30, 1999, NutriPlus filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code. By order dated May 8, 2000 (the "Confirmation Order"), it confirmed a plan of reorganization, and Mr. Goldberg, who was one of the attorneys for the Debtor NutriPlus, was appointed as Disbursing Agent.
See Confirmation Order, Disbursing Agent's Affirmation in Support of his Objection to Claim No. 14 of Amrion, Inc.("Goldberg Affirm. #1") Exh. B., at 1.
Goldberg Affirm. #1 ¶¶ 2, 5.
Allowance of the Amrion Claim
2. On September 29, 2000, a few months after the entry of the Confirmation Order, this Court approved and "so ordered" a stipulation between NutriPlus and Amrion, reducing a claim previously filed by Amrion (as an unliquidated claim in the amount of $988,495.73) down to $950,000, and then allowing it as a general unsecured claim (the "Allowed Claim Stipulation"). The Allowed Claim Stipulation was signed by Mr. Goldberg, as attorney for NutriPlus, and Jeffrey Solomon, Esq. ("Mr. Solomon"), as attorney and authorized representative of Amrion. The Amrion claim thereby became an "Allowed Claim" within the meaning of the Confirmed Plan.
Allowed Claim Stipulation ¶ 1, Goldberg Affirm. Exh. C.
See Allowed Claim Stipulation signatures.
The Court finds this as a mixed question of fact and law. To the extent any of the Findings of Fact is more appropriately regarded as a conclusion of law (or vice versa), or mixed question of fact and law, it should be regarded as such.
Provisions of the Confirmed Plan
3. Article VI(D) of the Confirmed Plan provided, in relevant part:
Distributions to holders of Allowed Claims shall be made by the Disbursing Agent (a) at the addresses set forth on the proofs of Claim or Interest filed by such holders (or at the last known addresses of such holders if no proof of Claim or Interest is filed or if the Debtor has been notified of a change of address), (b) at the addresses set forth in any written notices of address changes delivered to the Disbursing Agent after the date of any related proof of Claim or Interest, (c) at the addresses reflected in the Schedules if no proof of Claim or Interest has been filed and the Disbursing Agent has not received a written notice of a change of address. If any holder's distribution is returned as undeliverable, no further distributions shall be made unless the disbursing Agent is properly notified within 90 days following such return, of such holder's address change. Amounts in respect of undeliverable distributions made through the Disbursing Agent shall be utilized in satisfaction of remaining Allowed Claims. All claims for undeliverable distributions must be made on or before the 90 day anniversary of the Consummation Date, after which all unclaimed property shall revert to the Reorganized Company free of any restrictions thereon subject to the Claims of Allowed Creditors and the claim of any holder or successor to such holder with respect to such property shall be discharged and forever barred, notwithstanding any federal or state escheat laws to the contrary.
4. Article VI(D) of the Confirmed Plan, which was a lengthy single-spaced single paragraph, drafted in a way that was hardly the most readable, can be more easily read and understood by inserting additional spacing in it (without otherwise changing any of the words), and by italicizing particularly relevant provisions. After doing so, Confirmed Plan Article VI(D) reads as follows:
Distributions to holders of Allowed Claims shall be made by the Disbursing Agent
(a) at the addresses set forth on the proofs of Claim or Interest filed by such holders (or at the last known addresses of such holders if no proof of Claim or Interest is filed or if the Debtor has been notified of a change of address),
(b) at the addresses set forth in any written notices of address changes delivered to the Disbursing Agent after the date of any related proof of Claim or Interest,
(c) at the addresses reflected in the Schedules if no proof of Claim or Interest has been filed and the Disbursing Agent has not received a written notice of a change of address.
The Court notes that there is no conjunction linking these clauses. Ultimately, however, this is not of significance, because these clauses merely deal with how the Disbursing Agent is to address the mailings of the distributions, and do not, like the sentences that follow them, address substantive rights.
If any holder's distribution is returned as undeliverable, no further distributions shall be made unless the disbursing Agent is properly notified within 90 days following such return, of such holder's address change. Amounts in respect of undeliverable distributions made through the Disbursing Agent shall be utilized in satisfaction of remaining Allowed Claims. All claims for undeliverable distributions must be made on or before the 90 day anniversary of the Consummation Date, after which all unclaimed property shall revert to the Reorganized Company free of any restrictions thereon subject to the Claims of Allowed Creditors and the claim of any holder or successor to such holder with respect to such property shall be discharged and forever barred, notwithstanding any federal or state escheat laws to the contrary.
Id. (emphasis added).
Mailing Notice of Entry of Confirmation Order
5. On May 9, 2000 (the day after entry of the Confirmation Order), notice of entry of the Confirmation Order was served upon, among others, claimant Amrion. Service was made upon Amrion at the place of business identified by Amrion at the NutriPlus first meeting of creditors (frequently referred to as a "341 Meeting," after the section of the Bankruptcy Code under which that meeting is required to be held): 6565 Odell Place, Boulder, CO 80301-3330. It was also mailed to Mr. Solomon, Amrion's New York counsel, "fbo Amrion, Inc.," at Steinberg, Fineo, Berger Burlant, P.C., 1001 Franklin Avenue, Garden City, N.Y. 11530. Neither mailing was returned to the sender.
Goldberg Affirm. ¶ 9. It was sent "do" Mr. Solomon.
Id. n. 1.
Mailings of Distribution Checks
6. On or about March 5, 2001 (about 5 months after execution of the Claim Allowance Stipulation, and 10 months after entry of the Confirmation Order), the Disbursing Agent arranged for the mailing of a distribution check in the amount of $58,273 (the "March 2001 Check"), made payable to Amrion, addressed to Amrion at the address set forth on its proof of claim, i.e. to Mr. Solomon, "do" Mr. Solomon, at Mr. Solomon's address as set forth in the preceding paragraph. That check was not returned as undeliverable; Amrion negotiated the March 2001 Check on or about March 14, 2001.
Goldberg Affirm. ¶ 10.
7. On or about August 15, 2001, the Disbursing Agent arranged for the mailing of a second distribution check, in the amount of $24,104.58 (the "August 2001 Check"), also made payable to Amrion, once more mailed to Mr. Solomon, "do" Mr. Solomon The August 2001 Check likewise was not returned as undeliverable; it was negotiated, but this time by Whole Foods Market, Inc. ("WFM").
8. On or about December 3, 2001, the Disbursing Agent arranged for the mailing of a third distribution check, this time in the amount of $29,399.14 (the "December 2001 Check"), once more payable to Amrion, and once more addressed to Amrion at Mr. Solomon's address, "do" Mr. Solomon, at the address described above.
9. The December 2001 Check was not returned as undeliverable, nor was it negotiated. After learning that the August 2001 Check had been negotiated by an entity other than Amrion (i.e., WFM), the Disbursing Agent stopped payment on the December 2001 Check.
Goldberg Affirm. ¶ 16.
10. None of the distribution checks that had been made payable to Amrion — the March 2001 Check; the August 2001 Check; or the December 2001 Check — was returned as undeliverable, or undeliverable.
11. The Disbursing Agent sent a letter to Amrion referring to WFM's negotiation of the August 2001 Check in or about February 2002 (the "February 2002 Letter"), by Federal Express, addressed to the place of business at which NutriPlus had done business with Amrion, and which Amrion had identified as its place of business at the 341 Meeting. Federal Express reported that Amrion was no longer at that address, and that Amrion had left no forwarding address. The February 2002 Letter was not, however, a distribution under the plan.
12. Distributions on account of the allowed Amrion Claim were not "returned as undeliverable" or "undeliverable" within the meaning of Confirmed Plan Article VI(D).
13. The same attorney who represented Amrion in connection with the NutriPlus bankruptcy and the Amrion Claim (including the so-ordered stipulation to allow it), and to whom the distribution checks were mailed — i.e., Mr. Solomon — has represented NBTY in this dispute, and has not been shown to be difficult to find.
Transactions Affecting the Proper Recipient of Distributions
Additional facts — not relating to whether the right to distributions under the Confirmed Plan should be forfeited under Article VI(D), but asserted by the Disbursing Agent nevertheless to justify the desired forfeiture — are as follows:
14. In April 2002, the Disbursing Agent was contacted by Eric S. Klee, Esq., Assistant General Counsel of NBTY. The Disbursing Agent understood Mr. Klee to have been contacted by Mr. Solomon after the Disbursing Agent had filed this motion. Mr. Klee informed the Disbursing Agent that Amrion was no longer in business, and that, in Mr. Klee's opinion, NBTY had succeeded to Amrion's interest in the claim. Mr. Klee advised that NBTY had purchased the membership interests in NatureSmart LLC, a limited liability company formed in December 2000 — which, at least in Mr. Klee's view, had acquired the right to the distributions under the NutriPlus plan. NatureSmart LLC had at least arguably received them under a "Contribution Agreement," in December 2000, from its then-corporate parent, Whole Foods Market Group, Inc., a Delaware corporation ("WFMG").
Disbursing Agent's Supplement Affirmation in Support of His Objection to Claim No. 14 of Amrion, Inc. ("Goldberg Supp. Affirm.") ¶ 10.
Goldberg Supp. Affirm. ¶ 11.
Though people might quibble with how one characterizes the ownership of an LLC's membership interests by a corporation, it seems to the Court as appropriate to regard it as a parent-subsidiary type of relationship (as, inter alia, the parent has the ability to control the affairs of the subsidiary and convey the ownership interests further), and the relationship will be referred to as such here. Thus WFMG was the initial parent of NatureSmart LLC, and after WFMG sold its membership interests in NatureSmart LLC to NBTY, NBTY became NatureSmart LLC's parent.
The "Contribution Agreement" here referred to is the same as the LLC Contribution Agreement described at page 11 below.
15. NatureSmart LLC was the successor to at least many of the assets of Amrion which, after Amrion was twice renamed, vested in Amrion's parent by merger and then were conveyed back down to the newly formed NatureSmart LLC. Though it is arguable that NatureSmart LLC succeeded to Amrion's rights to distribution on the Amrion Claim, rather than its parent NBTY, any uncertainty in that regard — or as to the more fundamental issue, whether NatureSmart LLC had received the rights to the distributions in the first place, from its then-parent WFMG under the Contribution Agreement — was dispelled when WFMG executed a document confirming that to the extent it had not previously assigned away its rights (though WFMG had recited that this already had been done), WFMG assigned its rights to NBTY.
Hence the Court disagrees with the Disbursing Agent's factual contention (Goldberg Supp. Affirm. ¶ 13) that "NBTY (and/or its subsidiaries and affiliates) has not succeeded to [Amrion's] interest in the claim," and the Court finds expressly to the contrary. In any event, this is an issue solely between WFMG and NBTY (which, to the extent it ever was an issue, has been resolved to the Court's satisfaction), and would not be a basis for absolving oneself from the duty to make the distributions to one or another of these plainly identifiable, and findable, entities.
16. As noted, and without dispute, the membership interests in NatureSmart LLC were acquired by NBTY. Though, for the reasons stated, the Court regards these events as irrelevant to the duty of NutriPlus to make the distributions required under its Confirmed Plan, the Court sets forth the transactions leading to NBTY's status as the entity to receive payment for the sake of completeness.
17. Initially, there was a series of several transactions which are described separately, but which had no effect on the ownership of the rights to distribution under the NutriPlus Confirmed Plain:
(a) By "Agreement and Plan of Merger" dated as of June 9, 1997 (but which may have been closed upon in 1999), Nutrient Acquisition Corp. (a Colorado corporation, which was referred to in the documents as the "Merger Subsidiary"), a wholly owned subsidiary of Whole Foods Market, Inc., a Texas corporation — which previously has been defined in this decision as "WFM, " and which is the same "Whole Foods Market, Inc." that negotiated the August 2001 Check — was merged into Amrion, after the boards of each had determined that they wished "WFM to acquire Amrion through the merger of the Merger subsidiary with and into Amrion . . . ." Amrion was the surviving corporation; this made it a subsidiary of WFM, but did not change ownership of the rights to payment on the Amrion Claim.
This is what the Disbursing Agent refers to as "Transaction #1". See Goldberg Supp. Affirm. ¶ 13.
Goldberg Supp. Affirm. Exh. A.
Id.
(b) By "Contribution Agreement" dated as of December 31, 1999, WFM (referred to in that agreement as "Parent") contributed the shares of Amrion that it owned to WholePeople.com, Inc., a Delaware corporation ("WholePeople.com, " referred to in that agreement as "Subsidiary"). On December 30, 1999, Amrion's name was changed to WPcom Colorado, Inc. This changed Amrion's name, and made Amrion a subsidiary of WholePeople.com, but once more did not change ownership of the right to payment on the Amrion Claim.
Goldberg Supp. Affirm. Exh. C.
Goldberg Supp. Affirm. Exh. D. The steps taken in these two sentences are what the Disbursing Agent refers to as "Transaction #2. See Goldberg Supp. Affirm. ¶ 13
(c) On November 2, 2000, 10 months later, WPcom Colorado, Inc. (previously Amrion) once more changed its name, this time to NatureSmart, Inc. ("NatureSmart"). This, being solely a name-change, likewise did not change ownership of the right to payment on the Amrion Claim.
Goldberg Supp. Affirm. Exh. E. This is the first of the two transactions that the Disbursing Agent refers to as "Transaction #3." See id.
(d) By Articles of Merger executed on December 8, 2000 and filed with the Colorado Secretary of State on December 11, 2000, NatureSmart (i.e. Amrion, twice renamed) merged into its parent WholePeople.com, a Delaware corporation, and then WholePeople.com merged into Whole Foods Market Group, Inc., a Delaware corporation ("WFMG"). As a result, Amrion (aka WPCom and, later, NatureSmart), became part of WFMG. This too did not change ownership of the right to payment on the Amrion Claim.
Goldberg Supp. Affirm. Exh. B.
This is the second of the two transactions that the Disbursing Agent refers to as "Transaction #3." See id. The Court agrees with the Disbursing Agent, that "[u]p to this point, no assets have been either acquired or shed by Amrion (or its successors by name change or merger." Id. (block caps changed to normal type).
18. On December 22, 2000, WFMG formed a limited liability company, WFM NatureSmart, LLC, and by "Contribution Agreement" executed as of an unstated day in December, 2000 (the "LLC Contribution Agreement"), contributed most, but not all, of the assets related to the NatureSmart business to WFM NatureSmart LLC. The assets contributed from the parent WFMG to its newly formed LLC subsidiary were as follows:
Goldberg Supp. Affirm. Exh. F. This is what the Disbursing Agent refers to as "Transaction #4," and what the Disbursing Agent contends was fatally flawed.
All assets of WFMG primarily used in the nutritional supplements business conducted through its Bioenergy Nutrients, HealthSmart Vitamins, Brand Partners and Physiologies divisions, but excluding the following:
1. Receivables from, or advances payable to, such divisions, WFMG or its affiliates or Gaiam.com, Inc. and its affiliates.
2. WFMG's ownership interest in, and receivable from, Australian Natural Care Products, Pty. Ltd. and Amrion New Zealand Ltd., and the operating assets of such entities.
3. All land, buildings and leasehold improvements, including the facilities located in Thornton, Colorado and land located in Westminster, Colorado.
4 The non-competition agreements with the former principals of Amrion, Inc.
(Contribution Agreement Exh. A.) This step would not change ownership of the right to payment unless the right to payment was not included within the assets passed back down to NatureSmart LLC. The Court finds that though it is not 100% clear that the right to distributions was literally encompassed within the particular words of the LLC then used by the parties to describe the assets then conveyed (at least without assistance of parol evidence), it was intended by WFMG so to be encompassed; indeed, as noted below, WFMG (the entity which would have the rights to distributions if that were not the case) acknowledged its intent that they be so encompassed.
The affidavit of Leonid Vayn, an insider member of NutriPlus, rather than a person associated with either of the two parties to the alleged conveyance, raises an issue as to whether the original language setting forth the assets to be conveyed (in contrast to exclusions therefrom), by reason of its drafting, was sufficiently broad to cover the rights to distributions on the Claim here. Even assuming, arguendo, that he is correct and that the Amrion division with whom NutriPlus dealt should be regarded as different than the divisions mentioned in the LLC Contribution Agreement (and hence not conveying its assets), the entity that would otherwise hold the rights to distributions, WFMG, has disclaimed any intention of having not conveyed those rights.
See ¶¶ 22-24 below.
19. On May 14, 2001, WFM NatureSmart LLC changed its name to NatureSmart, LLC. This did not change ownership of the right to payment on the claims.
This is what the Disbursing Agent refers to as "Transaction #6."
20. By agreement dated May 10, 2001, which closed on May 16, 2001, NBTY acquired NatureSmart, LLC.
This is what the Disbursing Agent refers to as "Transaction #5."
21. After hearing of the Disbursing Agent's efforts to expunge the Amrion Claim, Mr. Klee, who was one of NBTY's in-house attorneys, immediately reached out to the Disbursing Agent and furnished him with all of the documentation concerning the transactions with respect to the ownership of the right to receive distributions on the Amrion Claim.
Goldberg Supp. Affirm. ¶¶ 12, 13.
22. After the Disbursing Agent raised issues with respect to the rights to receive distributions on the Amrion Claim, WFMG executed a "Letter, Reaffirmation and Assignment Agreement, dated June 20, 2002 (the "WFMG Reaffirmation Agreement"). The WFMG Reaffirmation Agreement stated in recitals that NBTY had purchased from WFMG all membership interests in a number of LLCs — of which NatureSmart LLC was one — "and all their assets and related businesses," except for described excluded assets. It stated expressly that the Amrion Claim was not one of the assets excluded. As significantly, or more so, WFMG acknowledged in the recitals to the WFMG Reaffirmation Agreement that:
NBTY Opp.Exh.A.
The Claim was acquired by NatureSmart [LLC] upon the contribution by Group [WFMG] of all of the assets constituting Amrion's business to NatureSmart pursuant to that certain Contribution Agreement (the "Contribution Agreement") by and between Group and NatureSmart . . . .
In other words, WFMG acknowledged each of the two key transfers of the rights to distributions with respect to the Amrion Claim that have been asserted by the Disbursing Agent not to have taken place.
23. Additionally, WFMG further stated, and agreed:
To the extent it is ever determined that the Claim was not transferred to NatureSmart pursuant to the Contribution Agreement, Group [again, WFMG] hereby transfers and assigns the Claim, together with all of Group's rights, title and interest in and to the Claim, to NatureSmart, with such transfer being deemed effective as of May 14, 2001.
In other words, WFMG acknowledged that even if it were determined that WFMG had not transferred the rights to distributions on the Amrion Claim, as had been thought to be the case, it was relinquishing any competing claim to such distributions.
24. The rights of NatureSmart LLC and/or NBTY to the distributions on the Amrion Claim are, accordingly, wholly unchallenged by the party that allegedly would otherwise have them, WFMG.
Other Matters
Once more for the sake of completeness, though it does not regard these matters as relevant, the Court notes the following:
25. There is no record with this Court regarding transfer of the Amrion Claim to WFM, and neither the Disbursing Agent, the Confirmed Debtor's counsel (which is the same person) or the Confirmed Debtor received evidence of transfer of the Amrion Claim.
Goldberg Affirm. ¶ 21.
26. There is no evidence on the Court's docket that Amrion transferred the Amrion Claim to NBTY.
Goldberg Supp. Affirm. ¶ 21.
Ultimate Factual Findings
Based on the evidence, and the Court's view thereof, the Court additionally finds the following.
27. No distributions on account of the Amrion Claim were ever returned as undeliverable.
28. At all relevant times, Mr. Solomon has not been unreachable or difficult to find. Likewise, NatureSmart LLC and NBTY have not been shown to be unreachable or difficult to find, and the same is true with respect to WFM and WFMG. This is not a case where the appropriate recipient of the distributions under a reorganization plan cannot be found.
29. No showing has been made that any person or entity has tried to hold the Disbursing Agent liable for sending distribution checks to the wrong person or entity.
30. No assertion has ever been made, as between WFM or WFMG (one or another of which would have the rights to distributions on the Amrion Claim if no assignment had been made) on the one hand, and NatureSmart LLC or NBTY (one or another of which would have the rights to distributions on the Amrion Claim if the assignment had been made), on the other, that NatureSmart LLC or NBTY lacks the right to receive the distributions on the Amrion Claim.
31. There is no dispute as to those rights between WFM and WFMG, on the hand, and NatureSmart LLC and NBTY, on the other.
32. The conclusion is compelling, and the Court finds, that at least after receiving the WFMG Reaffirmation Agreement, the Disbursing Agent and the Reorganized Debtor have been using the circumstances of this matter as a pretext for escaping their obligations to make payments to a creditor. Even if it were not a pretext, they have failed to establish any factual basis for doing so.
33. The interests of creditors in this case would not best be served by expunging the Amrion Claim. The argumentative and conclusory assertion by the Disbursing Agent to the contrary is rejected.
Goldberg Affirm. ¶ 23.
Discussion
The Disbursing Agent makes two arguments for the forfeiture he seeks. Neither has merit.
The first argument, premised on Article VI(D) of the Confirmed Plan, fails for failure to satisfy the requirements for the alleged forfeiture as a matter of fact. None of the three distribution checks was "returned as undeliverable." Thus the factual premise for application of the rule under the Confirmed Plan that "undeliverable" distributions shall be "utilized in satisfaction of remaining Allowed Claims" is lacking.
Effecting a forfeiture of the right of the holder of an allowed claim to receive its distribution from the assets of a debtor estate is serious business. If the matter were close, this would be a classic situation for application of the principle that plan provisions purportedly effecting such a forfeiture, particularly when drafted by the debtor and not the holders of claims, must be strictly construed. But here the matter is not even close. Neither the letter, nor the spirit, of Article VI(D) has been satisfied.
Nor is the alleged uncertainty as to who should receive the Amrion distribution a basis for evading one's duty to make the distributions required under the Confirmed Plan. There is no uncertainty now, if there ever was. The Court has found as a fact that this controversy, at least after Mr. Klee provided the documentation he did — including, most significantly, a disclaimer by WFMG of any desire to assert a competing claim to the distributions — has been a pretext for avoiding payments on the claim. But even if the Court had not so found, there would be no basis for denying payment. The Disbursing Agent has pointed to no provision of the Confirmed Plan authorizing him (or the Court, for that matter) to effect a forfeiture of rights to distributions under the Confirmed Plan by reason of alleged uncertainty as to the appropriate recipient of a distribution; that is an issue, if and when it ever is an issue, between the competing claimants themselves, and not a claimant and the debtor or its Disbursing Agent, so long as each of them is protected from liability for an inappropriate payment.
The Disbursing Agent spends considerable effort in arguing, as a matter of contract law and interpretation, as to why WFMG did not assign the rights to distributions under the Amrion Claim to NatureSmart LLC, and as to why NBTY did not acquire those rights from WFMG when WFMG sold the membership interests in NatureSmart LLC to NBTY. See Goldberg Supp. Affirm. ¶¶ 12-20, 22-29; Goldberg Reply Affirm. ¶¶ 3-37, 43. Assertions of this character might have relevance if there were a dispute as to these matters between WFMG and NBTY, but they are irrelevant here, where WFMG and NBTY agree.
The Court notes, in addition to all of the other observations above and below, that the Disbursing Agent has not offered to make the distributions on the Amrion Claim to WFMG, the entity that would be entitled to them if the Disbursing Agent's contentions were right.
The Court does not need to decide here whether F.R.Bankr.P. 3001(e)(2) required filing of a notice of transfer of claim when the right to the distributions on the claim devolved by reason of sales of entire lines of business. While sections 3001(e) and (e)(2) speak of "transfers" of claims, rather than conveyances of businesses and/or their assets which include, among many other things, the right to receive distributions on allowed claims (and there thus is uncertainty in the Court's mind as to whether a section 3001(e)(2) filing was even required), the Court does not need to reach this issue, because even assuming, without deciding, that a filing was required, there was neither legally cognizable prejudice from the failure to file a notice of transfer, nor a remedy — under either the Bankruptcy Code or Rules — providing for expungement of a claim for a failure to file.
Indeed the only prejudice, legally cognizable or not, that this Court can see is the loss of the windfall to other creditors and/or debtor insiders resulting from escaping the duty to make distributions on an allowed claim. Nothing has been shown to this Court to cause it to conclude that such is legally cognizable.
Bankruptcy Rule 3001(e) provides a mechanism for notice of the transfer, providing benefits for each of the claim transferor (giving the transferor notice and opportunity to be heard in the event that it disagrees with the assertion that there was an assignment) and transferee (helping ensure that the transferee will receive the distributions on account of the claim). It is silent in requiring service on the debtor or the Disbursing Agent, and its failure to require notice on the debtor has been recognized, as has its failure to require notice on other parties in interest. In light of that, it has been stated that "it is questionable" whether a party other than the alleged transferor may object to a purported transfer.
See In re Crosscreek Apartments, Ltd., 211 B.R. 641, 646 (Bankr. E.D. Tenn. 1997) ("Compliance with Rule 3001(e) appears designed primarily to meet the due process requirement that a creditor be given notice and an opportunity to object to any purported transfer of its claims against the estate"); Jordan v. Colorado Student Loan Program (In re Jordan), 146 B.R. 31, 32 (D. Colo. 1992) (after filing of evidence of transfer with the clerk, "[t]he clerk must then immediately notify the transferor of the evidence of the transfer to give that entity an opportunity to object").
See Crosscreek Apartments, supra, 211 B.R. at 646 ("obviously it is to the benefit of the transferee that any person responsible for disbursements in the case have notice of the transfer"); 9 Collier ¶ 3001.08[1][a] ("it is to the benefit of the transferee of a claim that any person responsible for disbursements in the case have notice of the transfer").
See Jordan, supra, 146 BR. at 32 (there is no requirement that the debtor be notified of the transfer); Crosscreek Apartments, supra, 211 B.R. at 646 (same, citing Jordan) 9 Collier ¶ 3001.08[1][a] at pages 3001-21 to 3001-22 (same, citing Jordan).
Id.
Id.
While prior to its amendment in 1991, Rule 3001(e) was used by the courts to control trading in claims, the 1991 amendments were designed, in part, to clarify that the rule is not intended to affect trading in claims or the rights and remedies of entities involved in such trading. Rather, as the 1991 Advisory Committee Note stated, "the court's role is to determine whether a transfer has been made that is enforceable under nonbankruptcy law . . ." — a matter of no relevance here, where the transferor has expressly acknowledged the transfer.
See 9 Collier on Bankruptcy ("Collier") ¶ 3001.08[1] at page 3001-19 (15th Ed. Rev. 2002).
Id. while the Court might have occasion to get involved if claims were purchased by an affiliate or insider for the sole purpose of b locking confirmation, or there were other allegations of misconduct affecting property of the estate or estate administration, see In re SPM Mfg. Corp., 984 F.2d 1305, 1314 (1st Cir. 1993), such, if shown, would be a basis for invalidating the transfer, rather than causing a forfeiture of the underlying claim. In any event, there have been no such allegations here.
See 9 Collier, ¶ 3001.08[1] at page 3001-20 (quoting 1991 Advisory Committee Note to F.R.Bankr.P. 3001)
The Disbursing Agent has failed to cite authority, and the Court is aware of none, suggesting that Rule 3001(e)(2) confers rights on debtors, disbursing agents or others with respect to the ownership of a transferred claim. As importantly or more so, the Disbursing Agent has cited no authority, and the Court is aware of none, that absolves a debtor from the duty to make payment on its allowed claims by reason of the failure of a transferee of a claim to file a Rule 3001(e)(2) notice of transfer.
Indeed, Crosscreek Apartments suggests exactly the opposite. See 211 B.R. at 646 ("it is not clear whether the Partners [of the debtor, who had proposed a reorganization plan competing with plan as to which claim transferee was proponent] even have standing to challenge any alleged noncompliance by [transferee] with F.R.Bankr.P. 3001(e)").
If, in the event of any uncertainty as to the appropriate recipient, a Disbursing Agent were desirous of obtaining comfort from the Court that he would not be liable for multiple distributions, or for paying the wrong person or entity, that could easily be obtained, by appropriate application to the Court and/or interpleader, if the latter were really necessary. Here, however, there is no dispute at all, and the Disbursing Agent and the Confirmed Debtor simply do not want to honor the agreement as between WFMG and NBTY. That is not a decision that the Disbursing Agent, or the Confirmed Debtor, have the right to make.
Conclusion
Both prongs of the motion are denied. The Disbursing Agent is authorized and directed to reissue the December 2001 Check, and to cause it to be delivered to NBTY or its designee within 10 days of the date of entry of this decision. The Disbursing Agent is likewise authorized and directed to make such further distributions on account of the Amrion Claim to NBTY or its designee as are otherwise appropriately made under the Confirmed Plan to holders of allowed claims in the same class.