Opinion
CASE NO. 02-07934 BKT.
April 6, 2009
OPINION ORDER
Before this Court is Debtor's motion for reconsideration of the order denying the objection to claim for lack of jurisdiction filed on March 6, 2009 [Dkt. No. 545]. This dispute involves a determination made by this court on March 3, 2009, after briefs and oral argument, that there was no jurisdiction under the doctrine of res judicata to proceed to adjudicate an objection to claim filed by Debtor against Citimortgage on January 8, 2008, four months after the order on confirmation became final and unappealable [Dkt. No. 451]. For the reasons stated below we deny the Debtor's motion for reconsideration.
On July 26, 2002, Debtor filed a voluntary petition for relief under the provisions of 11 U.S.C. Chapter 11, and as of that date have been managing their affairs and operating its business as a debtor in possession pursuant to 11 U.S.C. § 1107 and 1108. After proper notice and a hearing, the plan in this case was confirmed on September 12, 2007 [Dkt. No. 439]. How the debtor is reorganized and how the property of the bankruptcy estate is distributed under a chapter 11 plan are fundamental matters put at issue in the confirmation proceeding and determined by the confirmation order. A confirmation order determines the distributive rights of the various creditors to the property of the bankruptcy estate, property over which the bankruptcy court has exclusive jurisdiction, 11 USC §§ 1129, 1141. As a result, claims that affect the property of the bankruptcy estate or the distribution scheme under a Chapter 11 plan are clearly put at issue, and even if they are not contested, they are determined by the bankruptcy court in the confirmation proceeding.
It has long been recognized that a bankruptcy court's order confirming a plan of reorganization is given the same effect as a district court's judgment on the merits for claim preclusion purposes. See Stoll v. Gottlieb, 305 U.S. 165, 170-71, 59 S.Ct. 134, 137, 83 L.Ed. 104 (1938); Miller v. Meinhard-Commercial Corp., 462 F.2d 358, 360 (5th Cir. 1972) ("[a]n arrangement confirmed by a bankruptcy court has the effect of a judgment rendered by a district court") (citing In re Constructors of Florida, Inc., 349 F.2d 595, 599 (5th Cir. 1965), cert. denied sub nom. Coral Gables First Nat'l Bank v. American Surety Co., 383 U.S. 912, 86 S.Ct. 886, 15 L.Ed.2d 667 (1966)); In re Justice Oaks II, Ltd., 898 F.2d 1544, 1550 (11th Cir.), cert. denied, 498 U.S. 959, 111 S.Ct. 387, 112 L.Ed.2d 398 (1990); see also Shoaf, 815 F.2d at 1053. Section 1141(a) of the Bankruptcy Code clearly provides that all parties to a confirmed plan are bound by its terms. In cases under the Bankruptcy Code, the doctrine of res judicata applies to confirmation orders. Whatever claims were distinctly put at issue in the proceeding for confirmation of a Chapter 11 plan and determined by the bankruptcy court are forever barred by the confirmation order and cannot be collaterally attacked in a subsequent suit between parties to the confirmation proceeding and their privies — so long as the confirmation order itself remains unmodified.
In their motion for reconsideration of this Court's order, Debtor cites two cases to support their argument that this Court erred in finding that no jurisdiction existed to hear the objection to claim against Citimortgage. The first, Medina v. Chase Manhattan Bank, N.A., 737 F. 2d 140 (1st. Cir. 1984), recognized six exceptions to the doctrine of res judicata under Puerto Rico law. The Debtor cites three of these exceptions; fraud, a miscarriage of justice and public policy concerns as applicable. The second, Archer v. Warner, 538 U.S. 314 (2003), determined that res judicata could not be applied when looking at a dischargeability claim for fraud. The Court finds that neither case is relevant to the matter at hand. There has been no allegation of fraud in how the order to confirm the plan itself was obtained. The court's lack of jurisdiction in this matter stems from the effect of res judicata of the order confirming the plan. Debtor's argument and allegation of fraud regards a specific claim.
In Eubanks v. F.D.I.C., 977 F.2d 166 (5th Cir. 1992), The Court determined that the Debtor could have or should have raised claims against a bank for violation of Louisiana Blue Sky Law, breach of fiduciary duty, fraud, and breach of loan contract in a proceeding for confirmation of a Chapter 11 plan. Therefore the doctrine of res judicata barred the debtor from subsequently pursuing such claims against banks because the debtor knew of these claims prior to confirmation of his plan, yet failed to bring those claims to attention of bankruptcy court or creditors as mandated by Bankruptcy Code and Rules under11 U.S.C.A. § 1127(a).
Similarly in the case at hand, this Court concluded at the March 3, 2009 hearing, that the res judicata effect of the confirmation order divested this Court of jurisdiction over any matter regarding a claim dispute. In its opinion issued a the hearing, this Court cited three examples in the record of the case where Debtor was provided with knowledge that there was a discrepancy in the terms of the loan all prior to the date the confirmation order was entered. [See, Transcript of proceeding, pgs. 18-20, 22 Dkt. No. 552]. The Debtor had ample knowledge and opportunity to litigate this particular claim prior to the order confirming the plan becoming final, yet failed to do so.
For the reasons discussed above, the court concludes that the doctrine of res judicata applies to the confirmation order entered on September 12, 2007. The motion for reconsideration is therefore DENIED.
IT IS SO ORDERED.