Opinion
NUMBER 2014 CA 0615
11-07-2014
R.J. DAIGLE & SONS CONTRACTORS, INC. v. SPATZ HOMES, L.L.C.
Robert Ryland Percy, III Erin Lanoux Gonzales, LA Counsel for Plaintiff/Appellee, R.J. Daigle & Sons, LLC Maryanna B. Haynes Brian K. Abels Denham Springs, LA Counsel for Defendant/Appellant, Denham Homes, LLC, formerly Spatz Homes, LLC Brent Cobb Mary Anne Wolf Andrew Blanchfield Baton Rouge, LA Counsel for Third-Party Defendant/Appellee, Forte and Tablada, Inc.
NOT DESIGNATED FOR PUBLICATION Appealed from the Twenty-first Judicial District Court In and for the Parish of Livingston, Louisiana
Docket Number 124,308
Honorable M. Douglas Hughes, Judge Presiding
Robert Ryland Percy, III
Erin Lanoux
Gonzales, LA
Counsel for Plaintiff/Appellee,
R.J. Daigle & Sons, LLC
Maryanna B. Haynes
Brian K. Abels
Denham Springs, LA
Counsel for Defendant/Appellant,
Denham Homes, LLC, formerly
Spatz Homes, LLC
Brent Cobb
Mary Anne Wolf
Andrew Blanchfield
Baton Rouge, LA
Counsel for Third-Party Defendant/Appellee,
Forte and Tablada, Inc.
BEFORE: WHIPPLE, C.J., McCLENDON AND HIGGINBOTHAM, JJ.
WHIPPLE, C.J.
In this construction contract dispute, defendant appeals the trial court's judgment, dismissing defendant's reconventional demand and its third-party demand on the basis of res judicata. For the following reasons, we affirm, although on a different basis.
FACTS AND PROCEDURAL HISTORY
In April 2008, Spatz Homes, L.L.C., now Denham Homes, L.L.C. (hereinafter referred to as "Denham Homes"), as owner, entered into an agreement with R.J. Daigle & Sons Contractors, Inc. ("R.J. Daigle"), as contractor, for the construction of streets, drainage, water and sanitary sewer improvements for certain phases of Crystal Lakes Subdivision in Denham Springs, Louisiana ("the Crystal Lakes project"). Thereafter, Denham Homes paid R.J. Daigle $3,163,883.75 for services rendered on the Crystal Lakes project. Contending that the actual value of the services it rendered was $3,677,408.44, R.J. Daigle filed suit against Denham Homes in June 2009, alleging that it was owed an additional $513,524.69 under the parties' agreement.
Although a written contract was prepared, it apparently was never signed by the parties.
Although not an issue herein, we note that the petition contains two separate file stamps each with a different date, i.e., a file stamp indicating that it was fax-filed on June 10, 2009 at 8:50 a.m., and a second file stamp indicating that the petition was filed on June 11, 2009. Filing of a pleading by facsimile transmission shall be deemed complete at the time that the transmission is received and a receipt of transmission has been transmitted to the sender by the clerk of court. Assuming the party complies with the requirements of forwarding the original signed pleading and the applicable filing fee, the facsimile when filed has the same force and effect as the original. LSA-R.S. 13:850.
On July 13, 2009, Denham Homes filed an answer to the petition, denying that it owed R.J. Daigle any further sums and contending that it had in fact overpaid R.J. Daigle. In its answer, Denham Homes also sought to "[reserve] the right to supplement and amend its answer and assert such affirmative defences or reconventional demands as discovery may demonstrate or warrant."
On January 28, 2010, while this construction contract suit was pending, Denham Homes filed a voluntary petition for Chapter 11 Bankruptcy in the United States Bankruptcy Court for the Northern District of Illinois. A Fourth Amended Plan of Reorganization ("Plan of Reorganization") under Chapter 11 of the Bankruptcy Code was confirmed by the bankruptcy court on April 21, 2011. The confirmed Plan of Reorganization specifically addressed this pending litigation between R.J. Daigle and Denham Homes in Article VI, section J, entitled "The Daigle Dispute," recognizing that prior to the filing of the bankruptcy petition, Denham Homes and R.J. Daigle were in "active litigation over the amount due, if any, from [Denham Homes] to [R.J.] Daigle." This provision further set forth that the Daigle Dispute litigation could continue upon the "effective date" and the amount of the claim determined. Additionally, Article X of the Plan of Reorganization, entitled "Retention of Causes of Action," provided that Denham Homes and its bankruptcy estate reserved "all of its causes of action arising under state and federal law" and that Denham Homes "reserves all rights to bring such actions prior to June 30, 2011."
The "Daigle Dispute" is defined in the Plan of Reorganization as "the contract dispute brought by Daigle in Louisiana State Court under the caption RJ Daigle & Sons Contractors, Inc. v. Spatz Homes, LLC No. 124308."
"Effective date" is defined in the Plan of Reorganization as Friday, May 6, 2011.
Thereafter, on July 18, 2011, Denham Homes filed, in the instant construction contract suit, a Supplemental Answer and Reconventional Demand against R.J. Daigle, contending that R.J. Daigle breached the contract by failing to complete the agreed-upon work and failing to perform the work in a workmanlike manner. Denham Homes further contended that as a result of R.J. Daigle's breach of the construction contract, R.J. Daigle was indebted to Denham Homes in the amount of $1,340,544.55, which included costs incurred in completing unfinished work and repairing or replacing defective work, as well as expenses incurred in interest charges, delays in seeking approval of infrastructure improvements, and marketing delays.
In response to the reconventional demand, R.J. Daigle filed a peremptory exception of res judicata, contending that the reconventional demand should be dismissed because Denham Homes failed to timely assert its claim in accordance with the Plan of Reorganization confirmed by the bankruptcy court. R.J. Daigle acknowledged that Article VI, section J of the Plan of Reorganization specifically referenced the instant litigation regarding "the amount due, if any, from [Denham Homes] to [R.J.] Daigle" and allowed the litigation to continue "and the amount of any claim determined." However, according to R.J. Daigle, this provision of the Plan of Reorganization did not make any specific reference to any claim that Denham Homes may have against R.J. Daigle and, thus, did not reserve to Denham Homes the right to assert such a claim against R.J. Daigle.
R.J. Daigle further noted that while Article X of the Plan of Reorganization purported to reserve any claim that Denham Homes may have had against it, that provision required that Denham Homes assert any claim prior to June 30, 2011. Thus, R.J. Daigle contended that because Denham Homes failed to bring any claim against it prior to June 30, 2011, the preclusive effect of the Plan of Reorganization required that the reconventional demand be dismissed with prejudice under the doctrine of res judicata.
Denham Homes also filed a third-party demand against Forte and Tablada, Inc. ("Forte") on May 7, 2012. In its third-party demand, Denham Homes contended that the Parish of Livingston had required it to have Forte conduct construction inspections and the final inspection of R.J. Daigle's work on the Crystal Lakes project, as well as repair inspections, and that Forte breached its duties to Denham Homes by negligently conducting those inspections, thereby failing to discover numerous failures in R.J. Daigle's work on the project. Denham Homes further contended that Forte's negligence in conducting the inspections resulted in Denham Homes incurring approximately $291,189.00 in costs to repair, replace, and remediate the defective work performed by R.J. Daigle, and not timely detected by Forte, as well as consequential damages estimated at $750,000.00, including excessive interest expense, delays in seeking approval of infrastructure improvements, and marketing delays.
After answering the third-party demand, Forte filed a motion to adopt R.J. Daigle's peremptory exception of res judicata, likewise contending that Denham Homes's third-party demand against Forte should be dismissed in that it was not timely asserted in accordance with the "Retention of Causes of Action" clause contained in the Plan of Reorganization confirmed by the bankruptcy court. The trial court signed an order allowing Forte to adopt R.J. Daigle's exception.
A hearing on the exceptions raising the objection of res judicata was held on January 7, 2014, and by judgment dated January 27, 2014, the trial court granted the exceptions and dismissed with prejudice Denham Homes's reconventional demand against R.J. Daigle and its third-party demand against Forte.
From this judgment, Denham Homes appeals, contending that the trial court committed legal error in: (1) ruling that the law of res judicata precluded it from bringing its claims against R.J. Daigle and Forte; and (2) essentially holding that Denham Homes's claims have prescribed, where the Plan of Reorganization should be interpreted under Louisiana contract law and the parties did not and cannot contract to shorten the prescriptive period applicable to Denham Homes's claims.
DISCUSSION
On appeal, Denham Homes contends that the trial court legally erred in concluding that its claims against R.J. Daigle and Forte were barred by res judicata because: (1) all of the requirements for the application of res judicata were not met as to either of these parties; and (2) even if the requirements were met, certain exceptions apply under the facts herein. Additionally, Denham Homes avers that the trial court's ruling on res judicata was essentially a holding that Denham Homes's claims had prescribed and that such a ruling is erroneous because the parties did not and cannot contract to shorten the prescriptive period applicable to these claims given that a juridical act purporting to make the requirements of prescription more onerous is null.
The filing of a Chapter 11 petition creates an estate comprised of all of the debtor's property, including causes of action belonging to the debtor. 11 U.S.C. § 541(a)(1); In re SI Restructuring Incorporated, 714 F.3d 860, 864 (5th Cir. 2013). During the Chapter 11 case, the enforcement of these actions generally falls to the debtor-in-possession, which has most of the powers of a bankruptcy trustee to pursue claims on behalf of the estate. 11 U.S.C. §§ 1107(a) & 323(a) & (b). When a Chapter 11 plan is confirmed, however, the estate ceases to exist, and the debtor loses its status as debtor-in-possession along with its authority to pursue clams as though it were trustee. 11 U.S.C. § 1101(1); In re SI Restructuring Incorporated, 714 F.3d at 864.
A "debtor in possession" is defined in Chapter 11 of the Bankruptcy Code to mean the "debtor except when a person that has qualified under section 322 of this title is serving as trustee in the case." 11 U.S.C. § 1101(1).
After confirmation of a plan of reorganization, the ability of the debtor to enforce a claim once held by the estate is limited to that which has been retained in the bankruptcy plan. In re Texas Wyoming Drilling, Inc., 647 F.3d 547, 550 (5th Cir. 2011); In re United Operating, LLC, 540 F.3d 351, 355 (5th Cir. 2008). The Bankruptcy Code allows a reorganized debtor to bring post-confirmation actions by preserving them in the Plan of Reorganization itself. 11 U.S.C. § 1123(b)(3). However, the claim must be expressly reserved, and the failure to expressly retain a cause of action in a plan of reorganization is fatal to enforcement of that cause of action on several grounds, including res judicata and lack of standing. In re TXCO Resources, Inc., No. 09-51807, 2010 WL 8753253, at *1 (Bankr. W.D. Tx. 2010).
With regard to res judicata, a federal 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. Terrebonne Fuel & Lube, Inc. v. Placid Refining Company, 95-0654 (La. 1/16/96), 666 So. 2d 624, 632. When a state court is called upon to decide the preclusive effect of a judgment rendered by a federal court exercising federal question jurisdiction, it is the federal law of res judicata that must be applied. Terrebonne Fuel & Lube, Inc., 666 So. 3d at 633. Because the confirmation of a plan of reorganization by a federal bankruptcy court in the exercise of bankruptcy jurisdiction is federal question jurisdiction, federal res judicata law is applicable herein. Terrebonne Fuel & Lube, Inc., 666 So. 3d at 633.
We note that Article I, section I of the confirmed Plan of Reorganization provides as follows:
Except to the extent the Bankruptcy Code or Bankruptcy Rules are applicable, or unless otherwise stated in a document between the Debtor and any claimant, the rights and obligations arising under this Plan shall be governed by the laws of the State of Illinois, without giving effect to the principles of conflicts of law of the State of Illinois. Notwithstanding the foregoing, the Loan Documents, the Daigle Dispute and all rights of Mechanics Lien Claimants shall be governed by, and construed and enforced in accordance with, the laws of the State of Louisiana.This provision does not specifically address questions regarding the preclusive effect of the confirmation of the Plan of Reorganization. Clearly, however, the authority to reserve claims post confirmation is derived from the Bankruptcy Code, and the issue of the preclusive effects of a plan of reorganization confirmed by the federal bankruptcy court in a Chapter 11 proceeding is a question of federal res judicata law. Terrebonne Fuel & Lube, Inc., 666 So. 3d at 633.
The doctrine of res judicata bars relitigation of claims that were or could have been asserted in an earlier proceeding. D & K Properties Crystal Lake v. Mutual Life Insurance Company of New York, 112 F.3d 257, 259 (7th Cir. 1997). A federal bankruptcy judgment, just as any judgment under federal res judicata law, bars a subsequent suit if all of the following tests are satisfied: (1) both cases involve the same parties; (2) the prior judgment was rendered by a court of competent jurisdiction; (3) the prior decision was a final judgment on the merits; and (4) the same cause of action is at issue in both cases. In re Howe, 913 F.2d 1138, 1143-1144 (5th Cir. 1990); see also D & K Properties Crystal, 112 F.3d at 259 (under the doctrine of res judicata, a claim is precluded where it shares three elements with an earlier action: (1) an identity of parties or privies, (2) an identity of the cause of action, and (3) a final judgment on the merits).
Exceptions do exist to the application of the doctrine of res judicata. Specifically, res judicata does not apply where the court in the first action has expressly reserved the plaintiff's right to maintain the second action. Terrebonne Fuel & Lube, Inc., 666 So. 2d at 632, 634; D & K Properties Crystal Lake, 112 F.3d at 259-260. Nonetheless, a blanket reservation that seeks to reserve all causes of action reserves nothing. D & K Properties Crystal Lake, 112 F.3d at 261; see also In re United Operating, LLC, 540 F.3d at 355.
Although the United States Fifth Circuit Court of Appeals addressed the issue of what constitutes an effective reservation of a claim in the context of whether the debtor had standing to bring the claim post confirmation, see In re United Operating, 540 F.3d at 355-356, we find the analysis also applicable to whether an exception to the application of res judicata has been established, i.e., where there has been an express reservation of the claim in the first action.
In recent years, however, the Fifth Circuit has analyzed the issue of whether a bankruptcy plan confirmed by the bankruptcy court contains an effective reservation of claims pursuant to 11 U.S.C. § 1123(b)(3) by addressing "the more fundamental question" of standing, i.e., whether the reorganized debtor has standing to bring the claim. See In re United Operating, LLC, 540 F.3d at 354. Indeed, in In re United Operating, LLC, the Fifth Circuit did not reach the issue of res judicata raised by the parties, but instead raised the issue of standing on its own motion, holding that because standing is a jurisdictional requirement, the court is obliged to ensure it is satisfied regardless of whether the parties have raised the issue. In re United Operating, LLC, 540 F.3d at 354. Similarly, Louisiana law provides that a court may raise the issue of a party's standing to bring an action on its own motion. See LSA-C.C.P. art. 927(B); State v. Draughter, 2013-0914 (La. 12/10/13), 130 So. 3d 855, 864; Howard v. Administrators of Tulane Educational Fund, 2007-2224 (La. 7/1/08), 986 So. 2d 47, 59; see also In re United Operating, 540 F.3d at 354-355. As noted by the Louisiana Supreme Court, because courts are without power to render advisory opinions on abstract questions, a party must have standing to sue or, more comprehensively, the action must present a justiciable controversy. Howard, 986 So. 2d at 54 n.6.
Just as the Louisiana Supreme Court has concluded that the issue of the preclusive effects of a plan of reorganization confirmed by the federal bankruptcy court in a Chapter 11 proceeding is a question of federal res judicata law, Terrebonne Fuel & Lube, Inc., 666 So. 3d at 633, we likewise conclude that because retention of a post-confirmation claim is authorized by 11 U.S.C. 1123(b)(3) of the Bankruptcy Code, federal law governs whether a confirmed plan of reorganization preserved the debtor's standing to bring such a claim. Accordingly, we apply federal law to the issue presented herein as to whether Denham Homes is precluded from bringing a reconventional demand against R.J. Daigle or a third-party demand against Forte in the instant litigation, on the basis that it lacks standing to bring those claims.
Furthermore, while the order confirming Denham Homes's Plan of Reorganization was rendered by the United States Bankruptcy Court for the Northern District of Illinois, a court within the jurisdictional limits of the United States Seventh Circuit Court of Appeals, in matters involving federal law, we, as a state court, are only bound by decisions of the United States Supreme Court. Federal appellate court decisions are persuasive only. Shell Oil Company v. Secretary, Revenue and Taxation, 96-0929 (La. 11/25/96), 683 So. 2d 1204, 1210 n.11. In our opinion herein, we have relied, in part, upon federal appellate court decisions from both the Seventh Circuit Court of Appeals and the Fifth Circuit Court of Appeals.
In the seminal case of In re United Operating, the United States Fifth Circuit Court of Appeals recognized that to reserve a cause of action pursuant to 11 U.S.C. § 1123(b)(3), "the plan must expressly retain the right to pursue such actions. The reservation must be specific and unequivocal." In re United Operating, LLC, 540 F.3d at 355 (emphasis added; citations omitted). A blanket reservation of any and all claims is insufficient to preserve rights to pursue claims of the estate by the reorganized debtor. If a debtor has not made an effective reservation, the debtor has no standing to pursue a claim that the estate owned before it was dissolved. In re Texas Wyoming Drilling, Inc., 647 F.3d at 550; In re United Operating, LLC, 540 F.3d at355.
Bankruptcy courts in Illinois, on the other hand, have viewed 11 U.S.C. § 1123(b)(3)(B) as a "notice" provision, in essence requiring the debtor to give its creditors in the bankruptcy proceeding notice about claims that will be pursued post confirmation under a proposed plan of reorganization. In re Kmart Corporation, 310 B.R. 107, 120 (Bankr. N.D. 111. 2004). Thus, Illinois bankruptcy courts, whether under a res judicata analysis or a "notice" approach, have taken the position that defendants in a post-confirmation suit who were not creditors in the bankruptcy proceeding cannot invoke the protections of 11 U.S.C. § 1123(b)(3)(B) to dispute the adequacy of the notice of reservation of those claims in a plan of reorganization. See In re Commercial Loan Corp., 363 B.R. 559, 570 (Bankr. N.D. 111. 2007), and In re Equipment Acquisition Resources, Inc., 483 B.R. 823, 828-830 (Bankr. N.D. 111. 2012).
This is a logical consequence of the nature of a bankruptcy. Bankruptcy is designed to secure prompt, effective administration and settlement of all of a debtor's assets and liabilities within a limited time. Thus, a debtor must put its creditors on notice of any claim it wishes to pursue after confirmation, in that proper notice allows creditors to determine whether a proposed plan resolves matters satisfactorily before they vote to approve it. Absent specific and unequivocal language in a plan, creditors lack sufficient information regarding their benefits and potential liabilities to cast an intelligent vote. United Operating, 540 F.3d at 355. "Proper notice also assures that creditors will not be duped into voting for a plan only later to find out that they might be sued post-confirmation on a claim that was reserved in the same plan." In re Felt Manufacturing Co., Inc., 402 B.R. 502, 518 (Bankr. D. N.H. 2009).
As did the United States Fifth Circuit Court of Appeals in In re United Operating, LLC, this court, on our own motion, raises the issue of Denham Homes's standing to bring the claims asserted in the reconventional and third-party demands. Thus, as a "more fundamental question," we must determine whether the Plan of Reorganization effectively reserved to Denham Homes the right to pursue the breach of contract claim it has asserted in its reconventional demand against R.J. Daigle and the negligence claim it has asserted in its third-party demand against Forte.
Turning first to Denham Homes's reconventional demand asserting a claim for breach of contract against R.J. Daigle, Denham Homes contends that it has authority to pursue this claim pursuant to Article VI, section J of the Plan of Reorganization, entitled "The Daigle Dispute," which provides as follows:
Prior to the Petition Date, the Debtor and Daigle were in active litigation over the amount due, if any, from the Debtor to Daigle in the Louisiana State Court case, RJ Daigle & Sons Contractors, Inc. v. Spatz Homes, LLC, No. 124308. Upon the Effective Date any injunction or stay shall be modified so that such litigation can continue and the amount of any claim determined. For the purposes of distribution, if no resolution or settlement is reached prior to the payment of Class 12 Claims under this Plan, the Debtor shall escrow funds equal to the payments due on a claim for the scheduled amount, or any lower amount agreed to by the Debtor and Daigle. Upon settlement or resolution of the Daigle Dispute, the Debtor shall release the escrowed funds to Daigle, up to the settled amount. Any remaining escrowed funds shall be paid to Claimants as if the funds were net income from a Home Site sale.(Emphasis added).
In reviewing the language of this clause, we note that, while the provision clearly references this litigation, it does so only in the context of R.J. Daigle's claim against Denham Homes for sums due on the contract between the parties. Nothing in the language of this clause specifically and unequivocally reserves any rights to Denham Homes to pursue a breach of contract claim against R.J. Daigle, or against any other party. Rather, the clause simply focuses on the claim for payment due from Denham Homes to R.J. Daigle.
According to the allegations of Denham Homes's reconventional demand, the alleged breach of contract by R.J. Daigle occurred when R.J. Daigle "failed to complete the construction in accord with its agreement" with Denham Homes and such failure "necessitated that [Denham Homes] hire additional contractors to perform the work not performed" by R.J. Daigle, as well as damaging Denham Homes by causing it to incur costs "to repair, replace, and remediate the defective work" by R.J. Daigle. Given that these alleged breaches occurred during the execution of the contract between the parties and, thus, prior to the filing of the bankruptcy proceeding by Denham Homes or certainly during the pendency of that bankruptcy proceeding, we must conclude that this claim was owned by the bankruptcy estate and does not constitute a claim that arose subsequent to the confirmation of the Plan of Reorganization. See 11 U.S.C. § 541(a)(1) & (7). Thus, in order to preserve Denham Homes's standing to bring this breach-of-contract claim that belonged to the bankruptcy estate post confirmation, a specific and unequivocal reservation of such a breach-of-contract claim was needed in the Plan of Reorganization confirmed by the bankruptcy court, as per In re United Operating, LLC.
However, nothing in the Daigle Dispute provision of the Plan of Reorganization references, reserves, or retains any breach-of-contract claims to be pursued by Denham Homes. See In re SI Restructuring Incorporated, 714 F.3d at 864-865. Accordingly, the Daigle Dispute provision of the Plan of Reorganization does not preserve Denham Homes's standing to bring a breach-of-contract claim against R.J. Daigle post confirmation.
Denham Homes further contends that its right to pursue its breach-of-contract claim against RJ. Daigle was preserved by Article X of the Plan of Reorganization, entitled "Retention of Causes of Action," which provides as follows:
A. Reservation.
Except as otherwise provided herein or in any prior order of the Bankruptcy Court, the Debtor and its bankruptcy estate reserve all of its causes of action arising under state and federal law. As of the entry of the Confirmation Order, the Reorganized Debtor shall have the sole and exclusive authority to prosecute, abandon, settle or adjust the estate's Claims or causes of action without the consent or approval of any third party and without further order of the Bankruptcy Court. The Debtor reserves all rights to bring such actions prior to June 30, 2011, and pursuant to 11 U.S.C. § 502(d) reserves the right to object to the allowance of any claim if the holder of such
claim as received a transfer avoidable under Chapter 5 of the Bankruptcy Code.(Emphasis added).
However, this reservation clause is exactly the type of general reservation clause that has been held to lack the required specificity. As stated above, a general reservation of "any and all claims" is insufficient to preserve the reorganized debtor's standing to bring post-confirmation claims that belonged to the bankruptcy estate. See In re SI Restructuring Incorporated, 714 F.3d at 864-865, In re United Operating, LLC, 540 F.3d at 356, and D & K Properties Crystal Lake, 112 F.3d at 261 (wherein the Seventh Circuit Court of Appeals held that "[a] blanket reservation that seeks to reserve all causes of action reserves nothing."). Accordingly, we conclude that the Plan of Reorganization did not preserve Denham Homes's standing to pursue a breach-of-contract claim post confirmation.
On appeal, Denham Homes relies on the Louisiana Supreme Court's opinion in Terrebonne, wherein the Court held that language in a plan of reorganization stating that "the Debtor reserves all claims, demands, causes of action, and powers that it may have under the Bankruptcy Code" constituted an express reservation of claims. Terrebonne Fuel & Lube, Inc., 666 So. 2d at 627, 634. However, we note that Terrebonne predated the opinion of the United States Fifth Circuit Court of Appeals in In re United Operating, LLC and its progeny, which hold that such a general reservation of "any and all" claims does not meet the requirement that such a reservation be specific and unequivocal. In re United Operating, LLC, 540 F.3d at 355-356, In re Texas Wyoming Drilling, Inc., 647 F.3d at 551, and In re SI Restructuring Incorporated, 714 F.3d at 864.
Additionally, we further note that the issue addressed by the Court in Terrebonne was res judicata, and the Court, in finding that res judicata did not apply, relied on facts and circumstances, in addition to the reservation language, that were distinguishable from the facts presented herein. Specifically, in Terrebonne, the debtor had attempted to raise its breach-of-contract claim in the bankruptcy proceeding, and the bankruptcy court declined to exercise jurisdiction over the claim, instead directing the debtor to bring the claim in state court. Thus, the Louisiana Supreme Court concluded that under those circumstances, the parties "were aware" that the specific claims at issue would be asserted later. Terrebonne Fuel & Lube, Inc., 666 So. 2d at 627-628, 634.
Accordingly, for these reasons, we find Denham Homes's reliance on Terrebonne to be misplaced.
We note that, in addition to the plan of reorganization, courts may consult the disclosure statement, which is the primary notice mechanism informing a creditor's vote for or against a plan of reorganization, see 11 U.S.C. § 1125, in determining whether a post-confirmation debtor has standing to pursue a claim. In re Texas Wyoming Drilling, Inc., 647 F.3d at 551. However, the parties herein did not introduce the disclosure statement in these proceedings.
Moreover, even if we were to determine that the "Retention of Causes of Action" provision was sufficiently specific and unequivocal to reserve Denham Homes's right to pursue a claim for breach of contract, we further note that the provision sets forth a period within which that right was reserved to Denham Homes. Thus, because the Plan of Reorganization purported to preserve Denham Homes's standing for a period of time, upon the passage of that period of time, Denham Homes no longer had standing to pursue that claim, if the reservation had indeed been effective.
To the extent such a finding could be construed as an application of prescription, as argued by Denham Homes, we note that while a prescriptive period may not be lengthened, see LSA-C.C. art. 3471, contrary to Denham Homes's argument on appeal, a prescriptive period may be shortened by agreement of the parties. Louisiana Health Service and Indemnity Company v. McNamara, 561 So. 2d 712, 719 (La. 1990). Moreover, this court would be without power to vary the terms of the Plan of Reorganization confirmed by the bankruptcy court, which confirmation order has the effect of a federal court judgment.
Likewise, for these same reasons, because the Reservation of Causes of Action provision is not specific or unequivocal and, thus, was an ineffective reservation of Denham Homes's standing to pursue claims post confirmation, Denham Homes also lacks standing to pursue the third-party demand against Forte. In re SI Restructuring Incorporated, 714 F.3d at 864-865, In re United Operating, LLC, 540 F.3d at 356, and D & K Properties Crystal Lake, 112 F.3d at 261.
We recognize that two Texas Bankruptcy Court judges have mentioned concerns about the Fifth Circuit's opinion in In re United Operating. First, in In re Manchester, 2009 WL 2243592, *5 n.6 (Bankr. N.D. Tex. 2009), the judge stated that she had come to her decision that the Plan of Reorganization therein did not specifically and unequivocally reserve certain claims therein "with great reluctance," but concluded that she was bound by the "seemingly bright-line rule" announced by the Fifth Circuit in United Operating. Specifically, she believed that the creditors in Manchester "knew everything they needed to know" about the litigation contemplated in the Plan in order to make an informed judgment regarding the Plan. Thus, she believed that, under the circumstances present therein, the forfeiture of those claims was "unnecessarily harsh." In re Manchester, 2009 WL 2243592, at *5 n.6.
Subsequently, in In re Texas Wyoming Drilling, Inc., 422 B.R. 612, 626 n.12 (Bankr. N.D. Tx. 2010), the judge "join[ed] Chief Judge Barbara Houser in her concerns respecting" United Operating, noting that the "bright-line" rule of United Operating operates to cause injustice to creditors in many cases, though it is intended for their benefit. The judge then stated, "Taken to its logical conclusion, United Operating would seem to require that counter-claims and affirmative defenses, to say nothing of claims identified only through discovery after confirmation of the plan, be identified in the plan or lost forever." In re Texas Wyoming Drilling, Inc., 422 B.R. at 626 n.12.
This is precisely the situation presented here—the failure to preserve standing to pursue a breach-of-contract claim that is now being asserted in pending litigation as a counterclaim. Nonetheless, we recognize that an underlying reason for requiring such a reservation is to avoid the situation where the counterclaim is being asserted against a creditor of the bankruptcy estate who, after confirmation of the Plan of Reorganization is potentially "blindsided" by the claim against it by the debtor. While the record herein does not address whether or not R. J. Daigle was "blindsided" by the post-confirmation filing of the reconventional demand, such a finding is not required under the reasoning set forth by the Fifth Circuit in In re United Operating, LLC, which we have relied upon herein.
Further, as to the bankrupt debtor Denham Homes's claims against Forte, we note that a bankruptcy court in Illinois concluded that defendants in a post-confirmation suit brought by the reorganized debtor, who were not parties to the prior bankruptcy proceedings, could not raise the inadequacy of the reservation of claims clause in the debtor's confirmed plan of reorganization. In re Commercial Loan Corp., 363 B.R. 559, 569-570 (Bankr. N.D. 111. 2007). Applying res judicata principles, the court reasoned that because the defendants in the post-confirmation suit were not parties to the bankruptcy or participants in the confirmation of the plan of reorganization, there was no "identity of parties" in the two suits. Thus, the court concluded that the defendants were in no position to raise a res judicata defense to assert the preclusive effects of the confirmed plan of reorganization. In re Commercial Loan Corp., 363 B.R. at 569-570.
However, as the Fifth Circuit did in United Operating, the court on its own motion can raise standing, which goes to the issue of whether the plaintiff can bring the action and, thus, whether the court can hear it, not whether a defendant can raise it as a defense. As such, we find that Denham Homes accordingly lacks standing to assert either claim.
CONCLUSION
For the above and foregoing reasons, the trial court's January 27, 2014 judgment, dismissing Denham Homes's reconventional demand against R.J. Daigle & Sons Contractors, Inc. and its third-party demand against Forte and Tablada, Inc., is hereby affirmed, on the basis that Denham Homes lacks standing to bring these claims. Costs of this appeal are assessed against Denham Homes.
AFFIRMED.