A certain well-worn saying holds that the “devil is in the details,” and this was the case for a bank seeking to enforce its creditor claim against a principal of an information business in the business’ Chapter 11 bankruptcy case. The bank had notice of the terms of the proposed plan, including language releasing the principal, and that language was sufficiently broad to include the bank’s claim, so it lost its claim by failing to challenge before the bankruptcy court confirmed the plan.
FFS Data Inc. and Live Data Group Inc., a pair of affiliated companies that provide real estate information online, filed for Chapter 11 bankruptcy in 2009. Iberiabank, one of the debtor’s creditors, made an appearance into the case to protect its interests with regard to a guaranty in favor of the bank that FFS and its landlord, Siena Realty Associates LLC, had made.
The debtor eventually submitted its Chapter 11 reorganization plan to the court. The reorganization plan contained language that discharged and released the debtor’s principal, Bradford Geisen, from all of FFS’ debts, but this language went unchallenged by Iberiabank. The bank knew (or should have known) about this broad release regarding Geisen, since one of FFS’ other creditors filed an objection to the plan based on the extensiveness of that release, and the bank got a copy of this court filing. That debtor later withdrew its objection, leaving no one in opposition to the plan as written, so the court approved it in March 2011.
Fast forward two years, and the bank returned to court, seeking to enforce its claim, arguing that the release language in the plan did not apply to the claim the bank held. Specifically, the bank asserted that Geisen was still obligated to pay for the obligations the landlord, Siena, owed. The release language in the plan was not specific enough to cover the Siena debt, the bank contended.
These arguments were not persuasive. The court explained that, once a reorganization plan is approved, and the court issues a final confirmation order that incorporates the plan into it, the only issues the court must look at are whether the creditor’s claim was covered by the plan and whether the creditor had sufficient notice of the proposed plan language.
In Iberiabank’s situation, the answer to each question was “yes.” The bank conceded in court that it had notice of the terms of the proposed plan. Additionally, the plan’s language was clear that Geisen was released from all claims. As a result, the court ruled that the moment had come and gone for the bank to challenge the plan or pursue Geisen for this debt, and it denied the bank’s motion.
Whether you are a creditor or debtor involved in a bankruptcy proceeding, it is vitally important to examine every detail in the reorganization plan to ensure that your interests are protected. Waiting too long can mean losing your opportunity to enforce your rights. For advice and representation you can depend on, consult the Florida bankruptcy and commercial litigation attorneys at Stok Folk + Kon. Our attorneys can help you strive to make sure that the terms in a proposed Chapter 11 reorganization plan are terms that work for you.
Contact us online or by calling (305) 935-4440 to schedule your consultation.
More Blog Posts:
Landlord Free to Refuse Lease Extension for Any Reason, Florida Appeals Court Says, Florida Business Lawyers Blog, Nov. 5, 2014
Bankruptcy Judge Rejects LLC Owners’ Attempt to Use Federal Courts to Defeat State Court Judgment, Florida Business Lawyers Blog, Oct. 24, 2014