In re Crown Vantage, Inc.
| Decision Date | 30 August 2005 |
| Docket Number | No. 04-16547.,No. 04-16443.,04-16443.,04-16547. |
| Citation | 421 F.3d 963 |
| Parties | In re CROWN VANTAGE, INC., Debtor, Jeffrey H. Beck, Plaintiff-Appellant, v. Fort James Corporation; Fort James Fiber Co.; Fort James International Holdings Ltd.; McGuire Woods, Defendants-Appellees. Jeffrey H. Beck, Plaintiff-Appellee, v. Fort James Corporation; Fort James Fiber Co.; Fort James International Holdings Ltd.; McGuire Woods, Defendants-Appellants, and Crown Vantage, Inc., Debtor. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Malcolm Loeb, Leo R. Beus and Richard R. Thomas, Beus Gilbert PLLC, Scottsdale, AZ; Allen Steyer and Edward Egan Smith, Steyer Lowenthal Boodrookas Alvarez & Smith LLP, San Francisco, CA, for the plaintiff-appellant.
Kristin Linsley Myles and Susan Traub Boyd, Munger, Tolles & Olson LLP, San Francisco, CA; Joseph F. Coyne, Jr. and Michelle Sherman, Sheppard, Mullin, Richter & Hampton LLP, Los Angeles, CA, for appellees and cross-appellants Fort James.
James C. Krieg and Stan G. Roman, Krieg, Keller, Sloan, Reilley & Roman LLP, San Francisco, CA, for appellee and cross-appellant McGuire Woods.
Appeal from the United States District Court for the Northern District of California, Maxine M. Chesney, District Judge, Presiding. D.C. Nos. CV-04-01041-MMC, 03-4240-AN.
Before: THOMAS and FISHER, Circuit Judges, and ROBART,* District Judge.
The parties in this case appeal and cross-appeal the order of the district court vacating an injunction issued by the bankruptcy court. We affirm in part and reverse in part.
The success of an industry often depends on generating demand for its goods, so it is perhaps not surprising that litigation in the paper manufacturing industry would require a prodigious quantity of its product. This appeal concerns a small, but nonetheless important, cogwheel in the legal machinery of the Crown Vantage, Inc. bankruptcy, which itself was a byproduct of various corporate organizational fabrications and deconstructions.
Through a series of mergers and acquisitions, the James River Corporation ("James River"), a publicly-held corporation, ultimately became the successor in interest to such business entities as the Crown-Zellerbach Corporation and the Northern Paper Mills Company. James River, in turn, merged with the Fort Howard Paper Company to form the Fort James Corporation ("Fort James"). Fort James was eventually acquired by the Georgia-Pacific Corporation, but this development would not occur until years after the events that form the basis of our story.
In 1995, James River decided to spin off certain assets related to its communications papers and packaging business ("Crown Assets"). To that end, it formed Crown Vantage, Inc. ("Crown Vantage"), as a wholly-owned subsidiary holding company, and Crown Paper, Inc. ("Crown Paper"), an operating entity wholly owned by Crown Vantage.1 James River transferred all of the Crown Assets to the Crown Entities, and then spun off all its shares of stock in Crown Vantage as a tax-free dividend to James River shareholders, and Crown Vantage became a publicly-traded, stand-alone corporation. A large portion of this transaction was accomplished through various means, including an agreement ("Contribution Agreement") between James River and the Crown Entities.2 By late 1997, a number of disputes concerning the Contribution Agreement had arisen between the Crown Entities and James River, which had now through merger become Fort James. In 1998, the Crown Entities and Fort James entered into an agreement to resolve these issues ("Settlement Agreement"). The Settlement Agreement contained extensive mutual releases and provided that the sole forum and venue for any action arising out of the Settlement Agreement would be the federal or state courts of Delaware.3
In 2000, the Crown Entities filed a voluntary petition in bankruptcy under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Northern District of California. As part of the bankruptcy proceedings, the Unsecured Creditors Committee filed motions seeking authority to investigate the 1995 James River spin-off transaction to determine whether an adversary proceeding should be commenced against Fort James. Approximately a year later, Fort James filed an adversary proceeding seeking a declaration, inter alia, that the spin-off transactions did not constitute a fraudulent conveyance and that, in any event, the Settlement Agreement had released Fort James from any liability in connection with the Contribution Agreement and related spin-off transactions.
Subsequently, the Crown Entities, as debtor-in-possession, filed an adversary proceeding against Fort James, alleging the Settlement Agreement release constituted a fraudulent transfer. The Crown Entities also alleged claims for conversion, negligence, breach of fiduciary duty, unjust enrichment, and unlawful distribution. Pursuant to stipulation of the parties, the bankruptcy court consolidated all of the claims between the parties into one action ("the Crown-Fort James Bankruptcy Action").
Eventually, efforts to reorganize the company failed, and the Crown Entities proposed a liquidating plan of reorganization. Under the plan, a liquidating trust ("Crown Liquidating Trust") would be established and a trustee ("Liquidating Trustee") appointed to liquidate the assets of the Crown Entities and distribute the proceeds to creditors in accordance with an agreement ("Liquidating Trust Agreement") that was approved by the bankruptcy court. According to the plan, all assets of the Crown Entities were to be transferred to the Crown Liquidating Trust, and the Liquidating Trustee was substituted as successor to the debtor as to all actions pending or thereafter commenced relating to the bankruptcy estate. The plan named Jeffrey H. Beck as the Liquidating Trustee. The plan acknowledged that the Liquidating Trustee would bring authorized causes of action for fraudulent conveyance, among other claims, against Fort James. The plan also acknowledged that the Trustee would be asserting claims against certain directors and officers of Fort James, Crown Vantage and Crown Paper, underwriters, auditors, and other professionals. The plan expressly noted that potential recoveries from a fraudulent conveyance action against Fort James "could provide a substantial recovery" to creditors of the estate.
After notice and a hearing, on November 22, 2001, the bankruptcy court entered findings of fact and conclusions of law pursuant to 11 U.S.C. § 1129(a) and confirmed the proposed plan. In the confirmation order, the court retained "exclusive jurisdiction over all matters arising out of, and related to, the Chapter 11 cases and the Plan to the fullest extent permitted by law, including but not limited to, the matters set forth in Article XII of the Plan." Article XII provided, in relevant part, that:
[N]otwithstanding the entry of the Confirmation Order or the occurrence of the effective date, the Bankruptcy Court shall retain exclusive jurisdiction, as legally permissible, over all matters arising out of or relating to the Chapter 11 cases, including without limitation, jurisdiction to:
* * *
(g) decide or resolve any dispute or other matter that may arise in connection with or related to the Recovery Proceeds, Available Cash or Distributable Cash, including Distributions thereof
* * *
(k) hear and determine all applications, motions, adversary proceedings, including those in respect of the Avoidance Actions, contested matters, and other liquidated matters that may be pending in the Bankruptcy Court on or initiated after the Confirmation Date, arising out of, under or related to the Chapter 11 cases ...;
* * *
(x) [recover] all Assets of the Debtors and property of the Estates, wherever located, including any Causes of Action....
The confirmed plan itself further provided that the "Bankruptcy Court shall retain jurisdiction over this Agreement and the Liquidating Trust established hereby, including without limitation the interpretation and enforcement of its provisions, for the purpose of determining all amendments, applications, claims or disputes with respect to this Agreement and the Liquidating Trust."
A few days prior to the confirmation of the plan, Fort James filed a motion to dismiss the Crown-Fort James Bankruptcy Action. In April, after briefing and oral argument, the bankruptcy court denied Fort James's motion to dismiss. Ultimately, the reference was withdrawn with respect to this action, and it was transferred to the United States District Court in and for the Northern District of California.
In March 2002, the Crown Liquidating Trust filed an action in California state court against McGuire Woods LLP ("McGuire Woods"), the law firm that had represented James River in connection with the corporate spin-off of the Crown Entities and other entities. The defendants removed this action ("the Removed Action") to the United States District Court in and for the Northern District of California. The Crown Liquidating Trust moved to remand the case, but the district court declined to do so because of the "substantial overlap of fact patterns" between the Removed Action and the Crown-Fort James Bankruptcy Action. The court then consolidated the cases (which will now be collectively referenced as the "California Actions").
In October 2002, Fort James and McGuire Woods (the "Fort James Entities") filed a lawsuit ("the Delaware Action") in the Chancery Court of Delaware seeking, inter alia, a declaration that the California Actions were barred by the Settlement Agreement. In the Delaware Action, the Fort James Entities contend that the Liquidating Trustee breached the Settlement Agreement in proceeding with the California Actions. The Delaware Action seeks to compel the Liquidating Trustee to dismiss all...
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