In re Ditech Holding Corp.

• Decision Date: 02 January 2021
• Docket Number: Case No. 19-10412 (JLG)
• Parties: In re: Ditech Holding Corporation, et al., Debtors.
• Court: U.S. Bankruptcy Court — Southern District of New York

In re: Ditech Holding Corporation, et al., Debtors.

Case No. 19-10412 (JLG)

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK

Filed: January 3, 2021

January 2, 2021

NOT FOR PUBLICATION

Chapter 11

(Jointly Administered)

MEMORANDUM DECISION AND ORDER DENYING REORGANIZED RMS'S¹ SECOND OMNIBUS MOTION TO ENFORCE INJUNCTIVE PROVISIONS OF PLAN AND CONFIRMATION ORDER AGAINST DR. ELIE NASSAR

APPEARANCES:

REED SMITH LLP

Attorneys for Reorganized RMS

599 Lexington Avenue

New York, New York 10022

By: Christopher Lynch, Esq.

Dr. Elie T. Nassar

Appearing Pro Se

4525 Clayhead Road

Richmond, TX 77406

HON. JAMES L. GARRITY, JR. U.S. BANKRUPTCY JUDGE

Introduction

In November 2018, Dr. Elie Nassar ("Dr. Nassar") sued Reverse Mortgage Solutions, Inc. ("RMS"), as mortgage servicer, in a now consolidated action (the "Texas Action") pending in the United States District Court for the Southern District of Texas.² Without limitation, in that action Dr. Nassar is seeking compensatory and punitive damages from RMS occasioned by its alleged breach of contract, fraud and other wrongdoing. In February 2019, RMS and certain of its affiliates (the "Debtors") filed petitions for reorganization under title 11 of Chapter 11 of the United States Code (the "Bankruptcy Code") in this Court. In September 2019, the Debtors confirmed their joint Chapter 11 plan (the "Plan"),³ and the Plan has become effective. Under the Plan, Reorganized RMS is the successor to RMS, and is now servicing Dr. Nassar's mortgage.

Pursuant to section 10.3 of the Plan, holders of claims arising prior to the Plan's Effective Date (defined below) are deemed to have discharged Reorganized RMS to the fullest extent provided under section 1141 of the Bankruptcy Code. Section 10.5 of the Plan contains an injunction (the "Plan Injunction") which bars the holders of claims that arose prior to the Effective Date from "commencing, conducting or continuing in any manner, directly or indirectly, any suit, action, or other proceeding of any kind" against or affecting, among others,Reorganized RMS and its property. Dr. Nassar did not file a claim in these cases. RMS did not give him actual notice of the General Bar Date (defined below) or any other matter arising in the Debtors' cases. Dr. Nassar first learned of the pendency of the Debtors' cases in May 2019 - well in advance of the General Bar Date and Plan confirmation hearing. Thereafter, he took no steps to involve himself in the cases.

After the Effective Date, Dr. Nassar has continued to prosecute the Texas Action. Reorganized RMS advised him that, in its view, he is doing so in violation of the Plan Injunction and requested that he dismiss his damage claims asserted against it therein. Dr. Nassar refuses to do so. The matter before the Court is Reorganized RMS's Second Omnibus Motion to Enforce Injunctive Provisions of the Plan and Confirmation Order (the "Motion").⁴ In substance, Reorganized RMS seeks entry of an order enforcing the Plan Injunction against Dr. Nassar by prohibiting him from continuing to prosecute his monetary claims in the Texas Action. Dr. Nassar opposes the Motion (the "Objection").⁵ For the reasons set forth herein, the Court sustains the Objection and denies the Motion.

Jurisdiction

A party invoking this Court's post-confirmation jurisdiction must demonstrate both (i) that the matter has a "close nexus to the bankruptcy plan or proceeding, as when a matter affects the interpretation, implementation, consummation, execution, or administration of the confirmed plan or incorporated litigation trust agreement," Penthouse Media Group v. Guccione (In re Gen. Media, Inc.), 335 B.R. 66, 73 (Bankr.S.D.N.Y.2005) (quoting Binder v. Price Waterhouse & Co., LLP (In re Resorts Int'l, Inc.), 372 F.3d 154, 168-69 (3d Cir. 2004)); and (ii) that the plan provides for the retention of jurisdiction over the dispute. Id. (citing Hosp. and Univ. Prop. Damage Claimants v. Johns Manville Corp. (In re Johns-Manville Corp.), 7 F.3d 32, 34 (2d Cir.1993)). See also Cohen v. CDR Creances S.A.S. (In re Euro-Am. Lodging Corp.), 549 F. App'x 52, 54 (2d Cir. 2014) ("A party may invoke the authority of the bankruptcy court to exercise post-confirmation jurisdiction only if the matter has a close nexus to the bankruptcy plan . . . and the plan provides for the retention of such jurisdiction . . . ") (internal citations omitted) (summary order); Ace Am. Ins. Co. v. State of Mich. Workers' Comp. Ins. Agency (In re DPH Holdings Corp.), 448 F. App'x 134, 137 (2d Cir. 2011) (summary order), cert. denied, 567 U.S. 935 (2012). See also Travelers Indem. Co. v. Bailey, 557 U.S. 137, 151 (2009) (abankruptcy court retains post-confirmation jurisdiction to interpret and enforce its own orders).

The Motion has a "close nexus" to the Plan, because Reorganized RMS seeks to enforce the Plan Injunction - a provision of the Plan - and the Confirmation Order, a prior order of the Court. See, e.g., In re Avaya Inc., No. 17-10089 (SMB), 2018 WL 4381524, at *3 (Bankr. S.D.N.Y. Sept. 12, 2018) (finding that motion to enforce Bar Date Order injunction and Discharge Injunction under confirmed plan had "close nexus" to plan). The Plan provides for the retention of jurisdiction over the dispute because under the Plan the Court retained jurisdiction "to issue injunctions, enter and implement other orders, and take such other actions as may be necessary or appropriate to restrain interference by any Entity with the consummation, implementation, or enforcement of the Plan, the Confirmation Order, or any other order of the Bankruptcy Court[,]" (Plan, Art. XI § 11.1(g)), and "to hear, adjudicate, decide, or resolve any and all matters related to Article X of the Plan, including, without limitation, the releases, discharge, exculpations, and injunctions issued thereunder." Id., Art. XI § 11.1(n). Accordingly, the Court has subject matter jurisdiction over the Motion.

Background

On February 11, 2019 (the "Petition Date"), the Debtors filed petitions for relief under Chapter 11 of the Bankruptcy Code in this Court. Post-petition, the Debtors remained in possession of their business and assets as debtors and debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. On September 26, 2019, the Debtors confirmed their Plan, and on September 30, 2019 (the "Effective Date") the Plan became effective.⁶

On December 22, 2011, Dr. Nassar obtained a reverse mortgage from First National Bank of Layton on his real property located at 4525 Clayhead Road, Richmond, Texas 77406. The loan was later assigned to Finance of America Reverse. RMS serviced the loan. As of the Petition Date, Dr. Nassar was suing RMS, among others, in the Texas Action. In that lawsuit, among other things, Dr. Nassar is asserting claims for monetary damages, including attorney's fees, against RMS, occasioned by RMS's alleged breach of contract, fraud, illegal acceleration of his loan, illegal inspections, and violations of the Texas Fair Debt Collection Act.

On February 22, 2019, the Court entered a bar date order (the "General Bar Date Order").⁷ As relevant, that order directed the Debtors to mail the Court-approved Claim Form and Bar Date Notice at least thirty-five (35) days prior to the applicable bar date to:

all creditors and other known holders of potential claims as of the date of the order; including all persons listed in the schedules as holding claims; and

all parties to pending litigation against the Debtors (as of the date of the entry of the order.)

General Bar Order ¶¶ 10(e), (f). It also directed that

Pursuant to Bankruptcy Rule 2002(l) and the Guidelines, the Debtors shall publish the Bar Date Notice, once in the national editions of The New York Times and USA Today at least twenty-eight (28) days prior to the General Bar Date, which publication is hereby approved and shall be deemed good, adequate and sufficient publication notice of the Bar Dates and the Procedures for filing proofs of claim in these chapter 11 cases.

Id. ¶ 12. By orders dated March 27, 2019 and May 2, 2019, the Court extended the General Bar Date ultimately to June 3, 2019.⁸ By order dated May 10, 2019 the Court approved the Debtors'Disclosure Statement and Scheduled the Confirmation Hearing. That order directed the Debtors to mail the Court approved Confirmation Hearing Notice to all creditors and publish it in the national editions of The New York Times and USA Today.⁹

In their schedules, the Debtors identify Dr. Nassar as an unsecured creditor holding a claim in an "unknown" amount. The Debtors show that the "Basis for Claim" is "Litigation" and that the claim is contingent, unliquidated and disputed. They list Dr. Nassar's address as "NOT AVAILABLE."¹⁰ The relevant affidavits of service filed in the case reveal that Dr. Nassar is not listed as having been given notice of the General Bar Date¹¹ or of the subsequent extensions of the General Bar Date.¹² Moreover, the affidavits of service filed by RMS to evidence service of the documents relating to RMS's disclosure statement and Plan, including the Confirmation Hearing Notice, list Dr. Nassar as: "Elie Nassar, Pro Se," without a street address.¹³ Dr. Nassardenies receiving any documents relating to the bankruptcy cases from the Debtors. See Objection [ECF No. 2247], Ex. 5 Nassar Decl. ¶¶ 3-4. The Debtors also were ordered to publish notice of the Commencement of the Case, General Bar Date, Confirmation Hearing Notice and Confirmation Order.¹⁴ The docket in the case reflects that the Debtors published notice of the Confirmation Hearing Notice¹⁵ but the docket does not reflect evidence, like affidavits of service, that RMS published notice of the Commencement of the Case, General Bar Date or the Confirmation Order.

On March 22, 2019, five days after the Debtors filed their bankruptcy schedules, RMS filed a Notice of Bankruptcy and Imposition of Automatic Stay (the "Notice of Bankruptcy") in the Texas Action.¹⁶ In substance, that notice: (i) advised that on ...