In re Ditech Holding Corp.
| Decision Date | 20 August 2021 |
| Docket Number | 19-10412 (JLG) |
| Parties | In re: Ditech Holding Corporation, et al., Debtors.[1] |
| Court | United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — Southern District of New York |
NOT FOR PUBLICATION
(Jointly Administered)
WEIL GOTSHAL & MANGES, LLP
Attorneys for the Plan Administrator
Ray C Schrock, P.C.
Richard Slack, Esq.
Sunny Singh, Esq.
JENNER & BLOCK LLP
Attorneys for the Consumer Representative
Richard Levin, Esq.
Mr. Darryl Keith Browder
Darryl Browder ("Claimant" or "Mr. Browder") purports to be a Consumer Creditor Claimant of the Debtors. Prepetition, he sued Ditech Financial LLC ("Ditech Financial") in Iowa state court to recover damages that he says Ditech Financial caused in servicing his mortgage (the "First Iowa Action").[2] He timely filed twelve proofs of claim (one of which he withdrew) in these jointly administered cases seeking to recover damages based upon the allegations of wrongdoing on Ditech Financial's part underlying the First Iowa Action (the "Browder Claims"). Ditech Financial objected to those claims and the Court conducted a Sufficiency Hearing on the claims. Pursuant to a Memorandum Decision and Order dated February 2, 2021 (the "Browder Memorandum Decision and Order")[3] the Court sustained the objection and expunged those claims. On April 1, 2021, the Claimant filed another lawsuit in Iowa state court (the "New Iowa Action").[4] In it he seeks tens of millions of dollars in monetary relief against Ditech Holding Corporation ("Ditech"), the Wind Down Estates, as well as from Sunny Singh, Esq. (from Weil, Gotshal & Manges LLP, counsel to the Debtors and the Wind Down Estates), Megan Stumph- Turner, Esq., Ditech's local counsel in the First Iowa Action and Tara Twomey, Esq., the Consumer Representative in these Chapter 11 Cases.[5] Claimant also named NewRez LLC, d/b/a Shellpoint Mortgage Servicing ("Shellpoint"), a subsidiary of the Forward Stalking Horse Purchaser under the Plan, which is also the current servicer of Claimant's mortgage, as a defendant, along with Shellpoint's foreclosure counsel, SouthLaw P.C. ("SouthLaw, ").[6] The facts and damage claims underlying the New Iowa Action mirror those that the Claimant alleged in support of the First Iowa Action and the Browder Claims.
On September 26, 2019, the Debtors confirmed their Plan, [7] and on September 30, 2019 (the "Effective Date"), the Plan became effective.[8] The matter before the Court is the joint motion (the "Motion") of the Plan Administrator and the Consumer Representative (the "Movants") pursuant to sections 105, 524 and 1141 of the Bankruptcy Code, Federal Rules of Bankruptcy Procedure 1015(c), 3020(d), and 9007, and Sections 4.6 and 10.5 of the Plan, for an order: (A) enforcing the injunction provisions contained in the Confirmation Order (the "Sale Injunction"), and in Sections 4.6 (the "Forward Purchaser Injunction") and 10.5 (the "Section 10.5 Injunction") of the Plan (collectively, the "Plan Injunctions"); and (B) holding Claimant in contempt and imposing monetary sanctions for his violations of the Plan Injunctions and orders of this Court.[9] Claimant opposes the Motion.[10]
For the reasons set forth herein, the Court grants the Motion.
This Court has jurisdiction to consider this matter pursuant to 28 U.S.C. §§ 157 and 1334. This is a core proceeding pursuant to 28 U.S.C. § 157(b). 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. ). See also Cohen v. CDR Creances S.A.S. ( ), 549 Fed.Appx. 52, 54 (2d Cir. 2014) () (internal citations omitted) (summary order); Ace Am. Ins. Co. v. State of Mich. Workers' Comp. Ins. Agency (In re DPH Holdings Corp.), 448 Fed.Appx. 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) ().
The Motion has a "close nexus" to the Plan because the Plan Administrator and the Consumer Representative are appointed under the Plan and they seek to enforce the Plan Injunctions against Mr. Browder, who filed proofs of claim herein and is subject to the Plan. Moreover, under the Plan, the Court retained jurisdiction over "all matters arising in, arising under, and related to the Chapter 11 Cases," specifically including "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" 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." Plan §§ 11.1 (g), (n). Those types of matters are at issue in the Motion. Accordingly, the Court has post-confirmation jurisdiction to resolve the Motion.
On February 11, 2019 (the "Petition Date"), Ditech Holding Corporation (f/k/a Walter Investment Management Corp.) and certain of its affiliates ("Debtors") filed petitions for relief under chapter 11 of title 11 of the United States Code (the "Bankruptcy Code") in this Court. 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. Mr. Browder filed twelve proofs of claims against Ditech Financial in these Chapter 11 Cases, one of which was duplicative and was withdrawn. As discussed below, those claims arise out of the facts at issue, and the claims asserted, in the First Iowa Action.
The Plan Administrator is a fiduciary appointed under the Plan who is charged with the duty of winding down, dissolving and liquidating the Wind Down Estates. Plan §§ 1.130, 1.184, 1.186. The Consumer Claims Representative is a fiduciary appointed under the Plan who is responsible for the reconciliation and resolution of Consumer Creditor Claims and distribution of funds to holders of Allowed Consumer Creditor Claims in accordance with the Plan. Id.§ 1.41. Under the Plan, the Plan Administrator, on behalf of each of the Wind Down Estates, is authorized to object to all Administrative Expense Claims, Priority Tax Claims, Priority Non-Tax Claims, and Intercompany Claims; and the Consumer Claims Representative has the exclusive authority to object to all Consumer Creditor Claims. Id. § 7.1. The Plan Administrator and Consumer Representative filed a joint objection to the Browder Claims (the "Thirty-Second Omnibus Objection")[11] and sought to expunge those claims as "No Basis Consumer Creditor Litigation Claims." After conducting a Sufficiency Hearing on those claims, the Court sustained the objection and disallowed and expunged the Browder Claims. Browder Memorandum Decision and Order.
In the Motion, the Plan Administrator and Consumer Claims Representative seek an order enforcing the Plan Injunctions. Briefly, the Section 10.5 Injunction bars a claimant from interfering with the implementation or consummation of the Plan, [12] and enjoins a claimant from bringing claims for monetary relief on account of, among other things, claims and causes of action that are extinguished, discharged, or released pursuant to the Plan.[13] The Forward Purchaser Injunction is a separate injunction preventing a claimant from asserting pre-Effective Date claims against the Forward Stalking Horse Purchaser, its Affiliates and anyone acting on their behalf.[14] The Sale Injunction provides a similar injunction preventing suits against the Forward Buyer or any Affiliates of the Forward Buyer.[15] Finally, section 10.7 the Plan contains an exculpation provision (the "Exculpation Provision").[16] The Plan defines "Exculpated Parties" to include "(a) Debtors . . . (e) the Wind Down Estates . . . (p) Consumer Representative . . . [and] all Persons and Entities who acted on their behalf in connection with the matters as to which exculpation is provided herein." Plan § 1.77.
In May 2007, Claimant entered into a mortgage and note with Countrywide Home Loans, Inc. as security for real property located at 1925 10th St., Des Moines, Iowa 50314-2418. Browder Memorandum Decision and Order at 10. In 2011, Ditech began the servicing of Mr. Browder's mortgage. On January 29, 2018, Claimant filed the First Iowa Action against Ditech in the District...
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