In re Inc.
| Decision Date | 06 April 2011 |
| Docket Number | Bankruptcy No. 01–13984–BKC–RAM.,Adversary No. 96–17399–BKC–RAM. |
| Citation | 54 Bankr.Ct.Dec. 165,23 Fla. L. Weekly Fed. B 73,457 B.R. 884,22 Fla. L. Weekly Fed. B 681 |
| Parties | In re A.G.A. FLOWERS, INC., et al., Debtors.In re Rich International Airways, Inc., Debtor. |
| Court | U.S. Bankruptcy Court — Southern District of Florida |
OPINION TEXT STARTS HERE
Mark D. Bloom, Miami, FL, for A.G.A. Flowers, Inc.Peter H. Levitt, Miami, FL, for Rich International Airways, Inc.
Funds locators typically locate creditors who did not cash or receive distributions in bankruptcy cases. The funds locators obtain an assignment of the creditor's claim, file an application to withdraw the funds deposited in the creditor's name and retain an agreed upon percentage of the money when the application is granted and the funds are dispersed.
The applications to withdraw unclaimed funds at issue in this Opinion are altogether different. They were filed by funds locators as the alleged assignees of former debtors whose assets were fully administered and distributed in Chapter 11 liquidating plans confirmed several years ago. The specific motions before the Court are:
A. Omega Consulting's May 28, 2010 Motion for Release of Unclaimed Funds [DE # 1697 in Rich International Airways, Inc.]; and
B. Jacob Consulting's December 4, 2009 Corrected Notice of Motion and Motion for Release of Unclaimed Funds [DE # 1950 in A.G.A. Flowers, Inc. (“AGA”) ] (collectively, the “Unclaimed Funds Motion” or “Motions”).1
Applicants argue that, pursuant to 11 U.S.C. § 347(b) and upon completion of the time allowed under 11 U.S.C. § 1143, the unclaimed funds become property of the debtors. For the reasons discussed below, this Court finds that these long ago dissolved and fully liquidated former debtors (the “Debtors”) are not “debtors” under § 347 entitled to the funds in the Court registry. Thus, neither the Applicants nor the former officers or directors who executed the assignments to the Applicants are entitled to the funds, and the Unclaimed Funds Motions will be denied. The funds shall remain in the court registry subject to recovery only by the creditors who were entitled to the distributions under the plans.
Gerald Stevens Inc., and several subsidiaries, including subsidiary AGA, filed voluntary Chapter 11 bankruptcy petitions commencing this case on April 23, 2001. The Debtors were unable to reorganize and remain in business. The assets, primarily the individual floral shops, were sold, and the Debtors filed a joint liquidating plan. The Second Amended Joint Plan of Liquidation (“Plan”) (DE # 1024–1) was confirmed on April 2, 2002 (DE # 1314). Under Article V of the Plan, all assets, other than those distributed directly to the primary secured creditor, were vested in the AGA Liquidating Trust for liquidation and distribution to creditors. The assets were vested in the Liquidating Trust “free and clear of all [c]laims, liens, interests and encumbrances, including interest of equity security holders, except as otherwise provided under the Plan” [Plan, ¶ 5.1].
The Plan provided for full payment to priority creditors, certain payments to the lenders who were partially secured, and pro rata distribution of the balance of the funds in the Liquidating Trust to Class 4 unsecured creditors. The Debtors' equity holders were placed in Class 5 and under the Plan “receive no property whatsoever on account of their Allowed Interest[s]” [DE # 1024–1, Art. 4 ¶ 5]. The Plan provides further that “any and all claims that the holder of an equity interest in the Debtors could bring, by virtue of their equity ownership, either against the Debtors or their respective agents, members, affiliates, representatives, officers or directors shall be transferred to the Liquidating Trust, and the Liquidating Trustee shall have the sole right to prosecute any such claims”. Id. Under Article VII of the Plan, the Liquidating Trustee was responsible for making the distributions, including the final distribution, which was to be made after all assets were liquidated. The Plan did not provide for the distribution of unclaimed funds. The records of the Florida Department of State reflect that AGA was administratively dissolved on October 4, 2002.
Distribution took place in accordance with the Plan. The distribution process was completed, and the Liquidating Trustee deposited $112,389.13 in unclaimed funds into the Court's registry in 2007. A Final Decree was entered on November 15, 2007 [DE # 1922], and the estate was closed. On the date Jacob filed its Motion, there was approximately $86,690.46 in unclaimed funds remaining in the Court's registry. Jacob's Motion asserts that it is the assignee of the Debtor, AGA, by and through an assignment executed by its last known President, Tom Boesen.
Rich International Airways, Inc. (“Rich”) filed a voluntary Chapter 11 bankruptcy petition on November 18, 1996. Like AGA, Rich was unable to continue its business operations, and its assets were liquidated and distributed under a liquidating plan. Rich's Second Amended Joint Plan of Liquidation (“Plan”) (DE # 404) was confirmed by an order of this Court on April 27, 1998 (DE # 648).2 Under the terms of the Plan, all property of the estate was transferred to and vested in a Liquidating Trust [Plan, ¶ 6.1].3 A Liquidating Trustee was appointed to liquidate all remaining assets and distribute the proceeds to creditors. After distribution to certain priority and secured creditors, the Plan provided for pro rata distribution of the balance of the money in the Liquidating Trust to general unsecured creditors [Plan, ¶ 5.14].
Paragraph 5.16 of Rich's confirmed Plan provides that “[e]ach holder of an Allowed Interest in the Debtor shall receive any and all Liquidating Trust Assets that remain in the Liquidating Trust after payment in full of all Administrative Claims, Post Confirmation Administrative Claims, Priority Tax Claims and Allowed Claims, plus Post–Petition Interest, if applicable, in Classes [1] through [15]....” When Omega filed its Motion, the unsecured creditors had not been paid in full. Thus, interest holders were not entitled to any distribution. Plan Paragraph 5.16, analogous to AGA's plan, provides that, “all Interests in the Debtor, whether allowed or not, shall be extinguished and cancelled on the Effective Date.” Paragraph 6.33 of the Plan provides that Unclaimed Funds “shall be deposited into the Registry of the Bankruptcy Court.”
The records of the Florida Department of State reflect that Rich was administratively dissolved on October 16, 1998. The Liquidating Trustee did not have sufficient funds to begin distributions to unsecured creditors until a large litigation matter brought in funds in excess of $26,000,000 in 2004, more than six years after confirmation. The Liquidating Trustee obtained an Order authorizing an interim distribution on December 9, 2005 [DE # 1254], and he completed the liquidation of assets and distribution of proceeds in 2007. The Liquidating Trustee deposited the remaining funds into the registry of the court in a series of deposits in 2007 and 2008, totaling just under $800,000. A Final Decree (DE# 1623) was entered on October 30, 2008, and the estate was closed.
Omega's Motion asserts its rights to the remaining funds in the court registry, alleged to be $430,122.63, as the assignee of the former debtor, Rich, by virtue of an assignment executed by Stephen Meenan, a former officer and director of Rich.4
The Court conducted a joint preliminary hearing on the Unclaimed Funds Motions on July 7, 2010. The hearings were consolidated because Omega and Jacob are represented by the same counsel and both assert rights based upon the same legal arguments. Prior to the hearing, the former Liquidating Trustee for AGA filed a Memorandum in Opposition to [the Motion] [DE# 1975].
Following the preliminary hearing, the Court entered its July 9, 2010 Order Setting Further Hearing and Briefing Schedule on Motions for Release of Unclaimed Funds (the “July 9th Order”) [DE# 1703 in Rich]. The July 9th Order scheduled a final hearing on September 8, 2010, set a briefing schedule, and directed the parties to address several issues, including the applicability of the Florida and Nevada statutes cited by the Applicants, and the applicability of the Plan provisions to the Motions. Several memoranda were filed,5 and oral argument was presented at the September 8, 2010 final hearing. After thorough review of the Motions, the memoranda, and relevant statutes and case law, after consideration of the arguments presented at the final hearing, and for the reasons that follow, the Unclaimed Funds Motions will be denied. These funds cannot and will not be disbursed to former officers and directors of these Debtors or to the Applicants, as alleged assignees of the former Debtors.
The issue before the Court is the following: After confirmation of a liquidation plan of reorganization in which a debtor is dissolved, all of its assets are liquidated, and no entity acquires the assets of the debtor under the plan, may a former officer or director recover unclaimed creditor distributions on behalf of the former debtor?
Applicants rely primarily on 11 U.S.C. § 347(b), which provides as follows:
Any security, money, or other property remaining unclaimed at the expiration of the time allowed in a case under chapter 9, 11, or 12 of this title for the presentation of a security or the performance of any other act as a condition to participation in the distribution under any plan confirmed under section 943(b), 1129, 1173, or 1225 of this title, as the case may be, becomes the property of the debtor or of the entity acquiring the assets of the debtor under the plan, as the...
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...Premiere Holdings because, unlike that case, here there is a plan provision governing the disposition of unclaimed funds. As the court in A.G.A. Flowers noted: "Other commentators and courts have agreed that drafters of liquidating plans should provide for disposition of unclaimed funds." I......