For the purpose of ruling on the motion, the Court finds the following facts:1
Debtor commenced this Chapter 11 case on September 25, 2012. Debtor's principal was Andy Saied. Pre-petition, Citizen's Bank of Kilgore ("Bank") was Debtor's main secured lender, having loaned Debtor $1,000,000.2
On the petition date, Debtor was in poor financial condition. The Bank was concerned about its loan and collateral.
The Court approved a change in the oil and gas field operator on March 19, 2013. The United States Trustee's Office sought the appoint of a chapter 11 trustee, in part on the basis of environmental concerns and generally sloppy operations. On June 25, 2013, the Court approved the appointment of a chapter 11 trustee.
A number of plans and disclosure statements were filed in this case, by the Debtor, the chapter 11 trustee, and a group called the Ad Hoc Committee of Creditors ("Ad Hoc Committee"). The Ad Hoc Committee filed a Third Amended Chapter 11 Plan of Liquidation ("Plan") and Disclosure Statement ("Disclosure Statement").
The Plan proposed to vest all estate assets in a liquidating trustee, and designated Marilyn Smelcer as the initial liquidating trustee (with the successor trustee,3 the "liquidating trustee" or "Plaintiff"). Ms. Smelcer was the principal of one of one of the Ad Hoc Committee members. As the liquidating trustee, she was charged with, inter alia, stabilizing, operating, marketing, andselling Debtor's oil and gas properties. She also was appointed the estate representative for asserting causes of action. The Plan contains the following language:
Definitions:
1.16 Avoidance Action. Any and all rights, claims and causes of action arising under any provision of chapter 5 of the Bankruptcy Code.
1.24 Cause of Action. Any Claim or cause of action, legal or equitable, now owned or hereafter acquired by Debtor or the Liquidating trustee, whether arising under contract, tort or federal or state law, including but not limited to Avoidance Actions or claims brought in the same proceeding as a claims objection, whether commenced prior or subsequent to the Petition Date.
1.57 Liquidation Trustee Recovery. Any recovery made by the Liquidation Trustee. The Liquidation Trustee shall have authority to pursue all Claims and Causes of Action to liquidate all assets held or recovered by the Estate, including Avoidance Actions.
1.74 Rights of Action. Includes (a) any avoidance, recovery, subordination or other action of Debtor, the Estate or the Liquidation Trustee, (b) any Cause of Action of the Debtor, the Estate or the Liquidation Trustee, (c) any objection or other challenge to a Claim, and (d) any objection or other challenge to an Interest.
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11.6 Preservation of Claims and Rights. Confirmation of this Plan effects no settlement, compromise, waiver or release of any Claim, Cause of Action, Right of Action or claim for relief arising under the Bankruptcy Code unless this Plan or the Confirmation Order specifically and unambiguously so provides. The non-disclosure or nondiscussion of any particular Claim, Cause of Action, Right of Action or claim for relief is not and shall not be construed as a settlement, compromise, waiver, or release of any such Claim, Cause of Action, Right of Action or claim for relief. This Chapter 11 Liquidation Plan reserves any and all claims and rights against any and all third parties, whether such claims and rights arose before, on or after the Petition Date, the Confirmation Date, the Effective Date, the Record Date and/or any Distribution date, including, without limitation, any and all Causes of Action, Rights of Action and/or claims for relief that Debtor may have against any former director, officer, insider, creditor or lender of Debtor.
(emphasis in original).
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15.19 Reservation of Claims. The Liquidation Trustee reserve [sic] any and all claims and right against any and all third parties, whether such claims and rights arise before, on or after the Petition Date, the Confirmation Date, the Effective Date, the Record Date and/or any Distribution Date, including, without limitation, any and all Claim and causes of action for relief that the Liquidation Trustee may have against any director, officer, insider, creditor, lender, any insurer under any insurance policy, or any other person or entity. The entry of the Confirmation Order shall not constitute res judicata or otherwise bar, estop or inhibit any actions by theLiquidation Trustee relating to any Claims or causes of action. The Liquidation Trustee shall constitute the representative for the Debtor and its Estate for purposes of retaining, asserting and/or enforcing Claims and causes of action under Section 1123(b)(3)(B) of the Bankruptcy Code.
The Disclosure Statement states:
3.1.4 Events Leading to Bankruptcy.
According to its filings, the Debtor's prepetition financial problems stemmed from a decrease in oil price and increased refining costs lessened the Debtor's profit margins. Prior to filing the Debtor was involved in a possible purchase and sale agreement for the Leases. During the course of the sale discussions there was destruction of certain equipment and multiple wells were taken out of production as a result of this destruction.... The destruction, increased payments demanded by Citizen's coupled with the decrease in profit margins created a cash flow shortage forcing the Debtor to seek bankruptcy relief.
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12.2 Fraudulent Transfers and Other Claims.
Under the Bankruptcy Code and various state laws, Debtor may recover certain transfers of property, including the grant of a security interest in property, made while insolvent or which rendered Debtor insolvent. The Liquidation Trustee reserves the right to bring fraudulent conveyance claims and other claims arising under state law including breach of fiduciary duty claims or tort claims against any Person who may have taken action against Debtor on a pre-petition basis.
The Ad Hoc Committee has conducted a limited analysis of potential recoveries under Chapter 5 of the Bankruptcy Code and concluded that potential claims may exist. These include but are not limited to claims against Andy Saied and other insiders of Debtor. Creditors and Equity Interest holders are advised that if they received a voidable transfer, they may be sued whether or not they vote to accept the Plan. All avoidance actions and rights pursuant to §§ 542, 543, 544, 545, 547, 548, 549, 550 and 553 of the Bankruptcy Code and all causes of action under state, federal or other applicable law including equitable marshalling of liens as to any secured creditor shall be retained and may be prosecuted or settled by the Liquidation Trustee in her sole discretion. To the extent that material amounts are recovered, it will enhance the returns to the holders of Unsecured Claims.
The Court confirmed the Plan on September 27, 2013. The liquidating trustee did a good job of stabilizing oil production and cleaning up the environmental problems at the field, but had the bad luck to bring the assets to market after the 2014 oil price crash. Debtor's oil production assets, which the Ad Hoc Committee at one time thought might be worth $4 Million, eventually sold, in the Spring of 2015, for about $2 Million.
Plaintiff brought this adversary proceeding against the Bank on December 15, 2014. The original complaint stated a straightforward claim to avoid certain liens asserted against estate assets. In March 20, 2015, however, the liquidating trustee filed a second amended complaint, bringing 18 or so state law and other claims against the Bank, and bringing five state law claims against a new defendant, Ehrman.4 The second amended complaint bears little resemblance to the original lien-avoidance suit.
Ehrman is not a creditor in the bankruptcy case, did not file a proof of claim, and is not on the Court's mailing matrix for the bankruptcy case. Ehrman was not involved in any litigation in the bankruptcy case. Debtor did not list any claims against Ehrman on its schedules. No plan or disclosure statement filed in this case by any party alleged that the estate held claims against Ehrman.
In April, 2015, the Bank moved for dismissal of the claims against it, arguing, inter alia, that the Plan did not adequately reserve the claims. On July 2, 2015, the Court dismissed most of Plaintiff's claims against the Bank for lack of standing.
Ehrman filed his motion to dismiss on March 15, 2016. In response, Plaintiff submitted an affidavit from Ms. Smelcer, detailing when she first learned of facts underlying the Ehrman claims. In the affidavit, Ms. Smelcer quotes a statement she made at a status conference on March 12, 2015 in the main bankruptcy case: "Leading up to the bankruptcy I was aware of some highlyquestionable conduct of the bank. For instance, I was told that Citizens was working with a felon who was defrauding Hart." In the affidavit, Ms. Smelcer sought to clarify her prior statement, as follows:
4. Pre-bankruptcy, I knew Andy Saied was working with a man named Darrell Evans to sell his field.
5. Pre-bankruptcy, I had heard from Wayne Hartman and possibly Andy Saied that the Bank had provided Darrell Evans with Andy's personal financial information.
6. Pre-bankruptcy, Andy Saied had claimed that Hart field had been sabotaged by Bill Pinasco, a field hand he was using as part of his sale process, but I did not know who Bill worked for.
7. Pre-bankruptcy, I
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