CATHARINE R. ARON, Bankruptcy Judge.
This adversary proceeding came before the Court on June 25, 2018, to consider the Motion to Dismiss Complaint [Doc. #5] filed by Dynamic International Airways, LLC (the "Debtor" or the "Defendant") on April 27, 2018. At the hearing, Walter Pitt and Gerald Gordon appeared on behalf of the Debtor and Brian Hodgkinson appeared on behalf of the Port Authority of New York and New Jersey (the "Plaintiff"). After considering the Motion to Dismiss Complaint, the Supplement to Motion to Dismiss Complaint [Doc. #9], the Plaintiff's Memorandum of Law in Opposition to Defendant's Motion to Dismiss the Complaint [Doc. #11], the Reply in Support of Motion to Dismiss Complaint [Doc. #16], the arguments of counsel, the record in this proceeding, and other matters of record in the Debtor's main bankruptcy case (Case Number 17-10814, the "Chapter 11 Case"),
This Court has subject matter jurisdiction pursuant to 28 U.S.C. §§ 157 and 1334 and Local Rule 83.11 of the United States District Court for the Middle District of North Carolina. This is a "core proceeding" within the meaning of 28 U.S.C. § 157(b) that the Court may determine by final order, because it concerns an interpretation of the Debtor's plan of reorganization or the enforcement of an order of the Court.
(1) On July 19, 2017, the Defendant filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code [Chapter 11 Case Doc. #1].
(2) On August 9, 2017, the Defendant filed its Schedule A/B, listing, as amongst its assets, $107,527.24
(3) Also on August 9, 2017, the Defendant filed its Schedule E/F, listing the Plaintiff as the holder of a disputed, unsecured, non-priority claim in the amount of $2,605,901.00; the Defendant noted that the claim was not subject to offset [Chapter 11 Case Doc. #126].
(4) On August 11, 2017, the Plaintiff filed a proof of claim, listed in the claims registry as Claim Number 23-1, asserting an unsecured, non-priority claim in the amount of $1,785,288.87. On November 3, 2017, the Plaintiff amended the claim to $1,896,307.97. The amended claim, identified in the claims registry as Claim Number 23-2, makes specific reference to "f[l]ight fees, aircraft parking fees, and employee parking fees" for John F. Kennedy International Airport ("JFK").
(5) Over the course of the Chapter 11 Case, the Defendant requested and received permission to obtain post-petition financing on several occasions; the Defendant did not have sufficient resources to continue initial post-petition operations without those funds and struggled to maintain an ability to operate without the funds as the case progressed. See [Chapter 11 Case Doc. #'s 16, 99, 185, 258, 344, and 430] (collectively, the "Post-Petition Financing Orders"). A budget attached to the first interim order allowing post-petition financing [Chapter 11 Case Doc. #99] (the "First Interim Financing Order"), docketed on August 3, 2017, indicated that as of the week ending on July 22, 2017, the Defendant's collections minus operating disbursements totaled -$615,802.
(6) On August 30, 2017, the Defendant listed the Plaintiff in its Notification of Disputed, Contingent, and/or Liquidated Claims [Chapter 11 Case Doc. #205], with a claim in the amount of $2,605,901.00.
(7) On December 14, 2017, the Defendant filed its Third Amended Plan of Reorganization (the "Third Amended Plan") [Chapter 11 Case Doc. #407]. The Third Amended Plan stated that holders of "General Unsecured Claims,"
(8) On December 15, 2017, the Defendant filed its Disclosure Statement to Accompany Debtor's Third Amended Plan of Reorganization (the "Disclosure Statement") [Chapter 11 Case Doc. #411].
(9) On December 18, 2017, the Court held a hearing to consider the adequacy of the Disclosure Statement. The Plaintiff received notice of the hearing at the address listed in Proof of Claim 23-2. See [Chapter 11 Case Doc. #385]. The Court entered an order approving the Disclosure Statement on December 28, 2017 [Chapter 11 Case Doc. #424] (the "Disclosure Statement Order").
(10) On December 22, 2017, the Defendant filed an amended Schedule E/F and listed the Plaintiff
(11) Also on December 22, 2017, the Defendant listed the Plaintiff in its Second Notification of Disputed, Contingent, and/or Liquidated Claims [Chapter 11 Case Doc. #421],
(12) On December 28, 2017, the Defendant filed its Notice of: (i) Hearing to Consider Confirmation of Debtor's Third Amended Plan of Reorganization; (ii) Procedures for Objecting to Confirmation of the Plan; and (iii) Procedures and Deadlines for Voting on the Plan [Chapter 11 Case Doc. #425] (the "Hearing and Voting/Objections Notice").
(13) On the same date, the Defendant served upon the Plaintiff a solicitation package containing a copy of the Disclosure Statement with the Third Amended Plan attached thereto, the Disclosure Statement Order, the Hearing and Voting/Objections Notice, and a ballot specific to holders of general unsecured claims in Class 5, with the option to elect to be treated in Class 4 as a convenience claim [Chapter 11 Case Doc. #427].
(14) The Plaintiff did not vote on and did not object to the plan. See [Chapter 11 Case Doc. #527] (summarizing ballots).
(15) On January 8, 2018, the Plaintiff filed an additional proof of claim, listed in the claims registry as Claim Number 109, asserting an unsecured, non-priority claim in the amount of $562,315.10. Attached to the claim is a Schedule of Charges for Air Terminals for John F. Kennedy International Airport. The schedule explains those fees which are imposed by the airport on air carriers, including Passenger Facility Charges ("PFC"s). It notes that the Plaintiff is entitled to collect PFCs in the amount of $4.50 (effective 04/01/06) for each eligible enplaned passenger departing from any terminal at JFK. Also attached to the claim is a monthly traffic report, which includes emplaned revenue for the Defendant for passengers from 2014-2017 at JFK.
(16) On February 8, 2018, the Court held a hearing to consider confirmation of the Third Amended Plan (the "Confirmation Hearing"). The Plaintiff did not participate in the hearing.
(17) On February 21, 2018, the Court entered its Findings of Fact and Conclusions of Law Regarding Confirmation of Debtor's Third Amended Plan of Reorganization and Order Confirming Debtor's Third Amended Plan of Reorganization [Chapter 11 Case Doc. #543] (the "Confirmation Order"), which confirmed the Defendant's Modified Third Amended Plan of Reorganization (the "Confirmed Plan"), as attached to the Confirmation Order.
(18) Section 4.5 of the Confirmed Plan provides as follows:
(19) Section 9.3 of the Confirmed Plan provides as follows:
(20) Section 9.1 of the Confirmed Plan provides as follows:
(21) "Assets" are defined in the Confirmed Plan as: "All of the assets, property, interests, and effects, real and personal, tangible and intangible, wherever situated, of Debtor, as they exist on the Effective Date." Id. § 1.1.9.
(22) Section 7.1 of the Confirmed Plan provides as follows:
(23) On March 16, 2018, the Defendant filed its Notice of Effective Date and Occurrence of Substantial Consummation of Debtor's Modified Third Amended Plan of Reorganization [Chapter 11 Case Doc. #590] (the "Effective Date Notice"), explaining that the effective date and substantial consummation date of the Confirmed Plan was March 8, 2018.
(24) The 14 day period to appeal the Confirmation Order expired on March 7, 2018.
(25) On March 28, 2018, the Plaintiff instituted this adversary proceeding, requesting that the Court: (1) enter judgment against the Defendant, or the un-reorganized debtor, in the amount of $498,629.37 for pre-petition PFCs from passengers enplaned at JFK between November 2014 and July 2017, or (2) enter an order that the $498,629.37 be set aside and withheld from distribution.
(26) On April 27, 2018, the Defendant filed its Motion to Dismiss Complaint under Rule 12(b)(6) of the Federal Rules of Civil Procedure, made applicable in this proceeding via Rule 7012 of the Federal Rules of Bankruptcy Procedure. The motion asserts that the Complaint should be dismissed with prejudice, because confirmation bars the Plaintiff from attempting to revisit the treatment of its claim for PFCs.
"To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to `state a claim for relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). "In other words, the factual allegations in the complaint `must be enough to raise a right to relief above the speculative level on the assumption that all the allegations in the complaint are true (even if doubtful in fact).'" Walter v. Freeway Foods, Inc. (In re Freeway Foods of Greensboro, Inc.), 467 B.R. 853, 860 (Bankr. M.D.N.C. 2012) (quoting Sherman v. Litton Loan Servicing, L.P., 796 F.Supp.2d 753, 757 (E.D. Va. 2011)). If it is, however, clear from the face of a complaint and undisputed facts of which the Court may take judicial notice that a plaintiff's claims are barred as a matter of law by the affirmative defense of res judicata, then dismissal under Rule 12(b)(6) is appropriate. Andrews v. Daw, 201 F.3d 521, 524 n.1 (4th Cir. 2000).
While the Plaintiff insists that this adversary proceeding may proceed notwithstanding the procedural posture of the Chapter 11 Case, this Court disagrees. "`A bankruptcy court's order of confirmation is treated as a final judgment with res judicata effect,' binding the parties by its terms and precluding them `from raising claims or issues that they could have or should have raised before confirmation.'" Valley Historic Ltd. P'ship v. Bank of New York, 486 F.3d 831, 838 (4th Cir. 2007) (quoting First Union Commercial Corp. v. Nelson, Mullins, Riley & Scarborough (In re Varat Enters., Inc.), 81 F.3d 1310, 1315 (4th Cir. 1996)). "The binding effect of a chapter 11 plan is in fact premised on statutory and common law . . . preclusion," Lawski v. Frontier Ins. Grp., LLC (In re Frontier Ins. Grp., Inc.), Ch. 11 Case No. 05-36877(CGM), Adv. No. 14-9022(RDD), 2018 WL 922194, at *4 (Bankr. S.D.N.Y. Feb. 15, 2018); under 11 U.S.C. § 1141(a), "the provisions of a confirmed plan bind the debtor . . . and any creditor, . . . whether or not the claim or interest of such creditor . . . is impaired under the plan and whether or not such creditor . . . has accepted the plan."
Res judicata encompasses two related concepts, claim preclusion and issue preclusion. Id. Claim preclusion occurs when:
Id. (citing Kenny v. Quigg, 820 F.2d 665, 669 (4th Cir.1987)).
In the context of this adversary proceeding, the Court finds that all three claim preclusion criteria are satisfied. First, the Confirmed Plan constitutes a final judgment on the merits, issued based on proper jurisdiction. The deadline to appeal the Confirmed Plan has passed, and the plan has been substantially consummated. The Plaintiff also participated in the Chapter 11 Case by filing two proofs of claim
Finally, the Plaintiff's claim in this adversary proceeding stems from the same cause of action at issue in the Confirmation Hearing; the claim revolves around the same facts which gave rise, in part, to the Confirmed Plan. See Varat, 81 F.3d at 1316 (explaining that a claim objection, asserted post-confirmation, constituted later litigation arising from the same cause of action as the confirmed plan); Frontier, 2018 WL 922194, at *5 (noting that for purposes of res judicata, something would arise from the same cause of action as a confirmed plan if it concerned an allocation of the debtor's property or claims against it); Weidel, 208 B.R. at 851 (observing that, in light of the fact that confirmation of a plan is based upon the plan's treatment of claims, an objection to claim would arise from the same cause of action as the confirmed plan).
In short, the Plaintiff already asserted the claim it now seeks to re-characterize as a right to trust fund monies in Claim Number 109.
NOW, THEREFORE, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that:
(1) the Motion to Dismiss Complaint is GRANTED; and
(2) the Complaint is DISMISSED WITH PREJUDICE.
The Plaintiff's position lacks merit. Chapter 11 plans "may, and frequently do, propose restructuring that is contrary to the terms of the debtor's pre-petition relationships, duties, and obligations." In re DeCoro USA, Ltd., No. 09-10846C-11G, 2012 WL 1237558, at *3 (Bankr. M.D.N.C. Apr. 12, 2012) (explaining that a Chapter 11 plan was res judicata with respect to whether a debtor held an ownership interest in certain property, or, instead, was merely holding the property as an agent for another). Thus, "a creditor with a claim to, or an asserted interest in, an asset may lose that interest if, knowing the debtor's contrary claim, it lets a plan be confirmed without contesting the debtor's position." Frontier, 2018 WL 922194, at *6; see also Baeshen v. Arcapita Bank B.S.C.(c) (In re Arcapita Bank B.S.C.(c)), 520 B.R. 15, 23 (Bankr. S.D.N.Y. 2014) (explaining that a party has a right to contest what constitutes property of the estate but that the issue may also be resolved in a confirmed Chapter 11 plan).
In this case, the Confirmed Plan explained that those "Assets" which vested upon confirmation in the reorganized debtor included "[a]ll of the assets, property, interests, and effects, real and personal, tangible and intangible, wherever situated, of Debtor, as they exist[ed] on the Effective Date." Id. § 1.1.9. Analysis of the remainder of the plan leads to the conclusion that this definition encompassed any and all of the $107,527.24 remaining as of the effective date. Under section 7.1 of the Confirmed Plan, the reorganized debtor proposed to make plan payments using "existing Cash balances," or existing cash/cash equivalents. Thus, if any of the $107,527.24 remained as of the effective date—an in fact doubtful proposition in light of the fact that the budget attached to the First Interim Financing Order reflected that the Defendant's collections minus operating disbursements totaled -$615,802 for the week ending on July 22, 2017—the Confirmed Plan implicitly determined that those funds constituted property belonging to the Defendant, or property which would vest in the reorganized debtor and be available for distribution under the plan. Otherwise stated, regardless of the continuing existence of any pre-petition funds, the plan specifically provided for the use of the Defendant's cash to pay its creditors, a use irreconcilable with any putative claimed property interest in that cash by the Plaintiff. The Plaintiff did not object to the plan, and, indeed, did not contradict the Defendant's distribution of the $107,527.24. Despite its failure to object to the plan, the Plaintiff actively participated in the case by filing a proof of claim for PCFs for JFK. Therefore, the elements of § 1141(c) were met with respect to those funds. See generally City of Concord v. N. New Eng. Tel. Operations LLC (In re N. New Eng. Tel. Operations LLC), 795 F.3d 343, 348 (2d Cir. 2015) (explaining that in order for the requirements of § 1141(c) to be met with respect to a creditor, the creditor must have participated in the case; finding that filing a proof of claim which seems to relate to the interest at issue constitutes participation); Universal Suppliers, Inc. v. Reg'l Bldg. Sys. (In re Reg'l Bldg. Sys., Inc.), 254 F.3d 528, 529, 532 (4th Cir. 2001) (emphasizing that a creditor who (1) actively participated in a Chapter 11 case as a member of the creditors' committee, (2) filed several proofs of claim, and (3) knew that a plan did not expressly preserve its lien but did not object to confirmation "fell asleep at the switch" and thus could not "escape the consequences of its inaction" under § 1141(c)).
