SUMMARY ORDER

UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED AND DECREED that the judgments of the district court be AFFIRMED.

Police and Fire Retirement System of the City of Detroit ("PFRS") appeals from: (1) the September 28, 2011, judgments of the District Court approving, pursuant to Federal Rule of Civil Procedure 23(e), a settlement between Ambac Financial Group and plaintiffs in consolidated shareholder class actions, and (2) the December 29, 2011, judgment of the District Court affirming the Bankruptcy Court's order approving the settlement pursuant to Bankruptcy Rule 9019. As part of the settlement, Ambac released any claims that could be brought on its behalf against its officers and directors. PFRS, a nominal plaintiff in a shareholder derivative action, argues that Ambac lacked authority to release the derivative claims.

"[T]he filing of [a] bankruptcy petition immediately alter[s] the rights of the [c]orporation and the manner in which its rights [can] be asserted." Mitchell Excavators, Inc. v. Mitchell, 734 F.2d 129, 131 (2d Cir. 1984). "[W]hile normally the fiduciary obligation of officers, directors and shareholders `is enforceable directly . . . through a stockholder's derivative action, it is, in the event of bankruptcy of the corporation, enforceable by the trustee'" or debtor-in-possession.1 Id. (quoting Pepper v. Litton, 308 U.S. 295, 307 (1939)). Accordingly, when Ambac filed for bankruptcy, the derivative claims became property of the debtor-in-possession, Ambac.

"[U]nder certain circumstances a shareholder may assert a cause of action of the debtor even after the commencement of a bankruptcy proceeding. For example, the trustee may abandon a particular claim, making it possible for others to assert it. Also, the bankruptcy court may order the trustee to abandon a claim." Id. (citations omitted). The bankruptcy court never ordered Ambac to abandon the derivative claims and found that PFRS never petitioned for such an order, a finding PFRS challenges only in its reply brief. See United States v. Yousef, 327 F.3d 56, 115 (2d Cir. 2003) ("We will not consider an argument raised for the first time in a reply brief."). PFRS argues that Ambac unilaterally abandoned the claims by agreeing to their release. But in cases of abandonment, "some proceeding in the bankruptcy court must take place before a shareholder can assert the right directly." Mitchell, 734 F.2d at 132; see also 11 U.S.C. § 554(a)-(b) ("After notice and a hearing, the trustee may abandon any property of the estate. . . . On request of a party in interest and after notice and a hearing, the court may order the trustee to abandon any property of the estate . . . ."). Moreover, Ambac released the claims as part of a settlement with (inter alia) its directors' and officers' liability insurers, who had asserted that they were unwilling to pay absent the release. Accordingly, the derivative claims belong to the Ambac estate and PFRS lacks a cognizable interest in their release. See Sobchack v. Am. Nat'l Bank & Trust Co. of Chicago (In re Ionosphere Clubs, Inc.), 17 F.3d 600, 604 (2d Cir. 1994) ("[T]he claims submitted by the [shareholders] to the bankruptcy court are derivative . . . . They therefore belong exclusively to the [debtor's] Estate and were extinguished by its settlement of those claims.").

Having concluded that PFRS lacks an interest in the derivative claims, we need not consider the other arguments it raises. Accordingly, we hereby AFFIRM the judgments of the district court.