BRENDAN LINEHAN SHANNON, Bankruptcy Judge.
Before the Court is a motion to reopen the chapter 11 bankruptcy case of New Century TRS Holdings, Inc.
1. On April 2, 2007, New Century TRS Holdings, Inc. and related entities (the "Debtors") filed voluntary petitions for relief under chapter 11 of the United States Bankruptcy Code in this Court.
2. On July 15, 2008, the Court entered an order (the "Original Confirmation Order")
3. On August 1, 2008, the Original Plan became effective and, pursuant to its terms, the New Century Liquidating Trust Agreement was executed, thereby creating the New Century Liquidating Trust (the "NCL Trust") and appointing Alan M. Jacobs as Trustee of the Trust (the "New Century Trustee").
4. After the United States District Court for the District of Delaware issued an opinion reversing the Original Confirmation Order, on November 20, 2009, the Court entered an Order confirming the Modified Second Amended Joint Chapter 11 Plan of Liquidation (the "Modified Plan"), which became effective on December 1, 2009.
5. The Modified Plan (i) confirmed that all actions taken by the New Century Trustee subsequent to the Original Effective Date were valid and binding; (ii) adopted, ratified and confirmed the formation of the NCL Trust as of the Original Effective Date; (iii) adopted, ratified and confirmed the Trust Agreement as of the Original Effective Date; and (iv) adopted, ratified and confirmed the appointment of Alan M. Jacobs as trustee of the NCL Trust as of the Original Effective Date.
6. Paragraph 69 of the Modified Confirmation Order entered in the New Century bankruptcy case provides, in pertinent part:
7. On May 18, 2016, the Court entered an order authorizing the New Century Trustee to destroy the Debtors' and the NCL Trust's records and documents (collectively, the "Records") subject to certain procedures in that order (the "Document Destruction Order").
8. On August 25, 2016, the Court entered a Final Decree closing the chapter 11 cases, discharging the New Century Trustee of his obligations under paragraph 69 of the Modified Confirmation Order, and fully releasing and discharging the New Century Trustee of his duties an obligations as trustee to the NCL Trust (other than certain ministerial obligations related to NCL Trust wind down and Records destruction).
9. On September 30, 2016, the New Century Trustee made a final distribution of the NCL Trust assets.
10. On or about June 2, 2004, Michael D. Lynch executed a promissory note (the "Note") in favor of New Century Mortgage Corporation ("NCMC") in the principal amount of $224,000 (the "Loan") secured by a mortgage (the "Mortgage") executed by the Movants granting a lien upon real property located in Miami, Florida (the "Real Property").
11. On July 24, 2012, the Movants filed a voluntary petition under chapter 7 of the United States Bankruptcy Code in the Bankruptcy Court for the Southern District of Florida (the "Florida Bankruptcy Case").
12. On February 19, 2013, Deutsche Bank National Trust Company ("Deutsche Bank") as Trustee for New Century Home Equity Loan Trust Series 2004-A Asset Backed Pass Through Certificates, Series 2004-A (the "Securitized Trust"), filed a notice of appearance and request for service in the Florida Bankruptcy Case as the secured creditor under the Note and Mortgage.
13. On February 26, 2013, the Movants filed a motion against Deutsche Bank in the Florida Bankruptcy Case to compel production of the Note, Mortgage and all assignments of the mortgage.
14. On October 23, 2014, Movants filed an adversary proceeding against Deutsche Bank, as Trustee for the Securitized Trust, and Ocwen Loan Servicing LLC ("Ocwen") seeking declaratory judgment that Deutsche Bank and Ocwen were not the owners of the Loan and could not enforce it against the Movants (the "Florida Adversary Proceeding").
15. In the summer of 2016, in accordance with paragraph 69 of the Modified Confirmation Order, and at the request of Deutsche Bank and Ocwen, the NCL Trust, as successor to NCMC: (i) prepared a "business records" affidavit explaining the sale of the Note and Mortgage (the "Walker Affidavit"),
16. On February 15, 2017, Deutsche Bank and Ocwen filed a motion for summary judgment in the Florida Adversary Proceeding (the "Summary Judgment Motion"), attaching the Walker Affidavit and an allonge making the Loan payable to the Securitization Trustee that was executed by Deutsche Bank pursuant to the LPOA.
17. The Movants opposed the Summary Judgment Motion and cross-moved for summary judgment in their favor, arguing, among other things, that the Walker Affidavit and the LPOA were "void ab initio."
18. By Order dated June 8, 2017, the Florida Bankruptcy Court granted Deutsche Bank and Ocwen's Summary Judgment Motion and denied the Movants' cross-motion for summary judgment.
19. On November 7, 2019, the Movants filed the Motion to Reopen for the limited purpose of allowing Movants to file an adversary proceeding against the NCL Trust and New Century Trustee asserting claims for (i) lack of legal authority, (ii) negligence, (iii) gross negligence, and (iv) intent to defraud in connection with the preparation of the Walker Affidavit and execution of the LPOA, which the Movants assert caused them to suffer injuries.
20. The New Century Trustee filed an objection to the reopening of the Debtors' chapter 11 bankruptcy cases.
21. Pursuant to Section 350(b) of the Bankruptcy Code, a bankruptcy court may reopen a closed case "to administer assets, to accord relief to the debtor, or for other cause."
22. Whether to reopen the case is within the discretion of the bankruptcy court.
23. The Movant bears the burden of demonstrating circumstances sufficient to justify the reopening of the bankruptcy case.
24. "Generally, a bankruptcy case should remain closed if no valid purpose would be served if the matter were reopened."
25. The Movants argue that this Court has jurisdiction to hear the claims asserted in the proposed adversary complaint because those claims require the interpretation, implementation, consummation, execution or administration of the confirmed plan and the Liquidating Trust Agreement.
26. The New Century Trustee opposes reopening the cases to litigate the Movants' claims disputing the validity of the Walker Affidavit, the LPOA, and the transfer to of the Loan because, he argues, those claims have already been fully and finally litigated in the Florida District Court, and upheld on appeal through the Eleventh Circuit, and a (denied) petition for writ of certiorari to the United States Supreme Court. The New Century Trustee asserts that the Movants' claims are barred by the doctrines of collateral estoppel and res judicata.
27. Collateral estoppel (or issue preclusion) bars relitigation of an issue when (i) the identical issue was previously adjudicated; (ii) the issue was actually litigated; (iii) the previous determination was necessary to the decision; and (iv) the party being precluded from relitigating the issue was fully represented in the prior action.
28. The underlying basis of the Movants' claims in the proposed adversary complaint is that the New Century Trustee was lacked legal authority and was negligent or grossly negligent in performing his duties when he executed the LPOA and authorized the execution of the Walker Affidavit, which allowed Deutsche Bank, acting under the LPOA, to execute the allonge. The Movants seek declaratory judgment that the LPOA, the Walker Affidavit and the allonge are void ab initio and seek judgment in their favor for injuries caused to the Movants based on those documents.
29. Collateral estoppel applies here because the issues about the validity of the LPOA, the Walker Affidavit, and the allonge are identical to the issues pursued by the Movants and finally decided in the Florida Litigation. The validity of the LPOA and the Walker Affidavit were necessary to the final judgment and the Movants had a full and fair opportunity to litigate the issues in the Florida Litigation.
30. The doctrine of res judicata (or claim preclusion) "bars repetitious litigation based on the same cause of action."
31. When "deciding whether two suits are based on the same `cause of action,' [it is proper to] take a broad view, looking to whether there is an essential similarity of the underlying events giving rise to the various legal claims."
32. The foregoing factors are present here. The Movants' proposed adversary proceeding complains of the same acts, is based on the same theory of recovery (i.e., the lack of authority to create and the invalidity of the LPOA and the Walker Affidavit), involves the same disputed documents and evidence, and the same underlying material facts. Res judicata applies here.
33. Assuming, however, that the Movants' proposed claims against the New Century Trustee for negligent or grossly negligent acts can be distinguished from those pursued in the Florida Litigation, this Court concludes that the New Century Trustee acted as specifically directed by paragraph 69 of the Modified Confirmation Order. The Third Circuit has recognized that "bankruptcy trustees are covered by quasi-judicial immunity when acting pursuant to an express court order."
34. Applying the standard for reopening a bankruptcy case to the facts and circumstances before me, I conclude that no valid purpose will be served by reopening this case because the Movants' proposed adversary proceeding claims are barred by collateral estoppel and res judicata. The Movants are not prejudiced because they have already had a full and fair opportunity to litigate their claims through the Florida Litigation. Moreover, the New Century Trustee is immune from suit when acting as directed by an order of this Court.
Accordingly, it is hereby: