MW Post Portfolio Fund Ltd. v. Northwest Bank Minnesota
Docket: No. 05-4857
Court: Court of Appeals for the Third Circuit; January 23, 2007; Federal Appellate Court
Appellants, holders of Senior Notes from Oglebay Norton Company, initiated an adversary proceeding in Bankruptcy Court following Oglebay’s Chapter 11 filing, contesting their treatment under Oglebay's reorganization plan. They named Wells Fargo Bank, as Indenture Trustee for subordinated noteholders, and Depository Trust Company (DTC), as disbursing agent, as defendants. Appellants sought three forms of relief: a declaration preventing distributions to subordinated noteholders until Oglebay fulfilled its obligations to them, an order for Wells Fargo and DTC to turn over any property received from Oglebay, and monetary damages for the value of property received for the subordinated noteholders.
The Bankruptcy Court ruled against the appellants on all claims and confirmed Oglebay’s reorganization plan. Appellants appealed this judgment to the District Court but did not appeal the Confirmation Order. The District Court dismissed the appeal on constitutional mootness grounds, leading to the current appeal.
The Circuit Court affirmed the District Court's judgment, agreeing that the turnover and damages claims against Wells Fargo were moot as it did not receive any property under the plan. The claim against DTC was also deemed moot since it had already distributed all relevant property according to the plan. The Circuit Court noted that the inclusion of a 'savings clause' in the plan could not override jurisdictional mootness. Although the appellants’ claim for damages against DTC was not considered 'non-justiciable,' it was found lacking as they failed to establish the source of DTC's alleged duty under the Senior Noteholder Agreement, to which DTC was not a party. DTC's role was limited to executing the distribution per the court-approved plan, which it had fulfilled.
The savings clause of the Plan did not establish liability for DTC, as it explicitly preserved rights related only to the subordination provisions for specific parties, including holders of Senior Notes and subordinated noteholders. A "Final Order," as defined in the Plan, is an unappealable judgment from the Bankruptcy Court that has become final. The intended sequence of events was: a) resolution of subordination rights by court order; b) the conclusion of the savings clause upon this resolution; c) the consummation of the Plan; and d) DTC's distribution of property in line with the Plan. This sequence was followed, with appellants opting to raise subordination issues during the Chapter 11 and adversary proceedings, leading to a court order that confirmed the Plan. The order became final due to the appellants' inaction on appeal, allowing DTC to distribute property according to the approved plan. No grounds for imposing damage liability on DTC were identified, leading to the affirmation of the District Court’s judgment. Additionally, the appellants did not contest the District Court's finding of mootness regarding their claim for declaratory relief.
