Opinion
Case No. 04-38543, (Jointly Administered), Adv. No. 04 A 04393.
December 2, 2005
Steven B. Towbin (#2848546), Matthew A. Swanson (#6273133), Shaw Gussis Fishman Glantz, Wolfson Towbin LLC, Chicago, Illinois, Counsel for the Debtors.
Hedstrom Corporation and certain of its affiliates (together the "Debtors"), hereby submit this brief in connection with the Court's Order Setting Special Hearings entered on November 21, 2005 in the above-captioned case.
The Debtors include (1) Hedstrom Corporation, (2) Ero, Inc., (3) Ero Industries, Inc., (4) Ero Canada, Inc., and (5) Priss Prints, Inc.
Introduction
1. On November 21, 2005, this Court entered an Order Setting Special Hearings directing the Debtors to file a Memorandum regarding the first issue set forth in the Court's Opinion Setting Special Hearings In Bankruptcy Case And Adversary Proceeding On (A) Pendencey Of Simultaneous Chapter 11 Cases And (B) Jurisdiction Of This Court Over Fund At Issue In The Adversary (the "Opinion"). Specifically, this Court directed the Debtors to file a Memorandum addressing the "propriety of the filing and prosecution of Chapter 11 cases here [in Chicago] while earlier Chapter 11 cases were still pending in Delaware." As set forth below, binding Seventh Circuit authority holds that it was entirely appropriate for the Debtors to file liquidating chapter 11 cases here in Illinois even though the Debtors' 2000 Delaware bankruptcy proceedings technically remain opened.
Based on the settlement reached with Feralloy, the Debtors shall preliminary address this Court's second issue — jurisdiction over the Funds — in the instant Memorandum and may supplement the same accordingly. Notwithstanding the Debtors' settlement with Feralloy, the Court should note that Feralloy does not dispute that this Court has jurisdiction over the Debtors' Complaint. In addition, the Delaware Court has already overruled Feralloy's objection filed in the Delaware Case to the entry of a final decree that would administratively close the Delaware Case.
2. In addition, subsequent to this Court's issuance of its Opinion, the Debtors reached an agreement in principal with Feralloy Corporation ("Feralloy") to settle all claims and counterclaims raised by the parties in Adv. No. 04 A 04393. Such settlement will fully and finally resolve all parties' claims to and interests in the Funds (as defined in the Opinion). The Debtors anticipate presenting an agreed order resolving their dispute and dismissing the above-captioned Complaint to the Court at the December 20, 2005 hearing.
Status Of The Debtors' 2000 Delaware Bankruptcy Filing
3. In April of 2000, certain of the Debtors (the "Delaware Debtors") had previously filed for bankruptcy (the "Delaware Cases") in the United States Bankruptcy Court for the District of Delaware (the "Delaware Court"). A. Confirmation of the Delaware Debtors' Plan of Reorganization
4. On July 17, 2001, the Delaware Court entered an order (the "Confirmation Order") confirming the Delaware Debtors' Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code (the "Plan"). While this Court's Opinion generically sets forth the procedural history of the Debtors' Delaware Cases, citing to certain pertinent portions of the Plan, there are a number of additional Plan provisions relevant to the issues at hand:
A copy of the Plan may be found at Exhibit A to the Joint Pretrial Statement Of Stipulated Facts And Documents ("Joint Pretrial Statement") filed by the Debtors and Feralloy in Adv. No. 04 A 04393.
• Disbursing Agent. Under Section 5.4(a) of the Plan, the Reorganized Debtors (as defined in the Plan) could either make the Plan distributions themselves or designate a disbursing agent to facilitate the distributions. The Plan did not establish a trust for payment of unsecured creditors, Trade Claim Holders (defined below), or any other party in interest.
• Vesting of Assets. Under Section 9.3 of the Plan, on the Effective Date, "the Debtors, their properties, interests in property and their operations shall be released from the custody and jurisdiction of the Bankruptcy Court, and the Estate of each of the Debtors shall vest in the applicable Reorganized Debtor. Such vested property shall be free and clear of all liens, claims, encumbrances and interests, except as otherwise provided in the Plan."
• Closing of the Delaware Case. Under Section 12.9 of the Plan, "Unless otherwise ordered by the Bankruptcy Court, the Chapter 11 Cases shall be deemed closed one (1) year after the Effective Date pursuant to Section 350 of the Bankruptcy Code and Bankruptcy Rule 3022."
5. The Confirmation Order became final and is no longer subject to appeal, review or modification. Consequently, the Effective Date of the Plan occurred on August 1, 2001, and as the Delaware Court never entered an order in derogation of Section 12.9 of the Plan, the Delaware Cases were deemed closed on August 1, 2002. This issue is now res judicata and not subject to collateral attack by any party or modification by this Court or the Delaware Court. See Stoll v. Gottlieb, 305 U.S. 165, 176-77, 59 S.Ct. 134, 150 (1938); Republic Supply Co. v. Shoaf, 815 F.2d 1046, 1051-1054 (5th Cir. 1987); See also Pratt v. Ventas, Inc., 365 F.3d 514, 519-522 (6th Cir. 2004); In re Pardee, 218 B.R. 916, 925-26 (9th Cir. BAP 1998).
B. Distributions Under The Delaware Plan
6. On July 26, 2001, shortly after the Plan was confirmed, the Delaware Debtors and DRX Distribution Management, Inc. ("DRX") entered into an agreement (the "Agreement") whereby DRX agreed to act as the Delaware Debtors' disbursing agent of certain funds to holders of Class 4 Qualified Trade Claims, including Feralloy (the "Trade Claim Holders"). Under the terms of the Agreement, the Reorganized Debtors would periodically deliver cash to DRX who would then distribute the same to the Trade Claim Holders in the Delaware Cases. Agreement at ¶ 2.
A copy of the Agreement may be found at Exhibit C to the Joint Pretrial Statement.
7. Under the Plan, the Trade Claim Holders were to receive four annual payments on account of their allowed claims in the Delaware Cases. See Final Report filed in the Delaware Cases on October 31, 2005, a copy of which is annexed hereto as Exhibit A. Consistent with the Plan, Feralloy alleges that it did receive a distribution "from funds delivered to DRX by Hedstrom" in the years 2001, 2002 and 2003, each in the amount of $57,314.87, but that it did not receive a distribution of the Reorganized Debtors' funds for the year 2004. See Joint Pretrial Statement at Exhibit F, ¶ 3.
8. Other than the final payment to the Trade Claim Holders and a $14,000 payment to Binney Smith, Inc. (an administrative creditor in the Delaware Cases), the Delaware Debtors completed all distributions contemplated by the Plan. See Motion For Final Decree Closing Chapter 11 Cases Pursuant To Section 305(a) Of The Bankruptcy Code And Bankruptcy Rule 3022 ("Motion For Final Decree") at ¶ 8, attached hereto as Exhibit B; Transcript of Proceedings before the Honorable Randolph Baxter dated November 14, 2005 ("Transcript"), attached hereto as Exhibit C. C. The Reorganized Debtors Are Unable To Meet Expectations
9. From an operating standpoint, following confirmation of the Plan, the Reorganized Debtors emerged out of chapter 11 and worked to continue the business as a viable going concern by adhering to a new business plan and strategy. The new business plan, in part, aimed to resolve operational difficulties, diversify the Reorganized Debtors' customer base and become more competitive in the marketplace by improving design, quality, customer service and other areas of the business. See Verified Statement Of B.B. Tuley In Support Of Chapter 11 Petitions and First Day Motions and Applications filed on October 18, 2004 ("Verified Statement") at ¶¶ 12-16, attached hereto as Exhibit D.
10. Despite the Reorganized Debtors' best efforts, large operating losses ensued and the Reorganized Debtors experienced increasing cash flow constraints. The highly competitive market and a general decline in the United States economy substantially contributed to the Reorganized Debtors' financial difficulties. Due to these and other conditions, the Reorganized Debtors' financial strength deteriorated and their operated flexibility eroded accordingly. As a result, on October 18, 2004, a number of the Reorganized Debtors (with their principal place of business in Arlington Heights, Illinois) filed related petitions for relief under chapter 11 thereby commencing the Illinois Cases.
D. Open Issues In The Delaware Case As Of October 18, 2004
11. As evidenced by the docket in the Delaware Cases, after the August 1, 2001 Effective Date, the Reorganized Debtors continued to object to claims in accordance with the Plan. See Docket Report of Case No. 00-01665 attached hereto as Exhibit E. Other than claims litigation and the filing of a number of fee applications, there was very limited activity in the Delaware Cases after 2001. As of October 18, 2004 (the Petition Date in the Illinois Cases) a review of the Delaware docket reflects that no pleadings pertaining to any significant matters remained unresolved. In other words, the Delaware Cases were fully administered and there could be no "overlap" between the Delaware and Illinois Cases.
12. On July 25, 2005, this Court entered an order approving the Debtors' application to retain the law firm of Richards, Layton Finger, P.C. ("Richards Layton") as their local Delaware bankruptcy counsel for the limited purpose of formally closing the Delaware Cases (even though the cases had been deemed closed pursuant to the terms of the Plan for almost three years) and resolving any remaining administrative issues. A copy of that order is annexed hereto as Exhibit F. On October 20, 2005, the Debtors filed their Motion For Final Decree in Delaware and on November 14, 2005, the Delaware Court overruled Feralloy's objection to the same, adjourning the hearing until December 14, 2005 while certain limited issues were fully and finally resolved between the Debtors and the Office of the U.S. Trustee. See Transcript.
The Illinois Cases Were Properly Filed
13. As a preliminary matter, this Court's Opinion presupposes that the Delaware Cases remained open as of October 14, 2004 — the Petition Date in the Illinois Cases. As set forth at Section 12.9 of the Plan, the Delaware Cases were deemed closed as of August 1, 2002 and no order was entered subsequent to the Effective Date modifying the Plan. While the Delaware Cases technically remained open as of the date of this Memorandum, pursuant to the Delaware Court's own Confirmation Order, the cases are closed. To the extent this does not end the Court's inquiry, both the Bankruptcy Code and Rules and binding Seventh Circuit law confirm that the Debtors' filing of the Illinois Cases was appropriate. E. The Seventh Circuit's Decision In Jartran, Directly On Point, Confirms That The Filing Of The Illinois Cases Was Proper
14. While the Court's Opinion highlights a number of published and unpublished decisions from outside this Circuit, the Court of Appeals' ruling in Jartran clearly holds that a debtor whose original plan of reorganization has failed may file a new liquidating chapter 11 case even where the first case has not been closed. Fruehauf Corporation v. Jartran, Inc. (In re Jartran, Inc.), 886 F.2d 859 (7th Cir. 1989), aff'g 87 B.R. 525 (N.D.Ill. 1988), aff'g 71 B.R. 938 (Bankr. N.D.Ill. 1987).
15. In Jartran, the debtor filed a chapter 11 case and confirmed a reorganizing plan (" Jartran I"). The debtor performed the plan for a period of time, resulting in substantial consummation, and then defaulted on plan payments. Approximately 17 months after confirmation, the debtor filed a second chapter 11 case (" Jartran II"). The first case was still open at the time the second chapter 11 case was filed and the debtor sought to confirm a liquidating chapter 11 plan in the new case. Jartran, 71 B.R. at 939-40. A creditor from Jartran I moved to dismiss the second case on the grounds that the new chapter 11 case was in effect an attempt to modify an existing chapter 11 plan which had already been substantially consummated. The creditor argued that because a plan cannot be modified after it has been substantially consummated, the new case should be dismissed. The creditor also moved to have the first case (with the defaulted plan) converted to one under chapter 7. Id. at 940.
16. The bankruptcy court refused to dismiss the second case and refused to convert the first, stating that it did not view the second chapter 11 case as a continuation of the first case, but rather that the two bankruptcy cases were "separate cases characterized by different objectives, assets and claims." Id. at 941. The bankruptcy court noted that in Jartran I, the objective of the case was to reorganize and continue the debtor's trailer and truck rental business. The court also noted that upon confirmation of the first plan, the debtor was discharged of its prepetition debts and assumed obligations as stated in the plan, was revested with its property, and commenced renting trucks and trailers. Id.
17. On the other hand, Jartran II "is a new case with assets, liabilities, and objectives different than those of Jartran I. Jartran II is not an attempt to modify the terms of the Plan, but rather is a good faith admission that Jartran was unable to continue operating as a going concern. Jartran II and Hall [a creditor] have submitted a Joint Plan . . . which calls for selling the assets of Jartran II pursuant to § 1123(b)(4) and making distributions to holders of claims." Id. at 942. The Seventh Circuit affirmed, adopting the reasoning of the bankruptcy court, and holding that a debtor whose original plan of reorganization has failed may file a new liquidating chapter 11 case instead of converting the original case to chapter 7 for liquidation. Jartran, 8865 F.2d at 867-68.
18. The facts and circumstances surrounding Jartran (and thus the applicability of the Seventh Court's decision) are identical to those surrounding the Debtors' cases. On the very day the Illinois Cases were filed, the Debtors plainly disclosed the existence of their prior bankruptcy in Delaware. As set forth in the Verified Statement:
12. Prior to this chapter 11 filing, the Hedstrom Companies [referred to as the Debtors in this Memorandum] previously filed for chapter 11 in Delaware on April 11, 2000. The proceedings in Delaware remain open for administrative and claims processing purposes with respect to two creditors.
13. Upon confirmation of a plan of reorganization, the Hedstrom Companies emerged out of chapter 11 and worked to continue the business as a viable going concern by adhering to a new business plan and strategy. The new business plan, in part, aimed to resolve operational difficulties, diversify its customer base and become more competitive in the marketplace by improving design, quality, customer service and other areas of the business. In addition, several new executives were put into place to implement the new business plan.
14. Despite the Hedstrom Companies' best efforts to revitalize their business since emerging from their initial chapter 11 case, the Hedstrom Companies continued to incur large operating losses and experienced increasing cash flow constraints. The highly competitive market and a general decline in the United States economy substantially contributed to the Hedstrom Companies' financial difficulties. Due to these and other conditions, the Hedstrom Companies' financial strength deteriorated and its operating flexibility eroded accordingly.
15. Several steps were taken to improve the Hedstrom Companies' sales and share of the market. For example, in 2004, in an effort to optimize its product line, the Hedstrom Companies standardized their costing process and eliminated unprofitable products which resulted in a reduction of working capital needs and an improved supply chain efficiency. In addition, they recently revamped their senior management team and appointed a new COO, centralized their sales force and shifted their sales focus from products to customers, and eliminated redundant processes from their operations and reduced their salaried workforce.
16. The Hedstrom Companies also responded to their financial difficulties by initiating or completing several restructuring and new financing plans, endeavoring to reduce capital expenditures, and negotiating and amending various terms under their major lending agreements, the Hedstrom Companies ultimately decided to sell their assets, on a going concern basis, if possible. The Hedstrom Companies believe that the chapter 11 process provides the most efficient platform to maximize the value of their assets through competitive bidding procedures, the relief available under 11 U.S.C. § 365, and the protection that buyers will be afforded under 11 U.S.C. § 363.
See Verified Statement Of B.B. Tuley In Support Of Chapter 11 Petitions And First Day Motions And Applications filed on October 18, 2004 ("Verified Statement") at ¶¶ 12-16.
In addition, the Debtors are informed from direct discussions with the United States Trustee ("UST") for the District of Delaware and from discussions with the UST for this district that the Delaware UST was not opposed to the Debtors' pursuit of a liquidating case here in Chicago.
19. As set forth above, during the three years following the Debtors' 2001 exit from bankruptcy, there was a bona fide objective change in circumstances that necessitated the filing of the Illinois Cases. Similar to the situation in Jartran, the Debtors attempted to operate profitably on a reorganized basis but failed. Indeed, the "primary purpose of these Cases is to accomplish an orderly sale of the Hedstrom Companies' assets in a manner that maximizes their value." See Verified Statement at ¶ 52. To that end, the Debtors have liquidated substantially all of their tangible assets and have filed a Plan of Liquidation to further effectuate the same.
20. In addition, while the Delaware Cases technically remained open as of the Petition Date, a review of the docket reflects that no pleadings pertaining to any significant matters remained unresolved as of October 18, 2004. And as reflected in the Final Report, substantially all distributions have been made. The inflexible approach to successive bankruptcy filings advocated by the dated decisions from outside this Circuit cited in the Opinion ignore the holding of binding Seventh Circuit precedent and its progeny. There should be no concern of overlap between these two bankruptcy cases and it was entirely proper for the Debtors to commence bankruptcy proceedings here in Illinois last year. F. The Bankruptcy Code And Rules Do Not Prohibit Multiple Cases
While the Court's Opinion does cite to a 2002 bankruptcy decision from the Bankruptcy Court for the Middle District of Georgia, that opinion found that any overlap in the two cases was de minimis, rejecting a creditor's argument that the debtor's subsequent bankruptcy petition amounted to a bad faith filing. See In re Desai, 2002 WL 1832864 (Bankr. M.D.Ga. 2002)
Cases adopting the Seventh Circuit's rationale include: In re Studio Five Clothing Stores Inc., 192 B.R. 998 (Bankr. C.D.Cal. 1996) (dismissal of subsequent chapter 7 case not warranted where prior chapter 11 case was still open); In re Jamesway Corp., 202 B.R. 697 (Bankr. S.D.N.Y. 1996) (landlord not entitled to administrative claim on account of leases assumed in first chapter 11 case but rejected in second chapter 11 case); United States v. Conston, Inc. (In re Conston, Inc.), 181 B.R. 769, 772 n. 4 (D.Del. 1995) ("although Congress did not expressly enumerate serial Chapter 11 filings as a viable [plan] post-default option, the courts have generally permitted them"); Elmwood Development Co., v. General Electric Pension Trust (In re Elmwood Development Co.), 964 F.2d 508, 511 ("the national consensus permit[s] serial filings in Chapter 11 cases provided the second petition was filed in good faith") (citing cases), reh'g denied, 974 F.2d 1337 (5th Cir. 1992); CFC 78 Partnership B v. Casa Loma Assocs. (In re Casa Loma Assocs.), 122 B.R. 814, 816, 818 (Bankr. N.D.Ga. 1991) (partnership's second chapter 11 case would not be dismissed where there were unanticipated changes in circumstances).
The Debtors' principal place of business was in Arlington Heights, Illinois and venue in this Court was appropriate pursuant to 28 U.S.C. § 1408(a).
21. There is no provision in the Bankruptcy Code or Rules that expressly prohibits having two bankruptcy cases open at the same time. In fact, Bankruptcy Rule 1015 suggests that in some situations, a debtor may have two cases open at once, stating "[i]f two or more petitions are pending in the same court by or against the same debtor, the court may order consolidation of the cases." 11 U.S.C. § 1015(a).
22. In addition, section 109(g) of the Bankruptcy Code addresses the filing of multiple cases. 11 U.S.C. § 109(g). While it is clear from the text of section 109(g) that it does not involve the situation of two cases being open at the same time, "if Congress had wished to prohibit having more than one case open at the same time, Section 109 would have been the logical place to insert such a prohibition in the Bankruptcy Code." In re Studio Five Clothing Stores Inc., 192 B.R. 998. 1001 (Bankr. C.D.Cal. 1996); See also CFC 78 Partnership B v. Casa Loma Assocs. (In re Casa Loma Assocs.), 122 B.R. 814, 816 (Bankr. N.D.Ga. 1991) ("Congress could easily have included repeat corporate debtors in 11 U.S.C. § 109; its failure to do so indicated that corporate debtors are exempt from even the minimal constraints on serial filings imposed on other kinds of debtors").
G. Case Law Suggesting That Two Cases May Not Be Open At The Same Time Tends To Rely On Outdated Precedent
23. The decisions from outside this Circuit cited in the Opinion for the proposition that a debtor may not have two cases pending at the same tend to rely on a United States Supreme Court opinion decided under the Bankruptcy Act, Freshman v. Atkins, 269 U.S. 121, 46 S.Ct. 41, 70 L.Ed. 193 (1925). Upon closer examination, the Supreme Court in Atkins only held that a debtor who had sought but failed to get a discharge of certain debts in its first bankruptcy case could not seek a discharge of those same debts in a second bankruptcy case (under the then applicable Bankruptcy Act, a debtor had to affirmatively apply for a discharge to receive one). Atkins, 269 U.S. at 123, 46 S.Ct. at 41-42.
24. A number of cases have acknowledged this contemporary misinterpretation of Atkins, noting that "the [Atkins] case never held, on its facts, that a debtor could not have two petitions pending simultaneously." See, e.g., In re Strause, 97 B.R. 22, 29 (Bankr. S.D.Cal. 1989); In re Tauscher, 26 B.R. 99, 101 (Bankr. E.D.Wis. 1982). As the court explained in Tauscher, "[o]ver the years, there has been a truism in bankruptcy circles that a debtor cannot have two bankruptcy cases pending at the same time," but "[a]side from the questions of good faith or possibly abuse of process, however, the court has been unable to conceive of any legal or practical reason . . . as to why he should be barred from so filing." Tauscher, 26 B.R. at 101.
It should also be noted that not only is Atkins differentiated on its facts but it is technically not controlling because it was a case under the prior Bankruptcy Act, not the present Bankruptcy Code.
This Court's Jurisdiction Over The Funds
25. In connection with the Court's sua sponte inquiry into the propriety of the Debtors' Illinois Cases, the Court raises a number of jurisdictional questions, including questions regarding the Court's jurisdiction over the Funds. Notwithstanding Feralloy's prior concession that this Court has jurisdiction over the Funds, in light of the Debtors' settlement with Feralloy, such jurisdictional issue is addressed in this Memorandum. As set forth herein, the jurisdictional reservation in the Plan does not impact this Court's original jurisdiction over the Illinois Cases or the Funds and there should be no concerns of comity vis-à-vis this Court and the Delaware Court. A. The Delaware Court's Post-Confirmation Jurisdiction
26. After confirmation and substantial consummation of a chapter 11 plan, as in the Delaware Cases, a court's jurisdiction is sharply reduced. See Pettibone Corp. v. Easley, 935 F.2d 120, 122 (7th Cir. 1991); In re Craig's Stores of Texas, Inc., 266 F.3d at 388, 390-91 (5th Cir. 2001). The exercise of post-confirmation "related to" jurisdiction is "appropriate only to ensure that reorganization plans are implemented and to protect estate assets devoted to implement the confirmed plan." Cytomedix, Inc. v. Perfusion Partners Assocs., Inc., 243 F.Supp.2d 786, 789 (N.D.Ill. 2003) (citations omitted).
27. In this case, pursuant to the terms of the Plan, the Delaware Court reserved jurisdiction over matters related to the Plan including (a) determining pending matters related to assumption and rejection of executory contracts or unexpired leases, (b) adjudicating classification or allowance of claims and (c) settling any claims or cause of action by or against the Reorganized Debtors. See Plan at Article XI. Indeed, as reflected on the docket maintained in the Delaware Case, subsequent to confirmation, the Delaware Court continued to resolve a number of claim disputes and ministerial matters.
B. This Court Is The Only Court With Jurisdiction Over The Cases And The Funds
28. A bankruptcy court "cannot write its own jurisdictional ticket." Zerand-Bernal Group, Inc. v. Cox, 23 F.3d 159, 164 (7th Cir. 1994). "Once the bankruptcy court confirms a plan of reorganization, the debtor may go about its business without further supervision or approval. . . ." Pettibone Corp. v. Easley, 935 F.2d 120, 122 (7th Cir. 1991) ( citing, inter alia, In re Xonics, Inc., 813 F.2d 127, 130-32 (7th Cir. 1987)). As a result of confirmation and the substantial consummation of the Plan, the Delaware Debtors' estates no longer exist and any monies allocated by the Reorganized Debtors to fund Plan distributions in the years following the Effective Date are not property subject to the jurisdiction of the Delaware Court. See, e.g., In re Poplar Run Five Ltd. P'ship, 192 B.R. 848, 856 (Bankr. E.D.Va. 1995) (dismissing post-confirmation turnover proceeding under section 542 because "[t]here is no estate that can receive the `estate' property allegedly held by Virginia Power . . ."); Accord In re Diagnostic Int'l, Inc., 257 B.R. 511, 515-16 (Bankr. D.Ariz. 2000).
29. As explained by the Bankruptcy Court for the Southern District of New York:
The term "debtor" means the legal entity created upon the commencement of a case under title 11. See 11 U.S.C. § 101(13). In a case under chapter 11, a "debtor-in-possession" is the legal entity created. See 11 U.S.C. § 1101(1). An "estate" is created upon the commencement of a case under §§ 301, 302 or 303 of the Bankruptcy Code. 11 U.S.C. § 541(a). The confirmation of a chapter 11 plan of reorganization vests all estate property in the debtor, except as provided otherwise in the plan or confirmation order. 11 U.S.C. § 1141(b). Subject to the provisions of the plan, estate property administered under a plan is free and clear of all interests and claims of creditors, interest holders or partners. 11 U.S.C. § 1141(c). Upon plan confirmation, the debtor-in-possession and the bankruptcy estate cease to exist, even though the case may not be closed and the bankruptcy court retains jurisdiction over certain matters.
In re Jamesway Corp., 202 B.R. 697, 701 (Bankr. S.D.N.Y. 1996) (citations omitted).
30. Under the terms of the Plan, all estate property of the Delaware Debtors was revested in the Reorganized Debtors and the Delaware Debtors' bankruptcy estate ceased to exist. When a number of the Reorganized Debtors filed for bankruptcy protection on October 18, 2004, this Court was conferred with exclusive jurisdiction over their cases pursuant to 28 U.S.C. § 1334(e). In other words, the commencement of the Debtors' cases created distinct estates under section 541 compromised of all the Debtors' property including, but by no means limited to, all legal and equitable interest in the Funds. See Jamesway, 202 B.R. at 702 ("[t]he estate created in one bankruptcy case is distinct from that created upon the commencement of a subsequent case.") (citing Stuart v. Carter (In re Larsen), 59 F.3d 783, 787 (8th Cir. 1995) (filing of chapter 7 petition created new estate independent of estates created in earlier chapter 11, 12 and 13 cases).
31. In summary, the Delaware Court's "sharply reduced" post-confirmation jurisdiction under section 1334(b) does not extend to the Funds or to any other property of the Debtors. To answer the Court's question, when this Court entered an order on March 5, 2005 approving the Debtors' rejection of their Agreement with DRX — an agreement which constituted part of the Illinois Debtors' bankruptcy estate — there was no "infringement" upon the Delaware Court.
Conclusion
32. As binding Seventh Circuit makes clear, it is entirely appropriate for a debtor to file a liquidating chapter 11 case even where a prior bankruptcy case technically remains open. The Debtors' cases are properly before this Court and this Court has exclusive jurisdiction to determine the Debtors interest in, and right to, the Funds.