Copelin v. Spirco Inc

Opinions of the United

1999 Decisions States Court of Appeals

for the Third Circuit

7-1-1999

Copelin v. Spirco Inc

Precedential or Non-Precedential:

Docket 98-3309

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Filed July 1, 1999

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 98-3309

WAYNE COPELIN

v.

SPIRCO, INC., f/k/a Nasco Inc.

STEPHEN I. GOLDRING, Trustee

INNOVO GROUP, INC.,*

Appellant

(Pursuant to Rule 12(a), F.R.A.P.)

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF PENNSYLVANIA

(D.C. No. 96-cv-00342J)

District Judge: Honorable D. Brooks Smith

ARGUED MARCH 9, 1999

BEFORE: MANSMANN, SCIRICA, and NYGAARD,

Circuit Judges.

(Filed: July 1, 1999)

James R. Walsh (Argued)

Spence, Custer, Saylor, Wolfe

& Rose

400 United States National Bank

Building

P.O. Box 280

Johnstown, PA 15907

Attorney for Appellant

Thomas E. Reilly (Argued)

Davis & Reilly

437 Grant Street

1124 Frick Building

Pittsburgh, PA 15219

Attorney for Appellee

OPINION OF THE COURT

NYGAARD, Circuit Judge.

Innovo Group, Inc., the parent corporation of debtor

Spirco, Inc., f/k/a Nasco, Inc.,1 appeals a District Court

Order disallowing Innovo from using Innovo stock to satisfy

a Tennessee state court judgment against it. The District

Court concluded that the judgment does not fall within

the terms of Spirco's approved Bankruptcy Plan of

Reorganization, and that Wayne Copelin, who holds the

judgment against Innovo, is merely seeking to collect on a

judgment he holds against a non-debtor. We agree and will

affirm.

I.

Spirco and Innovo hired Wayne Copelin to serve as

Spirco's president. Copelin, Spirco and Innovo executed a

written employment agreement that included a clause

entitling Copelin to compensation in the amount of

$100,000 if his employment was terminated for any reason

other than for cause. Appellants' App. at 99. The

Employment Agreement did not make Innovo's liability

contingent upon Spirco's failure to pay. Approximately five

months later, Spirco terminated Copelin without cause, but

_________________________________________________________________

1. Spirco and Innovo merged under the terms of Spirco's Plan of

Reorganization filed with the Bankruptcy Court, with Innovo as the

surviving corporation. During the course of relevant litigations, Nasco

changed its name to Spirco. As such, the documents in the record refer

to both Spirco and Nasco to reflect the name of the company at the

various stages of the Tennessee State Court and bankruptcy litigation.

However, for ease of understanding, we will only use the company name

Spirco to refer to both Spirco and Nasco.

2

did not pay the $100,000 compensation due under the

contract.

Copelin sued Spirco and Innovo jointly and severally in

Tennessee state court alleging breach of contract,

misrepresentation, breach of covenant of good faith and fair

dealing, and promissory estoppel. Spirco filed a voluntary

petition for relief with the Bankruptcy Court for the

Western District of Pennsylvania under Chapter 11 of the

Bankruptcy Code, 11 U.S.C. S 101 et seq., which identified

Copelin as a creditor holding a disputed claim for $250,000

under the Employment Agreement. Copelin then filed in

state court a notice of intention to non-suit Spirco without

prejudice. The state court dismissed Spirco, but Innovo

remained a party. Innovo then sought to remove the state

court action to the Bankruptcy Court for the United States

District Court for the Middle District of Tennessee under 28

U.S.C. S 1452(a) claiming that the matter was related to

Spirco's bankruptcy proceeding then pending in the

Bankruptcy Court for the Western District of Pennsylvania.

Copelin objected and requested that the case be remanded

to the Tennessee State Chancery Court.

The Tennessee Bankruptcy Court conducted a hearing to

determine the proper forum and concluded that: (1)

Copelin's suit had no significant impact on the Spirco

bankruptcy action; (2) Innovo's only relation to the Spirco

bankruptcy case was as a non-debtor co-defendant in the

Copelin action; and (3) no objective of the bankruptcy code

would be furthered by removing the case to the Bankruptcy

Court for the Middle District of Tennessee. Innovo did not

appeal, and the case remained in state court.

Spirco filed an Amended Plan of Reorganization with the

Bankruptcy Court in the Western District of Pennsylvania.

A copy of the scheduling order and Amended Plan was

forwarded to Wayne Copelin c/o his attorney in the

Tennessee state court action.

The Plan stated that Spirco would receive a discharge

and the "discharge of the Debtor shall also effect a

discharge of [Innovo with] respect to all claims against

Spirco, Inc." Appellee's App. at 23. Further, the Plan

commanded that "at no time shall [Innovo] be deemed a

3

debtor." Id. The Bankruptcy Court for the Western District

of Pennsylvania confirmed the Amended Plan which stated

in relevant part:

Article II-Specifications of Claims and Interests

Pursuant to Sections 1122 and 1123(a)(1) of the

Bankruptcy Code, the following classes of Claims are

designated:

(H) Class 8 - Class 8 consists of holders of Allowed

General Unsecured Claims upon which [Innovo] is

liable, by guaranty or otherwise, as established by (a)

the entry of a final Order upon motion filed by[Spirco]

or Class 8 Claimant, or (b) written acknowledgment of

[Innov]. Appellants' App. at 65.

Article III-Plan of Reorganization

On the Effective Date of the Plan, [Spirco] shall be

deemed merged into its parent corporation, [Innovo],

with [Innovo] being the surviving corporation.

Therefore, on the Effective Date, [Spirco] will cease to

exist as a separate corporate entity and [Innovo] shall

incur liability of [Spirco] only as provided for in this

Plan. Appellants' App. at 66.

Article X - Effect of Confirmation; Issuance of Group

Common Stock; Vesting of Property; Discharge

. . . At no time shall [Innovo] be deemed a debtor.

[Innovo] shall incur no obligations as a result of such

merger except as specifically provided in the Plan.

D. Upon the Effective Date, [Spirco] shall receive a

discharge pursuant to Section 1141 of the Bankruptcy

Code. The discharge of [Spirco] shall also effect a

discharge of [Innovo] will [sic] respect to all claims and

interest against Spirco, Inc.

Appellee's App. at 23.

While confirmation of the Reorganization Plan was

pending, Innovo filed an Amended Answer to Copelin's state

court complaint claiming that Spirco was an indispensable

party to the suit and that the suit should be dismissed

until Spirco could be properly joined. The state court did

4

not find that Spirco was an indispensable party and Spirco

did not join the action. Appellants' App. at 129.

Spirco filed a Motion to Classify Claims in the

Bankruptcy Court for the Western District of Pennsylvania

alleging that Copelin filed non-bankruptcy litigation against

Innovo to establish Innovo's liability for Spirco's obligation

by guarantee or otherwise and that Innovo "denies any

responsibility to [Copelin] for obligations due and owing by

the Debtor [Spirco]." Spirco requested that this claim be

classified as a Class 8 claim if Copelin successfully

established Innovo's liability for Debtor's obligations.

Appellants' App. at 77. The Bankruptcy Court for the

Western District of Pennsylvania ordered that in the event

Copelin obtained a final order in state court establishing

Innovo liable for Spirco's obligations, then Copelin would be

deemed to have an Allowed Class 8 claim. Under the terms

of the confirmed Amended Plan of Reorganization, Innovo

could satisfy any Allowed Class 8 claim with payment of

Innovo stock.

The Tennessee State Chancery Court granted summary

judgment in favor of Copelin against Innovo for $100,000

plus costs. The Order stated in pertinent part:

ORDERED, ADJUDGED and DECREED that Summary

Judgment is hereby granted in favor of the Plaintiff,

Wayne Copelin, against the Defendant, Innovo Group,

Inc., as to the issue of severance benefits described in

Paragraph 9, of that Employment Agreement, dated

January 2, 1992, and identified as Exhibit B, to this

Complaint filed in this cause, and that the Plaintiff,

Wayne Copelin, have and recover of the Defendant,

Innovo Group, Inc., the sum of $100,000.

Appellants' App. at 149.

Copelin was given a certificate for 352,113 shares of

Innovo stock to satisfy the judgment. Copelin's attorney

returned the stock stating that the judgment against Innovo

was "for a sum certain of money, not stock." Spirco, as

merged with and into Innovo, then filed a Motion for

Enforcement of Discharge Injunction and Terms of

Confirmed Plan, Together with Request for Finding of

Contempt and Imposition of Sanctions with the Bankruptcy

5

Court for the Western District of Pennsylvania. Spirco

contended that under the terms of the Amended Plan,

Copelin's judgment against Innovo in state court could be

satisfied with Innovo stock. Copelin contested the motion.

The Bankruptcy Court for the Western District of

Pennsylvania enjoined Copelin from "pursuing Innovo

Group in any other forum to collect on the debt Innovo

jointly owes along with [Spirco]." The court found that: (1)

Innovo was a guarantor or otherwise liable to Copelin based

on Spirco's obligation to Copelin; (2) the dispute was a core

proceeding, and therefore the bankruptcy court had

jurisdiction to enter a final judgment; (3) Copelin had a

Class 8 claim payable in Innovo stock; (4) the debt owed to

Copelin "by Debtor" was discharged; (5) Copelin was barred

from challenging the classification of the judgment against

Innovo as a Class 8 claim; and (6) the denial of removal by

the Bankruptcy Court for the Middle District of Tennessee

regarding Copelin's state court action s against Spirco and

Innovo did not bar the reorganized debtor from enjoining

Copelin's collection efforts. See In re Spirco, Inc., 201 B.R.

744 (Bankr. W.D. Pa. 1996).

Copelin appealed the Bankruptcy Court's decision to the

United States District Court for the Western District of

Pennsylvania. The District Court concluded that: (1)

whether Copelin could execute on the state court judgment

was a non-core matter related to a case arising under title

11; (2) Copelin's state court lawsuit was against Innovo, not

Spirco; (3) Copelin's collection efforts did not involve rights

created by bankruptcy law; (4) the discharge of Innovo

under the Amended Plan was limited to "those claims and

interest against Spirco" and that Class 8 claims included

only those "upon which [Innovo] is liable, by guaranty or

otherwise"; (5) there was no evidence that Innovo was a

guarantor of Spirco; and (6) the preclusive effect accorded

the orders confirming the Amended Plan and classifying the

claims by the bankruptcy court was too broad. See In re

Spirco, Inc., 221 B.R. 361 (W.D. Pa. 1998).

The District Court ordered the Bankruptcy Court to

recognize the state court judgment against Innovo for

$100,000 plus costs.

6

II.

A. Jurisdiction

28 U.S.C. S 157 sets forth the jurisdiction of the

bankruptcy courts. It states in pertinent part:

(b)(1) Bankruptcy judges may hear and determine all

cases under title 11 and all core proceedings arising

under title 11, or arising in a case under title 11,

referred under subsection (a) of this section, and may

enter appropriate orders and judgments, subject to

review under section 158 of this title.

(2) Core proceedings include, but are not limited to-

(A) matters concerning the administration of the

estate;

. . .

(I) determinations as to the dischargability of

particular debts;

(J) objections to discharges;

(K) determinations of the validity, extent, or priority

of liens;

(L) confirmation of plans

. . .

(c)(1) A bankruptcy judge may hear a proceeding that

is not a core proceeding but that is otherwise related to

a case under title 11. In such proceeding, the

bankruptcy judge shall submit proposed findings of

fact and conclusions of law to the district court, and

any final order or judgment shall be entered by the

district judge after considering the bankruptcy judge's

proposed findings and conclusions after reviewing de

novo those matters to which any party has timely and

specifically objected.

In sum, as the Bankruptcy Court for the Western District

of Pennsylvania correctly observed, its jurisdiction extends

over four types of matters: (1) title 11 cases, (2) proceedings

that arise under title 11, (3) proceedings that arise in a case

7

under title 11, and (4) proceedings related to a case under

title 11. See Spirco, 201 B.R. at 748; 28 U.S.C. SS 1334(a),

(b). We conclude that the Bankruptcy Court had

jurisdiction because this matter is a "proceeding related to

a case under title 11."

A proceeding is related to a case under title 11 if it "could

conceivably have any effect on the estate being

administered in bankruptcy" such that " `it is possible that

[the] proceeding may impact on the debtor's rights,

liabilities, options, or freedom of action or the handling and

administration of the bankrupt estate.' " Halper v. Halper,

164 F.3d 830, 837 (3d Cir. 1999) (quoting In re Guild &

Gallery Plus, Inc., 72 F.3d 1171, 1181 (3d Cir. 1996) (other

citations and quotations omitted)); see also United States

Trustee v. Gryphon at the Stone Mansion, Inc., 166 F.3d

552, 556 (3d Cir. 1999) (noting that test to determine if

matter is "related to" a bankruptcy is whether the outcome

of the proceeding could conceivably have any effect on the

estate being administered in bankruptcy). As we reaffirmed

in Halper, the key word "is `conceivable.' Certainty, or even

likelihood [of effect on the estate being administered in

bankruptcy] is not a requirement." 164 F.3d at 837

(quoting In re Guild, 72 F.3d at 1181) (other quotations

omitted). Thus, jurisdiction is a threshold issue determined

by speculating whether the ultimate outcome of the

litigation could conceivably affect the bankrupt estate.

Here, the Bankruptcy Court had jurisdiction to hear

Spirco's, as merged into Innovo, motion to enforce the

terms of the Bankruptcy Plan of Reorganization because

resolution of that motion may arguably have had an impact

on Spirco's bankruptcy. That the underlying issue is

enforcement of a state court judgment is irrelevant to our

analysis of the Bankruptcy Court's jurisdiction.

B. Standard of Review

The scope of our review critically depends on the nature

of the Bankruptcy Court's and the District Court's

jurisdiction. In a core case, a bankruptcy court can enter a

final judgment over which a District Court can exercise only

appellate review. See 28 U.S.C. SS 157(b)(1), 158(a). During

a non-core proceeding, however, a bankruptcy court can

8

only issue proposed findings and conclusions; the district

court alone can enter final judgment, and exercise de novo

review of the bankruptcy court's proposals. See 28 U.S.C.

S 157(c)(1). In either case, we have appellate jurisdiction

over the district court's final decision. See 28 U.S.C.

SS 158(d), 1291. The nature of the bankruptcy and the

district court's jurisdictions, however, determines whether

we are reviewing the final decision of the bankruptcy court

or the district court, i.e., to whose fact-finding we owe

clear-error deference. See Halper, 164 F.3d at 836 ("[A]

proceeding's core or non-core nature is crucial in

bankruptcy cases because it defines both the extent of the

Bankruptcy Court's jurisdiction, and the standard by which

the District Court reviews its factual findings.").

A core proceeding, " `invokes a substantive right provided

by title 11 or . . . by its nature, could arise only in the

context of a bankruptcy case.' " Id. (quoting In re Guild, 72

F.3d at 1178). When reviewing a core proceeding, we accept

the Bankruptcy Court's findings of fact unless clearly

erroneous. See id. at 835.

In contrast, a non-core proceeding belongs to "the

broader universe of all proceedings that are not core

proceedings but are nevertheless `related to' a bankruptcy

case." Id. at 837. Thus, a "non-core" matter may include a

proceeding that is not against the debtor or the debtor's

property. See id. When reviewing a non-core proceeding, we

treat the district court as the trial court, accepting its

findings of fact unless clearly erroneous. See 28 U.S.C.

S 157. Of course, conclusions of law are reviewed de novo

in both core and non-core proceedings. See id.

The Bankruptcy Court for the Western District of

Pennsylvania opined that Spirco's motion to enforce the

terms of the Reorganized Plan and enjoin enforcement of

the state court judgment against Innovo was a core

proceeding because "[s]uch a request would arise only in

the context of a bankruptcy case wherein a plan of

reorganization was confirmed and debtor had received a

discharge." Spirco, 201 B.R. at 748. Innovo claims that

" `[b]ut for' the filing of the Chapter 11 case by `Spirco' and

the terms of its Plan, `Copelin' would have been free to

9

pursue collection from `Spirco' or `Innovo' or both, until his

claim was satisfied." Appellants' Br. at 26-27. We disagree.

At issue here is whether Copelin has the right to collect

his judgment from Innovo, a non-debtor who became

involved in a bankruptcy court proceeding through the

confirmation of an Amended Plan. This, we conclude, is a

non-core proceeding. See Northern Pipeline Construction Co.

v. Marathon Pipe Line Co., 458 U.S. 50, 102 S. Ct. 2858

(1982) (criticizing the exercise of jurisdiction by a non-

Article III judge over a state law claim that was connected

to a bankruptcy solely because the plaintiff filed a petition

for bankruptcy). Indeed, it would be inconsistent with

Northern Pipeline to require Copelin to have his rights

determined by a non-Article III court simply because Innovo

invoked the protection of the bankruptcy court through a

bankruptcy court procedure. It is clear from the record that

Copelin sued and won a state court judgment against

Innovo, not Spirco. Innovo remained a party to the action

after Copelin filed a notice of non-suit against Spirco

because Innovo was originally a party to the Employment

Agreement.2 Additionally, by the very terms of the

_________________________________________________________________

2. The Tennessee state court concluded that Spirco was not an

indispensable party. Tennessee's Rules of Civil Procedure state:

Rule 19. Joinder of Persons Needed for Just Adjudication.

19.01 Persons to Be Joined if Feasible. A person subject to the

jurisdiction of the court shall be joined as a party if (1) in the

person's absence complete relief cannot be accorded among those

already parties, or (2) the person claims an interest relating to

the

subject of the action and is so situated that the disposition of

the

action in the person's absence may (i) as a practical matter impair

or impede the person's ability to protect that interest, or (ii)

leave

any of the persons already parties subject to a substantial risk of

incurring double, multiple, or otherwise inconsistent obligations

by

reasons of the claimed interest. If the person has not been so

joined,

the court shall order that the person be made a party. If the

person

properly should join as a plaintiff but refuses to do so, he or she

may be made a defendant, or in a proper case, an involuntary

plaintiff. This rule shall be construed to allow joint tort-feasors

and

obligors on obligations that are joint and several to be sued

either

jointly or severally.

Tenn. R. Civ. P. 19.01.

10

Reorganization Plan, Innovo is not the debtor. Copelin's

judgment resulted from a "garden variety contract claim

[against Innovo,] and is not against the bankrupt estate."

Beard v. Braunstein, 914 F.2d 434, 444 (3d Cir. 1990)

(holding that RICO and state law alter ego and common law

fraud claims brought against shareholders, officers,

directors and managing agents of a corporation thatfiled

bankruptcy were not barred by the bankruptcy court's

order confirming the Reorganization Plan, in part, because

"the bankruptcy court would not have had jurisdiction to

hear [the plaintiff 's] claims against the defendants").

Copelin's judgment did not result from a claim filed against

a debtor that invoked bankruptcy law. Thus, the District

Court properly concluded,

the efforts to execute on the judgment are not against

the debtor . . . [because] they do not seek to satisfy the

state court judgment by obtaining any property of the

bankruptcy estate. . . . Copelin's efforts to collect on

the judgment do not involve rights created by

bankruptcy law, [therefore], the issue before[this

court] is not of the type which arises only in the

context of a bankruptcy case.

Spirco, 221 B.R. at 367 (citing Beard, 914 F.2d at 444).

We reject Innovo's assertions urging us to hold that a

non-debtor party who is independently liable on a state

court judgment may subvert that judgment and invoke core

treatment from a bankruptcy court simply by assuming

obligations of a debtor who is also obligated to the same

creditor. Both the Bankruptcy Court and Innovo

characterize the issue as "debtor['s] request[ ][of]

enforcement of the injunction arising from plan

confirmation against efforts by a pre-petition creditor to

collect a debt owed to that creditor by debtor and a third

party." Spirco, 201 B.R. at 749. However, the debt is owed

only by Innovo, the third party. The fact that Spirco merged

into Innovo with Innovo as the surviving corporation does

not does not change our analysis.

The proceeding was non-core, therefore, the Bankruptcy

Court's jurisdiction arose under 28 U.S.C. S 157(c)(1), and

we exercise jurisdiction under 28 U.S.C. S 1291. As such,

11

the Bankruptcy Court's findings and conclusions are mere

recommendations entitled to no deference, and the District

Court's findings of fact are subject to review for clear error.

C. Is Copelin's Claim Against Innovo a

Class 8 Claim Under the Terms of the Plan and

the Bankruptcy Court Order?

We also reject Innovo's assertion that the language and

terms of the Reorganization Plan included Copelin's state

court judgment against Innovo. First, the terms of the

Reorganization Plan and the Bankruptcy Court Order dated

November 18, 1994, expressly limits the discharge of

Innovo's liability. See, e.g., Art. II(H) ("Class 8 consists of

holders of Allowed General Unsecured Claims upon which

[Innovo] is liable, by guaranty or otherwise, as established

by (a) the entry of a Final Order upon motion filed by

Debtor or Class 8 Claimant, or (b) written acknowledgment

of [Innovo]."); Art. III ("Innovo shall acquire all assets and

powers belonging to the Debtor but shall incur liability of

[Spirco] only as provided for in this Plan."); Art. X(C) ("At no

time shall [Innovo] be deemed a debtor. [Innovo] shall incur

no obligations as a result of such merger except as

specifically provided in the Plan."); Art. X(D)("Upon the

Effective Date, [Spirco] shall receive a discharge pursuant

to Section 1141 of the Bankruptcy Code. The discharge of

[Spirco] shall also effect a discharge of[Innovo with] respect

to all claims and interests against Spirco, Inc.").

Importantly, although the Bankruptcy Court classified

Copelin's claim as a Class 8 claim, the express terms of the

Order do not encompass Innovo's independent liability to

Copelin. The Order of the Court dated November 8, 1994,

states in relevant part:

1. Each of the named Respondents herein have

initiated Litigation against Innovo Group, Inc. in an

effort to establish Innovo Group, Inc. liability[sic] for

[Spirco's] obligations to such Respondents;

2. Each of the named Respondents herein shall be

and are deemed to be holders of Disputed Class 8

claims against [Spirco] as provided in the confirmed

Plan of Reorganization;

12

3. In the event that Respondents, or any one of them,

obtain a final Order of Court in the aforesaid Litigation

establishing Innovo group, Inc. liability [sic] for the

Debtors obligations, then such Respondent shall be

deemed to have an Allowed Class 8 claim payable

pursuant to the terms of the confirmed Plan of

Reorganization.

Appellants' App. at 193-94. The plain language in the

Reorganization Plan and the Order classifying claims

reveals that judgments entered against Innovo individually,

without reference to Spirco's liability, do not fall within any

of these provisions.

Second, the Tennessee state judgment does not indicate

that Innovo's liability was contingent on Spirco's liability.

The Bankruptcy Court's faulty analysis is evident in its

characterization of Spirco's motion to enforce the terms of

the Reorganization Plan. The Bankruptcy Court premised

its decision on the statement that "debtor Spirco, Inc. has

moved for an order enforcing the provision of its confirmed

plan of reorganization which prohibits respondent Wayne

Copelin from continuing his efforts in another forum to

collect from Innovo Group, Inc. on a pre-petition debt owed

by debtor and guaranteed by Innovo." Spirco, 201 B.R. at

746. The Tennessee state court, however, found that Innovo

was independently liable, not liable as a guarantor.3

Because Spirco's Reorganization Plan and the

classification of claims by their terms do not apply to

Copelin's state court judgment against Innovo, Stoll v.

Gottlieb, 305 U.S. 165, 59 S. Ct. 83 (1938), Chicot County

Drainage District v. Baxter State Bank, 308 U.S. 371, 60 S.

Ct. 317 (1940), and In re Szostek, 886 F.2d 1405, 1408-10

(3d Cir. 1989), are not controlling. As explained, the

Reorganization Plan expressly limits the discharge of

Innovo's obligations to those "claims and interest against

Spirco" "upon which [Innovo] is liable by guaranty or

otherwise, as established by (a) the entry of afinal Order

upon motion filed by Debtor or Class 8 Claimant, or (b)

written acknowledgment of [Innovo]." Appellants' App. at

_________________________________________________________________

3. Innovo concedes that the Tennessee state court found Innovo

separately liable to Copelin.

13

65, Article II(H); Appellee's App. at 23, Article X(D). There is

no indication that Innovo's liability on the Tennessee state

court judgment arises from either of these two situations.

Moreover, the Reorganization Plan makes it clear that

despite the merger of Spirco and Innovo, Innovo is not the

debtor; therefore, Innovo's protections under Spirco's

Reorganization Plan are limited. Appellee's App. at 23,

Article X(C); Article X(D).

Finally, reading the plan to allow a general discharge of

Innovo is incorrect. Generally, independent obligations of a

parent corporation are not discharged by its subsidiary's

bankruptcy absent a general discharge provision. To the

contrary, the general rule of First Fidelity Bank v. McAteer,

985 F.2d 114 (3d Cir. 1993), controls. In McAteer, we said:

While it is true that the bankruptcy court's

confirmation of the amended plan binds the debtor and

all creditors vis-a-vis the debtor, it does not follow that

a discharge in bankruptcy alters the right of the

creditor to collect from third parties. Section 524(e)

specifically limits the effect of a discharge. It provides

that ". . . discharge of a debt of the debtor does not

affect the liability of any other entity on, or the

property of any other entity for, such debt." This

section assures creditors that the discharge of a debtor

will not preclude them from collecting the full amount

of a debt from co-debtors or other liable parties.

Id. at 118 (quoting 11 U.S.C. S 524(e)) (emphasis added).

In sum, the District Court did not err by determining that

Copelin's claim against Innovo does not qualify as a Class

8 claim. There is no evidence that Innovo's liability on the

Employment Agreement is contingent on Spirco's liability.

Further, the release provision is limited in scope. When

read in context with other provisions of the plan, it is clear

that this discharge provision is limited to those claims and

obligations upon which Innovo's liability results from

"claims and interest against Spirco" or Innovo's status as

"guaranty or otherwise, as established by (a) the entry of a

final Order upon motion filed by Debtor or Class 8

Claimant, or (b) written acknowledgment of [Innovo]."

Appellants' App. at 65; Appellee's App. at 23. We hold that

14

the state court judgment rendered against Innovo does not

fall within the plain terms of Spirco's Plan of

Reorganization. We will affirm the District Court's denial of

Spirco's motion to enjoin Copelin's enforcement of the state

court judgment.4

III.

In conclusion, Copelin holds a judgment against Innovo

for breach of contract, breach of the covenants of good faith

and fair dealing, and promissory estoppel. The District

Court correctly decided that Copelin's judgment against

Innovo does not fall within the terms of either the

Reorganization Plan or the Bankruptcy Court's order that

any final order establishing Innovo's liability for Spirco's

obligations be classified as an Allowed Class 8 claim.

Therefore, we affirm.

A True Copy:

Teste:

Clerk of the United States Court of Appeals

for the Third Circuit

_________________________________________________________________

4. Because we affirm the District Court, we need not address Copelin's

other arguments.

15