Nestlé Waters North America, Inc. v. Mountain Glacier LLC (In Re Mountain Glacier LLC)

RECOMMENDED FOR FULL-TEXT PUBLICATION

Pursuant to Sixth Circuit I.O.P. 32.1(b)

File Name: 17a0279p.06

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

IN RE: MOUNTAIN GLACIER LLC, ┐

Debtor. │

___________________________________________ │

NESTLÉ WATERS NORTH AMERICA, INC., │

> No. 17-5638

Appellant, │

│

│

v.

│

│

MOUNTAIN GLACIER LLC, │

Appellee. │

┘

Appeal from the United States District Court

for the Middle District of Tennessee at Nashville.

No. 3:17-cv-00154—Aleta Arthur Trauger, District Judge.

United States Bankruptcy Court for the Middle District of Tennessee at Nashville.

No. 15-03817; Adv. Pro. No. 3:16-ap-90113—Charles M. Walker, Judge.

Argued: December 5, 2017

Decided and Filed: December 11, 2017

Before: SILER, KETHLEDGE, and THAPAR, Circuit Judges.

_________________

COUNSEL

ARGUED: Deborah T. Kovsky-Apap, PEPPER HAMILTON LLP, Southfield, Michigan, for

Appellant. William L. Norton III, BRADLEY ARANT BOULT CUMMINGS LLP, Nashville,

Tennessee, for Appellee. ON BRIEF: Deborah T. Kovsky-Apap, Robert S. Hertzberg,

PEPPER HAMILTON LLP, Southfield, Michigan, for Appellant. William L. Norton III,

BRADLEY ARANT BOULT CUMMINGS LLP, Nashville, Tennessee, for Appellee.

No. 17-5638 In re Mountain Glacier LLC Page 2

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OPINION

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THAPAR, Circuit Judge. Sometimes bankrupt debtors want to hold on to legal claims

that pre-date their bankruptcies. They are allowed to do so—but only if they reserve those

claims in their reorganization plans. The question in this appeal is exactly what a debtor needs to

say about a claim to preserve it for later.

I.

The facts are undisputed. Mountain Glacier and Nestlé Waters were in the middle of an

arbitration when Mountain Glacier filed for bankruptcy. The bankruptcy automatically stayed

the companies’ arbitration. See 11 U.S.C. § 362(a)(1). And it remained stayed until the

bankruptcy court confirmed Mountain Glacier’s plan of reorganization and the bankruptcy

proceedings ended.

Shortly thereafter, Mountain Glacier attempted to resume arbitration. But Nestlé Waters

objected, claiming that Mountain Glacier failed to properly reserve the arbitration claim in its

reorganization plan. Mountain Glacier disagreed. And so did the bankruptcy court and the

district court. Nestlé Waters now appeals. We review the bankruptcy court’s legal conclusions

de novo. McMillan v. LTV Steel, Inc., 555 F.3d 218, 225 (6th Cir. 2009).

II.

At least in broad strokes, the Chapter 11 bankruptcy process is quite simple. The idea is

to provide a debtor on its last leg the means to reorganize. But to do so, the debtor must follow

certain rules. For one, the debtor must file a disclosure statement. 11 U.S.C. § 1125(b)–(c).

This is essentially an inventory of all the debtor’s assets and liabilities, which the debtor files

with the court and shares with creditors. Id. That inventory gives creditors the information they

need to “make an informed judgment about the [reorganization] plan”—i.e., the debtor’s ultimate

plan to get back on track and pay off (at least some) of its debts. Id. § 1125(a). If a creditor

No. 17-5638 In re Mountain Glacier LLC Page 3

believes that the debtor has not provided “adequate information,” that creditor can object to the

disclosure statement. See 9C Am. Jur. 2d Bankruptcy § 2840 (2017).

Just like every other Chapter 11 debtor, Mountain Glacier had to follow this process. So

it submitted a disclosure statement to the bankruptcy court detailing its assets and liabilities, as

well as a plan of reorganization outlining how it intended to pay its creditors. One of its assets

was its stayed claim against Nestlé Waters. The disclosure statement described the claim as “a

counterclaim asserted by the Debtor against Nestlé Waters North American, Inc. in arbitration

pending in Chicago, IL,” which “remain[ed] unliquidated and ha[d] unknown value.” B.R. 169,

Pg. ID 3. And Mountain Glacier’s plan indicated that this arbitration claim would be transferred

to the “Reorganized Debtor”—i.e., Mountain Glacier—upon the plan’s confirmation. B.R. 203,

Pg. ID 8–9.

Nestlé Waters says that res judicata bars Mountain Glacier’s attempt to restart the

companies’ arbitration. See Browning v. Levy, 283 F.3d 761, 772 (6th Cir. 2002) (holding that

res judicata can bar later litigation of reorganized debtors’ pre-existing legal claims). But, as all

parties here recognize, res judicata does not apply if the debtor expressly retained an existing

claim for post-bankruptcy litigation. Id. at 774. Section 1123(b)(3) of the Bankruptcy Code

allows a debtor’s plan to provide for “the retention and enforcement by the debtor” of “any . . .

claim or interest.” 11 U.S.C. § 1123(b)(3). And a “claim” is defined to include a “right to

payment,” even when that payment is “disputed.” Id. § 101(5)(A). Thus, a debtor who wishes to

retain an existing claim for future litigation need only note the reservation of that claim in its

plan. The statute requires nothing more. See, e.g., P.A. Bergner & Co. v. Bank One, Milwaukee,

N.A. (In re P.A. Bergner & Co.), 140 F.3d 1111, 1117 (7th Cir. 1998) (“While there might be

some logic in requiring ‘specific and unequivocal’ language to preserve claims belonging to the

estate . . . , the statute itself contains no such requirement.”).

Nestlé Waters argues that this court’s opinion in Browning set out requirements more

stringent than those in the Bankruptcy Code. Nestlé Waters is incorrect. As a preliminary

matter, courts cannot add to statutes. Cf. Henson v. Santander Consumer USA Inc., 137 S. Ct.

1718, 1725 (2017) (“[W]hile it is of course our job to apply faithfully the law Congress has

written, it is never our job to rewrite a constitutionally valid statutory text under the banner of

No. 17-5638 In re Mountain Glacier LLC Page 4

speculation about what Congress might have done . . . .”). Legislating is for Congress, not the

courts.

Moreover, Browning did not set out the stringent requirements that Nestlé Waters reads

into it. In Browning, we stated that “a general reservation of rights” is not sufficient to preserve

the debtor’s claims. Browning, 283 F.3d at 774. But Browning does not require a debtor’s

reservation of claims to name each (potential) defendant and state the factual basis for each

(potential) cause of action, as Nestlé Waters contends. Any such suggestion by Browning was

not part of its holding, but a mere statement of reasons for why the debtor’s blanket reservation

in that case did not give sufficient notice to creditors. See id. at 775; Cohens v. Virginia, 19 U.S.

(6 Wheat.) 264, 399 (1821) (noting that reasoning that goes “beyond the case . . . may be

respected, but ought not to control the judgment in a subsequent suit when the very point is

presented for decision”). Rather what Browning held is that a debtor’s reservation is sufficient

so long as it enables creditors to (1) identify the claims (or potential claims) at issue and

(2) evaluate whether those claims might provide additional assets for distribution. See

Browning, 283 F.3d at 774–75; see also P.A. Bergner, 140 F.3d at 1117 (holding that the

reservation of a claim need not name a defendant, but only identify the type of claim the debtor

seeks to retain); Harstad v. First Am. Bank, 39 F.3d 898, 903 (8th Cir. 1994) (describing Section

1123(b)(3) as “a notice provision” intended to ensure creditors know about claims that might

enlarge the estate).

So the question is whether Mountain Glacier’s reservation enabled creditors to identify its

claim and evaluate whether additional assets might be available for distribution. It did. There is

no doubt that creditors could identify the claim: The reservation identified Mountain Glacier’s

counterparty—Nestlé Waters—and indicated the forum—Chicago, Illinois. Creditors thus knew

that there was an ongoing claim and a potential recovery. If creditors wanted more information,

they could have objected to the reservation (or plan) and asked the bankruptcy court to require a

more fulsome description. See D & K Props. Crystal Lake v. Mut. Life Ins. Co. of N.Y., 112 F.3d

257, 261 (7th Cir. 1997) (suggesting that a claim might be retained if a broad reservation was

“explicit,” since creditors would have had the opportunity to “dicker over the language”). But no

creditor did. And Nestlé Waters certainly had all the information it needed—after all, it was the

No. 17-5638 In re Mountain Glacier LLC Page 5

other party in the arbitration. Ultimately, neither Browning nor the statute required Mountain

Glacier to provide more information than it did. So neither will we.

Nestlé Waters raises one more argument as to why Mountain Glacier’s reservation was

not sufficient. The “Retention of Claims” section of Mountain Glacier’s plan purported to retain

every “cause of action” that the company had the power to assert immediately before

confirmation. B.R. 203, Pg. ID 10. The “Transfer of Assets” section, by contrast, purported to

transfer Mountain Glacier’s “Causes of Action” to the reorganized debtor, which were explicitly

defined in the disclosure statement to include the claim against Nestlé Waters. Id. at Pg. ID 8–9;

B.R. 169, Pg. ID 3. Nestlé Waters says that the general “Retention of Claims” was insufficient,

since it was a “blanket reservation” of the sort we rejected in Browning, and that we should now

refuse to look to the definition of “Causes of Action” to find the requisite specificity. Why?

Because while “Causes of Action” was capitalized in the transfer-of-assets section, “causes of

action” in the retention-of-claims section was not. Nestlé Waters thus argues that the two terms

must have had different meanings.

This argument need not detain us for long, since it fails for two straightforward reasons.

First, even had the plan not included the retention-of-claims provision, the transfer-of-assets

provision was itself sufficient to preserve Mountain Glacier’s claim. As discussed above,

Section 1123(b)(3) does not require the debtor to intone any magic words. And the transfer-of-

assets provision put creditors on notice of Mountain Glacier’s claim. Second, even if the

retention-of-claims provision was essential to Mountain Glacier’s reservation, the lower-cased

“causes of action” is most naturally read as encompassing the upper-cased “Causes of Action.”

After all, Mountain Glacier’s retention-of-claims provision purported to retain “each and

every . . . cause of action whatsoever.” B.R. 203, Pg. ID 10. It would be strange indeed if that

broad language included every cause of action except the specific ones the plan identified just a

few paragraphs before. Thus, on any reading, Mountain Glacier’s plan was sufficient to retain its

claim.

***

We AFFIRM.