1997 #06, Van Dyke, 2-5-97

In re: TOKHEIM V. GEIGER CORP. (IN RE JOHN VAN DYKE, JR.), Adversary No. 96-5167ks, Chapter 11; Bankr. No. L88-01173s

The matter before the Court is the Motion to Dismiss for Lack of Subject Matter Jurisdiction filed by Defendant. This Motion is a core proceeding under 28 U.S.C. § 157(b)(2). This letter decision and accompanying Order shall constitute the Court's findings and conclusions under F.R.Bankr.P. 7052. As set forth below, the Court concludes that Defendant's Motion shall be denied.

Summary of Facts and Arguments. The history of this case is set forth in the Court's Memorandum of Decision in Tokheim v. Geiger (In re John W. Van Dyke), Adversary No. Bankr. No. L88-01173S, slip op. (Bankr. N.D. Iowa 1995). As pertains to this Motion, Defendant argues this Court does not have jurisdiction because Debtor's plan has been substantially consummated and because ¶ 11.03 of the plan, which Defendant argues delineates the matters over which this Court may exercise jurisdiction, does not specifically include an action for equitable subordination of a claim. Plaintiffs contend Defendant's Motion can be sustained only if the Plan's retained jurisdiction provisions limit or otherwise narrow the jurisdictional grants contained in 28 U.S.C. §§ 157 and 1334, which Plaintiff argues, a Chapter 11 plan may not do.

Discussion. A review of 11 U.S.C. §§ 1141 and 1142 and 28 U.S.C. §§ 157 and 1334, as interpreted by applicable case law, indicates that while parties to a bankruptcy case cannot create post-confirmation jurisdiction by consent, they may agree what matters may be addressed within the jurisdiction created by statute. In re Pauling Auto Supply, Inc., 158 B.R. 789, 794 (Bankr. N.D. Iowa 1993); Harstad v. First American Bank (In re Harstad), 155 B.R. 500, 507 and 507 n.7 (Bankr. D. Minn. 1993), aff'd, 39 F.3d 898 (8th Cir. 1994). In this case, the confirmed plan at ¶ 11.03 states that the Bankruptcy Court retains jurisdiction for:

a. Allowing claims and hearing objections thereto.

b. Completing any pending adversary proceedings.

c. Allowing and approving the payment of administrative expenses.

d. Adjudicating any questions regarding the interpretation of any provision of this Plan or the Standby Trust and rendering judgment accordingly.

e. Determining and resolving any defaults under the Plan or Standby Trust.

f. Modifying the Plan or the Standby Trust pursuant to 11 U.S.C. § 1127(b) of the Code.

g. Correcting any defect, curing any omission or reconciling any inconsistency in the Plan, the Standby Trust or the Order of Confirmation as may be necessary to carry out the purposes of the and intent of the Plan and Standby Trust.

h. Conducting such further proceedings as may be necessary pursuant to 11 U.S.C. [§] 1142 of the Code.

i. Issuing any order necessary to carry out the purposes and intent of the Plan and Standby Trust.

j. Resolving objections to the sale of secured and unsecured assets.

It is clear that some of these provisions do not apply to a post-confirmation equitable subordination complaint. Other provisions are fairly broad. Thus, as framed by Defendant's Motion, the issue is whether at least one provision is sufficiently broad to encompass this equitable subordination complaint but not so broad as to offend the Court of Appeal's decision in Harstad.

Initially, a distinction between the facts in Van Dyke and the facts in Harstad must be noted. In Van Dyke, this Court is considering whether it has post-confirmation jurisdiction over an equitable subordination complaint that arose from post-confirmation actions by a trustee. In Harstad, the Court of Appeals found that the Harstad plan did not specifically retain jurisdiction over a preference action that arose pre-petition. The more limited jurisdiction and the strict interpretation of 11 U.S.C. § 1123(b)(3) in Harstad was thus appropriate where the preference action arose pre-petition and was known by the plan proponent at the time of confirmation. Harstad, 39 F.3d at 902-03. Conversely, the plan proponents in Van Dyke could not have readily foreseen a post-confirmation equitable subordination action against a corporation affiliated with a trustee and then have included such a claim in ¶ 11.03 of the plan.

Two other Court of Appeal's decisions -- one before Harstad and another after -- further indicate Harstad should not be read too narrowly. In United States v. Unger, 949 F.2d 231, 234 (8th Cir. 1991), a co-trustee of a non liquidating trust arising from a Chapter 11 plan argued that the district court did not have jurisdiction to prosecute him for post-confirmation defalcations where the bankruptcy court held that the debtor's estate ceased upon confirmation. The Court of Appeals upheld the conviction. Id. at 233-35. It held that

[w]here a trustee, custodian, or other person charged with the assets of the estate of a debtor deals with those assets in complete contravention of a confirmed plan, such assets remain effectively unadministered; they are in custodia legis of the bankruptcy court and property of the estate.

Id. at 234 (relying on the Act case of United States v. Ivers, 512 F.2d 121, 124 (8th Cir. 1975)). The Court further held that

[i]n addition to a bankruptcy court's jurisdiction over unadministered assets, a bankruptcy court may explicitly retain jurisdiction over aspects of a plan related to its administration and interpretation.

Id. at 234. The Court went on to recognize the post-confirmation jurisdiction provision in that Chapter 11 plan, which incorporated § 1142. Section 1142 provides, in pertinent part:

(a) Notwithstanding any otherwise applicable nonbankruptcy law, rule, or regulation relating to financial condition, the debtor and any entity organized or to be organized for the purpose of carrying out the plan shall carry out the plan and shall comply with any orders of the court.

(b) The court may direct the debtor and any other necessary party . . . to perform any other act . . . that is necessary for the consummation of the plan.

In applying this provision to the case at hand, the Court concluded,

If the court retains jurisdiction to ensure that the parties fulfill the intent and specific provisions of the plan, then it must buttress this jurisdiction with the ability to have coercive measures applied, including the threat of prosecution under section 153. To hold otherwise would allow trustees, custodians, and others charged with assets of an estate to act with apparent impunity after confirmation of a plan, subject only to the restraints of moral and state law. Because Congress has given the federal courts exclusive jurisdiction in bankruptcy, we cannot support the thesis that we must rely on state law or the vicissitudes of conscience to further the policies of a confirmed plan. Given the circumstances of this case, the federal court properly exercised jurisdiction under section 153.

Id. at 234-35.

The circumstances and the confirmed plan in Van Dyke are analogous to the facts and plan in Unger. Questions regarding a former co-trustee's post-confirmation actions are at issue that may affect assets available for distribution. Accordingly, this Court finds that jurisdiction remains over any assets that may have been improperly administered. More important, however, ¶ 11.03 of the Van Dyke plan incorporates § 1142 as did the plan in Unger. Therefore, this Court has little difficulty in concluding that it retains sufficient jurisdiction to guard the intent and specific provision of the Van Dyke plan and trust and in so doing, hear an equitable subordination complaint that arose from post-confirmation activities by a former co-trustee. It is only through actions such as this equitable subordination complaint -- a less harsh remedy than that employed in Unger -- that this Court can "buttress" its jurisdiction with appropriate tools to enforce the plan's intent. See Unger, 949 F.2d at 234.

A second, more recent Court of Appeals decision also supports this Court's post-confirmation jurisdiction over Plaintiff's equitable subordination complaint. In Norwest Equipment Finance, Inc. v. Nath (In re D&P Partnership), 91 F.3d 1072, 1074 (8th Cir. 1996), the Court found that a Chapter 11 plan may provide for continued jurisdiction to enforce and interpret the terms of the plan. The Court in Nath did not require a specific delineation of the types of actions that could be heard post-confirmation; instead, the Court emphasized the need to retain jurisdiction to foster fulfillment of the plan. Id. Here too, ¶ 11.03 of the Van Dyke plan contains similar "enforce and interpret" language and justifies retention of post-confirmation jurisdiction over this equitable subordination action. To hold otherwise would require plan proponents to foresee all possible things that could go wrong after confirmation and include them in the plan's post-confirmation jurisdiction provision. That, of course, cannot be done, especially in an atypical case like Van Dyke.

An order will be entered denying Defendant's Motion to Dismiss for Lack of Subject Matter Jurisdiction.