Without dispute, an order confirming a plan
in a Chapter 11 case constitutes a final judgment on the merits for res judicata purposes. A plan is binding upon all parties once it is confirmed and “all questions that could have been raised pertaining to the plan are res judicata.” In re Grubbs Const. Co., 328 B.R. 873, 879 (Bankr. M.D. Fla. 2005): In re Harloff, 247 B.R. 523 (Bankr. M.D. Fla. 2000); see
In re Justice Oaks II, Ltd. 898 F.2d 1544 (11th 1990), cert. denied, 498 U.S. 959 (1990).
However, res judicata actually were raised or during the bankruptcy
only bars those claims that which could have been raised proceeding. The issue then
becomes what is the a confirmation order
limit of the res judicata effect of entered by a bankruptcy court.
Res judicata “is a judicially made doctrine with the purpose of giving finality to parties who have already litigated a claim and promoting judicial economy; it bars claims that could have been litigated as well.” Atlanta Retail, 456 F.3d at 1284 (citations omitted). In order to establish res judicata, each of four factors must be present:
The prior judgment must be valid, rendered by a
The prior judgment must be final and on the merits;
The prior litigation must involve the same parties or their privies; and
The later litigation must involve the same cause of action as involved in the earlier proceeding.
In Atlanta Retail, as in this case, there was (and is) no issue that the bankruptcy court was competent to enter the confirmation order or that the confirmation order was valid and final. Nor was the focus of the analysis based on the similarity of identity of the parties between the earlier litigation in the bankruptcy court and the later litigation in a non- bankruptcy forum.
Rather, in Atlanta Retail, as well as in this case, the only issue is whether the later litigation involved the same operative facts as those that were actually raised or that could have been raised in the earlier litigation. The key analysis is whether the two
legal actions “involve the same nucleus of operative fact, or [are] based upon the same factual predicate.”
Rubbermaid, Inc., 193 F.3d 1235, n. 8 (11th Cir.
In making this determination, a reviewing
court must consider not only those factors directly raised by the parties but also all factors that the initial court necessarily considered in rendering its decision. Atlanta Retail, 456 F.3d at 1288-89.
Because it is exactly this test that the Eleventh Circuit Court of Appeals applied to very similar procedural and factual issues raised in Daewoo, Atlanta Retail, and Piper Air, this Court is rightfully guided by those decisions. In Daewoo, the appellate court found a sufficient similarity between the operative facts to bar claims raised against non- debtors in later litigation. However, in both Piper Air and Atlanta Retail, the court found no such similarity of facts and allowed the later filed litigation to proceed.
In Daewoo, the later lawsuit involved two non-debtor entities following the Korean bankruptcy
of Daewoo Korea. The
the exclusive distributor for in the United States. Daewoo
America never filed bankruptcy but participated in the Korean bankruptcy of
actively its parent
agreement with General Motors Corporation (“GM”) in which GM would acquire Daewoo Korea, build new Daewoo cars, and control the future distribution rights of these vehicles.
Obviously, this agreement directly affected America’s future business. Daewoo was fully informed about the terms of this
new arrangement and, although Daewoo America’s attorneys informed GM’s attorneys that the new agreement violated Daewoo Korea’s existing distribution agreement and would lead to litigation, Daewoo America did not object to the confirmation of Daewoo Korea’s modified plan of reorganization,
which was based agreement with GM.
exclusively on the debtor’s The Korean bankruptcy court
confirmed the debtor’s agreement modified plan of reorganization. debtor and later announced, not
with GM and the GM bought the surprisingly, that
GM, not Daewoo America, would Daewoo cars in the United States.
Daewoo America then sued GM and others asserting several disparate claims, including fraud, tortuous interference with prospective economic