How not to reserve a claim in bankruptcy.

Adler, the distributing agent for a bankrupt business, sought to sue a law firm for allegedly mishandling its affairs and causing its financial problems.  The business’s Third Amended Plan of Reorganization had a provision that retained its standing to pursue avoidance and fraudulent transfer actions against a list of named defendants (which did not include the law firm).  The Plan also had a provision reserving “[a]ny and all other claims and causes of action which may have been asserted by the Debtor prior to the Effective Date.”  The Fifth Circuit held that this was “exactly the sort of blanket reservation that is insufficient to preserve the debtor’s standing.”  (citing Dynasty Oil & Gas LLC v. Citizens Bank, 540 F.3d 551 (5th Cir. 2008)). On waiver grounds, he Court declined to consider whether such a reservation would be sufficient if “(1) the defendant is a non-creditor [and thus not entitled to vote on the plan] and (2) the reorganization plan clearly identifies how the proceeds of the claim will be distributed.”  Adler v. Frost, No. 14-31109 (June 11, 2015, unpublished).

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