United States District Court, W.D. Texas, San Antonio Division
RODRIGUEZ UNITED STATES DISTRICT JUDGE.
civil action is before the Court on appeal from the United
States Bankruptcy Court for the Western District of Texas.
For the reasons stated below, the judgment of the bankruptcy
court is AFFIRMED and the appeal is DISMISSED.
separate lawsuit initiated before any bankruptcy proceedings,
Appellant Susan Harriman sued Debtor Palmaz Scientific, Inc.
in Dallas state court. Dist. Ct. Docket no. 6 at 3. Before
the state court could render judgment in the Dallas lawsuit,
Debtor filed for Chapter 11 bankruptcy on March 4, 2016.
Id.; Bankr. Docket no. 1.
the deadline for filing a proof of claim in the bankruptcy
proceeding was July 5, 2016. Bankr. Docket no. 41 at 1.
Notice of this deadline was sent to Appellant at a Dallas
address. Id. at 7. On May 10, 2016, the bankruptcy
court shortened the claims deadline to June 1, 2016. Bankr.
Docket no. 208. Notice of this change was sent to Appellant
at the same Dallas address. Bankr. Docket no. 214-1 at 8.
Appellant did not file a proof of claim by either the
original deadline or the shortened deadline.
10, 2016, Debtor proposed a plan in which a third party,
Vactronix Scientific, Inc., agreed to purchase the Dallas
lawsuit as a “pass-through, ” such that Vactronix
would acquire Debtor's rights to and liability from the
Dallas suit: “If Vactronix is the Purchaser and
acquires the Debtor's claims in the [Dallas lawsuit],
Vactronix shall assume any and all of the Debtor's
liability arising out of or relating to the [Dallas lawsuit],
without limiting any non-Debtor party's liability for
such claims, including applicable insurance policies.”
Bankr. Docket no. 282 at 15. That Plan also stated that
“nothing in this Plan shall waive, release or limit any
claims or liability asserted in the [Dallas lawsuit].”
Id. at 28.
day, the Bankruptcy court held a sale hearing. See
Bankr. Docket no. 423. At that hearing, Mr. Jim Hoffman, an
attorney, appeared and made a $10 bid for the rights and
liabilities from the Dallas lawsuit. Id. at 19. Mr.
Hoffman stated that he represented himself and was making the
bid as an individual, though he later represented Appellant
before the bankruptcy court and represents her on this
appeal. Bankr. Docket no. 423 at 20; Bankr. Docket no. 367 at
5; Dist. Ct. Docket no. 1 at 6. The bankruptcy court found
that Mr. Hoffman's $10 offer did not qualify as a
competing bid based on a prior order regarding sale
procedures, and approved the sale. Bankr. Docket no. 423 at
43-44. The bankruptcy court set a June 24 deadline for
objections to the plan and set a confirmation hearing for
June 27. Id. at 62; see also Bankr. Docket
no. 294. Mr. Hoffman asked for permission to appear
telephonically for the June 27 confirmation hearing, which
the bankruptcy court granted. Bankr. Docket no. 294 at 58.
filed no objections to the plan by the June 24 deadline. At
the June 27 confirmation hearing, limited objections were
heard, though it does not appear that Mr. Hoffman attended
(telephonically or otherwise). Bankr. Docket no. 355. At the
hearing, the bankruptcy court discussed a change to the
language of the Plan, which purportedly changed the
Plan's treatment of the Dallas lawsuit. Id. at
55-57. This language, which Debtor ultimately submitted in
its July 14 Second Amended Joint Plan of Reorganization and
the bankruptcy court approved in its July 15 Order Confirming
the Plan, reads as follows:
Vactronix designates HC Litigation Fund, LLC as the party to
be assigned any and all of the Debtors' claims and rights
(including any applicable insurance coverage) in the Harriman
Case. HC Litigation Fund, LLC shall also assume any and all
of the Debtor's liability, if any, remaining after
Bankruptcy (see 11.4 herein and the Order confirming the
Plan), for claims presently asserted against the Debtor
arising out of or relating to in the Harriman Case. Nothing
herein shall limit any non-Debtor party's liability,
including coverage under any applicable insurance policies.
Provided, however, that neither HC Litigation Fund, LLC, nor
any other Person, shall have any right to any D & O
Insurance Recovery under any D & O Insurance Policy or
any proceeds of, or coverage under, any such policy.
Id.; Bankr. Docket no. 351 at 14-15; Bankr. Docket
no. 356 at 26-27.
maintains that the first time she learned of this change to
the Plan was on July 15 when the bankruptcy court entered its
order confirming the Plan as amended. Docket no. 6 at 12. On
July 29, 2016, Appellant, appearing formally for the first
time before the bankruptcy court, filed a motion to
reconsider the bankruptcy court's order confirming the
Plan. Bankr. Docket no. 367. Appellant argued that changes to
the Plan's treatment of the Dallas lawsuit adversely
affected her rights in that case. Id. at 3. On
August 1, the bankruptcy court held a hearing on this motion,
at which Mr. Hoffman argued on Appellant's behalf. Bankr.
Docket no. 451. Mr. Hoffman acknowledged that he did not file
an objection to the confirmation of the Plan. Id. at
16. He acknowledged that Appellant knew of the bankruptcy
case. Id. at 73. Ultimately, the bankruptcy court
denied Appellant's motion for reconsideration because, in
short, Appellant never filed a proof of claim in the
bankruptcy proceeding. Id. at 76-80; Docket no. 374.
before this Court is Appellant's appeal of the Bankruptcy
court's denial of her Motion for Reconsideration.
Appellant's Issues on Appeal
designates four points on appeal: (1) that the Confirmed Plan
should be reconsidered to account for Appellant's
interest in the Dallas lawsuit; (2) that the filing of a
proof of claim in the bankruptcy court was not required to
preserve Appellant's claims in the Dallas lawsuit; (3)
Appellant's Due Process rights were violated by the
bankruptcy court's approval of the Confirmed Plan; and
(4) the preservation of Appellant's claims in the Dallas
lawsuit is mandated by equity. Docket no. 6 at 2-3.
Court finds that Appellant lacks standing to appeal because
she failed to file a proof of claim or otherwise appear or
object before the bankruptcy court. Furthermore, contrary to
her assertion on the third point, the Court finds that
Appellant was not deprived of due process. As a result,