United States District Court, S.D. Texas, Victoria Division
Kenneth M. Hoyt, United States District Judge.
appeal by the appellant, the Oklahoma State Treasurer
(“the Treasurer”), seeks review and reversal of
the Bankruptcy Court's Order dismissing the
Treasurer's adversary complaint pursuant to Fed. R. Civ.
Pro., Rule 12(b)(6). The Court has appellate jurisdiction
under 28 U.S.C. § 158(a)(1). The Treasurer asserts that
the Bankruptcy Court erred by granting the debtor's
motion to dismiss. After a careful review of the briefs,
argument and attachments contained in the record, the
Oklahoma Statutes and the Bankruptcy Court Order, this Court
determines that the order of dismissal should be reversed.
FACTUAL AND PROCEDURAL HISTORY
11, 2016, Linn Operating, LLC, successor-by-conversion to
Linn Operating, Inc., and fourteen affiliated entities filed
voluntary petitions for relief in Bankruptcy
Court. On August 29, 2016, the Treasurer filed
proofs of claim against certain of the debtor affiliates
seeking possession of all “unclaimed property”,
pursuant to Oklahoma law. See 52 OK STAT
§§ 52-551 et. seq (2017). On December 19,
2016, the debtors sought a vote from the Treasurer concerning
the Plan(s) of Reorganization. The Treasurer did not return
the ballot and, thereby, did not vote to accept or reject the
debtors' Plan. Thereafter, on January 27, 2017, the
Bankruptcy Court entered an Order confirming the debtors'
Plan. On February 28, 2017, the Plans became effective
pursuant to the Plan's terms and Linn Operating, LLC,
became the successor-by-conversion of the several Chapter 11
affiliated bankrupt entities.
25, 2017, the debtor objected to the Treasurer's claims
on the bases that the debtor was not liable to the Treasurer,
and further, because of Bankruptcy Code preemption. The
Treasurer filed a response and later an amended response.
Again, on June 14, 2017, the Treasurer amended its claim
citing Oklahoma State Statutes in support of its claim and
specifying the amount of unclaimed property sought.
Thereafter, the Treasurer filed an adversary proceeding
seeking to obtain funds designated as unclaimed property. In
turn, the debtor filed a motion to dismiss the
Treasurer's adversary proceeding arguing that the suit
violates the Plan Discharge Provision, the Plan Injunction,
the Plan Vesting Provision, and was barred by the doctrine of
November 8, 2017, the Bankruptcy Court granted the
debtor's motion to dismiss finding that: (a) the
Treasurer received more than adequate “due
process” thereby permitting it to make and prosecute
its claim; (b) the Treasurer's complaint is a collateral
attack on a confirmed Plan; and (c) the Treasurer failed to
act in “good faith”, presumably by, not
diligently pursuing its claim according to the Bankruptcy
THE DEBTORS' CONTENTIONS
points of error, the debtor asserts that the Bankruptcy Court
properly dismissed the Treasurer's complaint because: (a)
the complaint is barred by res judicata because the
Treasurer “could have raised” the adversary
proceeding issues during the Plan confirmation process; (b)
adoption of the confirmation Plan by the Bankruptcy Court
“renders the Treasurer's appeal both
constitutionally and equitably moot”; (c) the
Bankruptcy Court “correctly concluded that no set of
facts exists . . .” upon which the Treasurer has a
cognizable claim; and, (d) the Bankruptcy Code preempts
Oklahoma concerning unclaimed property statutes.
STANDARDS OF REVIEW
Standard on Bankruptcy Appeal
reviewing a bankruptcy court's decision, a district court
operates much like an appellate court, applying the standards
of review typically applied in federal courts of appeal.
See In re Webb, 954 F.2d 1102, 1103 - 04 (5th Cir.
1992) (internal citation omitted). To this end, a district
court will not set aside a bankruptcy court's findings of
fact, unless they are clearly erroneous. In re IFS
Financial Corp., 803 F.3d 195, 203 (5th Cir. 2015)
(citing In re Martinez, 564 F.3d 719, 726 (5th Cir.
2009)). “A finding of fact is clearly erroneous only if
‘on the entire evidence, the court is left with the
definite and firm conviction that a mistake has been
committed.'” Robertson v. Dennis (In re
Dennis), 330 F.3d 696, 701 (5th Cir. 2003) (quoting
Hibernia Nat'l Bank v. Perez (In re Perez), 954
F.2d 1026, 1027 (5th Cir. 1992)). A bankruptcy court's
conclusions of law, however, are reviewed de novo.
In re Dennis, 330 F.3d at 701. Mixed questions of
law and fact within a bankruptcy case are also reviewed
de novo. In re San Patricio Cty. Cmty. Action
Agency, 575 F.3d 553, 557 (5th Cir. 2009) (citing In
re Seven Seas Petroleum, Inc., 522 F.3d 575, 583 (5th
Standard Under Federal Rule of Civil Procedure
the demanding strictures of a motion brought pursuant to
Fed.R.Civ.P. 12(b)(6), a “plaintiff's complaint is
to be construed in a light most favorable to the plaintiff,
and the allegations contained therein are to be taken as
true.” Oppenheimer v. Prudential Sec., Inc.,
94 F.3d 189, 194 (5th Cir. 1996) (citing Mitchell v.
McBryde, 944 F.2d 229, 230 (5th Cir. 1991)). Dismissal
is appropriate only if, the “[f]actual allegations [are
not] enough to raise a right to relief above the speculative
level, on the assumption that all the allegations in ...