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Néstle Waters North America, Inc. v. Mountain Glacier LLC

United States District Court, M.D. Tennessee, Nashville Division

May 18, 2017



          ALETA A. TRAUGER United States District Judge

         Appellant Nestlé Waters North America, Inc. (“NWNA”) appeals from the January 13, 2017 Order of the United States Bankruptcy Court for the Middle District of Tennessee (the “Bankruptcy Court”) in the Chapter 11 case In re: Mountain Glacier LLC, Case No. 15-03817 (the “Order”). (Docket No. 1.) The Order grants summary judgment in favor of appellee Mountain Glacier LLC (“Mountain Glacier”) as to adversary proceeding Mountain Glacier LLC v. Nestle Waters North America, Inc., No. 3:16-ap-90113 (the “Adversary Proceeding”). (Docket No. 1-4.) NWNA has filed a brief in support of its appeal (Docket No. 5), to which Mountain Glacier has filed a Response in opposition (Docket No. 6), and NWNA has filed a Reply (Docket No. 8). For the reasons discussed herein, the Order will be affirmed.


         The key facts in this appeal are undisputed. Mountain Glacier is the reorganized debtor in the underlying Chapter 11 bankruptcy proceedings that commenced on June 3, 2015. Prior to Mountain Glacier's filing of its Chapter 11 petition, Mountain Glacier and NWNA were parties to a pending arbitration action before the Judicial Arbitration and Mediation Services in Chicago, Illinois (“JAMS”), and Mountain Glacier had asserted a counterclaim against NWNA in that action (the “Claim”). The arbitration was stayed by Mountain Glacier's filing of its Chapter 11 petition and the Claim remained pending. On February 16, 2016, the Bankruptcy Court issued an order confirming Mountain Glacier's reorganization plan (the “Plan”). The Plan contains the following provisions:

• Section 2.07 defines “Causes of Action” as “all claims that the Debtor had as of the Effective Date of the Plan against any party, including, but not limited to claims against . . . Nestle Waters North America, Inc. in the litigation further described in the Debtor's Disclosure Statement.” (Docket No. 2-1, p. 71.)
• Section 8.02, titled “Transfer of Assets, ” states: “As of the Effective Date of the Plan and except as otherwise provided herein, all Property of the Debtor will be transferred to the Reorganized Debtor free and clear of all claims, including the Causes of Action except as otherwise provided herein.” (Id. at pp. 77-78.)
• Section 9.02, titled “Retention of Claims, ” states: “Pursuant to § 1123(b)(3)(B) of the Code, the Reorganized Debtor shall retain each and every claim, demand or cause of action whatsoever which the Debtor may have had power to assert immediately prior to Confirmation, including without limitation, actions for the avoidance and recovery pursuant to §550 of the Code of transfers avoidable by reason of §§ 544, 545, 547, 548, 549, or 553(b) of the Code. To the extent permitted by applicable law, these actions may be pursued by the Reorganized Debtor after Confirmation and may be commenced or continued in any appropriate court or tribunal for the enforcement of same.”

         The Plan was accompanied by a disclosure statement that had been previously filed and approved by the Bankruptcy Court (the “Disclosure Statement”). The Disclosure Statement references the Claim in its “Summary of Assets” as follows:

The Debtor also has certain claims against parties in pending litigation that were in existence prior to the commencement of this case. These matters include . . . a counterclaim asserted by the Debtor against Nestle Waters North America, Inc. in arbitration pending in Chicago, IL before Arbitrator Nan Nolan. Since the litigation of these actions were stayed as to the Debtor upon the commencement of this Chapter 11 case, these claims remain unliquidated and have unknown value.

(Id. at p. 63.) The Disclosure Statement also contains the following language in its section entitled “Implementation of the Plan:”

Upon Confirmation, the Reorganized Debtor will retain all Property of the Estate, including Causes of Action as defined in the Plan. The Reorganized Debtor will have the power and authority to settle and compromise any Cause of Action or any Disputed Claim without further notice or Court approval.

(Id. at p. 7.) There is no additional information about the Claim in the Plan or the Disclosure Statement. Specifically, neither the Plan nor the Disclosure Statement includes the nature of the Claim, the factual allegations underlying the Claim, or the amount of damages being sought (or any other estimate of the value of the Claim).

         Following the Bankruptcy Court's confirmation of the Plan, Mountain Glacier sought to lift the stay and resume arbitration of the Claim before JAMS.[1] In response, NWNA moved to dismiss the Claim, arguing that the Plan did not properly reserve Mountain Glacier's interest in the Claim and, therefore, Mountain Glacier is barred from pursuing the Claim on the grounds of res judicata. Mountain Glacier then filed the Adversary Proceeding in the Bankruptcy Court, seeking a declaratory judgment that the Claim is not barred. On January 13, 2017, the Bankruptcy Court issued the Order (Docket No. 1-4), entering judgment in favor of Mountain Glacier, along with a Memorandum Opinion in support (Docket No. 1-3 (the “Bankruptcy Court Opinion”)). According to the Bankruptcy Court Opinion, the Claim is not barred by res judicata because the Plan sufficiently reserved its rights to pursue the Claim post-confirmation through the language quoted above.

         On March 24, 2017, NWNA filed the pending appeal from the Order, arguing that the Bankruptcy Court erred in finding that the Claim had been properly reserved by the Plan.[2] (Docket No. 5.) On April 21, 2017, Mountain Glacier filed a Response in ...

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