Bankr. E.D.N.C: Dupree Farms v. Producers Ag- Jurisdiction for Post-Confirmation Disputes

Summary:

Dupree Farms, LLC filed for Chapter 11 bankruptcy on January 16, 2018 and subsequently  obtained a Whole-Farm Revenue Protection (WFRP) policy from ProAg in February 2018.  After first initiating arbitration,  which held in favor of ProAg,   Dupree Farms then filed an adversary proceeding on November 11, 2019, asserting state law claims for negligent and intentional misrepresentation, unfair trade practices, and punitive damages,  asserting both that  the policy should cover losses at an "Expanded Operations Factor" of 1.35 (where ProAg calculated coverage at 1.17) and contending it was owed $1,226,720 not the $691,557 paid.

ProAg argued the bankruptcy court lacked jurisdiction because the claims arose post-confirmation, with the court applying the six-factor test from [http://Avado Brands, Inc. v. Dupree et al, 358 B.R. 868, 878 (Bankr. N.D. Tex. 2006)]Avado Brands, Inc. v. Dupree et al, 358 B.R. 868, 878 (Bankr. N.D. Tex. 2006) to determine whether the claims had a "close nexus" to the bankruptcy case and plan, which is necessary for post-confirmation jurisdiction:

1. when the claim at issue arose; 
2. what provisions in the confirmed plan exist for resolving disputes and whether there are provisions in the plan retaining jurisdiction for trying these suits;
3. whether the plan has been substantially consummated; 
4. the nature of the parties involved; 
5. whether state law or bankruptcy law applies; and 
6. indices of forum shopping. 

The court denied ProAg's motion  finding that the claims arose during the bankruptcy and were discussed during the plan confirmation process, indicating creditors relied on the potential recovery,  the plan included provisions for resolving disputes and retained jurisdiction over relevant matters and had not  been substantially consummated when the adversary proceeding was filed. 

Commentary:

While perhaps more applicable for after discharge in a Chapter 13 case,  which has little that is otherwise comparable to the "substantial consummation"  milestone in Chapter 11,   the bankruptcy plan in Chapter 13 should ideally include explicit retention of jurisdiction for any disputes that are likely to arise post-discharge,  including for example mortgage litigation issues.  (Which are at least partially preserved by 11 U.S.C. § 524(i).)

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