Sarnosky v. Chesapeake

Summary

The Fifth Circuit held that bankruptcy courts lack post-confirmation jurisdiction under 28 U.S.C. § 1334 to approve class action settlements that revive discharged prepetition claims and modify lease terms contrary to a confirmed Chapter 11 plan, where no proofs of claim were filed for class members. Applying the *Craig's Stores* factors, the court found the settlements did not pertain to implementation or execution of the plan, as they contradicted the plan's discharge of unfiled claims and its preservation of lease terms. The decision vacates lower court approvals and remands with instructions to dismiss for lack of jurisdiction.

Holdings

1. The settlements are not within core bankruptcy jurisdiction because no class proof of claim was filed, and the Plan discharged the prepetition claims of non-filing class members.
2. The settlements do not fall within post-confirmation related-to jurisdiction because they do not pertain to the implementation or execution of the plan; they contradict the plan by paying discharged claims and modifying leases that the plan left intact.

Questions Presented

1. Whether the bankruptcy and district courts had subject-matter jurisdiction under 28 U.S.C. § 1334 to approve the post-confirmation class action settlements, specifically whether the settlements fell within core bankruptcy jurisdiction or related-to jurisdiction.

Disposition

vacated