## Facts

- Polar Molecular Corporation filed for Chapter 11 relief in 1993, and a Chapter 11 trustee was appointed to administer the case.
- A Chapter 11 plan was confirmed in 1994.
- The plan required distributions to general unsecured creditors based on a formula tied to the debtor’s income, using “gross margin” as a baseline component.
- The plan included a retention-of-jurisdiction provision authorizing the bankruptcy court to interpret the plan, rule on post-confirmation litigated matters, and facilitate payments and performance under the plan.
- After Polar began making plan payments and implementation progressed, Polar moved in 1995 for entry of a final decree closing the case.
- The trustee filed an adversary complaint the same day, alleging Polar miscalculated gross margin, understated income, and underpaid general unsecured creditors by approximately $11,000.
- Polar moved to dismiss for lack of subject-matter jurisdiction, arguing the plan was substantially consummated and the dispute was a state-law contract matter.

## Issues

1. Whether, after confirmation and substantial consummation of a Chapter 11 plan, the bankruptcy court had subject-matter jurisdiction under 28 U.S.C. § 1334 to adjudicate a dispute over the debtor’s plan-based distribution calculations to unsecured creditors.

## Decision

- The bankruptcy court denied the motion to dismiss for lack of subject-matter jurisdiction.
- The court held it had jurisdiction to adjudicate the trustee’s complaint because it concerned interpretation and enforcement of obligations created by the confirmed plan and confirmation order.
- The court rejected the argument that substantial consummation, standing alone, terminates jurisdiction over disputes affecting plan implementation and creditor payments.
- The court concluded that a pending request for a final decree did not eliminate jurisdiction over an existing, plan-related adversary proceeding.

## Legal Principles

- Post-confirmation bankruptcy jurisdiction narrows but continues under 28 U.S.C. § 1334 for proceedings whose outcome can affect the implementation, execution, or consummation of a confirmed plan.
- A dispute over amounts owed to creditors under a plan’s distribution formula is plan-enforcement litigation, not merely an external state-law contract dispute, when the alleged obligation derives from the confirmed plan and confirmation order.
- Retention-of-jurisdiction provisions in a confirmed plan do not independently create federal jurisdiction, but they support jurisdiction where the dispute falls within statutory bankruptcy jurisdiction and concerns plan performance.
- Substantial consummation does not automatically end bankruptcy court jurisdiction over disputes tied to plan performance, including calculation and payment of distributions.
- Entry (or sought entry) of a final decree does not retroactively strip jurisdiction over pending matters necessary to ensure proper plan implementation.

## Conclusion

The bankruptcy court held that it retained subject-matter jurisdiction after confirmation and substantial consummation to resolve a trustee’s claim that the debtor misapplied a plan formula and underpaid unsecured creditors, because the dispute required interpretation and enforcement of the confirmed plan’s payment obligations.


Gray v. Polar Molecular Corp. (In re Polar Molecular Corp.), 195 B.R. 548 (Bankr. D. Mass. 1996)