## Facts

- Genesis Health Ventures, Inc. and an affiliate filed separate Chapter 11 petitions on June 22, 2000, later proceeding under a joint plan process.
- A Joint Plan of Reorganization was filed July 6, 2001 and confirmed after contested proceedings and a two-day confirmation hearing; the court entered the confirmation order on September 20, 2001.
- Plaintiffs were 275 former subordinated debenture holders whose notes were contractually junior to roughly $1.3 billion in senior debt; Goldman, Sachs & Co. allegedly held about half of that senior secured position.
- Plaintiffs alleged the senior lenders induced Genesis management to understate financial inputs used to calculate EBITDA and enterprise value presented in support of confirmation, depressing value and reducing recoveries to subordinated debenture holders.
- In January 2004—well more than 180 days after confirmation—plaintiffs sued Genesis and the senior lenders in New York state court, seeking about $200 million in damages on fraud and related theories; the case was removed and transferred to the Delaware bankruptcy court as an adversary proceeding.
- Prior rulings held the claims against Genesis were, in substance, an untimely effort to revoke the confirmation order and therefore barred by 11 U.S.C. § 1144’s 180-day limit.
- In this opinion, the non-debtor senior-lender defendants moved to dismiss the complaint under Rules 9(b) and 12(b)(6) (Bankruptcy Rules 7009 and 7012), arguing that § 1144, res judicata, and collateral estoppel barred the action and that the pleading was otherwise deficient.

## Issues

1. Whether plaintiffs’ claims against non-debtor senior lenders were barred as an untimely collateral attack on the confirmation order under 11 U.S.C. § 1144 and related finality doctrines.
2. Whether claim and issue preclusion from the confirmation litigation (including valuation disputes) foreclosed plaintiffs from relitigating alleged EBITDA manipulation and enterprise value questions.
3. Whether the fraud-based and related counts were pleaded with sufficient particularity under Rule 9(b) and stated a claim under Rule 12(b)(6) against each non-debtor defendant.

## Decision

- The court held § 1144 continued to bar any relief that would functionally revoke, modify, or reallocate distributions fixed by the confirmed plan, even if framed as a damages action.
- The court also applied res judicata and collateral estoppel to dismiss theories that depended on reopening valuation and disclosure matters that were, or could have been, litigated during confirmation, including allegations tied to information known before confirmation.
- The court declined to treat all third-party damage claims as barred solely because they related to alleged fraud connected to confirmation; some claims seeking damages from non-debtor defendants could proceed if they did not require changing the plan or the confirmation order.
- Applying Rules 9(b) and 12(b)(6), the court dismissed certain counts (or portions of counts) for failure to plead fraud and each defendant’s role with adequate specificity and/or for legal deficiency, but allowed other adequately pleaded, independent damages theories against the non-debtor defendants to survive.
- The motion to dismiss was granted in part and denied in part.

## Legal Principles

- Revocation of a Chapter 11 confirmation order for fraud is available only under 11 U.S.C. § 1144 and only if sought within 180 days after entry of the confirmation order.
- After the § 1144 period expires, a plaintiff may not obtain relief that would effectively undo confirmation, revisit value fixed by the plan, or reorder distributions, regardless of how the complaint labels the claim.
- Confirmation can have claim-preclusive and issue-preclusive effect; parties may be barred from relitigating valuation and disclosure disputes that were decided, or could reasonably have been raised, during confirmation.
- Not every post-confirmation damages claim against a non-debtor is barred; a third-party tort claim may proceed if it seeks money damages from the non-debtor and does not require altering the confirmed plan or the confirmation order.
- Fraud allegations must satisfy Rule 9(b) by stating the “who, what, when, where, and how” of the misconduct and each defendant’s participation; conclusory group pleading may warrant dismissal.
- Under Rule 12(b)(6), the complaint must allege facts that, if true, support each element of the asserted causes of action, including a plausible causal link between the alleged misconduct and plaintiffs’ injury.

## Conclusion

Haskell held that, long after confirmation, subordinated debenture holders could not use fraud-based tort claims to rework the enterprise value and distribution results fixed by Genesis’s confirmed plan, because § 1144 and preclusion doctrines protect plan finality; however, the court permitted some properly pleaded, independent damages claims against non-debtor senior lenders to continue while dismissing other counts for preclusion and pleading defects.


Haskell v. Goldman, Sachs & Co. (In re Genesis Health Ventures, Inc.), 355 B.R. 438 (Bankr. D. Del. 2006).