In Re: Adelphia Communication

Filing

OPINION, the district court judgment is affirmed, by RKW, JMW, JAC, FILED.[1194495] [11-1858]

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11-1858-cv
Adelphia Recovery Trust v. Goldman, Sachs & Co., et al.

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UNITED STATES COURT OF APPEALS

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FOR THE SECOND CIRCUIT

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August Term, 2011

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(Argued: April 25, 2012

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Decided: April 4, 2014)

Docket No.

11-1858-cv

- - - - - - - - - - - - - - - - - - - - - - - - - - - - ADELPHIA RECOVERY TRUST, AKA THE ADELPHIA CONTINGENT VALUE
VEHICLE,
Plaintiff-Counter-Defendant-Appellant,
ADELPHIA COMMUNICATIONS CORP., AND ITS AFFILIATED DEBTORS AND
DEBTORS IN POSSESSION, OFFICIAL COMMITTEE OF EQUITY SECURITY
HOLDERS OF ADELPHIA COMMUNICATIONS CORP., OFFICIAL COMMITTEE OF
UNSECURED CREDITORS OF ADELPHIA COMMUNICATIONS CORP.,
Plaintiffs-Counter-Defendants,
v.
GOLDMAN, SACHS & CO.,
Defendant-Appellee,
HARRIS NESBITT CORP., DEUTSCHE BANK AG, BANK OF NEW YORK COMPANY,
INC., DAI-ICHI KANGYO BANK, LTD., THE INDUSTRIAL BANK OF JAPAN,
LIMITED, IBJ WHITEHALL FUNDING 2001 TRUST, MIZUHO CORPORATE BANK,
LTD., J.P. MORGAN SECURITIES, INC., MOUNTAIN CAPITAL CLO I,
MOUNTAIN CAPITAL CLO II, UBS AG, MELLON BANK, N.A., J.P. MORGAN
SECURITIES, INC., DEUTSCHE BANK AG, J.P. MORGAN CHASE BANK, N.A.,
NATIONWIDE LIFE INSURANCE COMPANY, NATIONWIDE LIFE AND ANNUITY
INSURANCE COMPANY, NATIONWIDE MUTUAL INSURANCE COMPANY, MARATHON
SPECIAL OPPORTUNITY MASTER FUND, LTD., SPRUGOS INVESTMENTS IV,
L.L.C., BNP PARIBAS, FIRST HAWAIIAN BANK, NON-AGENT LENDERS,
PUTNAM DIVERSIFIED INCOME TRUST, PUTNAM HIGH YIELD ADVANTAGE
FUND, PUTNAM HIGH YIELD TRUST, PUTNAM MASTER INCOME TRUST, PUTNAM
MASTER INTERMEDIATE INCOME TRUST, PUTNAM PREMIER INCOME TRUST,
PUTNAM VARIABLE TRUST—PVT DIVERSIFIED INCOME FUND, PUTNAM
VARIABLE TRUST—PVT HIGH YIELD FUND, PUTNAM FLOATING RATE INCOME
FUND, PUTNAM FUNDS TRUST-PUTNAM HIGH YIELD TRUST II, PUTNAM HIGH
YIELD FIXED INCOME FUND, PUTNAM HIGH YIELD MANAGED TRUST, PUTNAM
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MANAGED HIGH YIELD TRUST, PUTNAM STRATEGIC INCOME FUND, TRAVELERS
SERIES FUND, INC.-PUTNAM, KZH HOLDING CORPORATION III, KZH
CYPRESS TREE-1 LLC, KZH III LLC, KZH ING-2 LLC, KZH LANGDALE
LLC, KZH PONDVIEW LLC, KZH SHOSHONE LLC, KZH WATERSIDE LLC, KZH
CNC LLC, KZH HIGHLAND-2 LLC, KZH ING-1 LLC, KZH ING-3 LLC, KZH
PAMCO LLC, KZH SOLEIL-2 LLC, KZH STERLING LLC, KZH RIVERSIDE LLC,
KZH SOLEIL LLC, MERRILL LYNCH PIERCE, FENNER & SMITH
INCORPORATED, MERRILL LYNCH CREDIT PRODUCTS LLC, MIZUHO GLOBAL
LIMITED, APEXTRIMARAN-CDO I, LTD., CARAVELLE INVESTMENT FUND,
L.L.C., CARAVELLE INVESTMENT FUND II, L.L.C., GOLDMAN SACHS
CREDIT PARTNERS, L.P., SEI INSTITUTIONAL INVESTMENTS TRUST AND
THE SEI INSTITUTIONAL MANAGED TRUST, FIFTH THIRD BANK, FLEET
NATIONAL BANK, BANK OF TOKYOMITSUBISHI TRUST COMPANY, N/K/A BANK
OF TOKYO-MITSUBISHI UFJ TRUST COMPANY, MITSUBISHI UFJ TRUST AND
BANKING CORPORATION, HALCYON FUND, L.P., EXIS HOLDING LTD., RBS
CITIZENS, N.A., KZH ENTITIES, DEUTSCHE BANK AG NEW YORK BRANCH,
HCM/Z SPECIAL OPPORTUNITIES LLC, PHOENIX-GOODWIN HIGH YIELD FUND,
BNY MELLON CAPITAL MARKETS, LLC, CITIGROUP GLOBAL MARKETS INC.,
BANK OF TOKYOMITSUBISHI TRUST COMPANY, MITSUBISHI TRUST AND
BANKING CORPORATION, CIBC WORLD MARKETS INC., CREDIT SUISSE, NEW
YORK BRANCH, SUNTRUST ROBINSON HUMPHREY, INC., CREDIT SUISSE
CAPITAL FUNDING, INC., THE BANK OF NEW YORK MELLON, SOCIETE
GENERALE, COWEN AND COMPANY, LLC, BMO CAPITAL MARKETS CORP., SUN
TRUST BANK, BANK OF AMERICA SECURITIES LLC,
Defendants,
THE FUJI BANK, LIMITED, THE TORONTO-DOMINION BANK,
Defendants-Consolidated-Defendants,
TORONTO DOMINION (TEXAS) LLC, THE BANK OF NOVA SCOTIA, CREDIT
SUISSE (USA), INC., TD SECURITIES (USA) LLC,
Defendants-Consolidated-Defendants-Counter-Claimants,
BANK OF AMERICA, N.A., INDOSUEZ CAPITAL FUNDING IIA, LTD., LCM I
LIMITED PARTNERSHIP, CALYON NEW YORK BRANCH, CALYON SECURITIES
(USA), INC., LIMITED AND INDOSUEZ CAPITAL FUNDING VI, LTD., BANK
OF NEW YORK CAPITAL MARKETS, INC., HSBC BANK USA, NATIONAL
ASSOCIATION, BANK OF MONTREAL, CITIBANK, N.A. AND CITICORP USA,
INC., BARCLAYS BANK PLC, PNC BANK, N.A., DEUTSCHE BANK TRUST
COMPANY AMERICAS, SOCIETE GENERALE, S.A., MERRILL LYNCH & CO.,
INC., MERRILL LYNCH CAPITAL CORP., BANK OF NEW YORK, ABN AMRO
BANK, N.V., COOPERATIVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A.,
“RABOBANK NEDERLAND” NEW YORK BRANCH, MORGAN STANLEY SENIOR
FUNDING, INC.,
Defendants-Counter-Claimants,
WACHOVIA BANK, NATIONAL ASSOCIATION,
Defendant-Bankruptcy-Movant-Counter-Claimant,

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WACHOVIA CAPITAL MARKETS LLC, CITIGROUP GLOBAL MARKETS HOLDINGS,
INC., COWEN & CO., LLC, SCOTIA CAPITAL (USA), INC.,
Consolidated-Defendants-Counter-Claimants,
CITIGROUP FINANCIAL PRODUCTS, INC.,
Consolidated-Defendant,
ABN AMRO INC., DEUTSCHE BANK SECURITIES, INC., FLEET SECURITIES,
INC., CIBC WORLD MARKETS CORP., MORGAN STANLEY & CO.
INCORPORATED, BARCLAYS CAPITAL INC., SUNTRUST CAPITAL MARKETS,
INC., BANC OF AMERICA SECURITIES LLC., PNC CAPITAL MARKETS LLC,
CIBC INC., BMO CAPITAL MARKETS FINANCING, INC., SUNTRUST BANK,
THE ROYAL BANK OF SCOTLAND PLC,
Counter-Claimants.
- - - - - - - - - - - - - - - -- - - - - - - - - - - - B e f o r e:

WINTER, WALKER, and CABRANES, Circuit Judges.

Appeal from a judgment of the United States District Court

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for the Southern District of New York (Lawrence M. McKenna,

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Judge) granting summary judgment to defendant-appellee Goldman,

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Sachs & Co. and dismissing Adelphia Recovery Trust’s fraudulent

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conveyance claim brought pursuant to 11 U.S.C. § 548(a)(1)(A).

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We affirm on grounds of judicial estoppel.

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DAVID M. FRIEDMAN (Michael C. Harwood &
Howard W. Schub, on the brief),
Kasowitz, Benson, Torres & Friedman,
LLP, New York, NY, for PlaintiffCounter-Defendant-Appellant.
MELVIN A. BROSTERMAN (Claude G. Szyfer
and Francis C. Healy, on the brief),
Stroock & Stroock & Lavan LLP, New York,
NY, for Defendant-Appellee.
WINTER, Circuit Judge:
The Adelphia Recovery Trust, an entity created to represent

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the non-whole creditors of a debtor corporation that is party to

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a bankruptcy proceeding described below, appeals from Judge

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McKenna’s grant of summary judgment dismissing its fraudulent

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conveyance claim against Goldman, Sachs & Co.

In such a

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fraudulent conveyance claim, the Trust may recover only property

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owned by the parent-company debtor.

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Chapter 11 plan, which were consummated with the agreement of

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appellant and its predecessors in interest in the bankruptcy

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proceeding, all treated the property transferred as owned by a

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separate subsidiary.

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judicial estoppel.

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The various schedules and

We, therefore, affirm on grounds of

BACKGROUND
Adelphia Communications Corp. (“ACC”) was the parent company

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of some 200 holding and operating subsidiaries (collectively,

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“Adelphia”).

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cable company in the United States.

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publicly traded company, was founded by John Rigas in 1986, and

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members of the Rigas family held several top positions at ACC.

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After ACC disclosed that it had several billion dollars in

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fraudulently concealed, off-balance-sheet debt, Rigas family

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members were forced to resign from their positions and faced

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various civil and criminal actions.

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Rigas, 490 F.3d 208 (2d Cir. 2007).

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At its peak, Adelphia formed the fifth-largest
ACC, at all relevant times a

See, e.g., United States v.

On June 25, 2002, ACC and its subsidiaries entered

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bankruptcy under Chapter 11.

Pursuant to an ensuing plan of

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reorganization, substantially all assets of ACC and its

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subsidiaries were liquidated, and all secured creditors of ACC

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and its subsidiaries were paid in full.

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unsecured debt of the subsidiaries was also paid in full with

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interest, and a portion of ACC’s unsecured debt was paid.
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In addition, all

Those

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creditors of ACC who were not paid in full received an interest

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in any remaining assets that appellant can recover.

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In July 2003, appellant’s predecessor in interest filed suit

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against over 400 lenders, investment banks, and other financial

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institutions, seeking damages for their alleged participation in

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the Rigas family fraud.

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against Goldman, Sachs & Co. (“Goldman”).1

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This action included the present action

Appellant’s action against Goldman alleges a fraudulent
conveyance under 11 U.S.C. §§ 548(a)(1)(A) and 550(a).

It arose

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out of a 1999 multi-million margin loan that Goldman had extended

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to Highland Holdings II LLP (“Highland”), an entity owned by the

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Rigas family (a Rigas family entity, or “RFE”) unconnected to

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Adelphia.

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Highland, was allegedly used by the Rigases to purchase

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additional ACC stock and thereby to maintain their control over

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Adelphia.

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disclosure of the fraudulent concealment of debt in 2002, Goldman

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issued several margin calls to Highland.

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that the Rigases caused ACC to make cash payments of $63 million

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to cover these margin calls.

The loan, which was secured by ACC stock owned by

As ACC’s stock price decreased following the

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The complaint alleged

On June 17, 2008, the claims asserted on behalf of ACC subsidiary
debtors, who had already been paid in full, were dismissed for lack of
standing. Adelphia Recovery Trust v. Bank of Am., N.A., 390 B.R. 80, 97
(S.D.N.Y. 2008). The remaining claims were ultimately settled or dismissed
against all defendants other than Goldman, Sachs & Co. Although Goldman had
also moved for dismissal of the claim against it, the district court allowed
the claim to continue to summary judgment to determine whether the source of
the payments to Goldman was ACC or a subsidiary.

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Appellant’s allegations against Goldman were amended several

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times at the suggestion of the district court.

The court was

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concerned that “[t]he Amended Complaint does not identify which

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fraudulent conveyances came from ACC and which came from the

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[subsidiaries].

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lacks standing to pursue claims to recover for fraudulent

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conveyance on behalf of the [subsidiaries].”

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Trust v. Bank of Am., N.A., No. 05-civ-9050, 2009 WL 1676077, at

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*2 (S.D.N.Y. June 16, 2009).

This omission is significant because [appellant]

Adelphia Recovery

The district court, therefore,

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directed appellant to “submit a revised version of paragraph 1359

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of the Amended Complaint.

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which payments to [Goldman] came from ACC.”

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The revised paragraph should identify
Id.

Pursuant to this order, appellant submitted a revised
version of the complaint that alleged, in relevant part:
[T]he Rigases caused ACC to commingle funds
in the concentration account that it
controlled, in the name of [a subsidiary]
Adelphia Cablevision LLC, from such sources
as customer receipts, liquidation of
overnight investment accounts, and transfers
from various subsidiary entities . . . in
order to satisfy these margin calls. On each
date identified in the following charts, the
Rigases caused ACC to direct that the funds
it had gathered in the concentration account
be distributed by Adelphia Cablevision LLC
directly to the Margin Lenders or to the RFE
for immediate payment over to the Margin
Lenders.
Rev. Second Am. Compl. ¶ 1359.
It appears from this allegation and the record that the
pertinent payments were made either:
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(i) directly to Goldman

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from a particular account (the “Concentration Account”), which

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contained most of the funds in the cash management system through

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which the collective cash of ACC and its subsidiaries was

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managed; or (ii) indirectly from the Concentration Account

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through an RFE and then to Goldman.

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action to recover $63 million.

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Appellant seeks in this

In the district court, and here, appellant faced the problem

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that the payments to Goldman were made in the name of the

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subsidiary, Adelphia Cablevision LLC, that held the Concentration

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Account and that has paid all its scheduled creditors, which did

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not include ACC, in full.

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to sue the subsidiary.

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allegation quoted above, that ACC was the real owner of, and

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payor from, the Concentration Account.

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v. Bank of Am., N.A., No. 05-cv-9050, 2011 WL 1419617 at *2

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(S.D.N.Y. Apr. 7, 2011).

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granted Goldman’s motion for summary judgment.

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stated, “it is admitted by [appellant’s] own revised pleading

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that the margin loan payments were not made by ACC but by

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Adelphia Cablevision LLC, an ACC subsidiary on whose behalf

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[appellant] does not have standing to sue.”

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Accordingly, appellant lacked standing

It therefore argued, based on the amended

Adelphia Recovery Trust

The district court disagreed and
Id.

The court

Id.

This appeal followed.
DISCUSSION
We review de novo whether Goldman was entitled to summary
judgment as a matter of law.

See, e.g., Miller v. Wolpoff &

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Abramson, L.L.P., 321 F.3d 292, 300 (2d Cir. 2003); Mario v. P&C

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Food Mkts., Inc., 313 F.3d 758, 763 (2d Cir. 2002).

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The sole issue is whether the amended complaint states a

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valid claim of a fraudulent conveyance under 11 U.S.C.

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§§ 548(a)(1)(A) and 550(a).

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relevant part:

Section 548(a)(1)(A) provides, in

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The trustee may avoid any transfer . . . of
an interest of the debtor in property . . .
that was made or incurred on or within 2
years before the date of the filing of the
[bankruptcy] petition, if the debtor
voluntarily or involuntarily . . . made such
transfer . . . with actual intent to hinder,
delay, or defraud any entity to which the
debtor was or became, on or after the date
that such transfer was made[,] . . .
indebted.
11 U.S.C. § 548(a)(1)(A).

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to “transfers of property of the debtor,” Begier v. IRS, 496 U.S.

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53, 58 (1990), which includes “all legal or equitable interests

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of the debtor in property as of the commencement of the case,” 11

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U.S.C. § 541(a)(1).

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were transfers of the property of ACC, or should be deemed to be

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so, is the issue on appeal.

The avoidance power thus applies only

Whether the margin loan payments to Goldman

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Appellant argues that we should follow decisions of the

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Fifth and Tenth Circuits, Matter of Southmark Corp., 49 F.3d 1111

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(5th Cir. 1995) and In re Amdura Corp., 75 F.3d 1447 (10th Cir.

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1996), to determine whether ACC was the true owner of the

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commingled Concentration Account.

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to support a principle of attributing ownership of funds

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aggregated in a communal account to a parent when the parent
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Together, these cases are said

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exercises complete dominion over the funds, and has all legally

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cognizable indicia of ownership.

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determined that because Southmark owned and controlled the cash

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management account, the subsidiary’s settlement payment from that

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account to its former president and director could be avoided by

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Southmark because the funds were part of, and under complete

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control by, Southmark’s estate.

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the court held that funds in a commingled cash management account

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belonged to the parent Amdura, even though subsidiaries had

In Southmark, the court

49 F.3d at 1117.

And in Amdura,

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contributed to the account, because Amdura was listed as the

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owner and “possessed all other legally cognizable indicia of

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ownership.”

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75 F.3d at 1451.

However, neither decision was rendered in a legal context

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similar to the one before us or involved application of the

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judicial estoppel doctrine.

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proceedings here, the Concentration Account was listed as an

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asset only of two successive ACC subsidiaries, not the property

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of ACC.

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the property of ACC appeared for the first time late in the

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present litigation, as described above, and well after

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consummation of the plan of reorganization.

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Throughout the reorganization

The theory that the Concentration Account was actually

Appellant’s (or its predecessors’ in interest) position in
the bankruptcy proceedings regarding ownership of the account is

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inconsistent with the claim it makes on appeal.2

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importance to bankruptcy proceedings of determining with finality

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a debtor’s ownership of particular assets, we hold that

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appellants are estopped from pursuing a claim that would

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reattribute asset ownership based on a determination of asset

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ownership among the various entities agreed to by the pertinent

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parties, after a plan of reorganization has been confirmed and

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substantially consummated.

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a) Principles of Judicial Estoppel

Given the

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In New Hampshire v. Maine, the Supreme Court made clear that

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the exact criteria for invoking judicial estoppel will vary based

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on “specific factual contexts,” and that “courts have uniformly

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recognized that its purpose is to protect the integrity of the

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judicial process by prohibiting parties from deliberately

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changing positions according to the exigencies of the moment.”

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532 U.S. 742, 749-51 (2001) (internal citations and quotation

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marks omitted).

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New Hampshire explains that,

Courts have observed that the circumstances
under which judicial estoppel may
appropriately be invoked are probably not

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Attribution of the Concentration Account to ACC required an explicit
claim of ownership by ACC in the bankruptcy proceeding. First, bank
statements listed the account holder’s Taxpayer ID Number as that
corresponding to the ACC subsidiary National Cable Acquisition Associates.
Second, within Adelphia the Concentration Account was referred to as the
Adelphia Cablevision (an ACC subsidiary) account, and Adelphia Cablevision was
the entity that made and received payments involved with the Account.
Finally, any of ACC, its subsidiaries, or RFEs could direct that money be paid
from the Account on their behalf by wire or check regardless of how much they
had contributed to the account, and if at any time the payments on behalf of
these entities exceeded the entity’s contribution to the Account, an
intercompany payable to Adelphia Cablevision by those entities was created.

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reducible to any general formulation of
principle. Nevertheless, several factors
typically inform the decision whether to
apply the doctrine in a particular case:
First, a party’s later position must be
clearly inconsistent with its earlier
position. Second, courts regularly inquire
whether the party has succeeded in persuading
a court to accept that party’s earlier
position, so that judicial acceptance of an
inconsistent position in a later proceeding
would create the perception that either the
first or the second court was misled. . . . A
third consideration is whether the party
seeking to assert an inconsistent position
would derive an unfair advantage or impose an
unfair detriment on the opposing party if not
estopped. In enumerating these factors, we do
not establish inflexible prerequisites or an
exhaustive formula for determining the
applicability of judicial estoppel.
Id. at 750-51. (internal citations and quotation marks omitted).

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Although we have recognized that “[t]ypically” the application of

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judicial estoppel requires showing unfair advantage against the

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party seeking estoppel, DeRosa v. Nat’l Envelope Corp., 595 F.3d

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99, 103 (2d Cir. 2010) (requiring a party to show a clearly

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inconsistent position, adoption of that position by a court in an

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earlier proceeding, and unfair advantage against the party

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seeking estoppel in the ADA context), we have not required this

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element in all circumstances. See Maharaj v. BankAmerica Corp.,

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128 F.3d 94, 98 (2d Cir. 1997) (not requiring the element of

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unfair advantage); Mitchell v. Washingtonville Cent. Sch. Dist.,

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190 F.3d 1, 6 (2d Cir. 1999) (same).

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Hampshire’s admonishment that the application of the judicial

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estoppel doctrine depends heavily on the “specific factual

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context[]” before the court. 531 U.S. at 751.
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This is consistent with New

We do note,

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though, that every case emphasizes that “[b]ecause the doctrine

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is primarily concerned with protecting the judicial process,

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relief is granted only when the risk of inconsistent results with

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its impact on judicial integrity is certain.” Republic of Ecuador

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v. Chevron Corp., 638 F.3d 384, 397 (2d Cir. 2011) (internal

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quotation marks omitted).

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Our holding in this regard is shaped by the context of a

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complicated bankruptcy proceeding involving 250 related,

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insolvent entities, and the risk to judicial integrity if we were

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to allow a party, after the consummation of a bankruptcy, to take

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a position that unravels key decisions in the proceedings.

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first turn to a description of the legal mechanics of such a

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proceeding.

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b) The Bankruptcy Context

We

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Following a filing for Chapter 11 bankruptcy reorganization,

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the debtor must file “a list of creditors[,] a schedule of assets

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and liabilities[,] a schedule of current income and current

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expenditures[, and] a statement of the debtor’s financial

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affairs.”

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exclusive period in which to submit a plan of reorganization, 11

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U.S.C. § 1121(b), and a disclosure statement containing “adequate

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information” to allow interested parties to evaluate that plan.

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11. U.S.C. § 1125(a)-(b).

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asset schedules.

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Co., 948 F.2d 869, 873 (2d Cir. 1991); see also Chartschlaa v.

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Nationwide Mut. Ins. Co., 538 F.3d 116, 122 (2d Cir. 2008) (The

11 U.S.C. § 521(a)(1).

The debtor is given a 120-day

This plan includes items like complete

See Sure-Snap Corp. v. State St. Bank & Trust

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bankruptcy estate includes “all legal or equitable interests of

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the debtor in property as of the commencement of the case” and

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“[i]t would be hard to imagine language that would be more

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encompassing than this broad definition.” (internal citations and

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quotation marks omitted)).

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The debtor is given 180 days, extendable up to 20 months by

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the court, from filing for Chapter 11 relief in which to obtain

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the approval of “each class of claims or interests that is

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impaired under the plan.” 11 U.S.C. § 1121(c)-(d).

If the debtor

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fails to file a plan or the debtor’s exclusive filing period

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expires without acceptance of a proposed plan by the parties in

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interest, any party in interest can file a competing plan and

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seek approval by the parties in interest.

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Both the debtor’s plan and any competing plan must meet various

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mandatory provisions and may meet various discretionary

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provisions.

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mandatory requirements is that the plan designate classes of

18

claims and classes of interests and specify how these classes

19

will be treated under the plan.

20

11 U.S.C. § 1121(c).

11 U.S.C. §§ 1122, 1123(a), (b).

Foremost among the

11 U.S.C. §§ 1122, 1123(a).

Once a conforming plan has been proposed, parties in

21

interest can vote to approve it.

22

one class of impaired non-insider claims -- claims that will not

23

be paid completely or will have some other right altered under

24

the plan -- the court can confirm the plan and bind all creditors

25

if the plan is feasible, was proposed in good faith, and is in

26

compliance with the Bankruptcy Code.
13

Following approval by at least

11 U.S.C. § 1129(a)(10),

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(b); Fed. R. Bankr. P. 3020(b)(2).

2

the debtor is discharged from any prepetition debts, subject to

3

specific exceptions not relevant here, as long as the confirmed

4

bankruptcy plan is followed.

5

c) Application of Judicial Estoppel

6

Once the plan is confirmed,

11 U.S.C. §§ 1141(d)(1), 523.

As the recitation of bankruptcy procedures and time frames

7

makes clear, debtors and creditors have ample periods of time

8

within which to finalize asset ownership schedules and fashion a

9

plan dependent upon those schedules.

10

In the present case, ACC filed for bankruptcy on June 25,

11

2002; the ultimately-confirmed plan was proposed on October 16,

12

2006; and the plan was confirmed on January 5, 2007, leaving over

13

four and a half years to sort out whether ACC or a subsidiary

14

owned the Concentration Account assets.

15

proceedings did ACC or any party attribute ownership of the

16

Concentration Account assets to ACC.

17

filing and again in February 2004, the ACC subsidiary ACC

18

Operations, Inc. identified the Concentration Account as its

19

property; ACC did not.

20

liabilities in January and May 2005 listed the ACC subsidiary

21

Adelphia Cablevision as the owner of the Account in concluding

22

that “intercompany transfers between a Debtor on the one hand,

23

and Adelphia Cablevision [as owner of the Concentration Account]

24

on the other hand, have been netted in the Intercompany Schedule,

25

creating either a net payable or receivable intercompany balance

26

between each such Debtor and Adelphia Cablevision.”

At no time during these

At the time of bankruptcy

Amendments to the schedules of

14

ACC never

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claimed the Account as one of its assets until such a claim of

2

ownership was asserted in the present proceeding in 2009.

3

did any other party assert such a claim or seek a substantive

4

consolidation of ACC and Adelphia Cablevision’s bankruptcies, as

5

permitted in bankruptcy proceedings to remedy circumstances where

6

formally separate entities commingle and subject their collective

7

assets to single control.

8

860 F.2d 515, 518-19 (2d Cir. 1988).

9

Nor

See In re Augie/Restivo Baking Co.,

Further, the bankruptcy plan undeniably was substantially

10

consummated as early as 2007.

11

B.R. 84, 94 (S.D.N.Y. 2007).

12

defined in 11 U.S.C. § 1101(2), requires the “transfer of all or

13

substantially all of the property” in the plan, “assumption by

14

the debtor . . . of all or substantially all of the property

15

dealt with by the plan,” and “commencement of distribution under

16

the plan.”

17

Time Warner shares, and $9.5 billion in tradeable Adelphia

18

Contingent Value Vehicle shares (shares set up as an interest in

19

Adelphia recoveries against third party lenders and accountants)

20

were distributed to claimholders as of early March 2007, just

21

after confirmation of the plan.

22

Adelphia’s assets have been liquidated, returning approximately

23

$18 billion to claimholders.

24

In re Adelphia Comm’cns Corp., 367
Substantial consummation, as

Over $6 billion in cash, $117 million in tradeable

Since then, substantially all

In the bankruptcy context, whether a party’s position with

25

regard to the ownership of assets is inconsistent with its later

26

claims is largely informed by the bankruptcy court’s treatment of
15

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those claims.

See Galin v. United States, No. 08-cv-2508, 2008

2

WL 5378387, at *10 (E.D.N.Y. Dec. 23, 2008) (“adoption” in

3

judicial estoppel “is usually fulfilled . . . when the bankruptcy

4

court confirms a plan pursuant to which creditors release their

5

claims against the debtor” (quoting Negron v. Weiss, No. 06-cv-

6

1288, 2006 WL 2792769, at *3 (E.D.N.Y. Sept. 27, 2006))).

7

Determination of the ownership of assets is at the core of the

8

bankruptcy process, and particularly the creation of a bankruptcy

9

reorganization plan, which involves “a schedule of all [the

10

debtors’] liquid assets and liabilities,” and thereafter

11

operates, with full preclusive effect, to “bind its debtors and

12

creditors as to all the plan’s provisions, and all related,

13

property or non-property based claims which could have been

14

litigated in the same cause of action.”

15

F.2d at 873 (citing 11 U.S.C. §§ 521(a)(1), 1141(a)).

Sure-Snap Corp., 948

16

It is therefore crucial, both for the sake of finality and

17

the needs of debtors and creditors, that claims to ownership of

18

various assets be determined in the bankruptcy proceedings.

19

Particularly when, as here, the assets in question were claimed

20

by other parties during the bankruptcy proceeding without

21

objection, a debtor’s subsequent claim to those assets in a

22

different proceeding must be seen as inconsistent with its prior

23

silence.3

Cf. Chartschlaa, 538 F.3d at 123 (“The Bankruptcy Code

3

A party may be bound by the position taken by its predecessors in
interest in prior proceedings. See, e.g., Secured Equities Invs., Inc. v.
McFarland, 753 N.Y.S.2d 264, 264 (4th Dep’t 2002)).

16

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is premised on full and complete disclosure of the debtor’s

2

finances.”).

3

involving strategic denials or affirmations of asset ownership

4

timed to the legal exigencies of the moment, precisely what the

5

doctrine is intended to prevent.

6

Any other holding would encourage sharp practices,

The bankruptcy court’s treatment of the asset schedules in

7

the present matter underlies their importance and the need for

8

finality.

9

Adelphia entities underwent a massive restatement of their

In order for the reorganization to proceed, the

10

accounting records, which sought to provide separate, audited

11

financials for each insolvent entity. In re Adelphia, 368 B.R. at

12

150-51.

13

central importance to this process.

14

difficulties the bankruptcy court encountered was the issue of

15

intercompany transfers between the various entities controlled by

16

the Rigas family. See id. at 152.

17

depended on the parties’ adoption of the so-called “Bank of

18

Adelphia Paradigm,”4 which tracked intercompany transfers through

19

a single RFE subsidiary that controlled the main account:

20

Adelphia Cablevision.

21

listed as the owner of the Concentration Account in both the

The allocation of assets to the various entities was of
One of the foremost

The resolution of this problem

Id. at 151-53.

4

Adelphia Cablevision was

“[I]ntercompany transactions (e.g., cash receipts, disbursements,
acquisition accounting and cost allocations) were deemed to have been made by
or to a single entity, Adelphia Cablevision, LLC (the ‘Bank of Adelphia’).
This methodology, often referred to as the ‘Bank of Adelphia Paradigm,’
aggregated intercompany transaction balances consistent with the actual flow
of funds within the Debtor’s cash management system.” In re Adelphia, 368
B.R. at 151.

17

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January and May amendments to the debtors’ schedules of assets

2

and liabilities, and neither ACC nor appellant’s predecessors in

3

interest contested that determination.

4

The asset schedules thus played a key role in both the

5

bankruptcy court’s supervision of the process and in the parties’

6

understanding of the plan.

7

discussion of substantive consolidation, such relief was “highly

8

unlikely” because “the Debtors have issued restated financial

9

statements and filed the May 2005 Schedules, thus evidencing an

As the district court noted in its

10

ability to generally determine the assets and liabilities of each

11

Debtor.”

12

519) (internal quotation marks omitted).

13

paradigm, which included Adelphia Cablevision’s ownership of the

14

account in the asset schedules, was the cornerstone of the

15

bankruptcy plan, and without it the entire process would have

16

been at risk of unraveling.

17

ruling inconsistent with the factual underpinnings of this duly

18

confirmed and substantially consummated bankruptcy plan.

19

Id. at 219 (discussing In re Augie/Restivo, 860 F.2d at
The Bank of Adelphia

We, therefore, decline to issue a

A different ruling would threaten the integrity of the

20

bankruptcy process by encouraging parties to alter their

21

positions as to ownership of assets as they deem their litigation

22

needs to change, leaving courts to unravel previously closed

23

proceedings.

24

“play[] fast and loose” with the requirements of the bankruptcy

25

process and inject an unacceptable level of uncertainty into its

26

results -- exactly the result that the doctrine of judicial

Doing so would allow parties an opportunity to

18

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estoppel is intended to avoid.

2

F.3d 79, 89 (2d Cir. 2000); accord In re Adelphia Recovery Trust,

3

634 F.3d at 696 (integrity of judicial process threatened by

4

parties taking a short term position that risks being

5

inconsistent with its future position, not only by “knowingly

6

[lying]”).

7

Wight v. BankAmerica Corp., 219

In relying upon the prospective harm to the integrity of

8

bankruptcy proceedings that would result from a different ruling,

9

we do not exclude the possibility of specific harm, or unfair

10

disadvantage to, Goldman beyond the possible loss of $63 million.

11

We simply decline to require Goldman and the courts having to

12

unravel all previous proceedings to determine what would have

13

happened had appellant or its predecessors in interest claimed

14

ownership of the Concentration Account in a timely fashion.

15

We also do not exclude the possibility that, in an unusual

16

case, the allocation of specific assets may be largely irrelevant

17

to the bankruptcy court’s actions.

18

of asset allocation to the integrity of the bankruptcy process,

19

see Chartschlaa, 538 F.3d at 122, particularly where multiple

20

related entities are involved, a creditor who fails to lay claim

21

to an asset in the bankruptcy court only to do so in subsequent

22

litigation must, to prevail, bear the heavy burden of showing a

23

de minimis effect on the bankruptcy proceeding.

24
25
26

However, given the centrality

CONCLUSION
The requirements of judicial estoppel are, therefore, met.
The asset schedules showing that the Concentration Account was
19

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held by a subsidiary of ACC were approved by appellant’s

2

predecessors in interest.

3

schedules and approved a plan of reorganization that treated ACC

4

separately from its subsidiaries based on those schedules.

5

Revisiting the accuracy of those schedules to permit the present

6

action to proceed would clearly threaten the integrity of

7

bankruptcy proceedings.

8

complaint is barred by the doctrine of judicial estoppel.

9

judgment of the district court is affirmed.

The bankruptcy court adopted the asset

We, therefore, hold that appellant’s

10
11

20

The