THE BRANHAM CORPORATION, LLC. v. BOONE COUNTY UTILITIES, LLC.

Filing 28

ENTRY REVIEWING BANKRUPTCY COURT'S DECISIONS - Branham's request for oral argument is denied, the bankruptcy court's dismissal and summary judgments will be affirmed, and the case is remanded to the bankruptcy court for further conside ration of sanctions consistent with this decision. The bankruptcy court should clearly state its findings, including its basis for imposing sanctions, and its reasoning to impose sanctions of a particular amount. SEE ORDER. Signed by Judge Richard L. Young on 1/22/2018.(JRB)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION

THE BRANHAM CORPORATION,
Appellant,
vs.
BOONE COUNTY UTILITIES, LLC,
Appellee.
IN RE: BOONE COUNTY UTILITIES,
Debtor.
THE BRANHAM CORPORATION,
Plaintiff,
vs.
BOONE COUNTY UTILITIES, LLC,
Defendant.

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Case No. 1:15-cv-00604-RLY-TAB

Bankruptcy Court Cause No.
03-16707-RLM-11

Adversary Proceeding Nos.
12-50128 and 14-50168

ENTRY REVIEWING BANKRUPTCY COURT’S DECISIONS
The Branham Corporation (“Branham”) appeals from several orders of the
bankruptcy court. These appeals involve separate proceedings and issues spanning
several years in both federal and state courts. However, the issues, though numerous, are
not complex. The court therefore finds oral argument unnecessary and denies Branham’s

request for oral argument. For the reasons that follow, the bankruptcy court’s decisions
will be affirmed in part and remanded for further proceedings with respect to sanctions.
I.

BACKGROUND 1
A development firm, Newland Resources, LLC (“Newland”), hired Branham to

assist in obtaining water and sewer utility service for a project in Boone County, Indiana.
Newland formed Boone County Utilities, LLC (“BCU”) to operate the project. Newland
is the sole owner and member of BCU. In late 1995, Newland and Branham entered into
a contract under which Branham was to be paid fees and expenses for securing the utility
services, including a success fee. Newland has not paid Branham its success fee.
BCU was a private utility company regulated by the Indiana Utilities Regulatory
Commission (“IURC”). In late 2001, the Board of Commissioners of Boone County
petitioned the IURC to revoke BCU’s certificates of territorial authority. The IURC
issued an interim order, directing Newland to pay BCU a cash equity infusion. The
IURC set a compliance hearing to be held within 90 days.
On September 8, 2003, BCU filed a petition for relief under Chapter 11 of the
United States Bankruptcy Code in the United States Bankruptcy Court, Bankruptcy Court
Case No. 03-16707-AJM-11. Branham filed several proofs of claims against the
bankruptcy estate based on the contract between Branham and Newland. BCU is not a
party to that contract. The first three claims were filed on May 11, 2004 and September 9
and 10, 2004; the fourth claim was filed on May 17, 2005.

1

A lengthy background is necessary to provide the appropriate context for these appeals.
2

BCU moved to sell its assets. A month later, the IURC made certain orders
requiring BCU to do certain things. A jurisdictional skirmish ensued between the IURC
and bankruptcy court. However, in its February 5, 2004 entry, the IURC noted that the
Bankruptcy Court “will direct the sale of the utility [BCU] and the distribution of
proceeds thereof[.]” [Filing No. 18-3, Branham App. 2594]. Then on February 25, 2004,
the IURC, “recogniz[ing] that the United States Bankruptcy Court has the full power and
exclusive jurisdiction to conduct the sale of [BCU’s] assets,” stayed all proceedings
before the IURC involving BCU. [Filing No. 7-2 at ECF p. 65-66]. The court will refer
to this order as the “stand down” order. The stand down order stated it “shall be effective
on and after the date of its approval,” which was on February 25, 2004. [Id.]
BCU obtained authority to sell its assets to the Town of Whitestown for
$4,200,000. The bankruptcy court approved the sale, and the sale closed on July 20,
2004. BCU received $3,891,645 in net sale proceeds. After the closing on the sale, BCU
ceased its operations as a regulated entity.
The bankruptcy court held a confirmation hearing on September 14, 2004, and
entered an Order Confirming Debtor’s Amended Liquidating Plan of Reorganization
(“Confirmation Order”), over Branham’s conditional objection. [Filing No. 9-1,
Branham App. 17-20]. The bankruptcy court disallowed three of Branham’s claims
because they were based on a contract to which the debtor BCU was not a party; it
disallowed the fourth claim, filed months after the claims bar dates and the day before the
hearing on claims, as untimely. The Confirmed Amended Plan (“Plan”) provided for the
balance of the sale proceeds to be paid to Newland for its equity interest after payment of
3

all other allowed claims. Branham was not listed as a secured creditor because Branham
was not a creditor of BCU. The Confirmation Order stated that “the Plan and its
provisions shall bind the Reorganized Debtor, any entity acquiring estate property under
the terms of the Plan, [and] all creditors of and claimants against Debtor ….” [Filing No.
9-1, Branham App. 20]. The order also said that the bankruptcy court “shall retain
jurisdiction over the Chapter 11 case for the purposes set forth in the Plan.” [Id.]
On the Confirmation Date, BCU made a distribution to Newland of approximately
$2.5 million, leaving a balance of over $1 million in its account. A second distribution
was made to Newland in May 2005; Newland received approximately $3 million in
distributions under the Plan.
Branham appealed to the district court, which affirmed. See In re Boone Cty.
Utils, LLC, Case No. 1:05-cv-01173-LJM-WTL. Branham appealed to the Seventh
Circuit Court of Appeals, which also affirmed. See In re Boone Cty. Utils., LLC, 506
F.3d 541 (7th Cir. 2007) (holding claims based on contract to which debtor was not a
party were properly disallowed and bankruptcy court did not abuse its discretion in
disallowing untimely unjust enrichment claim). Branham sought rehearing and rehearing
en banc, which requests were denied. Branham did not move the bankruptcy or district
court to stay payment of the distributions due to Newland under the Plan.
On July 1, 2011, BCU’s bankruptcy case was closed.
Meanwhile, in October 2005, Branham sued Newland in Boone Circuit Court to
collect its success fee. In November 2007, Branham obtained a judgment against
Newland in the amount of $397,853.92. Newland appealed, but did not seek a stay of the
4

judgment. Thus, the judgment was enforceable, notwithstanding the appeal. The Indiana
Court of Appeals affirmed. Newland Resources, LLC v. Branham Corp., 918 N.E.2d 763
(Ind. Ct. App. 2009). Before Branham obtained the judgment against Newland, it knew
that Newland had insufficient assets to satisfy the judgment. 2
On December 29, 2011, Branham filed a Verified Motion for Proceedings
Supplemental to Execution and Garnishment in Boone Circuit Court in Cause No.
06C01-0409-PL-517 (the “517 Case”), naming BCU and Newland, as party garnisheedefendants, among others. [Filing No. 9-6, Branham App. 842-912]. 3 Branham alleged
that the distributions made by BCU to Newland were unauthorized under the plan and
that the transfer of property was void ab initio and in violation of IURC orders and state
business law. Branham sought to recover all monies paid out under the Plan to allowed
claimants and professionals.
The next day, December 30, 2011, Branham filed a complaint for damages against
Newland and numerous others in Boone Circuit Court, Cause No. 06C01-1201-CT-0001
(the “001 Case”). The complaint alleged that Newland’s distributions of the BCU sale

Newland made distributions in 2004-2005 that depleted its corporate assets. In August 2007
Branham took a Rule 30(b)(6) deposition at which Jim Harmon, Newland’s corporate designee,
testified that after Newland’s distributions, Newland and BCU jointly had less than $10,000 in
assets. See Branham Corp. v. Newland Res., LLC, 17 N.E.3d 979, 990-91 (Ind. Ct. App. 2014).
3 Like the bankruptcy court, which characterized the proceedings supplemental motion as going
“far beyond simply asking for garnishment of funds the garnishee defendant might have owed
Newland” (Filing No. 18-6, Branham App. 3522], the Indiana Court of Appeals determined the
motion for proceedings supplemental was actually “much more than that.” Branham Corp. v.
Newland Res., LLC, 44 N.E.3d 1263, 1270 (Ind. Ct. App. 2015). Still, Branham is correct that the
state court also found that the proceedings supplemental motion “requests only the kind of
relief available through Trial Rule 69(E). Id. at 1272. Nonetheless, the state court also determined
the motion “raises many new issues in the process of asserting its entitlement to funds ….” Id.
2

5

proceeds were unauthorized under the Plan and were void ab initio in violation of IURC
orders, operating agreements, and Indiana law. Branham asserted that Newland
purposely depleted its assets, rendering it unable to satisfy Branham’s judgment.
Branham claimed fraud, deception, conversion, theft, and receiving stolen property and
asserted claims under the Indiana Crime Victim Relief Act and Indiana Corrupt Business
Influence Act. BCU was not named a party defendant, but BCU’s principals, employees,
and attorneys were named as defendants.
On April 12, 2012, in response to Branham’s state court complaint and
proceedings supplemental, BCU filed a Motion to Reopen its Bankruptcy Case. [Filing
No. 9-7, Branham App. 1061-70]. The bankruptcy court granted the motion on April 23,
2012, and BCU filed a complaint under Adversary Proceeding No. 12-50128 (“AP-128”),
naming Branham and its attorneys in the state court cases, Stewart & Irwin, P.C., as
defendants. [Filing No. 9-1, Branham App. 22-33].
BCU amended its complaint in 2013. Count I sought a declaratory judgment,
asking the court to affirm and give preclusive effect to various orders entered in the
Chapter 11 case, including a declaration that all distributions under the Plan were
authorized and lawful. BCU also sought a declaration of whether BCU has undistributed
assets in which Newland has an interest. Count II sought sanctions against Branham, its
principals, and its counsel for their willful, intentional, and malicious actions in
prosecuting matters filed in the Boone Circuit Court against BCU.
Branham answered and filed a counterclaim. Its answer admitted that the
bankruptcy court “has jurisdiction to render a declaratory judgment in this adversary
6

proceeding relating to the interpretation and enforcement of its orders, rulings, judgment
and decrees made with respect to the petition filed by BCU [.]” [Filing No. 18-1,
Branham App. 1838]. Similarly, the counterclaim asserted that the bankruptcy court has
“concurrent and ancillary jurisdiction to decide whether distributions from BCU to
Newland are in breach of the Amended Plan and Confirmation Order, were made prior to
allowance by the Court[,] and were made without the express authorization of this
Court.” [Filing No. 18-1, Branham App. 1895 (citations omitted); see also id. at 1896
(asserting that “this [Bankruptcy] Court has jurisdiction over the assets of BCU’s
estate”)]. The counterclaim sought a determination of whether the distributions by BCU
to Newland were lawful and requested an order allowing discovery of BCU as to its
assets and garnishment of Newland’s property in BCU’s possession.
At an August 22, 2012 hearing on the motion to dismiss for lack of subject matter
jurisdiction and failure to state a claim filed by Stewart & Irwin, the parties (including
Branham) stipulated that the U.S. Bankruptcy Court has concurrent and ancillary
jurisdiction to construe and enforce its orders. [See Filing No. 23-3, Branham App. 5624,
5680]. Branham’s counsel acknowledged Branham’s argument was the following: the
distributions to Newland under the Plan were improper and illegal because they did not
comply with state law, BCU’s operating agreement, the Plan itself (specifically Section
6.1), and the IURC orders, and therefore the transfer was void, and BCU still had a right
to the property. [Filing No. 23-3, Branham App. 5517, 5524-26, 5534 (“I’m challenging
distributions that were made that we argue, pursuant to a construction of your plan and

7

confirmation, were not permitted to be made in the fashion that they were made.”), and
5540].
On October 4, 2012, the bankruptcy court issued an Order, acknowledging the
parties’ stipulation that the court “has … jurisdiction to construe and enforce its orders.”
[Filing No. 7-8 at ECF page no. 21]. The court determined:
[I]t shall exercise its jurisdiction to interpret and enforce all of its orders and
rulings with respect to the [BCU] Chapter 11 Bankruptcy Case from the
petition date of September 8, 2003, up to and including all distributions and
transfers made by [BCU] to Newland … and all matters respecting the
[IURC]’s involvement in the BCU bankruptcy ….
[Filing No. 9-8, Branham App. 1209, AP-128, 10/4/2012 Order at 3; see also Filing No.
7-8 at ECF page no. 21]. The court granted the motion to dismiss with respect to Stewart
& Irwin only, without prejudice to BCU’s right to seek contempt sanctions against the
attorneys if the court were to determine that its orders were “willfully disregarded in this
matter.” [Filing No. 7-8 at 21-22]. The court further ordered that “[a]ny issues involving
[Newland’s] actions upon or after receipt of the distribution from [BCU] pursuant to the
amended Plan are to be decided in the Boone County Circuit Court.” [Filing No. 7-8 at
ECF page no. 22].
Thereafter, Branham moved to withdraw the proceedings supplemental as to BCU
in the 517 Case. The trial court granted Branham leave to dismiss the proceedings
without prejudice, conditioned on the payment of the garnishee defendants’ attorney fees.
The court of appeals affirmed. See Branham Corp. v. Newland Resources, LLC, 44
N.E.2d 1263 (Ind. Ct. App. 2015).

8

BCU moved to dismiss Branham’s counterclaim in AP-128, and the bankruptcy
court directed the parties to file proposed findings and conclusions. The parties did so,
and they filed additional pleadings and other matters. The motion to dismiss, responses,
proposed findings, and other papers referred to matters outside the pleadings. Since the
motion required the bankruptcy court to consider provisions of the confirmed plan and
matters outside the pleadings, the court treated BCU’s motion to dismiss as a motion for
partial summary judgment. 4
On April 1, 2014, the bankruptcy court made its Proposed Findings of Fact and
Conclusions of Law on Plaintiff’s Motion to Dismiss Treated as a Motion Under Rule 56
and found that “all of [BCU]’s scheduled property was sold to Whitestown.” [Filing No.
18-3, Branham App. 2377]. 5 The court made “short work” of any alleged claims of

The bankruptcy court did not provide notice to the parties it was treating the motion to
dismiss as a motion for summary judgment, but the parties had presented matters outside the
pleadings and had a reasonable opportunity to present material relevant to the motion. The
parties’ briefing on the motion referred to and attached matters outside the pleadings such as
IURC orders, a January 5, 2005 telephonic conference, transcripts from state court proceedings,
BCU’s corporate reports, and the Purchase Agreement between the Town of Whitestown and
BCU and Newland. The motion to dismiss and supporting memorandum were filed December
9, 2013; Branham filed its response on January 20, 2014; the bankruptcy court held a hearing on
the motion on February 20, 2014; thereafter, the parties filed post-hearing briefs; the bankruptcy
court ruled on the motion on April 1, 2014. Further, in its response to the legal arguments
contained in BCU’s supplemental exhibits submitted in support of the motion to dismiss,
Branham argued that BCU’s request for relief “alludes to matters outside the pleadings” and
stated its non-acquiescence to converting the motion to a summary judgment motion. [Filing
No. 18-3, Branham App. 2364 at 1 n.1.] All of this establishes Branham was aware the motion to
dismiss referred to matters outside the pleadings and required the bankruptcy court to consider
such matters in order to decide the motion.
5 Both scheduled and unscheduled property were dealt with by the Plan. In the words of the
Plan, “All Property of the Debtor is dealt with by this Plan.” [Filing No. 9-5, Branham App. 628
(emphasis added)]. While Branham understands the bankruptcy court’s findings of fact as
limiting the Plan language, the findings can reasonably be read to be consistent with the Plan
language. A finding that “all of [BCU]’s scheduled property was sold to Whitestown” does not
exclude the mutually consistent finding that all of BCU’s property was sold to Whitestown.
4

9

Newland against BCU, finding: “Branham is a judgment creditor of Newland and at best
has only the rights of an assignee of Newland’s interest in the Debtor.” [Id. at 2381].
The court continued:
[E]ven if Newland had any additional claims against Debtor, those were
expressly waived by Newland and Branham (as Newland’s judgment
creditor) is enjoined from bringing them under the express terms of
paragraph 11.2 [of the Plan] which provides, in part, that “All holders of
Claims and Equity Interests, and their successors and assigns, shall be
permanently enjoined after the Confirmation Date from asserting against the
Debtor, or any of the Debtor’s Property, any Claims or interests based upon
any act or omission, transaction or other activity of any kind or nature that
occurred prior to the Confirmation Date.”
[Id. (quoting Plan, p. 19)].
Turning to whether BCU retained any claims against Newland and whether those
claims were undistributed property, the bankruptcy court determined that Branham was a
“party in interest” in the bankruptcy case, had a pecuniary interest in the bankruptcy, was
aware of the facts underlying its alleged claims against Newland no later than September
2004, and could have moved for appointment of a bankruptcy trustee. [Filing No. 18-3,
Branham App. at 2382]. Nonetheless, Branham did not object that the Plan failed to
provide for prosecution of claims against Newland, failed to move for the appointment of
a trustee, and did not seek pre-judgment attachment in state court to protect its interests
against Newland. [Filing No. 18-3, Branham App. 2382]. The bankruptcy court
concluded that “[a]ll of the [BCU]’s property was dealt with by the Plan” and even
“[a]ssuming that causes of action were preserved under the Plan and that they revested in
[BCU] upon confirmation, the order confirming the … plan is res judicata as to all issues
which were decided and which could have been decided before confirmation.” [Id. at
10

2383]. The blanket reservation of rights, the court concluded, was “insufficient to
preserve … [any] state law claims against Newland.” [Id.] Along with its findings of
fact and conclusions of law, the bankruptcy court entered on April 1, 2014, a Partial
Summary Judgment in AP-128, concluding:
[T]here are no genuine issues of material fact in that the distributions made
to Newland by [BCU] under [BCU]’s confirmed plan were not unauthorized,
[BCU] has no assets of any kind or nature available for attachment or
garnishment and that [BCU] is entitled to partial summary judgment as a
matter of law on Branham’s counterclaim.
[Filing No. 18-3, Branham App. 2385-86; see also id. at 2372-2384].
Subsequently, Branham moved to take a Rule 30(b)(6) deposition of a BCU
representative in an effort to collect on its judgment against Newland. The bankruptcy
court determined that Newland’s interest in BCU, a limited liability company, was
personal property and thus subject to execution. However, the interest was limited by
state law to “the economic rights and nothing more.” [Filing No. 18-4, Branham App.
2899]. The bankruptcy court’s order of September 17, 2014, reiterated its earlier
determination “that all of BCU’s assets were distributed under the confirmed plan, as
stated in the plan, and that there were no other BCU assets to pursue or distribute as of
the date of distribution to Newland.” [Filing No. 18-4, Branham App. 2901]. Because
“the Plan unequivocally stated that all property of [BCU] was dealt with by the Plan,
there was no property left to re-vest in [BCU].” [Id.]
Furthermore, the court decided that even if BCU was holding claims of third
parties that pre-dated the distributions to Newland, Newland had no claim or right to
them because Newland released claim to any assets of BCU or interest in BCU, including
11

equity interests, under the Plan. [Branham App. 2901-02; see also Filing No. 9-5,
Branham App. 632]. The order reiterated that “the provisions of the confirmed plan were
res judicata as to all issues which were decided and which could have been decided
before confirmation, including whether BCU held causes [of] actions against Newland or
other persons or entities.” [Filing No. 18-4, Branham App. 2905]. However, the
bankruptcy court concluded if BCU held claims that arose after the Confirmation Order
and asset distribution, it appeared that Newland could pursue them; but Branham had no
right to directly pursue such claims or to direct Newland to do so. [Id. at 2902].
The bankruptcy court rejected Branham’s efforts to hold BCU in contempt for
making $2.5 million in distributions to Newland before the expiration of the then-twentyday stay under Bankruptcy Rule 3020(e). [Filing No. 18-4, Branham App. 2904-05].
The court gave several reasons for this, including that any argument about compliance
with Rule 3020(e) was not an argument for Branham to make since it was not a creditor
of Newland’s at the time of confirmation and distribution. [Id. at 2905]. In conclusion,
the court wrote that the Plan’s provisions “are binding on Newland, and, as Newland’s
judgment creditor, Branham.” [Filing No. 18-4, Branham App. 2908].
Meanwhile, on September 12, 2014, Branham had filed its Protective Action to
Renew and Refresh the Confirmation Order And Stay Thereof Under Bankruptcy Rule
3020(e) (a complaint) in Adversary Proceeding No. 14-50168 (AP-168), seeking to
renew and refresh the Confirmation Order and enforcement of the Bankruptcy Rule
3020(e) injunction. [Filing No. 9-1, Branham App. 14-16; Filing No. 23-1, Branham
App. 5493-95]. The bankruptcy court directed the parties to brief the issue of Branham’s
12

standing to seek renewal. The parties did so, and BCU filed a motion to dismiss the
complaint for failure to state a claim based, in part, on Branham’s lack of standing.
On April 1, 2015, in granting the motion to dismiss, the bankruptcy court
explained that bankruptcy standing is “more exacting” than Article III standing as it
requires a party “to have a pecuniary interest in the outcome of the bankruptcy
proceeding.” [Filing No. 9-1, Branham App. 4]. In addition, a party must be “directly
and adversely affected pecuniarily by a bankruptcy court order.” [Id.] The court decided
that Branham was “not entitled to make an issue of any of the Confirmation Order’s
provisions” because Branham was not “among the group of entities for which the
protections of § 1141 were intended” such as creditors, equity security holders, etc.
[Filing No. 9-1, Branham App. 5-6]. The court also found that, as of confirmation of the
plan, Branham “had no legally protected interest that it could assert directly against BCU,
as proven by the disallowance of its claims and subsequent affirmance by the Seventh
Circuit[.]” [Id. at 5]. The bankruptcy court further determined that the Confirmation
Order “did not adversely and directly affect any pecuniary interest of Branham’s.” [Id.].
Therefore, the court concluded that even taking every factual allegation in Branham’s
complaint as true, “there is no legal theory upon which Branham may recover and
‘renew’ the Confirmation Order.” [Filing No. 9-1, Branham App. 6]. The court granted
BCU’s motion to dismiss for failure to state a claim and dismissed Branham’s complaint
in AP-168.
On May 8, 2015, after hearing oral argument on the cross-motions for summary
judgment, the bankruptcy court issued its Findings of Fact and Conclusions of Law on
13

Cross Motions for Partial Summary Judgment in AP-128. [Filing No. 18-6, Branham
App. 3518-48]. 6 Both parties had moved for summary judgment on Count I of BCU’s
complaint—seeking an interpretation of court orders and a declaratory judgment based on
that interpretation. Although BCU did not expressly seek summary judgment on Count II
for sanctions, its prayer for relief asked for a finding that Branham willfully and
intentionally violated the bankruptcy court’s orders. Based on that, the bankruptcy court
understood BCU as seeking partial summary judgment on Count II as to sanctions
liability. [Filing No. 18-6, Branham App. 3525].
The bankruptcy court again ruled it “had exclusive jurisdiction over BCU’s assets,
sale proceeds and distributions made under the confirmed plan.” [Id. at 3529]. It
determined that the sale order of March 25, 2004, the Confirmation Order, the order
disallowing Branham’s claims, and the order on BCU’s amended application to allow
Newland’s claim in the amount of approximately $4.1 million were final and nonappealable orders. [Filing No. 18-6, Branham App. 3529-33, 3544]. The bankruptcy
court declared that “[a]ll of BCU’s pre-petition property was dealt with under the plan
and there were no additional pre-confirmation BCU assets to pursue or distribute as of the
date of distribution to Newland,” [id. at 3544], and reiterated that “[a]ll distributions
under the plan were authorized.” [Id. at 3535].
Furthermore, the court declared that “Branham was not and is not a creditor of
BCU,” Section 6.1 of the Plan did not require BCU to obtain a separate order directing

6

Nunc Pro Tunc findings and conclusions were entered June 25, 2015. [Id. at 3556-87].
14

payment to Newland, and the distribution to Newland shortly after confirmation of the
plan was not a basis on which to hold BCU and Newland in contempt. [Filing No. 18-6,
Branham App. 3545]. The court determined that Newland had waived any argument
with respect to Rule 3020(e) and, if Newland could not raise Rule 3020(e), then Branham
as Newland’s judgment creditor, could not raise it either. [Id.] The court declared that
the distributions made to Newland under the plan “were in full and final satisfaction,
settlement and release and discharge as against BCU of any and all claims or interests in
BCU; Newland expressly waived any pre confirmation claims against BCU and is
permanently enjoined under Section 11.2 of the plan from asserting those claims;” “[t]he
provisions of the confirmed plan were res judicata as to all issues which were decided
and which could have been decided before the Confirmation Date, including whether
BCU held causes of action against Newland or other persons or entities.” [Filing No. 186, Branham App. 3546]. Also, the court decided that Branham had knowledge of the
factual allegations underpinning its claims and the claims BCU might have had against
Newland or other persons as of the Confirmation Date….” [Filing No. 18-6, Branham
App. 3546].
Moreover, the bankruptcy court ruled that after BCU sold its assets to Whitestown
on July 20, 2004, the IURC no longer had jurisdiction over BCU regarding issues related
to management, capital structure or operation of the utility. [Filing No. 18-6, Branham
App. 3532, 3536, 3546]. In addition, the court determined that the IURC interim orders
were no longer viable because BCU was no longer operating a utility after July 20, 2004,
and the IURC’s “stand down” order stayed all proceedings involving BCU that were
15

before the IURC. [Id. at 3536, 3546]. The bankruptcy court stated the Plan expressly
preempted any otherwise applicable nonbankruptcy law that interfered with the Plan’s
implementation, such as Indiana law governing limited liability companies. [Filing No.
18-6, Branham App. 3537]. The court stated that the allegations in the 001 and 517 cases
“directly implicated the very essence of the confirmed plan-distribution[s] ….” [Id. at
3547]. The court found that Branham’s “unreasonable and vexatious” conduct in both
state court cases and in the bankruptcy court had been an abuse of the bankruptcy process
and set a hearing on sanctions. [Id. at 3544].
On August 14, 2015, after holding an evidentiary hearing, the bankruptcy court
issued its Order on Sanctions in AP-128. [Filing No. 18-6, Branham App. 3640-48]. The
court began by stating that “Branham has repeatedly attempted to circumvent the orders
of this Court, including the confirmation order, to obtain access to funds distributed many
years earlier.” [Filing No. 18-6, Branham App. 3641]. Although the bankruptcy court
found the Plan to be “explicit” regarding preemption of the IURC orders, and despite
Branham’s participation in the bankruptcy and the IURC’s “stand down” order, the court
concluded that “Branham has repeatedly pressed [a] baseless position [that the Plan did
not preempt enforcement of the IURC’s interim orders] in both state and bankruptcy
court.” [Id.]. The bankruptcy court found it “difficult to draw any conclusion other than
Branham’s repetitive attempts to argue baseless claims are the result of bad faith.” [Id. at
3642].
The bankruptcy court found that Branham failed to disclose certain facts to the
state court in the 001 Case, for example, the IURC had issued a “stand down” order. The
16

court also found that Branham misrepresented the record in the 517 Case, for example, by
omitting mention of the IURC’s “stand down” order and the disallowance of Branham’s
claims in the bankruptcy case. [Id. at 3642-43]. Branham, the court concluded, “crossed
the line from exploring novel theories to harassment of BCU and manipulation of these
proceedings to badger BCU.” [Id. at 3645]. Upon finding the evidence insufficient to
show Branham disregarded the corporate form, the court declined BCU’s request to hold
Branham’s sole shareholder, officer, and director George Pendygraft personally liable for
sanctions. [Id. at 3646-48]. The court found a sanction of $38,924 appropriate and
ordered Branham to pay that sum to BCU’s counsel. [Id. at 3648].
These appeals of AP-168 and AP-128 followed and have been consolidated for a
decision by this court.
II.

ISSUES PRESENTED

1. Whether the bankruptcy court had subject-matter jurisdiction to reopen BCU’s
bankruptcy case and adjudicate the amended complaint in AP-128?
2. Whether the bankruptcy court erred in converting BCU’s motion to dismiss
Branham’s counterclaim in AP-128 to a motion for summary judgment and in
granting summary judgment?
3. Whether the bankruptcy court erred in construing the Plan, Confirmation Order, and
other bankruptcy orders and in determining that:
(a) all of BCU’s pre-petition property was dealt with under the Plan, and that as of
the dates of distribution to Newland, BCU had no other pre-confirmation assets
available for attachment or garnishment;
17

(b) BCU’s distributions made to Newland under the Plan were not unauthorized;
(c) the distributions made to Newland were in full and final satisfaction,
settlement, release, and discharge as against BCU of any and all claims or interest in
BCU, Newland expressly waived any pre-confirmation claims against BCU, and
Newland and Branham are permanently enjoined from asserting them; and
(d) the provisions of the Plan were res judicata as to all issues which were decided
and which could have been decided before the Confirmation Date, including whether
BCU held any causes of action against Newland or others?
4. Whether the bankruptcy court erred in denying Branham’s discovery motions?
5. Whether the bankruptcy court erred in dismissing Branham’s complaint in AP-168
under Federal Rule of Civil Procedure 12(b)(6) for lack of standing?
6. Whether the bankruptcy court erred in imposing sanctions against Branham?
7. Whether this appeal is frivolous, abusive and vexatious, and justifies an award of fees
and costs against Branham and its counsel?

18

III.

STANDARDS OF REVIEW
The district court has jurisdiction to hear appeals from “final judgments, orders,

and decrees” in cases and proceedings in the bankruptcy court. 28 U.S.C. § 158(a). On
appeal, this court reviews the bankruptcy court’s factual findings for clear error and its
conclusions of law de novo. In re Kempff, 847 F.3d 444, 448 (7th Cir. 2017). A factual
finding is clearly erroneous if “there is evidence to support it, [but] the reviewing court
on the entire evidence is left with the definite and firm conviction that a mistake has been
committed.” Id. (quoting Kovacs v. United States, 614 F.3d 666, 672 (7th Cir. 2010)).
The district court reviews decisions involving mixed questions of fact and law de novo.
In re Airadigm Commc’ns, Inc., 519 F.3d 640, 647 (7th Cir. 2008).
The decision to reopen a bankruptcy case is within the bankruptcy court’s broad
discretion. Redmond v. Fifth Third Bank, 624 F.3d 793, 798 (7th Cir. 2010). Discovery
matters such as BCU’s motion to quash and for protective order are committed to the
bankruptcy court’s discretion as well. See In re DFI Proceeds, Inc., 441 B.R. 914, 916
(Bankr. N.D. Ind. 2011). This court reviews the bankruptcy court’s imposition of
sanctions for an abuse of discretion. In re Hancock, 192 F.3d 1083, 1085 (7th Cir. 1999).
“Such abuse occurs only when a court has acted contrary to the law or reached an
unreasonable result.” In re Sokolik, 635 F.3d 261, 269 (7th Cir. 2011).
IV.

DISCUSSION
A. AP-128
1. Reopening the Bankruptcy Case

19

The bankruptcy court may reopen a closed case “to administer assets, to accord
relief to the debtor, or for other cause.” 11 U.S.C. § 350(b); see also In re UAL Corp.,
809 F.3d 361, 354 (7th Cir. 2015). The bankruptcy court may also reopen a case to
interpret and enforce the plan and confirmation order as well as other judgments and
orders. See Travelers Indem. Co. v. Bailey, 557 U.S. 137, 151 (2009) (stating, where
bankruptcy court orders were entered more than two decades earlier, that the
“Bankruptcy Court plainly had [subject-matter] jurisdiction to interpret and enforce its
own prior orders”); Townsquare Media, Inc. v. Brill, 652 F.3d 767, 771 (7th Cir. 2011)
(“a bankruptcy court has jurisdiction over challenges to its orders whatever their basis”);
Redmond, 624 F.3d at 798 (noting the bankruptcy court may reopen a case to enforce
plan language and discharge).
Branham cites SG & Co. Ne., LLC v. Good, 461 B.R. 532, 537 (Bkrtcy. N.D. Ill.
2011), in arguing the bankruptcy court lacked subject-matter jurisdiction, but the case is
inapposite. The plaintiffs’ claims there did not arise under the Bankruptcy Code, did not
arise in a case under the Bankruptcy Code, and were not related to a case under the Code.
Here, in contrast, BCU’s claims arise in a case under the Bankruptcy Code and are very
much related to a case under the Code. More specifically, BCU’s amended complaint in
AP-128 seeks an interpretation and enforcement of the Plan, the Confirmation Order, and
other bankruptcy court orders.
A bankruptcy court’s interpretation of its own order is “entitled to substantial
deference,” Travelers Indem. Co., 557 U.S. at 150 n.4, because that court “is in the best
position” to give the order its intended meaning and is familiar with the underlying
20

bankruptcy case. Matter of Weber, 25 F.3d 413, 416 (7th Cir. 1994); Goodall v.
Chrysler, Inc., No. 3:16-cv-03228, 2017 WL 4076093, at *10 (C.D. Ill. Sept. 14, 2017).
The Confirmation Order in BCU’s bankruptcy case specifically retained jurisdiction over
the case “for the purposes set forth in the Plan.” [Filing No. 9-1, Branham App. 20]. The
purposes of the Plan were to sell BCU’s assets and to make distributions of the sale
proceeds to satisfy claims. To put it differently, distribution of the sale proceeds was
necessary to achieve the purposes set forth in the Plan. [See Filing No. 18-4, Branham
App. 2908].
Yet, Branham argues the bankruptcy court’s jurisdiction ceased upon
consummation of the Plan, or at least no later than the bankruptcy case’s closure. 7
Language at the beginning of Article X of the Plan states the “Bankruptcy Court will
retain jurisdiction until Consummation of the Plan.” [Filing No. 9-5, Branham App. 630
(emphasis added)]. While this language may suggest a temporal limitation on the
bankruptcy court’s jurisdiction when read independently, bankruptcy plans are treated as
contracts and interpreted under state contract principles. See In re Harvey, 213 F.3d 318,
320 (7th Cir. 2000). Here, the Plan provides that Indiana state law will apply. [Filing
No. 9-5, Branham App. 635 (“Except to the extent the Bankruptcy Code, Bankruptcy
Rules or other federal law are applicable …, the rights and objections arising under this
Plan shall be governed by, and construed and enforced in accordance with, the laws of

This is inconsistent with Branham’s judicial admissions in its answer and counterclaim that the
bankruptcy court had jurisdiction to interpret and enforce its orders. It also is inconsistent with
Branham’s stipulation at the August 2012 hearing.
7

21

the State of Indiana”)]. Therefore, the Plan must be interpreted under Indiana contract
law.
Under Indiana contract principles, the Plan’s terms must be read together and
construed as a whole. See, e.g., Erie Indem. Co. v. Estate of Harris, 80 N.E.2d 923, 928
(Ind. Ct. App. 2017). Thus, the language Branham highlights must be read together with
the rest of Article X and the Plan and interpreted so as to give full effect to all of the
Plan’s terms. For example, the Plan provides that the bankruptcy court will retain
jurisdiction to “reconcile any inconsistency in this Plan or the Confirmation Order as may
be necessary to carry out the purpose and intent of this Plan” and “enforce and interpret
or construe the terms and conditions of this Plan.” [Filing No. 9-5, Branham App. 63031]. The Plan must also be read together and interpreted with the Confirmation Order.
See In re Gainey Corp., 447 B.R. 807, 819 (Bankr. W.D. Mich. 2011) (“When there exist
multiple documents or writings tied together, all writings must be considered and
interpreted as a single package.”), aff’d, 481 B.R. 264 (6th Cir. 2012). The Confirmation
Order provides: “The Court shall retain jurisdiction over this Chapter 11 case for the
purposes set forth in the Plan.” [Filing No. 9-1, Branham App. 20]. When the Plan and
Confirmation Order are read together, it becomes clear the bankruptcy court retained
jurisdiction to enforce and construe the terms of the Plan.
None of the authorities cited by Branham establish the bankruptcy court lacked
subject-matter jurisdiction to re-open the bankruptcy case. See, e.g., Ernst & Young LLP
v. Baker O’Neal Holdings, Inc. (in re Baker O’Neal), 304 F.3d 753, 755 (7th Cir. 2002)
(holding language in confirmed plan providing for bankruptcy court’s retention of
22

jurisdiction precluded adversary party from seeking enforcement of contractual
arbitration clause); Pettibone Corp. v. Easley, 935 F.2d 120, 122 (7th Cir. 1991) (holding
bankruptcy court lacked jurisdiction to resolve statute of limitations defenses in state
court tort cases).
Further, Branham contends that BCU lacked standing to reopen the bankruptcy
because it had no assets and the bankruptcy court lacked subject-matter jurisdiction
because Branham was not a creditor of BCU. [Filing No. 17 at 25-26]. Both contentions
are incorrect. As the bankruptcy court decided, the challenge to BCU’s standing is
disingenuous. Federal Rule of Bankruptcy Procedure 5010 provides that “[a] case may
be reopened on motion of the debtor or other party in interest pursuant to 350(b) of the
Code.” Fed. R. Bankr. P. 5010; see also 11 U.S.C. § 350(b) (“A case may be reopened in
the court in which such case was closed to administer assets, to accord relief to the
debtor, or for other cause.”); Stachewicz v. Wells Fargo Home Mortg., No. 12-cv-1459,
2013 WL 501778, at *4 n.3 (C.D. Ill. Jan. 15, 2013) (“Any party in interest, such as the
debtor or any other creditor, may move to reopen a bankruptcy ….”), report and
recommendation adopted, 2013 WL 489648 (C.D. Ill. Feb. 8, 2013); In re Trahan, 460
B.R. 207, 209 (Bankr. C.D. Ill. 2011) (reopening may be at the request of the debtor or
other “party in interest”).
Moreover, Branham’s state court litigation and efforts in federal court seek to
invalidate BCU’s distributions to Newland under the Plan. Thus, Branham seeks to
jeopardize the new contract between BCU and its creditors that was created by the Plan.
BCU has standing to seek enforcement of that contract. Branham cites no authority to
23

establish that its status as a third-party, non-creditor deprives the bankruptcy court of
jurisdiction. Besides, Branham filed proofs of claims in the bankruptcy court, injecting
itself into the original bankruptcy case and submitting itself to the bankruptcy court’s
jurisdiction. It also filed AP-168, again submitting itself to the bankruptcy court’s
jurisdiction.
Branham raises for the first time in this appeal of the bankruptcy court’s orders the
Rooker-Feldman doctrine, arguing that the IURC’s utility permits were “functionally”
state court judgments” and “the equivalent of final state court judgments”. [Filing No. 17
at 24, 28-29]. It also argues the orders in the 001 and 517 Cases were like final
judgments. [Filing No. 17 at 28-29]. The Rooker-Feldman doctrine deprives a court of
subject-matter jurisdiction and it cannot be waived. See, e.g., Garry v. Geils, 82 F.3d
1362, 1364 (7th Cir. 1996). Under Rooker-Feldman, “the lower courts lack jurisdiction
to review the decisions of state courts in civil cases.” Gilbert v. Ill. State Bd. of Educ.,
591 F.3d 896, 900 (7th Cir. 2010). However, the Rooker-Feldman doctrine does not
preclude federal “judicial review of executive action, including decisions made by state
administrative agencies.” Id. As for the state court cases, BCU was not named as a party
in the 001 Case, and the case was dismissed as barred by the statute of limitations (as
Branham acknowledges [Filing No. 17 at 31]), see Branham Corp. v. Newland Res., LLC,
17 N.E.3d 979, 991 (Ind. Ct. App. 2014). In addition, the garnishment order in the 517
Case was withdrawn, and Branham has not identified a “final judgment” in that case.
(Instead, it cites its Verified Motion for Proceedings Supplemental to Execution and

24

Garnishment. [Filing No. 17 at 30 (citing Branham App. 842 (see Filing No. 9-6)].
There is no Rooker-Feldman problem here.
Thus, the court concludes the bankruptcy court had subject-matter jurisdiction to
reopen BCU’s bankruptcy case and adjudicate BCU’s amended complaint.
2. Converting the Motion to Dismiss to a Motion for Summary Judgment
and Granting Summary Judgments
Branham contends the bankruptcy court erred in sua sponte converting BCU’s
motion to dismiss Branham’s counterclaim in AP-128 into a motion for summary
judgment. [Filing No. 17 at 39-40]. Relatedly, it argues another procedural error:
genuine issues of material fact prevented the entry of summary judgment. [Id. at 42].
Branham argues the conversion was in contravention of Fed. R. Civ. P. 12(d) and
Federal Rule of Bankruptcy Procedure 7012(d). Under Rule 12(d), made applicable to
the bankruptcy court by Rule 7012(d), if “matters outside the pleadings are presented to
and not excluded by the court, the motion must be treated as one for summary judgment
under Rule 56” and “[a]ll parties must be given a reasonable opportunity to present all the
material that is pertinent to the motion.” Fed. R. Civ. P. 12(d). “However, ‘the failure to
afford such procedure will not necessarily mandate reversal unless the record discloses
the existence of unresolved material fact issues, or the parties represent that they would
have submitted specific controverted material factual issues to the trial court if they had
been given the opportunity.’” United States v. Rogers Cartage Co., 794 F.3d 854, 861
(7th Cir. 2015) (quoting Woods v. City of Chicago, 234 F.3d 979, 991 (7th Cir. 2000)
(internal quotation and citation omitted)).
25

While the bankruptcy court did not give notice to Branham before converting the
motion to a motion for summary judgment, Branham had a meaningful opportunity to
address issues and present material pertinent to the motion. Even if Branham was not
afforded such an opportunity, reversal is not required. Branham argues the bankruptcy
court determined the Plan was ambiguous such that extrinsic evidence was needed to
assess the meaning of the contract (the Plan). But the court found ambiguity in limited
respects—as to whether BCU’s assets were retained or re-vested in Newland on
confirmation, and whether BCU reserved the right to enforce, waive or assign any claims
or causes of action. [Filing No. 18-3, Branham App. 2376-77]. Branham maintains the
bankruptcy court used extrinsic evidence, namely the Disclosure Statement, to interpret
the Plan. [Filing No. 17 p. 40 (citing Branham App. 2375)]. Although the court did
reference the Disclosure Statement for its conclusion that “[a]ll of Debtor’s scheduled
‘Property was dealt with by the Plan,” [Filing No. 18-3, Branham App. 2375], it also
cited the Plan itself for that same conclusion. [Id.] The bankruptcy court’s citation to the
Disclosure Statement does not establish the existence of genuine issues of material fact
which would preclude the grant of summary judgment.
Moreover, Branham has wholly failed to identify any specific controverted
material factual issues it would have presented bearing on the motions for summary
judgment. [See Filing No. 17 at 42-44]. 8 Its “genuine issues” concern the bankruptcy

Branham suggests five issues of material fact, including whether the $2.5 million distribution
to Newland was made before the Plan’s Effective Date and expiration of the stay under Rule
3020(e). There is no dispute that such distribution did occur before both dates. However, it does
not follow that BCU has a right to recover the $2.5 million distribution.
8

26

court’s construction of the Plan and other orders—legal conclusions. Therefore, the
bankruptcy court did not err in entering partial summary judgments and dismissing the
counterclaim. Branham also complains generally that the bankruptcy court may have
overlooked shortcomings in BCU’s summary judgment filings, for example, its
designation of undisputed issues of material fact. However, the decision whether to
strictly enforce a procedural rule or to overlook any transgression is within the court’s
discretion. See, e.g., Little v. Cox’s Supermarkets, 71 F.3d 637,641 (7th Cir. 1995). No
abuse of discretion has been shown here.
3. The Interpretation of the Plan and Bankruptcy Court Orders
Branham first challenges the bankruptcy court’s ruling that bankruptcy law
preempted Indiana law. Branham appears to suggest that Indiana law could not be
preempted because state laws in existence at the time the Plan was confirmed were made
part of the Confirmed Plan (a contract), and “as part of Confirmed Plan, they were
applicable Bankruptcy Law.” [Filing No. 17 at 20-21]. This is incorrect. Bankruptcy
law is federal law and therefore preempts state law wherever the two conflict. See, e.g.,
In re Repository Techs., Inc., 601 F.3d 710, 723 (7th Cir. 2010) (“[T]he bankruptcy
statutes have significant preemptive force.”); Hammes v. Brumley, 659 N.E.2d 1021,
1027 (Ind. 1995) (“Because bankruptcy law is federal law, enacted pursuant to the
constitutional grant of bankruptcy power, it preempts state law ... pursuant to the
supremacy clause....”).
Branham continues to press its argument that causes of action remained assets of
BCU and were not distributed to Newland because they were subject to the Indiana
27

Statute of Frauds and thus void unless assigned in writing. [Filing No. 17 at 32]. It
asserts “the Statute of Frauds … does not inhibit implementation but only prescribes a
process to accomplish it.” [Id.]. But implementation of a plan requires a process, which
is defined as “a series of actions or events performed to make something or achieve a
particular result.” https://www.dictionary.cambridge.org/dictionary/ english/process (last
visited 01/18/2018). Implementation of a plan and the process to accomplish the plan are
essentially the same thing. As the bankruptcy court explained: “The only way the plan
could be implemented was by distribution of the proceeds from the sale.” [Filing No. 186, Branham App. 3537]. Subjecting the distributions to state law such as the Statute of
Frauds and IURC orders would interfere with and impede implementation of the Plan.
Branham’s argument that bankruptcy law did not preempt Indiana law, particularly the
Statute of Frauds, is incorrect.
Ironically, Branham contests the bankruptcy court’s determination that Branham’s
efforts to collect its judgment against Newland “challenged the distributions made under
the confirmed plan and amount to asking for a ‘do over’ of the confirmed plan.” [Filing
No. 18-6, Branham App. 3519; see also Filing No. 17 at 21]. Branham maintains it
“never challenged” the validity of the Confirmed Plan, but rather, merely sought an
interpretation of the Confirmed Plan “that considered applicable Indiana contract law, an
interpretation that supported Estate Assets re-vested in [BCU], not Newland” and that
ruled the $2.5 million distribution to Newland was not validly made under the Confirmed
Plan. [Filing No. 17 at 21-22]. But by seeking such an “interpretation,” Branham is
challenging the validity of the Confirmed Plan and the distributions that were made to
28

Newland under the Confirmation Order. Branham’s premise is that the distribution to
Newland was inappropriate and the transfer void, thus giving rise to a right in BCU to the
distributed property/sale proceeds. Branham has no claim unless it challenges the
distributions to Newland under the Confirmation Order and Plan.
Next, Branham challenges the bankruptcy court’s orders for failure to enforce
Section 1.15 of the Plan, which defines “Effective Date” 9; Federal Rule of Bankruptcy
Procedure 3020(e), which states that an order confirming a Chapter 11 plan is stayed until
expiration of 10 days unless the court orders otherwise; 10 and principles of in gremio
legis (in the bosom of the law) regarding the distributions to Newland. [Filing No. 17 at
32-34]. 11 Branham asserts the alleged violation of Rule 3020(e) was civil contempt. [Id.
at 33]. The only case it cites for support, however, neither holds nor implies any such
thing. See In re MMP 10180, LLC, Bankr. No. 4:10-bk-38675-JMM, 2012 WL 426708,
at *3-4 (Bankr. D. Ariz. Feb. 9, 2012) (deciding whether payments were timely in light of
Rule 3020(e)’s stay). In addition, Branham offers no authority for the proposition that it
had standing to pursue civil contempt for BCU’s alleged violation of Rule 3020(e). And
practically speaking, Branham has not shown that the distribution to Newland left
Branham unable to recover. As the bankruptcy court found, at the time of the

“Effective Date” is defined as “the first business day following the day on which the
Confirmation Order becomes a Final Order, without any party in interest having appealed from
same.” [Filing No. 9-5, Branham App. 616].
10 This was the number of days in the version of the rule in effect when the Plan was confirmed.
11
Branham refers to “BCU’s invalid payments to Newland,” [Filing No. 17 at 32], which
confirms it is, in fact, challenging the distributions made under the Confirmation Order.
9

29

distributions, Newland had more than enough funds to satisfy Branham’s contract claim.
[See Filing No. 18-4, Branham App. 2905].
Furthermore, Branham is not a creditor of BCU and was not a judgment creditor
of Newland when the Plan was confirmed; Branham has no right to be heard on
premature distributions. See, e.g., 11 U.S.C. § 1109(b) (“A party in interest … may raise
and may appear and be heard on any issue in a case under this chapter.”); Fed. R. Bankr.
P. 3020(e), adv. comm. notes, 1999 amend. (noting the purpose of the rule is to allow
time for a party to request a stay of the confirmation order pending appeal before the plan
is implemented and an appeal becomes moot). And the bankruptcy court had the
authority to order that Rule 3020(e) was inapplicable so that the Plan could be
implemented and distributions made immediately. Fed. R. Bankr. P. 3020(e), adv.
comm. notes, 1999 amend. Branham fails to develop any argument that the funds
distributed to Newland were in gremio legis, thus waiving the argument. See, e.g.,
Zuppardi v. Wal-Mart Stores, Inc., 770 F.3d 644, 648 (7th Cir. 2014) (“Perfunctory and
undeveloped arguments are waived[.]”).
Branham complains that BCU “jumped the gun” and made a distribution to
Newland before the expiration of the Rule 3020(e) stay, thus rendering the distributions
and disbursements to Newland “unlawful” and, as a result, the property purportedly
transferred remained property owned by BCU. [Filing No. 8 at 16, 37-38; Filing No. 17
at 32-33]. However, with one exception, Branham cites no legal authority to support its
position. The exception is Lamb v. Cramer, 285 U.S. 217, 219 (1932), cited for the
proposition that a party who directs or receives distribution of property subject to
30

litigation in a manner contrary to the court’s authority is in contempt of court and subject
to contempt proceedings to compel restoration of the diverted property to the custody of
the court. [See Filing No. 8 at 38 n.24]. But Lamb is inapposite and did not involve any
effort to void distributions made before expiration of the Rule 3020(e) stay. And
Branham cites no authority for the proposition that the violation of the stay vested BCU
with choses in action to pursue claims. [See id. at 38].
Relatedly, Branham argues the bankruptcy court erred in failing to enforce the
provision in Section 6.1 of the Plan which provides that the proceeds from the sale of
property to Whitestown were to be held by BCU until the court approved and ordered
payment of all creditor claims. [Filing No. 17 at 34]. 12 Branham does not offer any
reasoning or cite any authority to challenge the bankruptcy court’s determination that
Section 6.1 did not require BCU to obtain a separate order directing payment to Newland
on account of its equity interest. As the bankruptcy court concluded, Section 6.1 refers to
payment of claims and administrative expense claims; it does not refer to payment on
account of an equity interest such as Newland’s. [Filing No. 9-5, Branham App. 626].
Thus, the Plan did not require a separate court order directing payment to Newland.
Branham has not shown error here.

Branham suggests the bankruptcy court misunderstood its argument that the distributions to
Newland did not comply with Section 6.1 because they were made before the court approved
the claims and ordered payment. [Filing No. 17 at 22-23]. The bankruptcy court understood
Branham as arguing that the payments to Newland “were not authorized.” [Filing No. 18-3,
Branham App. 2380]. Branham is quibbling over semantics. Whether its argument is that the
distributions did not comply with the Section 6.1 or that the distributions were unauthorized,
the essence is that the distributions were invalid and void.
12

31

Branham argues that the bankruptcy court impermissibly modified the Plan by
allowing partial payments of BCU’s assets to Newland and allowing distribution to
Newland before all allowed claims were made. [Filing No. 17 at 23]. But the court was
not modifying the Plan; it was interpreting the Plan and evaluating the consequences of
minor failures in compliance—after distributing the $2.5 million to Newland, BCU still
had sufficient funds to pay other unpaid claims, including Branham’s claims under the
contract with Newland. Besides, Branham has not shown that it has standing to object to
partial payments or to distribution to Newland before other claims were paid.
The bankruptcy court did not err in concluding that the distributions by BCU to
Newland were not unauthorized.
Branham argues the bankruptcy court erred in finding that the Plan did not
sufficiently reserve BCU’s choses of action against Newland, its members and principals.
[Filing No. 17 at 34-35]. Branham first challenges the bankruptcy court’s authority to
rule on affirmative defenses such as estoppel to claims “outside its jurisdiction,”
presumably referring to state law claims against Newland for fraudulent transfer,
conversion and the like. [Id. at 35]. The case it cites in asserting a lack of jurisdiction is
not on point. See Pettibone Corp. v. Easley, 935 F.2d 120 (7th Cir. 1991) (holding
bankruptcy court lacked jurisdiction to decide affirmative defenses in tort cases pending
in other jurisdictions against debtor after confirmation of plan). In asserting that the Plan
adequately reserved BCU’s choses of action, Branham cites In re P.A. Bergner, 140 F.3d
1111 (7th Cir. 1998). This case does not help Branham either. The plan there waived
any cause of action or rights to payment of claims but expressly reserved “any … such
32

[causes of] actions that may be pending on [the approval] date,” id. at 1117, and the
action at issue was pending as of the date of approval. The Plan at issue here does not
contain similar language. Besides, no action by BCU against Newland, its members, or
its principals was pending on the date of confirmation.
Branham maintains that the Plan did not provide Newland, its members and/or its
principals a waiver, release, or other relief from BCU’s choses in action against them.
[Filing No. 17 at 35]. According to Branham, any ambiguity in the reservation language
of Section 9.3 must be read against BCU’s interests and those of Newland, its members,
and its principals. [Id.]. The language is not ambiguous; rather, as the bankruptcy court
correctly decided, the general reservation is not sufficiently specific to reserve a claim.
Though “[r]es judicata does not apply where a claim is expressly reserved by the litigant
in the earlier bankruptcy proceeding … a general reservation of rights does not suffice to
avoid res judicata.” Browning v. Levy, 283 F.3d 761, 774 (6th Cir. 2002) (citing D & K
Props. Crystal Lake v. Mut. Life Ins. Co., 112 F.3d 257, 260 (7th Cir. 1997) (debtor’s
reservations of rights lacked required specificity to reserve a cause of action)).
In addition, Branham cites In re Kmart Corp., 310 B.R. 107 (Bankr. N.D. Ill.
2004), in support of its argument that BCU reserved claims. But the case actually
supports the bankruptcy court’s conclusion that a blanket or general provision is
insufficient to defeat the preclusive effect of a confirmation order; instead, an express
reservation is necessary. Id. at 125. And it is unclear why Branham cites Salley v.
Schmitz, No. 94 C 3448, 1996 WL 665673, at *2-3 (N.D. Ill. Nov. 6, 1996), for principles
of judicial estoppel. BCU is not attempting to reverse an earlier litigation position.
33

Regardless, BCU did not retain any choses in action against Newland, its members
and/or its principals. 13 The bankruptcy court did not err in finding that all of BCU’s
property, including any choses of action, was dealt with by the Plan. Even if BCU
reserved any choses of action under the Plan, the Confirmation Order is res judicata as to
all issues that could have been decided before confirmation, and this includes any choses
in action BCU had against Newland, its members, and/or principals. See, e.g., Matter of
Greenig, 152 F.3d 631, 635 (7th Cir. 1998) (stating “the confirmation of a reorganization
plan is no less than an order of the bankruptcy court, with res judicata effect”) (citations
omitted). And, as the bankruptcy court correctly determined, both Newland and
Branham are enjoined from asserting any claims accruing on or before the Confirmation
Date under Section 11.2 of the Plan.
Branham contends the Bankruptcy Code prohibited BCU from obtaining a
discharge. The bankruptcy court addressed this argument and read the modifying
language in 11 U.S.C. § 1141(d)(1)—“[e]xcept as otherwise provided … in the plan”—as
applicable to § 1141(d)(3), which sets forth three instances in which the debtor does not
get a discharge. Section 1141(d)(3)(A) provides: “The confirmation of a plan does not
discharge a debtor if the plan provides for the liquidation of … the property of the
estate.” 11 U.S.C. § 1141(d)(3)(A). Because the Plan provided for the liquidation of
BCU’s estate, BCU was not statutorily entitled to a discharge. However, even though
BCU was not entitled to a discharge, the Plan could provide for a discharge, and here the

13

Further discussion on this matter is provided in the section addressing the appeal of AP-168.
34

Plan did. [Filing No. 18-6, Branham App. 3541]. Branham cites no authority to show
that the bankruptcy court’s interpretation was erroneous. But even if it were incorrect,
the bankruptcy court reasoned that the Plan provisions prevail if they are inconsistent
with the Bankruptcy Code. [Id.] Branham does not show any error with this conclusion
either.
Instead, it submits that any discharge provided in the Plan applied to parties to the
Plan only and not to third-party, non-creditors such as itself. Newland was a party to the
Plan and the discharge applies to Newland. And Section 11.2 of the Plan, which enforces
the discharge, permanently enjoins “[a]ll holders of Claims and Equity Interests, and their
successors and assigns,” that is, Branham as Newland’s judgment creditor, “from
asserting against [BCU], or any of [BCU’s] Property, any Claims or interests based upon
any act or omission, transaction or other activity … that occurred prior to the
Confirmation Date.” [Filing No. 9-5, Branham App. 632 (emphasis added)].
Next, Branham makes a confusing argument that the bankruptcy court erred in
failing to interpret Section 11.1 of the Plan as follows:
providing Newland’s equity interest in BCU-DIP continued in PostConfirmation-BCU unchanged except for complete resolution and discharge
as against Post-Confirmation-BCU of any and all equity interest of Newland
in BCU-DIP that accrued before Plan Confirmation[.]
[Filing No. 17 at 36 (all emphases Branham’s)]. Branham asserts that under Section 11.1
of the Plan, estate assets re-vested in “Post-Confirmation BCU and Newland held 100%
of Post-Confirmation-BCU’s equity interest.” [Id. (emphases Branham’s)]. Thus,
according to Branham, Newland still has an equity interest in BCU. Yet, Branham makes
35

no effort to explain how this could be so, especially in contravention of the plain, clear
language of the Plan that the distributions satisfied, settled, released, and discharged as
against BCU any and all claims against and equity interests in BCU. [See Filing No. 9-5,
Branham App. 632 (Plan, Article XI, § 11.1]. And Branham cites no authority to support
its position on this issue.
The bankruptcy court erred, Branham argues, in failing to identify BCU’s assets,
and estate assets, in finding that “Post-Confirmation-BCU had no assets,” and in giving
opinions on the merits of affirmative defenses to “Post-Confirmation-BCU’s choses in
action.” [Filing No. 17 at 37]. Branham is attempting to pursue BCU’s pre-confirmation
assets. Importantly, Branham’s case is premised on proving that the distributions to
Newland were inappropriate, rendering the transfers void, and giving BCU a right to the
sales proceeds that were distributed. But the bankruptcy court did not err in concluding
that the distributions by BCU to Newland were not unauthorized.
Branham contends the bankruptcy court erred in failing to consider Branham’s
equitable liens on Newland’s equity/economic interest in “Post-Confirmation BCU.”
[Filing No. 17, p. 38]. To the extent Branham has any equitable liens on BCU’s assets
acquired post-confirmation, the bankruptcy court explained that it was not addressing
such issues. [Filing No. 18-6, Branham App. 3547-48]. Branham asserts that it is
entitled to any future income, profits, or other property that Newland might receive from
BCU [Filing No. 17, p. 39]. But if such income, profits, or other property were to exist,
Branham’s right, if any, to them is for another day. Branham has not shown that the
bankruptcy court erred in declining to address BCU’s post-confirmation assets, if any.
36

What’s more, as Chief Judge Moberly correctly recognized, “a charging order is the only
remedy for a judgment creditor against a member’s interest in an LLC.” Brant v. Krilich,
835 N.E.2d 582, 592 (Ind. Ct. App. 2005). Branham has not argued that it ever obtained
a charging order.
Finally, Branham resurrects its arguments that the distributions to Newland were
invalid because of the IURC orders, which it maintains remained valid and had preclusive
effect on the bankruptcy proceeding. [Filing No. 17 at 23-24]. But, as the bankruptcy
court correctly decided, this assertion is baseless.
The court concludes that Branham has not established the bankruptcy court made
any error of fact or law in construing the Plan, the Confirmation Order, or any other order
of the bankruptcy court.
4. Branham’s Discovery Motions
The next issue is whether the bankruptcy court erred in granting BCU’s motion to
quash subpoena and motion for protective order to the extent they pertain to preconfirmation matters or to BCU’s corporate governance. Branham argues that discovery
is broad; a party may discover any matter, not privileged that is relevant to the claim or
defense of any party. Fed. R. Civ. P. 26(b)(1). But Branham has not articulated any
specific facts it needed to discover relevant to any claim or defense. Simply being a
judgment creditor of Newland is not enough to open wide the gates of discovery.
Branham has not shown that the bankruptcy court abused its discretion in the granting
BCU’s discovery motions.

37

B. AP-168
1. The Bankruptcy Court’s Jurisdiction to Enter Final Orders and
Judgments
For the first time on appeal, Branham argues the bankruptcy court lacked authority
to enter final orders and judgments in AP-168 because its complaint was not a core
proceeding. [Filing No. 8 at 17]. However, its argument is neither developed nor
supported by citation to pertinent legal authority, so it is therefore waived. See, e.g.,
Crespo v. Colvin, 824 F.3d 667, 674 (7th Cir. 2016) (“[P]erfunctory and undeveloped
arguments, and arguments that are unsupported by pertinent authority, are waived ….”)
(quoting United States v. Berkowitz, 927 F.2d 1376, 1384 (7th Cir. 1991)). Further, the
relief that Branham sought in the Adversary Proceeding—to renew and refresh the
Confirmation Order—directly involves issues considered core proceedings. See, e.g., In
re Turner, 558 B.R. 269, 271 (Bankr. N.D. Ill. 2016) (bankruptcy court had authority to
reopen case to enforce the terms of a confirmed plan and confirmation order as a “core
proceeding” under 28 U.S.C. § 157(b)(2)(A), (L) and (O), among others).
What’s more, as even Branham acknowledges, the bankruptcy court could enter
orders and judgments in a non-core proceeding with the consent of all parties. Wellness
Int'l Network, Ltd. v. Sharif, ––– U.S. ––––, 135 S. Ct. 1932, 1942 (2015) (“Our
precedents make clear that litigants may validly consent to adjudication by bankruptcy
courts.”). Such consent need not be express; implied consent will do. Id. at 1947-48. By
initiating the Adversary Proceeding, Branham effectively consented to the bankruptcy
court’s authority to enter orders and judgments, and no other party has challenged that
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authority. Branham has no basis on which to insist that the issues raised in AP-168 be
resolved by an Article III judge.
2. Branham’s Lack of Standing
Branham challenges the bankruptcy court’s dismissal of its AP-168 complaint for
lack of standing on several grounds. It first argues that a motion to dismiss for lack of
standing must be brought under Fed. R. Civ. P. 12(b)(1). Branham confuses Article III
standing, which is jurisdictional, with prudential and bankruptcy standing, which are not.
See In re Ray, 597 F.3d 871, 874 (7th Cir. 2010) (“Bankruptcy standing is narrower than
Article III standing.”); G & S Holdings LLC v. Cont’l Cas. Co., 697 F.3d 534, 540 (7th
Cir. 2012) (objections to prudential standing can be waived). The bankruptcy court did
not decide that Branham lacked Article III standing, but rather that Branham lacked
bankruptcy standing. See In re Stinnett, 465 F.3d 309, 315 (7th Cir. 2006) (“To have
standing to object to a bankruptcy order, a person must have a pecuniary interest in the
outcome of the bankruptcy proceedings. Only those persons affected pecuniarily by a
bankruptcy order have standing to appeal that order.”) (quotation omitted).
According to Branham, evidence in the reopened bankruptcy, specifically AP-128,
demonstrates it has standing to renew the Confirmation Order. Its claim to standing boils
down to this: “Branham has standing because indisputably it is a judgment-creditor of
Newland based on the Branham Judgment. As such, it has a legal right, and therefore
standing, to pursue a proceedings supplemental against Newland’s 100% owned [BCU],
as garnishee ….” [Filing No. 8 at 17]. Nonetheless, Branham argues that the
Confirmation Order “does not bind Branham.” [Filing No. 8 at 23 (quoting 11 U.S.C. §
39

1141(a) (“the provisions of a confirmed plan bind the debtor … any creditor, [and] equity
security holder”)]; see also id. at 25 n.12]. Ironically, the bankruptcy court also quoted §
1141(a) as legal authority in support of its determination that Branham lacked standing to
renew the Confirmation Order. [Filing No. 9-1, Branham App. 5-6]. The bankruptcy
court was right: the Confirmation Order did not adversely and directly affect any
pecuniary interest of Branham’s. Thus, Branham is not entitled to make any issue of the
order’s provisions.
Branham complains that the bankruptcy court allowed BCU to enforce the
Confirmation Order and other bankruptcy court orders against Branham. [Filing No. 8 at
p. 11-12]. It argues that based on the bankruptcy court’s findings, namely that Branham
was not and is not a creditor of BCU and Branham was not a “party in interest” to the
Confirmation Order, “it follows that the 9/14/04 Plan Order is not res judicata to
Branham ….” [Filing No. 8, p. 10]. Branham claims “there is a finding dichotomy” in
the reopened BCU bankruptcy, namely, the bankruptcy court’s finding in AP-128 that the
Confirmation Order “is res judicata as to Branham” and the court’s finding in AP-168
that the Confirmation Order “does not apply to Branham (not res judicata) as Branham
lacks standing to seek to extend or renew it.” [Filing No. 8 at 12]. Branham maintains
the inconsistency between these findings is prima facie. Not so. 14

Branham claims the law-of-the-case doctrine provides it with standing [Filing No. 8, pp. 21, 26], but
this argument is premised on its “finding dichotomy” argument, which fails. Similarly, even if Branham
could properly bring proceedings supplemental against BCU in state court, nothing in Federal Rule of
Civil Procedure 69 or Indiana Trial Rule 69(E) provides Branham with standing to assert proceedings
supplemental against BCU in the bankruptcy case through its counterclaim.
14

40

The bankruptcy court did not find that the Confirmation Order was res judicata as
to Branham as a party in interest to the Confirmation Order. Instead, it found, “assuming
… causes of action were preserved under the Plan and that they revested in [BCU] upon
confirmation,” the order was res judicata “as to all issues which were decided and which
could have been decided before confirmation.” [Filing No. 18-3, Branham App. 2383;
see also Filing No. 18-6, Branham App. 3546]. In arguing the Confirmation Order is not
res judicata as to it, Branham conveniently ignores the legal path by which it could have
a claim against BCU. 15 Branham was not and is not a creditor of BCU. Instead,
Branham is a judgment creditor of Newland. As a judgment creditor of Newland,
Branham has no greater right to assert a claim against BCU than Newland would have.
A “judgment creditor stands in the shoes of the judgment debtor and,
consequently, the claim asserted against the garnishee must be one which the judgment
debtor could have maintained and enforced in his own name.” Pak v. Admiral Ins. Co.,
No. 04 C 3553, 2004 WL 2931322, at *5 (N.D. Ill. Dec. 9, 2004). For Branham to have a
right to assert a claim against BCU, Newland would first have to hold a right to assert a
claim against or interest in BCU. However, as provided in Section 11.1 of the Plan,
Newland expressly released and discharged any claims or equity interests it may have
had against BCU. [See Filing No. 9-5, Branham App. 632 (“The … distributions made

Branham asserts there is “further evidence” to support its position that the Order Confirming
Plan is not res judicata as to Branham and points to its own pursuit of collection of its judgment
against Newland in the proceedings supplemental in Boone Circuit Court. But whether
Branham views the Confirmation Order as res judicata as to itself is beside the point—the point is
whether or not the order is res judicata as to the claims Branham attempts to assert.
15

41

pursuant to the Plan shall be in full and final satisfaction, settlement, release and
discharge as against the Debtor of any and all Claims against, and Equity Interest in, the
Debtor, … including, without limitation, any Claim or Equity Interests accrued on or
before the Confirmation Date….”)]. And Newland is enjoined under Section 11.2 of the
Plan from asserting any such claims against or equity interests in BCU. Consequently,
Branham, as Newland’s judgment creditor, is likewise enjoined. Moreover, it does not
follow from the conclusion that the Confirmation Order is res judicata as to all issues that
were decided or could have been decided that Branham has standing to seek renewal of
the Confirmation Order.
Branham also maintains it has standing in the reopened bankruptcy based on the
filing of its AP-128 Counterclaim, seeking to pursue proceedings supplemental against
BCU and its motion for sanctions against BCU for violating Federal Rule of Bankruptcy
Procedure Rule 3020(e). Its arguments are not persuasive. “[A] party having no direct
interest in the bankruptcy estate generally will not qualify as party in interest with
standing to participate in matters involving administration of the bankruptcy estate.” In
re Pantazelos, Case No. 15bk08916, 2016 WL 2342905, at *2 (Bankr. N.D. Ill. Apr. 29,
2016); see also In re Int’l Oriental Rug Ctr., Inc., 165 B.R. 436, 440 (Bankr. N.D. Ill.
1994) (non-creditor third-party lacked standing to prosecute motion for sanctions against
the debtor). “Status as a defendant in an adversary proceeding does not automatically
confer ‘party in interest’ status … or provide a direct interest in [the] bankruptcy to give
standing in th[e] matter.” In re Pantazelos, 2016 WL 2342905, at *2.

42

Branham believes that BCU “still holds Newland assets that the [Confirmation
Order] declared distributed to Newland, thereby obligating [BCU] to Newland for such
distributions.” [Filing No. 8 at 29]. The purported assets Branham identifies are “choses
in action[ 16] preserved by [BCU] and revested in [BCU].” [Id. at 30]. This includes
claims that existed when BCU filed its bankruptcy petition in September 2003 as well as
breach of fiduciary duty claims against Newland and its members for operating BCU in
violation of the law. [See id. at 30-31, 32-35]. Branham asserts that BCU owns prepetition distributions and redemptions. [Id. at 31]. In making all these arguments,
however, Branham relies on Plan language that states: “Any of the Debtor’s assets, which
are not being sold to Whitestown … shall be retained by the Debtor.” [Id. (quoting Plan
at 1-2, Branham App. 614-15 (see Filing No. 9-5)]. But the bankruptcy court ably
considered the ambiguity in this very language and other ambiguities in the Plan [see
Plan, §§ 9.3 and 9.4, Filing No. 9-5, p. 16, Branham App. 629], and found that all of
BCU’s assets were sold to Whitestown; no assets were retained by BCU. [Filing No. 183, Branham App. 2376-77]. And Branham has not shown any error in the bankruptcy
court’s determination that the Plan did not sufficiently reserve any of BCU’s choses of
action against Newland that arose prior to confirmation.
Branham conditions its right to garnish and attach Newland assets on its belief that
BCU holds Newland assets. [Filing No. 8 at 29-30]. While Branham correctly argues a

A “chose in action” is the right to bring an action to recover a debt, money or thing. Black’s
Law Dictionary (10th ed. 2014); see also Carhart v. Carhart-Halaska Int’l LLC, 788 F.3d 687, 691 (7th
Cir. 2015) (a “lawsuit” is a “chose in action” and form of intangible property).

16

43

creditor is not barred from pursuing claims that arise post-petition, see In re Bahary, 528
B.R. 763, 773 (Bankr. N.D. Ill. 2015), that rule is inapplicable here because Branham
seeks to pursue claims that arose pre-petition.
Finally, Branham argues that the bankruptcy court erred in dismissing the
complaint before addressing if the Confirmation Order was the equivalent of a civil
judgment that would lapse or expire after September 14, 2014, unless renewed or
extended under Indiana law (the “judgment renewal question”). [Filing No. 8 at 21].
Once the bankruptcy court decided that Branham lacked standing and dismissed its
complaint, the court had no obligation to consider the issues Branham raised in its
complaint. Therefore, the bankruptcy court did not err in declining to address issues
raised by Branham.
Accordingly, the court concludes that the bankruptcy court properly dismissed
Branham’s AP-168 complaint under Fed. R. Civ. P. 12(b)(6) for lack of standing.
C. SANCTIONS
The last matter for consideration is sanctions. BCU sought sanctions under the
bankruptcy court’s contempt powers and its “inherent” powers to impose sanctions, both
of which fall under 11 U.S.C. § 105(a). The bankruptcy court found that the Plan and
disclosure statement contained several ambiguities regarding whether BCU’s assets were
retained by BCU or vested in Newland upon confirmation and found the Plan made an
ambiguous reference to BCU reserving the right to enforce, waive, or assign claims
and/or causes of action, but neither scheduled or referred to such causes of action. The
court also found that the Confirmation Order did not resolve those ambiguities.
44

Therefore, it determined that the Confirmation Order did not make an “express and
unequivocal command” regarding such matters. [Filing No. 18-6, Branham App. 3540].
BCU also argued that Branham violated the Confirmation Order’s discharge and
permanent injunction provisions in Section 11.2 of the Plan. The bankruptcy court
rejected Branham’s argument that it did not violate the discharge injunction because BCU
was statutorily prohibited from receiving a discharge. The court also rejected Branham’s
argument that Section 11.2 did not apply to Branham because it was neither a creditor of
BCU nor assignee of Newland. [Id. at 3542]. The bankruptcy court determined that the
latter argument “speaks to the bad faith of Branham in these proceedings.” [Id.]
Nonetheless, the court’s decision lacks clarity as to whether its sanctions order was based
on its contempt powers. [See Filing No. 18-6, Branham App. 3540-3548]. The absence
of any specific finding that Branham was in contempt may suggest that it was not.
The bankruptcy court also addressed its inherent “power to sanction litigants who
intentionally abuse the bankruptcy process and multiply proceedings in an unreasonable
and vexatious manner.” [Filing No. 18-6, Branham App. 3542 (citing In re Volpert, 110
F.3d 494, 500 (7th Cir. 1997). The court found that Branham abused the bankruptcy
process based on the following:
Although Branham’s alleged “unreasonable and vexatious” conduct
originated in the state court with the 001 and 517 cases, it continues to rely
here on the legal theories asserted there. BCU must be found to have
undistributed assets if Branham’s garnishment action is to have any traction
against BCU. The only alleged property to pursue consists of allegations of
prepetition causes of action based on nonbankruptcy law. Branham
unabashedly continues to beat the “viability of IURC orders” drum and
continues to adhere to the “violation of applicable nonbankruptcy business
law” mantra even though both … were either pre-empted upon confirmation
45

of the plan or were made inapplicable because BCU no longer operated a
utility.
[Filing No. 18-6, Branham App. 3544]. The court also relied on the following facts: (1)
Branham sought to hold BCU in contempt for violating the Confirmation Order, despite
that Branham was not a creditor of BCU’s or entitled to a distribution; (2) Branham made
a specious argument about BCU’s standing but named BCU a garnishee defendant; and
(3) Branham participated in the bankruptcy case and failed to pursue its claims while
Newland still had funds to pay Branham. [Id.] Furthermore, the bankruptcy court
determined the allegations in the 001 and 517 state court cases “directly implicated the
very essence of the confirmed plan-distribution to professionals, creditors, and interest
holders.” [Id. at 3547]. Indeed, the bankruptcy court found that “Branham challenged
the legality of distributions made under [its] orders and the recipients’ rights to receive
them” and Branham’s state court actions “essentially attempted to reverse distribution
under a plan that had been confirmed seven years earlier in this chapter 11 case in which
Branham participated and was held to have no claim.” [Filing No. 18-6, Branham App.
3641, 3645]. It appears that the bankruptcy court’s determination to sanction Branham
may have been based solely on its finding that Branham abused the bankruptcy process.
Further clarification of the basis or bases for the bankruptcy court’s sanctions order may
be provided on remand.
The bankruptcy court concluded that Branham’s legal theories were unreasonable
and vexatious and therefore imposed sanctions. Branham relentlessly argues it has not
and is not challenging the validity of the Plan or any other order issued in the BCU
46

bankruptcy (before reopening). [See, e.g., Filing No. 17 at 30]. But that is precisely what
it is and has been doing. For example, during the August 2012 hearing, Branham’s
counsel conceded that Branham was “challenging distributions that were made that we
argue, pursuant to a construction of your plan and confirmation, were not permitted to be
made in the fashion that they were made.” [Filing No. 23-3, Branham App. 5534]. He
then agreed that Branham’s argument was as follows: “the distributions … to Newland
were illegal transfers” because they did not comply with state law, the Plan, and IURC
orders. [Filing No. 23-3, Branham App. 5540]. Branham can call it what it will, but it is
attacking the Plan and Confirmation Order.
The Supreme Court recently addressed a federal court’s “inherent authority” to
sanction a litigant for bad-faith “conduct which abuses the judicial process.”
Goodyear Tire & Rubber Co. v. Haeger, --- U.S. ----, 137 S. Ct. 1178, 1186 (2017)
(quoting Chambers v. NASCO, INC., 501 U.S. 32, 44-55 (1991)). The court may order a
litigant to pay the other side’s legal fees and costs. Id. However, “such an order is
limited to the fees the innocent party incurred solely because of the misconduct—or put
another way, to the fees that party would not have incurred but for the bad
faith.” Id. at 1184. This means “a causal link between the misconduct and the fees[.]”
Id. at 1186; see also id. at 1186 n.5 (stating that rule-based and statutory sanctions also
require a causal connection). “This but-for causation standard generally demands that a
[federal] court assess and allocate specific litigation expenses”; however, “‘[t]he essential
goal’” is “‘to do rough justice, not to achieve auditing perfection.’” Id. (quoting Fox v.
Vice, 563 U.S. 826, 838 (2011)). Thus, the court “‘may take into account [its] overall
47

sense of a suit, and may use estimates in calculating and allocating’” fees. Id. (quoting
Fox, 563 U.S. at 838).
In its order on sanctions, the bankruptcy court noted that BCU’s summary
judgment motion “went far beyond” merely requesting the court to interpret the
Confirmation Order and determined that “[m]any of the attorney fees incurred in this
action were the result of BCU’s over-reaching.” [Filing No. 18-6, Branham App. 3644].
Then the court found a sanction of $38,924 was appropriate, but did not provide any
explanation as to how it arrived at this particular amount. [Id. at 3648]. Having reviewed
BCU’s counsel’s affidavit and supporting fee documentation [see Filing No. 18-6,
Branham App. 3589-3616], this court is unable to determine how the bankruptcy court
found that amount to be an appropriate sanction. At the time of the sanctions hearing,
BCU’s counsel’s fees for work in the reopened bankruptcy case totaled $88,343.75.
[Filing No. 23-3, Branham App. 5869]. It is clear the bankruptcy court awarded only a
portion of the fees incurred and requested, but without further explanation, the court is
unable to determine that the sanction award represents the fees that BCU would not have
incurred but for Branham’s bad faith.
BCU indicated that it would seek double fees and costs for a frivolous appeal
pursuant to Bankruptcy Rule 8020. Because the court has found that the case should be
remanded to the bankruptcy court, sanctions for a frivolous appeal are not warranted.

48

V.

CONCLUSION
Branham’s request for oral argument is denied, the bankruptcy court’s dismissal

and summary judgments will be affirmed, and the case is remanded to the bankruptcy
court for further consideration of sanctions consistent with this decision. The bankruptcy
court should clearly state its findings, including its basis for imposing sanctions, and its
reasoning to impose sanctions of a particular amount.

SO ORDERED this 22nd day of January 2018.

Distributed Electronically to Registered Counsel of Record

49