United States District Court, N.D. Alabama, Southern Division
K. KALLON UNITED STATES DISTRICT JUDGE.
Appellants seek to reverse several orders issued by the
bankruptcy court in adversary proceedings stemming from
Jefferson County, Alabama's Chapter 9 bankruptcy. Docs.
1; 1 in 2:14-cv-00215-AKK. The Appellants contend, among other
things, that the dismissal of the adversary proceedings
pursuant to the order confirming the County's Chapter 9
Plan (“the Confirmation Order”) violated the
Bankruptcy Rules and Rules of Civil Procedure and denied them
due process. See doc. 21. These appeals are before
the court on Jefferson County's motion to dismiss, doc.
17, which the Appellants oppose, see doc. 21.
Because these appeals challenge the County's bankruptcy
plan and the Confirmation Order, which have become final and
nonappealable, see Bennett v. Jefferson County,
Alabama, 899 F.3d 1240 (11th Cir. 2018), cert. denied,
139 S.Ct. 1305 (March 4, 2019), and, as a result, the court
cannot grant meaningful relief to the Appellants, the motion
to dismiss is due to be granted.
FACTUAL AND PROCEDURAL BACKGROUND
County filed a petition for bankruptcy in 2011 related to
$3.2 billion in debt the County incurred for its sewer
system. Bennett, 899 F.3d at 1243. During the course
of the Chapter 9 bankruptcy proceeding, some of the
County's creditors filed an adversary proceeding (AP-16)
seeking a declaration that the County was required to remit
certain monthly payments to them from sewer system revenues.
See In re Jefferson Cnty., Ala., 482 B.R. 404
(Bankr. N.D. Ala. 2012). The Appellants, on behalf of
themselves and a putative class of County homeowners and
sewer ratepayers, filed a complaint in intervention in AP-16,
seeking an alternative declaratory judgment to void or
invalidate certain sewer system warrants issued by the
County. See doc. 21-1. The bankruptcy court severed the
Appellants' complaint in intervention and transferred it
to a separate, newly-opened adversary proceeding (AP-120).
Doc. 17 at 4.
County subsequently reached a tentative agreement with its
major creditors. Bennett, 899 F.3d at 1243. The
County then moved to stay further proceedings in AP-120 based
on its contentions that the Chapter 9 plan would resolve all
disputes relating to the County's liability for the sewer
warrants, and the bankruptcy court granted the motion. Doc.
17 at 5. Thereafter, the County filed its Chapter 9 Plan of
Adjustment (the “Plan”), and, after a two-day
hearing, the bankruptcy court issued the Confirmation Order
over the Appellants' objections. See Bennett,
899 F.3d at 1243. See also docs. 21-3; 21-4.
to the Confirmation Order, the Plan is binding on the County,
its creditors, and “all past, present, current, and
future ratepayers and users of the Sewer System . . .
.” Doc. 21-3 at 57. Among other things, the Plan
resolved and released all “Sewer Released Claims,
” which includes disputes related to the validity of
the sewer warrants and “the scope and extent of any
liens or other property rights under the [s]ewer [w]arrant[s]
. . . .” Doc. 21-4 at 68-70, 90-91. Because the claims
settled and released under the Plan encompass the claims
asserted in AP-16 and AP-120, the Plan specifically required,
and the Confirmation Order directed as such, the dismissal
with prejudice of AP-16 and AP-120 and enjoined the
Appellants from continuing any action to assert their claims.
Docs. 21-3 at 64-65, 74-75; 21-4 at 6, 69, 81, 89-91;
Bennett, 899 F.3d at 1243.
to these appeals, the Plan also provided that the County
would issue and sell new sewer warrants and that the County
would use the net proceeds to redeem and retire the prior
warrants and related obligations. Docs. 21-4 at 18; 21-3 at
50-52. See also Bennett, 899 F.3d at 1243. And, to
retire these new sewer warrants, the Plan provides for the
County to implement a series of rate increases over a period
of forty years. Bennett, 899 F.3d at 1243. In
addition, under the Plan and Confirmation Order, the validity
of the new sewer warrants “and the covenants made by
the County for the benefit of the holders thereof . . . shall
not be subject to any collateral attack or other challenge by
any [p]erson in any court . . . from and after the
[Plan's] [e]ffective [d]ate.” Docs. 21-4 at 85-86;
21-3 at 67.
Appellants filed a direct appeal of the Confirmation Order to
this court two days prior to the Plan's effective date,
see doc. 1 in 2:14-cv-00213-AKK, but did not move
for a stay of the Confirmation Order pending appeal,
Bennett, 899 F.3d at 1244. Relatedly, the Appellants
also filed these two appeals in which they seek the reversal
of several orders in their adversary proceedings. After the
Plan became effective, the County moved this court to dismiss
the direct appeal, arguing in part that the appeal was moot
because the Plan's consummation made it impossible for
the court to grant the Appellants meaningful
relief. Doc. 4 in 2:14-cv-00213-AKK. This court
(Judge Sharon Lovelace Blackburn) denied the motion to
dismiss the direct appeal, and, at the County's request,
certified its order for interlocutory review. Docs. 35; 36;
48 in 2:14-cv-00213-AKK. In the interim, the court stayed
these two appeals of the adversary proceedings pending the
resolution of the direct appeal in No. 2:14-cv-00213-AKK.
review, the Eleventh Circuit reversed this court and remanded
the direct appeal back to the court to dismiss the appeal of
the Plan and Confirmation Order. Bennett, 899 F.3d
at 1254. The Eleventh Circuit found that the appeal of the
Plan and Confirmation Order is equitably moot because
granting the relief sought by the Appellants “would
seriously undermine actions taken in reliance on the
[C]onfirmation [O]rder, ” and “would be
inequitable or practically impossible.” Id. at
1252. The Appellants petitioned unsuccessfully for a writ of
certiorari. Bennett v. Jefferson Cnty., Ala., 2019
WL 465193 (U.S. Mar. 4, 2019). Thus, the Plan and
Confirmation Order are final and nonappealable.
light of the resolution of the direct appeal, the stay in
these two appeals is no longer necessary. Indeed, the parties
have filed various motions seeking to bring these appeals to
a resolution. And, presently before the court is the
County's motion to dismiss. Doc. 17. Notwithstanding the
Circuit's clear mandate for this court to dismiss the
direct appeal due to equitable mootness, Bennett,
899 F.3d at 1252 and 1254, and the decision's related
implications to these two appeals, the Appellants maintain
that they can still challenge aspects of the Plan and
Confirmation Order through these appeals of their adversary
proceedings, and have filed various motions related to their
position. See docs. 15; 16. See also doc.
21. For its part, the County argues in its motion to dismiss
that, in light of the Eleventh Circuit's decision in the
direct appeal, these appeals stemming from the adversary
proceedings are barred by res judicata, doc. 17 at 16-19, or
alternatively, are moot, id. at 19-20. The court
agrees with the County.
Whether these Appeals are Barred by Res
primary argument in support of dismissal, the County argues
that these appeals are a collateral attack on the Plan and
Confirmation Order the Circuit upheld on direct appeal, and
are therefore barred by res judicata. See doc. 17 at
16-19. Under the doctrine of res judicata, “[a] final
judgment on the merits of an action precludes the parties or
their privies from relitigating issues that were or could
have been raised in the action.” Federated
Dep't Sores v. Moitie, 452 U.S. 394, 398 (1981)
(citations omitted). The doctrine bars a subsequent action
when “(1) the prior decision was rendered by a court of
competent jurisdiction, (2) there was a final judgment on the
merits, (3) the parties were identical in both suits; and (4)
the prior and present causes of action are the same.”
Davila v. Delta Air Lines, Inc., 326 F.3d 1183, 1187
(11th Cir. 2003). Only the first and last elements are in
contention here. More specifically, the Appellants argue
that (1) as to the first element-the Confirmation Order is
not a prior judgment and that the bankruptcy court exceeded
its jurisdiction in issuing the order, and (2) as to the last
element-the Plan and Confirmation Order involve a different
nucleus of operative facts than the adversary proceedings.
Doc. 21. The court addresses these contentions in turn.
Whether the Confirmation Order is a prior judgement
issued by a ...