By George Basharis, J.D.
Consultant’s claim was released by Bankruptcy Court’s settlement order approving a settlement agreement between the consulting firm’s client and the software company.
The dismissal of an antitrust action brought by consulting firm Spinner Consulting LLC (Spinner) against Bankruptcy Management Solutions, Inc. (BMS), a bankruptcy software company, was affirmed by the U.S. Court of Appeals in Philadelphia because the consulting firm’s claims were released by an order entered by the Bankruptcy Court enforcing and approving a settlement agreement (Settlement Order) between the consulting firm’s client and the software company. Because it’s client’s claims were released by the Settlement Order, all remaining claims arising from the bankruptcy that were assigned to the consulting firm also were released (Spinner Consulting LLC v. Bankruptcy Management Solutions, Inc., January 3, 2020, Fuentes, J.).
On behalf of the debtor, the Fusari estate filed a Chapter 7 bankruptcy petition in the United States Bankruptcy Court for the District of New Jersey. In 2015, the trustee of the estate contracted with BMS for banking and software support services. BMS received fees from the Fusari estate during the bankruptcy proceedings. The Bankruptcy Court entered the Settlement Order in May 2016. The order contained a general release provision stating the debtor, estate, and any successors and assigns were released from any and all claims including those claims that were raised or could have been raised in the bankruptcy case. After the remaining property of the estate revested in the debtor, the debtor assigned remaining claims arising from the bankruptcy to Spinner which brought the antitrust action alleging a horizontal price-fixing conspiracy with its competitors. According to the complaint, the harm occurred between June and December 2015, when the Fusari estate’s bank collected BMS’ fee. The district court granted BMS’s motion to dismiss for lack of antitrust standing.
The appellate court determined that the Settlement Order barred Spinner’s complaint because the order released BMS as an independent contractor or agent of the trustee, one of the parties covered by the release. The court noted that Spinner’s complaint admitted that BMS entered into a contract with the trustee making BMS his contractor. Even if BMS was not released as a contractor of the trustee, it was released as a contractor of the estate itself, the court said. The language of the Settlement Order was "expansive" and released each of the parties involved in the bankruptcy proceeding, including the estate, of all claims. The court disagreed with Spinner that the scope of the release was limited to claims of the "Debtor or any of the Entities," excluding claims of the Fusari estate. The Settlement Order released any claim that might have revested in Fusari. Therefore, Spinner, as assignee, also was barred by its terms of the order.
This case is No. 19-2371.
Attorneys: William Dunnegan (Dunnegan & Scileppi LLC) for Spinner Consulting LLC. Jonathan M. Herman (Dorsey & Whitney LLP) for Bankruptcy Management Solutions, Inc.
Companies: Spinner Consulting LLC; Bankruptcy Management Solutions, Inc.
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