Wilton Armetale Inc v. ( 2020 )

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_______________
No. 19-2907
_______________
IN RE: WILTON ARMETALE, INC.,
a/k/a Wapita, Inc., Debtor
ARTESANIAS HACIENDA REAL S.A. DE C.V.,
Appellant
v.
NORTH MILL CAPITAL, LLC; LEISAWITZ HELLER
_______________
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. No. 5-18-cv-05553)
District Judge: Honorable Edward G. Smith
_______________
Argued: May 19, 2020
Before: McKEE, BIBAS, and COWEN, Circuit Judges
(Filed: August 4, 2020)
_______________
Barry L. Goldin [ARGUED]
3744 Barrington Drive
Allentown, PA 18104
Counsel for Appellant
Sam P. Israel
Timothy L. Foster [ARGUED]
Sam P. Israel P.C.
180 Maiden Lane, 6th Floor
New York, NY 10038
Counsel for Appellee North Mill Capital LLC
Jeffrey B. McCarron [ARGUED]
Kathleen M. Carson
Swartz Campbell
One Liberty Place, 38th Floor
1650 Market Street
Philadelphia, PA 19103
Counsel for Appellee Leisawitz Heller
_______________
OPINION OF THE COURT
_______________
BIBAS, Circuit Judge.
When a company declares bankruptcy, that declaration
does not erase a creditor’s constitutional standing to sue. As a
company nears insolvency, some may plunder the sinking ship.
By depleting its remaining assets, they lower the odds that the
company will repay its creditors. That risk of loss gives the
creditors constitutional standing to sue the plunderers.
2
If the company declares bankruptcy, though, creditors may
lose the statutory authority to pursue those claims. Under the
Bankruptcy Code, a trustee manages the company’s estate, in-
cluding those creditors’ asset-plundering claims. The Code
thus shifts the statutory authority to pursue those claims from
the creditors to the trustee, unless the trustee relinquishes it.
At times, we have said that this transfer of statutory author-
ity takes away a creditor’s “standing.” But as the Supreme
Court recently held, that statutory question has nothing to do
with constitutional standing. We now clarify that Bankruptcy
Code “standing” is not constitutional standing (and thus is not
jurisdictional) and that Chapter 7 trustees can relinquish the
statutory authority to pursue a claim back to a creditor.
In this case, we hold that the creditor plaintiff has both con-
stitutional standing and the statutory authority to sue two de-
fendants who allegedly plundered a now-bankrupt company
that owed the creditor money. When the trustee formally aban-
doned the estate’s claims against those defendants, he returned
the power to pursue those claims to the creditor. So we will
vacate and remand the District Court’s order to the contrary.
I. BACKGROUND
A. The alleged asset-plundering scheme
On appeal from the District Court’s dismissal, we accept
the complaint’s allegations as true: Several years ago, Ar-
tesanias Hacienda Real S.A. de C.V. sold wares to Wilton Ar-
metale, Inc. But Wilton never paid for them. So Artesanias
sued Wilton and its then-owner, who had guaranteed the pur-
chase. Artesanias obtained a judgment for around $900,000
3
and all the owner’s shares in Wilton, which he transferred to
an affiliate of Artesanias. Soon after, Artesanias recorded its
judgment as a lien on a valuable warehouse that Wilton owned.
Once Artesanias took over Wilton, it got access to privi-
leged documents held by Leisawitz Heller, a law firm that had
represented Wilton and its previous owner. Those documents
showed that Wilton was insolvent and that its previous owner
and North Mill Capital, another creditor had plotted with
Leisawitz Heller to plunder the company’s remaining assets.
Among other things, the previous owner, Leisawitz Heller,
and North Mill had engineered a sale of Wilton’s non-real-
estate assets to an entity that North Mill chose, even though
that entity paid hundreds of thousands of dollars less than what
other bidders had offered. The previous owner and Leisawitz
Heller had also let North Mill file inflated judgments against
Wilton on its debts to North Mill, which gave North Mill a
competing lien on the warehouse. In exchange, Wilton’s owner
received a 20% cut of the proceeds from the warehouse sale
and Leisawitz Heller got tens of thousands of dollars in out-
standing and future legal fees. After striking this deal, North
Mill tried to foreclose on the warehouse.
When it discovered this scheme, Artesanias sued North
Mill and Leisawitz Heller. It alleged that by “divert[ing]” Wil-
ton’s remaining assets, they had “hinder[ed] . . . Artesanias’
ability to enforce and collect obligations [owed to it] from Wil-
ton.” App. 56. Artesanias sought damages, an order setting
aside the purportedly fraudulent asset transfers, and an order
stopping the warehouse foreclosure.
4
B. Wilton declares bankruptcy
Two months after Artesanias sued, the insolvent Wilton
filed for Chapter 7 bankruptcy. The Bankruptcy Code’s auto-
matic stay stopped the warehouse foreclosure. See 11 U.S.C.
§ 362(a). The bankruptcy court soon appointed a trustee to liq-
uidate Wilton’s remaining assets.
To resolve Artesanias’s and North Mill’s competing claims
to the warehouse, the trustee entered separate settlements with
each of them so that he could sell it. The trustee agreed to
(1) split the sale proceeds between the two, (2) release the es-
tate’s claims against North Mill, and (3) not interfere with Ar-
tesanias’s pending or potential claims against North Mill and
others.
At the hearing on the motions to approve the settlements,
the trustee, Artesanias, North Mill, and the bankruptcy court
all agreed that “nothing” in the settlements would “affect [Ar-
tesanias’s] litigation” against North Mill. App. 235–36. Rely-
ing on those statements, the bankruptcy court entered both set-
tlements and ordered the trustee to sell the warehouse. The
trustee later did.
Afterwards, Wilton’s bankruptcy estate had few assets left.
Among them were legal claims that the trustee could bring
against those who had allegedly plundered the company. If
those claims succeeded, the estate could recover money to re-
pay its remaining creditors, including Artesanias.
But to bring those claims would cost money. And any re-
covery was speculative. Rather than spend the estate’s few re-
maining assets pursuing those claims, the bankruptcy court let
5
the trustee abandon all but a select few of them. App. 468–74
(the Abandonment Order). Those few included negligence,
professional-liability, and breach-of-contract claims against
Leisawitz Heller. The other, abandoned claims were left for
Wilton itself or Artesanias to pursue.
C. Artesanias’s claims are dismissed for lack of
standing
Meanwhile, Artesanias’s claims against North Mill and
Leisawitz Heller continued for a time in the District Court. But
when the defendants moved to dismiss the amended complaint,
the court declined to rule on their motions. Instead, it referred
the whole action to the bankruptcy court handling Wilton’s liq-
uidation because Artesanias’s claims were “related to” the
bankruptcy. App. 265–66 (citing 28 U.S.C. § 157(a)).
On referral, the bankruptcy court reasoned that Artesanias
“lack[ed] standing to sue.” Artesanias Hacienda Real S.A. de
C.V. v. N. Mill Capital LLC (In re Wilton Armetale, Inc.),
No. 16-16779, 2018 WL 6440600, at *1 (Bankr. E.D. Pa. Dec.
6, 2018). Once the company had declared bankruptcy, Ar-
tesanias’s claims became property of the estate to be managed
by the trustee. So only the trustee, it explained, had standing to
sue. It also rejected Artesanias’s claim that the Abandonment
Order gave it standing to bring those claims.
Artesanias challenged those conclusions before the District
Court, which agreed with the bankruptcy court and “dismissed
[the suit] for lack of standing.” Artesanias Hacienda Real S.A.
de C.V. v. N. Mill Capital LLC (In re Wilton Armetale, Inc.),
607 B.R. 189, 211 (E.D. Pa. 2019). It found that Artesanias’s
6
claims were derivative of harm that the defendants had in-
flicted on Wilton. That meant that only the bankruptcy trustee
had standing to pursue them. And it held that the trustee could
not abandon to Artesanias the power to do so.
Artesanias now appeals. We review the dismissal de novo.
St. Pierre v. Retrieval-Masters Creditors Bureau, Inc., 898
F.3d 351, 356 (3d Cir. 2018).
II. BANKRUPTCY “STANDING” IS NOT AN ELEMENT
OF A CREDITOR’S CONSTITUTIONAL STANDING
At the outset, we must clean up some confusing legalese.
North Mill and Leisawitz Heller ask us to dismiss this appeal
for lack of jurisdiction because Artesanias lacks “standing.”
They argue that under the Bankruptcy Code, Wilton’s bank-
ruptcy took away Artesanias’s power to sue. In past decisions,
we have called that statutory authority a creditor’s “standing”
to assert claims in bankruptcy. But since then, the Supreme
Court has clarified that a litigant’s constitutional standing to
bring a suit differs from its statutory authority to maintain one.
Because disputes over statutory authority do not affect our ju-
risdiction, and because Artesanias has constitutional standing
to sue, we can hear this appeal.
A. “Standing” has imprecisely referred to a
bankruptcy litigant’s statutory authority to sue
When a debtor declares bankruptcy, most of its property
gets transferred to its estate. 11 U.S.C. § 541. The estate en-
compasses “all kinds of property, including . . . causes of ac-
tion.” Bd. of Trs. of Teamsters Local 863 Pension Fund v.
Foodtown, Inc., 296 F.3d 164, 169 (3d Cir. 2002) (quoting
7
United States v. Whiting Pools, Inc., 462 U.S. 198, 205 n.9
(1983)); see 11 U.S.C. § 541(a)(1). “A cause of action [be-
comes] property of the estate if the claim existed at the com-
mencement of the [bankruptcy] filing and the debtor could
have asserted the claim on his own behalf under state law.”
Foodtown, 296 F.3d at 169 n.5.
A court-appointed bankruptcy trustee manages the estate’s
property, including those causes of action. The trustee “is the
representative of the estate” with the “capacity to sue and be
sued” on its behalf. 11 U.S.C. § 323(a), (b). So once a cause of
action becomes the estate’s property, the Bankruptcy Code
gives the trustee, and only the trustee, the statutory authority to
pursue it.
At times, we have called that statutory authority the trus-
tee’s exclusive “standing” to assert those claims. We have held
that “[a]fter a company files for bankruptcy, [its] creditors lack
standing to assert claims that are property of the estate.” In re
Emoral, Inc., 740 F.3d 875, 879 (3d Cir. 2014) (emphasis
added) (internal quotation marks omitted); accord Foodtown,
296 F.3d at 169 (same). Our use of that terminology followed
the Supreme Court’s lead in Caplin v. Marine Midland Grace
Trust Co., 406 U.S. 416, 416–17 (1972). We were not alone.
See, e.g., Highland Capital Mgmt. LP v. Chesapeake Energy
Corp. (In re Seven Seas Petrol., Inc.), 522 F.3d 575, 584 (5th
Cir. 2008); Logan v. JKV Real Estate Servs. (In re Bogdan),
414 F.3d 507, 511–12 (4th Cir. 2005).
That imprecise language is confusing, so some courts have
tried to clear up the confusion. As Judge Easterbrook has
noted, writing for the Seventh Circuit, bankruptcy “standing”
8
is doctrinally “abnormal.” Grede v. Bank of N.Y. Mellon, 598
F.3d 899, 900 (7th Cir. 2010). He explained that the Caplin
Court “used the language of ‘standing’ to refer, not to . . . [con-
stitutional] standing, but to whether Congress had authorized a
trustee to pursue a given kind of action.” Id. (internal citation
omitted). And “[w]hether a given action is within the scope of
the [Bankruptcy] Code is a question on the merits rather than
one of justiciability.” Id. Thus, “[t]o avoid confusion,” the
court recharacterized bankruptcy “standing” as the trustee’s
“ ‘authority’ to act on behalf of the [estate].” Id. Our sister cir-
cuit’s explanation is persuasive and we will adopt it.
B. Bankruptcy “standing” is not constitutional
standing
Like the Seventh Circuit, we now clarify that a litigant’s
“standing” to pursue causes of action that become the estate’s
property means its statutory authority under the Bankruptcy
Code, not its constitutional standing to invoke the federal judi-
cial power. That articulation aligns our precedent with a recent
Supreme Court decision that excised “prudential” or “statu-
tory” additions to the “ ‘irreducible constitutional minimum of
standing.’ ” Lexmark Int’l, Inc. v. Static Control Components,
Inc., 572 U.S. 118, 125–28 & n.4 (2014) (quoting Lujan v. De-
fenders of Wildlife, 504 U.S. 555, 560 (1992)). Given this “in-
tervening Supreme Court precedent,” we may “reevaluate” our
prior decisions to the contrary. In re Krebs, 527 F.3d 82, 84 (3d
Cir. 2008).
In Lexmark, the Supreme Court reaffirmed that constitu-
tional standing has only three elements: (1) “a concrete and
particularized injury in fact,” (2) that is “fairly traceable” to the
9
defendant’s conduct, and (3) that “a favorable judicial deci-
sion” would likely “redress[ ].” 572 U.S. at 125 (internal quo-
tation marks omitted). Once a plaintiff satisfies those elements,
the action “presents a case or controversy that is properly
within federal courts’ Article III jurisdiction.” Id.
Other requirements, whether prudential or “tied to a partic-
ular statute,” do not affect our constitutional jurisdiction. Bank
of Am. Corp. v. City of Miami, Fla., 137 S. Ct. 1296, 1302
(2017) (citing Lexmark, 527 U.S. at 128 & n.4). Instead, they
go to the merits. Leyse v. Bank of Am. Nat’l Ass’n, 804 F.3d
316, 320 & n.3 (3d Cir. 2015); accord Grede, 598 F.3d at 900.
The statutory requirements of bankruptcy “standing” ex-
ceed the three elements of constitutional standing. Under
Lexmark, they do not affect our constitutional jurisdiction, but
only whether Artesanias has a claim on the merits.
C. Artesanias retained constitutional standing
throughout the bankruptcy
Artesanias has constitutional standing to bring its claims. It
sued North Mill and Leisawitz Heller after discovering their
alleged scheme to plunder Wilton’s remaining assets. It as-
serted that by depleting those assets, they had frustrated its
ability to recover on its judgment against Wilton and so caused
it economic harm.
Those allegations give Artesanias constitutional standing.
By allegedly plundering Wilton, they lowered Artesanias’s
odds of being repaid. That “[m]onetary harm is a classic form
of injury-in-fact.” Danvers Motor Co. v. Ford Motor Co., 432
F.3d 286, 293 (3d Cir. 2005) (Alito, J.). The alleged
10
misconduct is indirectly but fairly traceable to Artesanias’s in-
jury. See Finkelman v. NFL, 877 F.3d 504, 510–12 (3d Cir.
2017). And the relief it seeks, including money damages,
would likely redress that injury. See id. at 512.
Admittedly, Artesanias’s injury flows from the alleged
harm to Wilton’s assets. But a creditor has constitutional stand-
ing when it asserts that by taking and keeping the debtor’s as-
sets, the defendants “kept th[o]se assets from [the creditor] and
rendered [the debtor] insolvent, thereby contributing to [the
creditor’s] economic harm.” Enter. Fin. Grp., Inc. v. Podhorn,
930 F.3d 946, 950 (8th Cir. 2019).
A contrary rule would deprive all creditors of constitutional
standing to bring fraudulent-transfer claims against corporate
plunderers because those claims always flow from harm to a
debtor corporation. See 12 Pa. Cons. Stat. § 5108(b)(1) (giving
creditors remedies against a transferee of the debtor’s assets);
Unif. Fraudulent Transfer Act § 8(b)(1) (1984) (same). So too
with state-law claims that creditors can assert against an insol-
vent debtor’s fiduciaries. See, e.g., Official Comm. of Unse-
cured Creditors ex rel. Lemington Home for the Aged v. Bald-
win (In re Lemington Home for the Aged), 659 F.3d 282, 290
(3d Cir. 2011). We reject that approach.
III. ARTESANIAS’S CLAIMS BECAME PROPERTY OF THE
BANKRUPTCY ESTATE BECAUSE THEY RELY ON A
DERIVATIVE THEORY OF RECOVERY
Now that we have confirmed our jurisdiction, we proceed
to the merits. We start with whether Artesanias’s claims
against North Mill and Leisawitz Heller became property of
11
the estate. If they did, then only the bankruptcy trustee has the
statutory authority to bring them unless abandoned. We con-
clude that those claims rely on a theory of recovery derivative
of harm that Wilton suffered directly. If Artesanias prevails, all
of Wilton’s creditors would stand to benefit. So Artesanias’s
claims became property of the bankruptcy estate to be managed
by the trustee.
A. Only the trustee can pursue claims that rely on a
derivative theory of recovery
Even though it has constitutional standing, Artesanias can-
not pursue its claims if the Bankruptcy Code denies it the stat-
utory authority to do so. As discussed, the Code makes some
claims the exclusive province of the trustee, not a creditor like
Artesanias. Only the trustee has the power to prosecute causes
of action (1) that “existed at the commencement of the [bank-
ruptcy] filing” and (2) that “the debtor could have asserted . . .
on his own behalf.” Foodtown, 296 F.3d at 169 n.5.
The first element is about timing. Artesanias’s claims ex-
isted before Wilton’s bankruptcy. Indeed, Artesanias brought
those claims two months before the bankruptcy began. Even if
it had not filed them, they still would have predated the bank-
ruptcy because the alleged plundering preceded it. In bank-
ruptcy, “a ‘claim’ arises when an individual is exposed . . . [to]
conduct giving rise to an injury.” Jeld-Wen, Inc. v. Van Brunt
(In re Grossman’s Inc.), 607 F.3d 114, 125 (3d Cir. 2010) (en
banc) (quoting 11 U.S.C. § 101(5)).
The second element hinges on whether the claim is “gen-
eral” to the estate or “personal” to a specific creditor. Emoral,
12
740 F.3d at 879 (quoting Foodtown, 296 F.3d at 170); accord
5 Collier on Bankruptcy ¶ 541.07 & n.1 (16th ed. 2020) (citing
Emoral). Individual creditors have the statutory authority to
bring only personal claims. Emoral, 740 F.3d at 879. That is
because a general claim “inures to the benefit of all creditors”
by enlarging the estate, and so “ ‘the trustee is the proper person
to assert the claim.’ ” Id. (quoting St. Paul Fire & Marine Ins.
Co. v. PepsiCo, Inc., 884 F.2d 688, 701 (2d Cir. 1989)). The
distinction between general and personal claims “promotes the
orderly distribution of assets in bankruptcy” by funneling all
asset-recovery litigation through a single plaintiff: the trustee.
Id.
To distinguish general from personal claims, we focus not
on the nature of the injury, but on the “theory of liability.”
Emoral, 740 F.3d at 879. Claims alleging that “third parties . . .
wrongfully deplete[d] the debtor’s assets” are general or deriv-
ative because “[e]very creditor has a similar claim for the di-
version of assets of the debtor’s estate.” Tronox Inc. v. Kerr-
McGee Corp. (In re Tronox Inc.), 855 F.3d 84, 103 (2d Cir.
2017); accord Emoral, 740 F.3d at 879–80. The theory of re-
covery for those claims is “not tied to the harm done to the
creditor by the debtor.” Tronox, 855 F.3d at 103. Rather, it is
“based on an injury to the debtor’s estate that creates a second-
ary harm to all creditors regardless of the nature of their under-
lying claim[s] against the debtor.” Id. at 104.
So harm done mainly to the debtor can indirectly injure the
creditors, making the claim a general one. If the theory of re-
covery “would be based on facts generally available to any
creditor, and recovery would serve to increase the pool of
13
assets available to all creditors,” then the claim is general, not
personal. Emoral, 740 F.3d at 881. Only when a particular
creditor suffers a direct, particularized injury that can be “di-
rectly traced” to the defendant’s conduct is the claim personal
to that creditor and not property of the estate. Tronox, 855 F.3d
at 100 (quoting Marshall v. Picard (In re Bernard L. Madoff
Inv. Sec. LLC), 740 F.3d 81, 89 (2d Cir. 2014)); see id. at 100–
02 (collecting cases).
B. Artesanias’s claims rely on a derivative theory of
recovery
Artesanias’s claims against North Mill and Leisawitz Hel-
ler became property of the estate. According to Artesanias, the
defendants “hinder[ed]” its ability to collect debts owed to it
by Wilton by “divert[ing] assets from [an] insolvent corpora-
tion.” App. 56. As in Emoral and Tronox, Artesanias’s claims
are “aimed at recovering estate assets.” Tronox, 855 F.3d at
105 (citing Emoral, 740 F.3d at 880–81). Its theory of recovery
thus derives from the plundering suffered by Wilton.
Artesanias’s assertions that the plundering targeted and dis-
proportionately affected it do not transform the harm into an
injury unique to Artesanias. That its harm might be worse in
degree than that suffered by other creditors does not change the
fact that all the creditors’ injuries from the plundering are the
same in kind. Because Artesanias’s claims depend on harm
suffered directly by Wilton and only indirectly by Artesanias,
its theory of recovery is not personal, but derivative of harm to
the estate.
14
In reaching this conclusion, we decline to rely on the trus-
tee’s assertion that Artesanias’s claims “belonged to . . . and
continue to belong to Artesanias (not the Wilton estate).” App.
463. As the District Court rightly held, the trustee lacks author-
ity to decide who has the statutory authority to bring those
claims. 607 B.R. at 207–08. We must answer that legal ques-
tion ourselves. Plus, as the bankruptcy court noted, the trus-
tee’s assertion contradicts Wilton’s asset schedules, which in-
cluded causes of action much like Artesanias’s. 2018 WL
6440600, at *3. We will not outsource to the trustee our duty
to determine what is part of the estate.
At bottom, Artesanias alleges that North Mill and Leisawitz
Heller left Wilton “with insufficient assets to pay [its] credi-
tors.” Tronox, 855 F.3d at 105. Its claims rely on a general the-
ory of recovery derivative of harm done to Wilton. The Bank-
ruptcy Code thus gives the statutory authority to pursue those
claims to the trustee.
IV. THE TRUSTEE ABANDONED HIS STATUTORY
AUTHORITY OVER ARTESANIAS’S CLAIMS
The trustee can, however, relinquish his statutory authority
to bring general or derivative claims to a creditor. Because the
Abandonment Order did just that, Artesanias regained the
power to sue North Mill and Leisawitz Heller.
A. Bankruptcy trustees can abandon to a creditor
their authority to pursue the estate’s claims
As discussed, the Bankruptcy Code makes a creditor’s de-
rivative causes of action property of the estate. From there, the
trustee decides how best to manage them for the benefit of all
15
creditors. Myers v. Martin (In re Martin), 91 F.3d 389, 394 (3d
Cir. 1996). One option is to prosecute those claims to judg-
ment. See, e.g., Shearer v. Titus (In re Titus), 916 F.3d 293,
298–99 (3d Cir. 2019). Another is to settle and extinguish
them. See, e.g., Northview Motors, Inc. v. Chrysler Motors
Corp., 186 F.3d 346, 347–48 (3d Cir. 1999).
But the trustee also has a third option: he can instead relin-
quish those claims. For instance, he might formally abandon
them if the cost of pursuing them would be “burdensome” or
outweigh the likely gain to the estate. 11 U.S.C. § 554(a).
An abandoned claim, like abandoned property in general,
flows to someone else. The abandoned property can flow back
“to any party with a possessory interest in it.” Collier, supra,
¶ 554.02[3]; accord Dewsnup v. Timm (In re Dewsnup), 908
F.2d 588, 590 (10th Cir. 1990) (per curiam) (“Following aban-
donment, whoever had the possessory right to the property at
the filing of the bankruptcy again reacquires that right.” (inter-
nal quotation marks omitted)), aff’d, 502 U.S. 410 (1992). If
the bankruptcy has ended, abandonment sends the property
back to the debtor. See 11 U.S.C. § 554(c). Otherwise, the prop-
erty reverts to “some other party,” like “a secured creditor who
has possession of the property when the trustee abandons the
estate’s interest.” Collier, supra, ¶ 554.02[3].
When, as here, the abandoned property is a cause of action,
the right to assert it “revert[s] back to the prior holder.” Id.
¶ 548.02[5][a]. Thus, if a trustee abandons a cause of action,
the “creditor’s right to pursue” it “spring[s] back to life.” Id.;
accord St. Paul Fire & Marine Ins. Co., 884 F.2d at 698
16
(noting that “a trustee could choose to abandon a claim, and
allow creditors to pursue it independently”).
To be sure, if the trustee wants to abandon any property
during the bankruptcy, he must do so “overt[ly].” Collier, su-
pra, ¶ 548.02[5][a]; see also O’Dowd v. Trueger (In re
O’Dowd), 233 F.3d 197, 200 n.3 (3d Cir. 2000) (noting that
“[a]bandonment is an intentional act”). Thus, we and our sister
circuits have declined to hold that a cause of action was aban-
doned when the evidence was “ambiguous.” Chartschlaa v.
Nationwide Mut. Ins. Co., 538 F.3d 116, 123–24 (2d Cir. 2008)
(per curiam); see also O’Dowd, 233 F.3d at 200 n.3 (citing
Hanover Ins. Co. v. Tyco Indus., Inc., 500 F.2d 654, 657–58
(3d Cir. 1974)). But when the evidence of abandonment is
clear, any abandoned causes of action revert to their prior
owner. Collier, supra, ¶ 548.02[5][a].
B. The trustee abandoned the claims to Artesanias
By the Abandonment Order’s express terms, the trustee
abandoned to Artesanias his statutory authority to pursue cer-
tain claims against North Mill and Leisawitz Heller. The Order
relinquished “without limitation” all the estate’s “claims” (as
broadly defined in § 101(5) of the Bankruptcy Code), except
for the negligence, professional-liability, and breach-of-
contract claims that the trustee was pursuing against Leisawitz
Heller, plus certain claims against Wilton’s old owner and his
wife. App. 470–71. The trustee thus relinquished all claims that
the Order did not expressly spare.
The abandoned claims included all of Artesanias’s current
claims against Leisawitz Heller (claims for breach of fiduciary
17
duty, fraudulent transfer, unreasonable disposition of assets,
and aiding and abetting and conspiring to commit those torts).
The abandoned claims also included Artesanias’s claims
against North Mill. These claims survived the trustee’s sepa-
rate settlements with Artesanias and North Mill, which extin-
guished all the estate’s claims against North Mill while pre-
serving Artesanias’s separate claims against it.
We decline to read the Abandonment Order as relinquish-
ing those claims only to Wilton. At some points, the Order says
the claims are abandoned “to the Debtor”; at others, it says they
go to both “the Debtor” and “Artesanias.” App. 470–72. But
read as a whole, the Order shows that “Artesanias or the
Debtor” could “recover . . . on account of the Abandoned
Claims.” App. 471. It also provides that Artesanias’s recover-
ies would “be deducted from” its claims against the estate. Id.
The only way to make sense of those clauses is to read them as
allowing some of the claims to go to Artesanias. Plus, that read-
ing returns each claim to its pre-bankruptcy owner. Until then,
some claims were Wilton’s, while others belonged to Ar-
tesanias as “the prior holder.” Collier, supra, ¶ 548.02[5][a];
see id. ¶ 554.02[3].
The District Court declined to resolve that tension in the
wording of the Abandonment Order. Instead, it read our deci-
sion in Cybergenics as preventing the trustee from transferring
claims to Artesanias, no matter what the Order said. 607 B.R.
at 209–10. But Cybergenics does not hold that trustees cannot
transfer causes of action. It leaves that question open because
the asset transfer at issue did not reach the creditors’ claims.
Official Comm. of Unsecured Creditors of Cybergenics Corp.
18
ex rel. Cybergenics Corp. v. Chinery (In re Cybergenics
Corp.), 226 F.3d 237, 244–45 (3d Cir. 2000). And elsewhere,
it reaffirms that “outside of the context of bankruptcy,” claims
challenging asset plundering, like Artesanias’s, “belong[ ] to [a
debtor’s] creditors.” Id. at 242. So Cybergenics supports, rather
than undermines, our holding: Chapter 7 trustees can abandon
asset-plundering claims back to the creditors who had them be-
fore the bankruptcy.
We thus hold, contrary to the District Court, that the Aban-
donment Order “spr[ang] back to life” and so restored Ar-
tesanias’s power to pursue its claims against North Mill and
Leisawitz Heller. Collier, supra, ¶ 548.02[5][a]. To be sure,
Leisawitz Heller also argues that Artesanias’s amended com-
plaint should be dismissed under Federal Rule of Civil Proce-
dure 12(b)(6) and Pennsylvania law. We leave it to the District
Court to decide whether Artesanias raised claims on which re-
lief can be granted.
* * * * *
Artesanias had constitutional standing to sue North Mill
and Leisawitz Heller for plundering Wilton’s assets. The bank-
ruptcy merely deprived Artesanias of the statutory authority to
bring those claims, transferring that power to the trustee. But
by abandoning those claims, the trustee resurrected Ar-
tesanias’s power to prosecute them. So we will vacate and re-
mand for further proceedings.
19