Copelin v. Spirco Inc

Opinions of the United
1999 Decisions States Court of Appeals
for the Third Circuit

7-1-1999

Copelin v. Spirco Inc
Precedential or Non-Precedential:

Docket 98-3309

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Filed July 1, 1999

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 98-3309

WAYNE COPELIN

v.

SPIRCO, INC., f/k/a Nasco Inc.

STEPHEN I. GOLDRING, Trustee

INNOVO GROUP, INC.,*
Appellant
(Pursuant to Rule 12(a), F.R.A.P.)

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA

(D.C. No. 96-cv-00342J)
District Judge: Honorable D. Brooks Smith

ARGUED MARCH 9, 1999

BEFORE: MANSMANN, SCIRICA, and NYGAARD,
Circuit Judges.

(Filed: July 1, 1999)

James R. Walsh (Argued)
Spence, Custer, Saylor, Wolfe
& Rose
400 United States National Bank
Building
P.O. Box 280
Johnstown, PA 15907
Attorney for Appellant
 Thomas E. Reilly (Argued)
Davis & Reilly
437 Grant Street
1124 Frick Building
Pittsburgh, PA 15219
Attorney for Appellee

OPINION OF THE COURT

NYGAARD, Circuit Judge.

Innovo Group, Inc., the parent corporation of debtor
Spirco, Inc., f/k/a Nasco, Inc.,1 appeals a District Court
Order disallowing Innovo from using Innovo stock to satisfy
a Tennessee state court judgment against it. The District
Court concluded that the judgment does not fall within
the terms of Spirco's approved Bankruptcy Plan of
Reorganization, and that Wayne Copelin, who holds the
judgment against Innovo, is merely seeking to collect on a
judgment he holds against a non-debtor. We agree and will
affirm.

I.

Spirco and Innovo hired Wayne Copelin to serve as
Spirco's president. Copelin, Spirco and Innovo executed a
written employment agreement that included a clause
entitling Copelin to compensation in the amount of
$100,000 if his employment was terminated for any reason
other than for cause. Appellants' App. at 99. The
Employment Agreement did not make Innovo's liability
contingent upon Spirco's failure to pay. Approximately five
months later, Spirco terminated Copelin without cause, but
_________________________________________________________________

1. Spirco and Innovo merged under the terms of Spirco's Plan of
Reorganization filed with the Bankruptcy Court, with Innovo as the
surviving corporation. During the course of relevant litigations, Nasco
changed its name to Spirco. As such, the documents in the record refer
to both Spirco and Nasco to reflect the name of the company at the
various stages of the Tennessee State Court and bankruptcy litigation.
However, for ease of understanding, we will only use the company name
Spirco to refer to both Spirco and Nasco.

2
did not pay the $100,000 compensation due under the
contract.

Copelin sued Spirco and Innovo jointly and severally in
Tennessee state court alleging breach of contract,
misrepresentation, breach of covenant of good faith and fair
dealing, and promissory estoppel. Spirco filed a voluntary
petition for relief with the Bankruptcy Court for the
Western District of Pennsylvania under Chapter 11 of the
Bankruptcy Code, 11 U.S.C. S 101 et seq., which identified
Copelin as a creditor holding a disputed claim for $250,000
under the Employment Agreement. Copelin then filed in
state court a notice of intention to non-suit Spirco without
prejudice. The state court dismissed Spirco, but Innovo
remained a party. Innovo then sought to remove the state
court action to the Bankruptcy Court for the United States
District Court for the Middle District of Tennessee under 28
U.S.C. S 1452(a) claiming that the matter was related to
Spirco's bankruptcy proceeding then pending in the
Bankruptcy Court for the Western District of Pennsylvania.
Copelin objected and requested that the case be remanded
to the Tennessee State Chancery Court.

The Tennessee Bankruptcy Court conducted a hearing to
determine the proper forum and concluded that: (1)
Copelin's suit had no significant impact on the Spirco
bankruptcy action; (2) Innovo's only relation to the Spirco
bankruptcy case was as a non-debtor co-defendant in the
Copelin action; and (3) no objective of the bankruptcy code
would be furthered by removing the case to the Bankruptcy
Court for the Middle District of Tennessee. Innovo did not
appeal, and the case remained in state court.

Spirco filed an Amended Plan of Reorganization with the
Bankruptcy Court in the Western District of Pennsylvania.
A copy of the scheduling order and Amended Plan was
forwarded to Wayne Copelin c/o his attorney in the
Tennessee state court action.

The Plan stated that Spirco would receive a discharge
and the "discharge of the Debtor shall also effect a
discharge of [Innovo with] respect to all claims against
Spirco, Inc." Appellee's App. at 23. Further, the Plan
commanded that "at no time shall [Innovo] be deemed a

3
debtor." Id. The Bankruptcy Court for the Western District
of Pennsylvania confirmed the Amended Plan which stated
in relevant part:

Article II-Specifications of Claims and Interests

Pursuant to Sections 1122 and 1123(a)(1) of the
Bankruptcy Code, the following classes of Claims are
designated:

(H) Class 8 - Class 8 consists of holders of Allowed
General Unsecured Claims upon which [Innovo] is
liable, by guaranty or otherwise, as established by (a)
the entry of a final Order upon motion filed by[Spirco]
or Class 8 Claimant, or (b) written acknowledgment of
[Innov]. Appellants' App. at 65.

Article III-Plan of Reorganization

On the Effective Date of the Plan, [Spirco] shall be
deemed merged into its parent corporation, [Innovo],
with [Innovo] being the surviving corporation.
Therefore, on the Effective Date, [Spirco] will cease to
exist as a separate corporate entity and [Innovo] shall
incur liability of [Spirco] only as provided for in this
Plan. Appellants' App. at 66.

Article X - Effect of Confirmation; Issuance of Group
Common Stock; Vesting of Property; Discharge

. . . At no time shall [Innovo] be deemed a debtor.
[Innovo] shall incur no obligations as a result of such
merger except as specifically provided in the Plan.

D. Upon the Effective Date, [Spirco] shall receive a
discharge pursuant to Section 1141 of the Bankruptcy
Code. The discharge of [Spirco] shall also effect a
discharge of [Innovo] will [sic] respect to all claims and
interest against Spirco, Inc.

Appellee's App. at 23.

While confirmation of the Reorganization Plan was
pending, Innovo filed an Amended Answer to Copelin's state
court complaint claiming that Spirco was an indispensable
party to the suit and that the suit should be dismissed
until Spirco could be properly joined. The state court did

4
not find that Spirco was an indispensable party and Spirco
did not join the action. Appellants' App. at 129.

Spirco filed a Motion to Classify Claims in the
Bankruptcy Court for the Western District of Pennsylvania
alleging that Copelin filed non-bankruptcy litigation against
Innovo to establish Innovo's liability for Spirco's obligation
by guarantee or otherwise and that Innovo "denies any
responsibility to [Copelin] for obligations due and owing by
the Debtor [Spirco]." Spirco requested that this claim be
classified as a Class 8 claim if Copelin successfully
established Innovo's liability for Debtor's obligations.
Appellants' App. at 77. The Bankruptcy Court for the
Western District of Pennsylvania ordered that in the event
Copelin obtained a final order in state court establishing
Innovo liable for Spirco's obligations, then Copelin would be
deemed to have an Allowed Class 8 claim. Under the terms
of the confirmed Amended Plan of Reorganization, Innovo
could satisfy any Allowed Class 8 claim with payment of
Innovo stock.

The Tennessee State Chancery Court granted summary
judgment in favor of Copelin against Innovo for $100,000
plus costs. The Order stated in pertinent part:

ORDERED, ADJUDGED and DECREED that Summary
Judgment is hereby granted in favor of the Plaintiff,
Wayne Copelin, against the Defendant, Innovo Group,
Inc., as to the issue of severance benefits described in
Paragraph 9, of that Employment Agreement, dated
January 2, 1992, and identified as Exhibit B, to this
Complaint filed in this cause, and that the Plaintiff,
Wayne Copelin, have and recover of the Defendant,
Innovo Group, Inc., the sum of $100,000.

Appellants' App. at 149.

Copelin was given a certificate for 352,113 shares of
Innovo stock to satisfy the judgment. Copelin's attorney
returned the stock stating that the judgment against Innovo
was "for a sum certain of money, not stock." Spirco, as
merged with and into Innovo, then filed a Motion for
Enforcement of Discharge Injunction and Terms of
Confirmed Plan, Together with Request for Finding of
Contempt and Imposition of Sanctions with the Bankruptcy

5
Court for the Western District of Pennsylvania. Spirco
contended that under the terms of the Amended Plan,
Copelin's judgment against Innovo in state court could be
satisfied with Innovo stock. Copelin contested the motion.

The Bankruptcy Court for the Western District of
Pennsylvania enjoined Copelin from "pursuing Innovo
Group in any other forum to collect on the debt Innovo
jointly owes along with [Spirco]." The court found that: (1)
Innovo was a guarantor or otherwise liable to Copelin based
on Spirco's obligation to Copelin; (2) the dispute was a core
proceeding, and therefore the bankruptcy court had
jurisdiction to enter a final judgment; (3) Copelin had a
Class 8 claim payable in Innovo stock; (4) the debt owed to
Copelin "by Debtor" was discharged; (5) Copelin was barred
from challenging the classification of the judgment against
Innovo as a Class 8 claim; and (6) the denial of removal by
the Bankruptcy Court for the Middle District of Tennessee
regarding Copelin's state court action s against Spirco and
Innovo did not bar the reorganized debtor from enjoining
Copelin's collection efforts. See In re Spirco, Inc., 201 B.R.
744 (Bankr. W.D. Pa. 1996).

Copelin appealed the Bankruptcy Court's decision to the
United States District Court for the Western District of
Pennsylvania. The District Court concluded that: (1)
whether Copelin could execute on the state court judgment
was a non-core matter related to a case arising under title
11; (2) Copelin's state court lawsuit was against Innovo, not
Spirco; (3) Copelin's collection efforts did not involve rights
created by bankruptcy law; (4) the discharge of Innovo
under the Amended Plan was limited to "those claims and
interest against Spirco" and that Class 8 claims included
only those "upon which [Innovo] is liable, by guaranty or
otherwise"; (5) there was no evidence that Innovo was a
guarantor of Spirco; and (6) the preclusive effect accorded
the orders confirming the Amended Plan and classifying the
claims by the bankruptcy court was too broad. See In re
Spirco, Inc., 221 B.R. 361 (W.D. Pa. 1998).

The District Court ordered the Bankruptcy Court to
recognize the state court judgment against Innovo for
$100,000 plus costs.

6
II.

A. Jurisdiction

28 U.S.C. S 157 sets forth the jurisdiction of the
bankruptcy courts. It states in pertinent part:

(b)(1) Bankruptcy judges may hear and determine all
cases under title 11 and all core proceedings arising
under title 11, or arising in a case under title 11,
referred under subsection (a) of this section, and may
enter appropriate orders and judgments, subject to
review under section 158 of this title.

(2) Core proceedings include, but are not limited to-

(A) matters concerning the administration of the
estate;

. . .

(I) determinations as to the dischargability of
particular debts;

(J) objections to discharges;

(K) determinations of the validity, extent, or priority
of liens;

(L) confirmation of plans

. . .

(c)(1) A bankruptcy judge may hear a proceeding that
is not a core proceeding but that is otherwise related to
a case under title 11. In such proceeding, the
bankruptcy judge shall submit proposed findings of
fact and conclusions of law to the district court, and
any final order or judgment shall be entered by the
district judge after considering the bankruptcy judge's
proposed findings and conclusions after reviewing de
novo those matters to which any party has timely and
specifically objected.

In sum, as the Bankruptcy Court for the Western District
of Pennsylvania correctly observed, its jurisdiction extends
over four types of matters: (1) title 11 cases, (2) proceedings
that arise under title 11, (3) proceedings that arise in a case

7
under title 11, and (4) proceedings related to a case under
title 11. See Spirco, 201 B.R. at 748; 28 U.S.C. SS 1334(a),
(b). We conclude that the Bankruptcy Court had
jurisdiction because this matter is a "proceeding related to
a case under title 11."

A proceeding is related to a case under title 11 if it "could
conceivably have any effect on the estate being
administered in bankruptcy" such that " `it is possible that
[the] proceeding may impact on the debtor's rights,
liabilities, options, or freedom of action or the handling and
administration of the bankrupt estate.' " Halper v. Halper,
164 F.3d 830, 837 (3d Cir. 1999) (quoting In re Guild &
Gallery Plus, Inc., 72 F.3d 1171, 1181 (3d Cir. 1996) (other
citations and quotations omitted)); see also United States
Trustee v. Gryphon at the Stone Mansion, Inc., 166 F.3d
552, 556 (3d Cir. 1999) (noting that test to determine if
matter is "related to" a bankruptcy is whether the outcome
of the proceeding could conceivably have any effect on the
estate being administered in bankruptcy). As we reaffirmed
in Halper, the key word "is `conceivable.' Certainty, or even
likelihood [of effect on the estate being administered in
bankruptcy] is not a requirement." 164 F.3d at 837
(quoting In re Guild, 72 F.3d at 1181) (other quotations
omitted). Thus, jurisdiction is a threshold issue determined
by speculating whether the ultimate outcome of the
litigation could conceivably affect the bankrupt estate.
Here, the Bankruptcy Court had jurisdiction to hear
Spirco's, as merged into Innovo, motion to enforce the
terms of the Bankruptcy Plan of Reorganization because
resolution of that motion may arguably have had an impact
on Spirco's bankruptcy. That the underlying issue is
enforcement of a state court judgment is irrelevant to our
analysis of the Bankruptcy Court's jurisdiction.

B. Standard of Review

The scope of our review critically depends on the nature
of the Bankruptcy Court's and the District Court's
jurisdiction. In a core case, a bankruptcy court can enter a
final judgment over which a District Court can exercise only
appellate review. See 28 U.S.C. SS 157(b)(1), 158(a). During
a non-core proceeding, however, a bankruptcy court can

8
only issue proposed findings and conclusions; the district
court alone can enter final judgment, and exercise de novo
review of the bankruptcy court's proposals. See 28 U.S.C.
S 157(c)(1). In either case, we have appellate jurisdiction
over the district court's final decision. See 28 U.S.C.
SS 158(d), 1291. The nature of the bankruptcy and the
district court's jurisdictions, however, determines whether
we are reviewing the final decision of the bankruptcy court
or the district court, i.e., to whose fact-finding we owe
clear-error deference. See Halper, 164 F.3d at 836 ("[A]
proceeding's core or non-core nature is crucial in
bankruptcy cases because it defines both the extent of the
Bankruptcy Court's jurisdiction, and the standard by which
the District Court reviews its factual findings.").

A core proceeding, " `invokes a substantive right provided
by title 11 or . . . by its nature, could arise only in the
context of a bankruptcy case.' " Id. (quoting In re Guild, 72
F.3d at 1178). When reviewing a core proceeding, we accept
the Bankruptcy Court's findings of fact unless clearly
erroneous. See id. at 835.

In contrast, a non-core proceeding belongs to "the
broader universe of all proceedings that are not core
proceedings but are nevertheless `related to' a bankruptcy
case." Id. at 837. Thus, a "non-core" matter may include a
proceeding that is not against the debtor or the debtor's
property. See id. When reviewing a non-core proceeding, we
treat the district court as the trial court, accepting its
findings of fact unless clearly erroneous. See 28 U.S.C.
S 157. Of course, conclusions of law are reviewed de novo
in both core and non-core proceedings. See id.

The Bankruptcy Court for the Western District of
Pennsylvania opined that Spirco's motion to enforce the
terms of the Reorganized Plan and enjoin enforcement of
the state court judgment against Innovo was a core
proceeding because "[s]uch a request would arise only in
the context of a bankruptcy case wherein a plan of
reorganization was confirmed and debtor had received a
discharge." Spirco, 201 B.R. at 748. Innovo claims that
" `[b]ut for' the filing of the Chapter 11 case by `Spirco' and
the terms of its Plan, `Copelin' would have been free to

9
pursue collection from `Spirco' or `Innovo' or both, until his
claim was satisfied." Appellants' Br. at 26-27. We disagree.

At issue here is whether Copelin has the right to collect
his judgment from Innovo, a non-debtor who became
involved in a bankruptcy court proceeding through the
confirmation of an Amended Plan. This, we conclude, is a
non-core proceeding. See Northern Pipeline Construction Co.
v. Marathon Pipe Line Co., 458 U.S. 50, 102 S. Ct. 2858
(1982) (criticizing the exercise of jurisdiction by a non-
Article III judge over a state law claim that was connected
to a bankruptcy solely because the plaintiff filed a petition
for bankruptcy). Indeed, it would be inconsistent with
Northern Pipeline to require Copelin to have his rights
determined by a non-Article III court simply because Innovo
invoked the protection of the bankruptcy court through a
bankruptcy court procedure. It is clear from the record that
Copelin sued and won a state court judgment against
Innovo, not Spirco. Innovo remained a party to the action
after Copelin filed a notice of non-suit against Spirco
because Innovo was originally a party to the Employment
Agreement.2 Additionally, by the very terms of the
_________________________________________________________________

2. The Tennessee state court concluded that Spirco was not an
indispensable party. Tennessee's Rules of Civil Procedure state:

Rule 19. Joinder of Persons Needed for Just Adjudication.

19.01 Persons to Be Joined if Feasible. A person subject to the
jurisdiction of the court shall be joined as a party if (1) in the
person's absence complete relief cannot be accorded among those
already parties, or (2) the person claims an interest relating to
the
subject of the action and is so situated that the disposition of
the
action in the person's absence may (i) as a practical matter impair
or impede the person's ability to protect that interest, or (ii)
leave
any of the persons already parties subject to a substantial risk of
incurring double, multiple, or otherwise inconsistent obligations
by
reasons of the claimed interest. If the person has not been so
joined,
the court shall order that the person be made a party. If the
person
properly should join as a plaintiff but refuses to do so, he or she
may be made a defendant, or in a proper case, an involuntary
plaintiff. This rule shall be construed to allow joint tort-feasors
and
obligors on obligations that are joint and several to be sued
either
 jointly or severally.

Tenn. R. Civ. P. 19.01.

10
Reorganization Plan, Innovo is not the debtor. Copelin's
judgment resulted from a "garden variety contract claim
[against Innovo,] and is not against the bankrupt estate."
Beard v. Braunstein, 914 F.2d 434, 444 (3d Cir. 1990)
(holding that RICO and state law alter ego and common law
fraud claims brought against shareholders, officers,
directors and managing agents of a corporation thatfiled
bankruptcy were not barred by the bankruptcy court's
order confirming the Reorganization Plan, in part, because
"the bankruptcy court would not have had jurisdiction to
hear [the plaintiff 's] claims against the defendants").
Copelin's judgment did not result from a claim filed against
a debtor that invoked bankruptcy law. Thus, the District
Court properly concluded,

the efforts to execute on the judgment are not against
the debtor . . . [because] they do not seek to satisfy the
state court judgment by obtaining any property of the
bankruptcy estate. . . . Copelin's efforts to collect on
the judgment do not involve rights created by
bankruptcy law, [therefore], the issue before[this
court] is not of the type which arises only in the
context of a bankruptcy case.

Spirco, 221 B.R. at 367 (citing Beard, 914 F.2d at 444).

We reject Innovo's assertions urging us to hold that a
non-debtor party who is independently liable on a state
court judgment may subvert that judgment and invoke core
treatment from a bankruptcy court simply by assuming
obligations of a debtor who is also obligated to the same
creditor. Both the Bankruptcy Court and Innovo
characterize the issue as "debtor['s] request[ ][of]
enforcement of the injunction arising from plan
confirmation against efforts by a pre-petition creditor to
collect a debt owed to that creditor by debtor and a third
party." Spirco, 201 B.R. at 749. However, the debt is owed
only by Innovo, the third party. The fact that Spirco merged
into Innovo with Innovo as the surviving corporation does
not does not change our analysis.

The proceeding was non-core, therefore, the Bankruptcy
Court's jurisdiction arose under 28 U.S.C. S 157(c)(1), and
we exercise jurisdiction under 28 U.S.C. S 1291. As such,

11
the Bankruptcy Court's findings and conclusions are mere
recommendations entitled to no deference, and the District
Court's findings of fact are subject to review for clear error.

C. Is Copelin's Claim Against Innovo a
Class 8 Claim Under the Terms of the Plan and
the Bankruptcy Court Order?

We also reject Innovo's assertion that the language and
terms of the Reorganization Plan included Copelin's state
court judgment against Innovo. First, the terms of the
Reorganization Plan and the Bankruptcy Court Order dated
November 18, 1994, expressly limits the discharge of
Innovo's liability. See, e.g., Art. II(H) ("Class 8 consists of
holders of Allowed General Unsecured Claims upon which
[Innovo] is liable, by guaranty or otherwise, as established
by (a) the entry of a Final Order upon motion filed by
Debtor or Class 8 Claimant, or (b) written acknowledgment
of [Innovo]."); Art. III ("Innovo shall acquire all assets and
powers belonging to the Debtor but shall incur liability of
[Spirco] only as provided for in this Plan."); Art. X(C) ("At no
time shall [Innovo] be deemed a debtor. [Innovo] shall incur
no obligations as a result of such merger except as
specifically provided in the Plan."); Art. X(D)("Upon the
Effective Date, [Spirco] shall receive a discharge pursuant
to Section 1141 of the Bankruptcy Code. The discharge of
[Spirco] shall also effect a discharge of[Innovo with] respect
to all claims and interests against Spirco, Inc.").

Importantly, although the Bankruptcy Court classified
Copelin's claim as a Class 8 claim, the express terms of the
Order do not encompass Innovo's independent liability to
Copelin. The Order of the Court dated November 8, 1994,
states in relevant part:

1. Each of the named Respondents herein have
initiated Litigation against Innovo Group, Inc. in an
effort to establish Innovo Group, Inc. liability[sic] for
[Spirco's] obligations to such Respondents;

2. Each of the named Respondents herein shall be
and are deemed to be holders of Disputed Class 8
claims against [Spirco] as provided in the confirmed
Plan of Reorganization;

12
 3. In the event that Respondents, or any one of them,
obtain a final Order of Court in the aforesaid Litigation
establishing Innovo group, Inc. liability [sic] for the
Debtors obligations, then such Respondent shall be
deemed to have an Allowed Class 8 claim payable
pursuant to the terms of the confirmed Plan of
Reorganization.

Appellants' App. at 193-94. The plain language in the
Reorganization Plan and the Order classifying claims
reveals that judgments entered against Innovo individually,
without reference to Spirco's liability, do not fall within any
of these provisions.

Second, the Tennessee state judgment does not indicate
that Innovo's liability was contingent on Spirco's liability.
The Bankruptcy Court's faulty analysis is evident in its
characterization of Spirco's motion to enforce the terms of
the Reorganization Plan. The Bankruptcy Court premised
its decision on the statement that "debtor Spirco, Inc. has
moved for an order enforcing the provision of its confirmed
plan of reorganization which prohibits respondent Wayne
Copelin from continuing his efforts in another forum to
collect from Innovo Group, Inc. on a pre-petition debt owed
by debtor and guaranteed by Innovo." Spirco, 201 B.R. at
746. The Tennessee state court, however, found that Innovo
was independently liable, not liable as a guarantor.3

Because Spirco's Reorganization Plan and the
classification of claims by their terms do not apply to
Copelin's state court judgment against Innovo, Stoll v.
Gottlieb, 305 U.S. 165, 59 S. Ct. 83 (1938), Chicot County
Drainage District v. Baxter State Bank, 308 U.S. 371, 60 S.
Ct. 317 (1940), and In re Szostek, 886 F.2d 1405, 1408-10
(3d Cir. 1989), are not controlling. As explained, the
Reorganization Plan expressly limits the discharge of
Innovo's obligations to those "claims and interest against
Spirco" "upon which [Innovo] is liable by guaranty or
otherwise, as established by (a) the entry of afinal Order
upon motion filed by Debtor or Class 8 Claimant, or (b)
written acknowledgment of [Innovo]." Appellants' App. at
_________________________________________________________________

3. Innovo concedes that the Tennessee state court found Innovo
separately liable to Copelin.

13
65, Article II(H); Appellee's App. at 23, Article X(D). There is
no indication that Innovo's liability on the Tennessee state
court judgment arises from either of these two situations.
Moreover, the Reorganization Plan makes it clear that
despite the merger of Spirco and Innovo, Innovo is not the
debtor; therefore, Innovo's protections under Spirco's
Reorganization Plan are limited. Appellee's App. at 23,
Article X(C); Article X(D).

Finally, reading the plan to allow a general discharge of
Innovo is incorrect. Generally, independent obligations of a
parent corporation are not discharged by its subsidiary's
bankruptcy absent a general discharge provision. To the
contrary, the general rule of First Fidelity Bank v. McAteer,
985 F.2d 114 (3d Cir. 1993), controls. In McAteer, we said:

While it is true that the bankruptcy court's
confirmation of the amended plan binds the debtor and
all creditors vis-a-vis the debtor, it does not follow that
a discharge in bankruptcy alters the right of the
creditor to collect from third parties. Section 524(e)
specifically limits the effect of a discharge. It provides
that ". . . discharge of a debt of the debtor does not
affect the liability of any other entity on, or the
property of any other entity for, such debt." This
section assures creditors that the discharge of a debtor
will not preclude them from collecting the full amount
of a debt from co-debtors or other liable parties.

Id. at 118 (quoting 11 U.S.C. S 524(e)) (emphasis added).

In sum, the District Court did not err by determining that
Copelin's claim against Innovo does not qualify as a Class
8 claim. There is no evidence that Innovo's liability on the
Employment Agreement is contingent on Spirco's liability.
Further, the release provision is limited in scope. When
read in context with other provisions of the plan, it is clear
that this discharge provision is limited to those claims and
obligations upon which Innovo's liability results from
"claims and interest against Spirco" or Innovo's status as
"guaranty or otherwise, as established by (a) the entry of a
final Order upon motion filed by Debtor or Class 8
Claimant, or (b) written acknowledgment of [Innovo]."
Appellants' App. at 65; Appellee's App. at 23. We hold that

14
the state court judgment rendered against Innovo does not
fall within the plain terms of Spirco's Plan of
Reorganization. We will affirm the District Court's denial of
Spirco's motion to enjoin Copelin's enforcement of the state
court judgment.4

III.

In conclusion, Copelin holds a judgment against Innovo
for breach of contract, breach of the covenants of good faith
and fair dealing, and promissory estoppel. The District
Court correctly decided that Copelin's judgment against
Innovo does not fall within the terms of either the
Reorganization Plan or the Bankruptcy Court's order that
any final order establishing Innovo's liability for Spirco's
obligations be classified as an Allowed Class 8 claim.
Therefore, we affirm.

A True Copy:
Teste:

Clerk of the United States Court of Appeals
for the Third Circuit
_________________________________________________________________

4. Because we affirm the District Court, we need not address Copelin's
other arguments.

15