Autumn Wind Lending, LLC v. Estate of John J. Siegel, deceased, by

RECOMMENDED FOR PUBLICATION
Pursuant to Sixth Circuit I.O.P. 32.1(b)
File Name: 24a0025p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
AUTUMN WIND LENDING, LLC,
Plaintiff-Appellant,
v.
ESTATE OF JOHN J. SIEGEL, deceased, by and through
the Executor or Personal Representative; CECELIA
FINANCIAL MANAGEMENT, LLC; HALAS ENERGY,
LLC; OASIS AVIATION LLC,
Defendants-Appellees.
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No. 23-5476
Appeal from the United States District Court for the Western District of Kentucky at Louisville.
No. 3:22-cv-00255—Rebecca Grady Jennings, District Judge.
Decided and Filed: February 8, 2024
Before: COLE, GILMAN, and LARSEN, Circuit Judges.
_________________
COUNSEL
ON BRIEF: Robert M. Hirsh, Michael A. Kaplan, Rasmeet K. Chahil, LOWENSTEIN
SANDLER LLP, New York, New York, for Appellant. David M. Cantor, William P. Harbison,
Joseph H. Haddad, SEILLER WATERMAN, LLC, Louisville, Kentucky, for Appellees.
_________________
OPINION
_________________
RONALD LEE GILMAN, Circuit Judge. Insight Terminal Solutions, LLC (Insight)
brought an adversary proceeding in bankruptcy court against all the defendants named in this
lawsuit, alleging claims that were dismissed with prejudice by the bankruptcy court based upon
the parties’ stipulation to do so. Autumn Wind Lending, LLC (Autumn Wind) was not itself a
>

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party to the adversary proceeding, but it became the parent company of Insight prior to Insight
initiating its lawsuit in the bankruptcy court.
The question before us is whether the doctrine of res judicata bars Autumn Wind from
now bringing these same claims against the same defendants who were absolved of liability to
Insight as part of the bankruptcy court proceedings. For the reasons set forth below, we
REVERSE the judgment of the district court dismissing Autumn Wind’s claims on the basis of
res judicata and REMAND the case for further proceedings consistent with this opinion.
I. BACKGROUND
In September 2018, Autumn Wind and Insight entered into a loan and security agreement
(the Agreement). Autumn Wind initially agreed to lend Insight $6,800,000, and later amended
the Agreement to lend an additional $300,000. Insight represented to Autumn Wind, as part of
the Agreement, that it did not have any existing indebtedness, and it agreed not to incur any
future debt while the loan was outstanding without Autumn Wind’s consent.
Insight failed to repay the loan when it matured in June 2019. Shortly thereafter, Insight
filed for bankruptcy in the United States Bankruptcy Court for the Western District of Kentucky.
John J. Siegel, now deceased, was the manager of Insight prior to its bankruptcy. He also
served as the manager of three family enterprises, Cecelia Financial Management, LLC
(Cecelia), Halas Energy, LLC (Halas), and Oasis Aviation, LLC (Oasis), each of which filed a
proof of claim in the bankruptcy proceedings. Cecelia claimed $6,044,190.20 for money loaned,
Halas claimed $37,828.57 as reimbursement charges, and Oasis claimed $6,737.73 for travel
expenses. Each claim represented debts that Insight had incurred in violation of its Agreement
with Autumn Wind.
In April 2020, Autumn Wind submitted a Chapter 11 reorganization plan to the
bankruptcy court, which the court confirmed. The confirmed plan transferred all equity interest
in Insight to Autumn Wind, thus making Insight a wholly owned subsidiary of Autumn Wind.
Insight then filed an adversary complaint in the bankruptcy court in April 2021. The adversary
complaint primarily sought recharacterization, disallowance, and/or reduction of the proofs of

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claims filed. But Insight also sought damages based on allegations of fraudulent
misrepresentation by Siegel and tortious interference by Siegel, Cecelia, Halas, and Oasis. All
parties later stipulated, in September 2021, to dismiss the fraudulent-misrepresentation and
tortious-interference claims with prejudice.
Although Autumn Wind was never a party to the bankruptcy adversary proceeding, it was
the parent company of Insight for the entirety of the proceeding. Autumn Wind nevertheless
brought a separate suit in the United States District Court for the Southern District of New York
in February 2022, asserting fraud against Siegel and tortious interference against Siegel, Cecelia,
Halas, and Oasis (collectively, the Defendants). The lawsuit was transferred to the United States
District Court for the Western District of Kentucky, and Autumn Wind later filed an amended
complaint naming the executor of Siegel’s estate after Siegel died.
In June 2022, the Defendants jointly moved to dismiss the complaint, arguing that
Autumn Wind’s claims were barred by the res judicata effect of the bankruptcy court’s adoption
of Autumn Wind’s reorganization plan. The district court denied the motion. Meanwhile, the
bankruptcy court partially granted Insight’s motion for summary judgment by disallowing the
proofs of claim filed by Halas and Oasis, but it held a bench trial on Cecelia’s proof of claim.
On the same day that the district court denied the Defendants’ motion to dismiss, the bankruptcy
court entered a final judgment against Insight that allowed the Cecelia claim. The bankruptcy
court’s final judgment incorporated the September 2021 stipulation between the parties to
dismiss with prejudice Insight’s fraudulent-misrepresentation and tortious-interference claims
against the Defendants.
Soon thereafter, the Defendants filed a motion in the district court for reconsideration of
their denied motion to dismiss, arguing that Autumn Wind’s claims were now barred by the res
judicata effect of the bankruptcy court’s final judgment. The district court agreed. It then
dismissed the complaint, concluding that the Defendants had met their burden of proving that all
the elements of res judicata had been satisfied. This timely appeal followed.

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II. ANALYSIS
A. The entry of final judgment in the bankruptcy court does not preclude Autumn Wind’s
claims
“Pursuant to the doctrine of res judicata, ‘a final judgment on the merits bars further
claims by parties or their privies based on the same cause of action.’” Bragg v. Flint Bd. of
Educ., 570 F.3d 775, 776 (6th Cir. 2009) (quoting Montana v. United States, 440 U.S. 147, 153
(1979)). Autumn Wind argues that the district court erred in concluding that the doctrine applies
to Autumn Wind’s present lawsuit. Specifically, Autumn Wind contends that its claims are not
barred because only one of the elements of res judicata is met.
We review de novo the district court’s application of res judicata. Browning v. Levy, 283
F.3d 761, 772 (6th Cir. 2002). “The party asserting the defense of res judicata bears the burden
of proof.” Winget v. JP Morgan Chase Bank, N.A., 537 F.3d 565, 572 (6th Cir. 2008). To
succeed on a res judicata defense, the proponent must prove each of the following elements:
1. A final decision on the merits in the first action by a court of competent
jurisdiction; 2. The second action involves the same parties, or their privies, as the
first; 3. The second action raises an issue actually litigated or which should have
been litigated in the first action; 4. An identity of the causes of action.
Sanders Confectionery Prods., Inc. v. Heller Fin., Inc., 973 F.2d 474, 480 (6th Cir. 1992)
(internal citations omitted).
Autumn Wind and the Defendants agree that the first element is satisfied because the
parties stipulated to the dismissal of Insight’s tortious-interference and fraud claims with
prejudice, but they dispute the remaining elements. The failure to prove any element renders the
application of res judicata inappropriate. Browning, 283 F.3d at 771. Because we conclude that
the Defendants cannot establish the third element, Autumn Wind’s claims are not barred by res
judicata. We will therefore address only the third element.
That element requires a showing that “[t]he second action raises an issue actually
litigated or which should have been litigated in the first action.” Sanders, 973 F.2d at 480.
Autumn Wind argues that it could not have brought its claims in the adversary proceeding
because the bankruptcy court lacked subject-matter jurisdiction to hear them. Before reaching

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the question of whether Autumn Wind should have brought claims in its own name in the
bankruptcy court, however, we consider the effects of Insight’s September 2021 stipulated
dismissal of its claims with prejudice. If, after all, as the district court concluded, Insight is a
privy of Autumn Wind, then Autumn Wind would be bound by any res judicata effect of
Insight’s actions.
We conclude that Insight’s stipulated dismissal with prejudice does not bar Autumn
Wind’s present claims despite the district court’s observation that a stipulated dismissal with
prejudice “operates as a final adjudication on the merits.” See Warfield v. AlliedSignal TBS
Holdings, Inc., 267 F.3d 538, 542 (6th Cir. 2001). Contrary to the district court’s understanding,
the stipulated dismissal goes only to the first element of res judicata; it does not mean that the
claims were “actually litigated” or “should have been litigated.” See Sanders, 973 F.2d at 480.
“An issue is actually litigated when it ‘is properly raised, by the pleadings or otherwise, and is
submitted for determination, and is determined.’” In re Leonard, 644 F. App’x 612, 616 (6th
Cir. 2016) (quoting Restatement (Second) of Judgments § 27 cmt. d (Am. L. Inst. 1982)).
The issues underlying Insight’s purported claims against Siegel, Cecelia, Halas, and
Oasis were never determined by the bankruptcy court; rather, the dismissal was effective by
virtue of the parties’ stipulation, without any contestation or litigation and without any judicial
action. See Exact Software N. Am., Inc. v. DeMoisey, 718 F.3d 535, 540 (6th Cir. 2013) (quoting
Green v. Nevers, 111 F.3d 1295, 1301 (6th Cir. 1997)) (highlighting that stipulations of dismissal
are “‘self-executing’ and do ‘not require judicial approval’”); see also Levi Strauss Co.
v. Abercrombie & Fitch Trading Co., 719 F.3d 1367, 1372–73 (Fed. Cir. 2013) (noting that a
stipulated dismissal with prejudice counts as an adjudication on the merits but does not count as
the actual litigation of any issue); 18A Charles Alan Wright, Arthur R. Miller & Edward H.
Cooper, Federal Practice and Procedure § 4435 (3d ed. Aug. 2023 update) (“A stipulated
dismissal with prejudice operates as an adjudication on the merits for claim-preclusion purposes,
but ordinarily should not of itself count as the actual adjudication of any issue.”); cf. Semtek Int’l
Inc. v. Lockheed Martin Corp., 531 U.S. 497, 501 (2001) (cautioning against the assumption that
“all judgments denominated ‘on the merits’ are entitled to claim-preclusive effect”).

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Nor should Insight have litigated these claims in the adversary proceeding. Insight was
not the proper party to seek damages from the Defendants because Autumn Wind, not Insight,
was the entity that allegedly suffered the injury as a result of Insight breaching the terms of the
Agreement. See Carroll v. Hill, 37 F.4th 1119, 1121 (6th Cir. 2022) (quoting TransUnion LLC
v. Ramirez, 594 U.S. 413, 427 (2021)) (“A defendant’s alleged misconduct must ‘personally
harm the plaintiff.’”). Insight itself was not harmed when the Defendants loaned money to
Insight because Insight was obviously a willing participant. Insight was not forced to incur the
additional debt, nor was it misled by Siegel. Instead, Siegel served as the manager of Insight
when the company took on the debt, and thus Insight knew that accepting the new financing
would violate the Agreement. In sum, Insight had no cause of action against the Defendants for
the fraud and tortious-interference claims to begin with.
That leaves the question: should Autumn Wind have litigated these claims in the
adversary proceeding? Autumn Wind argued in its district-court briefing that, because it was not
a party to the adversary proceeding, its claims could not have been litigated in the bankruptcy
court. In its briefing on appeal, Autumn Wind now asserts that because Insight was the debtor,
the bankruptcy court lacked subject-matter jurisdiction over Autumn Wind’s claims. The
Defendants assert that Autumn Wind has forfeited that argument by failing to raise it before the
district court. Despite these different rationales, however, “as long as a claim or issue was raised
before the district court, a party may ‘formulate any argument it likes in support of that claim
here.’” Chelf v. Prudential Ins. Co. of Am., 31 F.4th 459, 468 (6th Cir. 2022) (cleaned up)
(quoting Yee v. City of Escondido, 503 U.S. 519, 534–35 (1992)). Challenging the subject-
matter jurisdiction of the bankruptcy court “is merely an argument in support of” Autumn
Wind’s basic position regarding this third element of res judicata. See id.
We thus conclude that Autumn Wind has not forfeited its argument on appeal, leaving us
free to address the merits of the issue. We agree with Autumn Wind that it could not have
brought its claims in the adversary proceeding on its own behalf. Indeed, as Autumn Wind now
recognizes, “[Insight] dismissed Count VII of its Complaint in the Adversary Proceeding as
those claims belonged to [Autumn Wind] (a non-debtor), not [Insight].”

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In response, the Defendants argue that the bankruptcy court would have had
supplemental jurisdiction under 28 U.S.C. § 1367 over Autumn Wind’s claims. Autumn Wind
replies that whether bankruptcy courts may exercise supplemental jurisdiction is an open
question in the Sixth Circuit, noting that most federal courts have determined that bankruptcy
courts lack such jurisdiction.
The claims raised by Insight in the adversary proceeding and by Autumn Wind in the
present case are nearly identical. Count VII of Insight’s adversary complaint alleged that Siegel
committed fraud by concealing Insight’s then-existing indebtedness when the Agreement was
entered into by Autumn Wind. In the present complaint, Autumn Wind alleges that Siegel
fraudulently misrepresented Insight’s indebtedness, thereby inducing Autumn Wind to enter the
Agreement. The adversary complaint further alleged that the Defendants tortiously interfered
with Insight’s performance under the Agreement by impermissibly increasing Insight’s
indebtedness. Similarly, the present complaint alleges that the Defendants tortiously interfered
with Insight’s performance of its obligations under the Agreement by causing Insight to take on
additional debt without Autumn Wind’s consent.
The reason for this near identity of pleadings is due to the adversary complaint
comingling the claims of Autumn Wind and Insight without recognizing the corporate
separateness of these two entities. Although the stipulation in the bankruptcy court does not
detail why Insight agreed to dismiss Count VII of its adversary complaint, the record leaves little
doubt that Autumn Wind and Insight belatedly came to the realization that the claims belong
solely to Autumn Wind. Autumn Wind’s present complaint concedes this point by noting that
the parties to the adversary proceeding in the bankruptcy court stipulated to the dismissal of
Insight’s claims because “[Autumn Wind]’s claims against Defendants have not, and will not be
resolved as part of the Bankruptcy action.”
Contrary to the Defendants’ contentions, Autumn Wind could not have pursued such
claims in the adversary proceeding because Autumn Wind and the Defendants are both creditors
of Insight, and the bankruptcy court lacks related-to jurisdiction to adjudicate a prepetition
dispute between these two creditors that would have no conceivable effect on the bankruptcy
estate. See Sanders Confectionary Prods., Inc. v. Heller Fin., Inc., 973 F.2d 474, 483 (6th Cir.

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1992) (“[A] bankruptcy court would not hear a case between two creditors based on their prior
dealings independent of the debtor.”); In re Wolverine Radio Co., 930 F.2d 1132, 1140–42 (6th
Cir. 1991) (quoting Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3d Cir. 1984), overruled on other
grounds by Things Remembered, Inc. v. Petrarca, 516 U.S. 124, 129 (1995)) (concluding that a
proceeding is within a bankruptcy court’s related-to jurisdiction only if “the outcome of that
proceeding could conceivably have any effect on the estate being administered in bankruptcy”).
Moreover, the conceivable-effect test applies only to related-to jurisdiction, and the Defendants
acknowledge that neither arising-under nor arising-in jurisdiction is implicated. They solely
argue that there is related-to jurisdiction here.
The Defendants also argue that the bankruptcy court’s related-to jurisdiction includes
supplemental jurisdiction under 28 U.S.C. § 1367. But, as explained above, the bankruptcy court
had no related-to jurisdiction over Autumn Wind’s fraud and tortious-interference claims against
the Defendants. We thus have no need to explore the open question in this circuit of whether a
bankruptcy court has supplemental jurisdiction under 28 U.S.C. § 1367. See In re Bruemmer
Dev., LLC, 515 B.R. 551, 560–61 (Bankr. E.D. Mich. 2014) (discussing the split of authority on
this issue and noting that the Sixth Circuit has not addressed the question directly); see also In re
Wolverine Radio Co., 930 F.2d at 1140–45 (endorsing a narrow view of bankruptcy courts’
jurisdiction, holding that “the bankruptcy court’s jurisdiction over a case involving nondebtors
[is] to be determined solely by 28 U.S.C. § 1334(b)”).
In conclusion, the Defendants have failed to establish the third element of res judicata.
Autumn Wind’s claims are therefore not precluded by the bankruptcy court’s final judgment.
B. The Defendants’ alternative argument
The Defendants alternatively argue that we should affirm the judgment of the district
court because the confirmation of the Chapter 11 reorganization plan precludes Autumn Wind’s
claims. They raised this argument before the district court, which disagreed.
As a threshold matter, Autumn Wind contends that the Defendants’ argument is now
barred because they failed to file a cross-notice of appeal as required by Rule 4(a)(3) of the
Federal Rules of Appellate Procedure. Rule 4(a)(3)’s cross-notice of appeal requirement is a

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claim-processing rule and is not jurisdictional. Georgia-Pac. Consumer Prods. LP v. NCR
Corp., 40 F.4th 481, 487 (6th Cir. 2022). “An appellee who does not take a cross-appeal may
‘urge in support of a decree any matter appearing in the record, although his argument may
involve an attack upon the reasoning of the lower court.’” Jennings v. Stephens, 574 U.S. 271,
276 (2015) (quoting United States v. Am. Ry. Exp. Co., 265 U.S. 425, 435 (1924)). Here, the
Defendants’ alternative argument “merely asserts additional grounds” to affirm the dismissal
granted by the district court. See Am. Ry. Exp. Co., 265 U.S. at 436. The Defendants do not ask
us to “provide relief beyond the district court’s determination,” so a cross-notice of appeal is not
required here. See Georgia-Pac. Consumer Prods. LP, 40 F.4th at 483.
We therefore turn to the merits of the issue. Autumn Wind contends that we should
adopt the district court’s reasoning that the plain language of the reorganization plan released
Autumn Wind’s claims against Insight, but not against the Defendants. The Defendants do not
contend that they received an express release under the plan. Rather, they argue that the plan
satisfied all “Obligations” of Insight to Autumn Wind under the initial term loan and that those
“Obligations” included all of Autumn Wind’s damages arising from Insight’s breach. According
to the Defendants, if the plan satisfied “all damages” from the breach, there can be no remaining
recovery for tortious inducement of that breach, so the Defendants should be “effectively
released from liability.”
The authority that the Defendants rely upon does not support this premise. The claims
here are related to intentional torts, not to a guarantor’s liability for a debt satisfied in
bankruptcy. Nor does the potential overlap in damages for breach of contract and tortious
interference serve to bar either claim. See, e.g., Midwest Precision Servs., Inc. v. PTM Indus.
Corp., 887 F.2d 1128, 1138 (1st Cir. 1989) (holding that “the issue of double recovery should be
resolved after rather than before the jury has returned a verdict on each claim”); Monumental
Life Ins. Co. v. Nationwide Ret. Sols., Inc., 242 F. Supp. 2d 438, 450 (W.D. Ky. 2003) (finding
“incorrect” the statement that the damages for breach of contract and tortious interference are
“identical” because tortious interference allows punitive damages); Restatement (Second)
Torts § 774A(2) (holding that any overlap in damages in claims for tortious interference and
breach of contract “does not affect the damages awardable,” but that any overlap might “reduce

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the damages actually recoverable on the judgment”). In sum, we agree with the district court that
the plan does not release the Defendants from liability for Autumn Wind’s claims.
III. CONCLUSION
For all of the reasons set forth above, we REVERSE the judgment of the district court
and REMAND the case for further proceedings consistent with this opinion.

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