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UNITED STATES COURT OF APPEALS
For the Fifth Circuit
No. 94-30179
ALVIN C. COPELAND, ET AL.,
Plaintiffs,
ALVIN C. COPELAND,

Plaintiff-Appellant.
versus
MERRILL LYNCH & CO., INC., ET AL.,
Defendants,
MERRILL LYNCH & CO., INC.,
Defendant-Appellee.
* * * * * * * * * * * * * * * * * * * * * *
ALVIN C. COPELAND,
Plaintiff,
versus
AMERICA'S FAVORITE CHICKEN COMPANY, ET AL.,
Defendants.
* * * * * * * * * * * * * * * * * * * * * *
ALVIN C. COPELAND,
Plaintiff-Appellant,
versus
MERRILL LYNCH & CO., INC., ET AL.,
Defendants,
MERRILL LYNCH & CO., INC.,
Defendant-Appellee.

Appeal from the United States District Court
For the Eastern District of Louisiana
(March 9, 1995)
Before R. GARZA, DeMOSS, BENAVIDES, Circuit Judges.
DeMOSS, Circuit Judge:
In 1989, Alvin C. Copeland (Copeland), founder and
franchisor of Popeye's Famous Fried Chicken decided to acquire
competitor Church's Fried Chicken. After an acquisition and
merger, the emerging company, Al Copeland Enterprises, Inc.
(ACE), was the obligor on loans in the amount of $173 million
from Merrill Lynch and $300 million from Canadian Imperial Bank
of Commerce, Inc. (CIBC). Financial difficulties ensued, and ACE
defaulted on the obligations. In April 1991, ACE entered Chapter
11 bankruptcy in the bankruptcy court for the Western District of
Texas. Copeland, individually, brought the instant breach of
contract action as an adversary proceeding in the ACE bankruptcy,
claiming that Merrill Lynch and CIBC failed to perform under an
agreement to submit a joint plan for ACE's reorganization to the
bankruptcy court. After traveling through the tangled web of
proceedings detailed below, the case landed in the Eastern
District of Louisiana. That court granted summary judgment in
favor of Merrill Lynch on Copeland's breach of contract claim,
finding that no binding agreement had ever been reached by the
2

parties, and Copeland appealed.1 After a thorough review of the
record, we conclude that there was no genuine fact issue and
therefore affirm the district court's holding that no agreement
was ever reached.
I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY
ACE's DIP Financing Motion
While the ACE bankruptcy was pending, Copeland, Merrill
Lynch, ACE, CIBC and the creditors committee tried to obtain a
consensus on a reorganization plan. As a condition to any
agreement, CIBC demanded that ACE bring current pre- and post-
petition interest on the defaulted debt. In July 1991, ACE moved
for authority to arrange a debtor-in-possession financing
facility (the DIP financing) to bring the interest arrears
current. After objections to the DIP financing were raised by
Merrill Lynch, the Church's Independent Franchises Association
and the State of Texas, the parties feverishly negotiated amongst
themselves to satisfy the various objectors and come up with a
framework for a reorganization plan that would persuade the court
to authorize the DIP financing.
On July 31, 1991, the bankruptcy court held a hearing on
ACE's motion for DIP financing. Disagreement about what occurred
in that hearing forms the basis of this lawsuit. Copeland claims
that the parties entered into a binding agreement in this hearing
to submit a joint plan of reorganization according to the terms
1CIBC was dismissed from the case by joint stipulation of
Copeland and CIBC and entry of rule 54(b) judgment.
3

announced in the hearing (the July 31 Agreement). Merrill Lynch
claims that the only event of legal significance that occurred in
the hearing was that the court approved the DIP financing. Under
the plan discussed in the hearing, Copeland individually was to
receive substantial cash and other assets (in excess of $30
million) for entering into four agreements with ACE: (1) a non-
compete agreement; (2) a new supply agreement; (3) a settlement
agreement; and (4) a formula and recipe agreement (the Copeland
Agreements). Copeland sued for breach of the alleged July 31
agreement in general and for breach of the Copeland Agreements in
particular.
At the conclusion of the hearing, the bankruptcy court
granted the requested approval for DIP financing, stressing the
importance of the fact that there was "the potential of seeing a
consensual plan of reorganization." Needless to say, the plan
alluded to in the July 31 hearing was never submitted to the
court. After due diligence and further negotiation, the parties
were unable to reach a final consensus concerning material terms
of the reorganization plan, including the Copeland Agreements.
Competing Plans for Reorganization and the Genesis of this Suit
In April 1992, CIBC submitted its own plan for reorganizing
ACE. Copeland objected to the CIBC plan because it did not
include certain favorable provisions of the Copeland Agreements.
After submission of both the CIBC and Copeland plans to creditor
vote the CIBC plan was adopted, over Copeland's objection.
Copeland responded in May 1992 by filing this action against
4

Merrill Lynch and CIBC, as an adversary proceeding in the
bankruptcy court. Count I of Copeland's complaint requested
specific performance by confirmation of the reorganization plan
allegedly agreed to in the July 31 hearing. Count II sought
money damages for breach of the July 31 agreement.
In October 1992, after a six-day hearing, the CIBC plan was
confirmed by the bankruptcy court. One term of the CIBC plan
compromised any claims ACE, the debtor, had against Merrill Lynch
and CIBC, one of which was the potential claim for breach of the
July 31 agreement.2 To determine whether compromise was in the
best interests of the estate, the bankruptcy court had to inquire
whether ACE had a viable breach of contract claim and whether the
potential recovery would return more to the estate than the plan
being confirmed. The bankruptcy court decided that, although the
debtor ACE and Copeland individually may have had a claim against
Merrill Lynch for not proceeding with the alleged July 31
Agreement, the proposed CIBC plan was more beneficial for the
estate and the creditors. Accordingly, the CIBC plan was
confirmed.
Bankruptcy Court's Continuing Jurisdiction over Copeland's Breach
of Contract Claim Following Confirmation of CIBC Plan
Following confirmation of the CIBC plan, the bankruptcy court
raised sua sponte the issue of whether it had continuing
jurisdiction over Copeland's individual claim for breach of the
2Debtor ACE also had other substantial claims against
Merrill Lynch based on Merrill Lynch's alleged failure to issue
junk bonds and arrange for certain mortgage financing prior to
the ACE bankruptcy.
5

alleged July 31 Agreement. After argument of counsel, the
bankruptcy court issued its Memorandum Opinion on Jurisdiction.
The Memorandum Opinion concluded that the bankruptcy court either
did not have or would decline to exercise continuing jurisdiction
over Copeland's individual contract claim. In core proceedings
under title 11 or arising in a case under title 11, the bankruptcy
court can enter final orders and judgments. 28 U.S.C. � 157(b)(1).
Bankruptcy judges may also hear non-core proceedings which are
related to the bankruptcy proceeding. 28 U.S.C. �157(c)(1). In
those cases, the bankruptcy court can recommend findings of fact
and conclusions of law to the district court, but cannot enter
final orders or judgment. 28 U.S.C. �157(c)(1). Copeland's
request for specific performance, the bankruptcy court held, was a
core claim that was mooted by the court's confirmation of the CIBC
reorganization plan. Copeland's damage claim, the court held, was
a non-core claim which could no longer have any conceivable effect
on the bankruptcy estate because many of the material issues,
including the existence and breach of the alleged July 31 Agreement
by Merrill Lynch, had already been litigated in the confirmation
hearings. See In re Wood, 825 F.2d 90, 93 (5th Cir. 1987)
(adopting the "conceivable effect on the estate" test for non-core
jurisdiction).
Despite the bankruptcy court's conclusion that it did not have
jurisdiction, the Memorandum Opinion reiterated the confirmation
hearing findings that Merrill Lynch, but not CIBC, had breached an
obligation to submit the joint reorganization plan announced in the
6

July 31 hearing. Relying on its asserted adjudication and release
of Merrill Lynch's liability to ACE, the bankruptcy court concluded
that Merrill Lynch would be precluded from litigating its liability
to Copeland individually. Thus, the only remaining issue was the
quantum of damages, regardless of where the matter was tried.
Since the outcome of the damage determination could have no effect
on the bankruptcy estate, the bankruptcy court decided that, even
if its conclusion that it lacked jurisdiction was incorrect, it
would decline to exercise jurisdiction over Copeland's non-core
claim and would transfer the case instead. On appeal, Copeland
claims that the bankruptcy court's findings, in the confirmation
hearing and the Memorandum Opinion, prohibit Merrill Lynch from
litigating either the existence or the breach of the July 31
Agreement.
Proceedings in the Western District of Texas

Merrill Lynch filed objections to the Memorandum Opinion
pursuant to Bankruptcy Rule 9033, which the bankruptcy court
denied.3 Shortly thereafter the bankruptcy court issued an order
transferring the case to the Eastern District of Louisiana, as
requested by Copeland. Merrill Lynch moved for leave to appeal the
order denying its objections and moved to stay transfer of the case
pending appeal. On Merrill Lynch's appeal to the Western District
3Bankruptcy Rule 9033 provides for de novo review by the
district court of written objections to proposed findings of fact
and conclusions of law entered by the bankruptcy court in a non-
core proceeding. FED. R. BANKR. P. 9033. Denying Merrill Lynch's
objections, the bankruptcy court stated that Rule 9033 was not
applicable because the disputed findings were made as part of its
core determination that it had no jurisdiction.
7

of Texas, the district court found that the bankruptcy court had
jurisdiction, not only over the specific performance request (core
proceeding), but also over the damages claim (a non-core
proceeding). The Western District therefore concluded that the
case was properly transferred and declined to consider the
substantive merits of Merrill Lynch's objections, stating that the
arguments could be raised before the district court in Louisiana.
Proceedings in the Eastern District of Louisiana
Once in the Eastern District of Louisiana, Copeland moved for
summary judgment, claiming that the doctrines of collateral
estoppel and law of the case precluded Merrill Lynch from
litigating its liability for breach of the July 31 Agreement. The
district court denied this motion, based on its judgment that the
bankruptcy court's compromise of Merrill Lynch's liability to ACE
in the confirmation process did not include litigation of Merrill
Lynch's liability to Copeland individually. The alleged July 31
Agreement, the court concluded, was merely an unenforceable
"agreement to agree." For its conclusion that there was no binding
agreement, the district court relied primarily on the uncertainty
of material terms and indications in the DIP financing hearing
transcript that everyone involved was aware that additional
negotiation would be required to "complete the deal." As to the
four Copeland Agreements, which were to be an integral part of the
reorganization plan, the district court found that they changed
substantially well after the July 31 hearing and likewise never
became final.
8

Based on the disposition of Copeland's motion, Merrill Lynch
filed its own motion for summary judgment, which was granted by the
district court. Despite a "voluminous record" and ample time for
discovery, the district court found that Copeland failed to create
a fact issue on elements essential to his case. We review the
district court's entry of summary judgment in favor of Merrill
Lynch de novo, applying the same standard as the district court.
Lemelle v. Universal Mfg. Corp., 18 F.3d 1268, 1272 (5th Cir.
1994). Summary judgment is appropriate when there is no genuine
issue of material fact and the moving party is entitled to judgment
as a matter of law. Id.
II. DISCUSSION
Copeland argues that the district court put "the cart before
the horse" by reaching the issue of whether there was an agreement,
instead of merely enforcing the bankruptcy court's findings in the
confirmation hearing (related to ACE's bankruptcy) and the
Memorandum Opinion (entered in this adversary proceeding) that
Merrill Lynch breached the July 31 Agreement. We conclude that the
statements made by the bankruptcy court in the confirmation
hearing, and reiterated in its Memorandum Opinion, did not bar
Merrill Lynch from litigating its liability to Copeland
individually.
Collateral Estoppel - The Confirmation Hearing
Copeland maintains that the statements made by the bankruptcy
court in ACE's confirmation hearing collaterally estop Merrill
Lynch from litigating the existence and breach of the alleged July
9

31 Agreement in this proceeding.4 Collateral estoppel applies to
bar litigation of an issue previously decided in another proceeding
by a court of competent jurisdiction when four conditions are met:
(1) the issue under consideration is identical to that litigated in
the prior action; (2) the issue was fully and vigorously litigated
in the prior action; (3) the issue was necessary to support the
judgment in the prior case; and (4) there is no special
circumstance that would make it unfair to apply the doctrine.
United States v. Shanbaum, 10 F.3d 305, 311 (5th Cir. 1994).
Merrill Lynch argues that it cannot be collaterally estopped
by findings made in the bankruptcy confirmation hearing because the
4The bankruptcy court made findings that ACE had a potential
claim against Merrill Lynch, but not CIBC, for breach of that
portion of the July 31 Agreement calling for submission of a
joint plan of reorganization. As to Copeland's individual claim,
the court stated:
Mr. Copeland put on evidence through Mr. Jenkins
and Mr. Talluto that the 7/31 agreement could have been
consummated. Even if that were proven without a shadow
of doubt, I do not find that that is a bar to
considering the confirmation of any other proposal put
on the table in good faith by any other party in
interest. All that means is that there are causes of
action that may exist, clearly that may exist in favor
of Mr. Copeland. And just as clearly, this plan does
not affect that cause of action one iota.
So the real issue to try and analyze is whether or
not the estate has a cause of action that should be
pursued instead of confirming the plan, and that goes
really to best interests, that is . . . going forward
against Merrill Lynch, what would be the prospect for
recovery?
Is there anything in this record that shows that
the prospect for recovery, under that scenario, for
this estate is any greater than what this estate is
getting under this plan? And I would answer that
question, "No."
10

court had, at best, non-core jurisdiction over Copeland's
individual claim, citing two cases decided by this Circuit which
suggest that judgments rendered in core bankruptcy proceedings are
not res judicata in non-core matters. See Howell Hydrocarbons,
Inc. v. Adams, 897 F.2d 183, 189-90 (5th Cir. 1990) (seller's RICO
claims against officers and director's of bankrupt buyer's parent
corporation not barred by bankruptcy proceedings of buyer and
parent corporation); Latham v. Wells Fargo Bank, N.A., 896 F.2d
979, 984 (5th Cir. 1990) (borrower corporation's compromise of
lender liability claims in bankruptcy confirmation did not bar
litigation of co-borrower corporation owner's claims for lender
liability in his individual capacity). Both Howell and Latham are
distinguishable as involving res judicata (or claim preclusion)
rather than collateral estoppel (or issue preclusion). Howell
relied in large part on the fact that there was no identity of
parties in the first and second proceeding, which is not a
requirement for collateral estoppel. Additionally, we recently
questioned whether Latham actually stands for the proposition that
bankruptcy jurisdiction must always be core to be "competent" for
res judicata purposes. See In re Baudoin, 981 F.2d 736, 741 n.10
(5th Cir. 1993). Because we find that the other requirements for
application of collateral estoppel are not met in this case, we
need not resolve that conflict.
Collateral estoppel does not preclude litigation of an issue
unless both the facts and the legal standard used to assess them
are the same in both proceedings. Recoveredge L.P. v. Pentecost,
11

No. 93-2523, slip op. at 2282 (5th Cir. Feb. 17, 1995) (even when
both suits arise out of the same factual setting, collateral
estoppel does not apply unless both suits involve application of
the same legal standard); Brister v. A.W.I., Inc., 946 F.2d 350,
354 & n.1 (5th Cir. 1991) (even when issues are stated in "nearly
identical language," collateral estoppel is unavailable when there
are disparate policies underlying each inquiry which result in
definite differences in application and result). Both the factual
issue and the legal analysis required in the ACE bankruptcy
confirmation hearing differ from the issue presented by Copeland's
individual breach of contract claim.
The issue presently under consideration is whether there was
a binding July 31 Agreement and whether Merrill Lynch breached any
obligation to Copeland individually under that agreement. The
objective of the confirmation hearing was to determine the
confirmability of CIBC's proposed plan for reorganization. As part
of that mandate, the bankruptcy court had to decide whether
compromise of the numerous and varied claims held by ACE against
Merrill Lynch and CIBC was in the best interest of the bankruptcy
estate. Copeland's individual claim did not impact the bankruptcy
court's consideration of the CIBC plan because, as explained by the
bankruptcy court, the "real issue to try and analyze is whether
the estate has any cause of action that should be pursued instead
of confirming the plan." Determining whether to compromise the
claim in the Chapter 11 proceeding required a balancing of the
prospect and potential value of recovery from Merrill Lynch against
12

the certain and ascertainable benefits assured under the CIBC
reorganization plan. Copeland's individual claim, on the other
hand, is governed by the ordinary principles of contract law.
While acknowledging that causes of action "may exist" in favor of
Copeland individually, the bankruptcy court stated that
confirmation of the CIBC plan would not affect his claim in any
way. Thus, the confirmation proceeding presented a different
issue, analyzed using a different legal standard than that
presented by Copeland's individual breach of contract claim.
Nor was the issue of Merrill Lynch's liability to Copeland
fully and vigorously litigated in the bankruptcy confirmation
hearing. Collateral estoppel is unavailable when a "new
determination on the issue is warranted by differences in the
quality or extensiveness of the procedure followed in the two
courts." RESTATEMENT (SECOND) OF JUDGMENTS � 28(3). Examining whether
a particular settlement is fair or equitable and in the best
interest of the estate and creditors is a different inquiry, driven
by different policies, than litigation of the actual claim. See,
e.g., In re Jackson Brewing Co., 624 F.2d 599, 602 (5th Cir. 1980)
(bankruptcy court decides whether to release a claim by determining
the probabilities of success, rather than the certainties). Such
a determination is a far cry from the preponderance of the evidence
standard Copeland would face in federal district court.
After reviewing the extensive record, it is apparent that
whether there had been any breach of the alleged July 31 Agreement
was in issue primarily as an aspect of whether CIBC, which both
13

presented the July 31 plan and benefited from the DIP financing,
acted in good faith. Copeland did present expert testimony that
the alleged July 31 Agreement would have been a feasible way to
reorganize ACE. The focus of the hearings, however, remained at
all times on valuation and compromise of claims held by ACE, the
debtor, against Merrill Lynch and CIBC. The material terms of the
Copeland Agreements were not in issue and the essential elements of
Copeland's claim for breach of those agreements, were not
litigated.
Finally, collateral estoppel does not apply unless the issue
presented was a "critical and necessary part" of the prior
judgment. Society of Separationists, Inc. v. Herman, 939 F.2d
1207, 1213 (5th Cir. 1991), cert. denied, 113 S. Ct. 191 (1992).
Although valuing ACE's claim against Merrill Lynch was a critical
part of confirming the CIBC plan, determination of Merrill Lynch's
obligation, if any, to Copeland was not necessary to the bankruptcy
court's conclusion that the estate would recover more by confirming
the CIBC plan than by pursuing litigation against Merrill Lynch.
Collateral estoppel (issue preclusion) differs from res
judicata (claim preclusion) in that it is an equitable doctrine
which should be "applied only when the alignment of the parties and
the legal and factual issues raised warrant it." Nations v. Sun
Oil Co. (DELAWARE), 705 F.2d 742, 744-45 (5th Cir.) (en banc),
cert. denied, 464 U.S. 893 (1983). The district court has broad
discretion to determine when collateral estoppel, particularly the
type of offensive collateral estoppel at issue here, should be
14

applied to preclude litigation of an issue. Id. Merrill Lynch's
liability to Copeland for breach of contract was not at issue in
the ACE bankruptcy confirmation hearing. Nor were the facts
necessary to support Copeland's claim fully litigated as part of
the bankruptcy court's decision to compromise ACE's claims against
Merrill Lynch. We do not find that the district court abused its
discretion by refusing to apply the doctrine of collateral
estoppel. Therefore, Copeland cannot rely on the findings made in
the ACE bankruptcy proceeding to preclude Merrill Lynch from
litigating the existence and breach of the alleged July 31
Agreement.
Law of the Case - The Memorandum Opinion on Jurisdiction
The law of the case doctrine provides that once a court of
competent jurisdiction decides upon a rule of law, that decision
should continue to govern the same issues in subsequent stages of
the same case. Christianson v. Colt Indus. Operating Corp., 486
U.S. 800, 816 (1988). Copeland argues that the rule 7052 findings
made by the bankruptcy court in its Memorandum Opinion on
Jurisdiction are the law of this case and preclude Merrill Lynch
from litigating the existence and breach of the alleged July 31
Agreement. We disagree for several reasons.
First, Merrill Lynch's liability to Copeland individually and
the existence or scope of the alleged Copeland Agreements were not
litigated in the instant proceeding. Instead, the bankruptcy court
simply restated, without expressly adopting, the fact findings made
in the ACE bankruptcy confirmation hearing and opined that those
15

findings would preclude Merrill Lynch from litigating its liability
to Copeland. Moreover, those remarks were offered merely for
support of the actual "rule of law" being decided upon, which was
that the court either did not have or should decline to exercise
jurisdiction.
Second, the preclusive effect of a bankruptcy court decree
must reflect the reality of its limited jurisdiction. Latham v.
Wells Fargo Bank N.A., 896 F.2d 979 (5th Cir. 1990). The
bankruptcy court's jurisdiction over Copeland's individual damage
claim for breach of contract was non-core at best. Thus, even
assuming that the bankruptcy court's order transferring the case to
the Eastern District of Louisiana is read to adopt a "rule of law"
based on the bankruptcy court's earlier findings in the
confirmation hearing, those findings would not be final until
reviewed de novo by the district court. 28 U.S.C. � 157(c)(1)
(bankruptcy judge may hear a non-core proceeding and make proposed
findings of fact and conclusions of law but may not enter final
order or judgment). Contrary to Copeland's assertions, the district
court for the Western District of Texas did not address those
findings. In fact, the court expressly declined to address the
findings, holding only that the bankruptcy court had sufficient
jurisdiction to transfer the case to the Eastern District of
Louisiana where, the court stated, Merrill Lynch could submit its
substantive objections to the bankruptcy court's findings.
Third, the law of the case doctrine is a discretionary rule of
practice which does not limit the power of the court to revisit a
16

legal issue. Arizona v. California, 460 U.S. 605, 618 (1983); Tel-
Phonic Services, Inc. v. TBS Int'l Inc., 975 F.2d 1134, 1138 (5th
Cir. 1992). Therefore, the Eastern District of Louisiana could
properly decline to apply the doctrine to this case. The doctrine
permits a change of position when it appears that the original
ruling in the case was wrong. Arizona v. California, 460 U.S. at
619 n.8. This Court cannot be expected to reverse the correct
ruling by the Eastern District of Louisiana simply because we find
that it is contrary to a prior ruling by the bankruptcy court,
particularly where the issue was not litigated. We hold that the
district court did not err by refusing to apply "law of the case"
to preclude Merrill Lynch from litigating its liability on
Copeland's breach of contract claim.
Having removed the obstacle of earlier proceedings, the issue
now becomes whether the district court correctly concluded that
there were no genuine issues of fact concerning Merrill Lynch's
liability to Copeland and that Merrill Lynch was entitled to
judgment as a matter of law.
The July 31 Agreement and the Copeland Agreements
No written document was prepared that purported to embody all
of the material terms of the July 31 or Copeland Agreements.
Copeland claims those terms were announced in the July 31 hearing
on the DIP financing motion. However, even after the district
court asked Copeland to submit the exact terms of the alleged
agreements, with specific references to the record, Copeland was
unable to identify any source for material terms in each of the
17

agreements, either in the July 31 transcript or elsewhere in the
record. We agree with the district court that the parties never
reached an enforceable consensus either as to the July 31 Agreement
to submit a joint plan of reorganization or the four Copeland
Agreements which were to be part of that plan.
Concerning the July 31 Agreement to submit a joint
reorganization plan, the hearing transcript together with other
record evidence, clearly demonstrates that there was only a general
commitment to move forward with negotiations. Neither Merrill
Lynch nor CIBC would have agreed to the proposed $30 million post-
petition DIP financing, which would significantly increase the
amount of debt that could be senior to their claims, unless there
was hope that a reorganization plan could be developed.
Nonetheless, many essential terms of the announced plan were
conceded to be uncertain in the hearing itself, including the
amount of additional funding, in excess of the DIP financing, that
would be necessary to bring ACE out of Chapter 11, key aspects of
debt restructuring and an overall business plan for management of
the emerging entity.
In the hearing, Mr. Trost, counsel for CIBC, which was to be
the obligee on the DIP financing, spoke first. Trost stated:
"[t]he actual part that is before your honor is the DIP facility,
but if you -- but all the parties . . . I think have agreed in
principle that the reorganization plan that was filed by the debtor
will be amended and there will be facilitating agreements filed as
exhibits which in a general way accomplish the following." After
18

giving the "contours of an overall [reorganization] arrangement"
for "information purposes," Trost concluded by stating: "[t]hat is
the background of why we are asking the court to approve the DIP
facility today." Next, Mr. Pitts, also counsel for CIBC, spoke as
to the details of the DIP financing. Finally, the court "polled"
the parties for their assent to what had been stated by Trost and
Pitts. Subsequent comments by counsel indicate that, although all
parties felt they had a duty to negotiate in good faith, no final
agreement had been reached. Counsel for Church's Independent
Franchises Association expressed strong reservations about whether
the proposed plan could be confirmed, to which the court responded:
"Well, I don't think they had represented that you had
yet agreed to the plan but that you had agreed to the
financing that was going to be requested to be
authorized, and I think that's exactly what you did."
Counsel for the creditors committee also expressly limited his
assent to the terms of DIP financing, stating that he had no
authority to approve a plan process.
Thus, the record demonstrates that there was only an
"agreement to agree" to a joint reorganization plan, contingent
upon meeting the requirements of Chapter 11 and upon substantial
additional negotiation. Such agreements to agree, particularly
absent material terms such as the required amount of post-petition
debt and the scope of the various Copeland agreements, are
unenforceable under Texas law, the law of the state where the
contract was allegedly formed. T.O. Stanley Boot Co., Inc. v. Bank
of El Paso, 847 S.W.2d 218, 221-22 (Tex. 1992) (contract is not
binding unless all material terms are specified and there are no
19

essential terms left open for future negotiation); Weitzman v.
Steinberg, 638 S.W.2d 171 (Tex. App. -- Dallas 1982, no writ)
(agreement to agree unenforceable). Further, even if all material
terms had been provided, the agreement would not be enforceable.
Chapter 11 requires that reorganization plans be subject to
creditor vote and receive judicial scrutiny for compliance with
statutory confirmation requirements, including the absolute
priority rule and the feasibility standard. Counsel for Church's
Independent
Franchises
Association expressed substantial
reservation in the July 31 hearing about whether the terms under
discussion would violate the absolute priority rule. In addition,
it is apparent that the parties had not formulated any specific
financial or business plan as required by Chapter 11's feasibility
standard. We have in the past held that a transaction specifying
the terms for adopting a reorganization plan cannot be enforced
until the parties and the court "scale the hurdles erected in
Chapter 11." In re Braniff Airways, Inc., 700 F.2d 935, 940 (5th
Cir. 1983) (refusing to enforce transaction approved by the
bankruptcy court because it dictated terms of a reorganization plan
that had not yet been subjected to creditor vote or confirmation);
In re Continental Airlines, 780 F.2d 1223, 1227 (5th Cir. 1986)
(debtor cannot sidestep protection extended to creditors under
Chapter 11 by dictating plan of reorganization in a piecemeal
fashion in collateral transactions before a plan is submitted for
confirmation); see also In re First South Savings Ass'n, 820 F.2d
700, 714 & n.15 (5th Cir. 1987) (suggesting that bankruptcy court
20

cannot rely on an overall plan for reorganization that has not been
tested under Chapter 11 standards to approve post-petition
financing when there is no assurance that such a plan would be
feasible or confirmable).
Concerning the Copeland agreements, both Copeland and Merrill
Lynch were still negotiating the terms and scope of those
agreements late in 1991. Copeland was to receive compensation from
ACE once a plan incorporating the desired terms was reached and
confirmed by the bankruptcy court. Merrill Lynch, as the potential
majority owner of the emerging entity, was involved in drafting the
Copeland Agreements, which were to be executed by ACE, the debtor,
and Copeland individually. Much of the negotiation centered on
exhibits and schedules which delineated the scope of the various
agreements, such as what personnel would be subject to the non-
compete agreement and what products subject to the supply
agreement. Those schedules and exhibits were never completed or
agreed upon by the parties and thus the Copeland Agreements never
reached a final form.
Copeland maintains that he fulfilled his obligations under the
agreements and that they became binding when he assented to Merrill
Lynch's "final position" as expressed in a transmittal dated
September 26, 1991. An examination of the record, however, reveals
that even as of that late date material terms remained unsettled.
On August 23rd Copeland wrote to Merrill Lynch Vice President Frank
Duemmler: "[a]lthough we made tremendous progress on July 31st, it
should have been obvious to everyone that a lot of work remained to
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finalize the four agreements. And it is equally obvious that the
agreements will never be finalized unless the principals are
directly involved." On September 20th, Merrill Lynch transmitted
a proposed draft of the agreements that "represented Merrill
Lynch's final position with respect to the matters to which they
relate" and requested complete schedules from Copeland, as well as
other information. On September 26th, Copeland answered that he
concurred with the September 20th drafts. Under separate letter,
Copeland also responded to questions posed by Merrill Lynch in the
September 20th correspondence. Copeland's letter makes plain that
the agreement was not final. For example, Copeland proposed that
he should retain certain insurance policies and benefits. Copeland
also acknowledged that further negotiation was necessary on certain
key schedules. Nonetheless, in a Wall Street Journal article
published September 27th, however, Copeland claimed that he and
Merrill Lynch had reached a "definitive agreement." Merrill Lynch
immediately responded that no definitive agreement had been reached
because due diligence was being held up, because management
enhancements discussed had not been achieved, because Merrill Lynch
had not received or reviewed any draft of exit financing
documentation with the secured lenders and because any plan of
reorganization would be subject to the final approval of Merrill
Lynch's Executive Committee. Even as late as November 1991 there
was correspondence indicating that there were remaining issues for
negotiation.
Under Texas law, the state where the Copeland Agreements were
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allegedly formed, an agreement is not enforceable unless it
resolves all essential terms and leaves no material matters open
for future negotiation. E.g., T.O. Stanley Boot Co., Inc. v. Bank
of El Paso, 847 S.W.2d 218, 221-22 (Tex. 1992). The exhibits and
schedules at issue were not incidental details but material
provisions which delineated the scope and application of the
Copeland Agreements and without which there could be no binding
agreement. Because the parties never reached a binding consensus
as to material terms, the Copeland Agreements at best amounted to
unenforceable agreements to agree.
Merrill Lynch argues and the district court found below that
Copeland admitted he was not a party to the alleged July 31
Agreement. We need not reach that issue. Even assuming Copeland
was a party, the record is clear that the parties never reached a
binding agreement, either in the July 31 hearing or at any later
date. Copeland's claim that the record was factually insufficient
to render summary judgment is likewise without merit. Ample time
was allowed for discovery and Copeland was allowed an opportunity
to identify the specific terms of the alleged agreement by
reference to the record, which he was unable to do. We affirm the
district court's holding that there was no final July 31 Agreement
as to either the joint reorganization plan or the Copeland
Agreements.
CONCLUSION
Neither collateral estoppel nor law of the case applied to
preclude Merrill Lynch from litigating the existence and breach of
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the alleged July 31 Agreement. The bankruptcy court's confirmation
findings did not reach the issue of Merrill Lynch's liability to
Copeland individually and that issue was not fully litigated as
part of confirming a reorganization plan in ACE's bankruptcy.
While the bankruptcy court restated those findings in its
Memorandum Opinion on Jurisdiction, those remarks were made in the
context of the bankruptcy court's decision to decline jurisdiction
and were further subject to de novo review by the Eastern District
of Louisiana.
The record clearly supports the district court's analysis
that as of July 31, the parties intended only to "agree in
principle" to a basic framework for a joint reorganization plan in
order to secure court approval for the post-petition DIP financing.
Everyone involved recognized that further negotiations would be
necessary to "complete the deal." Likewise the record supports the
district court's conclusion that the parties never reached, on July
31 or thereafter, any consensus as to the material terms of the so-
called Copeland Agreements. Copeland did not create any genuine
fact issue to the contrary, and Merrill Lynch was entitled to
judgment as a matter of law. Accordingly, the district court's
order granting summary judgment in favor of Merrill Lynch is
AFFIRMED.
wjl\opin\94-30179.opn
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