Order Granting MS Facilities 2020 LLC’s Motion to Dismiss
Summary
An order granting MS Facilities 2020 LLC's motion to dismiss in Thomas L. Swarek v. MS Facilities 2020, LLC, adversary proceeding 25-06007-JAW in the El Dorado Gas & Oil chapter 11 case 23-51715-JAW, U.S. Bankruptcy Court for the Southern District of Mississippi, entered August 4, 2025 as Dkt 31 and signed by Judge Jamie A. Wilson after a hearing on July 8, 2025. It recounts a $50 million loan from First Service Bank to El Dorado Gas & Oil under the Main Street Lending Program, in which MS Facilities 2020 bought a 95% participation, and a guaranty judgment of $54,928,751.83 against Swarek. The court finds no plausible claim for the debtor given the release in the Final DIP Order and no subject matter jurisdiction over Swarek's personal claims. Dismissal is with prejudice as to the debtor's claims and without prejudice as to Swarek's.
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25-06007-JAW Dkt 31 Filed 08/04/25 Entered 08/04/25 16:27:46 Page 1 of 30
__________________________________________________________________
SO ORDERED,
Judge Jamie A. Wilson
United States Bankruptcy Judge
Date Signed: August 4, 2025
The Order of the Court is set forth below. The docket reflects the date entered.
__________________________________________________________________
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF MISSISSIPPI
IN RE:
EL DORADO GAS & OIL, INC., et al., 1 CASE NO. 23-51715-JAW
DEBTORS. CHAPTER 11
THOMAS L. SWAREK, INTERESTED PARTY,
INDIVIDUALLY AND DERIVATIVELY ON BEHALF
OF EL DORADO GAS & OIL, INC. PLAINTIFFS
VS. ADV. PROC. NO. 25-06007-JAW
MS FACILITIES 2020, LLC DEFENDANT
ORDER GRANTING MS FACILITIES 2020 LLC’S MOTION TO DISMISS
There came before the Court for hearing on July 8, 2025 (the “Hearing”), MS Facilities 2020
LLC’s Motion to Dismiss (the “Motion to Dismiss”) (Adv. Dkt. #9) 2 filed by MS Facilities 2020,
LLC 3 (“MSF 2020”); the Memorandum of Law in Support of MS Facilities 2020 LLC’s Motion to
Dismiss (“MSF 2020’s Brief”) (Adv. Dkt. #10) filed by MSF 2020; the Response in Opposition to
1
Jointly administered with In re Hugoton Operating Company, Inc., Case No. 23-51139-JAW; In re Blue-
stone Natural Resources II – South Texas, LLC, Case No. 24-50223-JAW; and In re World Aircraft, Inc.,
Case No. 24-50224-JAW.
2
In the above-referenced adversary proceeding (the “Adversary”), docket entries are cited as “(Adv. Dkt.
___)”; and in the above-referenced lead bankruptcy case (the “Bankruptcy Case”), they are cited as “(Bankr.
Dkt. ___)”.
3
Although the Complaint for Damages (Adv. Dkt. #1) names “MS Facilities, LLC” as the defendant, the
correct legal name of the defendant is “MS Facilities 2020, LLC.”
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MS Facilities 2020, LLC’s Motion to Dismiss (the “Response”) (Adv. Dkt. #23) filed by Thomas
L. Swarek (“Swarek”); the Brief Supporting Response in Opposition to MS Facilities 2020, LLC’s
Motion to Dismiss (Adv. Dkt. #24) filed by Swarek; MS Facilities 2020 LLC’s Reply in Support
of Its Motion to Dismiss (Adv. Dkt. #27) filed by MSF 2020; and the Notice of Filing Supplemental
Exhibits in Support of MS Facilities 2020 LLC’s Motion to Dismiss (Dkt. #28) filed by MSF 2020
in the Adversary.
At the Hearing, John B. Hutton, Ari Newman, and Elizabeth R. Hadley represented MSF 2020;
Bradley T. Golmon represented Swarek; and Jack A. Crawford, Jr. and David L. Curry, Jr. repre-
sented First Service Bank (“FSB”). Because MSF 2020’s Brief, filed contemporaneously with the
Motion to Dismiss, argues grounds for dismissal that do not appear in the Motion to Dismiss, the
Court inquired at the Hearing whether Swarek had received adequate notice. The Court expressly
asked his counsel if the matter should be continued and reset. Counsel for Swarek indicated that he
had addressed all of MSF 2020’s arguments in the Response and was ready to proceed. (MTD Hr’g
at 1:40, 2:22 (July 8, 2025)). 4
JURISDICTION
The Court has jurisdiction over the subject matter of and the parties to this Adversary as to the
claims belonging to the debtor, El Dorado Gas & Oil, Inc. (“EDGO”), pursuant to 28 U.S.C. § 1334
and 28 U.S.C. § 157. As to these claims, this is a core proceeding as defined in 28 U.S.C.
§ 157(b)(2)(A), (B), and (O). For the reasons discussed below, the Court finds that it lacks subject
matter jurisdiction over the personal claims asserted by Swarek (a non-debtor) against MSF 2020
(also a non-debtor). Notice of the Hearing was proper under the circumstances.
4
The Hearing on the Motion to Dismiss was not transcribed. Citations are to the timestamp of the audio
recording.
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FACTS
The MSL Loan
This adversary arises out of a $50 million loan (the “MS Loan”) from FSB, as lender, to EDGO,
as borrower, governed by a Term Loan Credit Agreement (the “Loan Agreement”) (Adv. Dkt.
#24-1 at 1-22) dated September 17, 2020. Payment of the MS Loan was guaranteed by Swarek,
Hugoton Operating Company, Inc. (“Hugoton”), and World Aircraft, Inc. (“World Aircraft”). The
only signatories to the Loan Agreement are EDGO, FSB, Swarek, Hugoton, and World Aircraft.
The MS Loan is evidenced by a Term Note made payable to FSB. To secure the Term Note, EDGO
granted FSB a security interest in substantially all of its assets.
The MS Loan was made pursuant to the Main Street Lending Program (the “MSL Program”),
established by the Federal Reserve in 2020 to support lending to small and medium-sized for-profit
firms “that were in sound financial condition before the onset of the COVID-19 pandemic” but
whose businesses suffered during the crisis. 5 The MSL Program formed MSF 2020 as a special
purpose vehicle to purchase 95% participations in eligible loans from private lenders, mainly com-
mercial banks. MSF 2020 did not screen or originate these loans but relied on banks to perform
these services. Main Street loan terms were standardized. All loans matured in five year, deferred
principal payments for two years, and deferred interest payments for one year. 6 FSB was one of
many banks across the country that registered to participate in the MSL Program. (Adv. Dkt. #10-
1 at 6).
EDGO obtained the $50 million MS Loan “to reinvigorate the company and rehire dismissed
staff, amounting to 300 employees.” (Adv. Dkt. 1 at 2). As contemplated by the Loan Agreement,
5
Main Street Lending Program, www.federalreserve.gov/monetarypolicy/mainstreetlending.htm (last vis-
ited Aug. 4, 2025); see 12 U.S.C. § 343(3). The MSL Program started accepting loan submissions on July
6, 2020 and stopped on January 8, 2021.
6
https://www.federalreserve.gov/monetarypolicy/mainstreetlending.htm (last visited Aug. 4, 2025).
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on the same day that FSB loaned EDGO $50 million, FSB entered into the Participation Agreement
under the Main Street Lending Program (the “Participation Agreement”) (Adv. Dkt. #10-1), under
which FSB agreed to sell, and MSF 2020 agreed to buy, 95% of the MS Loan. EDGO was not a
party to the Participation Agreement. FSB retained sole authority to service and enforce the debt
pursuant to the MSL Program. MSF 2020 paid FSB administrative and servicing fees under the
Servicing Agreement under the Main Street Lending Program (the “Servicing Agreement”). (Adv.
Dkt. #10-3; Adv. Dkt. #24-1 at 23-31).
In early 2023, EDGO defaulted under the Loan Agreement. On November 22, 2023, FSB sent
EDGO and Swarek a letter declaring EDGO in default, accelerating the MS Loan, and demanding
immediate payment of $53,275,468.59. (Adv. Dkt. #10-2 at 1-2).
EDGO’s Bankruptcy Case & Appointment of Chapter 11 Trustee
On December 22, 2023, Swarek signed and filed a chapter 11 petition for relief on EDGO’s
behalf. (Bankr. Dkt. #1). The filing instituted an automatic stay as to any collection action against
EDGO. 11 U.S.C. § 362(a)(1). Swarek continued operating EDGO as the debtor in possession only
briefly. On January 8, 2024, seventeen days after the Bankruptcy Case was filed, FSB filed a mo-
tion seeking the appointment of a chapter 11 trustee, alleging that the appointment was necessary
“if there is to be any preservation of value of [EDGO’s] assets.” (Bankr. Dkt. #73). FSB com-
plained that EDGO was “either unable to, or simply refuse[d] to meet its obligations as a debtor-
in-possession”; failed to pay key employees both pre- and post-petition which has resulted in the
stoppage of work”; and “allowed certain oil and gas leases to expire.” (Bankr. Dkt. #73 at 1). Four
creditors, Resource Strategies, LLC, American National Insurance Company, Briguna, LLC, and
ATIC Limited Partnership, filed a limited joinder in support of FSB’s motion. (Bankr. Dkt. #141).
A fifth creditor, Pilot Thomas Logistics, filed a reservation of rights with respect to its purported
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statutory lien claims but otherwise did not oppose FSB’s motion. Drew McManigle, the chapter
11 trustee of an affiliated debtor, Escambia Operating Company, LLC, also filed a limited joinder
in support of FSB’s motion. (Bankr. Dkt. #113). Swarek did not file a response opposing the mo-
tion and ultimately consented to the appointment of a chapter 11 trustee. The Court approved the
appointment of Dawn Ragan as the chapter 11 trustee (the “Trustee”) on February 2, 2024. (Bankr.
Dkt. #208). From that date forward, Swarek lost control, and the Trustee began operating and
controlling EDGO.
FSB’s Guaranty Action Against Swarek in District Court
Weeks before the Trustee’s appointment, on January 19, 2024, FSB sued Swarek in the U.S.
District Court for the Southern District of Mississippi to enforce the guaranty. See First Service
Bank v. Thomas Swarek, Case No. 1:24-cv-00020-TBM-RPM (S.D. Miss.) 7 (the “Guaranty Ac-
tion”). Swarek failed to file an answer or responsive pleading, and an entry of default was entered
against him on February 20, 2024. Swarek, acting pro se, moved to set aside the entry of default,
and FSB, in turn, moved for default judgment. After a hearing on these motions, FSB moved for
summary judgment on its $54,928,751.83 claim. Swarek opposed the summary judgment motion.
(Case No. 1:24-cv-00020-TBM-RPM, Dkt. #40). He admitted that the MS Loan was enforceable,
that he had a duty to pay FSB as a guarantor, and that he had defaulted on his payments. (Case No.
1:24-cv-00020-TBM-RPM, Dkt. #40; Adv. Dkt. #10-2). Swarek nevertheless opposed the sum-
mary judgment motion on two grounds. First, he argued that FSB, as the owner of only 5% of the
MS Loan, lacked standing to sue for the full amount of the debt. Second, he complained that MSF
2020, the 95% owner, was “an essential missing party.” (Case No. 1:24-cv-00020-TBM-RPM,
Dkt. #40 at 1). The District Court rejected both arguments. It found that FSB was both a lender
7
FSB also sued World Aircraft, but the District Court stayed the Guaranty Action against World Aircraft
after it filed bankruptcy. (Adv. Dkt. #10-2).
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and a servicing agent for MSF 2020 under the Participation Agreement. FSB had agreed to “hold
title to the Loans for the benefit of [MSF 2020] to the extent of the Participation” and was author-
ized to bring suit against Swarek for the full amount of the MS Loan. (Adv. Dkt. #10-2). It con-
cluded that FSB had standing to sue for the entirety of the debt being serviced. (Adv. Dkt. #10-2)
(citing Neil v. Wells Fargo Bank, N.A., 686 F. App’x 213 (4th Cir. 2017); CWCapital Asset Mgmt.,
LLC v. Chicago Props., LLC, 610 F.3d 497, 500-01 (7th Cir. 2010)). For that reason, MSF 2020’s
joinder was unnecessary. (Adv. Dkt. #10-2); FED. R. CIV. P. 19(a)(1)(A) (joinder of a party is re-
quired if “in that person’s absence, the court cannot accord complete relief among existing” par-
ties).
The District Court entered an order: (a) granting summary judgment in favor of FSB in the
amount of $54,928,751.83 and (b) in the alternative, denying Swarek’s motion to set aside the
entry of default and granting FSB’s motion for default judgment. (Adv. Dkt. #10-2). A Final Judg-
ment Against Thomas Swarek and Order Administratively Closing Case (Case No. 1:24-cv-20-
TBM-RPM, Dkt. #47) was entered the next day, July 13, 2024.
Swarek asked the District Court to reconsider its order. (Case No. 1:24-cv-00020-TBM-RPM,
Dkt. #52). He claimed that new evidence proved EDGO was entitled to eighteen months of for-
bearance and a restructuring of the MS Loan. This evidence, which he attached to his motion,
consisted of 229 pages of print outs of various government websites about the MSL Program and
screenshots from news articles about Covid-19. On March 5, 2025, the District Court denied
Swarek’s motion to reconsider. 8 (Case No. 1:24-cv-00020-TBM-RPM, Dkt. #64). The District
Court concluded that the documents were available to Swarek and should have been presented
earlier at the summary judgment stage of the proceedings and, regardless, did not show that FSB
8
The District Court stayed the Guaranty Action during the brief pendency of Swarek’s personal bankruptcy
case.
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was obligated to extend the MS Loan. See FED. R. CIV. P. 54(b). Swarek did not appeal, and the
judgment became final (the “Guaranty Judgment”) (Case No. 1:24-cv-20-TBM-RPM, Dkt. #47).
DIP Motion in Bankruptcy Case
EDGO, now under the control of the Trustee, did not have sufficient cash to maintain business
operations or to market and sell its assets. (Bankr. Dkt. #329 at 10). On April 15, 2024, the Trustee
filed an emergency motion seeking entry of interim and final orders authorizing EDGO to obtain
post-petition financing up to $8,750,000 from FSB and another lender (the “DIP Motion”) 9 (Bankr.
Dkt. #329). One of the material terms of the proposed credit facility was EDGO’s agreement to
“unconditionally and irrevocably release[], acquit[], absolve[], [and] forever discharge[]” FSB and
MSF “from any and all claims, interests, causes of actions, avoidance actions, counterclaims, de-
fenses [and] setoffs.” (Bankr. Dkt. #329 at 20).
Interim Hearing on DIP Motion in Bankruptcy Case
The interim hearing on the DIP Motion was held on April 23, 2024. Swarek, acting pro se, was
present and participated in the interim hearing but had not filed a written response. Other interested
parties, however, had filed formal objections. (Bankr. Dkt. #347, #348, #349, #350). Two of them,
Mestena LLC (“Mestena”) and the United States Trustee (“UST”), raised concerns about EDGO’s
release of prepetition claims against FSB. (Bankr. Dkt. #349, #350). Mestena questioned whether
the Trustee had fully and comprehensively investigated whether EDGO held any such claims or
causes of action. (Bankr. Dkt. #349 at 2). Swarek complained that FSB had refused to restructure
the MS Loan and challenged FSB’s ability to seek payment of the full amount of the MS Loan but
did not mention the release. (Bankr. Dkt. #418 at 56-59).
9
The parties describe the post-petition motion as the “DIP Motion” although EDGO was no longer the
debtor in possession at the time the loan was negotiated.
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The parties agreed to reserve the release issues for resolution at the final hearing on the DIP
Motion. Based on that agreement, the Court entered the Interim Order (I) Authorizing the Debtors
To (A) Obtain Postpetition Financing and (B) Utilize Cash Collateral, (II) Granting Liens and
Superiority Administrative Expense Claims, (III) Granting Adequate Protection, (IV) Modifying
the Automatic Stay, (V) Scheduling a Final Hearing, and (VI) Granting Related Relief (the “In-
terim DIP Order”) (Bankr. Dkt. #365). The Interim DIP Order allowed EDGO to borrow up to
$2.5 million on an interim basis. (Bankr. Dkt. #365).
Final Hearing on DIP Motion in Bankruptcy Case
The final hearing on the DIP Motion was held on May 15, 2024. Before that hearing, Swarek
filed a three-page objection to the DIP Motion. (Bankr. Dkt. #409). He did not oppose the post-
petition loan itself but complained that the Trustee was not keeping him informed and challenged
the use of any loan proceeds to market and sell EDGO’s assets. (Bankr. Dkt. #409). After Swarek
filed his objection, Thru Tubing Solutions, Inc. and Cudd Pressure Control, Inc. filed their joint
objection (Bankr. Dkt. #413), and Mestena and the UST both filed supplemental objections, again
challenging the release provision. (Bankr. Dkt. #417; Bankr. Dkt. #414).
Before the final hearing, the Trustee resolved all objections except for Mestena’s and the
UST’s opposition to the release. (DIP Hr’g at 9:57-10:10 (May 15, 2024)). 10 Fully aware of the
pending release issue, the Trustee had ample opportunity to, and did investigate potential lender
liability claims, preference claims, and other claims arising under chapter 5 against FSB and/or
10
The final hearing on the DIP Motion was not transcribed. Citations are to the timestamp of the audio
recording.
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MSF 2020. The Trustee, who has substantial bankruptcy experience, testified that she found
none. 11 (DIP Hr’g at 10:56).
On cross-examination, Mestena and the UST questioned the Trustee about the scope of her
investigation. Swarek, 12 representing himself, cross examined the Trustee about many of the alle-
gations that appear in the Complaint for Damages (the “Complaint”) (Adv. Dkt. #1) against MSF
2020. He asked her about FSB’s alleged “sweeping” of EDGO’s bank account (DIP Hr’g at 12:58);
MSF 2020’s alleged corporate dissolution (DIP Hr’g at 1:07-1:08); and FSB’s standing to collect
the full amount of the debt 13 (DIP Hr’g at 1:09). The Trustee testified that she found no proof that
FSB had ever “swept” EDGO’s account and that FSB’s enforcement of its rights was authorized
by the Loan Agreement and otherwise lawful. (DIP Hr’g at 10:55-10:56). Mestena called Swarek
as a witness to testify about his long business relationship with FSB and the origination of the MS
Loan. (DIP Hr’g at 3:33).
In the end, the Court concluded that the Trustee had thoroughly evaluated any potential claims
and causes of action against MSF 2020 and/or FSB and approved the financing arrangement on a
final basis, including the release, with certain modifications. On May 24, 2024, the Court entered
the Final Order (I) Authorizing the Debtors To (A) Obtain Postpetition Financing and (B) Utilize
Cash Collateral, (II) Granting Liens and Superiority Administrative Expense Claims, (III) Grant-
ing Adequate Protection, (IV) Modifying the Automatic Stay, (V) Scheduling a Final Hearing, and
11
The Trustee has an undergraduate degree in accounting and a master’s degree in business administration.
(DIP Hr’g at 10:31). She has spent over nine years in investment banking and over twenty years as a finan-
cial restructuring advisor. (DIP Hr’g at 10:32).
12
One week earlier on May 7, 2024, as discussed in detail later, Swarek formed a new entity named “MS
Facilities, LLC” in Delaware.
13
The final hearing took place a week after Swarek filed his response in opposition to FSB’s summary
judgment motion in the Guaranty Action where he raised many of these same allegations. (Case No. 1:24-
cv-00020-TBM-RPM, Dkt. #40).
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(VI) Granting Related Relief (the “Final DIP Order”) (Bankr. Dkt. #463). There was no appeal,
and it became final.
Filing & Dismissal of Swarek’s Bankruptcy Case
Swarek, acting pro se, filed personal bankruptcy on September 30, 2024. In re Swarek, Case
No. 24-51388-JAW. The Court dismissed his case on November 19, 2024 for failure to file sched-
ules and other required documents by the deadline set by the Court. (Case No. 24-51388-JW, Dkt.
#97). The filing deadline had been extended at Swarek’s request to allow him additional time to
retain counsel, but Swarek failed to meet the extended deadline and did not appear at the hearing
set by the Court to show cause why his bankruptcy case should not be dismissed.
Adversary Filed by Swarek Against FSB (Adv. Proc. 25-06002-JAW)
Almost a year after the Trustee’s appointment, January 7, 2025, Swarek retained counsel and
filed an adversary complaint against FSB 14 on EDGO’s behalf in El Dorado Gas & Oil, Inc.
Debtor and Thomas L. Swarek, Interested Party v. First Service Bank, Adv. Proc. 25-06002-JAW,
Dkt. #1, and also filed an objection to FSB’s proof of claim. 15 (Bankr. Dkt. #1219). The complaint
was not styled as asserting derivative claims on EDGO’s behalf but directly alleged claims held
by EDGO and controlled by the Trustee against FSB. Swarek maintained that FSB had effectively
forced EDGO into a receivership, taken control of EDGO away from him, violated the Federal
Reserve’s directive on loan abatement, and failed to keep clear records regarding the MS Loan.
Presumably, after he was made aware that only the Trustee had authority to act on EDGO’s behalf
as to these matters, Swarek voluntarily dismissed the adversary proceeding without prejudice on
January 15, 2025 (Adv. Proc. 25-06002-JAW, Dkt. #6) and withdrew the objection to FSB’s proof
of claim on March 25, 2025. (Bankr. Dkt. #1229).
14
MF 2020 was not named as a defendant in this first Adversary complaint.
15
FSB filed a proof of claim “for money loaned” totaling $53,891,253.17. (Cl. #2-2).
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Instant Adversary Filed by Swarek Against MSF 2020 (Adv. Proc. 25-06007-JAW)
On April 23, 2025, Swarek initiated the present Adversary by filing the Complaint against
MSF 2020 “individually and derivatively on behalf of El Dorado Gas & Oil, Inc.” The focus of
the Complaint is FSB’s alleged improper use of the remedies provided in the Loan Agreement
against EDGO but names MSF 2020 as the sole defendant.
Allegations Against FSB in the Instant Adversary Complaint
The Complaint alleges that Swarek and “certain other parties and guarantors” were prepared
to pay $15 million to bring the MS Loan current provided that FSB subordinated its $4 million
secured position in certain equipment but that FSB declined to do so. Instead, FSB took a series of
actions to enforce its rights under the Loan Agreement. FSB declared the MS Loan in default,
swept EDGO’s bank account, initiated foreclosure actions in Mississippi, Texas, and Arkansas,
and commenced a receivership action. These actions, according to the Complaint, violated the
Federal Reserve’s “Joint Statement on Additional Loan Accommodations Related to COVID-19”
regarding loan abatement and were motivated by FSB’s discrimination against the oil and gas
industry. (Compl. ¶ 23). Notably, there are no allegations in the Complaint that EDGO was not in
default or that the remedies pursued by EDGO were not provided for in the Loan Agreement.
The Complaint also describes issues regarding FSB’s servicing of the MS Loan. According to
the Complaint, FSB charged interest beginning September 17, 2020 but did not fully fund the MS
Loan until October 22, 2020; withheld and delayed certain advances and payments; failed to keep
adequate financial records; and hid exorbitant expenses charged to the MS Loan. (Compl. ¶¶ 15,
18, 20, 22, 28-29). The Complaint also alleges that FSB “improperly threatened Swarek’s wife
with a $60,000,000.00 lawsuit leading to . . . a divorce.” (Compl. ¶ 41).
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Based on these allegations, the Complaint asserts claims for intentional or negligent infliction
of emotional distress (Compl. ¶41), breach of contract (Compl. ¶ 43), lender liability (Compl.
¶ 44), intentional interference with EDGO’s business (Compl. ¶ 45), discrimination based on the
nature of EDGO’s business (Compl. ¶ 46), fraud (Compl. ¶ 47), misuse of federal funds (Compl.
¶ 50), and violation of the covenant of good faith and fair dealing (Compl. ¶ 51).
MSF 2020 as the Named Defendant in the Complaint
The allegations in the Complaint concern FSB’s conduct, but the Complaint names MF 2020
as the sole defendant. The Complaint alleges that MSF 2020 appointed FSB as its administrative
agent and, therefore, MSF 2020 is responsible for FSB’s actions. (Compl. ¶¶ 13, 47-49).
DISCUSSION
MSF 2020 seeks the dismissal of all claims in the Complaint under Rule 12(b)(6) of the Federal
Rules of Civil Procedure (“Rule 12(b)(6)”). 16 MSF 2020 argues that EDGO voluntarily released
all claims against both it and FSB pursuant to the terms of the Final DIP Order and, in any event,
that Swarek lacks derivative standing to sue on the Trustee’s behalf. MSF 2020 next argues that
this Court lacks subject matter jurisdiction over Swarek’s personal claims.
A. Swarek’s Creation of a New Entity Named “MS Facilities, LLC” and MSF’s Revival as
MS 2020
The Participation Agreement names “MS Facilities, LLC” as the buyer of the 95% participa-
tion interest in the MS Loan. (Adv. Dkt. #24-1 at 19-20). Because of an administrative error, “MS
Facilities, LLC” failed to pay its annual taxes and ceased to be in good standing with Delaware’s
Division of Corporations on June 1, 2023. Swarek discovered the cancellation and on May 7, 2024
created a new distinct entity using the same name—"MS Facilities, LLC.” Swarek now contends
16
Rule 12(b)(6) is made applicable to adversary proceedings by Rule 7012 of the Federal Rules of Bank-
ruptcy Procedure.
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that the wrong entity filed the Motion to Dismiss. He says he sued “MS Facilities, LLC,” 17 the
participating lender mentioned in the Loan documents, not MSF 2020. He suggests that both MSF
2020 and “MS Facilities, LLC” are barred from defending the Adversary and relatedly that MSF
2020 was not released in the Final DIP Order. (MTD Hr’g at 2:30). His argument requires the
Court to consider MSF 2020’s corporate history.
Documents from Delaware’s Division of Corporation, produced by both MSF 2020 and
Swarek, show that “MS Facilities, LLC” was formed on May 18, 2020 under Delaware’s Limited
Liability Company Act. (Adv. Dkt. #24-2; Adv. Dkt. #28 at 4). In Delaware, Domestic limited
liability companies (“LLCs”) must pay an annual flat tax of $300. 6 DEL. CODE § 18-1107(b).
Nonpayment of the tax could result in the cancellation of an LLC’s certificate of formation at
which time the LLC is no longer in good standing. As a consequence, the LLC “may not maintain
any action, suit or proceeding” in a Delaware court. 6 DEL. CODE § 18-1107(b). The cancellation
of a certificate for failure to pay taxes, however, does not dissolve the LLC, invalidate its contracts,
or bar it from defending proceedings against it:
The neglect, refusal or failure of a domestic limited liability company . . . to pay an annual
tax shall not impair the validity of any contract, deed, mortgage, security interest, lien or
act of such domestic limited liability company . . . or prevent such domestic limited liability
company . . . from defending any action, suit or proceeding with any court of the State of
Delaware.
6 DEL. CODE § 18-1107(m). Moreover, a canceled LLC may be revived to good standing by paying
all delinquent taxes, including penalties and interest. 6 DEL. CODE § 18-1107(l).
17
Confusingly, at first glance, Swarek appears to have sued the entity he created on May 7, 2024, but as
explained herein, the revival of “MS Facilities, LLC” under the name MS Facilities 2020, LLC did not
invalidate the MS Loan, which Swarek does not dispute. (MTD Hr’g at 2:13-2:14).
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At the Hearing, MSF 2020 introduced into evidence, without objection, a chart listing the time-
line of events surrounding “MS Facilities, LLC’s” formation, cancellation, and subsequent revival
as MSF 2020:
As shown by Delaware’s records, Delaware canceled “MS Facilities, LLC” certificate of for-
mation on June 1, 2023 for failure to pay taxes; and “MS Facilities, LLC” filed its certificate of
revival on May 9, 2024 using a different name, MSF 2020, because Swarek had registered a new
entity using the name “MS Facilities, LLC” (“MSF 2024”) two days earlier. (Adv. Dkt. #24-2;
Adv. Dkt. #28). Delaware law expressly contemplates this scenario: if “the name of the limited
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liability company at the time its certificate of formation was canceled and, if such name is not
available at the time of revival,” then the certificate of revival must include “the name under which
the limited liability company is to be revived.” 6 DEL. CODE § 18-1109(a)(1).
Unlike MSF 2020, the new entity formed by Swarek on May 7, 2024, MSF 2024, is wholly
unrelated to the MSL Program. At the Hearing, Swarek’s counsel said he did not know why Swarek
formed an LLC in Delaware using MSF’s name—but “apparently it was lawful to do so because
it still exists.”18 (MTD Hr’g at 2:11). Swarek’s retention of the name is nothing more than a self-
created “red herring” without legal effect. Swarek presented no evidence that MSF 2020 lost any
contractual rights.
Unnecessary Motion to Substitute
The certificate of revival, which Swarek’s counsel had not previously seen, caused him to
change his position at the Hearing. (MTD Hr’g at 2:18). Although he continued to challenge MSF
2020’s right to file the Motion to Dismiss, he focused his argument on MSF 2020’s failure to file
a motion to substitute under Rule 25 of the Federal Rules of Civil Procedure. 19 (MTD Hr’g at
2:18). The Court finds Swarek’s reliance on Rule 25 to be misplaced.
“MS Facilities, LLC’s” revival as MSF 2020, even assuming it constituted a transfer of inter-
est, occurred almost a year before Swarek filed the Complaint. Rule 25(c), however, governs the
substitution of a party when an interest is transferred during the pendency of the lawsuit. Froning’s,
Inc. v. Johnston Feed Serv., Inc., 568 F.2d 108, 110 (8th Cir. 1978). Instead of Rule 25, the Court
18
According to the documents attached to the Response, MSF 2024 ceased to be in good standing on June
1, 2025 because of Swarek’s failure to pay taxes. (Adv. Dkt. #24-2).
19
Federal Rule of Civil Procedure 25 is made applicable to adversary proceedings by Rule 7025 of the
Federal Rules of Bankruptcy Procedure.
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examines Swarek’s challenge under Rule 17 of the Federal Rules of Civil Procedure, 20 which gov-
erns real parties in interest.
Under Rule 17(b)(2), an LLC’s capacity to be sued is determined by the law under which it
was organized. Swarek does not dispute that MSF 2020 is a limited liability company organized
under the laws of Delaware. Section 18-1109(c) provides that a company, upon revival, “shall be
revised with the same force and effect as if the certificate of formation . . . had not been canceled.”
Revival also “validates all contracts, acts, matters and things made, done and performed by the
limited liability company . . . during the time when the certificate of formation. . . was canceled .
. . with the same force and effect and to all intents and purposes as if the certificate of formation .
. . had remained in full force and effect. 6 DEL. CODE § 18-1109(c). Moreover, all “real and per-
sonal property, and all rights and interests” belonging to the company at the time of cancellation—
or acquired during the cancellation period—are fully “vested in the limited liability company, . . .
as fully as they were held . . . at, and after . . . the time” of cancellation. Id. These provisions show
that a revival under Delaware law does not create a new entity—it reinstates the original one. For
that reason, MSF 2020’s certificate of revival shows the date of its formation as May 18, 2020, the
same as “MS Facilities, LLC’s” and not the date of its revival. (Adv. Dkt. #28 at 5-6, 9).
The Court is satisfied that under Delaware law, MSF 2020 is the real party in interest and may
appropriately act as the entity that was the original participant in the MSL Program. The Court is
also satisfied (and Swarek does not dispute) that MSF 2020 has remained in good standing since
its revival. A finding that “MS Facilities, LLC” or MSF 2024 (and not MSF 2020) is the real party
in interest would suggest that Swarek is suing himself, a circumstance that even his attorney agreed
at the Hearing made no sense. (MTD Hr’g at 2:18-2:19).
20
Federal Rule of Civil Procedure 17 is made applicable to adversary proceedings by Rule 7017 of the
Federal Rules of Bankruptcy Procedure.
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Swarek does not dispute the validity of the MS Loan, and his challenge as to whether MSF
2020 is the real party in interest is one of his own making. (MTD Hr’g at 2:13-2:14). Counsel for
Swarek could not explain what Swarek hoped to achieve by obtaining the prior name of MSF 2020.
(MTD Hr’g at 2:11). When the Federal Reserve Bank of Boston filed the revival certificate, it used
a different name only because its original name was no longer available as a result of Swarek’s
antics. The Court fails to see any purpose for Swarek obtaining the name other than to cause con-
fusion. Swarek’s retention of MSF 2020’s previous name is of no legal consequence in this Ad-
versary.
B. Rule 12(b)(6) Standard
The U.S. Supreme Court has held that “[t]o survive a motion to dismiss, a complaint must
contain sufficient factual matters, accepted as true, to ‘state a claim for relief that is plausible on
its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atlantic Corp. v. Twombly, 550
U.S. 544, 570 (2007)). A claim is facially plausible “when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the defendant is liable for the misconduct
alleged.” Id. The Fifth Circuit has noted that “[w]here the complaint is devoid of facts that would
put the defendant on notice as to what conduct supports the claims, the complaint fails to satisfy
the requirement of notice pleading.” Anderson v. U.S. Dep’t of Hous. & Urban Dev., 554 F.3d 525,
528 (5th Cir. 2008). In resolving a Rule 12(b)(6) motion, the Court must construe the Complaint
in the light most favorable to the plaintiff and accept all well-pleaded factual allegations as true.
On the other hand, the Court is not bound by conclusory statements, statements of law, and un-
warranted inferences cast as factual allegations. Twombly, 550 U.S. at 555-57. “A Rule 12(b)(6)
dismissal may be based on either a ‘lack of a cognizable legal theory’ or ‘the absence of sufficient
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facts alleged under a cognizable legal theory.’” Johnson v. Riverside Healthcare Sys., 534 F.3d
1116, 1121 (9th Cir. 2008).
Although “[t]he failure-to-state-a-claim inquiry typically focuses on whether the plaintiff plau-
sibly alleges the element of a claim,” a Rule 12(b)(6) dismissal may also “be appropriately based
on a successful affirmative defense provided that the affirmative defense appear[s] on the face of
the complaint.” Am. Precision Ammunition, LLC v. City of Mineral Wells, 90 F.4th 820, 824 (5th
Cir. 2024) (quotation omitted). In other words, the facts supporting the affirmative defense must
be undisputed. Canidae, LLC v. Cooper, No. 6:21-CV-0019, 2022 WL 660197, at *16 (N.D. Tex.
Feb. 9, 2022).
In considering a Rule 12(b)(6) motion, a court must limit itself to the contents of the complaint,
including any attachments, documents incorporated into the complaint by reference, and “matters
of which a court may take judicial notice.” Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S.
308, 322 (2007). A documents may be incorporated by reference into a complaint if the complaint
extensively refers to the document or the document forms the basis of the plaintiff’s claim. A court
may also consider matters which are subject to judicial notice. Id. (citation omitted).
Here, MSF attached the Participation Agreement (Adv. Dkt. #10-1) and the Servicing Agree-
ment to the Motion to Dismiss (Adv. Dkt. #10-3), and Swarek attached the Term Loan Agreement
(Adv. Dkt. #24-1 at 1-22) and the same Servicing Agreement (Adv. Dkt. #24-1 at 23-31) to the
Response. Because the Complaint centers on the MS Loan, the Court considers the Term Loan
Credit Agreement and the Participation Agreement to be part of the Complaint for the purpose of
the Motion to Dismiss. Collins v. Morgan Stanley Dean Witter, 224 F.3d 496, 498-99 (5th Cir.
2000) (holding that documents attached to a motion to dismiss are treated as a part of the pleadings
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if “referred to in the plaintiff’s complaint and are central to her claim”). In addition, the Court takes
judicial notice of certain orders entered in this Bankruptcy Case and in the Guaranty Action.
C. The Complaint
Swarek’s Complaint contains no counts and no headings. See FED. R. BANKR. P. 7010 (requir-
ing that claims be stated “in numbered paragraphs” and that each claim be stated in a separate
count). It is a non-chronological narrative of events recounted across 52 numbered paragraphs
occasionally punctuated with a theory of liability. Contributing to the confusion is the Complaint’s
failure to separate claims belonging to EDGO from those owned by Swarek, but the focus of the
Complaint is the alleged harm to EDGO.
1. EDGO’s Claims Against MSF 2020
The claims Swarek asserts against MSF 2020 on EDGO’s behalf arise from FSB’s exercise of
its remedies under the Loan Agreement and its servicing of the MS Loan. As to these claims, the
Court finds that the Complaint fails as a matter of law because: (a) EDGO released FSB and MSF
2020 from all such claims and causes of action pursuant to the Final DIP Order approving EDGO’s
post-petition financing; and (b) Swarek lacks derivative standing to assert EDGO’s claims.
a. EDGO’s Release of All Claims Against FSB & MSF 2020
On May 24, 2024, the Court entered the Final DIP Order authorizing EDGO to borrow up to
$8,750,000 from FSB and another lender. (Bankr. Dkt. #463). No appeal was taken, and the Final
DIP Order became final. As part of the financing structure, EDGO released FSB and MSF 2020
from all existing claims related to the MS Loan:
[F]or good and valuable consideration, the adequacy of which, as to the Debtors and their
estates, is hereby confirmed, each of the Credit Parties (in its own right and, as applicable,
on behalf of its respective estate and its estate’s respective successors and assigns) hereby
unconditionally and irrevocably releases . . . [FSB and MSF 2020] . . . from any and all
claims . . . (including any derivative claims asserted or assertable on behalf of the Debtors,
their estates, or such entities’ successors or assigns, whether individually or collectively)
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whether known [or] unknown . . . including, without limitation, all legal and equitable
theories of recovery . . . that exist on the date hereof with respect to the Prepetition MSL
Obligation, the Prepetition MSL Liens, and/or the DIP Facility, including, without limita-
tion, (a) any so-called “lender liability” or equitable subordination claims or defenses, and
(b) any and all “claims” . . . and causes of action arising under the Bankruptcy Code.
(Final DIP Order ¶ F (viii)-(ix), at 12-13) (emphasis added). “Credit Parties” were defined as the
Debtors. “Released Parties” included: (a) FSB; (b) MSF 2020, described as a “participating Prep-
etition Lender and entity formed in connection with the implementation of the Main Street Lending
Program;” and (c) each Related Party. “Related Party,” in turn, included “successors and assigns.”
The release was binding not only on EDGO, but on any party asserting claims on EDGO’s behalf.
In New York, 21 “a valid release constitutes a complete bar to an action on a claim which is the
subject of the release.” Great Lakes Reinsurance (UK) SE v. Herzig, 673 F. Supp. 3d 432, 449
(S.D.N.Y. 2023) (quotations & citations omitted).
In chapter 11 bankruptcy cases, releases are common in financing orders where prepetition
lenders are asked to make concessions to permit post-petition financing. In re Adelphia Commc’ns
Corp., 330 B.R. 364, 383-84 (Bankr. S.D.N.Y. 2005). For FSB, the release was an essential term
of the financing arrangement to prevent EDGO from using any proceeds from the DIP loan to fund
litigation against itself or MSF 2020.
At the Hearing in the Adversary, Swarek admitted that the Final DIP Order released FSB from
the claims asserted on EDGO’s behalf in the Complaint but argued that EDGO’s release of claims
against MSF 2020 was invalid. (MTD Hr’g at 2:43). Initially, Swarek argued that MSF 2020 failed
to provide any consideration because unlike FSB, MSF 2020 was not a DIP lender. 22 At the Hear-
ing, MSF 2020 pointed to the provisions in the Final DIP Order that required MSF 2020 to
21
The law of New York applies based on a choice of law provision in the Loan Agreement. (Bankr. Dkt.
#463 at 73).
22
The MSL Program ended on December 31, 2020.
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subordinate its interests, allow the use of its cash collateral, and consent to the priming of its liens.
(Final DIP Order ¶¶ D(i)-(iii), F(i)-(iii), (viii)). In light of this consideration for the release, Swarek
recognized that his argument constituted an impermissible collateral attack on the Final DIP Order.
(MTD Hr’g at 2:31-2:32; Adv. Dkt. #27); Travelers Indem. Co. v. Bailey, 557 U.S. 137, 152
(2009) (final bankruptcy orders are not subject to collateral attack). Swarek then argued that MSF
2020, as opposed to “MS Facilities, LLC,” was not a Released Party.
The Court has previously rejected Swarek’s argument that the wrong entity filed the Motion
to Dismiss. For those same reasons, the Court rejects Swarek’s attempt to create confusion about
the parties released in the Final DIP Order. Although the release names “MS Facilities, LLC,” it
describes that entity as a “participating Prepetition Lender and entity formed in connection with
the implementation of the Main Street Lending Program.” That description can only refer to MSF
2020. 23 At bottom, there is no doubt the Trustee’s intent was to release FSB and MSF 2020 as
lenders. In re Roman Catholic Diocese of Rockville Centre, 650 B.R. 58 (Bankr. S.D.N.Y. 2023).
Because EDGO clearly released all pre-petition claims against FSB and MSF 2020, the Com-
plaint cannot proceed and is due to be dismissed for failure to state a plausible claim.
b. Lack of Derivative Standing To Assert EDGO’s Claims Against MSF 2020
When EDGO filed bankruptcy, “all legal or equitable interests of the debtor in property as of
the commencement of the case” became property of the estate, including causes of action. 11
U.S.C. § 541(a)(1); United States v. Whiting Pools, Inc., 462 U.S. 198, 205 n.5 (1983). The term
“all legal or equitable interests” is understood to include causes of action. See La. World Exposi-
tion, Inc. v. Fed. Ins. Co. (In re La. World Exposition, Inc.), 858 F.2d 233, 245 (5th Cir. 1988).
Generally, only a debtor in possession or a trustee has the right to pursue estate causes of action.
23
Even if Swarek is correct, he does not address why MSF 2020 was not a “Related Party,” described, in
part, as “successors and assigns.”
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In re S.I. Acquisition, Inc., 817 F.2d 1142, 1153-54 (5th Cir. 1987) (observing that the “general
bankruptcy policy of ensuring that all similarly situated creditors are treated fairly” requires that
the trustee have the first opportunity to pursue estate actions). Allowing a creditor standing to sue
in the name of the chapter 11 trustee is the exception, not the rule. The Fifth Circuit Court of
Appeals, however, has upheld derivative standing if certain conditions are met. See Louisiana
World, 858 F.2d at 247 (noting that the circumstances under which a creditor may sue are not
explicitly spelled out in the Bankruptcy Code).
In Louisiana World, the estate had potential causes of action against the debtor’s officers and
directors for gross negligence, mismanagement, and breach of fiduciary duty. Louisiana World,
858 F.2d at 235. The creditors’ committee demanded that the debtor bring an action, but the
debtor’s board of directors declined to vote on the demand. Construing that response as a refusal
to sue, the creditors’ committee obtained permission from the bankruptcy court to file an action in
the debtor’s name. In the subsequent district court action, the creditors’ committee faced a motion
to dismiss, which the district court granted.
The Fifth Circuit reversed. It held that a creditors’ committee has standing in some circum-
stances to file suit on behalf of a debtor. Louisiana World, 858 F.2d at 247. The Fifth Circuit
articulated three considerations in determining whether derivative standing should be allowed: (1)
whether the claim is colorable; (2) whether the debtor in possession or the trustee unjustifiably
refused to pursue the claim; and (3) whether the creditors’ committee first received leave to sue
from the bankruptcy court. Louisiana World, 858 F.2d at 247. All three elements must be met. In
re On-Site Fuel Servs., No. 18-04196-NPO, 2020 WL 3703004, at *9-10 (Bankr. S.D. Miss. May
8, 2020).
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(1) No “Colorable” Claim
For derivative standing purposes, a “colorable” claim must at least survive a motion to dismiss
under Rule 12(b)(6). On-Site Fuel Servs., 2020 WL 3703004, at *12. The Court finds that Swarek
has not met his burden to demonstrate that a colorable claim exists against MSF 2020. As discussed
previously, the Final DIP Order released EDGO’s prepetition claims against FSB and MSF 2020.
This element for derivative standing to bring claims against MSF 2020 is absent.
(2) Trustee’s Justifiable Refusal to Pursue Claims
In the Complaint, Swarek alleges that the Trustee is “unwilling to assert or pursue this claim.”
(Compl. ¶ 6). The basis for this allegation is his earlier failed attempt “to secure the agreement of
the Trustee” to sue FSB on EDGO’s behalf in adversary proceeding 25-06002-JAW. (Compl. ¶ 7).
In other words, because the Trustee denied him permission to sue FSB in that first adversary,
Swarek apparently assumed that she would deny him permission to sue MSF 2020 in the instant
Adversary. Swarek had voluntarily dismissed that first adversary proceeding and did not disclose
the reason for the Trustee’s decision. (Adv. Proc. 25-06002-JAW).
As to the claims in the Complaint against MSF 2020, Swarek had the opportunity to and did
question the Trustee about her investigation at the final hearing. The Trustee is an experienced
chapter 11 trustee; her testimony was thorough and unimpeached. Recall that there were two writ-
ten limited objections to the release at the interim hearing. At the end of the final hearing, it was
clear to the Court that the Trustee had evaluated the potential claims against FSB and MSF 2020
before agreeing to the release.
Also, typical concerns that undergird decisions allowing derivative standing are not present
when a chapter 11 trustee has already been appointed. A trustee is a neutral fiduciary charged with
acting in the best interests of the estate. Reed v. Cooper (In re Cooper), 405 B.R. 801, 804 (Bankr.
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N.D. Tex. 2009) (“[A] trustee has a unique role as an independent fiduciary, with a completely
different perspective and interest in a bankruptcy estate than an individual creditor.”). As an estate
fiduciary, a trustee is the “gatekeeper for what actions make sense” and the one best positioned to
evaluate “the potential benefits of litigation.” Id. Here, there has been no allegation that the Trustee
has not competently discharged her fiduciary duties, and her role in this Bankruptcy Case elimi-
nates any potential conflict of interest that EDGO might have in pursuing a cause of action, as was
the scenario in Louisiana World. Swarek has failed to show that the Trustee’s refusal was unjusti-
fied. See PW Enters., Inc. v. N.D. Racing Comm’n (In re Racing Servs., Inc.), 540 F.3d 892, 900
(8th Cir. 2008) (“A creditor thus does not meet its burden with a naked assertion that ‘the trustee’s
refusal is unjustified.’. . . The creditor, not the bankruptcy court, has the onus of establishing the
trustee unjustifiably refuses to bring the creditor’s claim.”).
(3) Failure to Satisfy Other Procedural Requirements
Swarek failed to comply with other procedural requirements for derivative standing. (Adv.
Dkt. #24 at 2). He admits in his Response that he failed to make a proper demand on the Trustee
or obtain permission from this Court to pursue estate claims. These requirements were not un-
known to him because he had previously filed and voluntarily dismissed a complaint against FSB
on EDGO’s behalf after failing to meet them. (Adv. Proc. 25-06002-JAW).
Derivative standing is not self-executing; it arises only after a bankruptcy court reviews the
proposed claims and authorizes the third party to bring estate causes of action. Such permission is
an essential gatekeeping function to “ensure that derivative standing does not risk interfering with
the debtor or trustee and prevents creditors from pursuing weak claims.” On-Site Fuel Servs., 2020
WL 3703004 at *9; Kriet v. Quinn (In re Cleveland Imaging & Surgical Hospital, LLC), 26 F.4th
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285, 296-97 (5th Cir. 2022) (no derivative standing where board members “never demanded” that
the trustee pursue the claim).
In his Response, Swarek seeks additional time to satisfy the procedural requirements for deri-
vate standing. Swarek’s Response was filed on July 2, 2025, yet he made no effort to satisfy any
of them before the Hearing. Further, the nunc pro tunc request, if granted, would be futile given
his inability to satisfy the other factors for derivative standing. This element is not satisfied.
(4) Other Considerations
While not an enumerated element, the Court pauses to note that Swarek would not be the ap-
propriate party to exercise derivative standing to bring claims on EDGO’s behalf even if he had
otherwise satisfied the elements in Louisiana World. Swarek’s interest in the bankruptcy case
arises, if at all, from his ownership of EDGO. He is not an unsecured creditor of the estate and,
therefore, it appears that his interest is to reduce his personal guaranty—not necessarily to act on
behalf of unsecured creditors.
Also, there is no dispute that Swarek controlled EDGO and many other related affiliates before
the filing of EDGO’s Bankruptcy Case and the appointment of the Trustee. His inability to observe
corporate formalities has been a pervasive and extensive problem. (Bankr. Dkt. #1162). EDGO is
the parent company of three affiliated debtors in this jointly administered Bankruptcy Case. (Other
affiliated debtors controlled by Swarek are jointly administered under the lead case of In re Es-
cambia Operating Company, LLC, Case No. 23-50491-JAW). Under Swarek’s control, assets
were co-mingled among all of them. Equipment purchased with EDGO’s funds were titled in other
affiliates’ names. Swarek never practiced meaningful corporate governance. His affiliated compa-
nies drew from whatever cash accounts had available funds while not maintaining intercompany
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accounting. This practice created legal issues for EDGO and its affiliates. 24 Swarek voluntarily
conceded control of EDGO pending motions to appoint a chapter 11 trustee. He would not be the
appropriate non-statutory fiduciary to lead EDGO through any litigation.
Also, the Court questions whether Swarek has the ability to maintain this lawsuit. Despite this
Court’s repeated warnings to retain counsel, he has represented himself in most contested matters
in the Bankruptcy Case, and his consistent reason for appearing pro se has been his lack of funds.
Here, Swarek had no choice but to retain counsel to represent himself and EDGO. 28 U.S.C.
§ 1654; FED. R. BANKR. P. 9011; MISS. BANKR. L.R. 9010-1; K.M.A., Inc. v. Gen. Motors Ac-
ceptance Corp. (In re K.M.A., Inc.), 652 F.2d 398, 399 (5th Cir. Unit B 1981) (“[A] corporation
as a fictional legal person can only be represented by licensed counsel . . . even when the person
seeking to represent the corporation is its president and major stockholder.”) Even so, he has filed
pleadings acting pro se. An example is his response to the Motion to Dismiss, which he filed pro
se while being represented by counsel and which his counsel subsequently asked the Court to
strike. (Adv. Dkt. #22; Adv. Dkt. #25). This inability to follow bankruptcy rules and procedure is
disruptive and a waste of judicial resources. 25
At bottom, even if derivative standing were appropriate (and it is not), this Court would not be
inclined to appoint the very person who was removed from the helm of the bankruptcy estate at
the request of five creditors and the chapter 11 trustee of an affiliated debtor.
24
An example of how Swarek used the affiliated debtors can be gleaned from the Court’s Order Denying
Without Prejudice First Service Bank’s Motion for Entry of an Order (I) Extending the Automatic Stay
under 11 U.S.C. § 362 and (II) Granting Related Relief (Bankr. Dkt. #1162). There are also pending the
Trustee’s Motion for Substantive Consolidation of the Debtors and El Dorado Oil & Gas, Inc. (Bankr. Dkt.
#1379) and Joint Motion for Order (I) Approving Initial Compromise and Settlement Pursuant to Fed. R.
Bank. P. 9019 Pertaining to Sale of Certain Personal Property and Reservation of Rights and (II) Granting
a Priority Administrative Expense Claim in Favor of First Service Bank in Connection with Such Settlement
(Bankr. Dkt. #833).
25
Swarek’s personal bankruptcy case was dismissed because of his failure to file required documents by
the deadline.
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2. Swarek’s Personal Claims Against MSF 2020
The Complaint does not separate derivative claims asserted on EDGO’s behalf from Swarek’s
direct claims. The emotional distress claim could only be asserted on Swarek’s behalf based on
the nature of the alleged injury, a divorce. The remaining claims, however, appear to be dual na-
tured or, in other words, they are the same claims he asserts on EDGO’s behalf. Swarek apparently
contends that he lost the value of his ownership interest in EDGO and incurred liability on his
guaranty as a result of FSB’s actions, which he imputes to MSF 2020. A question arises as to
whether these remaining claims belong solely to the bankruptcy estate. Schertz-Cibolo-Universal
City, Indep. School Dist. v. Wright (In re Educators Grp. Health Tr.), 25 F.3d 1281, 1284 (5th Cir.
1994) (“If a cause of action alleges only indirect harm to a creditor (i.e., an injury which derives
from harm to the debtor), and the debtor could have raised a claim for its direct injury under the
applicable law, then the cause of action belongs to the estate.”). For purposes of the Motion to
Dismiss, it is unnecessary to address this issue because the Court lacks subject matter jurisdiction
over Swarek’s non-debtor claims against MSF 2020, a non-debtor. 26
As the party invoking jurisdiction, Swarek has the burden of establishing its existence. Bank-
ruptcy subject matter jurisdiction is conferred by 28 U.S.C. § 1334(a) and extends to four types of
title 11 matters: (1) cases under title 11; (2) proceedings arising under title 11; (3) proceedings
arising in a case under title 11; and (4) proceedings related to a case under title 11. If subject matter
jurisdiction exists, all bankruptcy matters are classified into two categories: (1) core proceedings
arising under title 11 and (2) non-core proceedings that are otherwise related to a case under title
11. See 28 U.S.C. § 157(b). The core/non-core distinction does not itself determine whether subject
jurisdiction exists but provides guidance in analyzing its existence. The bankruptcy court has the
26
The Court examines the jurisdictional issue under Rule 12(b)(1).
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statutory authority to determine all core matters. 28 U.S.C. § 157(b)(1). As to non-core matters,
the bankruptcy court may not enter a final judgment but may only submit proposed findings of fact
and conclusions of law to the district court. 28 U.S.C. § 157(c).
A core proceeding is anchored in two jurisdictional grounds stated in 28 U.S.C. § 1334(b):
those that “arise under” and those that “arise in” the bankruptcy case. 27 Core proceedings involve
claims that invoke a substantive right provided by the Bankruptcy Code or claims that could arise
only in the context of bankruptcy. An illustrative list of core proceedings is provided in 28 U.S.C.
§ 157(b). In contrast, non-core proceedings include the broader universe of proceedings that are
not core but are nevertheless “related to” a bankruptcy case.
Swarek’s direct claims do not arise under or arise in the Bankruptcy Case. The Court’s subject
matter jurisdiction exists only if Swarek’s claims are non-core. The test for determining whether a
matter is sufficiently “related to” the bankruptcy case to create subject matter jurisdiction is:
Whether the outcome of that proceeding could conceivably have any effect on the
estate being administered in bankruptcy . . . . An action is related to bankruptcy if
the outcome could alter the debtors rights, liabilities, options, or freedom of action
(either positively or negatively) and which in any way impacts upon the handling
and administration of the bankrupt estate.
Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3d Cir. 1984), overruled on other grounds by Things
Remembered, Inc. v. Petraca, 516 U.S. 124 (1995). Under Pacor, most questions involving the
scope of the court’s non-core (“related to”) jurisdiction are determined by focusing on the effect,
if any, that resolution of the dispute may have on the bankruptcy estate. “Typically, litigation which
is related to a bankruptcy case is litigation which will affect in some manner the property to be
27
The Supreme Court’s decision in Stern v Marshall, 564 U.S. 462 (2011), created a third category. The
Supreme Court held that Article III of the U.S. Constitution prohibits bankruptcy courts from issuing final
orders in certain matters that Congress classified as core in 28 U.S.C. § 157(b). Such claims (commonly
referred to as “Stern” claims) are treated mostly as non-core. See Wellness Int’l Network Ltd. v. Sharif, 575
U.S. 665, 676 (2015).
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administered by the bankruptcy trustee or the amount or priority of claims to be repaid.” In re
Shuman, 277 B.R. 638, 647 (Bankr. E.D. Pa. 2001); see Celotex Corp. v. Edwards, 514 U.S. 300,
308 n.6 (1995) (“[B]ankruptcy courts have no jurisdiction over proceedings that have no effect on
the estate of the debtor.”). Litigation between non-debtors may affect the bankruptcy estate if the
litigation could potentially: (1) increase or decrease the amount of claims against the estate or (2)
decrease the value of property of the estate. Meritage Homes Corp. v. JPMorgan Chase Bank,
N.A., 474 B.R. 526, 559 (Bankr. S.D. Ohio 2012).
Shared facts between the third-party action and a debtor-creditor conflict do not in and of
themselves suffice to make the third-party action “related to” the bankruptcy. Moreover,
judicial economy alone cannot justify a court’s finding jurisdiction over an otherwise un-
related suit.
In re Zale Corp., 62 F.3d 746, 753-54 (5th Cir. 1995).
Here, the jurisdictional question is whether the resolution of Swarek’s alleged claims against
MSF 2020 could have any conceivable effect on the bankruptcy estate. Swarek appears to contend
that his status as a guarantor of the MS Loan could conceivably effect the size, obligations, and
rights of EDGO’s bankruptcy estate. He asserts claims against MSF 2020 for whatever damages
he can prove that he personally suffered as a result of MSF 2020’s alleged misconduct. Assuming
Swarek’s claims are plausible 28 and he succeeds in litigation, he might recover money or a reduc-
tion of his personal guaranty liability but the bankruptcy estate would be unaffected by the outcome
of their dispute because EDGO stipulated in the Final DIP Order that the MS Loan was valid and
that its prepetition debt arising from the Loan Agreement totaled not less than $53,891,253.17.29
28
MSF 2020 argued that Swarek’s claim are barred by claims preclusion and/or issue preclusion because
of the Guaranty Judgment. Lacking subject matter jurisdiction, the Court makes no judgment as to MSF
2020’s preclusion defense.
29
Another reason precludes this Court from resolving Swarek’s emotional distress claim arising from his
divorce. 28 U.S.C. § 157(b)(5). “Personal injury tort or wrongful death claims shall be tried in the district
in which the bankruptcy case is pending.” The Bankruptcy Code does not define “personal injury tort.”
Courts have reached different results under 28 U.S.C. § 157(b)(5) for emotional distress claims. In In re
Page 29 of 30
25-06007-JAW Dkt 31 Filed 08/04/25 Entered 08/04/25 16:27:46 Page 30 of 30
(Bankr. Dkt. #463 at 7). Swarek has failed to show that his personal claims are “related to” this
Bankruptcy Case and, therefore, this Court is without subject matter jurisdiction over his claims.
CONCLUSION
The Complaint fails to show a plausible claim for relief by EDGO against MSF 2020 in
light of the release provision in the Final DIP Order. Notwithstanding the release, the Complaint
fails to demonstrate that Swarek has attempted to meet any of the elements necessary for derivative
standing to pursue claims against MSF 2020 on behalf of EDGO. As to Swarek’s personal claims
against MSF, this Court lacks subject matter jurisdiction.
The defects in the Complaint as to EDGO’s claims cannot be corrected by amendment.
Great Plains Tr. Co. v. Morgan Stanley Dean Witter & Co., 313 F.3d 305, 329 (5th Cir. 2002);
Iqbal, 556 U.S. at 678-79 (Rule 8 “does not unlock the doors of discovery for a plaintiff armed
with nothing more than conclusions”). Accordingly, the Court finds that the Complaint should be
dismissed with prejudice as to EDGO’s claims and without prejudice as to Swarek’s claims.
IT IS, THEREFORE, ORDERED that the Motion to Dismiss is granted with prejudice as
to the claims asserted by EDGO and without prejudice as to the claims asserted by Swarek.
##END OF ORDER##
Residential Capital, LLC, in determining whether a claim for intentional infliction of emotional distress
was a personal injury tort, the court asked, “whether the emotional trauma is the gravamen of the complaint
or merely an element of damages.” 536 B.R. 566, 573 (Bankr. S.D.N.Y. 2015).
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