New York Skyline, Inc. v. Empire State Building Trust Co. (In re New York Skyline, Inc.)
New York Skyline, Inc. v. Empire State Building Trust Co. (In re New York Skyline, Inc.)
Opinion of the Court
OPINION AND ORDER
1. INTRODUCTION
Appellant New York Skyline Inc. (“Skyline”) operates “SkyRide,” a helicopter simulator on the second floor of the Empire State Building (the “Building”). Skyline and appellees
II. BACKGROUND
A. The 2005 Agreement
In April 2005, ESB moved the ticket office for the Observation Decks to the second floor of the Building and reversed the direction of the “West Escalators” leading to SkyRide.
In July 2008, ESB served Skyline with a Notice to Cure demanding Skyline pay $431,000 in Building security fees claimed
B. Skyline’s Bankruptcy
1. Skyline’s Chapter 11 Filing and the Removal of the Skyline Action
On January 12, 2009, Skyline filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code. Skyline’s largest creditor by far was its secured lender, which held a claim of over $24 million as of the petition date.
ESB filed an adversary proceeding against Skyline on March 4, 2009 (the “ESB Action”),
2. The April 28, 2009 Hearing
On April 7, 2009, Skyline filed a motion requesting that Judge Bernstein either remand the Skyline Action or abstain, arguing that state law predominated and the proceeding was non-core.
3. The Adversary Proceedings, the First Motions for Summary Judgment, and the Assumption of the Lease and License
The ESB Action asserted eleven claims.
Skyline filed a Second Amended Complaint on May 1, 2009, and a Third Amended Complaint (the “Complaint”) on July 29, 2009.
The Complaint alleges that jurisdiction is proper because the claims either arise in title 11, under title 11, or are related to the pending chapter 11 case.
On July 17, 2009, in connection with the order expediting claims relevant to Skyline’s decision to assume or reject the Lease, the parties cross-moved for partial summary judgment. In its motion, Skyline sought a determination that Article 42 of the Lease, relating to electricity charges, is ambiguous. ESB moved with respect to five of Skyline’s claims, including the Third Claim, which was to rescind the 2005 Agreement. Just after the motions were filed, Skyline moved to assume the Lease.
Judge Bernstein issued his decision on the parties’ cross-motions on June 21, 2010. He dismissed Skyline’s rescission claim in part because the Lease, License, and 2005 Agreement were a single, indivisible agreement for purposes of assumption under section 365.
4. Plan Confirmation
On August 13, 2010, Skyline filed a Fourth Amended Chapter 11 Plan of Reorganization (the “Plan”),
5. The Parties’ Remaining Claims, ESB’s Motion for Partial Summary Judgment, and the Authority Decision
On June 17, 2011, the parties filed a Joint Final Pretrial Order in which each side agreed to voluntarily dismiss a number of claims
On July 15, 2011, ESB filed a motion for partial summary judgment.
It is not clear whether the limitation on a bankruptcy court’s jurisdiction to ‘hear and determine’ a non-core matter would be implicated by the Empire State Building’s motion for partial summary judgment. Regardless of the disposition, the Court will not make any findings of fact or enter a final judgment. Furthermore, it appears that the parties have consented to the Court’s authority to ‘hear and determine’ all of the issues, at least in adversary proceeding 09-1145. [Skyline] alleged in its Third Amended Complaint ... that the causes of action alleged in the complaint were core, and [ESB] admitted the allegation in its Answer....53
Nonetheless, Judge Bernstein permitted the parties to make the argument that the bankruptcy court lacked “the power to ‘hear and determine’ the motion or the adversary proceedings, or that it lack[ed] the subject matter jurisdiction even to make a ‘report and recommendation’ to the District Court_”
In its opposition to ESB’s motion for partial summary judgment, Skyline questioned the bankruptcy court’s jurisdiction and authority to enter a final judgment and sought remand to the state court.
ESB argued that for the most part Stem was not relevant to the issues before Judge Bernstein because Stem did not address subject matter jurisdiction.
On May 11, 2012, Judge Bernstein issued the Authority Decision. He stated that at the time the Skyline Action was removed and the ESB Action was commenced “the claims and counterclaims asserted, at a minimum, ‘related to’ or were non-core claims in Skyline’s bankruptcy case.”
6. The Trials
Trial was held on the electricity claim in the Skyline Action on September 24 and October 24, 2012.
A district court functions as an appellate court in reviewing judgments rendered by bankruptcy courts.
IY. APPLICABLE LAW
A. Bankruptcy Jurisdiction and Bankruptcy Court Authority
Section 1 of Article III of the United States Constitution provides that
The judicial Power of the United States shall be vested in one supreme Court, and in such inferior Courts as the Congress may from time to time ordain and establish. The Judges, both of the supreme and inferior Courts, shall hold their Offices during good Behaviour, and shall, at stated Times, receive for their Services a Compensation, which shall not be diminished during their Continuance in Office.
Under Article III, Congress cannot
withdraw from judicial cognizance any matter which, from its nature, is the subject of a suit at the common law, or in equity, or admiralty.... At the same time there are matters, involving public rights, which may be presented in such form that the judicial power is capable of acting on them, and which are susceptible of judicial determination, but which congress may or may not bring within the cognizance of the courts of the United States, as it may deem proper.82
Since the enactment of the first federal bankruptcy law in 1800, Congress has permitted the initial adjudication of certain bankruptcy issues by non-Article III officials, subject to review by the district court.
federal district courts served as bankruptcy courts and employed a “referee” system. Bankruptcy proceedings were generally conducted before referees, except in those instances in which the district court elected to withdraw a case from a referee. The referee’s final order was appealable to the district court. The bankruptcy courts were vested with “summary jurisdiction” — that is, with jurisdiction over controversies involving property in the actual or constructive possession of the court. And, with consent, the bankruptcy court also had jurisdiction over some “plenary” matters — such as disputes involving property in the possession of a third*171 person.84
As explained in the Senate Report, a central purpose of the Act was to eliminate the “great cost and delay to the estate” that resulted from the inability of bankruptcy courts to adjudicate plenary matters without consent.
The plurality opinion in Northern Pipeline Construction Co. v. Marathon Pipe Line Co., invalidated this broad grant of authority. The Supreme Court held that a bankruptcy court did not have constitutional authority to enter a final judgment adjudicating a contract claim against a party not otherwise a part of the bankruptcy proceedings. As explained by Justice Brennan:
[T]he restructuring of debtor-creditor relations, which is at the core of the federal bankruptcy power, must be distinguished from the adjudication of state-created private rights, such as the right to recover contract damages that is at issue in this case. The former may well be a “public right,” but the latter obviously is not. Appellant Northern’s right to recover contract damages to augment its estate is “one of private right, that is, of the liability of one individual to another under the law as defined.”87
By entering a judgment, the Article I bankruptcy court improperly exercised the “judicial Power of the United States,” which is vested in Article III courts where judges have life tenure and salary protections. In response, Congress enacted the 1984 amendments to the Judicial Code, which are contained in the Bankruptcy Amendments and Federal Judgeship Act of 1984.
Section 1334 of title 28 of the United States Code addresses bankruptcy jurisdiction, and section 157, which permits the district courts to refer bankruptcy matters to bankruptcy courts,
However, section 157 limits a bankruptcy judge’s authority in “related to” proceedings. Under section 157(c)(1) [a] bankruptcy judge may hear a proceeding that is not a core proceeding but that is otherwise related to a case under title 11. In such proceeding, the bankruptcy judge shall submit proposed findings of fact and conclusions of law to the district court, and any final order or judgment shall be entered by the district judge after considering the bankruptcy judge’s proposed findings and conclusions....
Significantly, a bankruptcy judge may also enter a final judgment on non-core claims if the parties consent.
In Stem, the Supreme Court held that the current statutory regime failed to remedy all the constitutional infirmities identified in Marathon. Specifically, a bankruptcy court improperly exercised the “judicial Power of the United States” by entering a final judgment on a common law counterclaim by the estate against a creditor for tortious interference, despite the fact that such a claim is characterized by the Bankruptcy Code as a “core” claim under section 157(b)(2)(C).
B. Bankruptcy Jurisdiction Beyond Section 1334
“The jurisdiction of the bankruptcy courts, like that of other federal courts, is grounded in, and limited by, statute.”
The Second Circuit has also held that bankruptcy courts may exercise supplemental jurisdiction.
the jurisdictional grant in 28 U.S.C. § 1334(b) and 28 U.S.C. § 157, by implication, negates a bankruptcy court’s exercise of jurisdiction of a supplemental non-federal claim in instances where that claim has no impact on the bankruptcy estate. The carefully crafted conferral of jurisdiction under 28 U.S.C. § 1334 and 28 U.S.C. § 157 would be undermined if bankruptcy courts were authorized to exercise supplemental jurisdiction.108
In addition, the Second Circuit has held that a bankruptcy court may retain jurisdiction over an adversary proceeding even after 'the bankruptcy case has been dismissed provided that the exercise of jurisdiction would be consistent with the principles of pendent jurisdiction.
Although a bankruptcy court’s jurisdiction shrinks following confirmation of a plan, a bankruptcy court may retain post-confirmation jurisdiction pursuant to the plan.
First, the party must establish that the matter has a close nexus to the bankruptcy plan or proceeding, as when a matter affects the interpretation, implementation, consummation, execution, or administration of the confirmed plan. Second, the party must show that the plan provides for the retention of jurisdiction over the dispute. Courts have found the requisite nexus where adjudication of the post-confirmation dispute will affect the interests of creditors or requires interpretation of the reorganization plan. However, where the case has been fully administered and the interests of creditors will be unaffected by the resolution of the dispute, bankruptcy courts have declined to exercise post-confirmation subject matter jurisdiction.115
The scope of post-confirmation jurisdiction following the entry of a final decree and closure of a case has not been well defined,
V. DISCUSSION
A. Skyline Did Not Consent to the Bankruptcy Court’s Entry of a Final Judgment
Pursuant to section 157(b)(3), Judge Bernstein was required to determine whether the adversary proceedings were core or non-core. He addressed the status of the claims on April 28, 2009, in the context of Skyline’s remand motion and request under section 365, and determined that the claims were core insofar as they related to the Lease assumption and “arguably” core to the extent they related to the allowability of ESB’s proof of claim.
“[A] waiver of important rights should only be found where it is fully knowing.”
Instead, Article 11 of the Plan is a jurisdiction retention provision.
contains language authorizing the bankruptcy court to ‘hear and determine’ these claims is [] unavailing. This order confirmed the bankruptcy court’s subject matter jurisdiction; it did not*177 address the bankruptcy court’s authority to enter final judgments under Article I.125
In addition, Bankruptcy Rules 7008(a) and 7012(b) provide a far more direct means for litigants to indicate their express consent to the entry of final judgment in non-core adversary proceedings.
As discussed, the Plan language must be considered in the context of Judge Bernstein’s determination that the proceeding was core and in light of Stem.
B. Authority Under Section 157
There is an additional problem that requires remand of this appeal for further proceedings. Judge Bernstein relied on cases that stand for the proposition that jurisdiction is determined at the time of the filing of an adversary proceeding and concluded that “[ajt the time that the [Skyline] Action was removed and the ESB Action was commenced in this Court, the claims and counterclaims asserted, at a minimum, ‘related to’ or were non-core claims in Skyline’s bankruptcy case.”
VI. CONCLUSION
Accordingly, I hold that: (1) Skyline did not consent to the bankruptcy court’s power to enter a final judgment over non-core matters; (2) Skyline’s claims are not core; and (8) there is a need for a further explanation as to whether the bankruptcy court had the power to hear the Skyline claims and to issue proposed findings of fact and conclusions of law with respect to those claims. The Judgment is hereby vacated and this case is remanded to the bankruptcy court for the limited purposes just described.
SO ORDERED.
. The Building is owned by non-party Empire State Land Associates L.L.C., which is wholly-owned by the Empire State Building Associates L.L.C. ("ESBA”), the master lessee of the Building. The Empire State Building Company L.L.C. ("ESBC”) manages the Building, and the Empire State Building, Inc. ("ESBI”) owns the leasehold for the observation decks located on the 86th and 102nd floors (the "Observation Decks”). See Empire State Building Co. L.L.C. v. New York Skyline, Inc. (In re New York Skyline, Inc.), 471 B.R. 69, 76 (Bankr.S.D.N.Y. 2012) ("Authority Decision”). I refer to ESBC, ESBI and ESBA collectively as "ESB.”
. ESBA subleases the Building to ESBC. ESBC and Skyline are parties to a sublease, as amended (the "Lease”), and a license, as amended (the "License”). See id. Under the Lease and License, Skyline occupies space on
. See Adversary Proceeding Docket No. 108. Citations to “Adv. Pro. Docket No._” are to the docket in adversary proceeding number 09-01145. Citations to "Bankr.Docket No. _” are to the docket in Skyline’s bankruptcy case.
. 564 U.S.-, 131 S.Ct. 2594, 180 L.Ed.2d 475 (2011).
. Id. (citing Empire State Building Co. L.L.C. v. New York Skyline, Inc. (In re New York Skyline, Inc.), No. 09-10181, 2013 WL 655991 (Bankr.S.D.N.Y. Feb. 22, 2013) ("Electricity Decision”) and New York Skyline, Inc. v. Empire State Building Co. L.L.C. (In re New York Skyline, Inc.), 497 B.R. 700 (Bankr.S.D.N.Y. 2013) (“Protocol Decision”)).
. See Empire State Building Co. L.L.C. v. New York Skyline, Inc. (In re New York Skyline, Inc.), 432 B.R. 66, 72 (Bankr.S.D.N.Y. 2010) ("Skyline I”).
. See id.
. See id.
. See Appellant Mem. at 3-4.
. See id. at 4.
. See id. at 7.
. See id. at 7-8.
. See id. at 8; Skyline I, 432 B.R. at 74 (describing ESB’s conduct following the 2005 Agreement and noting that "[i]t became so bad that ESB's lawyers admitted that they were embarrassed”).
. See Debtor’s Disclosure Statement with Respect to Debtor's Fourth Amended Plan of Reorganization ("Disclosure Statement”) ¶ 9.
. See id. ¶ 10.
. The ESB Action was assigned adversary proceeding number 09-1107. The Judgment at issue in this appeal was entered in the Skyline Action; a separate judgment was entered in the ESB Action.
. See Skyline I, 432 B.R. at 74. I refer to the Skyline Action and the ESB Action collectively as the "adversary proceedings.”
. See Adv. Pro. Docket No. 1-1 ¶ 5.
. Id. ¶ 6.
. See id. No. 3.
. See Bankr.Docket No. 24. A chapter 11 debtor, “subject to the court’s approval, may assume or reject any executory contract or unexpired lease of the debtor.” 11 U.S.C. § 365(a). When there has been a default, the debtor generally must cure the default or otherwise compensate the contracting party in order to assume the contract. See id. § 365(b)(1). The debtor must assume a lease for nonresidential real property by the earlier of 120 days from the filing of the petition or the date of confirmation of a plan or it is deemed rejected. See id. § 365(d)(4)(A). The 120-day period may be extended for an additional 90 days without consent of the lessor provided the request for extension is made within the 120-day period. See id. § 365(d)(4)(B).
. See 4/28/09 Hearing Transcript (“4/28/09 Tr.”), Bankr.Docket No. 30.
. Skyline I, 432 B.R. at 74.
. 4/28/09 Tr. at 26.
. See Adv. Pro. Docket No. 8. In addition, the adversary proceedings were jointly administered for trial purposes.
. See Complaint, Docket No. 1 in adversary proceeding number 09-1107.
. See id. ¶¶ 98-104.
. See id. ¶¶ 105-153.
. See id. ¶¶ 154-157.
. MU 10.
. See Answer, Docket No. 10 ¶ 10 in Adv. Pro. No. 09-1107.
. See Adv. Pro. Docket Nos. 5, 30.
. See Complaint ¶ 25.
. Id. ¶ 26. See generally 4/28/09 Hearing Tr.
. See Adv. Pro. Docket No. 33.
. See Bankr.Docket No. 38.
. See id. No. 57.
. See id.
. Id.
. See Skyline I, 432 B.R. at 76-77.
. Id. at 88 (quotation marks omitted).
. See Bankr.Docket No. 132. Confirmation of Skyline's Third Amended Plan was denied in July 2010 after a confirmation hearing at which ESB was the only objecting party. See id. No. 130.
. See id. No. 144.
. Id. No. 132 § 11.1(b), (i), (j) (emphasis added).
. See id. No. 164.
. Id.
. See Adv. Pro. Docket No. 48.
. See id. On July 6, 2011, the parties entered into a stipulation dismissing each cause of action except for the claim for attorneys’ fees. See id. Docket No. 53.
. See id. Docket No. 55.
. See Bankr.Docket No. 167.
. Adv. Pro. Docket No. 62.
. Id.
. Id.
. Id. Rule 9033(a) provides that “[i]n non-core proceedings heard pursuant to 28 U.S.C. § 157(c)(1), the bankruptcy judge shall file proposed findings of fact and conclusions of law.”
. See Adv. Pro. Docket No. 63; Bankr.Docket No. 168.
. See Adv. Pro. Docket No. 65 at 10-20.
. Id. at 12 (quoting Complaint ¶ 26); 4/28/09 Hearing Tr. at 26 (bankruptcy court held that certain claims were core and others were ''arguably” core). In addition, Skyline indicated that it had "abandoned its right to a jury trial on its tort claims because research disclosed that a motion to withdraw the reference would be futile in June 2011.” Adv. Pro. Docket No. 65 at 19. ESB’s remaining claims were counterclaims relating to the protocol provision in the 2005 Agreement, Skyline’s right to sell New York City-themed memorabilia at the gift shop, and matters concerning the fire alarm system, and its claim for attorneys’ fees. See id. at 14.
. Adv. Pro. Docket No. 65 at 18.
. Id. at 19.
. See id. No. 70 at 3-5.
. Id. at 5.
. Id. at 9 (citing 28 U.S.C. § 157(b)(1) and (c)(1)).
. Authority Decision, 471 B.R. at 78.
. Id. at 79 (citing In re Porges, 44 F.3d 159 (2d Cir. 1995)).
. See id. (citing to Plan § 11.1(b) and (j)).
. Id.
. See id. at 80.
. See id. at 85.
. See Adv. Pro. Docket Nos. 84, 86.
. See id. Nos. 98, 99.
. Protocol Decision, 497 B.R. at 703 n. 3 (citing Authority Decision, 472 B.R. at 79-80).
. See id. at 715-16.
. Judge Bernstein also found that (1) ESB did not breach the parties’ agreements relating to the installation of television monitors and signage and (2) Skyline breached the Lease provision regarding the sale of souvenirs, but did not breach the provision that prohibits Skyline from paying commissions or sales incentives to its employees. See id. at 703.
. See New York Skyline, Inc. v. Empire State Building Co. L.L.C. (In re New York Skyline, Inc.), No. 09-1145, 2013 WL 5487938 (Bankr.S.D.N.Y. Oct. 10, 2013).
. On October 18, 2013, Judge Bernstein entered a money judgment of $20,000 on ESB’s claim for attorneys’ fees and closed the ESB
. See In re Sanshoe Worldwide Corp., 993 F.2d 300, 305 (2d Cir. 1993).
. See Fed. R. Bankr.P. 8013 ("Findings of fact ... shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the bankruptcy court to judge the credibility of the witnesses.”).
. See In re Adelphia Commc'ns Corp., 298 B.R. 49, 52 (S.D.N.Y. 2003) (citing In re United States Lines, Inc., 197 F.3d 631, 640-41 (2d Cir. 1999)).
. Fed. R. Bankr.P. 8013.
. Murray’s Lessee v. Hoboken Land & Improvement Co., 59 U.S. 272, 284, 18 How. 272, 15 L.Ed. 372 (1856).
. See Plank, Why Bankruptcy Judges Need Not and Should Not Be Article III Judges, 72 Am. Bankr.L.J. 567, 607-609 (1998).
. Northern Pipeline Const. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 53, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982) ("Marathon") (citations omitted).
. S.Rep. No. 95-989, at 153 (1977), reprinted in 1978 U.S.C.C.A.N. 5787, 5939.
. Marathon, 458 U.S. at 54, 102 S.Ct. 2858 (quotation marks and alterations omitted) (emphasis in original).
. Id. at 71-72, 102 S.Ct. 2858 (quoting Crowell v. Benson, 285 U.S. 22, 51, 52 S.Ct. 285, 76 L.Ed. 598 (1932)).
. See Pub.L. No. 98-353, § 122(b) (1984).
. See Pied Piper Casuals, Inc. v. Insurance Co. of the State of Pennsylvania, 72 B.R. 156, 158 (S.D.N.Y. 1987).
. The United States District Court for the Southern District of New York has referred its bankruptcy jurisdiction to the bankruptcy courts of this district pursuant to its Amended Standing Order of Reference, 12 Misc. 00032 (S.D.N.Y. Jan. 31, 2012).
. See, e.g., Stem, 131 S.Ct. at 2607 (stating that once referred, “[sjection 157 allocates the authority to enter final judgment between the bankruptcy court and the district court”). In addition, section 158 governs appeals from bankruptcy court orders.
. Under paragraph (a), the district courts "have original and exclusive jurisdiction of all cases under title 11.” A bankruptcy "case” is commenced by filing a petition for relief under title 11.
. "Proceedings” is interpreted broadly to include any civil matter or dispute that occurs during the administration of a bankruptcy case.
. The district court has jurisdiction if a proceeding comes within any of these three categories. See Stern, 131 S.Ct. at 2603. " ‘Arising under’ jurisdiction exists where one invokes a substantive right created by federal bankruptcy law.” Glinka v. Murad (In re Housecraft Indus. USA, Inc.), 310 F.3d 64, 70 (2d Cir. 2002). " ‘[A]rising in' proceedings are those that are not based on any right expressly created by title 11, but nevertheless, would have no existence outside of the bankruptcy.” Wood v. Wood (In re Wood), 825 F.2d 90, 97 (5th Cir. 1987). Accord Baker v. Simpson, 613 F.3d 346, 351 (2d Cir. 2010) (same). A proceeding is "related to” a case under title 11, "if the outcome of the litigation might have any conceivable effect on the bankruptcy estate, or has any significant connection with the bankrupt estate.” Lead I TV, LP v. North Fork Bank, 401 B.R. 571, 581 (E.D.N.Y. 2009) (quotation marks omitted). Accord Publicker Indus., Inc. v. United States (In re Cuyahoga), 980 F.2d 110, 114 (2d Cir. 1992) ("The test for determining whether litigation has a significant connection with a pending bankruptcy proceeding is whether its outcome might have any conceivable effect on the bankrupt estate.”) (quotation marks omitted).
. 28 U.S.C. § 157(b)(1).
. See Stern, 131 S.Ct. at 2605; 28 U.S.C. § 157(b)(1) ("Bankruptcy judges may hear and determine all cases under title 11 and all core proceedings arising under title 11, or arising in a case under title 11, referred under subsection (a) of this section, and may enter appropriate orders and judgments, subject to review under section 158 of this title.”). Section 157(b)(2) sets forth examples of "core” proceedings.
. See Stern, 131 S.Ct. at 2610.
. See 28 U.S.C. § 157(c)(2); In Men's Sportswear, Inc. v. Sasson Jeans, Inc. (In re Men’s Sportswear, Inc.), 834 F.2d 1134, 1137-38 (2d Cir. 1987).
. See also Fed. R. Bankr.P. 7008(a) ("In an adversary proceeding before a bankruptcy judge, the complaint, counterclaim, cross-claim, or third-party complaint shall contain a statement that the proceeding is core or
. Stern, 131 S.Ct. at 2605 (quotation marks omitted).
. See id. at 2608. Following Marathon, the Second Circuit noted that "both the Supreme Court and this court have concluded that the Marathon holding was a narrow one and have broadly construed the jurisdictional grant in the 1984 Bankruptcy Amendments.” In re S.G. Phillips Constructors, Inc., 45 F.3d 702, 705 (2d Cir. 1995). Likewise, the Second Circuit has indicated that Stem should be construed narrowly. See In re Quigley Co., Inc., 676 F.3d 45, 52 (2d Cir. 2012) (noting that the holding of Stem was narrow, and that "[e]n-joining litigation to protect bankruptcy estates during the pendency of bankruptcy proceedings, unlike the entry of the final tort judgment at issue in Stem, has historically been the province of the bankruptcy courts.”). Nonetheless, a number of courts in this Circuit have applied Stem to limit the authority of bankruptcy courts to enter final judgments on claims that are often integral to the bankruptcy process, such as actions to set aside fraudulent conveyances. See, e.g., In re Madison Bentley Assocs., LLC, 474 B.R. 430, 438-39 (S.D.N.Y. 2012) (stating that "[cjourts ... have consistently held that, after Stem, bankruptcy courts lack authority to issue final judgments on fraudulent conveyance claims”).
. In re Ames Dep’t Stores, Inc., No. 06 Civ. 5394, 2008 WL 7542200, at *6 (S.D.N.Y. June 4, 2008).
. Celotex Corp. v. Edwards, 514 U.S. 300, 307, 115 S.Ct. 1493, 131 L.Ed.2d 403 (1995).
. See, e.g., In re Petrie Retail, Inc., 304 F.3d 223, 230 (2d Cir. 2002) ("A bankruptcy court retains post-confirmation jurisdiction to interpret and enforce its own orders.”); In re Chateaugay Corp., 213 B.R. 633, 638 (S.D.N.Y. 1997); In re Fibermark, Inc., 369 B.R. 761, 765 (Bankr.D.Vt. 2007) (citing Local Loan Co. v. Hunt, 292 U.S. 234, 239, 54 S.Ct. 695, 78 L.Ed. 1230 (1934) (“That a federal court of equity has jurisdiction of a bill ancillary to an original case or proceeding in the same court, whether at law or in equity, to secure or preserve the fruits and advantages
. Peacock v. Thomas, 516 U.S. 349, 354, 116 S.Ct. 862, 133 L.Ed.2d 817 (1996) (citing Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375, 380-81, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994)).
. See Klein v. Civale & Trovato, Inc. (In re Lionel Corp.), 29 F.3d 88, 92 (2d Cir. 1994).
. See generally In re Cavalry Const., Inc., 496 B.R. 106 (S.D.N.Y. 2013) (discussing cases); In re Dreier LLP, No. 10-5456, 2012 WL 4867376, at *4 (Bankr.S.D.N.Y. Oct. 12, 2012) (" 'There is a serious question whether the supplemental jurisdiction statute is applicable to the jurisdiction exercisable by bankruptcy judges.’ ”) (quoting 16 Daniel R. Co-quillette, et al., Moore's Federal Practice § 106.05C10], at 106.34.2(1) (3d ed. 2012)).
. Enron Corp. v. Citigroup, Inc. (In re Enron Corp.), 353 B.R. 51, 61 (Bankr.S.D.N.Y. 2006) (citing In re Walker, 51 F.3d 562, 573 (5th Cir. 1995) ("[I]t would be somewhat incongruous to gut this careful system [of ‘core’ and 'non-core’ bankruptcy court jurisdiction] by allowing bankruptcy courts to exercise supplemental jurisdiction.”)).
. See Porges, 44 F.3d at 162-63 (stating that when jurisdiction is retained following dismissal “a court must consider four factors in determining whether to continue to exercise jurisdiction: judicial economy, convenience to the parties, fairness and comity”). As a general rule, courts are required to analyze the Porges factors when deciding to retain jurisdiction. See, e.g., In re Millenium Seacar-riers, Inc., 458 F.3d 92, 96 (2d Cir. 2006) (stating that "a party that has not objected to the forum court's failure to make specific findings relevant to the Porges factors is not entitled to remand for such findings (or, for that matter, a dismissal of the action) when we are satisfied that the forum court did not improperly exercise subject matter jurisdiction by abusing its discretion in retaining jurisdiction”).
. Porges, 44 F.3d at 164 (quotation marks and alterations omitted).
. Id. at 163.
. See id. at 164.
.Id. at 165. Other Second Circuit decisions that considered retention of jurisdiction under Porges have also involved contexts that invoke principles of ancillary jurisdiction. See Millenium Seacarriers, Inc., 458 F.3d at 96 ("[Jjudicial economy and convenience to the parties are both served by the Bankruptcy Court’s interpretation of its own Sale Order due to its familiarity with the facts. Fairness and comity are not affected either way.”) (quotation marks omitted); In re Aquatic Dev. Group, Inc., 352 F.3d 671, 676 (2d Cir. 2003) (interpretation of confirmation order).
. See Hospital & Univ. Property Damage Claimants v. lohns-Manville Corp. (In re Johns-Manville Corp.), 7 F.3d 32, 34 (2d Cir. 1993).
. In re Kassover, 448 B.R. 625, 632-33 (S.D.N.Y. 2011) (quotation marks omitted).
. See, e.g., Fibermark, 369 B.R. at 766.
. See Kassover, 448 B.R. at 632.
. 4/28/09 Tr. at 26.
. See 529 F.3d 432, 464-65 (2d Cir. 2008).
. Development Specialists, Inc. v. Akin Gump Strauss Hauer & Feld. LLP, 462 B.R. 457, 471 (S.D.N.Y. 2011). That is not to say that Judge Bernstein’s determination was incorrect or that CBI Holding Co. does not survive Stem, points on which I take no position. But Stem certainly alters the landscape. See, e.g., Stern, 131 S.Ct. at 2630 (Breyer, J., dissenting) ("[U]nder the majority’s holding, the federal district judge, not the bankruptcy judge, would have to hear and resolve the counterclaim. Why is that a problem? Because these types of disputes arise in bankruptcy court with some frequency. See, e.g., In re CBI Holding Co.”); Weisfelner v. Blavatnik (In re Lyondell Chem. Co.), 467 B.R. 712, 722 (S.D.N.Y. 2012) ("There is no implied consent where, as here, defendants seek withdrawal at the close of discovery before any trial activities or judgment, and where new precedent renders unclear the authority of the bankruptcy [court] to enter final judgment on certain claims.”).
. Development Specialists, Inc., 462 B.R. at 472. Accord In re Men's Sportswear, 834 F.2d at 1138 ("[A] court should not lightly infer from a litigant’s conduct consent to have private state-created rights adjudicated by a non-Article III bankruptcy judge. Indeed, to do so would violate the spirit of Northern Pipeline, which emphasizes that the power to adjudicate private rights, such as the right to recover contract damages, cannot be lodged in a court lacking ‘the essential attributes of the judicial power.’ ”) (quoting Northern Pipeline, 458 U.S. at 87, 102 S.Ct. 2858).
. See, e.g., Adelphia Recovery Trust v. FLP Group, Inc., No. 11 Civ. 6847, 2012 WL 264180, at *3-4 (S.D.N.Y. Jan. 30, 2012) ("Defendants sought to remain in Bankruptcy Court in 2007 because, inter alia, the claim was ‘core.’ There is no indication that Defendants, in conceding that the claim was ‘core,’ expressly consented to final adjudication by a bankruptcy judge. While this may have been implied at that time, Stem provided defendants with a legal basis to contest the Bankruptcy Court’s adjudicative power that they did not have before.”) (quotation marks and alterations omitted).
. Likewise, the Confirmation Order provides that "[t]he Court hereby retains jurisdiction over the Bankruptcy Case to the fullest extent provided for in Article 11 of the Plan.” Bankr.Docket No. 144 ¶ 30. "Bankruptcy Case” is defined in the Plan to mean the "Chapter 11 bankruptcy case of the Debtor.” Plan ¶ 1.7. To be sure, the Plan language was sufficient to retain jurisdiction. However, the issue here is whether the jurisdiction provision also addresses the authority of the bankruptcy court to enter final judgment on non-core claims.
. Lyondell Chem. Co., 467 B.R. at 722-23 (citing Stem, 131 S.Ct. at 2607 noting that the allocation of authority to enter final judgment between the bankruptcy court and the district court "does not implicate questions of subject matter jurisdiction”).
. Id. at 722.
. See Fed. R. Bankr.P. 7008(a) ("In an adversary proceeding before a bankruptcy judge, the complaint, counterclaim, cross-claim, or third-party complaint shall contain a statement that the proceeding is core or non-core and, if non-core, that the pleader does or does not consent to entry of final orders or judgment by the bankruptcy judge.”); Id. 7012 ("A responsive pleading shall admit or deny an allegation that the proceeding is core or non-core. If the response is that the proceeding is non-core, it shall include a statement that the party does or does not consent to entry of final orders or judgment by the bankruptcy judge. In non-core proceedings final orders and judgments shall not be entered on the bankruptcy judge’s order except with the express consent of the parties.”).
. Judge Bernstein relied on Plan sections 11.1(b) and (j). Section 11.1(b) states that the court has jurisdiction “[t]o determine any and all adversary proceedings, applications, and contested matters that are pending on the Effective Date.” Rather than use the bankruptcy term of art "hear and determine,” which itself is insufficient to manifest consent in the context of jurisdiction retention, section 11.1(b) only uses the term “determine,” mirroring section 157(b)(3), which states that "[t]he bankruptcy judge shall determine ... whether a proceeding is a core proceeding under this subsection or is a proceeding that is otherwise related to a case under title 11.” Whereas section 11.1(b) refers to adversary proceedings, section 11.1 (j) is a more general provision relating to claims brought on behalf of the "Debtor” for the enhancement of the “Estate,” and, in any event, cannot be read as express consent to the bankruptcy court's authority to enjoin Skyline, now a former debt- or, from compensating its employees for certain activities. By the same token, section ll.l(i), which Judge Bernstein did not discuss, states that the court has jurisdiction “[t]o hear and determine all Claims, controversies, suits and disputes against the Debtor to the full extent permitted under 28 U.S.C. § 1334 and 28 U.S.C. § 157.” This provision must be read narrowly, because it expressly limits the bankruptcy court's authority to "hear and determine” claims against the debtor by what section 157 allows, and section 157 does not permit a bankruptcy court to enter a judgment in a non-core proceeding absent consent.
.See, e.g., Adelphia Recovery Trust, 2012 WL 264180, at *3-4.
. See Executive Benefits Ins. Agency v. Arkison, 573 U.S.-, 134 S.Ct. 2165, 2171-74, 189 L.Ed.2d 83 (2014). Skyline alleged that its claims were core based on the determination made by Judge Bernstein at the April 28, 2009 hearing. See Complaint, Adv. Pro. Docket No. 30 ¶ 26. ESB admitted that allegation, and asserted that its counterclaims were core pursuant to section 157(b)(2)(A), (B), and (O). See Answer, Adv. Pro. Docket No. 33 ¶¶ 26, 267. Skyline does not appear to have filed an answer to the counterclaims. However, after three years of piecemeal litigation, Judge Bernstein determined in the Authority Decision that the remaining claims were non-core. Based on these facts, I cannot conclude that Skyline consented to the entry of final judgment. See generally Stern, 131 S.Ct. at 2607-08, 2614 (finding that defendant’s consent to the bankruptcy court’s final adjudication of its proof of claim did not mean defendant consented to the bankruptcy court’s final adjudication of plaintiff's state law counterclaim).
. I also note that the Authority Decision does not consider whether Skyline could have withdrawn its consent — even if it had consented — based on changed circumstances, such as the issuance of the Final Decree and the nature of the claims remaining following the parties’ stipulations and the entry of partial summary judgment.
. Authority Decision, 471 B.R. at 78 (emphasis added).
. See, e.g., Walker, 51 F.3d at 573.
. In May 2012, Judge Bernstein noted in the Authority Decision that the order approving assumption of the Lease listed certain "disputed cure claims," including "electrical charges.” 471 B.R. at 80 n. 6. However, he explained that ”[i]t appears [] that the only remaining monetary claim asserted by ESB relates to attorneys’ fees.” Id. Moreover, Judge Bernstein held that ESB was not entitled to pursue attorneys' fees in connection with its counterclaims in the Skyline Action. See id. at 85.
. See 28 U.S.C. § 157(c)(1) ("A bankruptcy judge may hear a proceeding that is not a core proceeding but that is otherwise related to a case under title 11.”) (emphasis added); Arki-son, 134 S.Ct. at 2173 ("With the ‘core’ category no longer available for the Stem claim at issue, we look to § 157(c)(1) to determine whether the claim may be adjudicated as a non-core claim — specifically, whether it is ‘not a core proceeding’ but is 'otherwise related to a case under title 11.’ If the claim satisfies the criteria of § 157(c)(1), the bankruptcy court simply treats the claims as non-core: The bankruptcy court should hear the
. See, e.g., Lyondell Chem. Co., 467 B.R. at 723 n. 8 (noting that a bankruptcy court has authority to determine its adjudicative authority pursuant to Stem and Article III subject to review by the district court).
Reference
- Full Case Name
- In re NEW YORK SKYLINE, INC., Debtor. New York Skyline, Inc. v. Empire State Building Trust Company L.L.C. and Empire State Building Associates, L.L.C.
- Cited By
- 7 cases
- Status
- Published