Fire Eagle L.L.C. v. Bischoff (In Re Spillman Development Group, Ltd.)
2013 U.S. App. LEXIS 4490
| 5th Cir. | 2013Background
- SDG obtained a $7.2M loan and a further $0.9M from the Bank, secured by liens and limited guarantees with forum-selection clauses to Grayson County, TX.
- SIG’s $1.2M certificate of deposit was collateral for the Senior Indebtedness and to be returned upon payment; Fire Eagle provided $4.1M junior debt.
- SDG filed for bankruptcy in 2005; Fire Eagle acquired the Bank’s Senior Indebtedness and advanced a credit bid for SDG’s assets.
- Bankruptcy court ordered an 11 U.S.C. § 363(b) sale; Falcon Golf Course Partners submitted a $9.2M bid, Fire Eagle bid $9.3M, sale approved, and it was found the Senior Indebtedness was paid in full.
- Guarantors (except one) and SIG filed adversary actions challenging release from guarantees and return of the certificate; Fire Eagle sought dismissal and separate action in Louisiana; courts ultimately held the Senior Indebtedness paid and ordered release of the CD.
- Bankruptcy court, then district court, ruled that Fire Eagle’s credit bid paid in full the Senior Indebtedness; district court affirmed; Fire Eagle appealed on jurisdiction, venue, and those rulings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the bankruptcy court had related-to jurisdiction. | Fire Eagle contends no related-to jurisdiction. | Fire Eagle challenges jurisdiction as beyond bankruptcy scope. | Related-to jurisdiction affirmed; adjudication could affect the estate. |
| Whether the proceedings were core under §157(b)(2) and authority to enter judgments. | Fire Eagle argues non-core claims; improper entry of final judgments. | Court held core because right to credit bid is a bankruptcy-created remedy. | Judgments affirmed as properly core proceedings. |
| Constitutional limit of the bankruptcy court's authority (Stern v. Marshall) | Stern prohibits such determinations. | Claim closely tied to bankruptcy rights; not a separate state claim. | Stern inapplicable; no constitutional bar. |
| Whether forum-selection clauses required dismissal or improper venue in Western District of Texas | Clauses require Grayson County, TX venue. | Core bankruptcy venue interest justifies Western District venue. | Forum clauses not enforced due to strong public-policy interest in bankruptcy forum. |
| Whether transfer of Bischoff Adversary venue violated proper procedure (first-to-file rule) | Transfer improper under first-to-file. | No abuse; overlapping issues justify transfer. | No abuse; first-to-file rule applicable. |
| Whether credit bid paid in full eliminates lender's right to recover against guaranties | Credit bid may be separate from guaranteed debt; possible recovery against guaranties. | Credit bid equates to payment-in-full; guarantees terminate. | Credit bid paid in full; cannot collect against guaranties. |
Key Cases Cited
- U.S. Abatement Corp. v. Mobil Exploration & Producing U.S. Inc. (In re U.S. Abatement Corp.), 79 F.3d 393 (5th Cir. 1996) (identical task in bankruptcy appeals: review of factual findings for clear error; law de novo)
- In re Bass, 171 F.3d 1016 (5th Cir. 1999) (related-to jurisdiction; district court venue considerations)
- Abrams Shell v. Shell Oil Co., 343 F.3d 482 (5th Cir. 2003) (jurisdiction and core/related distinctions in bankruptcy)
- Haynsworth v. The Corp., 121 F.3d 956 (5th Cir. 1997) (enforceability of forum-selection and related policy concerns in core contexts)
- In re Nat’l Gypsum Co., 118 F.3d 1056 (5th Cir. 1997) (non-enforcement of arbitration clauses where core bankruptcy rights at stake)
- In re Stonebridge Techs., Inc., 430 F.3d 260 (5th Cir. 2005) (core proceedings; connection to bankruptcy rights)
- In re SubMicron Sys. Corp. (Cohen v. KB Mezzanine Fund II, LP), 432 F.3d 448 (3d Cir. 2006) (valuation issues under §506(a) considerations in bankruptcy context)