461 B.R. 606
Bankr. N.D. Cal.2011Background
- Heller Ehrman LLP, Liquidating Debtor, filed an adversary proceeding against Gregory Canyon Ltd. and Servcon-San Marcos, Inc. for breach of contract and related claims.
- Defendants moved to dismiss the first amended complaint for lack of jurisdiction under 28 U.S.C. §§ 157 and 1334.
- The court held there is no related-to jurisdiction and the action is not a core proceeding; turnover relief under § 542 is not applicable.
- The complaint appears to be a collection action on an account receivable, not turnover of estate property, and the estate does not possess a specific fund in Defendants' possession.
- Post-confirmation, the plan and its liquidation framework do not confer related-to jurisdiction over this state-law breach of contract claim.
- The court granted the motion to dismiss and directed counsel to prepare an order.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the court have related-to jurisdiction over the action? | Heller asserts related-to jurisdiction under 28 U.S.C. § 1334. | Defendants contend there is no related-to jurisdiction for this post-confirmation state-law claim. | No related-to jurisdiction. |
| Is the action a core or non-core proceeding? | Claim designated as turnover under § 542; core to estate. | Action is non-core; not a turnover and does not arise from core bankruptcy powers. | Non-core proceeding. |
| Is turnover under § 542 applicable, given the facts? | Claim seeks turnover of estate property. | Action seeks recovery on a contract/receivable, not return of undisputed funds. | Turnover under § 542 not applicable. |
| Does post-confirmation nexus to the bankruptcy plan confer jurisdiction? | The action relates to plan administration and could affect distributions. | Post-confirmation actions require a close nexus; this action does not. | No close nexus; no jurisdiction. |
Key Cases Cited
- In re Gurga, 176 B.R. 196 (9th Cir. BAP 1994) (turnover involves undisputed funds; not applicable here)
- Pacor, Inc. v. Higgins, 743 F.2d 984 (3d Cir. 1984) (test for related-to jurisdiction)
- In re Fietz, 852 F.2d 455 (9th Cir.1988) (stakes the related-to nexus framework in Ninth Circuit)
- In re Pegasus Gold Corp., 394 F.3d 1189 (9th Cir.2005) (close-nexus test for post-confirmation matters tied to plan)
- In re Ray, 624 F.3d 1124 (9th Cir.2010) (no close nexus where action could exist independently of bankruptcy)
- Resorts Int'l, Inc., 372 F.3d 154 (3d Cir.2004) (limits on expansion of jurisdiction by potential asset increases)
- In re The Fairchild Corp., 452 B.R. 525 (Bankr.D. Del.2011) (pre-petition conduct claims post-confirmation require nexus)
- Stern v. Marshall, 131 S. Ct. 2594 (2011) (process, not jurisdictional power of bankruptcy court)