In re Digital Community Networks, Inc.
496 B.R. 243
Bankr. M.D. Fla.2013Background
- Debtor and SW Florida Communications sued Bay Village in state court for breach of a cable services contract; Bay Village contends it is excused due to rejection in bankruptcy.
- State court refused to decide this, citing bankruptcy exclusive jurisdiction over property of the estate; bankruptcy court must decide if the contract was rejected.
- Prepetition, Debtor assigned the cable service contract and easement to Bay Village Cable, LLC, which was later sold to Woolf; Woolf acquired rights to Bay Village contract.
- Debtor listed the contract in schedules and proposed plans to reacquire contracts via repurchases or recharacterized loans; motion to assume the Bay Village contract was never decided and ultimately not pursued after settlements.
- Settlement and amended plan removed any provision on assumption of the Bay Village contract; after confirmation, SW Florida Communications (the master LLC) held the contracts and pursued suit against Bay Village in state court.
- Court held the contract was never property of the estate and thus not subject to rejection; judicial estoppel did not apply; judgment granted for Debtor and allowed state court action to proceed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Bay Village contract was property of the estate and subject to rejection | Debtor owned the contract (Schedules) and planned to reacquire; thus it could be rejected | Contract was assigned prepetition and conveyed to Woolf; not estate property | No; contract not estate property and not rejected |
| Whether judicial estoppel bars Debtor from claiming non-estate ownership in state court | Debtor owned asset in bankruptcy schedules and now contends otherwise | Inconsistencies were strategic, not designed to mock judiciary | Judicial estoppel does not apply |
| Effect of confirmation and settlement on contract status | Plan contemplated ownership or control of contracts via repurchase or recharacterization | Settlement and plan removed contract from estate; not issue for rejection | Irrelevant; contract was not estate property and not subject to rejection |
Key Cases Cited
- Butner v. United States, 440 U.S. 48 (U.S. 1979) (property interests are created and defined by state law; no federal overlay in bankruptcy)
- Burnes v. Pemco Aero-plex, Inc., 291 F.3d 1282 (11th Cir. 2002) (two-factor test for judicial estoppel; oaths and mockery of the judicial system)
- New Hampshire v. Maine, 532 U.S. 742 (U.S. 2001) (purpose of judicial estoppel; factors vary by case)
- Robinson v. Tyson Foods, Inc., 595 F.3d 1269 (11th Cir. 2010) (examples of bankruptcy-related recharacterization and related issues)
- Ajaka v. Brooksamerica Mtg. Corp., 453 F.3d 1339 (11th Cir. 2006) (illustrates bankruptcy scheduling and asset treatment)
- Parker v. Wendy’s Int’l, Inc., 365 F.3d 1268 (11th Cir. 2004) (case handling alternative pleadings and related estoppel)
- Barger v. City of Cartersville, GA, 348 F.3d 1289 (11th Cir. 2003) (judicial estoppel factors in Eleventh Circuit)
- De Leon v. Comcar Indus., Inc., 321 F.3d 1289 (11th Cir. 2003) (estate property and related considerations in bankruptcy)