In Re: La Paloma Generating Company, LLC, 607 B.R. 794

La Paloma Generating Co. (Debtors) filed Chapter 11; the liquidating trustee (Kravitz) succeeded to a prepetition claim for property tax refunds for a Kern County, California power facility for 2012–2016.
Debtors moved under 11 U.S.C. § 505 to have the bankruptcy court determine entitlement to refunds; the Bankruptcy Court initially accepted jurisdiction and stayed state-court proceedings.
California State Board of Equalization (SBE) later moved for summary judgment, asserting Eleventh Amendment sovereign immunity and, alternatively, that § 505 limits/caps any refund because the taxpayer’s prepetition petitions specified a lower refund amount.
The Bankruptcy Court held it lacked jurisdiction under the Eleventh Amendment and dismissed the Adversary Proceeding, but also issued substantive § 505 rulings (including a cap of ~ $3.5M), which reduced the potential recovery from roughly $14–17M to ~$3.5M.
Trustee sought reconsideration to vacate the § 505 findings as void/advisory; the Bankruptcy Court denied reconsideration.
The District Court held the § 505 findings are void because the Bankruptcy Court lacked subject-matter jurisdiction, but declined to order those findings excised as an impermissible advisory opinion; the merits of the § 505 rulings remain for a court with jurisdiction.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the Bankruptcy Court's § 505 findings are void where it concluded it lacked jurisdiction under the Eleventh Amendment	Trustee: rulings on § 505 should be vacated as void because they were rendered without jurisdiction	SBE: court may determine its own jurisdictional limits and addressing § 505 first was proper; § 505 limits are jurisdictional	Court: § 505 findings are void as a matter of law because the court ultimately concluded it lacked subject-matter jurisdiction
Whether the § 505 discussion constituted an impermissible advisory opinion that must be excised	Trustee: the § 505 analysis is advisory and should be vacated/removed since it did not resolve the dispute on the merits	SBE: § 505 issues were fully briefed and ripe; alternative rulings promote appellate efficiency and are not advisory	Court: not an advisory opinion—issues were concrete, fully litigated, and alternative rulings are permissible; decline to excise
Whether the Bankruptcy Court correctly construed § 505 to "cap" the refund and require exhaustion for 2012	Trustee: California law does not permit a taxpayer's claimed valuation to cap refunds and exhaustion was satisfied by filing petitions and obtaining final Board action	SBE: prepetition petitions and administrative agreement limited the refund and barred judicial review for 2012	Court: did not decide the merits (rulings void); correctness of § 505 conclusions left to a court with jurisdiction

Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574 (1999) (federal court must have subject-matter and personal jurisdiction to decide merits)
City of Perth Amboy v. Customer Distribution Servs. Inc. (In re Custom Distribution Servs. Inc.), 224 F.3d 235 (3d Cir. 2000) (§ 505(a)(2)(B) limits bankruptcy-court authority over tax refunds absent a proper prepetition refund request)
Hechinger Inv. Co. of Del., Inc. v. creditors (In re Hechinger Inv. Co. of Del., Inc.), 335 F.3d 243 (3d Cir. 2003) (federal courts may sometimes decide merits before Eleventh Amendment issues when the merits fully resolve the dispute)
United States v. Fruehauf, 365 U.S. 146 (1961) (federal courts must avoid advisory opinions; opinions should arise from concrete adversary presentation)
In re Lazy Days RV Ctr., Inc., 724 F.3d 418 (3d Cir. 2013) (federal courts lack power to render advisory opinions)
Step-Saver Data Sys., Inc. v. Wyse Tech., 912 F.2d 643 (3d Cir. 1990) (warning against making law without necessary factual findings; advisory-opinion concerns)
Marshall v. Bd. of Educ., Bergenfield, N.J., 575 F.2d 417 (3d Cir. 1978) (judgment is void if rendered by a court lacking jurisdiction)
Liberty Mutual Ins. Co. v. Wetzel, 424 U.S. 737 (1976) (federal courts must consider their jurisdiction at all times)