In Re Safety Harbor Resort and Spa
456 B.R. 703
Bankr. M.D. Fla.2011Background
- Debtor Safety Harbor Resort filed a chapter 11 to restructure; plan relies on substantial contributions from Olympia Investment Group principals (non-debtor guarantors) to pay German American; Olympia principals personally guaranteed Wells Fargo loan; plan would transfer 100% of Olympia stock to the Debtor to fund the plan (yielding ~$200,000); German American holds approximately $13.8 million secured claim and ~$15.9 million unsecured; plan payments allocate ~$3 million from Olympia asset sales and sale of undeveloped land, plus a 25-year amortization with a five-year balloon for the secured claim, and $4 million to unsecured claim (with a $2 million balloon funded by Olympia securities); Court confirmed the plan but did not approve the proposed releases for non-debtor guarantors and issued a four-year injunction barring German American from pursuing those guarantors during the plan term, with the injunction expiring after the $2 million balloon payment
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Stern v. Marshall restricts the court's authority to imposing lock-up provisions | Debtor argues Stern limits authority to impose lock-ups | German American asserts Stern broadly curtails such jurisdiction | Stern is narrow; court may impose lock-ups under core plan-confirmation jurisdiction |
| Whether Stern limits the court's core/non-core jurisdiction distinction | Debtor contends Stern eliminates broad core status for non-core counterclaims | German American argues Stern constrains authority to final judgments on state-law claims | Stern narrows, but core proceedings under §157(b)(2) remain intact for plan-related matters |
| Whether non-debtor guarantors consent to final orders on lock-ups | Debtor argues no consent to final orders on non-core issues | Non-debtor guarantors consent by their involvement and control of Debtor | Consent (express/implied) supports court's entry of final lock-up orders |
| Whether the public rights doctrine applies to the non-core counterclaim at issue | Counterclaim is not a public-right matter | Public rights doctrine could authorize non-Article III adjudication | Vickie’s counterclaim not within public rights; Stern does not categorically remove core powers; however, non-core issues may still be consented to (157(c)(2)) |
Key Cases Cited
- Stern v. Marshall, 131 S. Ct. 2594 (2011) (narrow holding—Congress cannot redefine all counterclaims as core to exceed Article III limits)
- Granfinanciera, S.A. v. Nordberg, 492 U.S. 33 (1989) (Seventh Amendment; public rights limitations on bankruptcy judges not broadly sweeping)
- Northern Pipeline Construction Co. v. Marathon Pipe Line Co., 458 U.S. 50 (1982) (public rights exception; risks of non-Article III adjudication for state-law claims)
- Katchen v. Landy, 382 U.S. 323 (1966) (summary jurisdiction; payment/claims process integrated with bankruptcy adjudication)
- Langenkamp v. Culp, 498 U.S. 42 (1990) (consent and jury-trial considerations in bankruptcy adjudications)
- Murray's Lessee v. Hoboken Land & Improvement Co., 59 U.S. 272 (1855) (public rights origins; limits on traditional suits in Article III courts)