Janusz Kecki v. Texas Enterprises, LLC
C.A. No. 2017-0892-MTZ
| Del. Ch. | Jul 30, 2021Background
- On March 2, 2015 Texas Enterprises filed a Chapter 11 petition that included a List of Equity Security Holders showing Janusz Kecki as a 15% holder; Derek Chabrowski was listed as a creditor, not an equityholder.
- Plaintiffs (Kecki and Chabrowski) filed a pro se complaint in Delaware Chancery (Dec. 14, 2017) seeking a declaratory judgment identifying equity ownership as of the petition date; Chabrowski alleges he held 15% and that the List was fraudulent.
- The Bankruptcy Court confirmed a plan on March 17, 2016; Chabrowski later moved to reopen the bankruptcy proceedings and that motion was denied.
- In Chancery, the parties filed multiple summary-judgment motions; in Aug. 2019 the court entered summary judgment as to Kecki’s 15% interest but denied it as to Chabrowski.
- Texas Enterprises moved to dismiss/for summary judgment in Feb. 2021 arguing lack of subject-matter jurisdiction and related defenses; Plaintiffs did not timely oppose and the motion was deemed unopposed.
- Vice Chancellor Zurn held the Court lacks subject-matter jurisdiction to adjudicate collateral attacks on the bankruptcy petition or the List, granted the motion, dismissed the complaint, and vacated the earlier Aug. 20, 2019 summary-judgment order as entered without jurisdiction.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Chancery may adjudicate the accuracy of the bankruptcy "List of Equity Security Holders" (a collateral attack on the bankruptcy petition) | Kecki/Chabrowski seek declaratory relief identifying shareholders on the petition date and challenge the List as inaccurate/fraudulent | Bankruptcy petitions and collateral attacks are within exclusive federal jurisdiction; state courts lack authority | Court lacks subject-matter jurisdiction; dismissal granted |
| Adequacy of notice to Chabrowski (a listed/unlisted creditor issue) | Chabrowski contends he did not receive adequate notice and was improperly treated as a creditor | Adequacy of notice is a core bankruptcy issue for the Bankruptcy Court | Adequacy-of-notice questions belong to the Bankruptcy Court; Chancery may not decide them |
| Effect of Bankruptcy Court confirmation and denial to reopen (finality/preclusion) | Plaintiffs ask Chancery to revisit ownership despite confirmed plan | Bankruptcy confirmation is a final judgment; collateral attacks are barred and the denial to reopen is binding | Chancery cannot disturb the Bankruptcy Court's confirmation or denial to reopen; claim precluded |
| Fraud/abuse-of-process exception to exclusive federal jurisdiction | Plaintiffs allege the bankruptcy filing/List was part of a fraudulent scheme to strip shareholders | Defendant treats the claim as a collateral attack on the petition barred by exclusive jurisdiction | Court notes a split of authority on whether fraud claims may be heard in state court but declines to reach or adopt an exception; dismissal on jurisdictional grounds |
Key Cases Cited
- Gonzalez v. Parks, 830 F.2d 1033 (9th Cir. 1987) (state courts may not entertain collateral attacks on bankruptcy petitions)
- In re McGhan, 288 F.3d 1172 (9th Cir. 2002) (adequacy of notice and related bankruptcy matters are within federal bankruptcy jurisdiction)
- Gruntz v. County of Los Angeles, 202 F.3d 1074 (9th Cir. 2000) (state modification of bankruptcy orders is an unauthorized intrusion on federal bankruptcy jurisdiction)
- Rosenberg v. DVI Receivables XVII, LLC, 835 F.3d 414 (3d Cir. 2016) (limits on state-court collateral attacks on bankruptcy matters)
- In re Bral, 622 B.R. 737 (9th Cir. BAP 2020) (authority recognizing circumstances in which fraud-related challenges to bankruptcy filings may be considered)