2013 WL 1855751
Bankr. D. Colo.2013Background
- At a March 6, 2013 status conference, the court directed briefs on whether it had subject matter jurisdiction over the claims between Plaintiff LAR MHP Holdings and OH and LAR.
- Plaintiff and OH argued the claims are “related to” the Debtor's Chapter 7 case; the court concluded it did not have jurisdiction over the non-debtor claims and dismissed them without prejudice, vacating prior orders.
- Plaintiff's amended complaint contains sixteen claims against Debtor, LAR, and OH, including fraudulent conveyance, misrepresentation, conversion, civil theft, embezzlement, fiduciary breach, negligence, conspiracy, nondischargeability, declaratory relief, constructive trust, injunction, unjust enrichment, and aiding/abetting claims.
- The Trustee asserted five counterclaims seeking avoidance and recovery of transfers under 11 U.S.C. §§ 544, 547, 548(a)(1)(A), 548(a)(1)(B), and 550.
- Prior orders partially resolved claims; remaining claims before the court are limited to certain state-law claims against LAR and OH, the declaratory judgment against the Trustee, the constructive trust claim, quasi-contract/unjust enrichment against OH, aiding and abetting breach against OH, and the Trustee’s counterclaims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the court has subject matter jurisdiction over the state-law claims against non-debtor OH and LAR | Related to the Debtor’s estate could affect estate value. | Related-to jurisdiction is too broad; Gardner/Pacor limits apply. | No jurisdiction over state-law claims against OH and LAR. |
| Whether Twelfth declaratory-judgment claim and Trustee counterclaims fall within jurisdiction | Declaratory/specific avoidance actions arise under/arise in bankruptcy and are within jurisdiction. | Not applicable to non-debtors; focus remains on related-to limits. | Twelfth claim and Trustee counterclaims fall within jurisdiction. |
Key Cases Cited
- Pacor, Inc. v. Higgins, 743 F.2d 984 (3d Cir. 1984) (related-to test requires potential effect on estate, not mere conceivable effects)
- In re Gardner, 913 F.2d 1515 (10th Cir. BAP 1990) (limits related-to jurisdiction when controversy among creditors does not involve debtor or property)
- Tower Automotive Mexico v. Grupo Proeza, S.A. (In re Tower Automotive, Inc.), 356 B.R. 598 (Bankr.S.D.N.Y. 2006) (no jurisdiction over non-filed subsidiary disputes unless necessary to administrative duties)
- In re Midgard Corp., 204 B.R. 764 (10th Cir. BAP 1997) (defines arising under vs arising in; supports Gardner framework)
- Personette v. Kennedy (In re Midgard Corp.), 204 B.R. 764 (10th Cir. BAP 1997) (illustrates related-to limitations in bankruptcy jurisdiction)