597 B.R. 235
Bankr. D. Del.2019Background
- Maxus Energy (formerly Diamond Shamrock) sold its chemicals business to Occidental Chemical (OCC); the plant area was an EPA Superfund site contaminated with dioxin.
- New Jersey sued Maxus, its parents, and OCC; OCC cross-claimed against Maxus seeking indemnity and alleged alter-ego, unjust enrichment, fraudulent transfer, and conspiracy theories against Maxus’s parent/grandparent (YPF/Repsol).
- Maxus filed bankruptcy; the Maxus Liquidating Trust (Trust) replaced OCC as the party pursuing many claims and filed a broad adversary complaint in Delaware asserting fraudulent-transfer (UFTA and §§ 544/550) and related state-law claims (alter ego, unjust enrichment, conspiracy) against YPF and Repsol.
- Repsol moved to (1) mandatorily abstain, (2) permissively abstain, and (3) dismiss under Rooker–Feldman, arguing the claims duplicate or impermissibly seek review of the New Jersey judgments.
- The Delaware bankruptcy court denied the motion in full: mandatory abstention failed because no state action existed that could presently provide the broader creditor-wide relief the Trust seeks; permissive abstention would impair estate administration and was outweighed by factors against abstention; Rooker–Feldman did not apply because the Trust seeks to relitigate claims, not obtain appellate review of the state judgment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Mandatory abstention under 28 U.S.C. § 1334(c)(2) (Non-544 state-law claims) | Trust: federal forum necessary because New Jersey litigation (brought by OCC) cannot provide recovery for all creditors; no state action exists that fully mirrors Trust's claims | Repsol: a state action (New Jersey litigation/appeal) exists and can adjudicate these state-law claims, so bankruptcy court must abstain | Denied — state action does not presently permit the broader creditor-wide relief sought; abstention prerequisites not satisfied |
| Permissive abstention (Republic Reader factors) | Trust: exercising jurisdiction is necessary to protect and efficiently administer the trust res and creditor recovery; New Jersey appeal may preclude timely relief | Repsol: state-law issues predominate and related state proceedings counsel abstention; jury issues favor state forum | Denied — weighing of factors favored retaining jurisdiction (administration of estate, close nexus, severability concerns, risk of inconsistent proceedings) |
| Applicability of Rooker–Feldman doctrine | Trust: suit seeks independent federal adjudication of creditors’ claims, not appellate review of state-court judgment | Repsol: federal case is a “copycat” that would effectively reverse the New Jersey judgment and thus is barred | Denied — Rooker–Feldman is narrow; plaintiff’s claims allege injury from defendants, not from the state judgment, and do not seek review of state-court proceedings |
| Core v. non-core characterization and federal jurisdiction for 544 claims | Trust: § 544/550 claims are core because avoidance powers arise under federal law; related state-law counts are part of the same core controversy | Repsol: many counts are state-law and non-core; § 1334 may be the sole jurisdictional basis and abstention appropriate | Court: 544 claims are core; related alter-ego/unjust enrichment/conspiracy are closely tied and also treated as core for purposes of adjudication |
Key Cases Cited
- Stern v. Marshall, 564 U.S. 462 (U.S. 2011) (limits on bankruptcy court authority and reference to Bleak House quote)
- Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280 (U.S. 2005) (narrows Rooker–Feldman to true appellate-review cases)
- Granfinanciera, S.A. v. Nordberg, 492 U.S. 33 (U.S. 1989) (fraudulent-transfer or avoidance claims may give rise to jury-trial considerations)
- Lance v. Dennis, 546 U.S. 459 (U.S. 2006) (Rooker–Feldman jurisdictional principles)
- In re Resorts Int’l, Inc., 372 F.3d 154 (3d Cir. 2004) (limits on post-confirmation bankruptcy jurisdiction over trust claims)
- Great W. Mining & Mineral Co. v. Fox Rothschild LLP, 615 F.3d 159 (3d Cir. 2010) (Third Circuit’s articulation of Rooker–Feldman limits)
- Stoe v. Flaherty, 436 F.3d 209 (3d Cir. 2006) (distinguishing core bankruptcy matters from state-law claims)
- Halper v. Halper, 164 F.3d 830 (3d Cir. 1999) (tests for "arising in" jurisdiction and core/non-core analysis)