MEMORANDUM OPINION
The Chapter 11 bankruptcy Plan of Debtor Kewanee Boiler Corporation n/k/a/ Oakfabco, Inc. (hereinafter “Oakfabco”) was confirmed on March 10, 1988, and the case was closed on March 14, 1997. Oak-fabco moved to reopen its bankruptcy so as to file herein an Adversary Complaint against American Standard, Inc. (“ASI”) for alleged violations of 11 U.S.C. § 524(a)(2). ASI objected. The bankruptcy case was reopened for the limited purpose of briefing whether jurisdiction would lie here to hear Oakfabco’s proposed Adversary Complaint that it seeks leave to pursue. The parties filed herein on August 14, 2001, a Stipulation as to various exhibits pertinent to their arguments.
The parties dispute the scope of an agreement they entered into herein in 1994 to settle claims then filed by ASI, and ASI disputes jurisdiction here to resolve that dispute as part of Oakfabco’s proposed Adversary proceeding. Those issues relate to tort claims of plaintiffs allegedly harmed by products manufactured pre-bankruptcy by Kewanee Boiler.
For reasons discussed below, Oakfabco’s motion is now fully granted and leave is given by separate order to file and present the Adversary Complaint alleging violations of § 524(a)(2).
FACTUAL BACKGROUND AND PROCEDURAL HISTORY
Prior to 1970, Kewanee Boiler was controlled by ASI. In 1970 ASI sold Ke-wanee Boiler’s assets to Kewanee Boiler Corporation, a newly formed Illinois corporation. Under the Asset Purchase Agreement and a subsequent undertaking, Kewanee Boiler Corporation agreed to indemnify and hold ASI harmless for certain costs, liabilities, debts, or other obligations. Kewanee Boiler and its assets were subsequently sold again in 1975, and in 1986 both Kewanee Boiler and its corporate parent filed Chapter 11 Bankruptcy Petitions, including the above-titled case. During this bankruptcy, all of Kewanee’s assets and its name were sold and the Debtor Kewanee Boiler was renamed Oakfabco, Inc.
In 1991, having been scheduled and notified about the bankruptcy, ASI filed a proof of claim herein for $200,000, alleging Oakfabco’s liability under an indemnity agreement. Oakfabco objected to ASI’s claim and ASI then filed a related Adversary Complaint. ASI and Oakfabco agreed to settle the ASI Adversary Complaint and claim in May of 1994. Under their settlement agreement documented through correspondence, ASI was allowed an unsecured claim of $20,000. The parties then submitted two agreed Orders: one allowed the claim for $20,000 and the other dismissed the Adversary Complaint with prejudice. Both Orders were entered and docketed on June 7,1994. 1
In 1996, ASI began to submit claims to Oakfabco asserted under their indemnification contract referred to above. Those claims purportedly arose from products liability suits filed by persons claiming that they were injured by Kewanee boilers. Presently at least three state court cases pend claiming such injuries, and other similar cases have been settled or are anticipated in the future. For all of those cases, ASI seeks indemnity under the 1970 indemnification agreement.
Oakfabco contends that all of ASI’s rights under the indemnification contract were discharged in 1988 by the Plan confirmation under § 1141(d)(1) of the Bankruptcy Code and that ASI is barred from pursuing these claims by the statutory discharge injunction arising under 11 U.S.C. § 524(a)(2). It also argues that the 1994 settlement orders resolved any issues now sought to be raised.
ASI counters that the 1994 settlement agreement did not, and could not encompass all possible future claims under the indemnification agreement, and that the effect of § 524(a)(2) could not by the 1988 confirmation order bar an unscheduled creditor having no notice of the bankruptcy case or plan.
The parties disagree on whether jurisdiction lies here to decide issues raised by the proposed Adversary Complaint. Oak-fabco argues that bankruptcy courts have jurisdiction to enforce and interpret their own orders, and that this is the best forum to interpret the 1994 settlement agreement. However, ASI contends that: (1) jurisdiction lies in state court because Oak-fabco has asserted its protection under § 1141(d)(1) as an affirmative defense there; (2) there is no basis for bankruptcy jurisdiction over the present dispute because the 1994 agreed orders did not incorporate the settlement agreement between the parties; and (3) state courts should be deferred to because of the complexity of issues and the extensive litigation that has already taken place in those courts (though no motion has yet been filed here for abstention). Although the parties were admonished to restrict their argument to the issue of jurisdiction, both parties argued the merits of their respective positions. Nonetheless, this Opinion focuses solely on the jurisdiction issue.
DISCUSSION
Core Jurisdiction lies over the Proposed Adversary Complaint
Congress has given federal district courts exclusive jurisdiction over bank
A case “arises under” Title 11 when the cause of action is based on a right or remedy expressly provided by the Bankruptcy Code. 1
Collier on Bankruptcy
¶ 3.01[4][e][i] (Matthew Bender 15th ed. rev.2001). Proceedings “arising in” a case under Title 11 include matters that, though not explicitly mentioned in the Code, would not exist outside of bankruptcy.
Collier, supra,
¶ 3.01[4][c][iv]. Related matters are generally causes of action under state law that are imported into the bankruptcy because of their impact on the size of the debtor’s estate, and hence the distribution to the debtor’s creditors.
Matter of United States Brass Corp.,
Proceedings arising in or under Title 11 are core proceedings, while related matters are noncore.
Barnett v. Stern,
Proceedings flowing from a core matter are themselves core matters.
In re Williams,
Section 1141(d)(1) provides in relevant part:
(d)(1) Except as otherwise provided in this subsection, in the plan, or in the order confirming the plan, the confirmation of a plan—
(A) discharges the debtor from any debt that arose before the date of such confirmation ...
Pursuant to § 103(a) of the Code, the discharge allowed under § 1141(d)(1) is implemented by Section 524(a) which provides in relevant part:
A discharge in a case under this title:
(1) voids any judgment at any time obtained, to the extent that such judgment is a determination of the personal liability of the debtor with respect to any debt discharged under section ... 1141 ... of this title, whether or not discharge of such debt is waived;
(2) operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect, recover or offset any such debt as a personal liability of the debtor, whether or not discharge of such debt is waived ...
11 U.S.C. § 524(a)(1) — (2).
Proceedings to enforce the statutory injunction under § 524(a)(2) are core proceedings under 28 U.S.C § 157(b)(2)(0), and willful violations of § 524(a)(2) are punishable or otherwise enforceable by judges using authority under § 105(a) of the Code.
In re Hardy,
There is also no doubt that Oakfabco’s objection to ASI’s claim was a core proceeding under 28 U.S.C. § 157(b)(2)(B) under which matters dealing with claims allowance and disallowance are core proceedings. The claims allowance process is integral to the restructuring of the debtor-creditor relationship,
Langenkamp v. Culp,
Accordingly, core jurisdiction lies over the proposed Adversary case under § 157(b)(2) and also lies here to consider whether the injunction under § 524(a)(2) of the Code was violated.
Oakfabco’s Defense Asserted in State Courts Did Not Nullify Federal Bankruptcy Jurisdiction
ASI contends that Oakfabco waived any claim of federal jurisdiction under § 1141(d)(1) by raising the discharge as an affirmative defense in state court.
As with any debtor confronted by a creditor seeking to collect on what might be a discharged debt after a bankruptcy case is closed, Oakfabco had several options in the state court cases against it: (1) to assert the discharge as an affirmative defense in cases filed by ASI in state court; (2) to remove to federal court under 28 U.S.C. § 1452(a) either the discharge-ability defense or the entire state court cause of action; (3) to move to reopen its bankruptcy case under 11 U.S.C. § 350(b) (since “a case may be reopened ..., to accord relief to the debtor, or for other cause”); and (4) to bring an Adversary Complaint in bankruptcy court to enforce the statutory injunction under § 524(a)(2) of the Code.
See In re Stucker,
ASI cites
In re Toussaint,
The only authority cited by
Toussaint
and
Jeffries
is based on § 28 U.S.C. 1446 and did not involve a bankruptcy case. (In
United States ex. rel Walker v. Gunn,
The wording of §§ 1334 and 1452 contradicts the holdings of Toussaint and Jef-fries. For example, § 1334(a) places exclusive jurisdiction over bankruptcy cases in the district court, and hence in the bankruptcy judges under the standing referral order in this District. A case reopened under § 350(b) would come under federal jurisdiction delegated to the bankruptcy judges. Therefore, the debtor’s option to revive its bankruptcy case cannot be precluded by the debtor’s prior decision to raise its discharge as an affirmative defense in state court. Such preclusion would render § 350(b) and § 1334(a) a nullity. Further, § 1334(b) allows bankruptcy judges to provide a single forum to decide all issues related to the debtor’s estate. This statute evinces Congress’ intent that bankruptcy courts have comprehensive power to deal with cases under Title 11. Nothing in the statute shows that Congress intended for bankruptcy judges to defer to state courts that are hearing an issue arising under Title 11. Moreover, § 1452(a) expressly provides that either a debtor or creditor may opt to have concurrent proceedings under Title 11 pend in both state and federal court because removal is optional: “A party may remove any claim or cause of action ... to the district court ... if such district court has jurisdiction of such claim or cause under section 1334 of this title.” 28 U.S.C. § 1452(a). (emphasis supplied.)
ASI seeks in effect to rewrite § 1334(c) to add a second mandatory abstention which would bar debtors from invoking rights under the Code once they raise their discharge as an affirmative defense in state court and fail to effect timely removal to federal court. Such a result would deprive debtors of fundamental protections under the Code. The legislative history of § 524(a) shows that it was enacted to prevent debtors from having their discharge nullified by post-bankruptcy collection efforts in state court.
Cox,
Thus, Oakfabco’s efforts to raise the discharge as a defense in state courts has no bearing on whether its assertion that ASI violated § 524(a)(2) can be heard here.
Jurisdiction over this Case lies under § 524(a)(2) as well as from the 1994 Orders Entered to Settle the Adversary and Claims
An injunction under § 524(a)(2) is a “perpetual injunction” that covers any creditor scheduled by the debt- or whether the creditor files a proof of claim or not.
Matter of Hendrix,
As to whether ASI was or is bound by the § 524(a)(2) injunction even though the Plan was confirmed before it was noticed about the bankruptcy is a most important issue, as is the contention of Debtor that ASI became bound subsequently to confirmation under doctrines of equitable estoppel and waiver. But those issues to be determined during the litigation do not detract from this Court’s jurisdiction to determine the application and reach of § 524(a)(2), jurisdiction that enables resolution of Debtor’s arguments through the litigation process. Likewise, ASI’s argument that lack of notice of the bankruptcy completely bars Debtor from asserting discharge through Plan confirmation is another issue to be determined by litigation. For the present, it is sufficient to recognize that a bankruptcy judge has permanent jurisdiction to determine the reach and affect of § 524(a)(2), and that includes jurisdiction to decide whether it applies to a particular creditor.
However, ASI argues that the settlement Orders issued in 1994 did not incorporate the settlement agreement between it and Oakfabco, and therefore there is no independent basis of jurisdiction to hear the present dispute between the parties. In this regard, it relies on
Lucille v. City of Chicago,
First, as Lucille itself recognizes, a court has authority to enforce whatever agreement was contained in the judgment. Accordingly, by reference to the claim and adversary pleadings in litigation that were settled herein, and to the motions and orders resolving them, at least that record is within this Court’s authority to interpret.
Secondly, unlike
Lucille,
there is a source of jurisdiction here independent of the settlement agreement reached in 1994. As the opinion in
Hendrix
stated, Section 524(a)(2) made “the bankruptcy proceeding a continuous, ongoing proceeding as to anyone bound by the injunction.”
Hendrix,
Moreover, ASI’s contention that there is no jurisdiction to reopen this case to deal with any claims not covered by the 1994 agreement is circular and unavailing to block jurisdiction since the scope of that agreement remains to be decided. It presently appears from the briefs that the only efforts to memorialize the agreement to settle the 1994 Adversary Complaint may have been a single paragraph in a letter from counsel for Oakfabco acknowledging the agreement, and another letter from the same counsel giving a list of insurers that might be liable to ASI. (Response of ASI, exhibits 12 and 22). ASI’s arguments concerning the scope of agreement must be dealt with in the new Adversary litigation, but do not show lack of jurisdiction. Indeed, application of Lucille may affect whether this Court can interpret an agreement not filed, even though the ruling in that case does not block jurisdiction in this proceeding. Lucille itself made clear that this Court has authority to interpret and enforce at least those aspects of the settlement that are of record, consisting of pleadings in connection with the disputed claim and Adversary proceeding, motions to settle them and orders that were entered. As to whether related non-record correspondence should be considered can be dealt with at trial.
It must be noted that jurisdiction of a bankruptcy court in Chapter 11 is more limited after confirmation. In
Pettibone Corp. v. Easley,
Rooker-Feldman Does Not Apply Here
The Rooker-Feldman doctrine is derived from two cases: In
Rooker et al. v. Fidelity Trust Co.,
Although the
Rooker-Feldman
doctrine was not briefed, this issue merits discussion.
Dabrowski,
The
Rooker-Feldman
doctrine bars federal courts other than the Supreme Court from reviewing final judgments issued by state courts.
Rizzo v. Sheahan,
Sua Sponte Abstention is not Warranted
The only remaining issue raised by the briefs is whether to voluntarily abstain sua sponte from hearing this matter so that the various state court judges can decide whether ASI violated the injunction under § 524(a)(2). Though not formally moved by ASI, consideration has been given to its discussion suggesting abstention. Permissive abstention over proceedings arising under Title 11 is governed by 28 U.S.C. § 1334(c)(1) which provides:
Nothing in this section prevents a district court in the interest of justice, or in the interest of comity with State Courts or respect for State law, from abstaining from hearing a particular Proceeding under title 11 or arising in or related to a case under title 11.
28 U.S.C. § 1334(c)(1).
Discretionary abstention applies to both core and noncore proceedings,
see In re Ascher,
(1) the effect or lack thereof on the efficient administration of the estate if a Court recommends abstention, (2) the extent to which state law issues predominate over bankruptcy issues, (3) the difficulty or unsettled nature of the applicable law, (4) the presence of a related proceeding commenced in state court or other nonbankruptcy court, (5) the jurisdictional basis, if any, other than 28 U.S.C. § 1334, (6) the degree of relatedness or remoteness of the proceeding to the main bankruptcy case, (7) the substance rather than form of an asserted “core” proceeding, (8) the feasibility of severing state law claims from corebankruptcy matters to allow judgments to be entered in state court with enforcement left to the bankruptcy court, (9) the burden of [the bankruptcy court’s] docket, (10) the likelihood that the commencement of the proceeding in bankruptcy court involves forum shopping by one of the parties, (11) the existence of a right to a jury trial, and (12) the presence in the proceeding of non-debtor parties.
Matter of Chicago, Milwaukee, St. Paul & Pacific Railroad Co.,
Those factors should not be applied inflexibly.
Id.; See also In re Franklin,
ASI asserts that the dispute between it and Oakfabco should be decided in the various state courts presently hearing asbestos litigation. There are currently three separate proceedings underway and judging by the ASI’s briefs there could be many more such actions in the future. ASI argues that the states have a paramount interest in the state law tort claims at issue in these cases. It further argues because of the complexity of the issues involved and the resources expended prosecuting those cases, Oakfabco’s motion to pursue its Adversary case here should be denied.
However, the mere presence of state law issues does not mean that jurisdiction over bankruptcy issues should be left to the state courts.
See Matter of L & S Indus. Inc.,
Moreover, saying that a case involves important and complex issues of state law does not make it so. State tort law issues do not predominate here. The key issues presented is whether ASI’s claims or possible claims against Oakfabco were settled or discharged in bankruptcy, and whether the statutory injunction under § 524(a)(2) bars the proposed Adversary proceeding. It cannot be in the interests of either party to litigate those issues in several different state forums with the potential for differing results, as opposed to having them heard in a single forum where all the relevant events occurred. See 11 U.S.C. § 305(a)(1) (court should not abstain unless abstention is in the interest of the debtor and creditor). Moreover, counsel for Oakfabco has alluded to the fact that need to defend many cases may force Oakfabco to file a new bankruptcy petition. If so, more resources of this court and those of our brethren in the state courts would be wasted when this matter appears capable of resolution in this forum.
Therefore, abstention.is not warranted.
CONCLUSION
In light of the foregoing, Oakfabco’s motion to file its proposed Adversary Com
Other issues and defenses argued but not discussed above will be dealt with during the forthcoming litigation.
Notes
. Additional litigation here was begun in 1995 requiring decision as to reach of the discharge injunction, what constitutes a "claim” in bankruptcy, and related matters involving questions about the complex area of "future claims.” Those issues were dealt with in
Kewanee Boiler Corp. n/k/a OakFabCo v. Kenneth Smith,
