OPINION
Introduction
On May 29, 2014, Philadelphia Entertainment and Development Partners, L.P. (the “Debtor”) filed a seven-count com-pláint against the Commonwealth of Pennsylvania, Department of Revenue and the Commonwealth of Pennsylvania (together, the “Commonwealth Parties”) seeking, among other things, to recover for the benefit of the Debtor’s creditors (1) a fee in the amount of $50,000,000 (the “License Fee”) paid to the Pennsylvania Gaming Control Board (the “Gaming Board”) for a Category 2 slot machine license (“License”), and (2) the value of the License which was revoked pre-petition by the Gaming Board.
In response, the Commonwealth Parties filed on August 28, 2014, a Motion to Dismiss, or In the Alternative Abstain (the “Motion”) contending that dismissal of the entirety of the Complaint is warranted based on various grounds, including that (i) this Court lacks jurisdiction to adjudicate the Trustee’s claims as a result of sovereign immunity; (ii) the Trustee’s claims are barred by the Rooker-Feldman Doctrine; and (iii) the Trustee failed to state a basis for the relief sought. As alternative relief, the Commonwealth Parties request that this Court abstain from adjudicating the Trustee’s claims. The Commonwealth Parties contend that abstention is warranted by either the principles of permissive abstention codified by 28 U.S.C. § 1334(c)(1) or the Burford Abstention Doctrine.
The Trustee opposes dismissal of the Complaint contending that (1) the Commonwealth Parties are not immune from suit; (2) the Rooker-Feldman Doctrine is inapplicable; (3) issue and claim preclusion do not bar the Trustee from seeking relief;
As set forth below, after reviewing the parties’ pleadings and consideration of their arguments, the Court will:
1. Grant the Motion with regard to Count I (turnover pursuant to § 542) because the Trustee failed to state plausible claims for relief and the insufficiencies may not be cured by further amendment.
2. Grant the Motion with regard to Counts II (fraudulent conveyance under § 548), III (fraudulent conveyance under § 544), and IV (recovery of the value of the license under § 550) of the Complaint (collectively with Count I, the “Bankruptcy Claims”) because application of the Rook-er-Feldman Doctrine divests this Court of subject matter jurisdiction to consider the avoidance of the revocation of the License. To the extent that the fraudulent conveyance actions implicate some transfer other than the revocation of the License,
3. Grant the Motion with regard to Counts V (taking without payment of just compensation), VI (unjust enrichment), and VII (promissory estoppel) (the “State Law Claims”), because the Commonwealth Parties’ sovereign immunity defense deprives this Court of subject matter jurisdiction to hear the Trustee’s non-bankruptcy causes of action.
4.Refrain from addressing the Commonwealth Parties’ request for alternative relief based upon permissive abstention pursuant to 28 U.S.C. § 1334(c)(1), or under the Burford Doctrine. The Court has addressed the merits of the Commonwealth’s sovereign immunity defense and the sufficiency of the Trustee’s causes of action rendering consideration of this request unnecessary.
Procedural History
The Bankruptcy Case
On March 31, 2014 (the “Petition Date”), the Debtor invoked this Court’s jurisdiction by filing a voluntary petition for Chapter 11 relief together with a pre-packaged plan of reorganization. Significantly, the Debtor did not list the Commonwealth Parties among its creditors or solicit their approval of the Plan. The Commonwealth Parties have not (1) filed a claim against the Debtor; (2) filed any request for relief in the Debtor’s bankruptcy case; or (3) participated in the Debtor’s bankruptcy case in any manner whatsoever except as defendants in this adversary proceeding.
On July 28, 2014, this Court entered the Confirmation Order confirming the First Modified Chapter 11 Plan of Liquidation of Philadelphia Entertainment and Development Partners, L.P. filed by the Debtor on May 27, 2014 [Docket No. 88] (the
The Adversary Action
• As characterized by the Trustee and contemplated by the Plan, the only significant asset to be administered by the Liquidation Trust consists of the Debtor’s alleged interest • in the License and the License Fee. The Debtor initiated this adversary proceeding by filing the Complaint dated May 29, 2014 (the “Complaint”). In the Complaint, the Debtor asserts seven causes of action in support of its claim that it is entitled to a payment from the Commonwealth Parties in the amount of $50,000,000 due to the Commonwealth’s failure to refund the License Fee to the Debtor. The Debtor, and now the Trustee, seeks (1) Turnover of the License Fee pursuant to § 542; (2) Avoidance of the Revocation of the License as a Fraudulent Transfer as provided by § 548(a)(1)(B); (3) Avoidance of the Revocation of the License as a Fraudulent Transfer as provided by § 544(b) and 12 Pa.C.S.A. § 5101, et seq.; (4) Recovery of the value of the Revoked License pursuant to §§ 550 and 551; (5) the Revocation of the License Constitutes a Taking without Payment of Just Compensation; (6) Retention of the License Fee Caused an Unjust Enrichment; and (7) Promissory Estoppel resulting from the reservations contained in a letter dated October 16, 2007 (the “October 16 Letter”),
The claims against the Commonwealth Parties may be boiled down to the Debt- or’s, and now the Trustee’s, belief that the revocation of the License was unlawful because revocation was not accompanied by a refund of the License Fee. See, e.g., Transcript November 14, 2014, 67:4-5 (“our claim is predicated upon the failure to return the license fee.”). Based upon this belief, the Trustee asserts that the Debtor’s estate is entitled to judgment against the Commonwealth Parties in an amount equal to the License Fee.
In response to the Complaint, the Commonwealth Parties filed the Motion. In the Motion, the Commonwealth Parties argue that dismissal is warranted pursuant to Fed. R. Civ.P. 12(b)(1) and 12(b)(6).
Addressing the merits of the claims asserted by the Complaint, the Commonwealth Parties make the following arguments: (1) the Trustee’s § 542 cause of action should be dismissed because the License Fee and/or the License is not the acknowledged property of the Debtor’s estate; (2) applicable statutes of limitations require the dismissal of the Trustee’s fraudulent conveyance causes of action; (3) the lawful prepetition expiration of the Debtor’s rights do not constitute a transfer within the meaning of either § 544(b) or § 548; (4) the Debtor has not identified a creditor holding an unsecured claim who has standing to assert a cause of action pursuant to § 544(b); (5) the Debtor has failed to state a cause of action for a constitutional taking because revocation of the License does not constitute a taking under either Pennsylvania or Federal law; (6) application of Pennsylvania’s six-month statute of limitations for quasi-contractual claims brought against the Commonwealth requires dismissal of the Trustee’s promissory estoppel and unjust enrichment causes of action; (7) the Trustee has failed to state a cause of action for promissory estoppel because the Complaint does not allege any promises made by the Commonwealth Parties in connection with their acceptance of the License Fee; and (8) the Trustee has failed to state a cause of action for promissory, estoppel because the Debtor’s alleged reliance on its reservation of rights is unreasonable in light of applicable law
The Trustee filed a Response dated September 29, 2014 (the “Response”), requesting this Court deny the Motion.
On November 14,2014, this Court held a hearing to address the Commonwealth Parties’ Motion. At the close of the Hearing, this Court requested the parties submit briefs addressing two issues. First, whether this Court, pursuant to
Factual Background
After the passage of the Race Horse Development and Gaming Act, 4 Pa.C.S.A. § 1101 et seq. (the “Gaming Act”), the Debtor was formed in 2005 for the purpose of acquiring real estate for the development of a casino. To this end, the Debtor filed an Application dated December 28, 2005, with the Gaming Board to obtain a Category 2 gaming license. A year later, on December 20, 2006, the Gaming Board announced its intent to award the Debtor one of two gaming licenses available in Philadelphia. The Gaming Board later memorialized the award in a written decision dated February 1,2007.
On May 29, 2008, the Gaming Board formally issued the License to the Debtor. The Debtor was required by law to pay the License Fee. 4 Pa'.C.S.A. § 1209(a).
As alleged by the Commonwealth Parties and consistent with the Gaming Act, the License Fee was then deposited into the State Gaming Fund within the State Treasury immediately upon payment at which point it came under the custody and control of the Pennsylvania Treasury Department and not the custody or control of the Department of Revenue. 4 Pa.C.S. §§ 1208(e) and 1209(d); 72 P.S. § 1503.
As a condition of the issuance of the License and as required by the Gaming Act, 4 Pa.C.S.A. § 1210(a), the Debtor was required to begin operation of a 1,500 slot casino within one year. However, the Debtor was unable to commence operations within that time period. At the Debtor’s request, the Gaming Board extended the one year deadline until May 29, 2011, subject to certain conditions. Despite various efforts, the Debtor was unable to satisfy the conditions or to otherwise commence operations.
On April 29, 2010, the Gaming Board’s Bureau of Investigation and Enforcement (“BIE”) filed a complaint with the Gaming Board seeking revocation of the License (the “BIE Complaint”).
After issuance of the Revocation Order, the Debtor filed a petition with the Commonwealth Court of Pennsylvania requesting review of the Revocation Order as well as a myriad of prior orders issued by the Gaming Board with respect to the Debtor’s use of the License. In the Commonwealth Opinion issued November 10, 2011, the Commonwealth Court affirmed the Gaming Board’s revocation of the License. The Commonwealth Court confirmed that the Gaming Board acted within its discretion by revoking the License. In reaching this outcome, the Commonwealth Court addressed several issues including whether the Gaming Board’s revocation of the license pursuant to a summary judgment motion violated the Debtor’s due process rights.
Significant to this Court’s present analysis is the Commonwealth Court’s analysis of the Debtor’s procedural due process argument. Elaborating on the Debtor’s due process objection, the Commonwealth Court recognized that its decision would impact the Debtor’s substantial financial interest in the License, including but not limited to the amount of the License Fee. In relevant part, the Commonwealth Court stated:
PEDP finally argues on appeal that it has a valuable property right in its License, and the Board violated PEDP’s due process rights where: (1) it entered summary judgment against PEDP without conducting an evidentiary hearing and reviewing the evidence in a light most favorable to PEDP; (2) the Board’s determination was not supported by the record; (3) the Board denied PEDP discovery necessary to support its motion for summary judgment; and (4) the Board imposed an excessive sanction.
Commonwealth Opinion,
In response to the Debtor’s argument that its financial interest in the License warranted greater protections than were afforded it by the Gaming Board, the Commonwealth Court flatly concluded: “PEDP’s due process rights were not violated.” Id. Elaborating on the nature of the “excessive sanction” and whether it evidenced a violation of the Debtor’s due process rights, the Commonwealth Court determined:
[Revocation was not an excessive sanction under these circumstances. PEDP argues that revocation of its $50 million License as a result of its purported noncompliance was an unreasonably harsh sanction, when lesser sanctions were available and would have sufficed. Certainly, as PEDP points out, lesser sanctions are favored where they achieve the agency’s objective. In this case, however, a lesser sanction in the form of a daily $2,000.00 fine was imposed for more than a year, but, even together with the threat of revocation, it did not result in the achievement of the Board’s objectives in PEDP’s case. Accordingly, the Board did not violate PEDP’s due process rights by revoking PEDP’s license via summary judgment without a hearing. The Board’s determination was supported by the record, it did not deny PEDP discovery in support of its motion for summary judgment, nor was revocation excessive under the circumstances presented.
Id. at 279.
The dissent was more explicit in placing the due process arguments in the context of the Debtor’s forfeiture of the License Fee. In relevant part, the dissent wrote “by revoking PEDP’s License, PEDP will be required to forfeit a $50 million licensing fee.” Id. at 281 (emphasis added).
While it did determine that the Debtor did not hold any property rights in the License, the Commonwealth Court still acknowledged that the Debtor was entitled to “some form of due process.” Id. at 276. Addressing whether the notice the Debtor received comports with the level of due process required, the Commonwealth Court found that “[i]t is undisputed in this case that PEDP was on notice of the potential revocation of its license for some time.” Id.
Legal Discussion
In the Complaint, the Trustee asserts seven causes of action in support of its belief that the Debtor is entitled to a payment from the Commonwealth Parties in the amount of $50,000,000 due to the Commonwealth’s revocation of the License (an alleged fraudulent conveyance) and failure to refund the License Fee.
This Court finds that the adjudication of both the Bankruptcy Claims and State Law Claims to be within this Court’s general jurisdiction. However, application of sovereign immunity deprives this Court of jurisdiction to address the State Law Claims and application of the Rooker-Feldmcm Doctrine precludes the Trustee from attempting to challenge the prepetition revocation of the License. To the extent the Bankruptcy Claims do not attempt to undo the revocation of the License, this Court has concluded that it may hear and issue a final order adjudicating the Bankruptcy Claims. Finally, this Court has determined that the Bankruptcy Claims must be dismissed with prejudice because the Trustee has failed to allege facts necessary to support its §§ 542, 544 or 548 causes of action and this Court has
I. Bankruptcy Subject Matter Jurisdiction
As an initial matter, this Court must first consider whether the Trustee’s causes of action are within the Court’s subject matter jurisdiction as defined by 28 U.S.C. §§ 157 and 1334. This Court has exclusive jurisdiction over all property of the debtor as of the commencement of the case, as well as property of the estate, regardless of where the property is located. 28 U.S.C. § 1334(e). Pursuant to § 157, this Court’s jurisdiction is further divided between core and noncore matters. 28 U.S.C. § 157(a); In re Winstar Communications, Inc.,
Traditionally, a proceeding was core if “it invokes a substantive right provided by title 11 or if it is a proceeding that, by its nature, could arise only in the context of a bankruptcy case.” Torkelsen v. Maggio (In re Guild and Gallery Plus, Inc.),
Core proceedings include matters that either “arise under” or “arise in” the context of a bankruptcy case. 28 U.S.C. § 157(b)(1). A proceeding arises under the Bankruptcy Code if the causes of action to be adjudicated depend upon rules of decision that are incorporated by the Bankruptcy Code from other sources. See, e.g., In re Sunbridge Capital, Inc.,
On their face, the Trustee’s Bankruptcy Claims are within this Court’s core jurisdiction because they arise under §§ 542, 544, 548 and 550 of the Bankruptcy Code. For this reason, this Court has the authority to enter a final judgment adjudicating the plausibility of the Trustee’s Bankruptcy Claims.
A. Sovereign Immunity
As established by the Eleventh Amendment to the United States Constitution, the States are generally immune from suit in federal court. See, e.g., Blanciak v. Allegheny Ludlum Corp.,
The Commonwealth Parties counter that (1) Congress’ abrogation under § 106 is unconstitutional as determined by the Third Circuit in Sacred Heart Hosp. of Norristown v. Pa. (In re Sacred Heart Hosp. of Norristown),
1. Waiver of Sovereign Immunity Under § 106
The Supreme Court has issued several decisions regarding waiver of sovereign immunity in the bankruptcy context. Katz,
Contrary to the Trustee’s characterization of Katz, the Supreme Court expressly refused to address the abrogation contained in § 106(a), Katz,
The electable conclusion, then, is that States agreed in the plan of the Convention not to assert any sovereign immunity defense they might have had in proceedings brought pursuant to “Laws on the subject of Bankruptcies.”
Katz,
As this statement illustrates, the Supreme Court concluded the States’ waiver was complete upon ratification and not dependent upon subsequent Congressional action. Reviewing the historical record, the Supreme Court determined that, at the time of ratification, preference actions were understood to be included within the scope of “Laws on the subject of Bankruptcies.” Id. at 372,
Because Katz did not premise its decision on § 106 or otherwise address whether the Bankruptcy Clause confers upon Congress the authority to abrogate sovereign immunity, this Court must conclude that the Third Circuit’s analysis of the constitutionality of § 106 remains the law of this Circuit. See, e.g., In re Marshall,
2. Waiver of Sovereign Immunity by Ratification of the Constitution
Finding that Sacred Heart remains the law of this Circuit with regard to the effect of abrogation of State sovereign immunity contained in § 106(a), this Court must rely on the analysis contained in Katz to determine whether the Commonwealth Parties are entitled to invoke sovereign immunity to defeat this Court’s jurisdiction to hear and adjudicate the causes of action asserted in the Trustee’s Complaint. As explained by the Supreme Court, the States, by ratifying the Constitution, agreed to waive sovereign immunity with regard to “proceedings brought pursuant to ‘Laws on the subject of Bankruptcies.’ ” Katz,
However, the Supreme Court struggled to determine whether a preference action, the subject of the underlying suit in Katz, brought pursuant to § 547 is an in rem proceeding or a quasi in rem proceeding. Ultimately, the Supreme Court explicitly refused to characterize the nature of a preference action as in rem or in person-am. Id. at 372,
Based upon the Supreme Court’s refusal to categorize preference actions as implicating a bankruptcy court’s in rem or in personam jurisdiction,
3. Application of Sovereign Immunity to the § 542 Turnover Action
Turnover actions are expressly designated as core proceedings. 28 U.S.C. § 157(a)(2). Section 542 proceedings are essential to the process of assembling a debtor’s estate as defined by § 541 of the Bankruptcy Code regardless of whether such property is in the possession of a debtor. In re Hertzberg,
4. Whether the Fraudulent Conveyance Actions Implicate an Identifiable Res
While a properly pled § 542 cause of action certainly implicates this Court’s in rem jurisdiction, the same is not true of the Trustee’s fraudulent conveyance actions. As elaborated by Katz, a State’s sovereign immunity is waived if a cause of action is (1) an in rem cause of action, or (2) a cause of action that are ancillary to a
Fortunately for this Court, the Commonwealth Court adjudicated the nature of the Debtor’s interest in the License. To explain its conclusion that the Debtor’s due process rights were not violated by the revocation proceedings conducted by the Gaming Board, the Commonwealth Court addressed the nature of the Debtor’s interest in the License and determined it to be a “revocable privilege ... to transact business in the Commonwealth.” Commonwealth Opinion,
In confirming that the License does not constitute a res to which this Court’s in rem jurisdiction attaches, this Court places significant weight upon the analysis contained in Village of Rosemont v. Jaffe,
As here, the Illinois Gaming Board was not a creditor of the debtor and had not otherwise asserted any request for relief in the bankruptcy proceedings.. Village of
In reaching its conclusion that the suit did not implicate a res and therefore barred by sovereign immunity, the Seventh Circuit distinguished the applicability of Katz. In relevant part, the Seventh Circuit stated:
If Rosemont is arguing that the Board, by asserting its regulatory authority over the license, somehow waived its sovereign immunity in the bankruptcy court, we must reject that position. This is not a case like Central Virginia Comm. College v. Katz,546 U.S. 356 ,126 S.Ct. 990 ,163 L.Ed.2d 945 (2006), in which a state agency was defending an action by a trustee to recover a preferential transfer of funds. There the question was simple: who gets the money, the bankruptcy estate or the state agency? The Board here had no claim against Emerald; it was not Emerald’s creditor. Rosemont takes issue with the latter proposition because, under the IRGA, if the license is revoked and if the state later reissues it to another party, the state will be paid for the new license (and, of course, those funds will not be available to pay the prior licensee’s creditors). That possible chain of events, however, is not enough to make the state or the Board one of Emerald’s creditors. Nor do we accept the argument that we should treat Emerald’s license as a res with respect to which the bankruptcy court had the authority to displace the state’s police power. If the question were merely who was entitled to a license that was not subject to revocation, we would have a different case. But whatever property right the license conferred has always been subject to, or conditioned on, the regulatory powers of the state. Nothing in the bankruptcy laws permits the court to enjoin the Board, a state regulatory agency, from exercising the police powers of the state to regulate the gambling industry.
Village of Rosemont,
In reaching this result, the Seventh Circuit relied upon Illinois’s police powers as codified by Illinois Riverboat Gambling Act. The Seventh Circuit observed that “[njothing in the IRGA even hints at the idea that a gambling license, once granted, is a vested right in the hands of the operator.” Village of Rosemont,
Due to the parallel status of gaming licenses under Pennsylvania and Illinois law, this Court agrees with the Seventh Circuit’s analysis and determines that the Debtor’s alleged interest in the License
5. Whether the Fraudulent Conveyance Actions Implicate the “Laws on the subject of Bankruptcy”
Without a res to which this Court’s in rem jurisdiction may attach, this Court must attempt to determine whether the Fraudulent Conveyance Actions implicate the third category of legal actions for which sovereign immunity was waived as a result of ratification. In other words, this Court must determine whether fraudulent conveyance actions were, at the time of ratification, also understood to be among the “Laws on the subject of Bankruptcy.” See, e.g., Sheils,
Courts applying Katz, relying on its language limiting its holding to a “limited sphere,” have acknowledged that its holding may not extend to all causes of action identified as “bankruptcy” causes of action.
Undoubtedly, fraudulent conveyance actions have existed since at least the time of ratification. In re Cybergenics Corp.,
Fraudulent conveyance actions differ from preference actions in at least two significant respects. First, fraudulent conveyance actions exist independent of Congressional action. Fraudulent conveyance actions “are quintessentially suits at common law ...,” Granfinanciera, S.A. v. Nordberg,
To the extent fraudulent conveyance actions are incorporated into Bankruptcy proceedings, they are incorporated for reasons of administrative convenience. Official Committee of Unsecured Creditors of Cybergenics Corp. v. Chinery,
Second, unlike preference actions, the adjudication of fraudulent conveyance actions does not necessarily implicate the claims resolution process. See, e.g., Northern Pipeline Constr. Co. v. Marathon Pipe Line Co.,
The same is not true of fraudulent conveyance actions. None of the rules of decision incorporated by § 544 or § 548 implicate the Code’s distribution scheme. As recognized by the Supreme Court in Granfinanciera, the Trustee’s fraudulent conveyance causes of action “more nearly resemble state-law contract claims brought by a bankrupt corporation to augment the bankruptcy estate than they do creditors’
These differences between preference actions and fraudulent conveyance actions may be distilled to an essential concept, the legitimacy of the alleged debt. On the one hand, preference actions do not challenge the legitimacy of the debt owed to the creditor. Apex,
Drawing on these differences, this Court could rely on the independent existence of fraudulent transfer actions in the common law and their lack of a direct relation to the claims resolution process to conclude that fraudulent transfer actions are sufficiently dissimilar from preference actions so as not to be among the “Laws on the subject of Bankruptcy.” However, the Supreme Court has, in other contexts, largely treated the two causes of action as interchangeable. In both Granfinanciera and Langenkamp, the Supreme Court addressed the application of the Seventh Amendment to a bankruptcy court’s adjudication of these actions. The issue of whether both actions implicated a party’s Seventh Amendment jury trial right was an issue that long divided bankruptcy courts and was ultimately resolved in the affirmative by the Supreme Court. See, e.g., Langenkamp v. Culp,
Relying on the status of fraudulent conveyance actions as involving the adjudication of private rights, the Supreme Court held that the Congressional designation of fraudulent conveyance actions as core proceedings did not divest a defendant in a fraudulent conveyance action filed in a bankruptcy court of its right to a jury trial. As it did in Katz, the Supreme Court in Granfinanciera reached its result by conducting a survey of law as it was applied in the later 18th century. Granfinanciera,
Respondent adduces no authority to buttress the claim that suits to recover an allegedly fraudulent transfer of money, of the sort that he has brought, were typically or indeed ever entertained by English courts of equity when the Seventh Amendment was adopted ... We therefore conclude that respondent would have had to bring his action to recover an alleged fraudulent conveyance of a determinate sum of money at law in 18th-century England, and that a court of equity would not have adjudicated it.
Id. at 44-47,
Finally, the Supreme Court placed weight on the fact that the defendant in Granfinanciera had not filed a proof of claim against the estate.
Because petitioners here ... have not filed claims against the estate, respondent’s fraudulent conveyance action does not arise “as part of the process of allowance and disallowance of claims.” Nor is that action integral to the restructuring of debtor-creditor relations. Congress therefore cannot divest petitioners of their Seventh Amendment right to a trial by jury.
Id. at 58-59,
More recently, the Supreme Court has reaffirmed its position that fraudulent conveyances are outside a bankruptcy court’s core jurisdiction. In Arkison, the Supreme Court addressed the issue of the “statutory gap” created by Stem’s exclusion of private rights from the matters deemed core by § 157(b)(1). Executive Benefits Insurance Agency v. Arkison, — U.S. -,
The Supreme Court’s prior classification of fraudulent conveyance actions and pref
In an effort to harmonize the outcome of Katz with the Supreme Court’s prior precedent, this Court acknowledges the significance of a creditor’s filing of a proof of claim. As elaborated in Lagenkamp, the filing of a proof of claim has the effect of transforming what is otherwise a legal action into an equitable action to which no jury trial right attaches.
[B]y filing a claim against a bankruptcy estate the creditor triggers the process of “allowance and disallowance of claims,” thereby subjecting himself to the bankruptcy court’s equitable power. If the creditor is met, in turn, with a preference action from the trustee, that action becomes part of the claims-allowance process which is triable only in equity. In other words, the creditor’s claim and the ensuing preference action by the trustee become integral to the restructuring of the debtor-creditor relationship through the bankruptcy court’s equity jurisdiction. As such, there is no Seventh Amendment right to a jury trial. If a party does not submit a claim against the bankruptcy estate, however, the trustee can recover allegedly preferential transfers only by filing what amounts to a legal action to recover a monetary transfer. In those circumstances the preference defendant is entitled to a jury trial.
Langenkamp,
For whatever reason, the Supreme Court did not address in Katz whether the State entities filed proofs of claim in the debtor’s underlying bankruptcy. However, a review of the underlying history establishes that the state entities did in fact file proofs of claim.
In comparison, the Commonwealth Parties have not filed a proof of claim. As such, the Commonwealth Parties remain, if they demand it, entitled to a jury trial on the fraudulent conveyance causes of action pled in Counts II and III of the Complaint. See, e.g., Kaliner v. MDC Systems Corp., LLC,
The historical role of juries in bankruptcy proceedings suggests that fraudulent conveyance proceeding were not understood to be within the scope of the States’ waiver caused by ratification. As a result of Granfinanciera and in attempts to implement its holding, Congress authorized bankruptcy courts pursuant to the Bankruptcy Reform Act of 1994 to conduct jury trials. Prior to the passage of this enabling legislation, the authority of bankruptcy courts to conduct jury trials was uncertain and the majority of circuits concluded that bankruptcy courts lacked this authority. Compare Ben Cooper, Inc. v. Ins. Co. of Pa. (In re Ben Cooper, Inc.),
The courts explained this omission by reference to Congress’s historical understanding of the role of bankruptcy courts. As explained by the Tenth Circuit:
We are also persuaded by the absence of any express provision authorizing jury trial before bankruptcy judges. Congress in the past has provided expressly for jury trials in the Article I context. See 28 U.S.C. § 636(a)(3), (c)(1) (authorizing United , States magistrates to conduct jury trials with the consent of the parties). The absence of such a provision, particularly when Congress chose to expressly grant such authority in the analogous provisions for United States magistrates, is particularly compelling.
Congress had no specific intent to vest bankruptcy judges with the authority to conduct jury trials. Until Granfinanci-era, it was possible for Congress to presume that jury trial rights would not extend to core proceedings. As such, no authority to conduct such trials needed to be granted.
To summarize, these circuits concluded that Congress did not grant bankruptcy courts the authority to conduct jury trials because Congress understood jury trials to be generally unavailable in bankruptcy proceedings. Similarly, this Court may infer that, as a matter of historical record, the authority to conduct jury trials was not contemplated by the States as being necessary to the administration of Bankruptcy law. See, e.g., United Missouri Bank,
Returning to the framework elaborated by Katz, the States by ratifying the Constitution, and the Bankruptcy Clause in particular, agreed to a waiver of sovereign immunity with regard to the “Laws on the subject of Bankruptcies.” As elaborated, there are sufficient differences between preference actions and fraudulent conveyance actions to justify treating each differently. Chief among those differences being the designation of fraudulent conveyance actions as non-core. Arkison,
Based upon this Court’s research, this Court has identified only two courts that have squarely addressed whether ratification divests the States of sovereign immunity from fraudulent conveyance actions.
Of the two approaches, this Court believes the court in DBSI to have employed an approach consistent with Katz. In DBSI, the Bankruptcy Judge Walsh addressed whether the fraudulent conveyance actions brought by a litigation trust were defeated by the sovereign immunity defense invoked by the taxing authorities of a variety of States who had been named as defendants. DBSI,
Perhaps the differences between fraudulent conveyance actions and preferences actions are sufficient for this Court to conclude that the former are not necessarily within the rule elaborated by Katz. These differences may warrant the conclusion that Katz’s conclusions regarding preference actions are inapplicable to fraudulent conveyance actions. However, the evidence is ambiguous at best. Compare Arkison,
6. Application of Sovereign Immunity to the Trustee’s State Law Claims
The Commonwealth Parties are entitled to invoke sovereign immunity to deprive this Court of subject matter jurisdiction to address the Trustee’s State Law Claims (Counts V, VI and VII of the Complaint). This Court has no difficulty concluding that sovereign immunity deprives this Court of subject matter jurisdiction to hear the Trustee’s non-traditional bankruptcy causes of action. See, e.g., Shieldalloy Metallurgical Corp. v. New Jersey Dept. of Environmental Protection,
B. The Rooker-Feldman Doctrine
The Rooker-Feldman Doctrine provides that federal courts lack subject matter jurisdiction over “cases brought by state-court losers complaining of injuries caused by state-court judgments rendered before the district court proceedings commenced and inviting district court review and rejection of those judgments.” Exxon Mobil Corp. v. Saudi Basic Indus. Corp.,
It is frequently said that the Rooker-Feldman Doctrine has little or no relevance to matters involving the exercise of substantive bankruptcy rights. In exercise of the powers provided by the Bankruptcy Code, a debtor may invoke this Court’s jurisdiction “to avoid state judgments.” In re Knapper,
With regard to the subsequent efforts to enforce the parties’ respective rights embodied by the prior state court order, the Rooker-Feldman Doctrine is inapplicable. See, e.g., Gage v. Wells Fargo Bank, NA AS,
The dichotomy between the entry of a state court judgment adjudicating the parties’ respective rights to property and a party’s subsequent efforts to enforce its adjudicated rights is best illustrated by reference to mortgage foreclosure proceedings.
However, the adjudication evidenced by the entry of a foreclosure judgment does not cause a sale or otherwise cause a transfer of interests between the mortgagor and mortgagee. See, e.g., Funches,
Applying these principles to this Court’s jurisdiction to address the Trustee’s causes of action, this Court agrees with the parties that application of the Rooker-Feldman Doctrine prevents this Court from considering whether the License'was properly revoked prior to the Debtor’s filing for Bankruptcy relief. As the parties are well aware and the Trustee does not appear to contest,
In an effort to avoid this conclusion, the Trustee frames its various actions implicating the Debtor’s alleged interest in the License as not seeking the restoration of the License but rather seeking compensation for the loss of value of the License.
In essence, Maple Lanes seeks to undo the effect of the revocation of its liquor license by collecting an amount of damages from Messer for the alleged violation of its constitutional rights equal to the monetary value of the license. The Rooker-Feldman doctrine does not permit this result.
If a federal court were to award the relief Maple Lanes seeks in the form of . monetary damages equal to the value of the liquor license, this result would effectively reverse the state court judgment upholding the revocation of the liquor license. There is little difference between awarding Maple Lanes the monetary value of the license and the license itself. Because the district court lacked subject matter jurisdiction in this case, we VACATE the order dismissing the complaint for failure to state a claim and REMAND with instructions to dismiss for lack of jurisdiction.
Maple Lanes, Inc. v. Messer,
Despite the criticism of the “inextricably-intertwined” standard offered by the Third Circuit in its Great Western decision, the Third Circuit still recognizes that Rooker-Feldman divests federal courts of jurisdiction to hear claims that are the “functional equivalent” of claims
To consider, as the Trustee now advocates, that the forfeiture of the value of the License was not addressed in the prior state court proceeding is to indulge a patently eounterfactual argument. This Court concludes that the adjudication of the Debtor’s right to compensation for the loss of the License is the functional equivalent of the adjudication of Debtor’s right to retain the License. With regard to the Debtor’s interest in the License or any value that it may have lost as a result of its revocation, the relief sought by the Complaint would have the effect of undoing the Revocation Order or the Commonwealth Opinion. Great Western,
2. Application of the Rooker-Feld-man Doctrine to the Trustee’s Entitlement to a Refund of the License Fee
In order to escape application of the Rooker-Feldman Doctrine, the Trustee attempts to distinguish between this Court’s adjudication of the value of the Debtor’s interest in the License from this Court’s adjudication of the Debtor’s right to a refund of the License Fee. With regard to the latter, the Trustee argues that the prior orders issued by the Gaming Board and affirmed by the Commonwealth Court do not address or otherwise implicate whether the Debtor is entitled to a refund. The Trustee characterizes the prior orders as addressing whether the License should be revoked and whether the Gaming Board abused its discretion by revoking the License. Whereas, the Trustee argues that, in this adversary proceeding, it seeks a determination, among other things, of the Debtor’s property rights in the License Fee. As phrased by the Trustee, “the Plaintiff seeks this Court’s determination of whether or not the Commonwealth has unlawfully refused to return the License Fee to the Debtor.” Trustee’s Memorandum, p.25.
However, this Court must admit that, while it appeared to be an implicit understanding of all the parties, the issue of the Debtor’s right to a refund of the License Fee was not addressed by the prior state court litigation. From the record before this Court, it appears that no court has addressed the effect of the reservations contained in the October 16 Letter or whether the Gaming Act may be otherwise construed to provide for the Debtor’s entitlement of a refund of the License Fee upon revocation of the License. As a result and to the extent that the Trustee has characterized its turnover action and fraudulent conveyance actions as implicating something other than any loss of value caused by the revocation of the License, this Court will address whether the Trustee has managed to state a plausible theory of relief with regard to the Debtor’s entitlement to a refund of the License Fee and whether any insufficiency in the Complaint may be cured through amendment.
II. The Plausibility of the Trustee’s Remaining Causes of Action, Fed. R. Civ. P. 12(b)(6)
To survive a motion to dismiss, “all civil complaints must now set out sufficient factual matter to show that the claim is facially plausible.” Fowler v. UPMC Shadyside,
Pursuant to the pleading requirements of Fed. R. Civ. P. 8, this Court will not afford legal conclusions couched as factual allegations a presumption of truth. Iqbal,
A. Count I — Turnover, § 542
In Count I of the Complaint, the Trustee requests that this Court order the Commonwealth to turnover the License Fee. This Court lias determined that the Trustee has failed to state a claim for the relief sought. The Complaint does not include sufficient allegations to establish that the Commonwealth Parties are in possession of undisputed property of the Debtor’s estate. See, e.g., In re Student Fin. Corp.,
Section 542(a) requires an entity in possession of property of the estate to deliver said property, or the value of it, to the administrator of a debtor’s estate. To state a claim for turnover pursuant to
In evaluating the substance of the Trustee’s allegations to determine the plausibility of the Trustee’s turnover action, this Court is not obligated to credit the Trustee’s characterization of the cause of action as a turnover action within this Court’s core jurisdiction. See, e.g., In re LiTenda Mortg. Corp.,
Section 541(a) defines property of the estate as all property “wherever located and by whomever held,” including “all legal or equitable interests of the debt- or in property as of the commencement of the case.” 11 U.S.C. § 541(a)(1). In determining the scope of a debtor’s estate, this Court is obligated to adopt an expansive view. United States v. Whiting Pools, Inc.,
The Debtor’s Interest in the License Fee
The Trustee seeks an order compelling the Commonwealth to pay “its matured debt, for the return of the License Fee.” Complaint, ¶ 93. As an initial matter, this Court observes that actions to recover a sum of money generally do not implicate a court’s in rem jurisdiction. A res is conventionally understood to consist of an interest in a specific object. Haymond v. Lundy, Civ. No. 99-5048,
In support of its position that the Debt- or possesses an undisputed interest in the License Fee, the Trustee makes two arguments. First, the Trustee argues that the
As the Trustee acknowledged, the Trustee’s theory of relief consists of the Trustee’s belief that, as a result of the revocation of the License, the Debtor is entitled to a refund of the License Fee. Transcript November 14, 2014, 67:4-5 (“our claim is predicated upon the failure to return the License Fee.”); 137:8-9 (stating the Debt- or’s right to the License Fee is premised upon its demand for a refund arid its reservation of rights); Complaint, Exh. K. As stated in the Trustee’s Memorandum, “[t]he Debtor has demanded the return of its License Fee; however, the Commonwealth has improperly refused to do so.” Trustee’s Memorandum, p.l. Alternately, the Trustee has characterized the “fundamental issue” presented by the Complaint as being “whether or not the Commonwealth has improperly refused to return to the Debtor the License Fee to which it is entitled by reason of such revocation.” Trustee’s Memorandum, p.2.
From this Court’s review of the Trustee’s allegations, the Trustee’s allegations are more akin to common law contract claims than bankruptcy causes of action. For example, the Trustee makes several assertions that support this inference. For example, the Trustee argues that the License Fee was paid “[i]n exchange and in consideration for the issuance of a license ...” Trustee’s Memorandum, p.4 (emphasis added). Later, the Trustee contends that “the issue before this Court is whether or not the Commonwealth has an obligation to return the License Fee paid by the Debtor expressly in consideration of the issuance to it of the License.” Trustee’s Memorandum, p.29 (emphasis added). The parties do not contest that the Debtor made a demand for a return of the License Fee or that the Debtor reserved its right to a refund when it originally paid the License Fee. Neither fact gives rise to the inference that the License Fee constitutes the undisputed property of the Debtor. At best, the Trustee may argue from these facts that it is entitled to a refund. However, the existence of a colorable claim to property does not establish undisputed ownership for purposes of a § 542 proceeding. See, e.g., Cline v. Kaplan,
Reference to the Trustee’s promissory estoppel cause of action, one of the theories the Trustee advances to establish the Debtor’s alleged undisputed interest in the License Fee, underscores the disputed nature of the alleged debt. The Trustee alleges that when the Debtor paid the License Fee it reserved its right to seek a refund of the License Fee if the License was later revoked. The Trustee argues that by accepting the License Fee without disputing or otherwise acknowledging the Debtor’s attempt to reserve a right to a refund the Commonwealth agreed to the terms of the reservation of rights. See, e.g., Transcript November 14, 2014, 241:19-242:16. Problematically, the Trustee wholly fails to explain how the Gaming
Typically, promissory estoppel actions are premised upon the existence of an express promise. See, e.g., Nabisco, Inc. v. Ellison, Civ. No. 94-1722,
Promissory estoppel would be rendered meaningless if this Court were to allow C & K to maintain an action for detrimental reliance based on the alleged existence of such a broad and vague implied promise. Since there is no express promise by Equibank that could justifiably be relied upon, we will affirm the district court’s dismissal of C & K’s claim based on detrimental reliance.
C & K Petroleum Products, Inc. v. Equibank,
Despite the Commonwealth Parties’ reliance on the Third Circuit’s decision in C & K Petroleum, the Trustee did not address the application of the Third Circuit’s decision to its promissory estoppel cause of action. Rather, the Trustee relies on .two other decisions by the Third Circuit to establish that an explicit promise is not necessary: (1) Bradley v. Pittsburgh Board of Education,
In Bradley, the Third Circuit addressed whether a plaintiffs reservation of right to later have his federal civil rights claims adjudicated by a federal court immunized his subsequent suit on those federal rights from the preclusionary effect of the prior state court proceeding. Bradley,
R & J Holding is similarly inapplicable. In the decision, the Third Circuit elaborated upon its Bradley decision in light of the Supreme Court’s intervening decision in San Remo Hotel v. City & County of San Francisco, 545 U,S. 323,
Regardless of whether Plaintiffs’ statement was valid as an England reservation, it provided notice to Defendants of Plaintiffs’ intent to split their state and federal claims. And Plaintiffs reiterated their intent to reserve their federalclaims in filings before the Pennsylvania Commonwealth Court and the Pennsylvania Supreme Court. Defendants’ failure to object constitutes implied consent under Pennsylvania law. Thus, pursuant to 28 U.S.C. § 1738, we faithfully apply Pennsylvania law in concluding that Plaintiffs’ claims are permitted.
R &J Holding,
The Trustee’s reliance on Bradley and R & J Holding is clearly misplaced given that neither case supports in any manner whatsoever the Trustee’s contention that the Third Circuit has recognized that promissory estoppel claims may be based upon a party’s failure to object to a reservation of rights. Neither decision has any relevance to the doctrine of promissory estoppel nor the Third Circuit’s determination in C & K Petroleum that reliance upon an implied promise is per se unreasonable. Whether or not the Third Circuit’s determination in C & K Petroleum trumps the dicta contained in the Pennsylvania Supreme Court’s Fried opinion, this discussion serves to illustrate that, until the Trustee’s promissory estoppel action is adjudicated by a court of competent jurisdiction, the License Fee may not be characterized as a matured debt subject to turnover within the meaning of § 542. The fact that the Trustee may have stated a cause of action for recovery pursuant to a theory of promissory estoppel may not be relied upon to conclude that Commonwealth Parties are, prior to the adjudication of the Trustee’s theory of promissory estoppel, required to turnover the License Fee.
To buttress its reservation of rights theory, the Trustee argues that the subsequent amendment of the Gaming Act gives rise to the inference that the prior version of the Gaming Act did not foreclose the Debtor’s reservation of its right to a refund of the License Fee. However, an examination of this argument further undermines the Trustee’s entitlement to § 542 relief. As characterized by the Trustee, the January 2010 amendments to the Gaming Act added language that required all licensees to waive their right to a refund of a license fee. Trustee’s Memorandum, p.13. Despite the absence and in apparent contradiction to the language of § 1326(b) of the Gaming Act, the Trustee asks this Court to infer from later amendments to the Gaming Act that, at the time the Debtor paid the License Fee, the legislature intended applicants to be entitled to reserve their right to a refund of any license fees paid to the Gaming Board. The Trustee does not argue that the legislature intended the amendments to have a retroactive effect. See, e.g., Bowen v. Georgetown University Hospital,
Even if this Court found the Gaming Act to be ambiguous, the Trustee’s proffered interpretation of the effect of the 2010 amendments is not entitled to a presumption of truth. Matters of statutory interpretation are questions of law. Stissi v. Interstate & Ocean Transp. Co.,
To the extent the Gaming Act does explicitly address the effect of revocation upon a licensee’s interest in its license fee, the text further undermines the Trustee’s position. As explicitly provided by statute, licensees were entitled to a return of the $50,000,000 payment if the Gaming Act was amended by the General Assembly. 12 Pa.C.S.A. § 1209(f). On its face, the statute does not provide for reimbursement of the License Fee in any other circumstance. To the contrary, it appears that the Gaming Act unambiguously provides that, upon revocation of a license, a license fee is forfeited. 4 Pa.C.S.A. § 1326(b). In relevant part, the Gaming Act provides:
In the event of a revocation or failure to renew, the applicant’s authorization to conduct the previously approved activity shall immediately cease, and all fees paid in connection therewith shall be deemed to be forfeited.
Id. (emphasis added).
The Trustee argues that § 1326(b) is inapplicable to the instant dispute because the section only applies to fees paid in connection with the renewal of a license and not the issuance. Trustee’s Sur-Re-ply Brief dated October 29, 2014 [Docket No. 26] (the “Trustee’s Sur-Reply”), p.1-4. This argument once again demonstrates that the allegations of the Complaint do not establish that the License Fee constitutes the undisputed property of the Debt- or. Not only has the Trustee failed to cite to any basis for this Court to And the Gaming Board’s interpretation of § 1326(b) to be clearly erroneous,
At best, the Trustee’s various legal arguments regarding the Debtor’s entitlement to a refund of the License Fee are just that, arguments. See, e.g., Rajala v. Gardner,
If the Trustee ultimately discredits the interpretation of the Gaming Act proffered by the Commonwealth Parties, the Trustee may someday establish that the Debtor is entitled to a refund of the License Fee. However, those determinations have not been made and cannot be made by this Court. Therefore, § 542 may not be invoked as a vehicle for the adjudication of the Debtor’s disputed state law, claims. See, e.g., Pali Holdings,
B. Counts II & III — Fraudulent Con
Pursuant to Counts II and III, the Trustee seeks avoidance of the revocation of the License as a fraudulent transfer as provided by § 548(a)(1)(B) and avoidance of the revocation of the License as a fraudulent conveyance as provided by § 544(b) and 12 Pa.C.S.A. § 5101, et seq. (“PUF-TA”)
Pursuant to both counts, the Trustee seeks to avoid the revocation of the License on the basis of constructive fraud that allegedly occurred as a result of the Commonwealth Parties’ failure, subsequent to the revocation of the License, to refund the License Fee. As' stated, this Court has determined that application of the Rooker-Feldman Doctrine divests this Court of jurisdiction to address any cause of action that attempts to avoid the revocation of the License. Notwithstanding the plain language in the Trustee’s Complaint seeking to avoid the revocation of the License as a fraudulent transfer,
Despite the early stage of this litigation, few if any facts are'in dispute. See, e.g., Transcript November 14, 2014, 16:5-7 (acknowledging that the principal facts are not in dispute); 47:21-23 (same). Rather, the only issues dividing the parties relate to their respective interpretations of applicable law as applied to whether the Debtor was entitled to a refund of the License Fee subsequent to the revocation of the License. From this Court’s review of applicable law, this Court has determined that, to the extent the Complaint states a claim based upon the failure of the Commonwealth Parties to refund the License Fee, the Trustee has failed to state a fraudulent conveyance claim pursuant to either § 544(b) or § 548. Specifically, the Trustee has failed to plead facts that would establish that a transfer
To avoid a constructively fraudulent conveyance pursuant to § 548(a)(1)(B), the Trustee must have pled facts that would establish: (1) the debtor had an interest in property; (2) the property was transferred within two years of the bankruptcy filing; (3) the debtor was insolvent at the time of the transfer or was made insolvent as a result of the transfer; and (4) the debtor received less than reasonably equivalent value in exchange for the transfer. BFP v. Resolution Trust Corp.,
Timing of the Alleged Transfer
The term “transfer” is defined by the Bankruptcy Code to include “each mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with an interest in property.” 11 U.S.C. § 101(54)(D). The Debtor filed its Chapter 11 Petition on March 31, 2014, one year and 351 days after the Trustee alleges the transfer occurred and six years and five months after the Commonwealth Parties allege that the transfer occurred. The Commonwealth Parties argue that the alleged transfer occurred October 17, 2007, the date the Debtor paid the License Fee to the Gaming Board. Whereas, the Trustee argues that the transfer “occurred” on April 14, 2012, upon the Debtor’s failure to seek reconsideration of the Pennsylvania Supreme Court’s order denying the allowance of the Debtor’s appeal of the Commonwealth Opinion.
Beginning with the entry of the Revocation Order and culminating with the ex
Accordingly, the effect of the Revocation Order as confirmed by the Confirmation Order and the Commonwealth Parties’ subsequent retention of the License Fee was not to cause a transfer of interests between the parties. Rather, the effect was to adjudicate the parties respective interests and to determine the right to relief to which the parties were therefore entitled. See, e.g., ISN Bank,
To the extent the Debtor holds any interest in a refund of the License Fee, the Debtor obtained this interest upon payment of the License Fee to the Gaming Board on October 17, 2007. See, e.g., Wey,
Whether the Debtor Received Less Than Reasonably Equivalent Value
Even if this Court found that the allegations of the Complaint established the existence of a transfer of the License Fee within the applicable look-back periods, the Trustee has failed to allege sufficient facts to establish that the Debtor received less than reasonably equivalent value in exchange for its payment of the License Fee to the Commonwealth. The Trustee contends that the Commonwealth Opinion caused a transfer of the License for which they received no value. However, the Trustee does not allege that, at the time the Debtor paid the License Fee to the Commonwealth, all parties did not contemplate that this investment would generate a positive return. As a result, this Court must conclude that the Trustee cannot plead any facts that would establish that the Debtor received less than reasonably equivalent value in exchange for its payment of the License Fee. In re R.M.L., Inc.,
In R.M.L., the Third Circuit addressed the appeal of a bankruptcy court’s determination that the payment and retention of $387,461.96 by Mellon Bank in connection with a failed loan facility constituted a constructively fraudulent conveyance. The bankruptcy court premised is determination that the debtor did .not receive value on the fact that the proposed loan never closed. From this fact, the bankruptcy court concluded that the debtor did not receive any value in exchange for the transfer. In re R.M.L., Inc.,
C. Count IV — Recovery of the Avoided Transfer, §§ 550 & 551
Because this Court has determined that the Complaint fails to state a plausible cause of action pursuant to §§ 542, 544 and 548, this Court must dismiss the Trustee’s §§ 550 and 551 actions. Universal Marketing,
Conclusion
This Court does not doubt that the Trustee possesses a reasonable basis to believe that, pursuant to the State Law Claims in the Complaint, the Debtor is entitled to a refund of the License Fee. However, each of these underlying causes of action are premised upon the Debtor’s alleged rights under applicable state law and are not within the surrender of sovereign immunity resulting from the Commonwealth’s ratification of the Constitution. See, e.g., Metromedia,
Consistent with this memorandum, this Court will enter an order dismissing with prejudice Counts I through IV of the Complaint. With regard to Counts V through VII, this Court will enter an order dismissing those counts without prejudice to the Trustee’s capacity, if any, to pursue those claims in a court of competent jurisdiction.
Notes
. The complaint is being prosecuted by Persil Mangeur LLC in its capacity as the trustee of the Liquidation Trust (the "Trustee”) for the Estate of the Debtor. Consistent with this Court’s Order dated July 28, 2014 [Docket No. 153] (the "Confirmation Order”), a liquidation trust was established and Persil Mang-eur LLC was appointed as the liquidation trustee. Confirmation Order, ¶ 10. Upon the effective date of the Plan, all estate assets, including any prepetition causes of action held by the Debtor, vested in the Liquidation Trust.
. Burford v. Sun Oil Co.,
. In response to the Commonwealth Parties' Rooker-Feldman arguments, the Trustee characterized its Complaint as "seeking] this Court's determination of whether or not the Commonwealth has unlawfully refused to return the License Fee to the Debtor.” Trustee’s Memorandum of Law dated September 29, 2014 [Docket No. 19] (the "Trustee’s Memorandum”), p.25. Despite the Trustee's characterization, this Court observes that the Trustee’s fraudulent transfer actions (Counts II and III) explicitly seek the avoidance of the revocation of the License and not the avoidance of some subsequent act relating to the alleged refusal of the Commonwealth Parties to refund the License Fee. Complaint, ¶ 97.
. Consistent with the nature of a pre-pack-aged plan, the Debtor received the prepetition approval of the Plan by a majority of its creditors. However, its efforts to achieve swift confirmation of its Plan were delayed by a series of issues relating to the Debtor's attempt to retain bankruptcy counsel.
. A copy of the October 16 Letter was attached to the Complaint as Exhibit B.
, It is unclear whether the Trustee is seeking only $50 million from the Commonwealth Parties as the Complaint does not request alternative relief. Rather, it seeks both turnover of the License Fee and a judgment for the value of the License asserted to be at least $50 million.
. These rules are made applicable to this matter pursuant to F.R.B.P. 70Í2.
. 4 Pa.C.S.A. § 1326(b).
. On October 1, 2014, the Commonwealth Parties filed a Stipulation purporting to authorize the Trustee to file a reply brief and the Commonwealth Parties to file a sur-reply brief as well as to continue the originally-scheduled date for the hearing on the Motion. As provided by this Court’s Judicial Practices and Procedures, parties must obtain permission from this Court before reply briefs will be considered. To that end, this Court scheduled a conference call for October 3, 2014, to address the parties’ request to file reply briefs. As explained by the Commonwealth Parties, they believed that reply briefs were necessary because it was the Commonwealth Parties’ belief that the Trustee, in its Response, asserted a new theory of relief not pled by the Complaint. Namely, the Commonwealth Parties characterized the Response as requesting a determination that the Debtor holds a statutory right to a refund of the License Fee. Despite this Court’s misgivings, this Court granted leave for additional briefing. To the extent that the Commonwealth Parties are correct and this theory of relief was not asserted by the Complaint, it may not be raised in connection with this Court's adjudication of the Motion. See, e.g., Frederico v. Home Depot,
. The Factual Background is based upon the facts alleged in the Complaint, which the Court must accept as true for the purpose of the Motion, and the extensive description of the Debtor’s operating history set forth in Philadelphia Entertainment and Development Partners, L.P. v. Pennsylvania Gaming Control Board,
. In relevant part, the Gaming Act provides:
it the time of license issuance the board shall impose a one-time slot machine license fee to be paid by each successful applicant for a conditional Category 1, a Category 1 or a Category 2 license in the amount of $50,000,000 and deposited in the State Gaming Fund.
4 Pa.C.S.A. § 1209(a).
.See also Complaint, Exhibit B, p.15.
, The Gaming Act does provide for the refund of other taxes paid by licensees. The Gaming Act provides for the creation within the State Treasury an account for each gaming licensee. 4 Pa.C.S.A. § 1401(a). Significantly, the Gaming Act does not call for the deposit of the $50,000,000 license fee into this account. Rather, the accounts are funded by the tax on gaming revenue paid after each licensee commences business operations. If a licensee ceases operations and funds remain in its account, a licensee is entitled to a refund of the remaining funds. In relevant part, the Gaming Act provides:
Return of funds. — The funds deposited into its account shall not be returned to a slot machine licensee unless the slot machine licensee ceases conducting business under its license and relinquishes all rights to do so in the future. In that case, the balance of funds in the account attributable to such licensee, minus any unpaid amounts due and payable to the Commonwealth under this part or due and payable under section 1405, shall be returned to the licensee.
4 Pa.C.S.A. § 1401(d).
. It appears that the BIE expressly contemplated that the relief sought by the BIE Complaint constituted proceedings to revoke a $50 million slot license. As provided by Pennsylvania law, the revocation.of the License contemplated the forfeiture of the License Fee, In relevant part, Pennsylvania law provides:
In the event of a revocation or failure to renew, the applicant’s authorization to conduct the previously approved activity shall immediately cease, and all fees paid in connection therewith shall be deemed to be forfeited.
4 Pa.C.S.A. § 1326(b) (emphasis added).
.The Gaming Board is empowered to ”[a]t its discretion, to award, revoke, suspend, condition or deny issuance or, renewal of slot machine licenses.” 4 Pa.C.S.A. § 1202(b)(12). In addition, the Gaming Board ”[a]t its discretion, to suspend, condition or deny the issuance or renewal of any license or permit or levy fines or other sanctions for any violation of this part.” 4 Pa. C.S.A. § 1202(b)(16). The Gaming Board’s decision to revoke the License was premised on the following factual determinations: (1) the Debtor failed to commence construction of its proposed casino; (2) the Debtor failed to maintain financial suitability; and (3) the Debtor violated several prior orders issued by the Gaming Board.
. See also Complaint, Exh, H, p.42.
. Although this Court will not reach the merits of the Trustee's allegations in support of its belief that the Debtor is entitled to a refund of the License Fee, this finding would seem to preclude the Trustee’s present "reservation of rights” theory.
. To address the sufficiency of the Complaint, this Court will first address its jurisdiction to hear each cause of action. In re Exide Techs.,
.Pursuant to a letter dated April 15, 2014, the Trustee requested from the Commonwealth Parties "an immediate refund or return the License Fee to the Debtor.” Complaint, Exh. K, p.3.
. In attempting to resolve whether the scope of its jurisdiction includes the causes of action pled by the Complaint, this Court acknowledges that the issues presented by the Motion implicate an area of law, the jurisdiction and authority of bankruptcy courts, that, in recent years, has grown substantially uncertain. See, e.g., Stern v. Marshall,
. In reaching this conclusion, this Court is careful to distinguish between the bankruptcy causes of action asserted by the Complaint and the non-bankruptcy causes of action upon which the Debtor’s alleged interest in the License Fee is premised. As elaborated below, this Court may adjudicate the former but not the latter. If this Court were to allow the Trustee to cloak its non-bankruptcy causes of action with the garb of bankruptcy causes of action, it would render meaningless the "limited subordination of state sovereign immunity” recognized by the Supreme Court. Central Virginia Community College v. Katz,
. This Court acknowledges the practical consideration that its disposition of the Commonwealth Parties' sovereign immunity defense, regardless of outcome, is immediately appeal-able. Puerto Rico Aqueduct & Sewer Auth. v. Metcalf & Eddy, Inc.,
. In Sacred Heart, the Third Circuit addressed an appeal from a district court's determination that § 106(a) violates the Eleventh Amendment to the United States Constitution. In reaching this result, the district court relied upon the Supreme Court's decision in Seminole Tribe of Florida v. Florida,
. As observed by the dissent, "the majority ... offers no principled basis on which to draw distinctions in future cases.” Katz,
. Although not raised by the parties, this Court cannot help but recognize the similarity between Stem 's analysis of the constitutional scope of a bankruptcy court’s authority to enter final judgments and Katz's analysis of the scope of the States' waiver of sovereign immunity. Stem stands for the proposition that a bankruptcy court’s authority to enter final judgments is limited to the adjudication of causes of action that are derived "from a
. Due to its deposit into the State Gaming Fund at which point it came under the custody and control of the Pennsylvania Treasury Department, this Court notes that the Debt- or’s interest in the License Fee is likely not a res to which this Court’s in rem jurisdiction may attached. Nordic Village,
. Whether the fraudulent conveyance actions are within the scope of "Laws on the subject of Bankruptcy” will be addressed in the subsequent section.
. Admittedly, Village of Rosemont's procedural posture is somewhat different. ' In Village of Rosemont, the debtor sought bankruptcy relief prior to the revocation of its license. Here, the Debtor sought' bankruptcy relief after the revocation of the License and after the revocation was confirmed by the Commonwealth Court. As a result of this difference, the application of the Rooker-Feldman Doctrine or preclusion doctrines was not relevant to the disposition of the matters raised in Village of Rosemont.
. Village of Rosemont,
. Absent the possibility of waiver caused by ratification, the Trustee would not be able to bring a fraudulent conveyance action against the Commonwealth Parties. Pursuant to the Pennsylvania Sovereign Immunity Act, the Commonwealth enumerated the classes of actions for which it has consented to suit. 42 Pa.C.S.A, § 8522. None of the nine exceptions waive sovereign immunity with regard to tortious misconduct, Knauss v. Shannon, Civ. No. 08-1698,
.Conversely, at least one Court has relied on Katz to acknowledge that its rationale may extend to causes of action that do not arise "under the Bankruptcy Code.” Sheils,
. Because Congress has supplied the rules of decision, it may be said that preference actions implicate public rights because they are "completely dependent upon adjudication of a claim created by federal law.” Stem,
. The Trustee is seeking a judgment in the amount of $50,000,000 representing (i) the amount of the License Fee and (2) the alleged value of the License. Consistent with Granfi-nanciera, this Court acknowledges that the relief sought by the Trustee sounds in law and not equity. Granfinanciera,
. It has long been recognized that legal actions countenance the recovery of money damages whereas equitable actions “will always, by its decree, declare the rights, interest, or estate ... ” Clews v. Jamieson,
. Katchen v. Landy,
. Schoenthal et al. v. Irving Trust Co.,
. See Claim No, 3-1 filed in In re Wallace’s Bookstores, Inc., Bky, No. 01-50545 (Bankr.E.D Ky.).
. Other courts have addressed whether the States and their subdivisions are immune from suits brought pursuant § 544(b) and § 548. See, e.g., In re Redf Marketing, LLC, Bky. No. 12-32462,
. This Court does not agree that the distinction between fraudulent transfer actions brought pursuant to § 544(b) or § 548 is material. It cannot be that Congress can render sovereign immunity inapplicable simply by restating within the Bankruptcy Code the elements of a state law cause of action. Such a result would appear to run afoul of the Iiatz's instruction that bankruptcy courts look beyond Congressional labels to determine whether a cause of action implicates sovereign immunity. Katz, 546 U.S, at 378 n. 15,
. In addition, Bankruptcy Judge Walsh relied upon the inclusion of § 544 within § 106(a) to buttress this result. For whatever reason, he included no discussion of the Third Circuit’s Sacred Heart opinion to explain his conclusion that the abrogation of state sovereign immunity contained in § 106(a) was effective.
. Village of Rosemont v. Jaffe,
. The Rooker-Feldman Doctrine is named for Rooker v. Fidelity Trust Co.,
. Reiter v. Washington Mut. Bank,
. This Court notes that it does not intend to suggest that application of the Rooker-Feld-man Doctrine is co-extensive with the application of issue or claim preclusion. See, e.g., Lemonds v. St. Louis County,
.The Court observes that the frequency of the invocation of the Rooker-Feldman Doctrine appears to be the results from a misunderstanding of the effect of what it means to "avoid,” pursuant to the exercise of bankruptcy causes of action, a state court judgment. This misunderstanding results from a failure to distinguish between the avoidance of the entry of a state court order and the avoidance of the subsequent enforcement of the same order. A prior state court order constitutes an adjudication of the parties' respective rights and obligations as of the date of the entry of the prior state court order. See, e.g., ISN Bank v. Rajaratnam,
. This Court acknowledges that it is well settled that the Rooker-Feldman Doctrine bars bankruptcy courts from considering non-bankruptcy claims that seek to invalidate a mortgage that is subject to a prepetition state court default judgment. See, e.g., Sherk v. Countrywide Home Loans, Inc., Civ. No. 08-5969,
. In the Great Western framework, the debt- or is not complaining of an injury caused by a state court judgment but of an injury caused by a deficiency in the sale process.
, In response to the Defendants’ Rooker-Feldman arguments, the Trustee argued that the issues presented by the Complaint, namely the Debtor’s right to a refund of the License Fee, was not litigated before the Gaming Board or the Commonwealth Court. See, e.g., Transcript November 14, 2014, 57:9-59:112 (“It’s not the issue which we are raising here ... We could have gone to the state court and said we’re ... entitled to a refund____that issue never was litigated and never could have been litigated ... until there was a revocation.”).
. From the Debtor’s own statements and the findings contained in the Commonwealth Opinion, this Court may determine that the second prong is satisfied. Absent the entry of the Revocation Order, the Debtor would not have suffered the injury it now seeks to redress. To support its fraudulent transfer cause of action, the Debtor states “On April 14, 2012, the License was involuntarily transferred from the Debtor to the Commonwealth by virtue of the Revocation Order becoming final and not further appealable.” Complaint, ¶ 95. The Debtor even defines the revocation of the License caused by the Revocation Order as the transfer the Debtor seeks to avoid. Complaint, ¶ 99 ("The revocation of the License was a transfer for which the Debt- or received no value from the Commonwealth (the "Transfer”).”). Because its counsel has previously acknowledged as much, the Debtor cannot contest that this injury was caused by the Revocation Order. As recognized by Judge McCullough in his dissent,
[A]s counsel for PEDP noted at argument, by revoking PEDP’s License, PEDP will be required to forfeit a $50 million licensing fee paid to the Board. By affirming the Board's final order, the Majority, in essence, confirms the application of a summary forfeiture process with regard to a sizable property interest ($50 million fee), without a hearing.
Commonwealth Opinion,
.By arguing that Revocation Order did not address the Debtor’s right to be compensated for the value of the License, the Trustee is confusing the Rooker-Feldman Doctrine with the claim/issue preclusion. While substantial conceptual overlap does exist between the Rooker-Feldman Doctrine and claim/issue preclusion, the Trustee’s argument goes too far. Unlike issue/claim preclusion, the Rook-
. In relevant part, § 542(a) reads:
Except as provided in subsection (c) or (d) of this section, an entity, other than a custodian, in possession, custody, or control, during the case, of property that the trustee may use, sell, or lease under section 363 of this title, or that the debtor may exempt under section 522 of this title, shall deliver to the trustee, and account for, such property or the value of such property, unless such property is of inconsequential value or benefit to the estate.
11 U.S.C. § 542(a).
. The source of the “England Reservation” is the Supreme Court’s decision in England v. Louisiana State Board of Medical Examiners,
, "It is well settled that an administrative agency's interpretation of a statute is given controlling weight unless it is clearly erroneous." Riverwalk Casino, LP v. Pennsylvania Gaming Control Board,
. Axiomatically, any prepetition cause of action, by virtue of § 541, inures to the benefit of a debtor's estate. See, e.g., In re Emoral, Inc., 740 F.3d 875, 879 (3d Cir.2014) ("A cause of action that is 'property of the estate' is properly pursued by the bankruptcy trustee because it inures to the benefit of all creditors.”). However, the fact that a cause of action is property of a bankruptcy estate cannot be relied upon for determining whether its adjudication implicates a bankruptcy court’s in rem jurisdiction. The Debtor’s interests in causes of action that may entitle it to a refund of the License Fee may not be considered a res to which this Court’s in rem jurisdiction may attach. While the Debtor’s interest in a cause of action does inure to the benefit of its estate, it cannot be said that that interest constitutes a res that implicates this Court’s in rem jurisdiction. A cause of action cannot be within the scope of the "Laws on the subject of Bankruptcy” simply due to the fact that it inures to the benefit of a debtor’s estate. Otherwise, the rule enunciated by Katz would be hopelessly unmanageable and would necessarily run afoul of the “limited” abrogation of sovereign immunity resulting front ratification. Katz, 546 U.S. at.377,
. The Trustee's attempts to use its turnover action as a "Trojan Horse” for the adjudication of the Debtor's underlying state law causes of action underscores the viability of the Defendants’ sovereign immunity defense. While sovereign immunity does not prevent this Court from determining whether the Trustee has stated claim, sovereign immunhy would serve as a defense to this Court’s adjudication of the underlying state law causes of action that the Trustee's has attempted to cloak in the guise of a § 542 action. In re Zywiczynski,
.Because the governing legal standards under § 544(b) and 548(a) are largely identical, the Trustee’s causes of action under both section are addressed concurrently. See, e.g., In re Estate of Graven,
. In its Complaint, the Trustee does not state under what sections of PUFTA it intends to proceed. However, from the Trustee’s reference to the fact that the alleged transfer “was made by the Debtor without receiving a reasonably equivalent value,” this Court will infer that the Trustee intended to invoke § 5105 of PUFTA.
. See, e.g., Complaint, ¶¶ 97-104.
. The term "transfer” is defined by the Bankruptcy Code to include "each mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with an interest in property.” 11 U.S.C. § 101(54)(D).
. The date the Gaming Board entered the Revocation Order was December 23, 2010.