Delaware Business Bankruptcy Report : Delaware Business Bankruptcy Report : Morris James LLP Lawyers & Attorneys

Edwards v. New Century Mortgage Corp., et al. (In re New Century TRS Holdings, Inc.), Adv. Pro. No. 08-50000 (KJC) (February 2, 2010).

On April 2, 2007, New Century Mortgage Corporation and its affiliates (the "Debtors") filed voluntary petitions for relief under chapter 11 of the United States Bankruptcy Code. On January 3, 2008, Gary Forrest Edwards ("Plaintiff" or "Edwards") commenced an adversary proceeding against the banks, individuals, and Court he held responsible for the foreclosure on his home. Edwards later filed an amended complaint, which contained a litany of requests for relief in connection with the state court mortgage foreclosure action. Various Defendants filed motions to dismiss for lack of subject matter jurisdiction, asserting that the Rooker-Feldman doctrine applied, and arguing that the complaint failed to state a claim upon which relief may be granted.

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W.R. Grace & Co. v. Chakarian, Nos. 3697/3720, 2009 WL 5151089 (3d. Cir. Dec. 31, 2009)

In this joint appeal from decisions of the United States Bankruptcy Court for the District of Delaware and the United States District Court for the District of Delaware, the debtor, W.R. Grace & Co. (“Grace”) appealed an order denying expansion of an injunction under Section 105(a) of the Bankruptcy Code to bar claims brought by claimants (the “Libby Claimants”) against the State of Montana, alleged to arise out of Grace’s operation of a vermiculite mine near Libby, Montana.

On December 31, 2009, the Third Circuit affirmed the Bankruptcy Court and District Court’s refusal to extend the stay to the claims of the Libby Claimants against the State of Montana. In doing so, the Third Circuit found that the Bankruptcy Court properly determined that it did not have “related-to” jurisdiction over the claims.

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In re Exide Techs., No. 07-2230, __ F.3d __ (3d Cir. Sept. 19, 2008)

The persistent question of when a bankruptcy court can exercise “core” jurisdiction over nondebtor vs. nondebtor disputes received close examination in a precedential opinion issued by the Third Circuit Court of Appeals on September 19, 2008.

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MAS Litigation Trust v. Plastech Engineered Prods. (In re Meridian Automotive Sys.-Composite Ops. Inc.), Adv. Pro. No. 07-51196 (KG), 2007 WL 4322527 (Bankr. D. Del. Dec. 5, 2007) (Judge Kevin Gross)

Plastech Engineered Products, Inc., a defendant in an avoidance action commenced by the MAS Litigation Trust, moved to dismiss the plaintiff’s amended complaint on the grounds that, inter alia, the new claims set forth in the amended complaint did not relate back to the original complaint.  In a matter related to one we discussed here last week, The United States Bankruptcy Court for the District of Delaware granted the motion, finding that the new claims did not seem to arise out of the same transactions described in the original complaint.  However, the Court granted the plaintiff twenty days to amend the complaint, if it could allege facts sufficient to show the additional claims related back to the original ones.

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In re TWA Inc. Post Confirmation Estate, No. 01-00056 (PJW), 2007 WL 2757148 (Bankr. D. Del. Sept. 21, 2007) (Judge Peter J. Walsh)

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In re Seven Fields Dev. Corp., 505 F.3d 237 (3d Cir. 2007) (Circuit Judge Morton I. Greenberg)

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OHC Liquidation Trust v. Discovery Re (In re Oakwood Homes Corp.), C.A. No. 06-436-JJF, 2007 WL 2071730 (D. Del. July 17, 2007) (Judge Joseph J. Farnan, Jr.)

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In re RNI Wind Down Corp., Case No. 06-10110 (CSS), 2007 WL 949647 (Bankr. D. Del. March 29, 2007) (Judge Christopher S. Sontchi)

The Plan Administrator in the bankruptcy case of RNI Wind Down Corporation and its affiliated debtors objected to a request for payment of fees and expenses pursuant to the debtors’ plan of reorganization by the indenture trustee of pre-petition notes of the debtors. The parties agreed to a settlement and moved for approval of the agreement. The Delaware Bankruptcy Court refused to approve the settlement, finding that the legal invoices and request for fees were so heavily redacted and inspecific as to make it impossible for the court to determine whether they were reasonable, and thus whether the settlement was equitable and fair. The court also determined that the plan did not modify the indenture agreement, which was a pre-petition contract among non-debtors, and that it lacked jurisdiction over claims arising under the indenture.

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Consolidated SWINC Estate and SWE&C Liquidating Trust v. ACE USA, Inc. (In re Stone & Webster, Inc.), 367 B.R. 523 (Bankr. D. Del. 2007) (Judge Peter J. Walsh)

The liquidating trusts of the Stone & Webster debtors commenced an adversary proceeding against insurers of the debtors in connection with a coverage dispute that had been waged for many years, including well before the petition date. The insurers moved for a determination of the core/non-core status of the adversary proceeding. The United States Bankruptcy Court for the District of Delaware determined that the suit was merely a pre-petition state law breach of contract action over which the court had no jurisdiction under the United States Supreme Court’s decision in Northern Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 71 (1982).

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W.R. Grace & Co. v. Chakarian (In re W.R. Grace & Co.), 366 B.R. 295 (Bankr. D. Del. 2007) (Judge Judith K. Fitzgerald)

In an opinion interpreting the Third Circuit’s Pacor standard for related-to jurisdiction, the Court held that state court actions against the State of Montana in which the W.R. Grace & Co. debtors were named as co-defendants – but which causes of action were enjoined – could proceed to the extent that they sought to establish the liability of the State of Montana. Because Montana would have to bring subsequent claims against the Debtors for indemnity and contribution, the state court actions had no “conceivable” effect on the bankruptcy estate, as contemplated by Pacor, so as to vest the Court with related-to jurisdiction over the claims. The Court therefore denied the Debtors’ motion to expand a preliminary injunction against the suits to the state of Montana.

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Simon & Schuster, Inc. v. Advanced Marketing Servs. Inc. (In re Advanced Marketing Servs. Inc.), 366 B.R. 429 (Bankr. D. Del. 2007) (Judge Christopher S. Sontchi)

Simon & Schuster, a creditor of debtor Advanced Marketing Services, Inc., filed a reclamation claim against the debtor, and sought to have a temporary restraining order put in place to prevent the debtor from selling the S&S goods that were subject to the reclamation claim. The court denied the motion in a previously reported opinion. (here)

S&S then sought to pursue an appeal of the court’s interlocutory order denying the TRO motion, moved the District Court for leave to appeal, and requested that the Bankruptcy Court certify that the case was suitable for direct appeal to the United States Court of Appeals for the Third Circuit, pursuant to 11 U.S.C. § 158(d)(2). The Bankruptcy Court declined to decide the request, finding that, because the District Court and Bankruptcy Court were being asked to make an almost identical set of findings, judicial resources would best be used by deferring to the District Court to decide the motion for leave to appeal. Moreover, respect for the hierarchy of the courts warranted deference to the District Court.

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Finova Capital Corp. v. Cote (In re Finova Capital Corp.), 358 B.R. 113 (Bankr. D. Del. 2006) (Judge Peter J. Walsh)

The debtor sued the defendants in Vermont Superior Court for breach of contract. The Superior Court granted the defendants’ motion to dismiss on the basis of lack of jurisdiction, which, the Superior Court held, was vested with the Bankruptcy Court. The debtor then commenced an adversary proceeding in the Bankruptcy Court asserting the same breach of contact claims. The defendants moved the Bankruptcy Court to abstain, alleging that the Bankruptcy Court lacked personal jurisdiction. The Bankruptcy Court denied the motion on the basis of judicial estoppel.

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Astropower Liquidating Trust v. Xantrex Tech (In re Astropower Liquidating Trust), Case No. 04-10322 (MFW), Adv. Pro. No. 05-50867, 2006 WL 2850110 (Bankr. D. Del. Oct. 2, 2006) (Judge Mary F. Walrath)

Defendants Merrill Lynch Asset Management and Merrill Lynch Investment Managers Limited moved to dismiss a fraudulent transfer complaint for lack of personal jurisdiction. Finding that the minimum contacts requirement for personal jurisdiction was not met, the Court dismissed the complaint.

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