Opinion
CASE NO.: 19-50096-KKS ADV. NO.: 20-05002-KKS
2022-01-06
IN RE: CONCRETE INVESTMENTS, INC., Debtor. Concrete Investments, Inc., Plaintiff, v. Noble Public Adjusting Group, LLC, Defendant.
Teresa M. Dorr, Natasha Z. Revell, Zalkin Revell, PLLC, Santa Rosa Beach, FL, for Plaintiff. Tiffany Payne Geyer, Andrew V. Layden, Baker & Hostetler LLP, Orlando, FL, for Defendant.
Teresa M. Dorr, Natasha Z. Revell, Zalkin Revell, PLLC, Santa Rosa Beach, FL, for Plaintiff.
Tiffany Payne Geyer, Andrew V. Layden, Baker & Hostetler LLP, Orlando, FL, for Defendant.
ORDER DENYING NOBLE PUBLIC ADJUSTING GROUP, LLC'S MOTION TO DISMISS AMENDED COMPLAINT OR, ALTERNATIVELY TO ABSTAIN (ECF No. 61)
KAREN K. SPECIE, Chief United States Bankruptcy Judge
THIS ADVERSARY PROCEEDING is before the Court on Noble Public Adjusting Group, LLC's Motion to Dismiss Amended Complaint or, Alternatively to Abstain ("Motion to Dismiss," ECF No. 61) to which Plaintiff filed a response in opposition. For the reasons set forth below, the Court finds that no hearing is necessary, and the Motion to Dismiss is due to be denied.
Plaintiff's Opposition to Noble Public Adjusting Group, LLC's Motion to Dismiss Amended Complaint or, Alternatively to Abstain , ECF No. 66 ("Response").
BACKGROUND
Plaintiff filed a Chapter 11 petition on August 2, 2019. On May 28, 2020, Plaintiff filed an amended petition, electing to proceed under Subchapter V. Plaintiff filed its initial Subchapter V plan the same day, and its First Amended Plan on July 1, 2020. The Court entered an order confirming Plaintiff's First Amended Plan on September 3, 2020.
Voluntary Petition for Non-Individuals Filing for Bankruptcy , In re Concrete Investments, Inc. , Case No. 19-50096-KKS (Bankr. N.D. Fla. Aug. 2, 2019), ECF No. 1.
Voluntary Petition for Non-Individuals Filing for Bankruptcy , In re Concrete Investments, Inc. , Case No. 19-50096-KKS (Bankr. N.D. Fla. May 28, 2020), ECF No. 85.
Plan of Reorganization of Concrete Investments, Inc. Pursuant to Subchapter V of Chapter 11 , In re Concrete Investments, Inc. , Case No. 19-50096-KKS (Bankr. N.D. Fla. May 28, 2020), ECF No. 86.
First Amended Plan of Reorganization of Concrete Investments, Inc. Pursuant to Subchapter V of Chapter 11 , In re Concrete Investments, Inc. , Case No. 19-50096-KKS (Bankr. N.D. Fla. Jul. 1, 2020), ECF No. 126.
Order Confirming Amended Plan of Reorganization Pursuant to Subchapter V of the Bankruptcy Code , In re Concrete Investments, Inc. , Case No. 19-50096-KKS (Bankr. N.D. Fla. Sept. 3, 2020), ECF No. 186.
Plaintiff commenced this adversary proceeding on November 20, 2020. After the Court dismissed Plaintiff's initial complaint without prejudice, Plaintiff filed an Amended Complaint alleging five (5) counts.
Adversary Complaint for Turnover of Funds , ECF No. 1.
Order Granting Noble Public Adjusting Group, LLC's Motion to Dismiss Complaint for Lack of Subject Matter Jurisdiction and for a Judgment on the Pleadings for Failure to State a Claim on Which Relief Can be Granted , ECF No. 55.
Count I: Account Stated; Count II: Open Account; Count III: Unjust Enrichment; Count IV: Theft, Misappropriation; and Count V: Deceptive and Unfair Trade Practices. Verified Amended Adversary Complaint , ECF No. 59 ("Amended Complaint").
In its Motion to Dismiss, Defendant asserts that the Court lacks subject matter jurisdiction because, inter alia, the Amended Complaint only contains state court causes of action for which Defendant is entitled to a jury trial. Defendant urges, in the alternative, that even if it has subject matter jurisdiction, the Court should abstain from presiding over this adversary proceeding.
Defendant also asserts that Count IV fails to state a claim on which relief can be granted. ECF No. 61.
Id.
DISCUSSION
The Court has "related to" subjection matter jurisdiction.
Federal district courts have original and exclusive jurisdiction over all cases under title 11, and all civil proceedings arising under title 11 or arising in or related to cases under title 11. To determine whether subject matter jurisdiction exists, the Court must determine whether the matter arises under, arises in, or relates to the underlying bankruptcy case; in other words, whether the matter is "core" or "non-core."
28 U.S.C. § 1334 (a), (b). This Court has jurisdiction over bankruptcy cases and proceedings by referral pursuant to an administrative order entered by the District Court for the Northern District of Florida. Standing Order of Reference Regarding Title 11 , No. 4:95-mcr-40111-DJ (N.D. Fla. June 5, 2012) (pursuant to 28 U.S.C. § 157(a) referring to this Court "all cases under Title 11 (Bankruptcy) and all proceedings arising under Title 11 (Bankruptcy) or arising in or related to a case under Title 11 (Bankruptcy) ....").
Pursuant to 11 U.S.C. § 157(b)(1), bankruptcy courts may "hear and determine" all core proceedings arising under or arising in "a case under title 11." Core matters are defined in 11 U.S.C. § 157(b)(2) and include: "(A) matters concerning the administration of the estate; ... (O) other proceedings affecting the liquidation of assets of the estate or the adjustment of the debtor-creditor or the equity security holder relationship...." Bankruptcy courts may hear matters that are non-core, "or otherwise related to a case under title 11" pursuant to 11 U.S.C. § 157(c)(1).
A proceeding is "core under section 157 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.’ " A proceeding that is not core "may be related to the bankruptcy because of its potential effect, but under section 157(c)(1) it is an ‘otherwise related’ or noncore proceeding." An action is related to a bankruptcy case if "the outcome of the proceeding could conceivably have an effect on the estate being administered in bankruptcy." The key word used by the Eleventh Circuit Court of Appeals is conceivably , "which makes the jurisdictional grant extremely broad." The Eleventh Circuit recently relied on a ruling of the Third Circuit to determine that subject matter jurisdiction existed where "there was enough of a nexus to the bankruptcy plan or proceeding for the bankruptcy court to exercise ‘related to’ jurisdiction."
Venn v. Kinjite Motors, Inc. (In re WMR Enter., Inc.) , 163 B.R. 887, 889 (Bankr. N.D. Fla. 1994) (quoting In re Ben Cooper, Inc. , 896 F.2d 1394, 1400 (2nd Cir. 1990) ); see also Order Denying Motion for Default Judgment and Sua Sponte Dismissing Case with Prejudice , In re Vessillo , Case No. 14-16134-PDR, Adv. No. 20-01393-PDR (Bankr. S.D. Fla. Jan. 3, 2022) ECF No. 23.
In re Davis , 899 F.2d 1136, 1141 (11th Cir. 1990).
Miller v. Kemira, Inc. (In re Lemco Gympsum) , 910 F.2d 784, 788 (11th Cir. 1990).
Continental Nat'l Bank of Miami v. Sanchez (In re Toledo) , 170 F.3d 1340, 1345 (11th Cir. 1999) ; see also Baumann & Sons Buses, Inc. v. East Meadow Union Free School Dist., (In re Baumann & Sons Buses, Inc.) , Case No. 20-72121(REG), Adv. No. 20-08182, 2022 WL 38294 (Bankr. E.D.N.Y. Jan. 4, 2022).
Kachkar v. Bank of America Corp., (In re Kachkar) , 769 Fed. Appx. 673, 679 (11th Cir. 2019), citing Binder v. Price Waterhouse & Co., LLP (In re Resorts Intern., Inc. ), 372 F.3d 154, 167 (3rd Cir. 2004) (where, as here, the adversary proceeding involves an action initiated post-confirmation, "the claim must affect an integral aspect of the bankruptcy process.... Matters that affect the interpretation, implementation, consummation, execution, or administration of the confirmed plan will typically have the requisite close nexus.").
The counts contained in the Amended Complaint do not invoke a substantive right provided by the Bankruptcy Code and could have arisen outside the context of Plaintiff's administrative bankruptcy case. For that reason, the Amended Complaint raises no core matters. The question then becomes whether the claims are related to the bankruptcy case.
In support of its motion, Defendant cites WMR Enterprises . There, post-confirmation a reorganized debtor sued a third party; the defendant moved to dismiss for lack of subject matter jurisdiction. In granting the motion to dismiss, this Court held that it had no core or related to jurisdiction because:
Venn v. Kinjite Motors, Inc. (In re WMR Enter., Inc.) , 163 B.R. 887, 889 (Bankr. N.D. Fla. 1994)
Id. at 888–89.
[A]dministration of the bankruptcy estate has terminated with the confirmation of the plan and the vesting of the property of the estate in the reorganized debtor.... Performance ... of the terms of the Plan of Reorganization is not dependent on nor is it affected by any recovery in this proceeding.
Id. at 890.
This case is distinguishable from WMR Enterprises in two ways: 1) Plaintiff's performance under the confirmed plan relies, at least in part, on the recovery it seeks through this adversary proceeding; and 2) Plaintiff remains a debtor-in-possession because this is a confirmed Subchapter V case.
See In re Auto Dealer Serv., Inc. , 96 B.R. 360, 364 (Bankr. M.D. Fla. 1989).
In non-Subchapter V cases, once a Chapter 11 plan is confirmed the bankruptcy estate created upon filing the petition is no more. But Subchapter V cases, not yet in existence when WMR Enterprises was decided, are different. Upon confirmation, a Subchapter V debtor remains a debtor in possession. The estate continues its existence through consummation of a multi-year plan and includes property the debtor owned pre-petition as well as that acquired post-petition.
WMR Enter., Inc. , 163 B.R. at 889.
"Except as provide in section 1185 of this title, a plan confirmed under this subchapter, or an order confirming a plan under this subchapter, the debtor shall remain in possession of all property of the estate." 11 USC § 1186(b).
The services of a Subchapter V Trustee only terminate when the plan has been substantially consummated. 11 U.S.C. § 1183(c)(1). Property of the estate in a Subchapter V includes all property specified in Section 541 of the Bankruptcy Code, plus "all property of the kind specified in [541] that the debtor acquires after the date of commencement of the case but before the case is closed, dismissed or converted...." 11 U.S.C. § 1186(a)(1).
Here, the Subchapter V Debtor's confirmed plan is to be funded, in part, from "sale or liquidation of assets...." The confirmed plan also provides:
First Amended Plan of Reorganization of Concrete Investments, Inc. Pursuant to Subchapter V of Chapter 11 , In re Concrete Investments, Inc. , Case No. 19-50096-KKS (Bankr. N.D. Fla. Jul. 1, 2020), ECF No. 126, p. 16.
Until the provisions of the Plan have been satisfied in full, the Court shall retain jurisdiction, to the full extent authorized by law ... for the purposes of implementing and consummating the Plan, including but not limited to the following: ... (4) Enforcing all causes of action which may exist on behalf of the Debtor.
Id. at p. 18.
Because performance and consummation of the confirmed plan depends, in part, on the recovery sought in this adversary proceeding, this proceeding will have an effect on the administration of the bankruptcy estate. For that reason, the Court has subject matter jurisdiction over this adversary proceeding, which is related to the case.
Abstention is not merited.
Defendant requests the Court to abstain pursuant to 28 U.S.C. § 1334(c)(1). Courts have developed several factors regarding whether abstention is merited, including:
(1) the effect, or lack of effect, on the efficient administration of the bankruptcy estate if discretionary abstention is exercised, (2) the extent to which state law issues predominate over bankruptcy issues, (3) the difficulty or unsettled nature of the applicable state law, (4) the presence of related proceedings commenced in state court or other non-bankruptcy courts, (5) the jurisdictional basis, if any, other than § 1334, (6) the degree of relatedness or remoteness of the proceedings to the main bankruptcy case, (7) the substance rather than the form of an asserted "core" proceeding, (8) the feasibility of severing state law claims from core bankruptcy matters to allow judgments to be entered in state court with enforcement left to the bankruptcy court, (9) the burden on 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 jury trial, (12) the presence in the proceeding of non-debtor parties, (13) comity, and (14) the possibility of prejudice to other parties in the action.
E.S. Bankest, LLC v. United Beverage Fla., LLC (In re United Container LLC) , 284 B.R. 162, 176 (Bankr. S.D. Fla. 2002) (and cases cited therein). See also In re Cypress Health Sys. Fla., Inc. , 536 B.R. 334 (Bankr. N.D. Fla. 2015).
Here, factors (2), (5), and (8) weigh in favor of abstention: state law issues predominate; there is no jurisdictional basis in this Court other than under § 1334 ; and it is feasible to send the state law claims to a state court. But the remaining eleven (11) factors weigh against abstention. Factor (1): this adversary proceeding will not affect efficient administration of the estate. In fact, abstention at this point in the proceeding would likely have a detrimental effect on the efficient administration of Plaintiff's bankruptcy estate – the parties would have to start from the beginning in state court which would result in more time and expense.
Factor (3): the state law issues raised are not novel in nature and can easily be resolved by this Court. Factor (6): this adversary proceeding is directly related to Plaintiff's administrative bankruptcy case because recovery would provide additional funding of Plaintiff's confirmed Subchapter V plan. Factor (7) is neutral; nothing in the Amended Complaint appears to disguise a non-core matter as core. Factor (9): there will be no burden on this Court's docket if this adversary proceeding remains. Factor (10): there is no evidence of forum shopping. Factor (11): any of Defendant's jury trial rights are preserved. This Court may preside over this adversary proceeding through the discovery stage and then refer it to the District Court for a jury trial. Factor (12): Defendant is the only non-debtor party involved in this adversary proceeding. Factor (13): comity is not a concern. This adversary proceeding does not raise any unique legal issues peculiar to state courts of Florida, nor have the issues first been raised in any such courts. Factor (14): Defendant will not be prejudiced by denial of abstention. This proceeding was commenced in November of 2020 and Defendant has been active and involved from the beginning.
The concept of comity "teaches that one court should defer action on causes properly within its jurisdiction until the courts of another sovereignty with concurrent powers, and already cognizant of the litigation , have had an opportunity to pass upon the matter." Rhines v. Weber , 544 U.S. 269, 274, 125 S.Ct. 1528, 161 L.Ed.2d 440 (2005) (emphasis added).
Defendant's defense to Count IV, failure to state a claim upon which relief can be granted, is preserved.
Defendant argues that Count IV of the Amended Complaint fails to state a claim on which relief can be granted. This is a defense available pursuant to Federal Rule 12(b)(6), that may be raised by motion or in a responsive pleading. Because the Defendant will have leave to file an answer to the Amended Complaint, this defense may be raised in that answer.
Fed. R. Civ. P. 12(b), applicable here by Fed. R. Bankr. P. 7012(b).
CONCLUSION
Because Plaintiff is a reorganized Subchapter V debtor and the claims alleged could conceivably affect the administration of the bankruptcy estate, the Court has "related to" subject matter jurisdiction. It would not be appropriate to abstain.
For the reasons stated, it is
ORDERED:
1. Defendant's Motion to Dismiss (ECF No. 61) is DENIED.
2. Defendant has twenty-one (21) days within which to file an answer to the Amended Complaint.
3. The hearing on the Motion to Dismiss, currently scheduled for January 11, 2022, is CANCELED.
DONE and ORDERED on January 6, 2022.