Quincy Medical Center v. Gupta, et al

Filing

OPINION issued by Jeffrey R. Howard, Chief Appellate Judge; David H. Souter,* Associate Supreme Court Justice and Kermit V. Lipez, Appellate Judge. Published. *The Hon. David H. Souter, Associate Justice (Ret.) of the Supreme Court of the United States, sitting by designation. [15-1183]

Case: 15-1183

Document: 00117162458

Page: 1

Date Filed: 06/02/2017

Entry ID: 6096558

United States Court of Appeals
For the First Circuit
No. 15-1183
APURV GUPTA, M.D.; VICTOR MUNGER,
Plaintiffs, Appellants,
v.
QUINCY MEDICAL CENTER, A STEWARD FAMILY HOSPITAL, INC.,
Defendant, Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Rya W. Zobel, U.S. District Judge]

Before
Howard, Chief Judge,
Souter, Associate Justice,
Lipez, Circuit Judge.

Leah L. Miraldi, with whom Bruce W. Gladstone, Cameron &
Mittleman LLP, Charles R. Bennett, Jr., and Murphy & King, P.C.
were on brief, for appellants.
Jonathan W. Young, with whom Scott R. Magee and Locke Lord
LLP were on brief, for appellee.

June 2, 2017



The Hon. David H. Souter, Associate Justice (Ret.) of the
Supreme Court of the United States, sitting by designation.

Case: 15-1183

Document: 00117162458

LIPEZ,

Circuit

Page: 2

Date Filed: 06/02/2017

Judge.

This

appeal

Entry ID: 6096558

involves

the

bankruptcy of Quincy Medical Center, Inc., QMC ED Physicians, Inc.
and Quincy Physician Corporation ("Debtors").

Apurv Gupta and

Victor Munger ("Appellants"), former senior executives of Debtors,
appeal the district court's ruling that the bankruptcy court lacked
subject matter jurisdiction over their post-confirmation claims
for severance payments against the purchaser of Debtors' assets.
Because we agree that the bankruptcy court had no jurisdiction
over Gupta's and Munger's claims, we affirm.
I.
The facts pertinent to this appeal -- none of which are
disputed -- are fully set forth in the opinions of the bankruptcy
court and the district court.

See Quincy Med. Ctr. v. Gupta, Nos.

12-cv-40128-RWZ and 12-cv-40131-RWZ, 2015 WL 58633, at *1-2 (D.
Mass. Jan. 5, 2015); In re Quincy Med. Ctr., Inc., 479 B.R. 229,
231-33 (Bankr. D. Mass. 2012); In re Quincy Med. Ctr., Inc., 466
B.R. 26, 27-32 (Bankr. D. Mass. 2012).

We assume familiarity with

the decisions below and discuss only the pertinent facts here.
Gupta
Medical

and

Munger

Center,

a

hospital

Massachusetts.

were

senior

operated

by

executives
Debtors

at
in

Quincy
Quincy,

On June 30, 2011, Debtors signed an Asset Purchase

Agreement (the "APA") whereby they agreed to sell substantially
all of their assets to Quincy Medical Center, a Steward Family
Hospital, Inc. f/k/a Steward Medical Holdings Subsidiary Five,

- 2 -

Case: 15-1183

Document: 00117162458

Inc. ("Steward").1

Page: 3

Date Filed: 06/02/2017

Entry ID: 6096558

One day later, on July 1, 2011, Debtors filed

voluntary petitions under Chapter 11 of the Bankruptcy Code, and
a motion (the "Sale Motion") under sections 363 and 365 of the
Bankruptcy Code seeking bankruptcy court approval of the APA.

See

11 U.S.C. § § 363, 365.
Sections

5

and

9

of

the

APA,

which

deal

with

the

continued employment of Debtors' former employees, are relevant to
Appellants' claims.

Specifically, section 9.1 provides:

Not later than ten (10) Business Days prior to the
Closing, [Steward] shall offer employment by
[Steward] to each of the Employees who remain
employed by [Debtors] as of a recent date,
. . . such employment to commence immediately
following the Closing. . . . Such individuals who
accept such offer of employment are hereinafter
referred to as the "Transferred Employees."
Section 9.2 further provides that Steward is obligated to pay each
transferred employee "base wage and salary levels provided to such
Employees immediately prior to the Closing" for no less than three
months after the closing date.

Additionally, section 5.14(c) of

the

[Steward's]

APA

provides

that

"upon

termination

of

the

employment . . . of any employees . . . of [Debtors] at or following
the Closing, [Steward] shall be liable to any of such persons for
severance or retention pay or any other payments otherwise due
them as employees . . . for [Debtors]."

1

Steward is a subsidiary of Steward Health Care System, a
Boston-based for-profit healthcare company that operates hospitals
in New England.

- 3 -

Case: 15-1183

Document: 00117162458

Page: 4

Date Filed: 06/02/2017

Entry ID: 6096558

On September 26, 2011, the bankruptcy court issued an
order (the "Sale Order") approving the APA as requested in the
Sale Motion.

The sale closed on October 1, 2011.

Six days later,

Debtors filed a proposed Chapter 11 plan of reorganization (the
"Plan").

The bankruptcy court thereafter confirmed the Plan (the

"Confirmation Order").
The Sale Order and the Plan each contain provisions
regarding the retention of jurisdiction by the bankruptcy court
over any disputes arising under them.

The Sale Order provides:

It is necessary and appropriate, in order to ensure the
validity of the sale of the Assets to Steward and to
ensure compliance with this Order, for this Court to
retain jurisdiction to: (a) interpret and enforce the
provisions of the APA, the Assigned Agreements, the Sale
Motion and this Order; (b) protect Steward and any of
the Assets against any Lien or Claim; (c) resolve any
disputes arising under or relating to the APA, the
Assigned Agreements, the Sale Motion and this Order; and
(d) determine the validity, extent and priority of
asserted pre-Closing Liens or Claims on, and the
disposition of the gross proceeds of sale of, the Assets.

Similarly, the Plan provides that

Notwithstanding the entry of the Confirmation Order and
the occurrence of the Effective Date, on and after the
Effective Date, the Bankruptcy Court shall, to the
maximum extent permitted by applicable law, retain
exclusive jurisdiction over all matters arising out of,
or related to, the Chapter 11 Cases and the Plan pursuant
to sections 105(a) and 1142 of the Bankruptcy Code,
including jurisdiction to: . . .

- 4 -

Case: 15-1183

Document: 00117162458

Page: 5

Date Filed: 06/02/2017

Entry ID: 6096558

15. Enter and enforce any order for the sale of property
pursuant to sections 363, 1123, or 1146(a) of the
Bankruptcy Code; . . . .
29. Enforce all orders previously
Bankruptcy Court; . . . .
The

Confirmation

Order

also

entered

incorporates

the

by

the

retention

of

jurisdiction provision from the Plan.
On October 7, 2011, Appellants received letters from
Debtors stating that their employment was terminated effective
October 1, i.e., the day the sale closed.

Appellants subsequently

sought

filing

severance

pay

from

Debtors

by

motions

in

the

bankruptcy court for allowance of administrative expenses against
Debtors.

The

bankruptcy

status to both claims.

court

denied

administrative

expense

However, the court held that Appellants'

motions should be treated as "seeking relief in the alternative
. . . for an order directing Steward to pay the claims."2

2

The

In the proceedings before the bankruptcy court, Appellants
originally argued that their claims for severance pay against
Debtors qualified as expenses of administration of a Chapter 11
case under 11 U.S.C. § 503(b)(1).
In opposing these claims,
Debtors argued that the claims were properly against Steward
because Steward had violated the APA by not offering employment to
Appellants.
Citing our opinions in Mason v. Official Comm. of
Unsecured Creditors (In re FBI Distrib. Corp.), 330 F.3d 36, 41
(1st Cir. 2003) and Cramer v. Mammoth Mart, Inc. (In re Mammoth
Mart, Inc.), 536 F.2d 950, 954 (1st Cir. 1976), the court denied
Appellants' claims against Debtors, holding that "[s]everance pay
is entitled to administrative expense priority only to the extent
it is tied to the employee's length of service" and only for the
portion of severance pay "attributable to post petition services."
Hence, the court held that, because the severance pay claims were
unrelated to Appellants' salaries and lengths of service with
Debtors, the claims were "not entitled to treatment as expenses of
- 5 -

Case: 15-1183

Document: 00117162458

Page: 6

Date Filed: 06/02/2017

Entry ID: 6096558

court found that it had subject matter jurisdiction to hear the
claims against Steward pursuant to the retention of jurisdiction
provisions of the Sale Order and the court's authority to interpret
and enforce its own prior orders.
Steward

an

opportunity

to

The bankruptcy court offered

respond,

and

Steward

filed

its

objections.
Following a non-evidentiary hearing at which Gupta,
Munger, and Steward were heard, the bankruptcy court found Steward
liable to Appellants under the APA for their severance pay.
Steward appealed to the district court, which concluded that the
bankruptcy

court

Appellants' claims.

lacked

subject

matter

jurisdiction

over

Specifically, the district court found that

Appellants' claims against Steward fell outside the bankruptcy
court's statutorily granted jurisdiction and that the retention of
jurisdiction provision relied upon by the bankruptcy court did not
change this analysis.
judgments

against

The district court therefore vacated the

Steward

dismiss Appellants' claims.

and

remanded

with

instructions

to

This appeal followed.

administration under Bankruptcy Code § 503(b)(1)." The court went
on to find, however, that because Appellants' claims also alleged
that "Steward violated the terms of the APA by not offering them
employment post-closing" and because the APA was made binding on
both Appellants and Steward, the court would treat the claims as
"seeking . . . an order directing Steward to pay [the claims]."

- 6 -

Case: 15-1183

Document: 00117162458

Page: 7

Date Filed: 06/02/2017

Entry ID: 6096558

II.
A. Jurisdictional Principles
Appellants contend that the district court erred in
concluding

that

their

severance

claims

against

Steward

fell

outside the bankruptcy court's statutorily granted jurisdiction.
Thus, we first must examine the statutory scheme establishing the
bankruptcy

court's

jurisdiction,

understanding

that

the

"jurisdiction of the bankruptcy courts, like that of other federal
courts, is grounded in, and limited by, statute."
v. Edwards, 514 U.S. 300, 307 (1995).

Celotex Corp.

We examine the bankruptcy

court's findings of fact for clear error and afford de novo review
to its conclusions of law.

See Razzaboni v. Schifano (In re

Schifano), 378 F.3d 60, 66 (1st Cir. 2004).
The general grant of bankruptcy jurisdiction is found in
28

U.S.C.

bankruptcy

§

1334,

which

matters

over

establishes
which

the

two

main

district

categories
courts

of

have

jurisdiction: "cases under title 11," 28 U.S.C. § 1334(a), and
"proceedings arising under title 11, or arising in or related to
cases under title 11," 28 U.S.C. § 1334(b).

See also Middlesex

Power Equip. & Marine, Inc. v. Town of Tyngsborough, Mass. (In re
Middlesex Power Equip. & Marine, Inc.), 292 F.3d 61, 66 (1st Cir.
2002). "[C]ases under title 11" refers only to the bankruptcy
petition itself, and it is the umbrella under which all of the

- 7 -

Case: 15-1183

Document: 00117162458

Page: 8

Date Filed: 06/02/2017

Entry ID: 6096558

proceedings3 that follow the filing of a bankruptcy petition take
place.

Id.

In turn, 28 U.S.C. § 157 permits the district courts

to refer to bankruptcy courts all "proceedings arising under title
11 or arising in or related to cases under title 11."4
jurisdictional

grant

allows

the

bankruptcy

courts

This broad
to

"deal

efficiently and expeditiously with all matters connected with the
bankruptcy estate."5

Celotex, 514 U.S. at 308 (quoting Pacor, Inc.

v. Higgins, 743 F.2d 984, 994 (3d Cir. 1984)).

3

The term "proceeding," as used in 28 U.S.C. § 1334(b),
refers "to the steps within the 'case' and to any subaction within
the case that may raise a disputed or litigated matter." Mich.
Emp't Sec. Comm'n v. Wolverine Radio Co. (In re Wolverine Radio
Co.), 930 F.2d 1132, 1141 n.14 (6th Cir. 1991).
4

Section 157(a) leaves it up to the district courts whether
to refer or not to refer cases and proceedings to the bankruptcy
courts. In practice, however, "each district court has provided
by rule for automatic reference to bankruptcy judges." Collier on
Bankruptcy ¶ 3.02 (Alan N. Resnick & Henry J. Sommer eds., 16th
ed. 2016). Accordingly, the District of Massachusetts, by standing
order, has delegated to the bankruptcy court all cases in which
jurisdiction is premised on § 1334, see D. Mass. R. 201, subject
to review by the district court (or, in the alternative, by the
bankruptcy appellate panel) in accordance with 28 U.S.C. § 157(a).
See also LeBlanc v. Salem (In re Mailman Steam Carpet Cleaning
Corp.), 196 F.3d 1, 5 (1st Cir. 1999) (discussing D. Mass. R. 201).
5

Section 157 also divides bankruptcy proceedings into two
further categories: "core" and "non-core." Stern v. Marshall, 564
U.S. 462, 473-76 (2011). These categories determine "[t]he manner
in which a bankruptcy judge may act on a referred matter."
Id. at 473. Proceedings "arising under title 11, or arising in a
case under title 11," are both considered "core proceedings" in
which the bankruptcy court may enter final orders and judgments.
Id. at 474 (citing 28 U.S.C. § 157(b)).
Proceedings merely
"related to" a case under title 11 are considered "non-core"
proceedings. Stern, 564 U.S. at 477 (citing Collier on Bankruptcy
¶ 3.02[2], p. 3-26, n.5 (16th ed. 2010)("The terms 'non-core' and
'related' are synonymous.").
Although whether a bankruptcy
- 8 -

Case: 15-1183

Document: 00117162458

Page: 9

Date Filed: 06/02/2017

Entry ID: 6096558

Hence, in order for Appellants' severance claims to fall
within 28 U.S.C. § 1334's statutory grant of jurisdiction, the
claims must "arise under," "arise in," or "relate to" a case under
title 11. We have observed that the boundaries between these types
of proceedings are not always easy to distinguish from each other.
See In re Middlesex Power Equip. & Marine, Inc., 292 F.3d at 68
(noting that "[t]he dividing line is unclear between proceedings
that 'arise under' as opposed to 'arise in' and as opposed to
'relate

to'

title

definitions.").

11.

The

statute

itself

provides

no

Nonetheless, each term has a particular scope

that matters for the jurisdictional analysis here.
The “arising under” language of § 1334(b) is "analogous
to the 'arising under' language in 28 U.S.C. § 1331."

In re

Middlesex Power Equip. & Marine, Inc., 292 F.3d at 68 (comparing
"arising under" jurisdiction to federal question jurisdiction).
In other words, proceedings "aris[e] under title 11" when the
Bankruptcy Code itself creates the cause of action.

See Stoe v.

Flaherty, 436 F.3d 209, 217 (3d Cir. 2006) (noting that "arising
under"

jurisdiction

is

limited

to

proceedings

where

"the

Bankruptcy Code creates the cause of action or provides the

proceeding is a core proceeding is analytically separate from
whether there is jurisdiction, "by definition all core proceedings
are within the bankruptcy court's jurisdiction."
Continental
Nat'l Bank v. Sanchez (In re Toledo), 170 F.3d 1340, 1345 n.6 (11th
Cir. 1999) (citing 28 U.S.C. §§ 157(b)(1), 1334(b)).

- 9 -

Case: 15-1183

Document: 00117162458

Page: 10

Date Filed: 06/02/2017

Entry ID: 6096558

substantive right invoked"); Wood v. Wood (In re Wood), 825 F.2d
90, 96 (5th Cir. 1987) ("Congress used the phrase 'arising under
title 11' to describe those proceedings that involve a cause of
action created or determined by a statutory provision of title
11.").
We have defined "arising in" proceedings generally as
"those that are not based on any right expressly created by title
11, but nevertheless, would have no existence outside of the
bankruptcy."

In re Middlesex Power Equip. & Marine, Inc., 292

F.3d at 68; see also Stoe, 436 F.3d at 218 ("[C]laims that 'arise
in' a bankruptcy case are claims that by their nature, not their
particular factual circumstance, could only arise in the context
of a bankruptcy case."); In re Toledo, 170 F.3d at 1345 (stating
that proceedings "arising in" bankruptcy are "matters that could
arise only in bankruptcy").

"Arising in" proceedings include such

things as administrative matters, orders to turn over property of
the estate, and determinations of the validity, extent, or priority
of liens.

See Collier on Bankruptcy ¶ 3.01[3][e][iv] (Alan N.

Resnick & Henry J. Sommer eds., 16th ed. 2016)[hereinafter Collier]
(noting

that

“administrative

matters”

such

as

allowance

and

disallowance of claims, orders in respect to obtaining credit,
determining

the

confirmation

of

dischargeability
plans,

orders

of

permitting

debts,
the

discharges,
assumption

or

rejection of contracts, are the principal constituents of “arising

- 10 -

Case: 15-1183

Document: 00117162458

Page: 11

Date Filed: 06/02/2017

Entry ID: 6096558

in” jurisdiction, and that "[i]n none of these instances is there
a 'cause of action' created by statute, nor could any of the
matters illustrated have been the subject of a lawsuit absent the
filing of a bankruptcy case").
By contrast, "related to" proceedings are those "which
'potentially have some effect on the bankruptcy estate, such as
altering debtor's rights, liabilities, options, or freedom of
action,

or

otherwise

have

an

impact

administration of the bankrupt estate.'"

upon

the

handling

and

In re Middlesex Power

Equip. & Marine, Inc., 292 F.3d at 68 (quoting In re G.S.F. Corp.,
938 F.2d 1467, 1475 (1st Cir. 1991)); see also Celotex, 514 U.S.
at 308 ("The usual articulation of the test for determining whether
a civil proceeding is related to bankruptcy is whether the outcome
of that proceeding could conceivably have any effect on the estate
being administered in bankruptcy."
Pacor, 743 F.2d at 994)).

(emphasis omitted) (citing

Although "related to" jurisdiction

"cannot be limitless," Celotex, 514 U.S. at 308, it is nonetheless
"quite broad."

Boston Reg'l Med. Ctr., Inc. v. Reynolds (In re

Boston Reg'l Med. Ctr., Inc.), 410 F.3d 100, 105 (1st Cir. 2005)
(noting that Congress deliberately allowed the cession of wideranging "related to" jurisdiction to the bankruptcy courts "to
enable them to deal efficiently and effectively with the entire
universe of matters connected with bankruptcy estates").

- 11 -

Case: 15-1183

Document: 00117162458

Page: 12

Date Filed: 06/02/2017

Entry ID: 6096558

B. Application of the Jurisdictional Principles
The bankruptcy court never determined whether it had
"arising under," "arising in," or "related to" jurisdiction over
Appellants' claims.

Instead, the court concluded that it had

jurisdiction solely on the basis of the retention of jurisdiction
provisions in the Sale Order and the Plan.

This approach was

erroneous.
Bankruptcy courts -- like all federal courts -- may
retain jurisdiction to interpret and enforce their prior orders.
See Travelers Indem. Co. v. Bailey, 557 U.S. 137, 151 (2009)
(Souter,

J.)

(noting

that

bankruptcy

courts

"plainly

ha[ve]

jurisdiction to interpret and enforce . . . prior orders").
However, a bankruptcy court may not "retain" jurisdiction it never
had -- i.e., over matters that do not fall within § 1334's
statutory grant.

See Celotex, 514 U.S. at 307.

A retention of

jurisdiction provision may not alter the fact that "the source of
the bankruptcy court's subject matter jurisdiction is neither the
Bankruptcy Code nor the express terms of the Plan.

The source of

the bankruptcy court's jurisdiction is 28 U.S.C. §§ 1334 and 157."
U.S. Brass Corp. v. Travelers, Ins. Group (In re U.S. Brass Corp.),
301 F.3d 296, 303 (5th Cir. 2002).
Hence, despite the routine inclusion of retention-ofjurisdiction provisions in Chapter 11 plans, see Collier ¶ 1123.02,
they may be given effect only if there is jurisdiction under 28

- 12 -

Case: 15-1183

Document: 00117162458

U.S.C. § 1334.

Page: 13

Date Filed: 06/02/2017

Entry ID: 6096558

See Valley Historic Ltd. P'ship. v. Bank of N.Y.,

486 F.3d 831, 837 (4th Cir. 2007) ("[N]either the parties nor the
bankruptcy court can create § 1334 jurisdiction by simply inserting
a retention of jurisdiction provision in a plan of reorganization
if jurisdiction otherwise is lacking . . . ."); Binder v. Price
Waterhouse & Co., (In re Resorts Int'l., Inc.), 372 F.3d 154, 161
(3d Cir. 2004) (stating that, absent jurisdiction under § 1334,
"retention of jurisdiction provisions in a plan of reorganization
or trust agreement are fundamentally irrelevant"); Zerand-Bernal
Group, Inc. v. Cox, 23 F.3d 159, 164 (7th Cir. 1994) ("[O]rders
approving [a] bankruptcy sale [or] . . . plan of reorganization .
. . [cannot] confer jurisdiction.

A court cannot write its own

jurisdictional ticket.").
Therefore, the question before us is whether Appellants'
claims for severance pay from Steward are proceedings which "arise
under," "arise in," or are "related to" the chapter 11 bankruptcy
such that they fall within the grant of jurisdiction contained in
28 U.S.C. § 1334.

Given Appellants' silence in their briefing on

"arising under" and "related to" jurisdiction, they do not appear
to dispute that neither form of jurisdiction applies to their
claims for severance pay.
either

form

of

Their failure to expressly argue that

jurisdiction

applies

is

understandable.

Appellants' claims for severance pay from Steward derive solely
from Steward's alleged breach of sections 5 and 9 of the APA.

- 13 -

Case: 15-1183

Document: 00117162458

Hence,

their

Massachusetts

claims

do

contract

Page: 14

not

law,

Date Filed: 06/02/2017

"arise
rather

creates their cause of action.

under"
than

title

the

Entry ID: 6096558

11

because

Bankruptcy

Code,

See In re Middlesex Power Equip.

& Marine, Inc., 292 F.3d at 68; In re Wood, 825 F.2d at 96.
Similarly, these claims fall outside even the broad statutory grant
of "related to" jurisdiction in that Appellants' claims against
Steward could have no conceivable impact upon Debtors' bankruptcy
estate.
105.

See Celotex, 514 U.S. at 307; In re Boston, 410 F.3d at

Indeed, Appellants state in their brief that "the Bankruptcy

Court's subject matter jurisdiction here is not based on 'related
to' jurisdiction."
Appellants insist, however, that their claims against
Steward "arise in" a bankruptcy case because the APA was approved
by

the

bankruptcy

court

in

the

Sale

Order

pursuant

to

11

U.S.C. §§ 363 and 365, and, invoking language from one of our prior
cases, such an order may "only be issued by a bankruptcy court."
In re Middlesex Power Equip. & Marine, Inc., 292 F.3d at 68-69.
Thus,

Appellants

contend,

their

state

law

claims

"arise

in"

Debtors' bankruptcy case because, "but for" Debtors' Chapter 11
case and the Sale Order approving the sale of Debtors' assets to
Steward in the APA, their claims for severance pay would not exist.
This argument misapprehends the relevant law.

As we

have explained, it is not enough for "arising in" jurisdiction
that a claim arose in the context of a bankruptcy case.

- 14 -

Instead,

Case: 15-1183

Document: 00117162458

Page: 15

Date Filed: 06/02/2017

Entry ID: 6096558

our case law makes clear that for "arising in" jurisdiction to
apply, the relevant proceeding must have "no existence outside of
the bankruptcy."

Id. at 68 (quoting In re Wood, 825 F.2d at 97).

Hence, there is no "but for" test for "arising in" jurisdiction as
Appellants suggest.

That is, "the fact that a matter would not

have arisen had there not been a bankruptcy case does not ipso
facto mean that the proceeding qualifies as an 'arising in'
proceeding."

Collier ¶ 3.01[3][e][iv].

question

whether

is

the

proceeding

Instead, the fundamental
by

its

nature,

not

its

particular factual circumstance, could arise only in the context
of a bankruptcy case. In re Middlesex Power Equip. & Marine, Inc.,
292 F.3d at 68.

In other words, it is not enough that Appellants'

claims arose in the context of a bankruptcy case or even that those
claims exist only because Debtors (Appellants' former employer)
declared bankruptcy; rather, "arising in" jurisdiction exists only
if Appellants' claims are the type of claims that can only exist
in a bankruptcy case.
In re Middlesex Power Equip. & Marine, Inc. provides no
support for Appellants' contrary position.

In that case, we held,

inter alia, that a bankruptcy court had "arising under" or "arising
in" jurisdiction to decide the scope of a sale order provision
authorizing certain assets to be sold "free and clear of liens."
292 F.3d at 68; see also Elliott v. GM LLC (In re Motors Liquidation
Co.), 829 F.3d 135, 153 (2d Cir. 2016) ("A bankruptcy court's

- 15 -

Case: 15-1183

Document: 00117162458

Page: 16

Date Filed: 06/02/2017

Entry ID: 6096558

decision to interpret and enforce a prior sale order falls under
. . . 'arising in' jurisdiction.").

Appellants point to this

language, insisting that their claims, "although framed as state
law claims . . . depend upon an interpretation of the Bankruptcy
Court's

Sale

Order."

Appellants'

argument

misses

the

mark,

however, because the bankruptcy court's mere approval of Debtors'
sale of assets to Steward did not automatically create jurisdiction
over all future contract disputes somehow related to the APA.6
Hence, unlike Middlesex Power Equip. & Marine, Inc., which involved
the interpretation of a specific provision of a sale order,
Appellants here have failed to identify any provision of the Sale
Order itself or any related questions of bankruptcy law underlying
their claims that would require interpretation by the bankruptcy
court.

Indeed, the bankruptcy court's own analysis of Appellants'

claims was based entirely on the terms of the APA and state
contract law. The court mentioned the Sale Order only in reference
to the retention-of-jurisdiction provision.

6

Indeed, the "but for" test articulated by Appellants for
"arising in" jurisdiction would potentially eliminate the
boundaries of "related to" jurisdiction, allowing a party to invoke
the "core" jurisdiction of the bankruptcy court even for claims
that could have no conceivable impact "upon the handling and
administration of the bankrupt estate." In re Boston, 410 F.3d at
105; See also Celotex, 514 U.S. at 308 n.6 ("[B]ankruptcy courts
have no jurisdiction over proceedings that have no effect on the
estate of the debtor."); Collier ¶ 3.01[3][e][iv](noting that a
"but for" test for "arising in" jurisdiction "would surely expand
bankruptcy
jurisdiction
well
beyond
that
which
is
constitutional").

- 16 -

Case: 15-1183

Document: 00117162458

Page: 17

Date Filed: 06/02/2017

Entry ID: 6096558

Therefore, a court deciding Appellants' claims on the
merits would only need to perform a state law breach of contract
analysis.

As the district court explained, Appellants' claims

"look like ones that could have arisen entirely outside the
bankruptcy context.

They are essentially employment disputes that

could arise in any asset sale, regardless of whether the sale
involved

a

bankruptcy

proceeding."

Appellants'

claims

are

therefore not merely "framed as state law claims," but are claims
which may be decided solely under Massachusetts law.

See Stoe,

436 F.3d at 218 (holding that state-law action to recover unpaid
severance benefits from officers of former employer did not "arise
in" a bankruptcy case).

See also Marotta Gund Budd & Dzera LLC v.

Costa, 340 B.R. 661, 669 (D.N.H. 2006) (holding that defamation
action is not a proceeding "arising in" a bankruptcy case).7

7

Our conclusion here is buttressed by the fact that
Appellants filed almost identical claims for breach of the APA
against Steward in Massachusetts state court while this appeal was
pending. See Munger et al. v. Quincy Medical Center, a Steward
Family Hospital, Inc., Civil Action No. 15-2099-C. On October 11,
2016, the state court granted summary judgment for Steward on
Appellants' claims. Id. In deciding the summary judgment motion,
the state court made no reference to any part of the Sale Order
itself, instead relying only on the existence vel non of
Appellants' contractual rights under the APA. Given these facts,
Appellants' claims can hardly "depend upon an interpretation of
the Bankruptcy Court's Sale Order."
We further note that both parties were remiss in failing to
inform this court of the outcome of the state court proceedings.
The state court's grant of summary judgment does not, however,
moot the question of whether the bankruptcy court had subject
matter jurisdiction over Appellants' claims in federal court.
Rather, if we were to conclude that the bankruptcy court had
- 17 -

Case: 15-1183

Document: 00117162458

Page: 18

Date Filed: 06/02/2017

Entry ID: 6096558

In short, Appellants' claims do not fit into the narrow
category

of

matters

that

"have

no

existence

outside

of

the

bankruptcy," In re Middlesex Power Equip. & Marine, Inc., 292 F.3d
at 68, or that "could only arise in the context of a bankruptcy,"
Stoe, 436 F.3d at 218. Hence, the bankruptcy court did not possess
"arising in" jurisdiction over Appellants' claims.
AFFIRMED

jurisdiction, the district court on remand would have to address
a number of complex procedural questions, including the potential
preclusive effect of the state court proceedings. However, because
we find that the bankruptcy court lacked subject matter
jurisdiction over Appellants' claims, those issues do not arise.

- 18 -