Bennett et al v. Jefferson County, Alabama
Filing
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MEMORANDUM OPINION - Because these appeals are barred by res judicata and are moot, the Countys motion to dismiss, doc. 17 in 2:14-cv-00214-AKK and doc. 17 in 2:14-cv-00215-AKK, is due be granted. Accordingly, the Appellants motion to strike, doc. 7 in 2:14-cv-00214-AKK and doc. 8 in 2:14-cv-00215-AKK, motions to consolidate, docs. 12 and 15 in 2:14-cv-00214-AKK and docs. 13 and 16 in 2:14-cv-00215-AKK, and motion for hearing, doc. 16 in 2:14-cv-00214-AKK, are due to be denied as moot. Separate orders will be entered. Signed by Judge Abdul K Kallon on 8/1/2019. (KEK)
FILED
2019 Aug-01 PM 02:20
U.S. DISTRICT COURT
N.D. OF ALABAMA
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
ANDREW BENNETT, et al.,
Appellants,
v.
JEFFERSON COUNTY,
ALABAMA
Appellees.
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Civil Action Number
2:14-cv-00214-AKK
and
2:14-cv-00215-AKK
MEMORANDUM OPINION
The Appellants seek to reverse several orders issued by the bankruptcy court
in adversary proceedings stemming from Jefferson County, Alabama’s Chapter 9
bankruptcy. Docs. 1; 1 in 2:14-cv-00215-AKK. 1 The Appellants contend, among
other things, that the dismissal of the adversary proceedings pursuant to the order
confirming the County’s Chapter 9 Plan (“the Confirmation Order”) violated the
Bankruptcy Rules and Rules of Civil Procedure and denied them due process. See
doc. 21. These appeals are before the court on Jefferson County’s motion to dismiss,
doc. 17, which the Appellants oppose, see doc. 21. Because these appeals challenge
the County’s bankruptcy plan and the Confirmation Order, which have become final
1
Unless otherwise indicated, the documents cited are from case number 2:14-cv-00214-AKK.
Although the court has not consolidated these appeals, they involve the same facts and issues, and
the parties submitted identical briefing in support of their respective positions in both appeals. See
docs. 17; 21; 22 in 2:14-cv-00214-AKK and 17; 21; 22 in 2:14-cv-00215-AKK.
and nonappealable, see Bennett v. Jefferson County, Alabama, 899 F.3d 1240 (11th
Cir. 2018), cert. denied, 139 S. Ct. 1305 (March 4, 2019), and, as a result, the court
cannot grant meaningful relief to the Appellants, the motion to dismiss is due to be
granted.
I.
FACTUAL AND PROCEDURAL BACKGROUND
The County filed a petition for bankruptcy in 2011 related to $3.2 billion in
debt the County incurred for its sewer system. Bennett, 899 F.3d at 1243. During
the course of the Chapter 9 bankruptcy proceeding, some of the County’s creditors
filed an adversary proceeding (AP-16) seeking a declaration that the County was
required to remit certain monthly payments to them from sewer system revenues.
See In re Jefferson Cnty., Ala., 482 B.R. 404 (Bankr. N.D. Ala. 2012). The
Appellants, on behalf of themselves and a putative class of County homeowners and
sewer ratepayers, filed a complaint in intervention in AP-16, seeking an alternative
declaratory judgment to void or invalidate certain sewer system warrants issued by
the County. See doc. 21-1.2 The bankruptcy court severed the Appellants’ complaint
in intervention and transferred it to a separate, newly-opened adversary proceeding
(AP-120). Doc. 17 at 4.
2
The Appellants also filed a claim for more than $1.6 billion in the Chapter 9 proceeding for
alleged overcharges for sewer services. Doc. 21-1 at 3. That claim is not at issue in these two
appeals.
2
The County subsequently reached a tentative agreement with its major
creditors. Bennett, 899 F.3d at 1243. The County then moved to stay further
proceedings in AP-120 based on its contentions that the Chapter 9 plan would
resolve all disputes relating to the County’s liability for the sewer warrants, and the
bankruptcy court granted the motion. Doc. 17 at 5. Thereafter, the County filed its
Chapter 9 Plan of Adjustment (the “Plan”), and, after a two-day hearing, the
bankruptcy court issued the Confirmation Order over the Appellants’ objections.
See Bennett, 899 F.3d at 1243. See also docs. 21-3; 21-4.
Pursuant to the Confirmation Order, the Plan is binding on the County, its
creditors, and “all past, present, current, and future ratepayers and users of the Sewer
System . . . .” Doc. 21-3 at 57. Among other things, the Plan resolved and released
all “Sewer Released Claims,” which includes disputes related to the validity of the
sewer warrants and “the scope and extent of any liens or other property rights under
the [s]ewer [w]arrant[s] . . . .” Doc. 21-4 at 68-70, 90-91. Because the claims settled
and released under the Plan encompass the claims asserted in AP-16 and AP-120,
the Plan specifically required, and the Confirmation Order directed as such, the
dismissal with prejudice of AP-16 and AP-120 and enjoined the Appellants from
continuing any action to assert their claims. Docs. 21-3 at 64-65, 74-75; 21-4 at 6,
69, 81, 89-91; Bennett, 899 F.3d at 1243.
3
Relevant to these appeals, the Plan also provided that the County would issue
and sell new sewer warrants and that the County would use the net proceeds to
redeem and retire the prior warrants and related obligations. Docs. 21-4 at 18; 21-3
at 50-52. See also Bennett, 899 F.3d at 1243. And, to retire these new sewer
warrants, the Plan provides for the County to implement a series of rate increases
over a period of forty years. Bennett, 899 F.3d at 1243. In addition, under the Plan
and Confirmation Order, the validity of the new sewer warrants “and the covenants
made by the County for the benefit of the holders thereof . . . shall not be subject to
any collateral attack or other challenge by any [p]erson in any court . . . from and
after the [Plan’s] [e]ffective [d]ate.” Docs. 21-4 at 85-86; 21-3 at 67.
The Appellants filed a direct appeal of the Confirmation Order to this court
two days prior to the Plan’s effective date, see doc. 1 in 2:14-cv-00213-AKK, but
did not move for a stay of the Confirmation Order pending appeal, Bennett, 899 F.3d
at 1244. Relatedly, the Appellants also filed these two appeals in which they seek
the reversal of several orders in their adversary proceedings. After the Plan became
effective, the County moved this court to dismiss the direct appeal, arguing in part
that the appeal was moot because the Plan’s consummation made it impossible for
the court to grant the Appellants meaningful relief.3 Doc. 4 in 2:14-cv-00213-AKK.
3
The County did not move to dismiss the appeal of the bankruptcy court orders sustaining the
County’s objection to the Appellants’ proof of claim in the underlying bankruptcy proceeding.
Docs. 17 at 13-14; 4 in 2:14-cv-00213-AKK.
4
This court (Judge Sharon Lovelace Blackburn) denied the motion to dismiss the
direct appeal, and, at the County’s request, certified its order for interlocutory
review. Docs. 35; 36; 48 in 2:14-cv-00213-AKK. In the interim, the court stayed
these two appeals of the adversary proceedings pending the resolution of the direct
appeal in Case No. 2:14-cv-00213-AKK. Doc. 11.
On review, the Eleventh Circuit reversed this court and remanded the direct
appeal back to the court to dismiss the appeal of the Plan and Confirmation Order.
Bennett, 899 F.3d at 1254. The Eleventh Circuit found that the appeal of the Plan
and Confirmation Order is equitably moot because granting the relief sought by the
Appellants “would seriously undermine actions taken in reliance on the
[C]onfirmation [O]rder,” and “would be inequitable or practically impossible.” Id.
at 1252. The Appellants petitioned unsuccessfully for a writ of certiorari. Bennett
v. Jefferson Cnty., Ala., 2019 WL 465193 (U.S. Mar. 4, 2019). Thus, the Plan and
Confirmation Order are final and nonappealable.
II.
ANALYSIS
In light of the resolution of the direct appeal, the stay in these two appeals is
no longer necessary. Indeed, the parties have filed various motions seeking to bring
these appeals to a resolution. And, presently before the court is the County’s motion
to dismiss. Doc. 17. Notwithstanding the Circuit’s clear mandate for this court to
dismiss the direct appeal due to equitable mootness, Bennett, 899 F.3d at 1252 and
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1254, and the decision’s related implications to these two appeals, the Appellants
maintain that they can still challenge aspects of the Plan and Confirmation Order
through these appeals of their adversary proceedings, and have filed various motions
related to their position. See docs. 15; 16. See also doc. 21. For its part, the County
argues in its motion to dismiss that, in light of the Eleventh Circuit’s decision in the
direct appeal, these appeals stemming from the adversary proceedings are barred by
res judicata, doc. 17 at 16-19, or alternatively, are moot, id. at 19-20. The court
agrees with the County.
A.
Whether these Appeals are Barred by Res Judicata
As its primary argument in support of dismissal, the County argues that these
appeals are a collateral attack on the Plan and Confirmation Order the Circuit upheld
on direct appeal, and are therefore barred by res judicata. See doc. 17 at 16-19.
Under the doctrine of res judicata, “[a] final judgment on the merits of an action
precludes the parties or their privies from relitigating issues that were or could have
been raised in the action.” Federated Dep’t Sores v. Moitie, 452 U.S. 394, 398
(1981) (citations omitted). The doctrine bars a subsequent action when “(1) the prior
decision was rendered by a court of competent jurisdiction, (2) there was a final
judgment on the merits, (3) the parties were identical in both suits; and (4) the prior
and present causes of action are the same.” Davila v. Delta Air Lines, Inc., 326 F.3d
6
1183, 1187 (11th Cir. 2003). Only the first and last elements are in contention here.4
More specifically, the Appellants argue that (1) as to the first element—the
Confirmation Order is not a prior judgment and that the bankruptcy court exceeded
its jurisdiction in issuing the order, and (2) as to the last element—the Plan and
Confirmation Order involve a different nucleus of operative facts than the adversary
proceedings. Doc. 21. The court addresses these contentions in turn.
1.
Whether the Confirmation Order is a prior judgement issued by
a court of competent jurisdiction
The Appellants argue that the Confirmation Order has no preclusive effect on
these appeals because they filed their complaints in the adversary proceedings before
the County filed the Plan. See doc. 21 at 6, 13-17. Consequently, they claim this
lawsuit, as the purportedly first filed action, is not barred by res judicata. This
contention is unavailing. As the Eleventh Circuit noted when it rejected a similar
argument, the party advancing the argument cited “no case law applying a pending
proceeding exception to res judicata doctrine, and we are not persuaded that we
should recognize such an exception here.” In re Piper Aircraft Corp., 244 F.3d 1289,
1296 n.3 (11th Cir. 2001), cert denied sub nom. TDY Indus., Inc. v. Kaiser Aerospace
4
The second element is satisfied because “[i]t is established law that a [bankruptcy] confirmation
order satisfies ‘the requirements of a judgement that can be given preclusive effect.’” In re Optical
Tech., Inc., 425 F.3d 1294, 1300 (11th Cir. 2005) (quotation and alteration in original omitted).
And, as for the third element, the parties in these proceedings were also parties to the underlying
bankruptcy proceeding and Confirmation Order.
7
& Elec. Corp., 534 U.S. 827 (2001). 5
Moreover, “upon familiar principles,
irrespective of which action or proceeding was first brought, it is the first final
judgment rendered. . . which becomes conclusive in the other as res judicata.”
Chicago, R.I & P. Ry. Co. v. Schendel, 270 U.S. 611, 616-17 (1926) (citations
omitted). As a result, because there is no judgment yet entered in the adversary
proceedings, the Confirmation Order is the prior judgment for purposes of res
judicata.
As for the Appellants’ secondary contention that the court should reject the
res judicata doctrine because the bankruptcy court purportedly exceeded its
jurisdiction when it issued the Confirmation Order, doc. 21 at 11-12, 24, the
Appellants were free to challenge the bankruptcy court’s jurisdiction in their direct
appeal. They failed to successfully do so, and because they “were given a fair chance
to challenge the Bankruptcy Court’s subject-matter jurisdiction, they cannot
challenge it now by resisting enforcement of the [] Order[].” Travelers Indem. Co.
v. Bailey, 557 U.S. 137, 153 (2009) (citations omitted). See also In re Optical Tech.,
425 F.3d 1294, 1308 (11th Cir. 2005). Thus, because the bankruptcy court had
5
The Appellants suggest that In re Piper Aircraft Corp. supports their position that the timing of
their complaint in the adversary proceedings in comparison to when the County filed the Plan
matters for purposes of res judicata. Doc. 21 at 17-18. However, the Eleventh Circuit held in In
re Piper that res judicata did not apply to a party’s damages claim, which the party filed in state
court before the debtor filed its bankruptcy plan, because the claim and the bankruptcy proceeding
did not arise out of the same nucleus of operative fact. 244 F.3d at 1302. That is far different from
the circumstances presented by these appeals.
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jurisdiction to issue the Confirmation Order, see 28 U.S.C. § 1334, the Order is
entitled to preclusive effect in these appeals.
2.
Whether these appeals arise from the same nucleus of operative
fact as the Plan and Confirmation Order
Determining whether the prior and present causes of action are the same
requires the court to decide whether the actions arise “out of the same nucleus of
operative fact . . . .” In re Piper Aircraft Corp., 244 F.3d at 1297. The Appellants’
contention that these appeals arise out of a different nucleus of operative facts than
the Plan and Confirmation Order, doc. 31 at 6, 17, is belied by their own motion to
consolidate these appeals with the direct appeal of the Plan and Confirmation Order.
As the Appellants admitted in that motion, all three appeals “are so intertwined with
identical questions of law and fact that to have to keep them in separate proceedings
would waste the [c]ourt’s resources and create unnecessary cost, delay and
complexity.” Doc. 8 at 27. Moreover, these appeals involve the exact same claims
that the bankruptcy court dismissed with prejudice and enjoined the Appellants from
litigating further pursuant to the Plan and Confirmation Order. See docs. 21-3 at 6465, 74-75; 21-4 at 6, 69, 89-91. Thus, these appeals arise out of the same nucleus of
facts as the Confirmation Order.
3.
Whether a public policy exception to res judicata should apply
Finally, the Appellants raise a public policy argument, claiming that the new
sewer warrants the County issued represent an unfair and unconstitutional taking of
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their property. Doc. 21 at 7-12. Consequently, they argue that the court should not
give the Plan and Confirmation Order any preclusive effect. See id. The Appellants
had an opportunity to raise arguments about unfairness or unconstitutionality at the
bankruptcy court’s hearing on the Plan, and the bankruptcy court considered and
rejected their arguments. See Bennett v. Jefferson Cnty., Alabama, 518 B.R. 613,
625-26 (N.D. Ala. 2014), rev’d on other grounds, 899 F.3d 1240. They also had an
opportunity to raise these arguments in their direct appeal of the Confirmation Order.
See Bennett, 899 F.3d at 1243. While the Appellants feel strongly about the
purported inequities of the Plan, they cannot, under the guise of public policy
concerns, resurrect arguments that the courts have already rejected, or that they could
have raised previously. After all, “[t]here is simply ‘no principle of law or equity
which sanctions the rejection by a federal court of the salutary principle of res
judicata.’” Moitie, 452 U.S. at 401 (quoting Heiser v. Woodruff, 327 U.S. 726, 733
(1946)).
To summarize, the doctrine of res judicata bars these appeals:
the
Confirmation Order is a prior judgment on the merits issued by a court of competent
jurisdiction, the parties to these appeals are parties to the Confirmation Order, and
these appeals and the Confirmation Order arise out of the same nucleus of operative
fact. See In re Piper Aircraft Corp., 244 F.3d at 1296-97. As a result, these appeals
are due to be dismissed.
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B.
Whether these Appeals are Moot
The County argues alternatively that these appeals, which challenge the
validity of certain aspects of the County’s Plan and the Confirmation Order, are moot
because the Plan and Confirmation Order are final and nonappealable. See Bennett,
899 F.3d 1240; doc. 17 at 19-20. The Appellants counter that the court can still give
them meaningful relief because they seek an equitable remedy and a declaration of
their rights regarding the validity of a lien on their real property relating to the new
sewer warrants, and not a monetary judgment or transfer of property. Doc. 21 at 1218. The Appellants do not explain, however, what meaningful relief, if any, the
court could order without running afoul of the Confirmation Order, which states
explicitly that the validity of the new sewer warrants “and the covenants made by
the County for the benefit of the holders thereof . . . shall not be subject to any
collateral attack.” Doc. 21-3 at 67. Moreover, the Confirmation Order required the
dismissal of the Appellants’ adversary proceedings, AP-16 and AP-120, and barred
the Appellants from pursuing these appeals. Id. at 64-65, 74-75.
“[W]here the plain terms of a court order unambiguously apply, as they do
here, they are entitled to their effect.” Travelers Indem. Co., 557 U.S. at 150
(citations omitted). And, “[i]f events that occur subsequent to the filing of a lawsuit
or an appeal deprive the court of the ability to give the plaintiff or appellant
meaningful relief, then the case is moot and must be dismissed.” Al Najjar v.
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Ashcroft, 273 F.3d 1330, 1336 (11th Cir. 2001). Thus, based on the terms of the
Plan and Confirmation Order, the court cannot provide any meaningful relief to the
Appellants, and these appeals are moot. See id.
III.
CONCLUSION
Because these appeals are barred by res judicata and are moot, the County’s
motion to dismiss, doc. 17 in 2:14-cv-00214-AKK and doc. 17 in 2:14-cv-00215AKK, is due be granted. Accordingly, the Appellants’ motion to strike, doc. 7 in
2:14-cv-00214-AKK and doc. 8 in 2:14-cv-00215-AKK, motions to consolidate,
docs. 12 and 15 in 2:14-cv-00214-AKK and docs. 13 and 16 in 2:14-cv-00215-AKK,
and motion for hearing, doc. 16 in 2:14-cv-00214-AKK, are due to be denied as
moot. Separate orders will be entered.
DONE the 1st day of August, 2019.
_________________________________
ABDUL K. KALLON
UNITED STATES DISTRICT JUDGE
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