Meyers et al v. Heffernan et al
Filing
64
MEMORANDUM AND ORDER IT IS ORDERED since the Bankruptcy Court has determined the above-captioned matter is a non-core proceeding and not related to In re: Mortgage Lenders Network USA, Inc., Bankr. D. Del. No. 07-10146-PJW, the continued referral to the Bankruptcy Court to handle all pre-trial matters is withdrawn, and the matter is returned to this Court. IT IS FURTHER ORDERED that a teleconference with counsel is scheduled for Wednesday, February 1, 2012 at 3:00 p.m. The teleconference shall be initiated by plaintiffs counsel. Signed by Judge Mary Pat Thynge on 1/26/2012. (cak)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
MICHAEL MEYERS, et al.,
Plaintiffs,
v.
MITCHELL L. HEFFERNAN, et al.,
Defendants,
Third Party Plaintiffs
v.
STEVE PATTON, et.al.,
Third Party Defendants.
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
C. A. No. 10-212-MPT
MEMORANDUM ORDER
At Wilmington, this 26th day of January, 2012.
This matter to collect unpaid wages was originally filed in the United States
District Court for the District of New Jersey. In this action, plaintiffs assert that
defendants are principal officers of Mortgage Lenders Network USA, Inc. (“MLN”), a
corporation which failed to pay them commissions earned and owed and that
defendants, as MLN’s “agents,” are liable under New Jersey law.
MLN petitioned for bankruptcy relief in the United States Bankruptcy Court for the
District of Delaware, Bankr. D. Del. No. 07-10146-PJW. Defendants filed appearances
in that matter.
In an Opinion and Order dated March 15, 2010, New Jersey District Court Judge
Mary Cooper determined that the issues in the present action appeared “to be
intertwined with the bankruptcy proceedings in Delaware,” and ordered that the matter
be transferred to the federal district court of this jurisdiction, on the assumption that the
claims would then be referred to the bankruptcy court here. The New Jersey court also
found that the “extent of the bankruptcy court’s authority” over the present matter
depends on whether the action is a core or non-core proceeding, and noted the
applicable law. See D.I. 3, 4. Under 28 U.S.C. § 157(b)(3), it is the bankruptcy court’s
jurisdiction to determine whether a matter is a core proceeding or a non-core (related to)
proceeding. As noted in Certain Underwriters at Lloyd’s of London v. Otlowski, No. 083998, 2009 WL 234957, at *2 (D.N.J. Jan 29, 2009), the unambiguous language of §
157(b)(3) requires the bankruptcy judge to make the initial decision whether a case is a
core proceeding.
After the matter was transferred to the Delaware District Court, it was eventually
referred to me. See D.I. 7. The parties consented to my jurisdiction under 26 U.S.C.
§ 636. See D.I. 25. On September 24, 2010, a memorandum order was entered on
defendants’ motion to dismiss (D.I. 11), which was granted and denied in part. See D.I.
27. Thereafter, defendants filed their answer on October 22, 2010. See D.I. 31. In
addition, defendants filed their third party action on November 22, 2010. See D.I. 34.
Third party defendants responded by filing a motion to dismiss for lack of personal
jurisdiction under FED. R. CIV. P. 12 (b)(2) and (3) on February 2, 2011. See D.I. 47.
On May 2, 2011, the matter was referred to the Bankruptcy Court of the District of
Delaware to determine the issue of whether this case involved a core proceeding.
Since that time and quite by accident, this court learned that the Honorable Peter
2
J. Walsh, the Bankruptcy judge to whom this matter was assigned, entered a decision
on September 28, 2011 which determined plaintiffs’ claims for unpaid wages are noncore because those “claims do not fall into any of the categories of core proceedings
listed in 28 U.S.C. § 157(b) and do not arise in a bankruptcy case or under the
Bankruptcy Code.” See In re Mortgage Lenders Network, USA, Inc., Bank. No. 0710146-PJW, Adv. No. 11-51991-PJW, 2011 WL 4543257, *2 (Bankr. D. Del. Sept. 28,
2011). Judge Walsh further determined whether the Bankruptcy Court has “related to”
jurisdiction over the matter, and found it did not. Unlike Belcufine v. Aloe, 112 F.3d 633
(3d Cir. 1997), where the former employees’ state law claims against the officers of the
debtor entity for unpaid wages resulted in the defendant officers raising a claim against
the debtor for indemnity, no such claim has been asserted in the instant matter. In
Belcufine, because the indemnification claim brought by the officers resulted in a claim
against the bankruptcy estate, related to jurisdiction over the plaintiff-employees’ claims
existed.
The district court’s bankruptcy jurisdiction is determined under 28 U.S.C. § 1334
which provides “the district courts shall have original and exclusive jurisdiction of all
cases under title 11,” and shall have original but not exclusive jurisdiction of all civil
proceedings arising under title 11, or arising in or related to cases under title 11. See
28 U.S.C. § 1334(a)-(b). District courts are authorized to refer to bankruptcy judges in
the district “any and all cases under title 11 and any or all proceedings arising under title
11 or arising in or related to a case under title 11 . . . .” 28 U.S.C. § 157(a).1
1
In this District, there is a standing order for the automatic referral of all title 11
proceedings to the bankruptcy judges.
3
For the Bankruptcy Court to hear or determine a proceeding, the proceeding
must be “related to” a case under title 11. The test for whether a matter is related to a
bankruptcy case is “whether the outcome of that proceedings could conceivably have
any effect on the estate being administered in bankruptcy.” Pacor, Inc v. Higgins, 743
F.2d 984, 994 (3d Cir. 1984)(emphasis in original).2 “An action is related to bankruptcy
if the outcome could alter the debtor’s rights, liabilities, options, or freedom of action
(either positively or negatively) and which in any way impacts upon the handling and
administration of the bankrupt estate.” Id. Where, as here, the bankruptcy plan has
already been confirmed, a close nexus is required to be established between the claim
and the bankruptcy proceeding for related to jurisdiction to exist. See In re Resorts Int’l,
Inc., 372 F.3d 154, 166-67 (3d Cir. 2004); see also In re Sportsman’s Warehouse, Inc.,
457 B.R. 372, 385 (Bankr. D. Del. 2011). When the “‘interpretation, implementation,
consummation, execution, or administration of a confirmed plan’” would not be affected,
or if “there is no litigating or liquidating trust involved,” finding the required a close nexus
to invoke bankruptcy court jurisdiction is unlikely. In re Sportsman’s Warehouse, Inc.,
457 B.R. at 385 (quoting In re Resorts Int’l, 372 F.3d at 167).
As noted in Judge Walsh’s well reasoned opinion, the resolution of the present
claims would have no effect on MLN’s estate. No party has claimed indemnification
rights or is seeking any recovery from MLN. Plaintiffs have received a distribution from
MLN’s estate for their back wages claim and as part of the WARN Act settlement. In re
2
Pacor was overruled on other grounds by Things Remembered, Inc. v. Petrarca,
516 U.S. 124 (1995); however, the Supreme Court has since agreed with the Pacor holding
that “bankruptcy courts have no jurisdiction over proceedings that have no effect on the
estate of the debtor.” Celotex Corp. v. Edwards, 514 U.S. 300, 308 n.6 (1995).
4
Mortgage Lenders Network, 2011 WL 4543257, at *5-6. Any recovery by defendants on
their indemnification claims against third party defendants will not come from the MLN
estate. As previously noted, this matter is not related to the MLN bankruptcy case.
Since the District Court may only refer proceedings that are at least “related to” a
bankruptcy case, where no such related to situation exists, the Bankruptcy Court does
not have jurisdiction to address any further matters beyond the core/non-core and
related to issues.
Since the present action is a non-core proceeding and not related to the
bankruptcy matter, the referral to the Bankruptcy Court should be withdrawn and the
matter returned to this Court. Therefore,
IT IS ORDERED since the Bankruptcy Court has determined the abovecaptioned matter is a non-core proceeding and not related to In re: Mortgage Lenders
Network USA, Inc., Bankr. D. Del. No. 07-10146-PJW, the continued referral to the
Bankruptcy Court to handle all pre-trial matters is withdrawn, and the matter is returned
to this Court.
IT IS FURTHER ORDERED that a teleconference with counsel is
scheduled for Wednesday, February 1, 2012 at 3:00 p.m. The teleconference shall be
initiated by plaintiffs’ counsel.
/s/ Mary Pat Thynge
United States Magistrate Judge
5
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?