INTERNATIONAL UNION, UNITED AUTOMOBILE, AEROSPACE AND AGRICULTURAL IMPLEMENT WORKERS OF AMERICA (UAW) et al v. Ford Motor Company
Filing
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MEMORANDUM OPINION re 73 MOTION for Order Referring Case to the Bankruptcy Court or, In The Alternative, Retaining the Case in the District Court. Signed by Judge Richard G. Andrews on 7/18/2014. (nms)
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IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
INTERNATIONAL UNION, UNITED
AUTOMOBILE AEROSPACE, AND
AGRICULTURAL IMPLEMENT
WORKERS OF AMERICA (UAW); and
DOLORES GROMALSKI and PABLO
GOMES, for themselves and others
similarly situated,
Plaintiffs;
v.
VISTEON CORPORATION; VISTEON
SYSTEMS LLC; VISTEON
CARRIBBEAN, INC.; VISTEON
SYSTEMS LLC HEALTH AND
WELFARE BENEFIT PLAN FOR
HOURLY EMPLOYEES-NORTH PENN
LOCATION; and VISTEON CARIBBEAN,
INC. EMPLOYEE GROUP INSURANCE
PLAN,
Defendants.
No. 1: 13-cv-01742-RGA
MEMORANDUM OPINION
Laura Davis Jones, Esq., James E. O'Neill, Esq., Pachulski Stang Ziehl & Jones LLP; Andrew B.
Bloomer, Esq., Catherine L. Fitzpatrick., Esq., Kirkland & Ellis LLP, for the Plaintiffs.
Susan E. Kaufman, Esq., Cooch and Taylor P.A.; John G. Adam, Esq., Legghio & Israel, P.C., for
the Defendants.
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.
Before the Court is Defendants Visteon Corporation ("Visteon"), Visteon Systems LLC,
Visteon Caribbean, Inc., Visteon Systems LLC Health and Welfare Benefit Plan for Hourly
Employees-North Penn Location, and Visteon Caribbean, Inc. Employee Group Insurance Plan's
(collectively, the "Defendants") request to either refer the case to the bankruptcy court, or retain
the case in the District Court. (D.I. 73 at 1).
I.
Background
International Union, United Automobile Aerospace, and Agricultural Implement Workers
of America ("UAW") and Dolores Gromalski and Pablo Gomez, for themselves and other
similarly-situated (collectively, the "Plaintiffs"), filed the instant suit against the Defendants in the
U.S. District Court for the Eastern District of Michigan. (D.I. 4 at 1). The Plaintiffs claim that the
Defendants (1) breached their collectively-bargained obligations to the Plaintiffs; and (2)
wrongfully terminated the Plaintiffs' collectively-bargained lifetime healthcare benefits. (Id. at 8,
11).
Earlier, in the course of its Chapter 11 bankruptcy in Delaware, Visteon moved the
Bankruptcy Court for permission to terminate all United States retiree benefit plans pursuant to 11
U.S.C. § 363(b)(l). (D.I. 73 at 2). A group of retirees formerly employed by Visteon, including the
Plaintiffs, opposed the motion, arguing that Visteon could not terminate the benefits without first
complying with the requirements of 11 U.S.C. § 1114. (Id.). The Bankruptcy Court granted
Visteon's motion as to most of the retirees, including the Plaintiffs, reasoning that the rights were
not vested and thus Visteon had the right to terminate those rights unilaterally (the "OPEB
Termination Order"). (Id.). A group of retirees that did not include the Plaintiffs appealed the
Bankruptcy Court's ruling. (Id.). The Third Circuit reversed the ruling and remanded the
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proceedings. (Id. at 3). On remand, the Bankruptcy Court held that the Third Circuit's decision
applied to UAW retirees and ordered the Defendants to restore those benefits (the "Reinstatement
Order"). (Id.). Visteon appealed the Reinstatement Order to this Court, arguing that the UAW
retirees were not parties to the appeal, and hence were bound by the bankruptcy court's
Termination Order. (Id.). This Court agreed with Visteon, citing a strong interest in finality. UAW
appealed, and the case is pending in the Third Circuit. (Nos. 12-3352 & 3353, argued May 20,
2014).
During this time, the Bankruptcy Court approved Visteon's Plan of Reorganization (the
"Reorganization Plan"). (Id. at 4). The Reorganization Plan reserved Visteon's right to terminate
retiree healthcare benefits upon its emergence from Chapter 11. (Id.). Accordingly, once Visteon
emerged from bankruptcy on October 1, 2010, it terminated the benefits of the North Penn and
Caribbean retirees, which included the Plaintiffs. (Id.). The Plaintiffs sued the Defendants in the
Eastern District of Michigan for the post-bankruptcy termination of their postemployment
benefits. (Id.). The Defendants moved to dismiss the case or to have it transferred to the District of
Delaware. (Id.). The Michigan Court denied the Defendants' motion to dismiss and granted the
motion to transfer. (Id.). The Plaintiffs subsequently filed a Petition for Writ of Mandamus
requesting that the Sixth Circuit rescind the Michigan District's transfer order (filed Nov. 7, 2013).
(D.I. 75-1 at 2, 13-14). The writ of mandamus was denied on May 23, 2014. Order Denying
Petition for Writ of Mandamus, In re International Union, United Automobile, Aerospace and
Agricultural Implement Workers of America; Dolores Gromalski; Pablo Gomez, Case: 13-2511
(6th Cir. 2014).
On November 18, 2013, this Court requested both parties to submit briefs in support of
their respective positions. The question before the Court is whether to refer the case to the
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bankruptcy court or to keep it in the District Court. The Court's analysis will be divided into two
inquiries: first, whether the bankruptcy court has jurisdiction over this matter, and second, whether
the present claim is barred by res judicata.
II.
Discussion
a. Bankruptcy Court Jurisdiction
The bankruptcy court's subject matter jurisdiction is outlined in§§ 28 U.S.C. 1334 and
157. Where these statutes do not already provide jurisdiction, courts have held that neither the
parties nor the court can create it by stating it in a reorganization plan or order. See In re Resorts
Intern., 372 F.2d 154, 161 (3d Cir. 2004); In re Continental Airlines, Inc., 236 B.R. 318, 323
(Bankr. D. Del. 1999).
The Defendants correctly assert that bankruptcy courts retain jurisdiction to interpret and
enforce their prior orders. (D.I. 73 at 5, 6; D.I. 76 at 5). In support of their position, Defendants cite
In re Sportsman's Warehouse. (D.I. 73 at 5). In In re Sportsman's Warehouse, the bankruptcy
court held that, in the post-confirmation context, claims that do not affect the '"interpretation,
implementation, consummation, execution, or administration of the confirmed plan ... ' are
unlikely to have the requisite 'close nexus' necessary for asserting bankruptcy court jurisdiction."
457 B.R. 372, 385 (Bankr. D. Del. 2011). The court accordingly found one of the claims to be
subject to the court's jurisdiction as it required the court to interpret, validate, and enforce an
assumption order. Id. at 387. In In re Resorts, the Third Circuit clarified the "close nexus" inquiry,
holding that, at the post-confirmation stage, the claim must affect an integral aspect of the
bankruptcy process. 3 72 F .3d at 166-67.
The Defendants assert that the issues in this case are "inextricably intertwined with the
bankruptcy court's Termination and Reinstatement Orders during Visteon's Chapter 11
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proceedings and from the confirmed Reorganization Plan." (D.I. 76 at 5). However, it is difficult to
reconcile the termination of retiree benefits with the execution of the Reorganization Plan. The
court in In re Sportsman dealt with substantive Title 11 issues that compelled bankruptcy court
intervention. 457 B.R. at 387. Visteon's post-bankruptcy termination ofretiree OPEB benefits
does not exhibit such a relationship. 1 Further, as the Plaintiffs have argued, because the case deals
with ERISA/LMRA claims, it can be dealt with outside the Bankruptcy Court. (D.I. 4 at 8-11.).
The Defendants also suggest that in addition to the Reorganization Plan reserving
jurisdiction, the bankruptcy court also retained jurisdiction over matters relating to the
Reorganization Plan. 2 The Defendants rely on Travelers Indem. Co. v. Bailey, where the
Bankruptcy Court for the Southern District of New York included similar language regarding
jurisdiction in an approval order for the defendant's reorganization plan. 557 U.S. 137, 143 (2009).
The Supreme Court found that the Bankruptcy Court not only had jurisdiction to interpret and
enforce its own prior orders, but also that it explicitly retained jurisdiction in its approval order
over the matter in question. Id. The Court subsequently approved the bankruptcy court's subject
matter jurisdiction. Id. The facts in Travelers are fundamentally different from the facts in this
case. First, the claims in Travelers resulted from conduct before and during bankruptcy. Id. at
138-139. Second, the claims were related to a key element of the reorganization plan. Id. The
Court does not see the termination ofretiree benefits that is the subject of the complaint to be a key
component ofVisteon's Reorganization Plan. The Plaintiffs' claim does not affect Visteon's
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In claiming bankruptcy jurisdiction over this matter, the Defendants note the Plaintiffs' request for damages resulting
from the "earlier termination of healthcare benefits," which implicates conduct during bankruptcy. (D.I. 76 at 4; D.I. 4
at 10). However, the Plaintiffs have repeatedly represented that their claims arise from post-bankruptcy conduct
falling outside of bankruptcy jurisdiction. (D.I. 75 at 6-9). The Court therefore strikes Plaintiffs' damages claims from
the "earlier termination of benefits" from the Amended Complaint.
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The material provision is as follows: "Notwithstanding the entry of the Confirmation Order and the occurrence of the
Effective Date, the Bankruptcy Court shall retain exclusive jurisdiction over all matters arising out of, or related to, the
Chapter 11 Cases and the Plan as set forth in Article XII of the Plan." (Case 09-11786-CSS, Doc. 4099 at 37.).
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Reorganization Plan in a manner that requires Bankruptcy Court interpretation or enforcement.
This is especially important because this case arises in a post-confirmation context. Thus, the
Court does not find Travelers to support the Defendants' position.
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For the reasons stated above, the Court does not find that the Bankruptcy Court has
jurisdiction over this matter. The claims asserted by the Plaintiffs do not bear a "close nexus" to
Visteon's bankruptcy proceedings. Further, as repeatedly recognized by courts in the Third
Circuit, neither parties nor the bankruptcy court can create jurisdiction where it does not already
exist by statute.
b. Res Judicata
The Court need not address the Michigan Court's decision to reject the Defendants' res
judicata claim. There is nothing in Third Circuit case law to support a reversal of the Michigan
Court's decision.
The Defendants stress that even if res judicata does not apply, the Michigan Court did not
address the question of vested retiree benefits in its transfer order. (D.I. 76 at 6). This omission
coupled with the Bankruptcy Court's final order regarding this issue, at the very least, the
Defendants argue, should bar the vested benefits issue from being litigated again. However, it
appears that the central crux to the Plaintiffs' claims is whether their retiree health care benefits
were vested. (D.I. 75 at 5, 6). Therefore, it would make sense that if a claim is not precluded,
subsidiary issues relating to the particular claim are not precluded as well.
III.
Conclusion
For the reasons above, the Court will retain jurisdiction over this case. A separate order will
be entered.
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