Wilkins et al v. Rymes Heating Oils, Inc. et al

Filing 21

///ORDER granting 4 Motion to Refer Case to Bankruptcy Court. So Ordered by Chief Judge Joseph N. Laplante.(jb)

UNITED STATES DISTRICT COURT
DISTRICT OF NEW HAMPSHIRE
Nichole T. Wilkins and
Estate of Beverly L. Mulcahey
v.

Civil No. 17-cv-744-JL
Opinion No. 2018 DNH 043

Rymes Heating Oils, Inc. and
Rymes Energy Holdings, LLC
MEMORANDUM ORDER
Whether this court retains the plaintiffs’ action or refers
it to the Bankruptcy Court turns on whether that court has
jurisdiction to resolve the plaintiffs’ successor liability
claims.

In this case, it does.

Plaintiffs Nichole T. Wilkins and Beverly L. Mulcahey,1 sued
Fred Fuller Oil & Propane Co., Inc. (“FFOP”) and its president,
Fred J. Fuller, for discrimination, a hostile work environment,
assault, and retaliation arising from events that occurred
during the plaintiffs’ employment with FFOP.2

On the eve of

trial, FFOP filed for bankruptcy protection.3

Two weeks later,

Mulcahey is represented in this action by her estate as
administered by her husband, Raymond Mulcahey. Compl. (doc.
no. 1-1) ¶ 3.
1

Compl. (doc. no. 1-1) ¶¶ 8-13. Specifically, the plaintiffs
sued Fuller in his individual capacity and joined as intervenors
the Equal Employment Opportunity Commission’s action against
FFOP. Compl. (doc. no. 1-1) ¶¶ 9-13.
2

3

Id. ¶ 14.

defendant Rymes Heating Oils, Inc. purchased FFOP’s assets in a
sale approved by the Bankruptcy Court (Deasy, B.J.).4

Though

plaintiffs’ counsel was present at the hearing held in
connection with the sale, they lodged no objection to the sale
itself.

The plaintiffs settled their claims against FFOP after

the sale.5

Upon discovering that FFOP may be unable to pay the

$3.7 million settlement (which was also approved by the
Bankruptcy Court), they now seek to recover their damages from
the Rymes defendants under a theory of successor liability.
For the reasons discussed infra, this court has
jurisdiction over the plaintiffs’ claims pursuant to 28 U.S.C.
§ 1334 (bankruptcy).6

Rymes moves this court to refer this

Id. ¶ 15; see also Mot. to Refer Ex. A (doc. no. 4-1) (“Sale
Order”). The defendants contend that defendant Rymes Energy
Holdings, LLC is not properly a defendant because it was not
party to that sale. See Mem. in Supp. of Mot. to Dismiss (doc.
no. 6-1) at 7-8. Because this distinction is not relevant to
resolution of the defendants’ motion to refer the action to the
Bankruptcy Court, the court refers to the defendants
collectively as “Rymes.”
4

5

Compl. (doc. no. 1-1) ¶ 31.

This case originated in Merrimack County Superior Court. The
defendants removed it to this court, citing its federal question
and bankruptcy jurisdiction. See Notice of Removal (doc. no. 1)
¶ 5. The plaintiffs filed a “Partial Objection to Defendants’
Notice of Removal,” disputing this court’s jurisdiction under
28 U.S.C. § 1334 for the reasons described infra, but conceding
this court’s jurisdiction under § 1331 over plaintiffs’ claims
arising under Title VII of the Civil Rights Act of 1964. See
Obj. to Notice of Removal (doc. no. 12). Although, as also
discussed infra, the claims in this case do not arise under
Title VII, the court is satisfied of its jurisdiction under
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action to the Bankruptcy Court for this District.

In doing so,

it invokes both the Bankruptcy Court’s statutory authority as
well as its retention in the Sale Order of jurisdiction to
interpret the terms and provisions of that order, which appears
to provide that Rymes purchased FFOP’s assets free and clear of
claims such as the plaintiffs’.7

The plaintiffs object on the

grounds that, under the standard set by the First Circuit Court
of Appeals in Gupta v. Quincy Med. Center, 858 F.3d 657 (1st
Cir. 2017), the Bankruptcy Court lacks jurisdiction to
adjudicate this dispute because it arises under Title VII.
Concluding that the Bankruptcy Court has jurisdiction to
determine whether Rymes acquired FFOP’s assets free and clear of
the plaintiffs’ claims, because that dispute “arises in” or
“arises under” the Bankruptcy Code, the court grants Rymes’s
motion to refer the case to that court.
“[J]urisdiction of the bankruptcy courts, like that of
other federal courts, is grounded in, and limited by, statute.”
Gupta, 858 F.3d at 661 (quoting Celotex Corp. v. Edwards, 514
U.S. 300, 307 (1995)).

District courts have jurisdiction over

§ 1334 and thus need not also find federal question jurisdiction
under § 1331.
As the plaintiffs point out, Rymes’s motion is less than
robust, and would have benefitted from a supporting memorandum,
or at least from addressing the relevant precedential authority
and its application to the facts of this case.
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“any or all 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,” id. § 1334(b).
at 661.

See also Gupta, 858 F.3d

In turn, district courts may, as this District has, see

LR 77.4(a), refer to the bankruptcy courts of the district “any
or 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).

Under this statutory regime,

therefore, “in order for [Rymes’s] 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.”

Gupta, 858 F.3d at 662.
“[P]roceedings ‘aris[e] under title 11’ when the Bankruptcy

Code itself creates the cause of action.”

Id.

“Arising in”

proceedings are defined “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,’” such as
“administrative matters, orders to turn over property of the
estate, and determinations of the validity, extent, or priority
of liens.”

Id. at 662-63 (quoting Middlesex Power Equip. &

Marine, Inc. v. Town of Tyngsborough, Mass. (In re Middlesex
Power Equip. & Marine, Inc.), 292 F.3d 61, 68 (1st Cir. 2002)).
“By contrast, ‘related to’ proceedings are those ‘which
potentially have some effect on the bankruptcy estate, such as

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altering debtor’s rights, liabilities, options, or freedom of
action, or otherwise have an impact upon the handling and
administration of the bankrupt estate.’”

Id. at 663 (quoting In

re Middlesex Power Equip. & Marine, 292 F.3d at 68).
Rymes argues that it purchased FFOP’s assets free and clear
of any claims against FFOP, including the plaintiffs’ claims,
under several of the Sale Order’s provisions,8 rendering
interpretation of those provisions integral to resolution of the
plaintiffs’ successor liability claims.

As it points out,

through the Sale Order, the Bankruptcy Court retained
jurisdiction during the pendency of the bankruptcy action to,

E.g., Sale Order (doc. no. 4-1) ¶ 4 (“All persons holding Liens
or Claims of any kind against the Debtor or the Purchased
Assets, including, without limitation, any federal, state, local
governmental agency, department or instrumentality, are hereby
forever barred, estopped, restrained and permanently enjoined
from asserting such Liens or Claims against the Buyer, its
successors or assigns or the Purchased Assets or Sprague. The
Buyer is not a successor to the Debtor or its estate by reason
of any theory of law or equity and the Buyer shall not assume or
in any way be responsible for any liability, obligation,
commitment or responsibility of the Debtor and/or estate, or any
debts, liabilities, responsibilities or commitments in any way
relating to the Purchased Assets or the Debtor's use of the
Purchased Assets prior to the Closing, except as otherwise
expressly provided in the Asset Purchase Agreement.”); id. ¶ 15
(“Neither the purchase of the Purchased Assets by the Buyer nor
the subsequent operation by the Buyer of any business previously
operated by the Debtor shall cause the Buyer to be deemed a
successor in any respect to the Debtor's business within the
meaning of any law, rule or regulation, including but not
limited to any revenue, pension, ERISA, tax, labor or
environmental law, rule or regulation or under any products
liability law with respect to the Debtor's liability.”).
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among other things, “[i]nterpret, implement and enforce the
terms and provisions of” the agreement, “[r]esolve any disputes
arising under or relating to” the agreement, and “[a]djudicate
any disputes concerning (asserted) pre-Closing Liens or Claims
on, and the proceeds of the sale of, the Assets . . . .”9

The

Bankruptcy Court, however, “may not ‘retain’ jurisdiction it
never had -— i.e., over matters that do not fall within § 1334’s
statutory grant.”

Gupta, 858 F.3d at 664.

Thus, for the

Bankruptcy Court’s retention of jurisdiction in the Sale Order
to operate, the underlying claim must satisfy the jurisdictional
criteria -- that is, it must “arise under,” “arise in,” or
“relate to” a case under Title 11.

Id.

The underlying claim here does so.

It is not, as the

plaintiffs propose, a claim “in the nature of personal injury or
tort claims,” arising under Title VII.10

Liability for the

plaintiffs’ Title VII claims against FFOP and the amount of
damages owed them has been resolved through the plaintiffs’ and
FFOP’s settlement of those claims.

In light of that settlement,

the only claim at issue here is whether Rymes may be held to
account for the settlement as FFOP’s alleged successor.

And the

First Circuit Court of Appeals has unequivocally determined that

9
10

Id. ¶ 26.
Obj. (doc. no. 10) ¶¶ 8, 11

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when “[t]he underlying dispute . . . involves a subsequent
purchaser’s interpretation of a sale order ‘free and clear of
liens’ under 11 U.S.C. § 363(b), an order that can only be
issued by a bankruptcy court, . . . it is one that arises in a
case under title 11 or perhaps arises under title 11.”
Middlesex Power Equip. & Marine, 292 F.3d at 68.

In re

It reaffirmed

that conclusion in Gupta, describing its holding in In re
Middlesex Power Equip. & Marine as, “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.’”

858 F.3d at 665.

The plaintiffs’ claims turn on whether the defendants may
be held liable as FFOP’s successors.
the terms of the Sale Order.

That, in turn, depends on

The Bankruptcy Court has

jurisdiction to interpret those terms and determine whether the
defendants may be held so liable.

The court therefore GRANTS

the defendants’ motion to refer.11

Doc. no. 4. The defendants have also filed a motion to
dismiss the plaintiffs’ complaint, invoking the free-and-clear
provision of the Sale Order. See Mot. to Dismiss (doc. no. 6).
Were that motion premised simply on the plaintiffs’ alleged
failure to state a claim for relief under the law of successor
liability, this court may have resolved that motion directly
rather than referring the case to the Bankruptcy Court. See
Gupta, 858 F.3d at 662 n.4 (the district court has some
discretion “whether to refer or not to refer cases and
proceedings to the bankruptcy courts”). In this case, however,
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SO ORDERED.

Joseph N. Laplante
United States District Judge
Dated:
cc:

March 7, 2018

Leslie H. Johnson, Esq.
Christopher M. Candon, Esq.
Courtney H.G. Herz, Esq.

the Bankruptcy Court is best positioned to interpret the
language of its Sale Order.

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