Brown's Chicken & Pasta, Inc. v. Brown's Chicken & Pasta, Inc.

503 B.R. 86
CourtUnited States Bankruptcy Court, N.D. Illinois
DecidedDecember 16, 2013
DocketBankruptcy No. 09-49094; Adversary No. 11-2395
StatusPublished
Cited by5 cases

This text of 503 B.R. 86 (Brown's Chicken & Pasta, Inc. v. Brown's Chicken & Pasta, Inc.) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, N.D. Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Brown's Chicken & Pasta, Inc. v. Brown's Chicken & Pasta, Inc., 503 B.R. 86 (Ill. 2013).

Opinion

AMENDED MEMORANDUM OPINION

JACQUELINE P. COX, Bankruptcy Judge.

I. Jurisdiction and Venue

This Court has jurisdiction to hear this matter pursuant to 28 U.S.C. § 1334(a) which provides that the district courts have original and exclusive jurisdiction of all cases under title 11. 28 U.S.C. § 157(a) allows the district courts to refer title 11 cases to the bankruptcy judges for their districts. The District Court for the Northern District of Illinois has promulgated Internal Operating Procedure 15(a), [88]*88which refers its bankruptcy cases to this Court.

As allowed by 28 U.S.C. § 157(b)(1), a bankruptcy judge to whom a case has been referred may enter final judgment on core proceedings arising in or under the Bankruptcy Code. “Arising under” jurisdiction covers matters for which a claim is made under a provision of title 11, the U.S. Bankruptcy Code, such as claims for damages for violation of the automatic stay under 11 U.S.C. § 362(k)(l). “Arising in” jurisdiction covers matters that are not based on any right expressly created by title 11, but nevertheless, would have no existence outside of the bankruptcy, such as motions to turn over property of the estate, and motions to appoint or elect trustees under 11 U.S.C. § 1104. See Matter of Wood, 825 F.2d 90, 96-97 (5th Cir.1987).

Core proceedings include those concerning plan confirmation, the liquidation of the assets of the estate, and adjustment of the debtor-creditor relationship. 28 U.S.C. § 157(b)(2)(L) and (0). The questions to be determined herein are whether equipment listed in the Debtor’s Schedule B was sold to Plaintiff Popgrip, LLC (“Popgrip”) and whether Popgrip has assumed certain franchise agreements. Resolution of these issues involves interpretation of this Court’s March 15, 2011 order confirming the First Amended Plan of Reorganization and whether Popgrip has complied with the Bankruptcy Code’s contract assumption provisions.

Proceedings that do not arise in a bankruptcy case or under title 11 but are otherwise related to a bankruptcy case are noncore proceedings. Stern v. Marshall, -U.S.-, 131 S.Ct. 2594, 2604-05, 180 L.Ed.2d 475 (2011).

In Stern, the Supreme Court held unconstitutional bankruptcy court jurisdiction over certain counterclaims based on state law. A bankruptcy judge may hear noncore matters, but absent consent of the parties, may only “submit proposed findings of fact and conclusions of law to the district court, and any final order or judgment shall be entered by the district court after considering the bankruptcy judge’s proposed findings and conclusions and after reviewing de novo those matters to which any party has timely and specifically objected.” 28 U.S.C. § 157(c)(1).

The test for determining whether a civil proceeding is related to a bankruptcy case is whether the outcome of that proceeding could conceivably have any effect on the estate being administered in bankruptcy. In re Greektown Holdings, LLC, 728 F.3d 567, 577 (6th Cir.2013). In In re Xonics, 813 F.2d 127, 130 (7th Cir.1987), the Seventh Circuit held that “[a] non-core proceeding is related to a bankruptcy case only when it affects the amount of property available for distribution or the allocation of property among creditors.”

Further complicating this matter is that the adversary proceeding herein was initiated post-confirmation. In Greektown, the Sixth Circuit explained that a bankruptcy court’s “related to” jurisdiction could be diminished post-confirmation and required that jurisdiction inquiries turn on whether the outcome of the claims would affect the bankruptcy estate. Noncore “related to” jurisdiction could be invoked herein as this Court is called on to rule on what was property of the bankruptcy estate under 11 U.S.C. § 541(a): was the equipment listed on Schedule B property of the estate? This issue affects the fundamental question of what was available for distribution and sale. Count II’s request for in-junctive relief regarding which contract was assumed and/or assigned also rests on what was property of the bankruptcy estate. The issue is the effect of the post-[89]*89sale disclosure of a franchise agreement via an amended Schedule G.

A similar situation was addressed by the Third Circuit in In re Lazy Days’ RV Center, Inc., 724 F.3d 418 (3d Cir.2013). An order was entered in the Lazy Days’ case by a bankruptcy judge reopening a confirmed chapter 11 case and declaring that an anti-assignment clause included in the debtor’s lease was unenforceable. A district court reversed the bankruptcy court, finding that the bankruptcy judge lacked jurisdiction and that its order was advisory. See In re Lazy Days’ RV Center, Inc., 2012 WL 4364257, at *2 (D.Del.2012). The Third Circuit reversed the district court’s order. The debtor Lazy Days’ and its lessor agreed pre-petition that in the debtor’s expected chapter 11 case their lease would be assumed and assigned to the LDRV entity. The bankruptcy court confirmed a plan that incorporated the agreement and closed the case. The lease was assigned to LDRV. However, when LDRV attempted to exercise the lease’s purchase option the lessor refused to hon- or it. Lawsuits were filed by each party in state court in Florida. Debtor Lazy Days’ filed an emergency motion to reopen the bankruptcy case seeking a ruling that the lease’s anti-assignment provision was unenforceable pursuant to 11 U.S.C. § 365(f)(3), which renders unenforceable any provision in an unexpired lease of a debtor that terminates or modifies a right to assign the lease.

In addition to the district court’s holding, the lessor asserted an alternative ground for affirmance: that the bankruptcy court unconstitutionally asserted subject matter jurisdiction over a private rights dispute.

The court discussed the principle that federal courts have no authority to render advisory opinions opining on “what the law would be upon a hypothetical state of facts.” 724 F.3d at 421. The court ruled that because the bankruptcy judge issued a decree that invalidated the lease’s anti-assignment clause and ordered the parties to do something, it “affected the rights of litigants, and was not an advisory opinion.” Id. (citing In re McDonald,

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Bluebook (online)
503 B.R. 86, Counsel Stack Legal Research, https://law.counselstack.com/opinion/browns-chicken-pasta-inc-v-browns-chicken-pasta-inc-ilnb-2013.