In re Federated Department Stores, Inc.

226 B.R. 191, 1998 Bankr. LEXIS 1281, 33 Bankr. Ct. Dec. (CRR) 345
United States Bankruptcy Court, S.D. Ohio·Decided October 14, 1998·No. Bankruptcy No. 1-90-00130·Published

Opinion

DECISION ON REORGANIZED DEBTORS’ MOTION FOR ORDER ENFORCING CONFIRMATION INJUNCTION and DISCHARGE AGAINST MEREDITH TOBACK

BURTON PERLMAN, Bankruptcy Judge.

In these consolidated cases, Order Establishing Bar Date for Filing Proofs of Claim (the “Bar Date Order”) was entered May 7, 1990, a bar date of August 1, 1990, was set for filing proofs of claim in the consolidated bankruptcy cases. Order Confirming Third Amended Joint Plan of Reorganization was entered January 10,1992. The effective date of the Plan was February 4, 1992. On January 9, 1997, this court entered its Order Authorizing and Approving Alternative Dispute Resolution Procedure (the “ADR Procedure”) for unresolved pre-petition personal injury claims and certain other claims.

Meredith Toback, on or about August 10, 1994, filed a complaint against Reorganized Debtors in the state courts of New York asserting a personal injury claim. Reorganized Debtors filed an answer to the complaint, and subsequently a motion for summary judgment based upon an assertion that Toback’s claim was barred by the discharge set forth in the confirmed Plan because she failed to file a proof of claim in the consolidated bankruptcy cases. The state court denied the motion for summary judgment. The Reorganized Debtors then filed the present motion in this court. With their motion, Reorganized Debtors filed a number of exhibits. These include the pleadings in the state court action, including the decision by the state court denying the motion for summary judgment. Toback filed a memorandum in opposition to the motion which was supported by an affidavit by her attorney, Sanford S. Lurie. A number of exhibits were attached to Lurie’s affidavit. A hearing was held on Reorganized Debtors’ motion, and subsequent thereto both sides filed mem-oranda.

Central to the present controversy is the holding by the state court in denying the motion of Reorganized Debtors for summary judgment in the state court litigation. The court said:

... Inasmuch as plaintiff filed no proofs of claim prior to the deadline, Federated maintains plaintiff is now barred from her cause of action for personal injury (See In re Maya Construction Co., 78 F.3d 1395, 1398-99 (9th Cir.1996), cert. den., — U.S. -, 117 S.Ct. 168, 136 L.Ed.2d 110 (1996))
Plaintiff maintains that Federated was well aware of its contingent liability for plaintiffs injuries and should have served plaintiff with formal notice. Failing such notice, plaintiff is not included within the class of claimants barred by Federated’s bankruptcy discharge. (Id.).
A debtor must list a creditor whose identity and claim he knows (citation omitted). The burden is on the debtor to cause formal notice to be given; the creditor who is not given notice, even if he has actual knowledge of ... proceedings, does not have a duty to investigate and inject himself into the proceedings .... As a matter of due process, the person whose entitlement to money from the debtor will be destroyed by the judg[193]*193ment is entitled to notice, (citations omitted). (In re Maya Constmction Co., 78 F.3d, supra, at 1399, cert. den., 117 S.Ct. 168).
A known claim arises from facts that would alert the reasonable debtor to the possibility that a claim might reasonably be filed against it (citation omitted)! ... Known creditors are defined as creditors that a debtor knew of or should have known of when sending notice of the bar date (citation omitted). In re Brunswick Hospital Center v. State of New York, 1997 WL 836684 (Bkrtcy.E.D.N.Y. 1997).
“Due process requires a reasonable search for contingent ... claims so that ... creditors can receive adequate notice of the bar date. What is reasonable depends on the particular fact of each case. A debtor need not be omnipotent or clairvoyant. A debtor is obligated, however, to initiate more than a cursory review of its records and files to ascertain known creditors.” (Id.)
Inasmuch as it appears from the factual submissions that Federated did not diligently search its records to determine if this plaintiff had a claim, and that Federated should have known that she had one, Federated cannot, without formal notice, bring plaintiff within the bar of the Bankruptcy Court’s order of May 7,1990.

No appeal was taken or attempted from the state court decision.

After reviewing the submissions by the parties in this court, it is very clear that what is presented here is the very same controversy which was before the state court on Reorganized Debtors’ motion there for summary judgment. The state court considered the issue and found facts and concluded as a matter of law against the position of Reorganized Debtors. Reorganized Debtors had the option of coming to this court in the first instance for a resolution of the question of whether Toback was bound by the confirmation order. They chose instead to present the question to the New York state court. Since they did so, and the state court rendered a decision, this court is precluded from reviewing the issue dealt with by the New York state court.

The basis for this conclusion is the Rooker-Feldman doctrine. That doctrine, rooted in two United States Supreme Court decisions, Rooker v. Fidelity Trust Co., 263 U.S. 413, 44 S.Ct. 149, 68 L.Ed. 362 (1923); District of Columbia Court of Appeals v. Feldman, 460 U.S. 462, 103 S.Ct. 1303, 75 L.Ed.2d 206 (1983), is a “combination of abstention and res judicata doctrines, [and] stands for the proposition that a federal district court may not hear an appeal of a case already litigated in state court.” United States v. Owens, 54 F.3d 271, 274 (6th Cir. 1995), cert. dismissed, 516 U.S. 983, 116 S.Ct. 492, 133 L.Ed.2d 418 (1995); see also Wright, Miller & Cooper, Federal Practice and Procedure: Jurisdiction § 4469. As a rule, the lower federal courts do not have the authority to review state court judgments, even where a federal question is presented. Federal appellate review of state court judgments can be obtained only in the United States Supreme Court. See Feldman, 460 U.S. at 476, 103 S.Ct. at 1303; see also 28 U.S.C. § 1257(a) (“Final judgments ... rendered by the highest court of a State ... may be reviewed by the Supreme Court_”). Rooker-Feldman, in essence, bars “a party losing in state court ... from seeking what ... would be appellate review of the state judgment in a United States district court.” Johnson v. De Grandy, 512 U.S. 997, 1005-06, 114 S.Ct. 2647, 129 L.Ed.2d 775 (1994).

Under the Rooker-Feldman doctrine, impermissible appellate review by. a lower federal of state court determinations occurs where the relief sought in federal court is “inextricably intertwined” with a state court judgment.

Free access — add to your briefcase to read the full text and ask questions with AI

In re Federated Department Stores, Inc., 226 B.R. 191, 1998 Bankr. LEXIS 1281, 33 Bankr. Ct. Dec. (CRR) 345 (Ohio 1998).

226 B.R. 191 (In re Federated Department Stores, Inc.) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

Related

Rooker v. Fidelity Trust Co.
263 U.S. 413 (Supreme Court, 1924)
Mullane v. Central Hanover Bank & Trust Co.
339 U.S. 306 (Supreme Court, 1950)
District of Columbia Court of Appeals v. Feldman
460 U.S. 462 (Supreme Court, 1983)
Pennzoil Co. v. Texaco Inc.
481 U.S. 1 (Supreme Court, 1987)
Johnson v. De Grandy
512 U.S. 997 (Supreme Court, 1994)
Joel Charchenko v. City of Stillwater
47 F.3d 981 (Eighth Circuit, 1995)
In Re Federated Department Stores
158 B.R. 103 (S.D. Ohio, 1993)
Levin v. Maya Construction
117 S. Ct. 168 (Supreme Court, 1996)
Chodos v. Shop Television Network, Inc.
117 S. Ct. 168 (Supreme Court, 1996)
Sidebottom v. Bowersox
516 U.S. 983 (Supreme Court, 1995)