Kalamazoo Realty Venture Ltd. Partnership v. Blockbuster Entertainment Corp.

249 B.R. 879, 2000 U.S. Dist. LEXIS 9480, 2000 WL 913801
CourtDistrict Court, N.D. Illinois
DecidedJuly 6, 2000
Docket99 C 7266
StatusPublished
Cited by11 cases

This text of 249 B.R. 879 (Kalamazoo Realty Venture Ltd. Partnership v. Blockbuster Entertainment Corp.) is published on Counsel Stack Legal Research, covering District 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
Kalamazoo Realty Venture Ltd. Partnership v. Blockbuster Entertainment Corp., 249 B.R. 879, 2000 U.S. Dist. LEXIS 9480, 2000 WL 913801 (N.D. Ill. 2000).

Opinion

*883 MEMORANDUM OPINION AND ORDER

GETTLEMAN, District Judge.

Plaintiff Kalamazoo Realty Venture Limited Partnership has filed a one-count complaint against defendants Blockbuster Entertainment-Corp. (“Blockbuster”) and Viacom, Inc., alleging breach of a guaranty. Defendants have filed a motion to dismiss for lack of jurisdiction pursuant to Fed.R.Civ.P. 12(b)(1), or in the alternative, a motion to transfer the instant case to the District of Delaware under 28 U.S.C. § 1404(a).

FACTS

On January 11, 1994, plaintiffs predecessor-in-interest, Seymour N. Logan Associates (“Logan”), leased a store located in Portage, Michigan to Discovery Zone Children’s Amusement Corp. (“Discovery Zone”). 1 Blockbuster guarantied all obligations assumed by Discovery Zone under the lease. The initial term of the lease was from January 19, 1994, through January 31, 1999, and the lease gave Dis'covery Zone the option of renewing for two additional five-year terms.

Plaintiff alleges (and presents evidence 2 ) that, in a letter dated July 31, 1998, Discovery Zone renewed the lease for a term of five years, thus extending the lease through January 31, 2004. Plaintiff contends that beginning on April 1, 1999, Discovery Zone defaulted on the lease by failing to pay rent and other charges due from that date forward. Plaintiff contends that under the guaranty, defendants are liable for Discovery Zone’s failure to pay rent, real estate taxes, and utility charges.

Defendants dispute plaintiffs allegations. Defendants present evidence that Discovery Zone first filed for relief under Chapter 11 of the Bankruptcy Code on March 25, 1996, long before the initial lease term’s expiration date. According to defendants, during Discovery Zone’s initial bankruptcy case, which was conducted in the United States Bankruptcy Court for the District of Delaware (“the bankruptcy court”), Discovery Zone assumed the lease and assigned its tenancy interest in the lease to defendants. Defendants, in turn, subleased the premises back to Discovery Zone through the end of the existing term of the lease. Defendants contend that the assignment and sublease were effectuated on July 28, 1997, when the bankruptcy court’s Confirmation Order, confirming Discovery Zone’s plan of reorganization, became final. Defendants argue that as of July 28, 1997, Discovery Zone ceased to be the tenant under the lease, and that therefore Discovery Zone’s purported July 31, 1998, renewal of the lease for a second five-year term was ineffective and should be disregarded. If defendants’ argument is correct, the guaranty has not been breached.

Around April 20, 1999, Discovery Zone filed a second bankruptcy proceeding in the Delaware federal district court (“the Delaware district court”). 3 That case is still pending. Plaintiff contends that as part of this proceeding, Discovery Zone rejected the lease effective July 2, 1999. Defendants argue that because Discovery Zone had assigned the lease to defendants several years earlier, the prime tenancy interest in the lease could not have become part of Discovery Zone’s bankruptcy estate in the later proceedings.

DISCUSSION

I. Motion to Dismiss for Lack of Jurisdiction

Plaintiff alleges that this court has diversity jurisdiction over the instant *884 lawsuit pursuant to 28 U.S.C. § 1332. Defendants have moved to dismiss pursuant to Fed.R.Civ.P. 12(b)(1), arguing that the court does not have subject matter jurisdiction over the instant case. Under Rule 12(b)(1), a court must dismiss any action for which it lacks subject matter jurisdiction. Rule 12(b)(1) motions are premised on either facial or factual attacks on jurisdiction. Villasenor v. Industrial Wire & Cable, Inc., 929 F.Supp. 310, 311 (N.D.Ill.1996). If a defendant makes a factual attack on the plaintiffs assertion of subject matter jurisdiction, it is proper for the court to look beyond the jurisdictional allegations in the complaint, and “view whatever evidence has been submitted on the issue to determine whether in fact subject matter jurisdiction exists.” Capitol Leasing Co. v. F.D.I.C., 999 F.2d 188, 191 (7th Cir.1993). To withstand such a motion, plaintiff must put forth “competent proof’ that the court has subject matter jurisdiction. NLFC, Inc. v. Devcom Mid-America, Inc., 45 F.3d 231, 237 (7th Cir.1995).

A. The Delaware District Court’s Jurisdiction

As an initial matter, defendants argue that under 28 U.S.C. § 1334(e), the Delaware federal district court where Discovery Zone’s second bankruptcy case is pending has exclusive jurisdiction over the instant case. Section 1334(e) provides: “The district court in which a case under title 11 is commenced or is pending shall have exclusive jurisdiction of all of the property, wherever located, of the debtor as of the commencement of such case, and of property of the estate.” Defendants contend that if the lease was part of Discovery Zone’s bankruptcy estate at' the inception of the second bankruptcy case, the Delaware district court has exclusive jurisdiction over questions involving the lease.

Defendants cannot have it both ways. Throughout their motion, defendants assert that Discovery Zone assigned the lease to them during its first bankruptcy case, and thus explicitly dispute that' the lease ever became part of Discovery Zone’s second bankruptcy estate. Defendants presumably intend to pursue this argument (their self-proclaimed defense) in later proceedings as well. Moreover, although plaintiff purports .to present evidence that Discovery Zone rejected the lease in its second bankruptcy case, plaintiff does not attach to the relevant court document the exhibit that describes the particular leases Discovery Zone was rejecting. The court therefore cannot determine, at this stage, whether Discovery Zone indeed rejected the lease at issue in the instant case during its second bankruptcy.

Defendants also argue that the Delaware district court has jurisdiction over the instant case because it is “related to” Discovery Zone’s current Delaware bankruptcy proceedings. “The bankruptcy courts also may hear noncore proceedings that are ‘related to’ a case under title 11.” Barnett, 909 F.2d at 979. The “related to” clause confers on bankruptcy courts federal jurisdiction over certain matters over which they would not otherwise have jurisdiction.

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Cite This Page — Counsel Stack

Bluebook (online)
249 B.R. 879, 2000 U.S. Dist. LEXIS 9480, 2000 WL 913801, Counsel Stack Legal Research, https://law.counselstack.com/opinion/kalamazoo-realty-venture-ltd-partnership-v-blockbuster-entertainment-ilnd-2000.