Morrisanderson, Ltd. v. Wenger Feed Mills, Inc. (In re ETFF Corp.)

542 B.R. 180, 2015 Bankr. LEXIS 4304
CourtUnited States Bankruptcy Court, E.D. Pennsylvania
DecidedDecember 15, 2015
DocketBANKRUPTCY NO. 12-19430-MDC; ADVERSARY NO. 14-00506-MDC
StatusPublished
Cited by1 cases

This text of 542 B.R. 180 (Morrisanderson, Ltd. v. Wenger Feed Mills, Inc. (In re ETFF Corp.)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, E.D. Pennsylvania primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Morrisanderson, Ltd. v. Wenger Feed Mills, Inc. (In re ETFF Corp.), 542 B.R. 180, 2015 Bankr. LEXIS 4304 (Pa. 2015).

Opinion

ORDER

MAGDELINE D. COLEMAN, UNITED STATES BANKRUPTCY JUDGE

AND NOW, this Court held a hearing on December 9, 2015 (the “Hearing”), to address the Motion to Amend dated November 10, 2015 [Docket No. 46] (the “Mo- ' tion to Amend”), filed by Ernest O. Horn, III, Timothy F. Horn, Sr., Donald E. Eshleman, John T. Zerbe, Arnold Sumner, Jeffrey Schaum, and Edward F. McMillan (the “Pennfield Defendants”).

AND, also at the Hearing, this Court addressed and granted the Motion to Approve Compromise dated November 13, 2015 [Docket No. 49] (the “Settlement Motion”), filed by Morris Anderson, Ltd;, Plan Trustee of the Plan Trust of ETFF Corporation (the “Plan Trustee”).

AND, pursuant to the Settlement Motion, the Plan Trustee sought approval of the compromise of its claims brought against Wenger Feed Mills, Inc. (“Wen-ger”) wherein the Plan Trustee agreed to accept, as evidenced by the Settlement Agreement and Release dated November 11, 2015, attached as Exhibit A to the Settlement Motion (the “Settlement”), a payment in the amount of $150,000 in exchange for the release of its claims against Wenger.

AND, the Pennfield Defendants did not object to this Court’s approval of the Settlement. Audio recording of Hearing 12/9/2015 @ 11:39 a.m. (11:51:12-11:52:15) Bky. No. 12-19430MDC.

AND, finding that the Settlement was reasonable and in the best interests of the Debtor’s estate, this Court entered an Order dated December 9, 2015 [Docket No. 60], granting the Settlement Motion.

AND, pursuant to the Motion to Amend, the Pennfield Defendants sought permission to file an Amended Crossclaim asserting claims for contribution and unjust enrichment against Wenger (the “Amended Crossclaims”).

AND, as alleged by the Pennfield Defendants in the Motion to Amend, the Penn-field Defendants maintain that, “in the event” that this Court determines that Wenger’s April 2012 sale of Hempland Mill to Pennfield Corporation constituted a breach of the Pennfield Defendants’ fiduciary duties and awards damages to the Plaintiff on that basis, the Pennfield Defendants would have claims against Wen-ger for contribution and unjust enrichment. Motion to Amend, ¶ 6.

AND, in response to the Motion to Amend, Wenger filed a Response dated November 23, 2015 [Docket No. 53] (“Response”), wherein Wenger asserted, inter alia, that this Court lacked jurisdiction to adjudicate the Amended Crossclaims because they involved the adjudication of a dispute between two non-debtor parties that would have no impact on the administration of the Debtor’s Bankruptcy estate. Response, ¶ 14(b).

It is hereby ORDERED and DETERMINED that:

1. Fed. R. Civ. P.15 governs a party’s request to amend its pleadings and recognizes that leave to amend should be [183]*183freely given. Fed. R. Civ. P. 15(a)(l)(2); see also Long v. Wilson, 393 F.3d 390, 400 (3d Cir.2004). However, leave to amend may be denied for the following reasons: (1) undue delay; (2) bad faith or dilatory motive; (3) undue prejudice to the opposing party; and (4) futility of amendment. Foman v. Davis, 371 U.S. at 182, 83 S.Ct. 227.

2. A party objecting to amendment bears the burden of establishing grounds for denial. Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962).

3. “An amendment is considered futile if the amended pleading fails to state a claim or would be subject to a motion to dismiss on some other basis.” McNally v. Yamall, 764 F.Supp. 863, 855 (S.D.N.Y. 1991).

4. For the reasons elaborated herein, the Motion to Amend must be denied because this Court lacks jurisdiction to adjudicate the Amended Crossclaims.

5. Bankruptcy courts are courts of limited jurisdiction that may adjudicate four categories of proceedings: cases under title 11 (the bankruptcy itself); proceedings “arising under title 11”; proceedings “arising in” a bankruptcy case; and proceedings “related to” a bankruptcy case. In re Exide Technologies, 544 F.3d 196, 205 (3d Cir.2008). As stated by the Third Circuit:

The first three categories are ‘core’ proceedings in which the bankruptcy court has power to hear, decide, and enter orders and judgments. The fourth category, ‘related to’ proceedings, are ‘non-core’ proceedings, which the bankruptcy court can hear, but in which it can only submit proposed findings of fact and conclusions of law to the district court, not issue orders.

Id., 544 F.3d at 205 (citations omitted).

6. Generally, the adjudication of claims between non-debtor parties are not considered to within a Bankruptcy court’s “related to” jurisdiction. Sanders Confectionery Products, Inc. v. Heller Financial, Inc., 973 F.2d 474, 483 (6th Cir.1992); In re Foundation for New Era Philanthropy, 201 B.R. 382, 387 (Bankr.E D.Pa.1996).

7. As observed by the Third Circuit, “even if the estate has a direct financial interest in a claim that a party proposes to litigate in bankruptcy court, this fact, by itself, does not provide an adequate jurisdictional foundation.” In re Guild and Gallery Plus, Inc., 72 F.3d 1171, 1180 (3d Cir.1996).

8. The Pennfield Defendants assert against Wenger common law claims of contribution and unjust enrichment.

9. The Pennfield Defendants maintain that the terms of the Settlement implicate the respective liability between Wenger and the Pennfield Defendants and thereby, as a result of the Settlement, this Court has jurisdiction to adjudicate their common law claims of contribution and unjust enrichment to the extent they are determinative of ultimate payment obligations of Wenger and the Pennfield Defendants.

10. The Pennfield Defendants advanced no other basis for this Court to adjudicate the Amended Crossclaims.

11. The fact that the Settlement may implicate the liability of Wenger to the Pennfield Defendants does not create jurisdiction for this Court to adjudicate the Amended Crossclaims. In re Resorts Int’l, Inc., 372 F.3d 154 (3rd Cir.2004) (“If a court lacks jurisdiction over a dispute, it cannot create that jurisdiction by simply stating that it has jurisdiction in a confir[184]*184mation or other order.”); In re Guild and Gallery Plus, Inc., 72 F.3d 1171, 1182 (3d Cir.1996) (“Pacor cannot be read to countenance this sort of bootstrapping.”).

12.

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Bluebook (online)
542 B.R. 180, 2015 Bankr. LEXIS 4304, Counsel Stack Legal Research, https://law.counselstack.com/opinion/morrisanderson-ltd-v-wenger-feed-mills-inc-in-re-etff-corp-paeb-2015.