Smith v. Hilton (In re Swan Transp. Co.)

596 B.R. 127
CourtUnited States Bankruptcy Court, D. Delaware
DecidedNovember 16, 2018
DocketCase No. 01-11690 (BLS) Jointly Administered; Adv. Proc. No. 17-50053 (BLS)
StatusPublished
Cited by2 cases

This text of 596 B.R. 127 (Smith v. Hilton (In re Swan Transp. Co.)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, D. Delaware primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Smith v. Hilton (In re Swan Transp. Co.), 596 B.R. 127 (Del. 2018).

Opinion

BRENDAN LINEHAN SHANNON, UNITED STATUS BANKRUPTCY JUDGE

*131Before the Court is the Motion filed by W.D. Hilton, Jr., Trust Services, Inc., James A. Huguenard, and Randall D. Grooms, Jr. (collectively, the "Defendants" or "Trustees") to Dismiss Plaintiff's Complaint (the "Defendant's Motion") [Adv. Docket No. 81]. Richard Smith, Mark Little, and Larry Garrett (collectively, the "Plaintiffs") oppose the Motion [Adv. Docket No. 88]. The Plaintiffs have also filed their own Motion to Dismiss [Adv. Docket No. 92], which the Trustees oppose [Adv. Docket No. 114].1 For the reasons stated below, the Court will GRANT the Trustees' Motion in part and DENY the Plaintiffs' Motion.

BACKGROUND

Swan Transportation Company (the "Debtor") filed a Chapter 11 petition on December 20, 2001. For many years preceding the petition, Tyler Pipe and Foundry, one of Debtor's subsidiaries, used asbestos and silica in the manufacture of a variety of its products. Many of the employees who worked with those materials suffered injuries and brought tort claims against the Debtor, eventually forcing it to seek Chapter 11 protection. As is common in bankruptcy cases of this stripe, the prepackaged plan (the "Plan") [Docket No. 47] created an asbestos/silica litigation trust (the "Trust") which was designed to provide for the claims of future claimants once their asbestos or silica related injuries were diagnosed. This Court entered an Order confirming the Plan on July 21, 2003 (the "Confirmation Order") [Docket No. 455]. The record further reflects that the Trust was funded with cash and securities to provide for recovery on claims against the Debtor relating to asbestos or silica exposure. Defendants Randall Grooms, W.D. Hilton, and James Huguenard were appointed in 2003 to serve as Trustees under the Trust, and each has continued in that capacity to this day. Defendant Trust Services, Inc. is a Texas corporation and was hired by the Trust to perform administrative functions for the Trust.

In May of 2015, each of the Plaintiffs filed claims with the Trust seeking payment on account of alleged injuries arising from exposure to asbestos while in the Debtor's employ. Plaintiff Mark Little's *132claim was deemed allowed and he was recognized as a beneficiary of the Trust. Consequently, the record reflects that the Trust paid him at the current percentage established under the Trust's claims resolution procedures. The record reflects that the personal injury claims of Messrs. Smith and Garrett have been rejected or disallowed by the Trust, which determined that they did not suffer from qualifying injuries. Messrs. Smith and Garrett assert that their claims were wrongfully denied, but as of the date of briefing the reconsideration and appeal process provided under the Trust has not been concluded as to their claims. Each of the Plaintiffs allege that the Trustees have breached statutory and fiduciary duties in their administration of the Trust.

The procedural history and posture of this matter is more than a little complicated. On May 20, 2016, all three Plaintiffs filed a complaint against the Trustees in the County Court of Law in Smith County, Texas (the "Texas State Court"). The Plaintiffs alleged a breach of fiduciary duty by the Trustees administering the Trust and requested several forms of relief, including disgorgement of Trustee fees and expenses, removal of the Trustees, appointment of a receiver for the Trust, and other equitable relief.

The Trustees filed a motion to remove that proceeding from the Texas State Court to the United States District Court for the Northern District of Texas (the "Texas District Court"). After removal, the Trustees filed a motion to transfer venue of the proceeding to this Court. The Plaintiffs objected to the venue transfer request and filed a motion to remand the dispute back to the Texas State Court. Through comprehensive rulings by the United States Magistrate Judge, which were adopted by the Texas District Court, the Plaintiffs' motion to remand the matter was denied and the Trustees' motion to transfer venue was granted. The case was transferred to the United States District Court for the District of Delaware, and subsequently referred to this Court.

There are a number of motions before this Court. The Trustees filed a Motion to Dismiss Plaintiffs' Complaint [Docket No. 81] along with a Motion to Strike Plaintiffs' Exhibits [Docket No. 96]. In their Motion to Dismiss, the Trustees request that the Court dismiss Plaintiffs' complaint in its entirety, with prejudice, and without leave to amend. The Plaintiffs have filed a Motion to Dismiss for Lack of Subject Matter Jurisdiction, and Alternatively, to Abstain [Docket No. 92]. By their Motion, the Plaintiffs request that this Court remand the case back to the Texas State Court either by abstaining in favor of that court, or by dismissing this adversary proceeding for lack of subject matter jurisdiction.

JURISDICTION AND VENUE

The Court has jurisdiction over this matter under 28 U.S.C. §§ 1334 and 157(b)(1). Venue is proper in this Court pursuant to 28 U.S.C. §§ 1408 and 1409. Plaintiffs have alleged this Court does not have jurisdiction, citing to numerous facts including that the bankruptcy case has been closed for nearly a decade, that the litigants herein are unrelated to the reorganized Debtor, and the outcome of this adversary proceeding will have no effect on the Debtors' reorganization Plan. This Court and the courts in Texas disagree. Bankruptcy courts "plainly [have] jurisdiction to interpret and enforce [their] own prior orders." Travelers Indent. Co. v. Bailey , 557 U.S. 137, 151, 129 S.Ct. 2195, 174 L.Ed.2d 99 (2009). As noted by the Texas District Court and further discussed below, this matter relates to the interpretation and enforcement of this Court's Confirmation Order and thus constitutes a core matter under 28 U.S.C. § 157(b)(2).

*133In re FormTech Indus. , 439 B.R. 352, 357 (Bankr. D. Del. 2010) ("Enforcement and interpretation of orders issued in core proceedings are also considered core proceedings within the bankruptcy court's jurisdiction.").

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Bluebook (online)
596 B.R. 127, Counsel Stack Legal Research, https://law.counselstack.com/opinion/smith-v-hilton-in-re-swan-transp-co-deb-2018.