United Air Lines, Inc. v. City of Los Angeles (In re UAL Corp.)

391 B.R. 791, 2008 Bankr. LEXIS 3581
CourtUnited States Bankruptcy Court, N.D. Illinois
DecidedMay 31, 2008
DocketBankruptcy No. 02 B 48191; Adversary No. 05 A 02806
StatusPublished
Cited by2 cases

This text of 391 B.R. 791 (United Air Lines, Inc. v. City of Los Angeles (In re UAL Corp.)) 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
United Air Lines, Inc. v. City of Los Angeles (In re UAL Corp.), 391 B.R. 791, 2008 Bankr. LEXIS 3581 (Ill. 2008).

Opinion

MEMORANDUM OF DECISION

EUGENE R. WEDOFF, Bankruptcy Judge.

This adversary proceeding, arising in the Chapter 11 bankruptcy case of United Air Lines, Inc. (referred to as “United”), was brought to enforce an asserted contractual right to operate turboprop aircraft from the central terminal of Los Angeles International Airport (“LAX”). The defendants are the City of Los Angeles and the city department in charge of its airports, Los Angeles World Airports (referred to collectively as “the City”), which contend that prohibiting turboprop operations from the central terminal is an appropriate exercise of their regulatory au-

thority. United also contends the City’s action regarding United’s turboprop operations violated the automatic stay imposed by § 362(a) of the Bankruptcy Code (Title 11, U.S.C.) and is a discrimination prohibited by § 525(a) of the Code.

The proceeding is now before the court, following the reopening of evidence, on United’s motion to reconsider a judgment entered in favor of the City. As discussed below — and as determined originally — the evidence does not establish either a violation of the automatic stay or a discrimination prohibited by § 525. However, contrary to the original judgment, the evidence does establish that under a lease with the City, United was given the right to operate commercial aircraft, including turboprops, at one of the central terminal buildings at LAX and that a permanent injunction is the appropriate remedy for the City’s threatened violation of this right. Additionally, the jurisdictional basis for the entry of judgment requires amendment. Accordingly, United’s motion for reconsideration will be granted, and a revised judgment order entered.

Jurisdiction

District courts have exclusive jurisdiction over bankruptcy cases, pursuant to 28 U.S.C. § 1334(a), and they have concurrent jurisdiction over all civil proceedings “arising under title 11, or arising in or related to cases under title 11,” pursuant to 28 U.S.C. § 1334(b). A proceeding to determine whether action by a creditor violates the automatic stay imposed by § 362 of the Bankruptcy Code “arises under” the Code, and so is within the district court’s jurisdiction. See Wood v. Wood (In re Wood), 825 F.2d 90, 97 (5th Cir.1987) (“Congress used the phrase ‘arising under title 11’ to describe those proceedings that involve a cause of action created or deter[795]*795mined by a statutory provision of title 11.”). Similarly, a proceeding to determine whether action by a creditor is a discrimination prohibited by 11 U.S.C. § 525(a) “arises under” the Code. Proceedings that “arise under” the Code — invoking a substantive right that it provides— are core proceedings. Barnett v. Stern, 909 F.2d 973, 981 (7th Cir.1990).

Pursuant to 28 U.S.C. § 157(a) and its own Internal Operating Procedure 15(a), the District Court for the Northern District of Illinois has referred its bankruptcy cases to the bankruptcy court of this district. When presiding over a referred case, the bankruptcy court has jurisdiction under 28 U.S.C. § 157(b)(1) to enter appropriate orders and judgments in core proceedings within the case. This court accordingly may enter a final judgment in this proceeding as to United’s claims arising under § § 362 and 525.

However, an action to enforce a contract right belonging to a bankruptcy estate does not arise under the Code; rather, it is “related to” the underlying bankruptcy case because its outcome may affect the property that the estate has available for payment to creditors. In re Xonies, Inc., 813 F.2d 127, 131 (7th Cir.1987). Contract claims of an estate that are only within the “related-to” jurisdiction are not core proceedings. Home Ins. Co. v. Cooper & Cooper, Ltd., 889 F.2d 746, 749 (7th Cir.1989); Sokol v. Mass. Mut. Life Ins. Co. (In re Sokol), 60 B.R. 294 (Bankr.N.D.Ill.1986).1 Thus, as to United’s claim for breach of contract, this court may not issue a final judgment, but rather is limited to making proposed findings of fact and conclusions of law, subject to entry of judgment by the district court, pursuant to 28 U.S.C. § 157(c)(1).

Both United and the City disagree with this determination. The City argues that the court should decline to its exercise any jurisdiction, under the doctrine of primary jurisdiction. “Primary jurisdiction,” as the Supreme Court explained in United States v. Western Pac. R.R. Co., 352 U.S. 59, 63-64, 77 S.Ct. 161, 1 L.Ed.2d 126 (1956), “applies where a claim is originally cognizable in the courts, and comes into play whenever enforcement of the claim requires the resolution of issues which, under a regulatory scheme, have been placed within the special competence of an administrative body.” The doctrine has no application here. United does not argue in this proceeding that the City lacks authority under applicable administrative regulations to determine aircraft use and placement at LAX; nor does the City argue that it is required by any administrative regulation to prohibit United from operating turboprop aircraft from the central terminal at LAX. Rather, United asserts that the City contractually obligated itself to allow United to use certain central terminal gates for whatever commercial aircraft it could properly land at the airport, and the City denies that it undertook such a contractual obligation. No regulation of the Secretary of Transportation or the Federal Aviation Administration has any bearing on this contract [796]*796dispute, and the decisions cited by City— which did involve governing administrative regulations — are plainly inapplicable.2

United, on the other hand, argues that the court has core jurisdiction over all the matters involved in its complaint, including its breach of contract claim. First, United asserts that the breach of contract it alleges would also violate the automatic stay, and hence that the court may determine these “intertwined” issues together. In granting a preliminary injunction in favor of United and in issuing an initial judgment against United, the court accepted this argument. However, as discussed below, even a material breach of a contract with a debtor in bankruptcy does not, in itself, violate the automatic stay, and United has proven no additional action by the City that would constitute such a violation.

Second, United argues that by failing to object immediately to this court’s statement regarding jurisdiction when the preliminary injunction was issued, the City implicitly consented to the court’s exercise of core jurisdiction. However, well before the entry of that injunction, the City had answered United’s complaint by stating that it “admits ...

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

Related

Mason v. RJK Investors (In re Klarchek)
509 B.R. 175 (N.D. Illinois, 2014)
In Re Ual Corp.
391 B.R. 791 (N.D. Illinois, 2008)

Cite This Page — Counsel Stack

Bluebook (online)
391 B.R. 791, 2008 Bankr. LEXIS 3581, Counsel Stack Legal Research, https://law.counselstack.com/opinion/united-air-lines-inc-v-city-of-los-angeles-in-re-ual-corp-ilnb-2008.