433 B.R. 911 (Bkrtcy.N.D.Ga. 2010), 09-13461-WHD, In re Cox

Docket NºBankruptcy 09-13461-WHD.
Citation433 B.R. 911
Opinion JudgeW. HOMER DRAKE, Bankruptcy Judge.
Party NameIn the Matter of John Hamilton COX, Jr., Kathryn Burgess Cox, Debtors. v. Fox Broadcasting Company, Kathy Cox, in her capacity as State Superintendent of Schools, Georgia Department of Education, Defendants. Gary W. Brown, Trustee of the Estate of John and Kathryn Cox, Plaintiff,
AttorneyA. Alexander Teel, Chris D. Phillips, James C. Cifelli, Lamberth, Cifelli, Stokes, Ellis & Nason, Atlanta, GA, for Plaintiff. Oscar B. Fears, III, Georgia Department of Law, John C. Weitnauer, Alston & Bird LLP, Atlanta, GA, for Defendants.
Case DateJanuary 22, 2010
CourtUnited States Bankruptcy Courts, Eleventh Circuit

Page 911

433 B.R. 911 (Bkrtcy.N.D.Ga. 2010)

In the Matter of John Hamilton COX, Jr., Kathryn Burgess Cox, Debtors.

Gary W. Brown, Trustee of the Estate of John and Kathryn Cox, Plaintiff,

v.

Fox Broadcasting Company, Kathy Cox, in her capacity as State Superintendent of Schools, Georgia Department of Education, Defendants.

Bankruptcy No. 09-13461-WHD.

United States Bankruptcy Court, N.D. Georgia, Newnan Division.

January 22, 2010

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A. Alexander Teel, Chris D. Phillips, James C. Cifelli, Lamberth, Cifelli, Stokes, Ellis & Nason, Atlanta, GA, for Plaintiff.

Oscar B. Fears, III, Georgia Department of Law, John C. Weitnauer, Alston & Bird LLP, Atlanta, GA, for Defendants.

ORDER

W. HOMER DRAKE, Bankruptcy Judge.

Before the Court is a Motion to Dismiss Complaint, filed by the defendant, Kathy Cox, in her capacity as State Superintendent of Schools (hereinafter the " Defendant" ), and a Motion for Leave to File an Amended Complaint, filed by the plaintiff, Gary W. Brown (hereinafter the " Trustee" ), in his capacity as the trustee of the bankruptcy estate of the Chapter 7 debtor, Kathryn Burgess Cox. Both motions are opposed. The motion to dismiss requires the Court to determine whether this Court has jurisdiction to entertain the Trustee's requests for a determination of whether certain funds are property of the Defendant's bankruptcy estate.

FACTS AND PROCEDURAL HISTORY

The Defendant is the Superintendent of Schools for the State of Georgia. In July and August of 2008, the Defendant completed questionnaires, releases, and contractual agreements necessary to become a contestant on the Fox Network Television show " Are You Smarter than a Fifth Grader?" Contestants on this game show compete to win up to $1 million by correctly answering eleven questions regarding elementary

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school subjects. One of the questionnaires completed by the Defendant asked " What would you do with $1 million?" In response, the Defendant stated that she would " Donate to Educational Charities."

The Defendant appeared on the show on August 6, 2008 and answered all eleven questions correctly. When asked on the show what she intended to do with the prize money, the Defendant stated that she would donate the funds to certain educational institutions for the visual and hearing impaired. On that same date, the Defendant executed a Charitable Designation Document requesting that the prize money be transferred to the Fidelity Charitable Gift Fund (hereinafter " Fidelity" ). By letter dated October 9, 2008, the Defendant designated as recipients of the charitable gift the Georgia Academy for the Blind in Macon, Georgia; the Georgia School for the Deaf in Cave Spring, Georgia; and The Atlanta Area School for the Deaf in Clarkston, Georgia.

On November 17, 2008, the Defendant and her husband filed a voluntary petition under Chapter 7 of the Bankruptcy Code. At some time in December 2008, Fox Broadcasting Company (hereinafter " Fox" ) delivered a $1 million check to Fidelity. Fidelity returned the check to Fox due to its concerns that the funds may be subject to the claims of the Defendant's creditors. Fox retains control of the funds. By letter dated April 16, 2009, the State of Georgia asserted an interest in the funds and demanded the funds be paid to the three educational institutions designated by the Defendant. Likewise, the Trustee demanded turnover of the funds on July 2, 2009. As Fox is uncertain as to the rightful recipient of the funds, Fox continues to hold the funds, pending a determination by this Court.

On July 31, 2009, the Trustee filed a complaint against the Defendant, in her capacity as the State Superintendent of Schools, and Fox. The Trustee asserts that, pursuant to section 541 of the Bankruptcy Code, the funds are property of the Defendant's bankruptcy estate and is seeking a declaratory judgment, pursuant to Federal Rule of Bankruptcy Procedure 7001(9) and 28 U.S. C. § 2201 to the effect that the estate has all of the Defendant's right and title to the funds, notwithstanding the claims of the Georgia Department of Education. The Trustee also seeks an order directing Fox to turn over the funds to the Trustee.

Fox answered the Complaint and filed a counterclaim/crossclaim for interpleader on August 28, 2009, pursuant to Federal Rule of Bankruptcy Procedure 7022.1 The Defendant answered the Trustee's Complaint on August 31, 2009 and filed a motion to dismiss the Complaint on September 4, 2009. The Defendant's motion to dismiss asserts that the Complaint fails to state a claim upon which relief can be granted and that the relief requested by the Trustee is barred by the Eleventh Amendment to the United States Constitution.

Subsequently, the Trustee filed a motion for leave to amend his complaint. The Trustee proposes to add two counts to the Complaint. These counts include: 1) avoidance and recovery of a fraudulent transfer; and 2) injunctive relief to prevent a continuing violation of the automatic stay. The Defendant opposes the Trustee's

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motion to amend on the basis that the additional counts fail to state a claim upon which relief can be granted and, therefore, permitting the amendment to add these claims would be futile.

CONCLUSIONS OF LAW

A. Whether the Trustee's Request for Declaratory Judgment Should be Dismissed as Barred by Sovereign Immunity

The Defendant seeks dismissal of the Trustee's request for declaratory judgment on the basis that prosecution of such a claim is barred by the Eleventh Amendment to the United States Constitution. 2 " A federal court must dismiss an action barred by the Eleventh Amendment for lack of subject matter jurisdiction." BHGDN, LLC v. Minnesota, 598 F.Supp.2d 995 (D.Minn.2009); FED.R.CIV.P. 12(h)(3). Rule 12(b)(1) governs the dismissal of a complaint for lack of subject matter jurisdiction. See Fed. R. Bankr.P. 7012 (incorporating Fed.R.Civ.P. 12(b)(1)). When ruling on a motion to dismiss for lack of subject matter jurisdiction, " [a] court must accept the material factual allegations in the complaint as true, but need not draw inferences favorable to the plaintiff." In re General Media, Inc., 335 B.R. 66, 71-72 (Bankr.S.D.N.Y.2005) (citing J.S. v. Attica Cent. Schools, 386 F.3d 107, 110 (2d Cir.2004); Shipping Fin. Servs. Corp. v. Drakos, 140 F.3d 129, 131 (2d Cir.1998)). The Court may consider " materials outside of the pleadings to resolve any jurisdictional disputes, but cannot rely on conclusory or hearsay evidence." Id. at 72. The Trustee has the burden of proving the Court's subject matter jurisdiction by a preponderance of the evidence. See id. (citing Luckett v. Bure, 290 F.3d 493, 497 (2d Cir.2002)).

The Trustee's complaint seeks a declaratory judgment that would determine the true and lawful owner of the prize money. The Trustee asserts that the prize money became property of the Defendant's bankruptcy estate because she appeared on a game show in her personal capacity, won the prize, and, at the time she filed her Chapter 7 petition, had not yet made a charitable donation of the funds. The Defendant submits that this claim for relief is barred by the sovereign immunity of the State of Georgia.

The Eleventh Amendment states that the " Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign state." U.S. CONST. amend. XI. The Eleventh Amendment, however, has long been applied to reach suits...

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18 practice notes
  • 475 B.R. 9 (S.D.N.Y. 2012), 11-CV-6133 (CS), In re Salander-O'Reilly Galleries, LLC
    • United States
    • Federal Cases United States District Courts 2nd Circuit United States District Courts. 2nd Circuit. Southern District of New York
    • July 10, 2012
    ...the estate’ as set forth in Bankruptcy Code § 541 are core proceedings." ) (collecting cases); Brown v. Fox Broad. Co. (In re Cox), 433 B.R. 911, 920 (Bankr.N.D.Ga.2010) (" It is generally recognized that a proceeding to determine what constitutes property of the estate pursuant t......
  • 525 B.R. 662 (Bkrtcy.S.D.Tex. 2015), 11-38928, In re Waco Town Square Partners, L.P.
    • United States
    • Federal Cases United States Bankruptcy Courts Fifth Circuit
    • February 11, 2015
    ...exercise of exclusive jurisdiction over all of the debtor's property. . . ." ). See also Brown v. Fox Broadcasting Co. (In re Cox), 433 B.R. 911, 919 (Bankr. N.D.Ga. 2010) (" [T]wo of the fundamental purposes of a bankruptcy court [are] the exercise of jurisdiction over the estate......
  • 475 B.R. 885 (Bkrtcy.E.D.Tenn. 2012), 10-52148, In re MD Recycling, Inc.
    • United States
    • Federal Cases United States Bankruptcy Courts Sixth Circuit
    • August 3, 2012
    ...seeking to avoid a judicial lien under 11 U.S.C. § 522 held by a state or county." ); Brown v. Fox Broadcasting Co. (In re Hamilton), 433 B.R. 911, 918 (Bankr.N.D.Ga.2010) (" [T]he avoidance and recovery of a preferential transfer is the type of proceeding the bankruptcy court may......
  • In re Turner Grain Merchandising, Inc., 101119 AREBC, 2:14-bk-15687
    • United States
    • Federal Cases United States Bankruptcy Courts Eighth Circuit
    • October 11, 2019
    ...to resolve disputes regarding whether property is property of the estate. See, e.g., Brown v. Fox Broad. Co. (In re Cox), 433 B.R. 911, 920 (Bankr. N.D.Ga. 2010) ("It is generally recognized that '[a] proceeding to determine what constitutes property of the est......
  • Request a trial to view additional results
17 cases
  • 475 B.R. 9 (S.D.N.Y. 2012), 11-CV-6133 (CS), In re Salander-O'Reilly Galleries, LLC
    • United States
    • Federal Cases United States District Courts 2nd Circuit United States District Courts. 2nd Circuit. Southern District of New York
    • July 10, 2012
    ...the estate’ as set forth in Bankruptcy Code § 541 are core proceedings." ) (collecting cases); Brown v. Fox Broad. Co. (In re Cox), 433 B.R. 911, 920 (Bankr.N.D.Ga.2010) (" It is generally recognized that a proceeding to determine what constitutes property of the estate pursuant t......
  • 525 B.R. 662 (Bkrtcy.S.D.Tex. 2015), 11-38928, In re Waco Town Square Partners, L.P.
    • United States
    • Federal Cases United States Bankruptcy Courts Fifth Circuit
    • February 11, 2015
    ...exercise of exclusive jurisdiction over all of the debtor's property. . . ." ). See also Brown v. Fox Broadcasting Co. (In re Cox), 433 B.R. 911, 919 (Bankr. N.D.Ga. 2010) (" [T]wo of the fundamental purposes of a bankruptcy court [are] the exercise of jurisdiction over the estate......
  • 475 B.R. 885 (Bkrtcy.E.D.Tenn. 2012), 10-52148, In re MD Recycling, Inc.
    • United States
    • Federal Cases United States Bankruptcy Courts Sixth Circuit
    • August 3, 2012
    ...seeking to avoid a judicial lien under 11 U.S.C. § 522 held by a state or county." ); Brown v. Fox Broadcasting Co. (In re Hamilton), 433 B.R. 911, 918 (Bankr.N.D.Ga.2010) (" [T]he avoidance and recovery of a preferential transfer is the type of proceeding the bankruptcy court may......
  • In re Turner Grain Merchandising, Inc., 101119 AREBC, 2:14-bk-15687
    • United States
    • Federal Cases United States Bankruptcy Courts Eighth Circuit
    • October 11, 2019
    ...to resolve disputes regarding whether property is property of the estate. See, e.g., Brown v. Fox Broad. Co. (In re Cox), 433 B.R. 911, 920 (Bankr. N.D.Ga. 2010) ("It is generally recognized that '[a] proceeding to determine what constitutes property of the est......
  • Request a trial to view additional results
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