544 F.3d 196 (3rd Cir. 2008), 07-2230, In re Exide Technologies
|Citation:||544 F.3d 196|
|Party Name:||In re EXIDE TECHNOLOGIES, Reorganized, Debtor Pacific Dunlop Holdings (USA) Inc.; Pacific Dunlop Holdings (Europe) Limited; PD International Pty Limited; Pacific Dunlop Holdings (Hong Kong) Limited; Pacific Dunlop Holdings (Singapore) Pte. Limited, Appellants * (Amended in accordance with the Clerk's Order dated 07/30/07).|
|Case Date:||September 19, 2008|
|Court:||United States Courts of Appeals, Court of Appeals for the Third Circuit|
Argued June 30, 2008.
[Copyrighted Material Omitted]
Douglas N. Candeub, Esq. [Argued], Brett D. Fallon, Esq., Morris James, Wilmington, DE, for Plaintiffs-Appellants Pacific Dunlop Holdings (USA) Inc.; Pacific Dunlop Holdings (Europe) Limited; PD International PTY Limited; Pacific Dunlop Holdings (Hong Kong) Limited; Pacific Dunlop Holdings (Singapore) PTE Limited.
Benjamin G. Chew, Esq. [Argued], Andrew Zimmitti, Esq., Patton Boggs, N.W. Washington, DC, Laura D. Jones, Esq. James E. O'Neill, Esq., Pachulski Stang Diehl & Jones, Wilmington, DE, for Reorganized Debtor-Appellee Exide Technologies.
Before: RENDELL, SMITH, and FISHER, Circuit Judges.
RENDELL, Circuit Judge.
Appellants, Pacific Dunlop Holdings (USA), Inc. (“ PDH USA" ), and four of its foreign affiliates, Pacific Dunlop Holdings (Europe) Limited (“ PDH Europe" ), P.D. International Pty Limited (“ PD Int'l" ), Pacific Dunlop Holdings (Hong Kong) Limited (“ PDH Hong Kong" ), and Pacific Dunlop Holdings (Singapore) Pte. Ltd. (“ PDH Singapore" ) (collectively, the “ PDH Foreign Entities" ), appeal the Bankruptcy Court's denial of their motion to remand to state court, and/or abstain from, their claims against three foreign subsidiaries of Exide Technologies, f/k/a Exide Corporation (“ Exide" )-namely, Exide Holding Europe (“ Exide Europe" ), Exide Holding Asia Pte. Limited (“ Exide Asia" ), and Exide Singapore Pte. Ltd., f/k/a Bluewall Pte. Ltd. (“ Exide Singapore" ) (collectively, the “ Exide Foreign Entities" )-and their motion for reconsideration.
The crux of the appeal is whether the Bankruptcy Court properly decided that the state law cause of action between non-debtor parties, the PDH Foreign Entities and the Exide Foreign Entities, was a “ core" bankruptcy proceeding under 28 U.S.C. § § 157(b)(2)(B) and (C) over which
exclusive bankruptcy jurisdiction was appropriate. For the reasons that follow, we conclude that the Bankruptcy Court erred and we will vacate and remand for further proceedings.
I. Facts and Procedural History
PDH USA and PDH Foreign Entities, collectively, owned the GNB Companies (“ GNB" ), a global automotive and industrial battery business; each of the PDH entities owned portions of GNB in designated territories around the world. In May and June of 2000, PDH USA and the PDH Foreign Entities entered into a series of sale agreements to sell their interests in GNB to Exide and the Exide Foreign Entities. PDH USA sold its interests in GNB to Exide, and each of the four PDH Foreign Entities sold its respective interests to the three Exide Foreign Entities.1 Separate agreements were concluded between the companies' counterparts. Each agreement provided that “ Buyer's sole and exclusive indemnification obligations under this Agreement are set forth in the Coordinating Agreement." App. 257, 286, 344, 389, 434. On May 9, 2000, the Coordinating Agreement was concluded and, inter alia, set forth procedures to deal with potential disputes, including various provisions addressing venue, submission to jurisdiction, and governing law. App. 565. It included a forum selection clause, pursuant to which any claims arising under the agreement were to be filed in “ a state or federal court located in the County of Cook, State of Illinois." App. 582.
According to the PDH entities, after the sale's closing, Exide and the foreign entities swept GNB's cash accounts and appropriated approximately $16.6 million of cash at hand that was due to the sellers under the sales agreements. The PDH entities reportedly asked that the cash be released to them, but the Exide entities refused all such requests.
Thus, on July 21, 2001, the PDH entities filed suit against the Exide entities in the Circuit Court of Cook County, Illinois, alleging breach of contract, unjust enrichment, and conversion.2 The specific claims and amounts were as follows:
• PDH Singapore against Exide Asia in the amount of $396,817 for breach of contract (the India Agreement), conversion, and unjust enrichment;
• PDH Singapore against Exide Singapore in the amount of $278,446 for breach of contract (the Singapore Agreement), conversion, and unjust enrichment;
• PDH Hong Kong against Exide Asia in the amount of $791,524 for breach of contract (the Hong Kong/PRC Agreement), conversion, and unjust enrichment;
• PDH Europe against Exide Europe in the amount of $6,665,051 for breach of contract (the UK Agreement), conversion, and unjust enrichment;
• PD Int'l and PDH Europe against Exide Europe in the amount of $1,788,054 for breach of contract (the European Agreement), conversion, and unjust enrichment; and
• PDH USA against Exide in the amount of approximately $6,700,000 for breach of contract (the USA Agreement), conversion, and unjust enrichment.3
The complaint included a demand for a jury trial.
The Exide defendants moved to dismiss the complaint on September 17, 2001 under Illinois Code of Civil Procedure Section 2-615, arguing that plaintiffs failed to state a valid cause of action. In their motion, they asserted, inter alia, that the plaintiffs contractually agreed to waive the claims of breach of contract, conversion, and unjust enrichment and were only entitled to seek indemnification. Furthermore, they contended, the plaintiffs had not alleged a breach of a covenant made by “ Exide," defined as Exide and the Exide Foreign Entities. The motion was subsequently denied by the Illinois trial judge overseeing the case. Accordingly, the Exide defendants filed an answer, affirmative defenses, and counterclaim on January 22, 2002. In their answer, the Exide Foreign Entities raised several defenses but did not assert that they were not proper parties to the litigation or that the exclusive remedy for breach was against Exide alone.
Discovery had just begun in the state court action when Exide and several of its domestic subsidiaries, who are not parties here, filed petitions for Chapter 11 bankruptcy in the United States Bankruptcy Court for the District of Delaware on April 15, 2002. None of the Exide Foreign Entities filed for bankruptcy, and Exide is the only defendant to the Illinois action that is involved in bankruptcy proceedings.
Recognizing that the automatic stay under 11 U.S.C. § 362(a) applied to its claims against Exide, PDH USA did not pursue them further in Illinois state court. The PDH Foreign Entities, however, continued to prosecute their claims against the non-debtor defendants. The Exide Foreign Entities consequently asked the state court to stay discovery on the claims against them as well, which it initially did. After three hearings, however, the judge lifted the stay on July 8, 2002, holding that the stay did not apply to the non-debtor defendants and ordering that the case move forward without Exide.
The Exide Foreign Entities then filed a motion to dismiss the claims against them for lack of necessary party. Rather than wait for the state court's ruling, however, on August 21, 2002, the day before a hearing was to be held in state court on the motion to dismiss, the Exide defendants removed the action to the United States Bankruptcy Court for the Northern District of Illinois. They also moved to transfer the action to the United States Bankruptcy Court for the District of Delaware.
The PDH Foreign Entities in turn moved for remand to state court or, in the alternative, abstention. They argued that removal was improper because the claims asserted against Exide's non-debtor subsidiaries did not “ arise under" the bankruptcy code or “ arise in" Exide's bankruptcy case and were not “ related to" the bankruptcy case as required for the court to exercise jurisdiction under 28 U.S.C. § 1334.
The Exide Foreign Entities argued that the claims were at minimum “ related to" Exide's bankruptcy case and thus subject matter jurisdiction should be found to exist.
The crux of their argument was that the Coordinating Agreement provided that Exide was the “ sole indemnitor" and, therefore, the exclusive remedy available to the PDH Foreign Entities was a direct claim against Exide, not the foreign subsidiaries.
Exide's arguments that only it had assumed indemnification obligations turned on the meaning of the term “ Buyer" as used within the first phrase of Section 4.2(a) of the Coordinating Agreement, which set forth remedies available against the Exide entities under the sales agreements and provided:
Indemnification by Buyer
(a) Subject to Sections 4.2(b), 4.2(c), and 4.2(d), Buyer agrees to indemnify and hold Seller and the International Sellers and their Affiliates harmless from and against any and all Losses and Expenses incurred by Seller or the International Sellers and their Affiliates in connection with or arising from:
(i) any breach by Buyer of any of its covenants or agreements in the Sale Agreements or in this Agreement;
(ii) any breach of any warranty or the inaccuracy of any representation by Buyer contained in the Sale Agreements, ...; or
(iii) any breach by Buyer of any covenant contained in Section 11.1 or Section 12.2 of the U.S. Agreement or the corresponding provisions in the other Sale Agreements.
App. 578-79. Under the Coordinating Agreement, PDH USA and its affiliates were “ Seller" and “ International...
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