Gupta v. Quincy Med. Ctr.

Decision Date02 June 2017
Docket NumberNo. 15-1183,15-1183
Citation858 F.3d 657
Parties Apurv GUPTA, M.D.; Victor Munger, Plaintiffs, Appellants, v. QUINCY MEDICAL CENTER, a Steward Family Hospital, Inc., Defendant, Appellee.
CourtU.S. Court of Appeals — First Circuit

Leah L. Miraldi, with whom Bruce W. Gladstone, Cameron & Mittleman LLP, Providence, RI, Charles R. Bennett, Jr., and Murphy & King, P.C., Boston, MA, were on brief, for appellants.

Jonathan W. Young, with whom Scott R. Magee and Locke Lord LLP, Boston, MA, were on brief, for appellee.

Before Howard, Chief Judge, Souter, Associate Justice,* Lipez, Circuit Judge.

LIPEZ, Circuit Judge.

This appeal involves the bankruptcy of Quincy Medical Center, Inc., QMC ED Physicians, Inc. and Quincy Physician Corporation ("Debtors"). Apurv Gupta and Victor Munger ("Appellants"), former senior executives of Debtors, appeal the district court's ruling that the bankruptcy court lacked subject matter jurisdiction over their post-confirmation claims for severance payments against the purchaser of Debtors' assets. Because we agree that the bankruptcy court had no jurisdiction over Gupta's and Munger's claims, we affirm.

I.

The facts pertinent to this appeal—none of which are disputed—are fully set forth in the opinions of the bankruptcy court and the district court. See Quincy Med. Ctr. v. Gupta , Nos. 12–cv–40128–RWZ and 12-cv-40131-RWZ, 2015 WL 58633, at *1–2 (D. Mass. Jan. 5, 2015) ; In re Quincy Med. Ctr., Inc. , 479 B.R. 229, 231–33 (Bankr. D. Mass. 2012) ; In re Quincy Med. Ctr., Inc. , 466 B.R. 26, 27–32 (Bankr. D. Mass. 2012). We assume familiarity with the decisions below and discuss only the pertinent facts here.

Gupta and Munger were senior executives at Quincy Medical Center, a hospital operated by Debtors in Quincy, Massachusetts. On June 30, 2011, Debtors signed an Asset Purchase Agreement (the "APA") whereby they agreed to sell substantially all of their assets to Quincy Medical Center, a Steward Family Hospital, Inc. f/k/a Steward Medical Holdings Subsidiary Five, Inc. ("Steward").1 One day later, on July 1, 2011, Debtors filed voluntary petitions under Chapter 11 of the Bankruptcy Code, and a motion (the "Sale Motion") under sections 363 and 365 of the Bankruptcy Code seeking bankruptcy court approval of the APA. See 11 U.S.C. §§ 363, 365.

Sections 5 and 9 of the APA, which deal with the continued employment of Debtors' former employees, are relevant to Appellants' claims. Specifically, section 9.1 provides:

Not later than ten (10) Business Days prior to the Closing, [Steward] shall offer employment by [Steward] to each of the Employees who remain employed by [Debtors] as of a recent date, ... such employment to commence immediately following the Closing.... Such individuals who accept such offer of employment are hereinafter referred to as the "Transferred Employees ."

Section 9.2 further provides that Steward is obligated to pay each transferred employee "base wage and salary levels provided to such Employees immediately prior to the Closing" for no less than three months after the closing date. Additionally, section 5.14(c) of the APA provides that "upon [Steward's] termination of the employment ... of any employees ... of [Debtors] at or following the Closing, [Steward] shall be liable to any of such persons for severance or retention pay or any other payments otherwise due them as employees ... for [Debtors]."

On September 26, 2011, the bankruptcy court issued an order (the "Sale Order") approving the APA as requested in the Sale Motion. The sale closed on October 1, 2011. Six days later, Debtors filed a proposed Chapter 11 plan of reorganization (the "Plan"). The bankruptcy court thereafter confirmed the Plan (the "Confirmation Order").

The Sale Order and the Plan each contain provisions regarding the retention of jurisdiction by the bankruptcy court over any disputes arising under them. The Sale Order provides:

It is necessary and appropriate, in order to ensure the validity of the sale of the Assets to Steward and to ensure compliance with this Order, for this Court to retain jurisdiction to: (a) interpret and enforce the provisions of the APA, the Assigned Agreements, the Sale Motion and this Order; (b) protect Steward and any of the Assets against any Lien or Claim; (c) resolve any disputes arising under or relating to the APA, the Assigned Agreements, the Sale Motion and this Order; and (d) determine the validity, extent and priority of asserted pre-Closing Liens or Claims on, and the disposition of the gross proceeds of sale of, the Assets.

Similarly, the Plan provides that

Notwithstanding the entry of the Confirmation Order and the occurrence of the Effective Date, on and after the Effective Date, the Bankruptcy Court shall, to the maximum extent permitted by applicable law, retain exclusive jurisdiction over all matters arising out of, or related to, the Chapter 11 Cases and the Plan pursuant to sections 105(a) and 1142 of the Bankruptcy Code, including jurisdiction to: ...
15. Enter and enforce any order for the sale of property pursuant to sections 363, 1123, or 1146(a) of the Bankruptcy Code ; ....
29. Enforce all orders previously entered by the Bankruptcy Court; ....

The Confirmation Order also incorporates the retention of jurisdiction provision from the Plan.

On October 7, 2011, Appellants received letters from Debtors stating that their employment was terminated effective October 1, i.e., the day the sale closed. Appellants subsequently sought severance pay from Debtors by filing motions in the bankruptcy court for allowance of administrative expenses against Debtors. The bankruptcy court denied administrative expense status to both claims. However, the court held that Appellants' motions should be treated as "seeking relief in the alternative ... for an order directing Steward to pay the claims."2 The court found that it had subject matter jurisdiction to hear the claims against Steward pursuant to the retention of jurisdiction provisions of the Sale Order and the court's authority to interpret and enforce its own prior orders. The bankruptcy court offered Steward an opportunity to respond, and Steward filed its objections.

Following a non-evidentiary hearing at which Gupta, Munger, and Steward were heard, the bankruptcy court found Steward liable to Appellants under the APA for their severance pay. Steward appealed to the district court, which concluded that the bankruptcy court lacked subject matter jurisdiction over Appellants' claims. Specifically, the district court found that Appellants' claims against Steward fell outside the bankruptcy court's statutorily granted jurisdiction and that the retention of jurisdiction provision relied upon by the bankruptcy court did not change this analysis. The district court therefore vacated the judgments against Steward and remanded with instructions to dismiss Appellants' claims. This appeal followed.

II.
A. Jurisdictional Principles

Appellants contend that the district court erred in concluding that their severance claims against Steward fell outside the bankruptcy court's statutorily granted jurisdiction. Thus, we first must examine the statutory scheme establishing the bankruptcy court's jurisdiction, understanding that the "jurisdiction of the bankruptcy courts, like that of other federal courts, is grounded in, and limited by, statute." Celotex Corp. v. Edwards , 514 U.S. 300, 307, 115 S.Ct. 1493, 131 L.Ed.2d 403 (1995). We examine the bankruptcy court's findings of fact for clear error and afford de novo review to its conclusions of law. See Razzaboni v. Schifano (In re Schifano ), 378 F.3d 60, 66 (1st Cir. 2004).

The general grant of bankruptcy jurisdiction is found in 28 U.S.C. § 1334, which establishes two main categories of bankruptcy matters over which the district courts have jurisdiction: "cases under title 11," 28 U.S.C. § 1334(a), and "proceedings arising under title 11, or arising in or related to cases under title 11," 28 U.S.C. § 1334(b). See also Middlesex Power Equip. & Marine, Inc. v. Town of Tyngsborough, Mass. (In re Middlesex Power Equip. & Marine, Inc. ), 292 F.3d 61, 66 (1st Cir. 2002). "[C]ases under title 11" refers only to the bankruptcy petition itself, and it is the umbrella under which all of the proceedings3 that follow the filing of a bankruptcy petition take place. Id. In turn, 28 U.S.C. § 157 permits the district courts to refer to bankruptcy courts all "proceedings arising under title 11 or arising in or related to cases under title 11."4 This broad jurisdictional grant allows the bankruptcy courts to "deal efficiently and expeditiously with all matters connected with the bankruptcy estate."5 Celotex , 514 U.S. at 308, 115 S.Ct. 1493 (quoting Pacor, Inc. v. Higgins , 743 F.2d 984, 994 (3d Cir. 1984) ).

Hence, in order for Appellants' severance claims to fall within 28 U.S.C. § 1334's statutory grant of jurisdiction, the claims must "arise under," "arise in," or "relate to" a case under title 11. We have observed that the boundaries between these types of proceedings are not always easy to distinguish from each other. See In re Middlesex Power Equip. & Marine, Inc. , 292 F.3d at 68 (noting that "[t]he dividing line is unclear between proceedings that ‘arise under’ as opposed to ‘arise in’ and as opposed to ‘relate to’ title 11. The statute itself provides no definitions."). Nonetheless, each term has a particular scope that matters for the jurisdictional analysis here.

The "arising under" language of § 1334(b) is "analogous to the ‘arising under’ language in 28 U.S.C. § 1331." In re Middlesex Power Equip. & Marine, Inc. , 292 F.3d at 68 (comparing "arising under" jurisdiction to federal question jurisdiction). In other words, proceedings "aris[e] under title 11" when the Bankruptcy Code itself creates the cause of action. See Stoe v. Flaherty , 436 F.3d 209, 217 (3d Cir. 2006) (noting that "arising under" jurisdiction is limited to proceedings where "the Bankruptcy Code creates the cause of action or provides the...

To continue reading

Request your trial
63 cases
  • Houck v. Lifestore Bank Substitute Tr. Servs., Inc.
    • United States
    • U.S. District Court — Western District of North Carolina
    • 8 February 2018
    ...within § 1334(b)." Menk v. Lapaglia (In re Menk), 241 B.R. 896, 908–09 (9th Cir. BAP 1999) ; see also Gupta v. Quincy Med. Ctr., 858 F.3d 657, 661–62 (1st Cir. 2017) (" '[C]ases under title 11' refers only to the bankruptcy petition itself, and it is the umbrella under which all of the proc......
  • Ohnmacht v. Commercial Credit Grp. Inc. (In re Ohnmacht)
    • United States
    • U.S. Bankruptcy Court — Eastern District of North Carolina
    • 3 November 2017
    ...by their nature, in a bankruptcy case." Id. at 125. This court is further persuaded by the logic of First Circuit in Gupta v. Quincy Med. Ctr., 858 F.3d 657 (1st Cir. 2017), a recent case which presented analogous factual circumstances to those before this court. In Gupta, the appellee purc......
  • Heaney v. Lamento (In re Whiz Kids Dev., LLC)
    • United States
    • United States Bankruptcy Courts. First Circuit. U.S. Bankruptcy Court — District of Massachusetts
    • 17 November 2017
    ...United States Court of Appeals for the First Circuit recently addressed the nature of "arising in" jurisdiction in Gupta v. Quincy Med. Ctr., 858 F.3d 657 (1st Cir. 2017). In Gupta, the debtors signed an asset purchase agreement (the "APA") effectuating a sale of substantially all of their ......
  • In re Corbett
    • United States
    • United States Bankruptcy Courts. First Circuit. U.S. Bankruptcy Court — District of Massachusetts
    • 12 February 2018
    ...(2d Cir. 2016), cert. denied sub nom. Gen. Motors LLC v. Elliott, ___ U.S. ___, 137 S. Ct. 1813 (2017). See also Gupta v. Quincy Med. Ctr., 858 F.3d 657, 663 (1st Cir. 2017) ("Bankruptcy courts—like all federal courts—may retain jurisdiction to interpret and enforce their prior orders."); H......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT