Covanta Onondaga Ltd. v. Onondaga County Resource

• Decision Date: 29 January 2003
• Docket Number: Docket No. 02-9107.
• Citation: 318 F.3d 392
• Parties: COVANTA ONONDAGA LIMITED PARTNERSHIP, Plaintiff-Appellant, v. ONONDAGA COUNTY RESOURCE RECOVERY AGENCY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Second Circuit

318 F.3d 392

COVANTA ONONDAGA LIMITED PARTNERSHIP, Plaintiff-Appellant, v. ONONDAGA COUNTY RESOURCE RECOVERY AGENCY, Defendant-Appellee.

Docket No. 02-9107.

United States Court of Appeals, Second Circuit.

Argued: December 10, 2002.

Decided: January 29, 2003.

Barry Sullivan, Chicago, IL (Vincent E. Lazar, Jennifer L. McManus, Jenner & Block, LLC, Chicago, IL; Deborah M. Buell, James L. Bromley, Cleary, Gottlieb, Steen & Hamilton, New York, NY, on the brief), for Plaintiff-Appellant.

Lee E. Woodard, Martin, Martin & Woodard, LLC, Syracuse, NY, for Defendant-Appellee.

Before: NEWMAN, SACK, and SOTOMAYOR, Circuit Judges.

JON O. NEWMAN, Circuit Judge.

This appeal concerns a district court's authority to act in a case that was initially removed from a state court, pursuant to 28 U.S.C. § 1452, because it was related to a bankruptcy case, and then remanded back to the state court because the district court determined that mandatory abstention applies. The specific issue is whether, after such a remand, the district court may enjoin a party in the remanded case — the debtor in the pending bankruptcy case — from asking the bankruptcy court to stay the remanded state court action. This issue arises on an appeal by Covanta Onondaga Limited Partnership ("Covanta") from the September 23, 2002, order of the District Court for the Northern District of New York (Howard G. Munson, District Judge), granting a permanent injunction sought by the Onondaga County Resource Recovery Agency ("OCRRA"). We conclude that the injunction must be vacated.

Background

The origin of the pending appeal is a waste disposal agreement entered into by Covanta and OCRRA in 1992. Covanta operates a waste-to-energy municipal waste incinerator in Jamesville, N.Y., on property leased to it by OCRRA. In February 2002, OCRRA notified Covanta that the agreement between the parties was terminated by reason of Covanta's alleged breach of the agreement's requirement concerning maintenance of adequate credit. On March 1, Covanta filed a suit in the New York Supreme Court ("the State Court") seeking a declaratory judgment that OCRRA was not entitled to terminate the parties' agreement ("the State Court case").¹ On March 22, OCRRA filed an answer asserting numerous defenses and seeking a judgment declaring, among other things, that OCRRA properly terminated the parties' agreement.

On April 1, Covanta filed a voluntary petition under Chapter 11 in the Bankruptcy Court of the Southern District of New York ("Bankruptcy Court"). Chapter 11 petitions were simultaneously filed by Covanta's parent company and 122 related companies. On April 8, Covanta filed in the District Court for the Northern District ("the District Court" or "Northern District") a notice of removal of the State Court case pursuant to 28 U.S.C. § 1452 and Rule 9027 of the Federal Rules of Bankruptcy Procedure. On April 12, Covanta filed in the Northern District a motion to transfer the removed case to the Southern District of New York so that it could be referred to the Bankruptcy Court in the Southern District.

Also on April 12, OCRRA filed in the Northern District a motion to remand the State Court case to the State Court, or, in the alternative, to have the District Court retain jurisdiction and adjudicate the action. Remand was sought on the ground that the criteria for mandatory abstention specified in 28 U.S.C. § 1334(c)(2) were met. On August 8, OCRRA filed a proof of claim in the Bankruptcy Court. On August 13, the District Court granted OCRRA's motion and remanded the State Court case to the State Court. Covanta Onondaga Limited [Partnership] v. Onondaga County Resource Recovery Agency, 281 B.R. 809 (N.D.N.Y.2002) ("Covanta Remand"). The District Court agreed with OCRRA that mandatory abstention was required by subsection 1334(c)(2) and remanded, apparently using the remand authority conferred by 28 U.S.C. § 1452(b). On August 19, 2002, OCRRA notified the District Court that it had filed a proof of claim with the SDNY Bankruptcy Court earlier that month and apologized for not previously informing the Court.

On September 5, Covanta filed an adversary proceeding against OCRRA in the Bankruptcy Court seeking, among other things, a declaration that the automatic stay of 11 U.S.C. § 362 applied to the State Court case, or, in the alternative, an injunction under 11 U.S.C. § 105(a) to prevent OCRRA from further prosecuting the State Court case pending confirmation of a plan of reorganization. Covanta also sought an injunction under section 105(a), apart from the pendency of the adversary proceeding.

On September 11, OCRRA moved in the Northern District for a temporary restraining order ("TRO"), which was issued that same day. The TRO prohibited Covanta and the Bankruptcy Court from proceeding with Covanta's adversary proceeding and with Covanta's motion, filed in that proceeding, for section 362 or section 105(a) relief. On September 13, the District Court continued the TRO after a hearing. On September 23, the District Court issued the permanent injunction that is the subject of the pending appeal. Covanta Onondaga Ltd. [Partnership] v. Onondaga County Resource Recovery Agency, 283 B.R. 651 (N.D.N.Y.2002) ("Covanta Injunction"). That injunction prohibits Covanta from proceeding in the Bankruptcy Court with the adversary proceeding and the motion contained within it, and "from instituting any further action or proceeding in [the Bankruptcy Court] or in any other court against any party regarding the application of the automatic bankruptcy stay to this case," id. at 657, presumably referring to the State Court case. Covanta's motion for interim injunctive relief pending appeal was denied by the District Court and initially denied by this Court, without prejudice to renewal before the merits panel. On December 19, after oral argument, we entered an order maintaining the status quo, pending this appeal, by barring OCRRA from proceeding with the State Court case and barring Covanta from seeking relief in the Bankruptcy Court with respect to the State Court case.

Discussion

The parties have framed the issue on appeal primarily in terms of whether the District Court exceeded its discretion under the All Writs Act, 28 U.S.C. § 1651(a), by issuing the permanent injunction. Although that issue inheres in the appeal, we initially consider whether the District Court had jurisdiction to issue the injunction after it had relinquished jurisdiction over the removed State Court case by remanding it to the State Court. In seeking injunctive relief, OCRRA invoked only section 1651(a), which authorizes federal courts to "issue all writs necessary or appropriate in aid of their respective jurisdictions and agreeable to the usages and principles of law." However, it is well settled that the All Writs Act is not an independent source of a federal court's jurisdiction. See United States v. Tablie, 166 F.3d 505, 506-07 (2d Cir.1999); Westinghouse Electric Corp. v. Newman & Holtzinger, P.C., 992 F.2d 932, 937 (9th Cir.1993); Telecommunications Research and Action Center v. FCC, 750 F.2d 70, 76 (D.C.Cir.1984).

Federal courts frequently use section 1651(a) to protect their jurisdiction over cases that are grounded on some valid jurisdictional basis, typically diversity or federal question jurisdiction. See, e.g., United States v. New York Telephone Co., 434 U.S. 159, 172-75, 98 S.Ct. 364, 54 L.Ed.2d 376 (1977). OCRRA has not pled either diversity or federal question jurisdiction as the jurisdictional basis for the injunction it has obtained. Instead, its theory of entitlement to the injunction, apparently accepted by the District Court, is that the injunction was somehow in aid of the jurisdiction the District Court had exercised over the removed and remanded State Court action.

If a district court is acting with respect to a case that remains within its jurisdiction, there is no doubt that its jurisdiction over the case includes authority to act under section 1651 when necessary to "protect," Findley v. Laughead (In re Johns-Manville Corp.), 27 F.3d 48, 49 (2d Cir.1994), or "aid," Jones v. Lilly, 37 F.3d 964, 967 (3d Cir.1994), its jurisdiction. Furthermore, a court that has concluded its adjudication of the merits of a case within its jurisdiction by entering a final judgment retains authority to take action with respect to some collateral matters related to the case, such as attorney's fees and costs, see, e.g., Chesley v. Union Carbide Corp., 927 F.2d 60, 64-65 (2d Cir. 1991), and sanctions, see, e.g., Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 394-95, 110 S.Ct. 2447, 110 L.Ed.2d 359 (1990) (sanctions under Fed.R.Civ.P. 11). In addition, a court that enters a judgment with continuing effect retains some authority to enforce its judgment, see, e.g., Yonkers Racing Corp. v. City of Yonkers, 858 F.2d 855, 863-65 (2d Cir.1988) (approving district court's removal of state court suit, in absence of independent removal jurisdiction, because removal necessary to preserve integrity of district court's consent decree); United States v. International Brotherhood of Teamsters, 266 F.3d 45, 49-50 (2d Cir.2001) (affirming district court's authority to enjoin non-parties from preventing implementation of consent decree), although there are jurisdictional limits to such authority, see Kokkonen v. Guardian Life Insurance Co. of America, 511 U.S. 375, 380-82, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994) (holding that district court lacks ancillary jurisdiction to enforce settlement agreement after underlying lawsuit has been dismissed unless the parties agree to such continuing authority or the court retains jurisdiction for such purpose).

The injunction challenged in the pending appeal does not derive jurisdictional validity from any of these traditional sources of ancillary or continuing jurisdiction. Indeed, we are not aware of any other case in which a district court has purported to have jurisdiction to enter...