Eubanks v. Esenjay Petroleum Corp., Civ. A. No. 92-3150

• Citation: 152 BR 459
• Decision Date: 29 March 1993
• Docket Number: 92-3152.,Civ. A. No. 92-3150
• Parties: Billy Ray EUBANKS v. ESENJAY PETROLEUM CORP.
• Court: U.S. District Court — Eastern District of Louisiana

152 B.R. 459 (1993)

Billy Ray EUBANKS v. ESENJAY PETROLEUM CORP.

Civ. A. Nos. 92-3150, 92-3152.

United States District Court, E.D. Louisiana.

March 29, 1993.

Douglas Draper, Barbara Weiss, Friend, Wilson & Draper, New Orleans, LA, for plaintiff.

Robert Barkley, Jr., Barkley & Thompson, New Orleans, LA, Keith Remels, Jeffrey Pollicoff, Pollicoff, Smith & Myres, Houston, TX, for defendant.

MEMORANDUM AND ORDER

SEAR, Chief Judge.

This is a consolidated appeal from two orders of the United States Bankruptcy Court for the Eastern District of Louisiana dismissing two adversary proceedings filed by debtor Billy Ray Eubanks against Esenjay Petroleum Corporation.¹ Eubanks filed for relief under Chapter 11 of the Bankruptcy Code on August 7, 1986. On February 15, 1990, Eubanks' plan of reorganization was confirmed by the bankruptcy court. The confirmation order was affirmed by this Court on August 28, 1990.

Eubanks' plan of reorganization provides, inter alia, that net income from producing oil and gas properties, after certain deductions are made, is to be deposited into a cash fund. Article 3.4 of Eubanks' Plan of Reorganization. Distributions to creditors are to be made from this cash fund. Article 3.5.

Both adversary proceedings concern events or omissions that occurred prior to the confirmation of the plan of reorganization. At issue are rights to property interests, typically leases, located in Jasper County, Mississippi.

The first adversary proceeding, filed on March 31, 1992, is a complaint for specific performance and accounting. See Complaint for Specific Performance and Accounting, Exhibit 1 attached to Memorandum in Support, Civil Action No. 92-3150. Eubanks alleges that pursuant to a Joint Operating Agreement ("Agreement") executed in 1964, Esenjay had an obligation to assign to other parties to the Agreement upon demand interests in any lease acquired within a defined "Joint Area" in Jasper County, Mississippi. Eubanks asserts that Esenjay first acquired property subject to the Agreement in 1987, and that Esenjay subsequently acquired a lease subject to the assignment provision of the Agreement in 1989. Eubanks seeks the assignment of an interest in the lease acquired by Esenjay in 1989 and also an award of a percentage of the net proceeds attributable to the lease.

The second adversary proceeding, filed on April 27, 1992, seeks to rescind certain sales by Eubanks to Esenjay of property located within the Joint Area. See Complaint, Exhibit 1 attached to Memorandum in Support, Civil Action No. 92-3152. The complaint alleges that on December 16, 1988, the bankruptcy court authorized the sale by Eubanks to Esenjay of two oil and gas leases within the Joint Area. Eubanks then executed an assignment pursuant to the bankruptcy judge's order. Eubanks alleges that the records of the Chancery Clerk of Jasper County, Mississippi indicate that Esenjay caused to be recorded a transfer of property interests owned by Eubanks but not covered by the December 16, 1988, bankruptcy court order.

Esenjay moved to dismiss both claims for lack of subject matter jurisdiction. The bankruptcy court granted both motions, see Memorandum Opinions, Exhibits 3 attached to both Memorandum in Support, and these appeals followed. I conclude that while these adversary proceedings fall within the broad grant of bankruptcy jurisdiction set out in 28 U.S.C. § 1334(b), abstention pursuant to 28 U.S.C. § 1334(c)(1) is warranted by the facts and circumstances surrounding both proceedings.

Discussion²

A. Bankruptcy Jurisdiction

Eubanks' appeal requires a brief discussion of the difference between the bankruptcy jurisdiction of a district court and the judicial power of a bankruptcy court.

The statutory grant of bankruptcy jurisdiction to district courts is found in 28 U.S.C. § 1334(a) and (b).³ District courts have exclusive and original jurisdiction of all cases under Title 11 of the United States Code (i.e. the Bankruptcy Code). 28 U.S.C. § 1334(a). District courts have original and concurrent jurisdiction over "all civil proceedings arising under title 11, or arising in or related to cases under title 11." 28 U.S.C. § 1334(b) (emphasis added). Consequently, it is irrelevant whether a particular proceeding is "core" or "noncore" if the inquiry is whether that proceeding falls within the scope of 28 U.S.C. §§ 1334(a) and (b).

Although district courts have full judicial power over all matters within the scope of §§ 1334(a) and (b), these matters typically are referred to the bankruptcy court of each district pursuant to 28 U.S.C. § 157(a),⁴ which was passed as part of the Bankruptcy Amendments and Federal Judgeship Act of 1984. See generally Matter of Wood, 825 F.2d 90, 91 (5th Cir. 1987) (Wisdom, J.). This district is no exception. See Order of Reference of Bankruptcy Cases and Proceedings Nunc Pro Tunc, for cases filed in the Eastern District of Louisiana, filed August 2, 1984; Order of Reference of Bankruptcy Cases and Proceedings, for cases filed in, transferred to, or removed to the Eastern District of Louisiana, filed April 11, 1990. Proceedings outside the scope of 28 U.S.C. § 1334(a) and (b) cannot be referred to a bankruptcy court by a district court pursuant to 28 U.S.C. § 157.

Section 157 is the legislative progeny of the Supreme Court's decision in Northern Pipeline v. Marathon, 458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982) (holding unconstitutional the Bankruptcy Reform Act of 1978, Pub.L. 95-598, 92 Stat. 2549). Section 157 divides matters within the scope of §§ 1334(a) and (b) into "core" and "non-core" proceedings. Bankruptcy courts are given full judicial power over core proceedings. 28 U.S.C. § 157(b). Non-core proceedings that are "otherwise related to a case under title 11" may be heard by a bankruptcy judge, but any final order or judgment must be entered by the district judge. 28 U.S.C. § 157(c).⁵ The initial determination of whether a proceeding referred to a bankruptcy court is "core" or "non-core" is made by the bankruptcy judge. 28 U.S.C. § 157(b)(3).

Accordingly, it is necessary here to first determine whether Eubanks' adversary proceedings fall within the scope of 28 U.S.C. §§ 1334(a) and (b). Once that determination is made, then it is proper to identify the proceedings as either "core" or "non-core but related" matters.⁶

Section 1334(a) refers to "cases under title 11." Although the exact boundaries of a case under Title 11 have not been precisely defined,⁷ Eubanks' adversary proceedings clearly are not cases under Title 11. The outer perimeter of § 1334(b), covering proceedings arising under Title 11, arising in a case under Title 11, or related to a case under title 11,⁸ has been delineated by the following test:

Whether the outcome of the proceeding could conceivably have any effect on the estate being administered in bankruptcy.

Wood, 825 F.2d at 93 (quoting Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3rd Cir.1984) (emphasis added)).

Unfortunately, the reference to the "estate" in the Wood test leads to some confusion since, normally, the debtor's "estate" ceases to exist once a plan of reorganization is confirmed by the bankruptcy court. See 11 U.S.C. § 1141(b) ("Except as otherwise provided in the plan or the order confirming the plan, the confirmation of a plan vests all of the property of the estate in the debtor."); U.S. v. Unger, 949 F.2d 231, 233 (8th Cir.1991). However, there is no dispute that a bankruptcy court's jurisdiction, which is derivative of the jurisdictional grant in §§ 1334(a) and (b), continues post-confirmation "to protect its confirmation decree, to prevent interference with the execution of the plan and to aid otherwise in its operation." In re Dilbert's Quality Supermarkets, Inc., 368 F.2d 922, 924 (2nd Cir.1966).⁹ See also In re Almarc Corp., 94 B.R. 361, 365 (Bkrtcy.E.D.Pa. 1988).

In In re Cinderella Clothing Industries, Inc., 93 B.R. 373, 377 (Bkrtcy.E.D.Pa.1988), the court observed,

Whether emanating from the general power of courts to enforce their decrees, see generally 11 U.S.C. § 105(a); In re Timbers of Inwood Forest Assocs., Ltd., 808 F.2d 363, 373-74 (5th Cir.1987) (en banc), aff\'d sub nom, United Sav. Assoc. v. Timbers of Inwood Forest Assocs., Ltd., 484 U.S. 365 108 S.Ct. 626 98 L.Ed.2d 740 (1988); In re Chinichian, 784 F.2d 1440, 1442-43 (9th Cir.1986), or from specific bankruptcy code sections such as 11 U.S.C. § 1112 (allowing for conversion or dismissal after confirmation), § 1127 (allowing for plan modification after confirmation), § 1142 (allowing for plan enforcement post-confirmation), and § 1114 (allowing for revocation of confirmation), there exists a residue, albeit limited, of court authority over a confirmed chapter 11 case. See, e.g., Goodman v. Phillip R. Curtis Enterprises, Inc., 809 F.2d 228 (4th Cir.1987) (jurisdiction retained under § 1127); In re Harlow Properties, Inc., 56 B.R. 794 (B.A.P. 9th Cir.1985) (creditors may obtain specific performance against debtors pursuant to § 1142).

The exact extent of a district court's¹⁰ post-confirmation jurisdiction over a chapter 11 case has been a source of disagreement among courts as they have attempted to balance the need to retain jurisdiction post-confirmation with the need to end the reorganization process at some time. See generally, In re Pioneer Inv. Services Co., 141 B.R. 635, 640-41 (Bkrtcy.E.D.Tenn. 1992); In re Cinderella, supra at 376-77. The Fifth Circuit in Wood, however, has stated its intention that the jurisdictional grant of §§ 1334(a) and (b) is to be construed as broadly as possible. Wood, 825 F.2d at 93 (jurisdiction exists if the "outcome of the proceeding could conceivably have any effect on the estate being administered in bankruptcy") (quoting Pacor, 743 F.2d at 994 (emphasis added)).¹¹ This liberal interpretation of the jurisdictional grant has been noted favorably by a leading commentator on bankruptcy law. 5 Collier on Bankruptcy, ¶ 1142.01, at 1142-3...