Fire Eagle L.L.C. v. Bischoff (In re Spillman Dev. Grp., Ltd.)

• Decision Date: 28 February 2013
• Docket Number: No. 11–51057.,11–51057.
• Parties: In the Matter of SPILLMAN DEVELOPMENT GROUP, LIMITED; Debtor. Fire Eagle L.L.C., Appellant v. Richard L. Bischoff; Spillman Investment Group, Limited; Donald C. Walden; Stephen W. Gurasich, Jr.; Robert H. West; Richard Topfer; Alan Topfer; Morton L. Topfer, Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

710 F.3d 299

In the Matter of SPILLMAN DEVELOPMENT GROUP, LIMITED; Debtor.Fire Eagle L.L.C., Appellant

v.Richard L. Bischoff; Spillman Investment Group, Limited; Donald C. Walden; Stephen W. Gurasich, Jr.; Robert H. West; Richard Topfer; Alan Topfer; Morton L. Topfer, Appellees.

No. 11–51057.

United States Court of Appeals, Fifth Circuit.

Feb. 28, 2013.

Richard William Martinez, New Orleans, LA, for Appellant.

Earl Landers Vickery, C. Daniel Roberts, C. Daniel Roberts & Associates, P.C., Mark Lee Hawkins, Armbrust & Brown, L.L.P., Austin, TX, for Appellees.

Appeal from the United States District Court for the Western District of Texas.

Before REAVLEY, DENNIS, and CLEMENT, Circuit Judges.

EDITH BROWN CLEMENT, Circuit Judge:

Fire Eagle L.L.C. (“Fire Eagle”) appeals the district court's decision affirming a bankruptcy court's grants of summary judgment in two consolidated matters. We AFFIRM.

FACTS AND PROCEEDINGS

Beginning in November 2001, Spillman Development Group, Ltd. (“SDG”) took out a series of loans to finance its construction of the Falconhead Golf Course in Bee Cave, Texas. American Bank of Texas (“the Bank”) loaned SDG an initial $7.2 million and later a further $900,000. Both of these loans (together, “the Senior Indebtedness”) were secured by liens on SDG's assets and limited guarantees executed by SDG principals. Each of these limited guarantees contained a forum-selection clause requiring that any suit brought by the guarantors be brought in Grayson County, Texas, which is located within the Eastern District of Texas. As further collateral for the Senior Indebtedness, the Spillman Investment Group, Ltd. (“SIG”) assigned its rights in a $1.2 million certificate of deposit to the Bank under the condition that the Bank would return the certificate to SIG upon payment of the Senior Indebtedness. In addition to the Senior Indebtedness, SDG also borrowed $4.1 million from Fire Eagle Neither the guarantees nor the certificate of deposit secured this junior debt owed to Fire Eagle.

On August 1, 2005, SDG filed for bankruptcy in the Western District of Texas, its principal creditors being the Bank and Fire Eagle. After disagreements between these two creditors over competing proposed Chapter 11 reorganization plans, Fire Eagle purchased the Senior Indebtedness from the Bank. At the time of this acquisition, Fire Eagle and the Bank stipulated that the outstanding balance owed on the Senior Indebtedness was approximately $9.1 million. Despite this consolidation amongst the creditors, the bankruptcy court refused to confirm either the reorganization plan proposed by Fire Eagle or that proposed by SDG and instead ordered an 11 U.S.C. § 363(b) sale of SDG's assets, which included the principal assets securing the Senior Indebtedness. The bidding on these assets progressed until an entity called Falcon Golf Course Partners, L.P. submitted a cash bid of $9.2 million. At this point, Fire Eagle entered a credit bid, pursuant to 11 U.S.C. § 363(k), of $9.3 million. The bankruptcy court accepted Fire Eagle's bid and later held, on SDG's motion, that Fire Eagle's credit bid had paid in full the Senior Indebtedness and that Fire Eagle had no deficiency claim against SDG's estate for the Senior Indebtedness.

SIG and all of the individual guarantors except for one (“the Guarantors”) then filed an adversary action in bankruptcy court in the Western District of Texas (“the Guarantors' Adversary”), seeking a declaratory judgment that, as a result of the sale, the Guarantors should be released from their obligations under the guaranty agreements and that the certificate of deposit should be returned to SIG. Fire Eagle moved to dismiss the suit on a number of grounds, including that the bankruptcy court lacked subject-matter jurisdiction and that venue was improper because of the forum-selection clauses contained within the guarantees. Fire Eagle also filed its own action against the remaining guarantor, Richard Bischoff, in district court in the Eastern District of Louisiana (“the Bischoff Adversary”). Fire Eagle contended in both suits that its credit bid had not paid in full the Senior Indebtedness and that it could therefore still collect against the guarantees.

The bankruptcy court in the Western District of Texas resolved the Guarantors' Adversary by denying Fire Eagle's motion to dismiss and granting summary judgment to the Guarantors, holding that, “This is not rocket science. The Senior Loan has been PAID!!!!” Fire Eagle moved the court to reconsider, and Bischoff moved to intervene. The bankruptcy court denied Fire Eagle's motion to reconsider and granted Bischoff's motion to intervene.

Shortly thereafter, in the Bischoff Adversary, the district court in the Eastern District of Louisiana granted Bischoff's motion to transfer venue to the Western District of Texas for referral of the case to the bankruptcy court there, noting that Bischoff had become a party to the near-resolved Guarantors' Adversary. The bankruptcy court then consolidated the Bischoff Adversary and the Guarantors' Adversary and granted Bischoff summary judgment. On SIG's motion, it also ordered the release of the certificate of deposit. After the bankruptcy court certified its rulings as final, Fire Eagle appealed. The district court affirmed the bankruptcy court's rulings, and Fire Eagle now appeals on numerous grounds.

STANDARD OF REVIEW

In bankruptcy appeals, “we perform the identical task as the district court, reviewing the bankruptcy court's findings of fact under the clearly erroneous standard and its conclusions of law de novo.” U.S. Abatement Corp. v. Mobil Exploration & Producing U.S. Inc. (In re U.S. Abatement Corp.), 79 F.3d 393, 397 (5th Cir.1996). We review de novo a district court's determination that a bankruptcy court had jurisdiction over a dispute. Bass v. Denney (In re Bass), 171 F.3d 1016, 1021 (5th Cir.1999). We review a district court's venue determinations for abuse of discretion only, Abrams Shell v. Shell Oil Co., 343 F.3d 482, 486 (5th Cir.2003), but a district court's decision as to the enforceability of a forum-selection clause is a legal issue that we review de novo, Haynsworth v. The Corp., 121 F.3d 956, 961 (5th Cir.1997).

DISCUSSION

Fire Eagle raises seven distinct issues on appeal, contending that: (1) the bankruptcy court lacked jurisdiction over the underlying adversary actions; (2) the bankruptcy court lacked the statutory authority to enter final judgments in the two adversary actions; (3) the bankruptcy court's entering final judgments in the two adversary actions was unconstitutional; (4) venue was improper in the Western District of Texas in light of the forum-selection clauses in the guaranty agreements; (5) the transfer of venue of the Bischoff Adversary to the Western District of Texas was improper; and (6) the bankruptcy court's grant of summary judgment was in error.

1. The bankruptcy court's jurisdiction

A bankruptcy court's jurisdiction extends to “all civil proceedings arising under title 11, or arising in or related to cases under title 11.” 28 U.S.C. § 1334(b); see also In re Bass, 171 F.3d at 1022. Proceedings are “related to” bankruptcy cases if their outcome “could conceivably have any effect on the estate being administered in bankruptcy.” In re Bass, 171 F.3d at 1022 (quoting Walker v. Cadle Co. (In re Walker), 51 F.3d 562, 569 (5th Cir.1995)). A “conceivable effect” in this context is any that “ could alter the debtor's rights, liabilities, options, or freedom of action (either positively or negatively) and which in any way impacts upon the handling and administration of the bankrupt estate.” FDIC v. Majestic Energy Corp. (In re Majestic Energy Corp.), 835 F.2d 87, 90 (5th Cir.1988) (emphasis added) (quoting Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3d Cir.1984)).

Fire Eagle contends that the bankruptcy court lacked jurisdiction because a bankruptcy court cannot “entertain collateral disputes between third parties that do not involve the bankrupt or its property” or “exercise jurisdiction over a private controversy which does not relate to matters pertaining to bankruptcy.” Blackburn–Bliss Trust v. Hudson Shipbuilders, Inc. (In re Hudson Shipbuilders, Inc.), 794 F.2d 1051, 1055 (5th Cir.1986) (quoting Uranga v. Geib (In re Paso Del Norte Oil Co.), 755 F.2d 421, 424 (5th Cir.1985)).

We disagree with Fire Eagle's characterization of this dispute. If Fire Eagle were to succeed on the merits of this suit and proceed to recover against the guarantees and the certificate of deposit, such a recovery would presumably diminish Fire Eagle's deficiency claim against the bankruptcy estate, conceivably allowing a greater recovery for other unsecured creditors against the estate. We have previously held that similar attenuated, hypothetical effects of third-party litigation can give rise to related-to bankruptcy jurisdiction. See, e.g., EOP–Colonnade of Dallas Ltd. P'ship v. Faulkner (In re Stonebridge Techs., Inc.), 430 F.3d 260, 266–67 (5th Cir.2005) (finding related-to jurisdiction over third-party claims where collection on those claims could affect “the need for [a third party] to seek reimbursement from [the] bankruptcy estate”). Therefore, we hold that the bankruptcy court's jurisdiction extended to these matters and decline to reverse the district court's holding to that effect.

2. The bankruptcy court's statutory authority

“Bankruptcy judges may hear and determine all cases under title 11 and all core proceedings arising under title 11, or arising in a case under title 11 ... and may enter appropriate orders and judgments [in such core proceedings].” 28 U.S.C. § 157(b)(1). However, while “[a] bankruptcy judge may hear a proceeding that is not a core proceeding but that is otherwise related to a case under title 11,” in such cases he shall merely “submit proposed findings of fact and conclusions of law to the district court, and any final order or judgment shall be entered by the...