IDEA Boardwalk, LLC v. Revel Entm't Grp., LLC (In re Revel AC, Inc.)
| Decision Date | 24 June 2015 |
| Docket Number | Case No. 14–22654 MBK,Ad. Pro. No. 14–01756 MBK |
| Citation | 532 B.R. 216 |
| Parties | In re: Revel AC, Inc., et al., Debtors. IDEA Boardwalk, LLC, Plaintiff v. Revel Entertainment Group, LLC, Defendant. |
| Court | U.S. Bankruptcy Court — District of New Jersey |
Stuart J. Moskovitz, Esq., Law Offices of Stuart J. Moskovitz, Esq., 819 Highway 33, Freehold, NJ 07728, Attorney for Polo North Country Club, Inc.
Jeffrey Cooper, Esq., Barry Roy, Esq., Rabinowitz, Lubetkin & Tully, L.L.C., 293 Eisenhower Parkway, Suite 100, Livingston, NJ 07039, Attorneys for IDEA Boardwalk, LLC
Warren J. Martin Jr., Esq., Porzio Bromberg & Newman P.C., 100 Southgate Parkway, P.O. Box 1997, Morristown, NJ 07962, Attorneys for Exhale Enterprises XXI, Inc., GRGAC1, LLC, GRGAC2, LLC, GRGAC3, LLC, Mussel Bar AC, LLC, PM Atlantic City, LLC, RJ Atlantic City, LLC and The Marshall Retail Group, LLC (“Amenity Tenants”)
Robert K. Dakis, Esq., Morrison Cohen, LLP, 909 3rd Avenue, New York, N.Y. 10022, Attorneys for American Cut AC Marc Forgione, Azure AC Allegretti, and Lugo AC, LLC (“LDV Tenants”)
Michael D. Sirota, Esq., Warren A. Usatine, Esq., Ryan T. Jareck, Esq., Cole Schotz P.C., 25 Main Street, P.O. Box 800, Hackensack, NJ 07602, Attorneys for the Official Committee of Unsecured Creditors
Michael Viscount, Esq., Samuel Israel, Esq., Fox Rothschild LLP, 2000 Market Street, 20th Floor, Philadelphia, PA 19103, John K. Cunningham, Esq., Richard S. Kebrdle, Esq., Kevin M. McGill, Esq., Jason N. Zakia, Esq., White & Case LLP, 200 South Biscayne Boulevard, Suite 4900, Miami, FL 33131, Attorneys for the Debtors
MICHAEL B. KAPLAN, U.S.B.J.
Before the Court is the cross motion (“Cross Motion”) of IDEA Boardwalk, LLC (“IDEA”), filed in connection with the Debtors' prior motion to reject certain leases and executory contracts, in which IDEA seeks an order clarifying its rights under 11 U.S.C. § 365(h). In rendering its decision herein, the Court also addresses the respective rights of the Amenity Tenants2 and the LDV Tenants3 , which subsequently joined in the Cross Motion (hereinafter, IDEA, the Amenity Tenants, and the LDV Tenants may be referred to, collectively, as “the Tenants”). Prior to the bankruptcy filing, each of the Tenants had entered into agreements (“Agreements”) with the Debtors, under which the Tenants operated various retail facilities on the Debtors' premises. Whether the Agreements are in fact true leases or memorializations of some other form of contractual relationship (e.g., management or joint venture agreements) is an issue in dispute that must be decided in order for the Court to determine whether the Tenants are entitled to protections afforded by § 365(h).
This matter also comes before the Court on the Debtors' motion to dismiss the first amended adversary complaint (“Complaint”) filed by IDEA against the Debtor/Defendant,4 seeking temporary and permanent injunctive and declaratory relief. The Court addresses only Count One of the Complaint, which consists of IDEA's request to preliminarily enjoin the Defendant from engaging in conduct that prevents IDEA from enjoying its possessory rights, including the right to utilities and necessary easements. The Court has heard oral argument on June 11, 2015 and June 24, 2015 and has accepted, in lieu of testimony, the following documents and accompanying exhibits:
For the reasons set forth below, the Court denies the Defendant's pending motion to dismiss and grants, in part, the relief sought by IDEA in its Cross Motion and in Count One of the Complaint.
On June 19, 2014, Revel AC, Inc. and its affiliated debtors and debtors in possession (“Debtors”)5 each filed a voluntary petition for relief under Chapter 11 of the United States Code (“Bankruptcy Code”).
On August 28, 2014, the Debtors filed a motion (the “Rejection Motion)” to reject the Agreements held with the Tenants. The Rejection Motion sought rejection of the Agreements nunc pro tunc to the Debtors' shutdown date of September 2, 2014 (“Shutdown Date”). On the Shutdown Date, the Debtors ceased operations and barred the Tenants from accessing the premises. Each of the Tenants gave notice of its intent to continue exercising possessory leasehold rights under § 365(h).
On April 6, 2015, the Court entered an order (“Sale Order”) approving the sale of the Debtors' assets to Polo North, pursuant to § 363 of the Bankruptcy Code. The sale closing occurred on the following day. Thereafter, on April 13, 2015, IDEA filed its Cross Motion, seeking clarification of its § 365(h) rights as they related to the pending Rejection Motion. Subsequently, on April 20, 2015, the Court entered an order granting the Rejection Motion.6
Polo North adopts the position originally set forth by the Debtor/Defendant, that the Tenants' § 365(h) elections were invalid because the Agreements are not true leases. Polo North contends that the Agreements are either management or joint venture agreements, and, consequently, there are no possessory rights capable of being retained by the Tenants. As such, the Agreements would not fall within the purview of § 365(h). Needless to say, the Tenants maintain that the dictates of § 365(h) do apply because the Agreements are indeed true leases. At this juncture, the parties seek a determination of their respective rights. For the reasons set forth below, the Court grants IDEA's Cross Motion in part, by reaffirming the applicability of § 365(h) with regard to the rejected Agreements.
On September 3, 2014, IDEA filed its initial verified complaint, which commenced an adversary proceeding against the Debtor/Defendant. As noted above, as a consequence of the § 363 sale, Polo North is now deemed the Defendant in this action. On September 26, 2014, IDEA filed its first amended Complaint. In Count One of the Complaint, IDEA seeks to preliminarily enjoin the Defendant from engaging in conduct that prevents IDEA from enjoying its possessory rights, including the right to utilities and necessary easements. On October 13, 2014, the Debtors filed a motion to dismiss the Complaint.
The Court has jurisdiction over both the contested matter and complaint under 28 U.S.C. §§ 1334(a) and 157(a) and the Standing Order of the United States District Court dated July 10, 1984, as amended October 17, 2013, referring all bankruptcy cases to the bankruptcy court.
In Stoe v. Flaherty, 436 F.3d 209 (3d Cir.2006), the Third Circuit outlined the bankruptcy court's jurisdiction as follows:
Bankruptcy jurisdiction extends to four types of title 11 matters: (1) cases “under” title 11; (2) proceedings “arising under” title 11; (3) proceedings “arising in” a case under title 11; and (4) proceedings “related to” a case under title 11. In re Combustion Eng'g, Inc., 391 F.3d 190, 225 (3d Cir.2005). The category of cases “under” title 11 “refers merely to the bankruptcy petition itself.” Id. at 225–26 n. 38 (quotation and citation omitted). A case “arises under” title 11 “if it invokes a substantive right provided by title 11.” Torkelsen v. Maggio (In re Guild & Gallery Plus, Inc.), 72 F.3d 1171, 1178 (3d Cir.1996). Bankruptcy “arising under” jurisdiction is analogous to 28 U.S.C. § 1331, which provides for original jurisdiction in district courts “of all civil actions arising under the Constitution, laws, or treaties of the United States.” 1 Collier on Bankruptcy § 3.01[4][c][i] at 3–21–22 (15th ed. rev. 2005); see also Wood v. Wood (Matter of Wood), 825 F.2d 90, 96–97 (5th Cir.1987). The category of proceedings “arising in” bankruptcy cases “includes such things as administrative matters, orders to turn over property of the estate and determinations of the validity, extent, or priority of liens.” 1 Collier on Bankruptcy § 3.01[4][c][iv] at 3–31 (quotations and footnotes omitted). Proceedings “arise in” a bankruptcy case, “if they have no existence outside of the bankruptcy.” United States Trustee v. Gryphon at the Stone Mansion, Inc., 166 F.3d 552, 556 (3d Cir.1999). Finally, a proceeding is “related to” a bankruptcy case if “the outcome of that proceeding could conceivably have any effect on the estate being administered in bankruptcy.” In re Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3d Cir.1984) ; see also In re Federal–Mogul Global, Inc., 300 F.3d 368, 381 (3d Cir.2002) ().
These matters are core proceedings within the meaning of 28 U.S.C. § 157(b)(2)(A), (N), and (O), and these matters “arise under” title 11. In In re Bell, 476 B.R. 168, 175 (Bankr.E.D.Pa.2012), the court explained that “arising under” jurisdiction includes any proceeding which invokes a substantive right under the Bankruptcy Code. Indeed, the current action is one which involves the substantive rights granted by § 365(h). See In re Ciena Capital LLC, 2009 WL 2905759, at *4 (Bankr. S.D.N.Y. July 28, 2009) ().
A proceeding that arises under title 11 is also described as one that “involve[s] a cause of action created or determined by a provision of title 11.” In re Ciena Capital LLC, 2009 WL 2905759, at *5. In Ciena Capital LLC, the debtor subleased a portion of its property to Alstra, and then rejected the lease. Among other things, Alstra sought a declaration regarding its § 365(h) rights. The court held that:
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