In re Ames Dept. Stores, Inc., 95 Civ. 3890 (JGK).

• Decision Date: 31 December 1995
• Docket Number: 95 Civ. 3890 (JGK).
• Citation: In re Ames Dept. Stores, Inc., 190 B.R. 157 (S.D. N.Y. 1995)
• Parties: In re AMES DEPARTMENT STORES, INC., Debtor. The HUNNICUTT COMPANY, INC., Plaintiff, v. The TJX COMPANIES, INC., formerly known as Zayre Corp., Defendant.
• Court: U.S. District Court — Southern District of New York

190 B.R. 157 (1995)

In re AMES DEPARTMENT STORES, INC., Debtor The HUNNICUTT COMPANY, INC., Plaintiff, v. The TJX COMPANIES, INC., formerly known as Zayre Corp., Defendant.

95 Civ. 3890 (JGK).

United States District Court, S.D. New York.

December 31, 1995.

Peter W. Homer, Jay A. Gayoso, Homer & Bonner, P.A., Miami, Florida, Gary Gerrard, Gerrard & Powers, Coral Gables, Florida, for Plaintiff.

Douglas H. Meal, James W. Matthews, E. David Pemstein, Ropes & Gray, Boston, Massachusetts, for Defendant.

OPINION AND ORDER

KOELTL, District Judge:

This is an action by plaintiff The Hunnicutt Company, Inc. ("Hunnicutt") against defendant The TJX Companies, Inc. ("TJX") asserting state law claims for money damages arising from unpaid rent and property damage. Hunnicutt is the lessor of certain commercial property in Atlanta, Georgia. TJX is the guarantor on the lease. The tenant, Ames Department Stores, Inc. ("Ames") filed for bankruptcy in April 1990. The complaint in this matter was filed originally in the United States District Court for the Middle District of Georgia (Owen, J.) and was transferred subsequently to the bankruptcy court for the Southern District of New York by order dated January 12, 1995. Hunnicutt has moved (i) to transfer the case pursuant to 28 U.S.C. § 1631 to the United States District Court for the Middle District of Georgia to cure an alleged defect in jurisdiction in this Court, or, alternatively (ii) to withdraw the reference from the bankruptcy court for the Southern District of New York (Goodman, B.J.) pursuant to 28 U.S.C. § 157(d).

For the reasons that follow, Hunnicutt's motions to transfer the case for want of jurisdiction and to withdraw the reference from the bankruptcy court are denied.¹

I.

This case arises out of a 1971 lease (the "Lease") by Hunnicutt to Zayre of Georgia, Inc. TJX, known at that time as Zayre Corp, and the parent of Zayre of Georgia, guaranteed the lease on behalf of its subsidiary. In 1988, as part of the transfer of TJX's Zayre Stores Division, Ames assumed the Lease, agreed to indemnify TJX, and TJX became guarantor for Ames' obligations under the Lease. In 1990 Ames filed for bankruptcy under Chapter 11 in the Southern District for New York and rejected the Hunnicutt Lease pursuant to 11 U.S.C. § 365. Hunnicutt then filed a claim in the bankruptcy case against Ames for rent due under the Lease and for property damages to the premises. In due course, a reorganization plan (the "Reorganization Plan" or "Plan") was adopted and confirmed, and Ames proceeded to begin operations as a reorganized company. Hunnicutt's claims against Ames were to be resolved as part of a large number of such claims brought by various Ames landlords under the leases that Ames rejected in bankruptcy (the "Rejected Zayre Leases").

In 1994 Hunnicutt brought this action in the United States District Court for the Middle District of Georgia (Owen, J.) against TJX as guarantor of the Ames Lease. The complaint alleges essentially the same rent due and property damage claims first brought against Ames in the bankruptcy case. TJX moved to dismiss the case or transfer it to the bankruptcy court on the basis that it was related to the bankruptcy case and therefore within the jurisdiction retained by the bankruptcy court in the Reorganization Plan. Judge Owen ordered the case transferred, holding that the suit was actually a challenge to provisions of the Reorganization Plan and should have been brought as an appeal of the Plan in the Southern District of New York pursuant to 28 U.S.C. § 158(a). The Hunnicutt Co., Inc. v. The TJX Cos., Inc., C.A. 94-23-ATH (WDO), 1995 WL 800436 (M.D.Ga. Jan. 12, 1995) (Hunnicutt I). Judge Owen explained that:

The complaint filed by Hunnicutt in this court directly contradicts the jurisdictional retention clause of the Ames bankruptcy court. Thus for this court to hear Hunnicutt\'s complaint, it would be necessary to first determine the validity of the retention clause. Although this court has serious reservations about the validity of the jurisdictional retention clause, the court refuses to countenance the type of collateral attack advanced here by Hunnicutt.

Hunnicutt I, 1995 WL 800436, slip op. at 5 (citation omitted).

Immediately following the transfer, Hunnicutt petitioned the Court of Appeals for the Eleventh Circuit for a writ of mandamus vacating the transfer order. The petition was based on the absence of any expressed statutory authority for the transfer in Judge Owen's order. The Court of Appeals denied the writ. See In re: The Hunnicutt Co., Inc., No. 95-8061 (11th Cir. Mar. 30, 1995) (Hunnicutt II). Rather than reach the merits of the transfer, however, the Court determined that the bankruptcy court for the Southern District of New York had at least concurrent jurisdiction over Hunnicutt's claim. Hunnicutt II, slip op. at 6. Following the decision, Hunnicutt petitioned for rehearing and suggested rehearing en banc, and those petitions were both denied. See In re: The Hunnicutt Co., Inc., No. 95-8061 (11th Cir. May 16, 1995) (Hunnicutt III). Hunnicutt then brought the motions now pending.

II.

In its first motion Hunnicutt argues that there is no jurisdiction in this Court or the bankruptcy court for the Southern District of New York. Therefore, Hunnicutt maintains, this case should be transferred pursuant to 28 U.S.C. § 1631 to the Middle District of Georgia where Hunnicutt contends jurisdiction is proper. Section 1631 provides:

Whenever a civil action is filed in a court . . . and that court finds that there is a want of jurisdiction, the court shall, if it is in the interest of justice, transfer such action . . . to any other such court in which the action . . . could have been brought at the time it was filed . . . and the action . . . shall proceed as if it had been filed in . . . the court to which it is transferred. . . .

28 U.S.C. § 1631.

Hunnicutt argues that Judge Owen and the Court of Appeals for the Eleventh Circuit were wrong to conclude that the Ames bankruptcy court had even concurrent jurisdiction over this case. Consequently, this motion represents Hunnicutt's fourth attempt to persuade a court that its suit against TJX is not related to the Ames bankruptcy. After conducting an independent review of the law governing the bankruptcy court's jurisdiction, I reach the same conclusion as the other courts to which Hunnicutt has proffered this jurisdictional argument.

A.

Whether this matter is properly before this Court or the bankruptcy court at all is governed by 28 U.S.C. § 1334(b), which provides that:

The district courts shall have original but not exclusive jurisdiction of 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). In turn, such matters properly before the district court may be referred to the bankruptcy court. 28 U.S.C. § 157(a) (using same "related to" phrase). The question is whether Hunnicutt's suit against TJX for damages under the Lease is "related to" the Ames bankruptcy case which is pending before the bankruptcy court for the Southern District of New York.

As the Court of Appeals for the Second Circuit has explained:

The test for determining whether litigation has a significant connection with a pending bankruptcy proceeding is whether its outcome might have any "conceivable effect" on the bankrupt estate. If that question is answered affirmatively, the litigation falls within the "related to" jurisdiction of the bankruptcy court.

Publicker Indus. Inc. v. United States (In re Cuyahoga Equip. Corp.), 980 F.2d 110, 114 (2d Cir.1992) (citing Turner v. Ermiger (In re Turner), 724 F.2d 338, 340-41 (2d Cir. 1983)). The Court then cited Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3d Cir.1984) with respect to the phrase "conceivable effect." Cuyahoga, 980 F.2d at 114. In Pacor, the Court of Appeals for the Third Circuit enunciated the following test:

The usual articulation of the test for determining whether a civil proceeding is related to bankruptcy is whether the outcome of that proceeding could conceivably have any effect on the estate being administered in bankruptcy. . . . Thus, the proceeding need not necessarily be against the debtor or against the debtor\'s property. An action is related to the bankruptcy if the outcome 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.

Pacor, 743 F.2d at 994 (citations & emphasis omitted). See Celotex Corp. v. Edwards, ___ U.S. ___, ___ n. 6, 115 S.Ct. 1493, 1499 n. 6, 131 L.Ed.2d 403 (1995) (recognizing Pacor formulation adopted in First, Fourth, Fifth, Sixth, Eighth, Ninth, Tenth & Eleventh Circuits).

While some district courts had questioned whether the formulation in Turner of a "significant connection" was synonymous with the "conceivable effect" formulation set forth in Pacor, see, e.g., Weisman v. Southeast Hotel Properties, No. 91 Civ. 6232, 1992 WL 131080, at *3 (S.D.N.Y. June 1, 1992) (assuming Turner to be narrower than Pacor); Widewaters Roseland Ctr. Co. v. TJX Co., 135 B.R. 204, 206 & n. 4 (N.D.N.Y.1991) (same), it is now clear that there is no difference. See Cuyahoga, 980 F.2d at 114 (either "conceivable effect" or "any significant connection" establishes jurisdiction under § 1334(b), citing both Pacor and Turner); see also Nemsa Establishment, S.A. v. Viral Testing Systems Corp., No. 95 Civ. 0277, 1995 WL 489711 (S.D.N.Y. Aug. 15, 1995) (Preska, J.); Grillo v. Zurich Ins. Co., 170 B.R. 66, 68 (S.D.N.Y.1994) (Sweet, J.); Neuman v. Goldberg, 159 B.R. 681, 687 (S.D.N.Y. 1993) (Sweet, J.); Monaco v. United States Dep't of Educ. (In re County Sch., Inc.), 163 B.R. 424, 428 & n. 3 (Bankr.D.Conn.1994).

The Supreme Court, while neither endorsing nor adopting either formulation, appeared to establish the minimum required...