In re Ice Cream Liquidation, Inc.

• Decision Date: 31 July 2002
• Docket Number: No. 01-34624 (LMW).,01-34624 (LMW).
• Citation: 281 B.R. 154
• Court: U.S. Bankruptcy Court — District of Connecticut
• Parties: In re ICE CREAM LIQUIDATION, INC. fka Fieldbrook Farms, Inc., Debtor. Beth Stranz, Corrinne Kemp and Elizabeth Stokes, Movants, v. Ice Cream Liquidation, Inc. fka Fieldbrook Farms, Inc., Respondent.

281 B.R. 154

In re ICE CREAM LIQUIDATION, INC. fka Fieldbrook Farms, Inc., Debtor Beth Stranz, Corrinne Kemp and Elizabeth Stokes, Movants, v. Ice Cream Liquidation, Inc. fka Fieldbrook Farms, Inc., Respondent.

No. 01-34624 (LMW).

United States Bankruptcy Court, D. Connecticut.

July 31, 2002.

Anna Marie Richmond, Esq., Richard H. Wyssling, Esq., Buffalo, NY, Byron Paul Yost, Esq., Westport, CT, for Movants.

Barry S. Feigenbaum, Esq., Rogin, Nassau, Caplan, Lassman & Hirtle, LLC, Hartford, CT, for Respondent/Debtor.

Wanda Borges, Esq., Syosset, NY, for The Official Committee of Unsecured Creditors.

MEMORANDUM OF DECISION RE: MOTION FOR RELIEF FROM STAY, OBJECTION TO CLAIM, JURY TRIAL DEMAND AND ABSTENTION

LORRAINE MURPHY WEIL, Bankruptcy Judge.

Before the court are the following:

• Motion for Relief from Automatic Stay (Doc. I.D. No. 271, the "Lift Stay Motion") filed by Beth Stranz, Corrinne Kemp and Elizabeth Stokes (collectively, the "Plaintiffs") seeking modification of the automatic stay to permit them to prosecute to judgment against the above-referenced debtor certain litigation (the "Litigation") pending in the United States District Court for the Western District of New York (the "New York District Court");

• Debtor's Objection to Motion for Relief from Automatic Stay filed by Beth Stranz, Corrine [sic] Kemp and Elizabeth Stokes (Doc. I.D. No. 288, the "Stay Motion Objection");

• Debtor's Objection to Claim filed by Beth Stranz, Corrine [sic] Kemp and Elizabeth Stokes (Doc. I.D. No. 289, the "Claim Objection");

• Plaintiffs' Response to Objection to Proof of Claim and Demand for Jury Trial (Doc. I.D. No. 297, the "Jury Demand and Abstention Request") pursuant to which, among other things, the Plaintiffs assert a right to trial by jury in respect of the Claim Objection and request that this court abstain from adjudicating the Claim Objection in favor of the Litigation proceedings; and

• Debtor's Objection to "Response to Objection to Proof of Claim and Demand for Jury Trial" filed by Beth Stranz, Corrine [sic] Kemp and Elizabeth Stokes (Doc. I.D. No. 299, the "Jury Demand and Abstention Objection") pursuant to which the Debtor objects to the Jury Demand and Abstention Request.¹

Hearings having been held in respect of the foregoing and the matters having been argued and briefed fully by the parties (including the Committee (as defined below)), the matters are ripe for the disposition provided for below.²

I. BACKGROUND

This Chapter 11 case was commenced by voluntary petition filed by Fieldbrook Farms, Inc. (as later renamed, the "Debtor") on September 21, 2001. An official committee of unsecured creditors (the "Committee") has been appointed and is serving in this case. Pursuant to an order of this court dated December 20, 2001 and after an auction sale, the Debtor sold substantially all of its assets to a third party. In fulfillment of the terms of that sale, the Debtor changed its name to "Ice Cream Liquidation, Inc." On July 2, 2002, this court issued an order approving the First Amended Disclosure Statement Pursuant to Section 1125 of the Bankruptcy Code submitted jointly by the Committee and the Debtor. A confirmation hearing with respect to the related First Amended Joint Liquidating Plan of Reorganization is scheduled for August 13, 2002.

On December 3, 2001, the Plaintiffs filed in this case a proof of claim (Number 299, the "Proof of Claim") asserting a general unsecured claim in the amount of $6,000,000 with respect to the Litigation. If allowed in full, the referenced claim will be the largest claim in this case. Annexed to the Proof of Claim is a copy of the complaint (the "Complaint") in the Litigation.³ The Complaint names as defendants certain persons including Dunkirk Ice Cream Co., Inc. ("Dunkirk") and the Debtor. Each of the Plaintiffs is a former employee of Dunkirk. On behalf of each Plaintiff and in addition to other alleged claims, the Complaint alleges claims for "[s]exual [h]arassment" against Dunkirk under 42 U.S.C. § 2000e and/or Section 296 of the New York Executive Law. The Complaint contains thirty-five (35) counts. A very brief summary of the relevant counts of the Complaint is annexed as Schedule A hereto. With regard to all Plaintiffs, Count XXXIII alleges a claim against the Debtor (under its prior name, Fieldbrook Farms, Inc.) for "Successor Liability" in respect of all claims alleged by the Plaintiffs against defendant Dunkirk (the "Successor Liability Claim").⁴

Discovery in the Litigation is complete. There are cross-motions for summary judgment (the "Cross-Motions") pending in the Litigation; one of them is the Debtor's motion for summary judgment on the Successor Liability Claim. The Cross-Motions have been briefed fully and await only oral argument and a decision on whether supplemental responses to the Plaintiffs' second request for admissions and a certain affidavit should be stricken (the "Motion To Strike") from the record with respect to the Successor Liability Claim to make them ripe for decision.⁵ A jury trial is scheduled in the Litigation.

Pursuant to the Lift Stay Motion, the Plaintiffs seek relief from stay to prosecute the Litigation to judgment against the Debtor and, pursuant to the Jury Demand and Abstention Request, seek to have this court abstain from adjudicating the Claim Objection in favor of the Litigation proceedings. The Debtor objects to the foregoing in toto. However, as an alternative position, the Debtor urges that this court should at least exercise jurisdiction over the Successor Liability Claim. That, the Debtor urges, would allow the Debtor to establish (if it can) that it cannot be held liable as a successor for any liability Dunkirk may have to the Plaintiffs in respect of the Complaint, and thus permit the estate to avoid a needless (and expensive) defense in a potentially lengthy trial with regard to Dunkirk's liability to the Plaintiffs.⁶

For the reasons set forth below, the court determines that it should grant relief from stay in respect of, and abstain from, all relevant proceedings in respect of the Successor Liability Claim.

II. DISCUSSION

A. Jurisdiction in Respect of Relief from Stay/Abstention

During the course of briefing these matters, the Plaintiffs raised the issue of whether the Successor Liability Claim constitutes a "personal injury tort claim" within the purview of 28 U.S.C. § 157.⁷ That issue has been briefed and argued by the parties at some length and its resolution could be an essential first step here. That is because (as discussed more fully below), to the extent that the Successor Liability Claim is a "personal injury tort claim", this court is without jurisdiction to set venue for any "trial" on such claim. See 28 U.S.C. § 157(b)(5). Cf. Maritime Asbestosis Legal Clinic v. United States Lines, Inc. (In re United States Lines, Inc.), 216 F.3d 228, 234 (2d Cir.2000) ("We agree with the district court insofar as it determined that the bankruptcy court lacked the power to set venue under Section 157(b)(5). There is nothing in the language of Section 157(b)(5) to suggest that a bankruptcy court can determine venue [for trial in respect of `personal injury tort claims'] ...."). The foregoing raises the following question: Would a grant of relief from stay and abstention (under 28 U.S.C. § 1334(c)) in order to allow prepetition proceedings to proceed in a federal district court outside of this district in respect of a "personal injury tort claim" be an invalid exercise by this court of the exclusive jurisdiction enjoyed by the district court for this district (the "Connecticut District Court") to set venue in respect of such claims? At least one court has implied that it would be. See In re Poole Funeral Chapel, Inc., 79 B.R. 37 (Bankr.N.D.Ala.1987). The court in Poole Funeral Chapel reasoned as follows:

The 1984 amendments made it abundantly clear that Congress intended to remove dispositive control of personal injury [tort] ... claims from bankruptcy courts. 28 U.S.C. § 157(b)(2)(B), (O), and (5). Congress placed the duty on the district court to decide whether to try personal injury tort and wrongful death cases as mandated by 28 U.S.C. § 157(b)(5), or to abstain under 28 U.S.C. § 1334(c)(1) and permit them to be tried in state courts. It would thwart that Congressional purpose if bankruptcy judges made that choice under the guise of exercising core jurisdiction to terminate the stay when terminating the stay is the only choice available to bankruptcy judges.

In re Poole Funeral Chapel, Inc., 79 B.R. at 39 n. 9.

Other courts expressly or impliedly reject the Poole Funeral Chapel rationale. See, e.g., In re New York Medical Group, P.C., 265 B.R. 408 (Bankr.S.D.N.Y.2001). See also Santa Clara County Fair Ass'n, Inc. v. Sanders (In re Santa Clara County Fair Ass'n, Inc.), 180 B.R. 564 (9th Cir. BAP 1995); Calumet National Bank v. Levine, 179 B.R. 117 (N.D.Ind.1995). In In New York Medical Group, P.C., Chief Judge Bernstein reasoned as follows:

The bankruptcy court cannot exercise the authority granted to the district court under § 157(b)(5). In re United States Lines, Inc., 216 F.3d [228, 234 (2d Cir.2000)] .... Nevertheless, the bankruptcy court's decision to grant stay relief is akin to abstention under § 157(b)(5) since both leave the case to be tried in the appropriate non-bankruptcy court. The two powers are distinct, however, and can be reconciled. Thus, while the bankruptcy court has the power to grant relief from the automatic stay to permit the commencement or continuation of personal injury litigation in a state or federal court, see United States Lines, Inc., 1998 WL 382023, at *2, its decision does not affect the debtor's right to move in the district court under § 157(b)(5) to transfer the litigation in accordance with that provision.

In re New York Medical Group, P.C., 265 B.R. at 412.

This court believes that the New York Medical Group, P.C. view is more...