In re Kewanee Boiler Corp., 86 B 16937.
| Decision Date | 02 January 2002 |
| Docket Number | No. 86 B 16937.,86 B 16937. |
| Citation | 270 BR 912 |
| Parties | In re KEWANEE BOILER CORPORATION, n/k/a/ Oakfabco, Inc., Debtor. |
| Court | U.S. Bankruptcy Court — Northern District of Illinois |
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Frederick W. Stein, Oak Brook, IL, for Plaintiff.
James K. Toohey, Ross & Hardies, Chicago, IL, for Defendant.
Barbara A. Sellinger, Chief Labor & Litigation Counsel, American Standard, Inc., Piscataway, NJ, Trustee.
The Chapter 11 bankruptcy Plan of Debtor Kewanee Boiler Corporation n/k/a/ Oakfabco, Inc. (hereinafter "Oakfabco") was confirmed on March 10, 1988, and the case was closed on March 14, 1997. Oakfabco moved to reopen its bankruptcy so as to file herein an Adversary Complaint against American Standard, Inc. ("ASI") for alleged violations of 11 U.S.C. § 524(a)(2). ASI objected. The bankruptcy case was reopened for the limited purpose of briefing whether jurisdiction would lie here to hear Oakfabco's proposed Adversary Complaint that it seeks leave to pursue. The parties filed herein on August 14, 2001, a Stipulation as to various exhibits pertinent to their arguments.
The parties dispute the scope of an agreement they entered into herein in 1994 to settle claims then filed by ASI, and ASI disputes jurisdiction here to resolve that dispute as part of Oakfabco's proposed Adversary proceeding. Those issues relate to tort claims of plaintiffs allegedly harmed by products manufactured pre-bankruptcy by Kewanee Boiler.
For reasons discussed below, Oakfabco's motion is now fully granted and leave is given by separate order to file and present the Adversary Complaint alleging violations of § 524(a)(2).
Prior to 1970, Kewanee Boiler was controlled by ASI. In 1970 ASI sold Kewanee Boiler's assets to Kewanee Boiler Corporation, a newly formed Illinois corporation. Under the Asset Purchase Agreement and a subsequent undertaking, Kewanee Boiler Corporation agreed to indemnify and hold ASI harmless for certain costs, liabilities, debts, or other obligations. Kewanee Boiler and its assets were subsequently sold again in 1975, and in 1986 both Kewanee Boiler and its corporate parent filed Chapter 11 Bankruptcy Petitions, including the above-titled case. During this bankruptcy, all of Kewanee's assets and its name were sold and the Debtor Kewanee Boiler was renamed Oakfabco, Inc. ASI was not scheduled as a creditor and apparently received no notice of the bankruptcy until several years after Plan confirmation when Oakfabco moved to amend its schedules to list ASI among a number of other unscheduled creditors.
In 1991, having been scheduled and notified about the bankruptcy, ASI filed a proof of claim herein for $200,000, alleging Oakfabco's liability under an indemnity agreement. Oakfabco objected to ASI's claim and ASI then filed a related Adversary Complaint. ASI and Oakfabco agreed to settle the ASI Adversary Complaint. ASI and Oakfabco agreed to settle the ASI Adversary Complaint and claim in May of 1994. Under their settlement agreement documented through correspondence, ASI was allowed an unsecured claim of $20,000. The parties then submitted two agreed Orders: one allowed the claim for $20,000 and the other dismissed the Adversary Complaint with prejudice. Both Orders were entered and docketed on June 7, 1994.1
In 1996, ASI began to submit claims to Oakfabco asserted under their indemnification contract referred to above. Those claims purportedly arose from products liability suits filed by persons claiming that they were injured by Kewanee boilers. Presently at least three state court cases pend claiming such injuries, and other similar cases have been settled or are anticipated in the future. For all of those cases, ASI seeks indemnity under the 1970 indemnification agreement.
Oakfabco contends that all of ASI's rights under the indemnification contract were discharged in 1988 by the Plan confirmation under § 1141(d)(1) of the Bankruptcy Code and that ASI is barred from pursuing these claims by the statutory discharge injunction arising under 11 U.S.C. § 524(a)(2). It also argues that the 1994 settlement orders resolved any issues now sought to be raised.
ASI counters that the 1994 settlement agreement did not, and could not encompass all possible future claims under the indemnification agreement, and that the effect of § 524(a)(2) could not by the 1988 confirmation order bar an unscheduled creditor having no notice of the bankruptcy case or plan.
The parties disagree on whether jurisdiction lies here to decide issues raised by the proposed Adversary Complaint. Oakfabco argues that bankruptcy courts have jurisdiction to enforce and interpret their own orders, and that this is the best forum to interpret the 1994 settlement agreement. However, ASI contends that: (1) jurisdiction lies in state court because Oakfabco has asserted its protection under § 1141(d)(1) as an affirmative defense there; (2) there is no basis for bankruptcy jurisdiction over the present dispute because the 1994 agreed orders did not incorporate the settlement agreement between the parties; and (3) state courts should be deferred to because of the complexity of issues and the extensive litigation that has already taken place in those courts (though no motion has yet been filed here for abstention). Although the parties were admonished to restrict their argument to the issue of jurisdiction, both parties argued the merits of their respective positions. Nonetheless, this Opinion focuses solely on the jurisdiction issue.
Core Jurisdiction lies over the Proposed Adversary Complaint
Congress has given federal district courts exclusive jurisdiction over bankruptcy cases: "Except as provided in subsection (b) of this section, the district court shall have original and exclusive jurisdiction of all cases under title 11." 28 U.S.C. § 1334(a). District courts have original but not exclusive jurisdiction to hear civil proceedings "arising under" Title 11 or those that "arise in a case" under Title 11 or are "related" to a case under Title 11. "Notwithstanding any Act of Congress that confers exclusive jurisdiction on a court or courts other than district courts, 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). District courts are authorized to refer bankruptcy cases to bankruptcy judges under 28 U.S.C. § 157(a). Pursuant thereto, this District has a standing referral order as to all bankruptcy cases under local Internal Operating Procedure 15(a).
A case "arises under" Title 11 when the cause of action is based on a right or remedy expressly provided by the Bankruptcy Code. 1 Collier on Bankruptcy ¶ 3.014ci (Matthew Bender 15th ed. rev.2001). Proceedings "arising in" a case under Title 11 include matters that, though not explicitly mentioned in the Code, would not exist outside of bankruptcy. Collier, supra, ¶ 3.014civ. Related matters are generally causes of action under state law that are imported into the bankruptcy because of their impact on the size of the debtor's estate, and hence the distribution to the debtor's creditors. Matter of United States Brass Corp., 110 F.3d 1261, 1269 (7th Cir.1997).
Proceedings arising in or under Title 11 are core proceedings, while related matters are noncore. Barnett v. Stern, 909 F.2d 973, 981 (7th Cir.1990) (citations omitted). The distinction between core and noncore proceedings is important because it defines the contours of a bankruptcy judges' power as either adjudicatory (core proceedings) or advisory (noncore proceedings) and determines whether the bankruptcy judge may or must abstain from hearing a matter. Phar-Mor, Inc. v. Coopers & Lybrand, 22 F.3d 1228, 1235 (3rd Cir.1994) (); 28 U.S.C. § 1334(c)(1) (permissive abstention); 28 U.S.C. § 1334(c)(2)(mandatory abstention).
Proceedings flowing from a core matter are themselves core matters. In re Williams, 256 B.R. 885, 892 (8th Cir. BAP 2001). Moreover, bankruptcy courts have core jurisdiction to interpret and enforce their orders. Cox v. Zale Delaware, Inc., 239 F.3d 910, 917 (7th Cir.2001); Matter of Weber, 25 F.3d 413, 416 (7th Cir.1994) ().
Section 1141(d)(1) provides in relevant part:
Pursuant to § 103(a) of the Code, the discharge allowed under § 1141(d)(1) is implemented by Section 524(a) which provides in relevant part:
11 U.S.C. § 524(a)(1)-(2).
Proceedings to enforce the statutory injunction under § 524(a)(2) are core proceedings under 28 U.S.C. § 157(b)(2)(O), and willful violations of § 524(a)(2) are punishable or otherwise enforceable by judges using authority under § 105(a) of the Code. In re Hardy, 97 F.3d 1384, 1389-90 (11th Cir.1996); In re Jacobs, 149 B.R. 983, 989 (Bankr. N.D.Okla.1993). A Seventh...
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