In re Kimball Hill, Inc.

• Decision Date: 10 June 2021
• Docket Number: Case No. 08bk10095
• Court: United States Bankruptcy Courts. Seventh Circuit. U.S. Bankruptcy Court — Northern District of Illinois
• Parties: IN RE: In re KIMBALL HILL, INC., et al., Debtors.

630 B.R. 294

IN RE: In re KIMBALL HILL, INC., et al.,¹ Debtors.

Case No. 08bk10095

United States Bankruptcy Court, N.D. Illinois, Eastern Division.

Signed June 10, 2021

Attorneys for TRG Venture Two, LLC: Douglas J. Lipke and William W. Thorsness, Vedder Price P.C., Chicago, IL, Edward B. Ruff, III, and Michael P. Turiello, Pretzel & Stouffer, Chartered, Chicago, IL

Attorneys for Fidelity and Deposit Company of Maryland: Margaret Anderson and David Koropp, Fox Swibel Levin & Carroll LLP, Chicago, IL

Attorney for KHI Post-Confirmation Trust: Mark L. Radtke, Cozen O'Connor, Chicago, IL

MEMORANDUM DECISION

Timothy A. Barnes, United States Bankruptcy Judge

The matter before the court comes on for consideration on TRG's Motion, Pursuant to Rules 52(b) and 59(e) of the Federal Rules of Civil Procedure, for Entry of an Order Granting TRG (I) Supplemental Damages; (II) Leave to Further Supplement Damages Through the Date of a Final, Non-Appealable Order[;] and (III) Related Relief [Dkt. No. 4396] (the "Supplemental Damages Motion") filed by TRG Venture Two, LLC ("TRG"), in light of this court's Memorandum Decision [Dkt. No. 4390] and Order [Dkt. No. 4388] (together, the "Decision on Remand"), In re Kimball Hill, Inc. , 620 B.R. 894 (Bankr. N.D. Ill. 2020) (Barnes, J.), wherein this court considered the District Court for the Northern District of Illinois (the "District Court")’s questions on remand and, for the reasons set forth in the Decision on Remand, found that the conduct of Fidelity and Deposit Company of Maryland ("F&D") continued to be sanctionable even when considered in light the recent United States Supreme Court decision in Taggart v. Lorenzen , ––– U.S. ––––, 139 S. Ct. 1795, 204 L.Ed.2d 129 (2019).

After the Decision on Remand but before F&D's renewed appeal thereof divested this court of jurisdiction, TRG filed the Supplemental Damages Motion seeking further damages as a result of alleged continuing conduct by F&D.

Having considered the Supplemental Damages Motion and the filings made in conjunction therewith, the court concludes that, while it has jurisdiction to hear the Supplemental Damages Motion, the request is improvident in light of the pending, second appeal and uncertain application of the court's earlier stay pending appeal and related bond. TRG has failed to convince the court that an award of supplemental damages is appropriate at this time. As a result, for the reasons stated herein, the Supplemental Damages Motion will be denied without prejudice.

JURISDICTION

The federal district courts have "original and exclusive jurisdiction" of all cases under title 11 of the United States Code, 11 U.S.C. §§ 101, et seq. (the "Bankruptcy Code"). 28 U.S.C. § 1334(a). The federal district courts also have "original but not exclusive jurisdiction" of all civil proceedings arising under the Bankruptcy Code or arising in or related to cases under the Bankruptcy Code. 28 U.S.C. § 1334(b). District courts may refer these cases to the bankruptcy judges for their districts. 28 U.S.C. § 157(a). In accordance with section 157(a), the District Court has referred all of its bankruptcy cases to the Bankruptcy Court for the Northern District of Illinois. N.D. Ill. Internal Operating Procedure 15(a).

A bankruptcy judge to whom a case has been referred has statutory authority to enter final judgment on any proceeding arising under the Bankruptcy Code or arising in a case under the Bankruptcy Code. 28 U.S.C. § 157(b)(1). Bankruptcy judges must therefore determine, on motion or sua sponte , whether a proceeding is a core proceeding or is otherwise related to a case under the Bankruptcy Code. 28 U.S.C. § 157(b)(3). As to the former, the bankruptcy court may hear and determine such matters. 28 U.S.C. § 157(b)(1). As to the latter, the bankruptcy court may hear the matters, but may not decide them without the consent of the parties. 28 U.S.C. §§ 157(b)(1), (c). Absent consent, the bankruptcy court must "submit proposed findings of fact and conclusions of law to the district court, and any final order or judgment shall be entered by the district judge after considering the bankruptcy judge's proposed findings and conclusions and after reviewing de novo those matters to which any party has timely and specifically objected." 28 U.S.C. § 157(c)(1).

In addition to the foregoing considerations, a bankruptcy judge must also have constitutional authority to hear and determine a matter. Stern v. Marshall, 564 U.S. 462, 131 S.Ct. 2594, 180 L.Ed.2d 475 (2011). Constitutional authority exists when a matter originates under the Bankruptcy Code or, in noncore matters, where the matter is either one that falls within the public rights exception, id ., or where the parties have consented, either expressly or impliedly, to the bankruptcy court hearing and determining the matter. See, e.g., Wellness Int'l Network, Ltd. v. Sharif , 575 U.S. 665, 669, 135 S.Ct. 1932, 191 L.Ed.2d 911 (2015) (parties may consent to a bankruptcy court's jurisdiction); Richer v. Morehead , 798 F.3d 487, 490 (7th Cir. 2015) (noting that "implied consent is good enough").

In this court's initial determinations of the underlying motion,² F&D argued that the bankruptcy court does not have jurisdiction or should have abstained from adjudicating the Damages Motion. The court rejected those arguments, finding instead that it possesses the jurisdiction and statutory and constitutional authority to determine the Damages Motion, In re Kimball Hill, Inc ., 565 B.R. 878, 888–91 (Bankr. N.D. Ill. 2017) (Barnes, J.) (" Kimball I"); In re Kimball Hill, Inc ., 595 B.R. 84, 89–90 (Bankr. N.D. Ill. 2019) (Barnes, J.) (" Kimball II"), and that abstention was not appropriate. Kimball I, 565 B.R. at 891–92. The District Court affirmed the bankruptcy court's findings regarding its authority and abstention. Memorandum Opinion and Order [Dkt. No. 4350], Fid. & Deposit Co. of Maryland v. TRG Venture Two , LLC , Case No. 19 C 389, 2019 WL 5208853, at *2–3 (N.D. Ill. Oct. 16, 2019) (the "Appellate Decision"). That determination is the law of this case.

In the Decision on Remand, the court considered and rejected further objections of F&D to this court's jurisdiction. As stated therein, "[t]o the extent that F&D[ ] attempts to assert again that this court may not determine the [Damages] Motion based on jurisdiction, statutory or constitutional authority or abstention theories, such an argument is not appropriate on remand.

United States v. Husband , 312 F.3d 247, 251 (7th Cir. 2002) ("[A]ny issue conclusively decided by this court on the first appeal is not remanded.") (citing United States v. Morris , 259 F.3d 894, 898 (7th Cir. 2001) )." Decision on Remand, 620 B.R. at 900.

It follows that if the court has the jurisdiction, statutory authority and constitutional authority to determine a dispute and nothing has changed since so doing, the court also has jurisdiction, statutory authority and constitutional authority to consider a request to modify its prior rulings. Gerba v. Nat'l Hellenic Museum , 351 F. Supp. 3d 1097, 1099 (N.D. Ill. 2018) (a court has the authority to revisit its rulings).

Pending a discussion below of the limitations on this court's jurisdiction when an appeal pends, accordingly and for the reasons set forth in the Decision on Remand, the court has the jurisdiction, statutory authority and constitutional authority to hear and determine the Supplemental Damages Motion.

BACKGROUND

This history of the dispute between TRG and F&D has been set forth by the court in the Decision on Remand and in both of its prior decisions addressing the Damages Motion. Id . at 900–01 ; Kimball I, 565 B.R. at 883–88 ; Kimball II, 595 B.R. at 90–91.

In context, in Kimball I the court found that F&D's actions on interpleading TRG, the successive owner to certain assets of the bankruptcy estate, into state court actions wherein F&D asserted claims that had been treated in, released and enjoined by the Debtors' Plan,³ F&D had violated the terms of the court's Confirmation Order⁴ and the Release and Plan Injunction⁵ contained in the Plan and the Confirmation Order. Kimball I, 565 B.R. at 902.

In Kimball II, the court determined and awarded damages as a remedial contempt sanction. Kimball II, 595 B.R. at 104. There it stated that:

... TRG seeks damages from the date of the Demand Letter to August 2, 2017. ....

At the Trial, TRG increased its request, asking for additional legal fees, consultant fees and project management fees from August 2, 2017 to July 30, 2018. No increase was sought for additional lost property value. No evidence was submitted to support the additional damages; therefore, the court will not rule on the increase in damages requested by TRG .

As a result, the court finds that the scope of the [Damages] Motion allows TRG to recover damages from date of the Demand Letter, August 9, 2011, to August 2, 2017.

Id . (emphasis added).

Following the entry of the order in Kimball II, but prior to filing its Notice of Appeal [Dkt. No. 4300] (the "First Appeal"), F&D moved for an order of this court staying its orders pending appeal. Motion for Stay Pending Appeal [Dkt. No. 4295]. That Motion was heard and granted on January 22, 2019. Order Granting Motion [of] Fidelity and Deposit Company of Maryland for Stay Pending Appeal [Dkt. No. 4306] (the "Stay Order"). The Stay Order provided that, in exchange for a supersedeas bond in the amount of $15 million,

[i]mmediately upon F&D's posting of the supersedeas bond, the following orders are stayed pending appeal; March 20, 2017 Memorandum Decision [Docket No. 4051], March 20, 2017 Order [Docket No. 4052], July 21, 2017 Order [Docket No. 4187], January 3, 2019 Memorandum Decision [Docket No. 4292] and January 3, 2019 Order [Docket No. 4293].

Stay Order, at ¶ 4. The Stay Order was prepared by counsel for F&D but reviewed by counsel to TRG. By its express terms, it stayed the decisions and orders in both Kimball I and Kimball II "pending appeal." Id .

In the First...