In re Malden Mills Industries, Inc., Bankruptcy No. 01-47214-JBR.

• Decision Date: 10 May 2002
• Docket Number: Adversary No. 01-4433.,Bankruptcy No. 01-47215-JBR.,Bankruptcy No. 01-47217-JBR.,Bankruptcy No. 01-47216-JBR.,Bankruptcy No. 01-47214-JBR.
• Citation: 277 B.R. 449
• Parties: In re MALDEN MILLS INDUSTRIES, INC., et al., Debtors. Commerce Industry Insurance Company, et al. v. E.I. Du Pont De Nemours & Company, et al.
• Court: U.S. Bankruptcy Court — District of Massachusetts

277 B.R. 449

In re MALDEN MILLS INDUSTRIES, INC., et al., Debtors.

Commerce Industry Insurance Company, et al. v. E.I. Du Pont De Nemours & Company, et al.

Bankruptcy No. 01-47214-JBR.

Bankruptcy No. 01-47215-JBR.

Bankruptcy No. 01-47216-JBR.

Bankruptcy No. 01-47217-JBR.

Adversary No. 01-4433.

United States Bankruptcy Court, D. Massachusetts.

May 10, 2002.

COPYRIGHT MATERIAL OMITTED

James T. Hargrove, Leonard H. Freiman, Alan M. Reisch, Goulston & Storrs, P.C., Boston, MA, for Commerce and Industry Insurance Company, et al.

Paul Michienzie, David B. Russman, John C. Barker, Michienzie & Sawin LLC, Boston, MA, for Fenwal defendants.

John A. Donovan, Jr., Kevin G. Kenneally, Andrew J. Botti, Donovan Hatem, Boston, MA, for Detector Electronics Corp.

MEMORANDUM OF DECISION

JOEL B. ROSENTHAL, Bankruptcy Judge.

This matter came before the Court on the three motions by certain of the defendants (the "Defendants")¹ for summary judgment (the "Summary Judgment Motions").² The Defendants, each of whom

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has been sued, for among other thing, negligence and breach of contract in connection with a fire that destroyed Malden Mills Industries, Inc.'s manufacturing plant, allege that they are entitled to summary judgment as a matter of law because they had no duty to advise or warn Malden Mills, Inc. (the "Debtor" and collectively with Commerce Industry Insurance Company and Federal Insurance Company, the "Plaintiffs") of the hazards inherent in its flock manufacturing process nor did their acts or omissions cause the destruction of the Plaintiff's property. In addition the Fenwal Defendants allege that they "either had nothing to do with Malden Mills, or do not exist as legal entities capable of being sued." The Plaintiffs oppose the entry of summary judgment because of alleged disputed issues of material fact.

The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157(a) and 1334. The adversary proceeding is a non-core proceeding and the Plaintiffs have requested a jury trial. The Defendants do not consent to entry of final orders by or a jury trial in the Bankruptcy Court. This Court, however, has jurisdiction to enter orders denying summary judgment and did so previously in connection with the Summary Judgment Motions on April 12, 2002 (the "Summary Judgment Orders") for the reasons stated on the record. Subsequently the Defendants appealed and attacked this Court's jurisdiction to enter those orders. Although this Court has jurisdiction to enter denials of summary judgment as such orders are not final, nevertheless, given the contentious nature of these proceedings and what the Court views as the Defendants' persistent attempts to stall and delay a trial in this matter, the Court vacated the Summary Judgment Orders to afford the parties an opportunity for oral argument which was held on May 1, 2002. The Plaintiffs filed a motion seeking reconsideration of the orders vacating the Summary Judgment Orders and a hearing on the motion to reconsider was held on May 1, 2002. The Court will now issue new orders denying summary judgment for the reasons set forth herein so that, in the event an appellate court were to question the validity of this Court's orders denying summary judgment, the appellate court could undertake a de novo review of those orders with the benefit of more complete findings and rulings before it. Before turning to the merits of the case, however, a brief examination of the Defendants' frivolous attack on this Court's jurisdiction to deny summary judgment without recommendation to the District Court will illuminate the frivolity of certain positions espoused by the Defendants including their contention that there are no disputes of material fact to be decided by a trier of fact.

JURISDICTION TO DENY SUMMARY JUDGMENT

As an Article I court, a bankruptcy court has constitutionally limited jurisdiction. Northern Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 87, 102 S.Ct. 2858, 2880, 73 L.Ed.2d 598 (1982). A bankruptcy court may hear and determine all core proceedings; that is, proceedings that are "integral to the core bankruptcy function of restructuring debtor-creditor rights ... [including] all necessary aspects of a bankruptcy case." Arnold Print Works, Inc. v. Apkin (In re Arnold Print Works, Inc.), 815 F.2d 165, 167 (1st Cir.1987) (citation omitted). The nonexclusive list of core proceedings set forth in 28 U.S.C. § 157(b)(2) illustrates the type of proceedings that fall under the rubric of "core." "But as to noncore matters, bankruptcy courts are precluded from making final determinations absent consent of the parties. 28 U.S.C. § 157(c)(2)." Spookyworld v. Town of Berlin (In re Spookyworld), 266 B.R. 1, 6 (Bankr.D.Mass.2001) (emphasis added). Noncore issues may be characterized as "state or federal claims that arise between parties within a bankruptcy proceeding... [which could] survive outside bankruptcy, and in the absence of bankruptcy, would have been initiated in a state or district court'". Id., quoting Ralls v. Docktor Pet Centers, Inc., 177 B.R. 420, 424-25 (D.Mass.1995). Moreover disputes arising from prepetition events are often noncore. Id.

The parties hereto agree that the adversary proceeding is noncore. This litigation can and did exist separate from the bankruptcy prior to the commencement of the case. Its essence is a garden variety negligence/product liability/contract case governed by Massachusetts law. The Plaintiffs removed the case to this Court only because it is related to the Debtor's chapter 11 proceeding.³ Therefore this Court's power to enter orders is circumscribed by the parameters of 28 U.S.C. § 157(c)(1).⁴

Section 157(c)(1) expressly provides:

A bankruptcy judge may hear a proceeding that is not a core proceeding but that is otherwise related to a case under title 11. In such proceeding, the bankruptcy judge shall 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.

The jurisdictional line is clear: non-final orders are entered in this Court without report to the District Court; final orders may only be entered by the District Court.

The Defendants, while confessing a lack of familiarity with and understanding of bankruptcy and bankruptcy jurisdiction, concede that the validity of this Court's orders in the adversary proceeding turn on the issue of finality. A final order is one which "is dispositive of the entire case." BLACK'S LAW DICTIONARY 1123 (7th ed.1999). A judgment is "a court's final determination of the rights and obligations of the parties in the case," id. 846, while a final judgment is "a court's last action that settles the rights of the parties and disposes of all issues in controversy, except for the award of costs (and sometimes attorneys' fees) and enforcement of the judgment." Id. 847. A denial of summary judgment is none of these.

"As applied in bankruptcy, `final orders' are those that resolve some discrete dispute within the larger bankruptcy case. The disposition of a discrete dispute generally is considered to mean the resolution of an adversary proceeding within the bankruptcy case." Robinson v. Robinson (In re Robinson), 194 B.R. 697, 700 (Bankr.N.D.Ga.1996) (citations omitted).

"The denial of a motion for summary judgment is an interlocutory ruling which establishes no more than that on the summary judgment record there are fact issues which should be submitted to the trier of fact." Kutner Buick, Inc. v. American Motors Corp., 868 F.2d 614, 619 (3d Cir.1989). Generally, appellate courts "do not have jurisdiction to hear an appeal from a denial of a motion for summary judgment because the denials are not final judgments." Rogers v. Fair, 902 F.2d 140, 142 (1st Cir.1990) (reviewing denial of summary judgment when coupled with denial of qualified immunity); Acevedo-Garcia v. Vera-Monroig, 204 F.3d 1, 10 (1st Cir.2000). See 28 U.S.C. §§ 1291 and 1292. It is clear that the Summary Judgment Orders are not final and therefore are within the scope of authority granted to this Court.

The Defendants, however, argue that the orders are "important" and because the Summary Judgment Motions are potentially dispositive of the entire case (in the event that the Court were to have granted them), they should only be acted on by the District Court. This position eviscerates bankruptcy courts' noncore jurisdiction and would, if accepted, increase challenges to jurisdiction as parties and courts wrestled with determining which orders are "important." An extreme result of the Defendants' argument might well be that every discovery ruling in a case where the monetary stakes are high, such as the instant one, would have to be reported. Such a result is not required by the Constitution or the language of Section 157(c)(1).

Moreover the Defendants misread Spookyworld which they argue stands for the proposition that a bankruptcy court lacks jurisdiction to rule on a summary judgment motion in a noncore matter. In that case, Judge Boroff granted summary judgment on the core claims and recommended that summary judgment be entered on the noncore claims as well. There is no question that the grant of summary judgment on the noncore claims, coupled with the grant of summary judgment on the core claims, would dispose of the entire case and therefore be a final order. Therefore Judge Boroff correctly noted he could only make recommendations to the District Court.

Because it is evident that this Court has jurisdiction to enter orders denying the Summary Judgment Motions, for the reasons set forth below, it will do so.

BACKGROUND

On the evening of December 11, 1995 an explosion and fire erupted at and destroyed the Debtor's flock fabric...