Liquidating Tr. of the MPC Liquidating Trust v. Granite Fin. Solutions, Inc. (In re MPC Computers, LLC)

Decision Date07 February 2012
Docket NumberAdversary No. 10–54299 (PJW).,Bankruptcy No. 08–12667 (PJW).
Citation56 Bankr.Ct.Dec. 8,465 B.R. 384
PartiesIn re MPC COMPUTERS, LLC, et al., Debtors.The Liquidating Trustee of the MPC Liquidating Trust, Plaintiff, v. Granite Financial Solutions, Inc., d/b/a Granite Data Solutions, Defendant.
CourtU.S. Bankruptcy Court — District of Delaware


Howard A. Cohen, Drinker Biddle & Reath LLP, Wilmington, DE, Mark S. Indelicato, Edward L. Schnitzer, Hahn & Hessen LLP, New York, NY, for the MPC Liquidating Trust.

Frederick B. Rosner, Scott J. Leonhardt, Julia Klein, The Rosner Law Group LLC, Wilmington, DE, for Granite Financial Solutions, Inc. d/b/a Granite Data Solutions.


PETER J. WALSH, Bankruptcy Judge.

This opinion is with regard to Granite Financial Solutions, Inc.'s (Defendant) motion to dismiss (the “Motion”) this adversary proceeding. (Doc. # 19.) Defendant filed the Motion challenging this Court's subject matter jurisdiction pursuant to Fed.R.Civ.P. 12(b)(1).1 For the reasons described below, I will deny the Motion.2


The principal facts in this case are undisputed. In November 2008, MPC Computers and its subsidiaries (collectively the “Debtors”) filed voluntary petitions under chapter 11 of the Bankruptcy Code, 11 U.S.C. §§ 101 et seq. (Case No. 08–12667 (PJW).) On November 4, 2010, while the bankruptcy case was still pending, Debtors filed this action against Defendant for breach of contract and unjust enrichment. (Doc. # 1.) The claims arose from Defendant's alleged failure to pay for goods shipped by Debtors before the bankruptcy petitions were filed. (Compl. ¶¶ 8–26.)

On March 4, 2011, this Court entered an order (the “Confirmation Order”) confirming Debtors' Second Amended Plan of Liquidation (the “Plan”). (Case No. 08–12667 (PJW), Docs. # 1218 & 1344.) The Plan provides for the creation of the MPC Liquidating Trust (“Trust,” or as named in the Plan, “Liquidating Trust”) pursuant to an accompanying Liquidating Trust Agreement (“Trust Agreement”). (Case No. 08–12667 (PJW), Doc. # 1341.) Specifically, the Plan “effects a transfer of all of the Debtors' Assets 3 and liabilities into the newly formed Liquidating Trust created for the purposes, among others, of making distributions to the Holders of Allowed Claims and Interests, pursuing Causes of Action, and otherwise completing the liquidation of the Estates.” (Plan, at 1.) The Plan further provides that “Debtors and the [Official Committee of Unsecured Creditors] will form the Liquidating Trust to administer certain post-confirmation responsibilities under the Plan, including but not necessarily limited to, those responsibilities associated with the pursuit and collection of Litigation Claims 4 [and] Causes of Action.” ( Id. at 19.) Also on the effective date, Debtors were to “transfer, assign and deliver to the Liquidating Trust, the Liquidating Trust Assets 5 as specified in the Liquidating Trust Agreement.” ( Id. at 20.) The Trust Agreement, for its part, provides that [t]he Debtors hereby transfer, assign, and deliver to the MPC Liquidating Trust all of their right, title, and interest in the Trust Assets to the extent provided for in the Confirmation Order free and clear of any lien, Claim or interest in such property except as provided in the Plan.” (Trust Agreement § 1.1(a).) The Confirmation Order approved the Trust Agreement. (Confirmation Order, at 11–12 ¶¶ 1, 4.)

Additionally, the Confirmation Order provides for the automatic substitution of the Liquidation Trustee (herein Plaintiff) as plaintiff in the place of Debtors and/or the Official Committee of Unsecured Creditors “with respect to any and all pending Causes of Action.” (Confirmation Order, at 13 ¶ 6.) Consequently, the caption on this adversary proceeding was changed to: “The Liquidating Trustee of the MPC Computers Liquidating Trust v. Granite Financial Solutions, Inc. d/b/a Granite Data Solutions, Inc. (Doc. # 12.)


A court has jurisdiction to determine whether or not it has subject matter jurisdiction over a proceeding. In re BWI Liquidating Corp., 437 B.R. 160, 163 (Bankr.D.Del.2010) (citing Chicot Cnty. Drainage Dist. v. Baxter State Bank, 308 U.S. 371, 376–77, 60 S.Ct. 317, 84 L.Ed. 329 (1940)).

Standard of Review

A court may treat a motion to dismiss under Rule 12(b)(1) as a facial attack or a factual attack on subject matter jurisdiction. See In re SemCrude, L.P., 428 B.R. 82, 93 (Bankr.D.Del.2010) (citing Gould Elecs. Inc. v. United States, 220 F.3d 169, 176 (3d Cir.2000)). In reviewing a facial attack, which is a challenge to the sufficiency of pleading in the complaint, the court must ‘accept all well-pleaded allegations in the complaint as true and view them in the light most favorable to the plaintiff.’ Id. (citing In re Kaiser Grp. Int'l Inc., 399 F.3d 558, 561 (3d Cir.2005)). The factual attack challenges “the existence of subject matter jurisdiction in fact, quite apart from any pleadings.” Mortensen v. First Fed. Sav. & Loan Ass'n, 549 F.2d 884, 891 (3d Cir.1977). “In reviewing a factual attack, a court may consider evidence outside the pleadings.” Gould, 220 F.3d at 176. It is the plaintiff who bears the burden of proving that jurisdiction exists. Mortensen, 549 F.2d at 891.

Defendant here does not raise a challenge to the sufficiency of Plaintiff's pleadings, but rather attacks the factual grounds for jurisdiction. As Defendant has submitted as exhibits the Plan, the Trust Agreement, and the Confirmation Order, and Plaintiff has had the opportunity to submit his own evidence in response, I will treat this motion as a factual attack.


Defendant here makes three arguments in support of dismissal for lack of subject matter jurisdiction. First, Defendant argues that the Bankruptcy Court's entry of judgment in this matter would be the unconstitutional exercise of ‘judicial power’ since Plaintiff's claims are state law “suits at common law and clearly could exist outside the context of bankruptcy.” (Def.'s Br., at 10.) Defendant cites the recent Supreme Court decision Stern v. Marshall, ––– U.S. ––––, 131 S.Ct. 2594, 180 L.Ed.2d 475 (2011), to bolster its argument. ( Id. at 13–18.) Next, Defendant argues that because this action is being adjudicated post-confirmation, this Court does not have jurisdiction over the matter under the standard established in Binder v. Price Waterhouse & Co. LLP (In re Resorts Int'l, Inc.), 372 F.3d 154 (3d Cir.2004). ( Id. at 18–21.) Lastly, Defendant asserts that this Court cannot hear the action because Defendant has demanded a jury trial, and such a trial cannot be conducted in this Court. ( Id. at 23–25.) I will address each of these arguments in turn.

Applicability of Stern v. Marshall

In his opposition brief to Defendant's Motion, Plaintiff responds that Stern, upon which Defendant heavily relies, did not address the bankruptcy court's subject matter jurisdiction, but rather the court's ability to enter a final, binding judgment in a narrow category of state law actions. (Pl.'s Opp'n, at 4–7.) I agree with Plaintiff; as the Court itself said in Stern, the holding in that case was a narrow one. Stern, 131 S.Ct. at 2620 (We do not think the removal of counterclaims such as [the debtor's] from core bankruptcy jurisdiction meaningfully changes the division of labor in the current statute; we agree with the United States that the question presented here is a ‘narrow’ one.”).

The narrow question that the Stern Court was asked to determine involved a two-part inquiry: (1) whether the Bankruptcy Court had the statutory authority under 28 U.S.C. § 157(b) to issue a final judgment on [the debtor's] counterclaim; and (2) if so, whether conferring that authority on the Bankruptcy Court is constitutional.” Stern, 131 S.Ct. at 2600 (emphasis added). After a lengthy analysis of 28 U.S.C. § 157 and Article III of the Constitution, the Court held that “although the Bankruptcy Court had the statutory authority to enter judgment on [the bankruptcy estate's state law counterclaim], it lacked the constitutional authority to do so.” Id. at 2601 (emphasis added). In so holding, the Court in no way disturbed the bankruptcy court's jurisdiction to hear certain matters, which is a separate issue from the court's power to enter a final judgment.

Section 1334 of title 28 of the United States Code establishes the district court's bankruptcy jurisdiction. Section 1334 provides that “the district courts shall have original and exclusive jurisdiction of all cases under title 11 and “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(a) & (b) (2005). Section 157 of title 28 permits the district courts to refer to the bankruptcy judges in the district “any and all cases under title 11 and any or all proceedings arising under title 11 or arising in or related to a case under title 11.” 28 U.S.C. § 157(a).6 Where matters are so referred, a bankruptcy judge “may hear and determine all cases under title 11 and all core proceedings arising under title 11, or arising in a case under title 11 ... and may enter appropriate orders and judgments.” 28 U.S.C. § 157(b)(1). Section 157 also provides for the bankruptcy court's ability to hear—but not render a final judgment in—a proceeding that is non-core but still related to a bankruptcy case:

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.28 U.S.C. § 157(c)(1).

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