Pierce v. Breitburn Energy LP. (In re Breitburn Energy Partners L.P.)
| Decision Date | 07 May 2018 |
| Docket Number | Adv. Proc. No.: 16-01198 (SMB),Case No.: 16-11390 (SMB) |
| Parties | In re: BREITBURN ENERGY PARTNERS L.P., et al., Debtors. FELICIA PIERCE, Plaintiff, v. BREITBURN ENERGY LP., ENTITIES, Defendants. |
| Court | United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — Southern District of New York |
APPEARANCES:
FELICIA PIERCE
9764 Water Tree Drive
McKinney, Texas 75070
WEIL, GOTSHAL & MANGES LLP
767 Fifth Avenue
New York, New York 10153
Ray C. Schrock, P.C. Esq.
Stephen Karotkin, Esq.
Edward Soto, Esq.
Of CounselSTUART M. BERNSTEIN United States Bankruptcy Judge:
Felicia Pierce ("Pierce") filed this adversary proceeding to obtain declaratory, monetary and injunctive relief to stop the Debtors (collectively, "Breitburn") from drilling on certain property in Texas (the "Texas Property") that Pierce claimed to own or have an interest in. The Court concluded that her claims were barred by res judicata based on a decision by the County Court at Law of Gregg County, Texas (the "Texas Court") (see Memorandum Decision Granting Motion to Dismiss Complaint, dated Mar. 17, 2017 (the "Memorandum Decision") (ECF # 27),2 and entered judgment dismissing the complaint. (Judgment for Dismissal of Adversary Proceeding, dated March 24, 2017 (the "Judgment") (ECF # 29).)
Pierce has moved to vacate the Judgment and also seeks to assert a new claim. (Plaintiff's Motion Concerning Matters Related to Order Modifying the Automatic Stay, Motion to Vacate Judgment Due to Fraud on the Court and Plaintiff's Motion for Damages Due to Deprivation Caused by Debtor's Bankruptcy Filing for Reorganization, dated Dec. 22, 2017 (the "Motion") (ECF # 30).) Breitburn opposed the Motion, (Debtors' Response to Motion of Felicia Pierce, dated Feb. 12, 2018 ("Breitburn Response") (ECF # 38)), and Pierce filed several more submissions in support of her arguments and to request oral argument.3 For the reasons that follow,the Motion is denied.
The relevant facts and procedural history predating the Motion are set forth in the Memorandum Decision. Briefly, Pierce contended that she owned or had an interest in certain property located in Texas (the "Property") which she alleged was wrongfully acquired by A.A. King ("King") from Pierce's predecessors in interest earlier in the Twentieth Century. Prior to the commencement of these chapter 11 cases, she commenced litigation in Texas (the "Texas Action") seeking various forms of relief all dependent on the finding that she owned the Property or had an interest in it.
When the debtors filed these chapter 11 cases on March 15, 2016, several Breitburn entities were already defendants in the Texas Action. Pierce moved for relief from the automatic stay to continue the Texas Action, and limited stay relief was granted on consent. The relevant provisions of the Court's order stated:
(Order Pursuant to 11 U.S.C. § 362(d) Granting Limited Modification of the Automatic Stay, dated June 23, 2016 ("Stay Relief Order"), at 2 (emphasis in original) (ECF Main Doc. # 161).) The "Pierce Claims" referred to in the Stay Relief Order meant "[a]ll rightsand claims belonging solely to Pierce and asserted in or related to the Petition and the Texas Action." (Debtors' Response to Motion of Felicia Pierce for Relief from the Automatic Stay, dated June 22, 2016, at ¶ 6 (ECF Main Doc. 158); Stay Relief Order at 1 n. 2 ().)
Pierce then returned to the Texas Court to litigate the Pierce Claims. As a result of Pierce's failure despite repeated warnings by the Texas Court to join all parties and entities whose rights would be affected in the event the Court concluded that she owned or had an interest in the Property, the Texas Court granted the Texas defendants' second motion to dismiss the Texas Action with prejudice. Under Texas law, the dismissal with prejudice constituted an adjudication on the merits. Accordingly, I dismissed this adversary proceeding based on res judicata, (Memorandum Decision at 9), and the Court entered the Judgment.
The Court did not completely shut the door. The Memorandum Decision concluded that "[s]hould Pierce succeed in Texas in vacating, reversing or modifying the dismissal order in a manner that removes the res judicata bar, she may refile her adversary proceeding and Breitburn may renew its motion to dismiss or abstain." (Id. at 9-10.) However, the Texas Court of Appeals subsequently affirmed the judgment of the Texas Court dismissing the Texas Action with prejudice based upon Pierce's repeated failure to join necessary parties. Pierce v. Blalack, 535 S.W.3d 35, 43-44 (Tex. Ct. App. 2017).
Following the affirmance in Texas, Pierce filed the Motion which was clarified by Pierce at oral argument. She seeks to vacate the Judgment on the ground that the Texas Court lacked subject matter jurisdiction to render the judgment which formed the basis of this Court's dismissal on res judicata grounds and Breitburn's attorneys committed a fraud on this Court and on the Texas Court whose judgment I relied on in dismissing the adversary proceeding. Pierce also asserts a new claim for money damages under 18 U.S.C. § 242. Breitburn contends, among other things, that section 242 is part of the U.S. criminal code, and does not give rise to a private right of action. The Court need not decide this question because even if it did give Pierce a right of action, it is a newly asserted claim that does not provide a basis to vacate the Judgment.
Rule 60(b) of the Federal Rules of Civil Procedure, made applicable to this adversary proceeding with certain immaterial differences by Rule 9024 of the Federal Rules of Bankruptcy Procedure, governs motions to vacate final judgments. It provides in pertinent part:
Rule 60(d) further provides in pertinent part:
A. Lack of Jurisdiction
Pierce does not challenge this Court's jurisdiction to enter the Judgment. Instead, she argues that the effect of the automatic stay and the Stay Relief Order deprived the Texas Court of jurisdiction to render the judgment on which this Court relied in dismissing the adversary proceeding. A judgment rendered by a court lacking subject matter jurisdiction is void and subject to collateral attack. Da Silva v. Kinsho Int'l Corp., 229 F.3d 358, 362 (2d Cir. 2000). Similarly, with the exception of ministerial acts by the clerk of court, the continuation of pre-petition litigation and the entry of a judgment against the debtor in violation of the automatic stay are also void. Rexnord Holdings, Inc. v. Bidermann, 21 F.3d 522, 527 (2d Cir. 1994).
That said, Pierce's "voidness" argument is based on a misunderstanding of the Stay Relief Order. The Stay Relief Order is typical of the type entered in a bankruptcy case to expedite the resolution of all of the issues raised in prepetition litigation especially when they are intertwined with the issues involving non-debtor parties. While the automatic stay does not apply to non-debtors, the non-bankruptcy litigation cannot proceed as a practical matter without the debtor. A stay relief order of the type entered in this case allows the party suing the debtor to liquidate its claims or declare its rights, but also requires the party, now a judgment creditor, to return to the bankruptcy court to enforce the judgment. For example, if the non-bankruptcy court enters amoney judgment, the judgment creditor must collect that judgment through the claims allowance process - it cannot seize and liquidate property of the estate to satisfy the judgment. If the non-bankruptcy court declares rights, the judgment creditor must still return to the Bankruptcy Court to enforce those rights in accordance with the scheme laid out by the Bankruptcy Code.
The Stay Relief Order was designed to achieve this goal. The debtors were part of a much larger group of defendants and potential, additional defendants who could be adversely affected by a Texas Court determination that Pierce owned or had an interest in the Property. The Stay Relief Order expressly granted Pierce the right "to prosecute the Pierce Claims to judgment in the Texas Action so that the Pierce Claims, if any, may be liquidated." If Pierce prevailed, she would have to return to this Court to enforce her rights (or seek further stay relief to enforce her rights in Texas).
Pierce argues that she believed that the Stay Relief Order precluded her from litigating against...
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