U.S. Trustee v. Gryphon at Stone Mansion, Inc.

Decision Date18 November 1998
Docket NumberNo. 97-3670,97-3670
Citation166 F.3d 552
Parties, Bankr. L. Rep. P 77,884 UNITED STATES TRUSTEE v. GRYPHON AT THE STONE MANSION, INC., d/b/a Erik Lewis Global d/b/a Wanner Van Helden, Appellant . Argued Under Third Circuit LAR 34.1(a)
CourtU.S. Court of Appeals — Third Circuit

H. Thomas Byron, III (Argued), U.S. Department of Justice, Civil Division, Appellate Staff, Washington, DC, for Appellee.

Daniel J. Gates, Haller & Gates, Warrendale, PA, Patricia L. Blais (Argued), Gates & Associates, Warrendale, PA, for Appellant.

Before: McKEE, RENDELL and WEIS, Circuit Judges.


RENDELL, Circuit Judge.

We are asked to determine whether the Bankruptcy Court had jurisdiction to require payment of postconfirmation trustee's fees before closing the debtor's case. We also address the threshold issue of our jurisdiction to consider this appeal in light of the District Court's remand of the matter to the Bankruptcy Court. We conclude that we have appellate jurisdiction and that the Bankruptcy Court did in fact have jurisdiction over the award of fees in question. Accordingly, we will affirm the District Court's order that so held. As discussed in detail below, the Bankruptcy Court had jurisdiction pursuant to 28 U.S.C. § 157 and 28 U.S.C. § 1334, and we have jurisdiction on appeal pursuant to 28 U.S.C. § 158(d). The District Court had jurisdiction to review the Bankruptcy Court's decision pursuant to 28 U.S.C. § 158(a).

Although the award of trustee's fees in bankruptcy cases has become a routine occurrence since § 1930 of Title 28 of the United States Code was first enacted in 1986, Congress's recent amendments to § 1930(a)(6) that imposed post-confirmation trustee's fees in all pending cases have created a controversy, with potential and actual legal and practical implications. Historically, § 1930(a)(6) set forth a scheme to impose the costs of the United States Trustee Program on its users. See H.R.Rep. No. 99-764, at 22 (1986), reprinted in 1986 U.S.C.C.A.N. 5227, 5234. The statute originally provided, in relevant part, that "a quarterly fee shall be paid to the United States trustee ... in each case under chapter 11 of title 11 ... for each quarter (including any fraction thereof) until a plan is confirmed or the case is converted or dismissed, whichever occurs first." Pub.L. No. 99-554, § 117, 100 Stat. 3088 (1986). On January 26, 1996, Congress amended the quarterly fee provision to require payment of fees postconfirmation, by striking out the language providing that the fees would accrue until "a plan is confirmed," so that the statute now reads that the fees should be paid "until the case is converted or dismissed, whichever occurs first." Pub.L. No. 104-91, § 101(a), 110 Stat. 7 (1996) & Pub.L. No. 104-99, § 211, 110 Stat. 26 (1996).

After Congress passed the January 26, 1996 amendment, there was some confusion as to whether the amendment applied to cases in which plans had been confirmed prior to the amendment. In response, Congress enacted a second amendment to the quarterly fee provision on September 30, 1996, providing that "the fees under 28 U.S.C. § 1930(a)(6) shall accrue and be payable from and after January 27, 1996, in all cases (including, without limitation, any cases pending as of that date), regardless of confirmation status of their plans." Pub.L. No. 104-208, § 109(d), 110 Stat. 3009 (1996). It is therefore clear that Congress has imposed a specific requirement that trustee's fees accrue and are payable after confirmation and up to closing of the case, which requirement applies to all cases pending as of January 1996. 1

In the specific case before us, the debtor confirmed its plan of reorganization in June of 1995. The plan provides for payment of all priority and administrative claims, sets forth the treatment of several specific creditors, and provides that unsecured creditors will receive a pro rata distribution of the remaining funds, to be paid in installments commencing 73 months from confirmation, which would be in July of 2001. 2 The debtor's plan is a liquidating plan; the debtor ceased its business and sold all of its assets as part of the plan and is distributing proceeds to creditors. The plan "estimates" that the fund available for unsecured creditors would be $83,042.40 and that unsecured creditors should receive 25-33% on account of their claims.

The debtor moved for entry of a final order to close the case in April 1996, and the trustee objected on the basis that post-confirmation trustee's fees had not been paid. 3 The Bankruptcy Court entered an order granting the debtor's motion but reserving the issue of what fees were due. At oral argument before us, it was conceded that the funds awaiting distribution to unsecured creditors are on hand with the debtor's agent and that the postconfirmation trustee's fees at issue are in the approximate amount of $750.

The en banc Bankruptcy Court ultimately determined that the bankruptcy court lacks jurisdiction over postconfirmation claims and the trustee must go elsewhere to pursue these claims. En route to reaching this conclusion, however, the court entertained numerous difficult questions posed, and problems presented, by the legislative scheme that, the court felt, created an obligation seemingly inconsistent with the provisions of the Bankruptcy Code and the practical and legal implications of belatedly imposing such fees in the context of a confirmed plan. 4

Although neither of the parties on appeal argues that the Bankruptcy Court's holding was broader than its jurisdictional pronouncement (nor does either seek a remand in order for the District Court to address other issues argued to the court), nonetheless, each of the parties urges its own view as to whether the fees in question are to be paid in the context of a confirmed reorganization plan. However, this issue has little bearing on our ruling as to the Bankruptcy Court's jurisdiction. It may, however, have some bearing on the question of our jurisdiction over this appeal, as becomes apparent in our discussion below.

The Bankruptcy Court reviewed cases commenting on the limited role of bankruptcy courts after confirmation, and drew from them the conclusion that its jurisdiction was limited to matters concerning the implementation or execution of a confirmed plan, and did not extend to enforcement of the post-confirmation fee provision. 5 The Bankruptcy Court focused its analysis on 11 U.S.C. § 1142(b), which provides that, in order to implement the plan, the bankruptcy court may direct the debtor to perform such acts as are necessary for the consummation of the confirmed plan. The District Court addressed the issue of the Bankruptcy Court's jurisdiction in the broad sense and determined that the Bankruptcy Court did in fact have jurisdiction over the award of the trustee's fees. The District Court accordingly remanded the case back to the Bankruptcy Court for further proceedings.

Our review of the District Court's decision is governed by the principle that we are in as good a position to evaluate the Bankruptcy Court's findings as the District Court was. We review the Bankruptcy Court's findings by the same standard that should have been employed by the District Court to determine if the District Court erred in its review. Universal Minerals, Inc. v. C.A. Hughes & Co., 669 F.2d 98, 102 (3d Cir.1981). Thus, our review of the legal questions presented in this case is plenary. First Jersey Nat'l Bank v. Brown (In re Brown), 951 F.2d 564, 567 (3d Cir.1991).

We will affirm the District Court's ruling and adopt its reasoning. The District Court correctly concluded that an analysis of the Bankruptcy Court's jurisdiction begins with 28 U.S.C. § 1334, not with 11 U.S.C. § 1142. See Belcufine v. Aloe, 112 F.3d 633, 636 (3d Cir.1997). Section 1334 provides that the district courts "shall have original and exclusive jurisdiction of all cases under title 11," and "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). The Bankruptcy Court, by virtue of referral by the District Court, has jurisdiction over cases falling under these categories. See 28 U.S.C. § 157(a)-(b).

We agree with the District Court's conclusion that the trustee's action to enforce the post-confirmation fee provision is "related to" or "arising in" the bankruptcy, and was thus within the Bankruptcy Court's jurisdiction. A matter is "related to" a chapter 11 case if it " 'could conceivably have any effect on the estate being administered in bankruptcy.' " Belcufine, 112 F.3d at 636 (quoting Pacor v. Higgins, 743 F.2d 984, 994 (3d Cir.1984)). Belcufine further defined the test as whether the outcome of the case " 'could alter the debtor's rights, liabilities, options, or freedom of action (either positively or negatively) and which in any way impacts upon the handling and administration of the bankrupt estate.' " Id. The trustee's award of fees clearly satisfies this test, because it directly relates to the debtor's liabilities--in fact it creates a liability--and could impact the handling and administration of the estate.

Although finding that the trustee's action is related to a bankruptcy case is sufficient in order to establish the Bankruptcy Court's jurisdiction, the District Court also found that the trustee's action might even be said to "arise in" bankruptcy. We agree. Proceedings "arise in" bankruptcy if they have no existence outside of the bankruptcy. See Wood v. Wood (In re Wood), 825 F.2d 90, 97 (5th Cir.1987). By definition, an action for trustee's fees pursuant to § 1930(a)(6) applies only in chapter 11 cases, during the pendency of the case. 6

Furthermore, 11 U.S.C. § 1142(b), the provision relied upon by the Bankruptcy Court to support its conclusion that its jurisdiction was limited, does not change the...

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