UNITED STATES BANKRUPTCY COURT 

EASTERN DISTRICT OF VIRGINIA 

Richmond Division

In re: Chapter 11 

Toys “R” Us, Inc., et al., Case. No. 17-34665-KLP 

 (Jointly Administered) 

 Debtors. 

Wayne Services Legacy Inc., 

 Plaintiff, 

v. Adv. Proceeding No. 19-03074-KLP 

Donlen Trust, 

 Defendant. 

MEMORANDUM OPINION 

 This matter comes on the motion (the “Motion”) of the Defendant, Donlen 

Trust, to dismiss the complaint filed by Wayne Services Legacy Inc. (“Wayne 

Services”) for lack of jurisdiction and for failure to state a claim. In the Motion, 

Donlen Trust alternatively seeks judgment on the pleadings. For the reasons stated 

below, the Motion is denied. 

Preliminary Statement 

Wayne Services, the successor entity to the Toys-Delaware Debtors1 (“ToysDelaware”) under a confirmed plan of reorganization, initiated this adversary 

proceeding by filing a complaint (the “Complaint”) seeking to recover funds 

allegedly owed pursuant to an agreement under which Donlen Trust agreed to pay 

1 The Toys-Delaware Debtors include Toys “R” Us-Delaware, Inc., TRU Guam, LLC, Toys 

Acquisition, LLC, Giraffe Holdings, LLC, TRU of Puerto Rico, Inc., and TRU-SVC, Inc. 

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Toys-Delaware a portion of the proceeds it derived from selling vehicles previously 

leased by Toys-Delaware (the “Proceeds”). The Complaint sets forth four counts: 

(i) turnover of the Proceeds pursuant to § 542 of the Bankruptcy Code;2

(ii) breach of contract for Donlen Trust’s failure to pay or credit the 

Proceeds to Wayne Services; 

(iii) unjust enrichment; and 

(iv) conversion. 

Donlen Trust filed a timely answer to the Complaint (the “Answer”). In 

addition to putting forth general denials and certain affirmative defenses, the 

Answer states that Donlen Trust does not waive its rights to (1) contest jurisdiction, 

(2) have only the District Court enter final orders regarding non-core matters, or (3) 

seek withdrawal of the reference. The Court’s pretrial order, entered on October 17, 

2019, required the filing of any motion to dismiss no later than November 7, 2019. 

On November 7, Donlen Trust filed the Motion, asserting that there is no 

basis for bankruptcy court jurisdiction because the Court lacks personal jurisdiction 

over Donlen Trust. Donlen Trust also contends that even if it is subject to this 

Court’s jurisdiction, Count One of the Complaint should be dismissed for failure to 

state a claim upon which relief can be granted and Counts Two, Three and Four of 

the Complaint should be dismissed for lack of subject matter jurisdiction. 

Wayne Services opposes the Motion,3 arguing that the Court has personal 

jurisdiction over Donlen Trust as a result of Donlen Trust’s having filed a proof of 

2 11 U.S.C. § 542. Unless noted to the contrary, all subsequent references to the Bankruptcy 

Code are to 11 U.S.C. §§ 101-1532. 

3 Wayne Services asserts that Donlen Trust has waived its right to file a motion to dismiss 

pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, made applicable by 

Bankruptcy Rule 7012(b), Fed. R. Bankr. P. 7012(b), because Donlen Trust did not file the 

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claim in the bankruptcy case and that subject matter jurisdiction exists pursuant to 

28 U.S.C. § 1334(b).4 More specifically, Wayne Services contends that Count One 

“arises under” Title 11 and Counts Two, Three and Four assert counterclaims to 

Donlen Trust’s proof of claim, thereby constituting “core” proceedings that “arise in” 

a bankruptcy case. 

The Complaint 

Wayne Services filed the Complaint as the wind-down entity for ToysDelaware under the confirmed Fourth Amended Chapter 11 Plans of Toys-Delaware 

and the Geoffrey Debtors5 (the “Plan”) that became effective on January 20, 2019. 

Under the Plan, Wayne Services is charged with collecting and administering assets 

Motion until two months after it filed the Answer. Although Rule 12(b)(6) contemplates 

that motions to dismiss should be filed before the filing of an answer, Rule 12(h) of the 

Federal Rules of Civil Procedure, made applicable by Fed. R. Bankr. P. 7012(b), which 

addresses the waiver or reservation of defenses, provides that the failure to state a claim 

upon which relief can be granted may be raised in any pleading allowed under Civil 

Procedure Rule 7(a), Fed. R. Civ. P. 7(a). Rule 7(a) includes answers as permissible 

pleadings, and the Answer expressly asserted this defense. See Telesca v. Long Island 

Hsng. P’Ship, Inc., 443 F. Supp. 2d 397, 405 (E.D.N.Y. 2006) (“Prior to filing its motion 

under Rule 12(b)(6), the Town of Islip filed an answer to the complaint. Although courts will 

generally rule on an untimely motion to dismiss that is filed after the answer, the 

defendant’s previously-filed answer must expressly preserve the defense.”). The Court’s 

pretrial order entered on October 17, 2019, provides that any motion to dismiss the 

Complaint to the extent not waived by the Defendant shall be filed no later than November 

7, 2019. Dkt. 13, ¶ 5. There was no waiver by Donlen Trust, and the Motion was timely filed 

on November 7, 2019. Accordingly, the Court will rule on the Motion. Alternatively, a postanswer Rule 12(b)(6) motion may be considered as a motion for judgment on the pleadings 

under Rule 12(c). See Hardy v. Lewis Gale Med. Ctr., LLC, 377 F. Supp. 3d 596, 605-06 

(W.D. Va. 2019). 

4 28 U.S.C. § 1334(b) provides that “the district courts 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.” 

5 The Geoffrey Debtors included Geoffrey Holdings, LLC, Geoffrey LLC, and Geoffrey 

International, LLC. 

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of Toys-Delaware.6 The Order Confirming the Plan (the “Confirmation Order”) 

provides that the Court retains jurisdiction over all matters arising out of and 

related to the chapter 11 cases of Toys-Delaware. 

Wayne Services commenced this action for the purpose of recovering any 

sums owed pursuant to the terms of a Master Motor Vehicle Lease Agreement (the 

“Lease”) dated August 4, 2009, pursuant to which Toys-Delaware, and Wayne 

Services as its successor, leased motor vehicles from Donlen Trust. The Complaint 

alleges that (1) pursuant to the Lease, leased vehicles were surrendered to Donlen 

Trust upon the expiration of the applicable lease term, whereupon the vehicles were 

sold by Donlen Trust and a portion of the Proceeds were credited to ToysDelaware/Wayne Services, (2) after the final leased vehicle was surrendered to 

Donlen Trust in February 2019, Wayne Services requested an accounting of sums 

due under the Lease and the turnover of the Proceeds then due, and (3) Donlen 

Trust refused to provide the accounting and the Proceeds. Wayne Services believes 

that the amount is not less than $200,000. 

The Factual Allegations. The specific facts alleged giving rise to the claims 

asserted in the Complaint are as follows. Pursuant to the Lease, Donlen Trust 

leased vehicles and certain equipment to Toys-Delaware for scheduled periods of 

time. At the end of each term, the subject vehicle would either be returned to 

6 Pursuant to the Fifth Amended Plan Supplement for the Toys Delaware Debtors’ and 

Geoffrey Debtors’ Plan, Case No. 17-34665-KLP, Dkt. 6451, the Toys-Delaware Debtors 

designated Wayne Services as the wind-down entity to, among other things, collect and 

administer the Toys-Delaware assets and resolve outstanding claims. 

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Donlen Trust or, if Donlen Trust consented, retained by Toys-Delaware. Vehicles 

that were surrendered were required to be sold within 60 days, after which Donlen 

Trust was obligated to provide an accounting of the sale to Toys-Delaware. If the 

sale proceeds exceeded a certain value, Donlen Trust was required to pay or credit a 

portion of those proceeds to Toys-Delaware. 

Pursuant to the Lease, Donlen Trust invoiced Toys-Delaware on the first of 

each month and Toys-Delaware paid the invoices on the tenth of each month. 

Payments included the monthly rental fees and additional monthly fees for 

maintenance, repairs, gas and other costs. As of the filing date of the bankruptcy 

cases, Toys-Delaware was current under the Lease. 

On March 22, 2018, the Court entered an order authorizing Toys-Delaware to 

wind down U.S. operations.7 In June of 2018, Toys-Delaware surrendered the 

majority of the leased vehicles to Donlen Trust. On March 23, 2018, Donlen Trust 

filed proof of claim number 3038 (the “Donlen Claim”) in the amount of $14,330.26, 

the amount it claims is due under the Lease. 

After the bankruptcy filings, the parties continued to perform in the ordinary 

course pursuant to the Lease. By the fall of 2018, Donlen Trust was no longer 

crediting Toys-Delaware’s invoices, although Toys-Delaware was continuing to 

surrender the leased vehicles and Donlen Trust was continuing to sell them. Upon 

inquiry, Donlen Trust advised Toys-Delaware that it would provide a global 

reconciliation after the final vehicle was surrendered. 

7 Case No. 17-34665-KLP, Dkt. 2344. 

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In February 2019, Wayne Services, the successor entity for Toys-Delaware, 

surrendered the last vehicle. Despite Wayne Services’ request, Donlen Trust has 

refused to provide an accounting and refused to remit the Proceeds. 

Claims for Relief. Count One of the Complaint alleges that Donlen Trust is in 

possession and control of the Proceeds that are due to Toys-Delaware under the 

Lease, that Toys-Delaware has a property interest in the Proceeds, that Wayne 

Services is obligated under the Plan and Confirmation Order to collect and 

administer the Proceeds, and that Donlen Trust has possession and control of the 

Proceeds. In Count One, Wayne Services seeks the turnover of the Proceeds 

pursuant to §§ 541 and 542 of the Bankruptcy Code. 

Count Two asserts a breach of contract under § 105 of the Bankruptcy Code 

and Illinois law. Wayne Service claims that Donlen Trust’s failure to provide an 

accounting or tender the Proceeds due under the Lease is a breach of the Lease that 

entitles Wayne Services to a judgment of no less than $200,000. 

Count Three of the Complaint asserts that Donlen Trust has been unjustly 

enriched by retaining the Proceeds due Wayne Services, and Count Four alleges 

conversion of the Proceeds by Donlen Trust. Wayne Services seeks a judgment 

against Donlen Trust in the amount of no less than $200,000 “to be proved at trial” 

and directing Donlen Trust to turn over and pay such sums to Wayne Services. 

Wayne Services also asks for entry of judgment against Donlen Trust awarding 

Wayne Services the costs, expenses, and attorneys’ fees incurred in pursuing this 

adversary proceeding. 

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Donlen Trust filed the Answer on September 19, 2019, asserting as 

“[a]ffirmative [d]efenses” that the Court lacks personal jurisdiction over Donlen 

Trust, that the Court lacks subject matter jurisdiction, that the Court is an 

improper venue, that Donlen Trust is entitled to a setoff, that each cause of action 

asserted fails to state a claim on which relief can be granted, that Wayne Services is 

barred from recovery under the doctrine of laches and the applicable statute of 

limitations, that Wayne Services lacks standing to bring the action, and that the 

claims are barred by the doctrines of estoppel, waiver, unjust enrichment and 

unclean hands. Donlen Trust also contends that the claims are barred due to preand post-petition defaults by the lessee, including a breach resulting from ToysDelaware’s rejection of the Lease. The Motion, seeking dismissal of the Complaint, 

includes as its grounds certain of the affirmative defenses set forth in the Answer – 

that the Court does not have personal jurisdiction over Donlen Trust, that Count 

One should be dismissed pursuant to Rule 12(b)(6) of the Federal Rules of Civil 

Procedure for failure to state a claim upon which relief can be granted, and that 

Counts Two, Three and Four of the Complaint should be dismissed pursuant to 

Rule 12(b)(1) of the Federal Rules of Civil Procedure on the basis that the Court 

lacks subject matter jurisdiction. 

Analysis 

The Court has personal jurisdiction over Donlen Trust 

In the Complaint, Wayne Services alleges that Donlen Trust filed the Donlen 

Claim asserting a general unsecured claim in the amount of $14,330.26 against 

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Toys-Delaware. In its Answer, Donlen Trust admits that it filed the Donlen Claim.8

Donlen Trust also affirmatively asserts pre-petition defaults and setoff rights 

against Wayne Services. 

By filing the Donlen Claim, Donlen Trust consented to personal jurisdiction 

in this Court. Siegel v. Cal. Self-Insurers’ Sec. Fund (In re Circuit City Stores, Inc.),

Adv. Pro. No. 15-03477-KRH, 2016 WL 1714515, at *7 (Bankr. E.D. Va. Apr. 26, 

2016) (“The general rule is that ‘by filing a claim against a bankruptcy estate the 

creditor triggers the process of allowance and disallowance of claims, thereby 

subjecting himself to the bankruptcy court’s equitable power.’ Langenkamp v. Culp, 

498 U.S. 42, 44 (1990).”); see also In re LandAmerica Fin. Grp., Inc., 08-35994-KRH, 

2013 WL 1819984, at *7, n.4 (Bankr. E.D. Va. Apr. 30, 2013) (defendant consented 

to personal jurisdiction by filing a proof of claim). In Circuit City, this Court stated 

that a creditor filing a proof of claim in a bankruptcy case has “availed itself of the 

laws and protections of this Court in order to receive payment from the . . . 

bankruptcy estate through the bankruptcy proceeding.” 2016 WL 1714515, at *7. A 

creditor who elects to participate in the estate “cannot have it both ways—asserting 

it can receive payment through this Court while conversely claiming that any 

8 In its reply brief in support of the motion, Dkt. 22, Donlen Trust equivocates, maintaining 

that the Donlen Clam is a combined proof of claim submitted on behalf of Donlen Trust and 

Donlen Corporation where only Donlen Corporation is claiming sums due (pp. 3-4). For 

purposes of determining whether the Court may exercise personal jurisdiction over Donlen 

Trust, such parsing of the proof of claim is unnecessary, because it is undisputed that 

Donlen Trust filed a proof of claim, thereby voluntarily submitting itself to the Court’s 

jurisdiction. 

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payment or claim asserted by the Trustee must be resolved by the state 

administrative process. This position is simply untenable.” Id. 

The fact that the Donlen Claim and the relief sought in the Complaint arise 

from the same course of dealing between the parties also supports personal and 

subject matter jurisdiction. The Complaint is based upon the Lease, which also 

serves as a basis for the Donlen Claim. The Complaint and the Donlen Claim 

concern the same subject matter, the parties’ respective rights under the Lease. 

The bankruptcy court for the Southern District of New York, in Buena Vista 

Television v. Adelphia Commc’ns Corp. (In re Adelphia Commc’ns Corp.), 307 B.R. 

404 (Bankr. S.D.N.Y. 2004), held that a creditor consents to personal jurisdiction in 

the bankruptcy court by filing a proof of claim and also included an extensive 

discussion of the rationale for continued bankruptcy court jurisdiction when 

disputes that may be less directly involved in the claims objection process arise. 

Although Adelphia dealt with a determination of whether claims asserted in an 

adversary proceeding were “core” in the context of a motion to withdraw the 

reference, Judge Gerber focused on the commonality of issues between the proofs of 

claim and the adversary proceeding, finding that because the claims allowance 

process is undeniably “core” pursuant to 28 U.S.C. § 157(b)(2)(B), and because the 

proceedings enumerated in § 157(b)(2) are explicitly not exclusive, post-petition 

claims arising out of the same transaction are also “core.” 

The Copyright Owners did not seriously argue, as they could not, that 

the submission to bankruptcy court jurisdiction that results from filing 

of a proof of claim is limited to the adjudication of the claim itself. 

Katchen, Langenkamp and their progeny uphold the imposition of 

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bankruptcy jurisdiction even when the estate “goes on offense,” as 

plaintiff, following the filing of a proof of claim, and consistently speak 

of submission to the jurisdiction of the bankruptcy court, or its equitable 

jurisdiction,to determine claims against estate, as a consequence of the 

filing of a proof of claim. They do not distinguish between matters in 

which the estate is a plaintiff seeking to recover additional assets (such 

as by recovery of preferences) and matters when the estate is defending 

a claim to share in the estate's own assets. The latter, which is what 

this Court has here, presents an even easier case. As the Supreme Court 

noted in Katchen, after the filing of a proof of claim: “This power to allow 

or to disallow claims includes ‘full power to inquire into the validity of 

any alleged debt or obligation of the bankrupt upon which a demand or 

a claim against the estate is based.’” 

307 B.R. 404, 419–20 (quoting Katchen v. Landy, 382 U.S. 323, 329 (1966)). 

Donlen Trust maintains the filing of the Donlen Claim conferred personal 

jurisdiction on this Court only to the extent necessary to determine whether the 

claim should be allowed and, because the deadline for objecting to claims expired 

without an objection, the claim is deemed allowed and is no longer at issue. 

According to Donlen Trust, the claim resolution process, including any 

counterclaims to the Donlen Claim, is complete. 

The status of the Donlen Claim is unclear from the record. In fact, the 

pleadings, including the assertion of setoff rights by Donlen Trust, suggest that the 

Donlen Claim will be considered in connection with this adversary proceeding. 

It is also evident from the pleadings that significant questions involving 

bankruptcy law are implicated, including lease rejection issues under § 365 of the 

Bankruptcy Code, whether the Lease is subject to § 365, potential setoff rights, and 

the consequences of Wayne Services’ action, or inaction, with respect to the Donlen 

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Claim and the Lease. Moreover, even if the Donlen Claim is no longer subject to 

objection, personal jurisdiction remains.9

The principal issue in Adelphia, withdrawal of the reference, is not currently 

under consideration. However, the commonality of issues identified by the court in 

Adelphia is present in this case, and the personal jurisdiction over Donlen Trust 

conferred upon this Court by the filing of the Donlen Claim should, and does, 

remain with this Court. Finding that Donlen Trust consented to this Court’s 

equitable jurisdiction to adjudicate this adversary proceeding when it filed the 

Donlen Claim, the Court need not address whether Donlen Trust has sufficient 

contacts with Virginia, or as Wayne Services contends, the United States, to 

establish personal jurisdiction or whether diversity jurisdiction exists. 

Count One of the Complaint states a claim upon which relief can be granted 

 A court ruling on a defendant’s motion to dismiss a complaint pursuant to 

Rule 12(b)(6) of the Federal Rules of Civil Procedure “must accept as true all of the 

factual allegations contained in the complaint.” Bell Atlantic Corp. v. Twombly, 550 

U.S. 544, 572 (2007) (quoting Swierkiewicz v. Sorema N.A., 534 U.S. 506, 508, n.1 

(2002); see also E.I. du Pont de Nemours & Co. v. Kolon Indus., Inc. 637 F.3d 435, 

9 The Court in Circuit City addressed the creditor’s attempt to divest the Court of 

jurisdiction by withdrawing its proof of claim, finding it of “no moment.” Siegel v. Cal. SelfInsurers’ Sec. Fund (In re Circuit City Stores, Inc.), Adv. Pro. No. 15-03477-KRH, 2016 WL 

1714515, at *7 (Bankr. E.D. Va. Apr. 26, 2016). “[A] creditor cannot seemingly un-pull the 

trigger of this Court’s equitable power by withdrawing its proof of claim.” Circuit City, 2016 

WL 1714515 at *7. The disposition of the Donlen Claim is unclear from the record, as is its 

effect on Wayne Services’ claim to the Proceeds. Nevertheless, similar to the creditor’s 

withdrawal of the proof of claim in Circuit City, the deemed allowance of the Donlen Claim, 

if true, is of “no moment.” Id. 

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440 (4th Cir. 2011). However, courts “are not bound to accept as true a legal 

conclusion couched as a factual allegation.” Papasan v. Allain, 478 U.S. 265, 286 

(1986). 

In the Complaint, Wayne Services states that Toys-Delaware has a legal and 

equitable interest in the Toy-Delaware Proceeds. Dkt. 1, ¶30. Donlen Trust argues 

that this allegation amounts to a legal conclusion rather than a factual allegation 

because the Plaintiff’s entitlement to payment has not been established, i.e., 

any right to payment would be contingent upon Toys-Delaware not being in default 

under the Lease. Donlen Trust argues that Toys-Delaware was, in fact, in default. 

 Section 542(b) of the Bankruptcy Code provides that “an entity that owes a 

debt that is property of the estate and that is matured, payable on demand, or 

payable on order, shall pay such debt to, or on the order of, the trustee, except to the 

extent that such debt may be offset under section 553 of this title against a claim 

against the debtor.” Wayne Services alleges that the Proceeds are property of the 

estate pursuant to §541 of the Bankruptcy Code. Wayne Services also contends that 

its claim has “matured” as required by § 542(b), that it has so alleged in the 

Complaint, and that this is sufficient to state a claim. 

In support of its position, Wayne Services cites Judge Huennekens’ opinion in 

Shaia v. Taylor (In re Connelly), 476 B.R. 223 (Bankr. E.D. Va. 2012). In that case, 

the chapter 7 trustee sought to recover on a bearer note.10 The complaint was filed 

10 In Shaia v. Taylor (In re Connelly), 476 B.R. 223 (Bankr. E.D. Va. 2012), the primary 

issue was whether the Court had constitutional authority to issue a final order. 

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under § 542 of the Bankruptcy Code. The defendants filed an answer denying their 

indebtedness and asserting affirmative defenses challenging the validity and 

enforceability of the note and asserting that the trustee’s claim was not a core 

proceeding. 

In addressing whether the adversary proceeding constituted a core 

proceeding under 28 U.S.C. § 157(b)(2)(E), Judge Huennekens first observed that 

under § 542(b), the debt underlying the turnover action must be “matured, payable 

on demand, or payable on order,” 11 U.S.C. § 542(b). He held that “matured” means 

“presently payable, as opposed to those [debts] that are contingent and become 

payable only upon the occurrence of a certain act or event.” Connelly, 476 B.R. at 

230 (quoting Smith v. McLeskey (In re Bay Vista of Va., Inc.), 394 B.R. 820, 837 

(Bankr. E.D. Va. 2008)). The trustee alleged that the note represented a mature 

obligation owed to the bankruptcy estate. The fact that the defendants asserted that 

they were not liable on the instrument was “simply not relevant” in Judge 

Huennekens’ view, so long as the complaint alleged the existence of a mature debt. 

394 B.R. at 837. “A cause of action is a turnover proceeding under § 542(b) . . . 

where it seeks the collection rather than creation or liquidation of a matured debt.” 

Id. Thus, he found the trustee’s action qualified as a turnover action under § 542(b) 

and a core proceeding under § 157(b)(2)(E). 

 Courts have recognized the impropriety of a turnover action when there is a 

legitimate debate over the bankruptcy estate’s entitlement to the property in 

question: 

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Of course, the turnover power can be improperly invoked, especially 

when it is used as a Trojan Horse for bringing garden variety contract 

claims; when the property in question is not already property of the 

estate; or when the turnover statute is used to recover assets with 

disputed title when the estate's claim of ownership is legitimately 

debatable. It is well established that the turnover power may not be used 

for such purposes. See, e.g., Fairfield Sentry, 458 B.R. at 683 

(“Numerous courts have therefore held that an action is non-core when 

property which is the subject of a significant dispute between the parties 

is sought to be recovered through a turnover action.... These actions are 

subject to significant dispute, resolution of which will determine 

whether the funds redeemed are in fact property of the Funds' estates.”) 

(citations and internal quotations omitted; emphasis added); Savage v. 

Mandl (In re Teligent), 325 B.R. 134, 137–38 (Bankr. S.D.N.Y. 2005) 

(Bernstein, C.J.) (“Teligent ”) (citing “settled law that the debtor cannot 

use the turnover provisions to liquidate contract disputes or otherwise 

demand assets whose title is in dispute”; other law holding that an 

action to determine the amount of a claimed debt to the estate that is, 

as yet, wholly disputed and unliquidated cannot properly be styled an 

action to turn over estate “property”; and other law holding that an 

action should be regarded as a turnover “only when there is no 

legitimate dispute over what is owed to the debtor”) (citations 

omitted); Shea & Gould v. Red Apple Companies, Inc. (In re Shea & 

Gould), 198 B.R. 861, 867 (Bankr. S.D.N.Y. 1996) (Garrity, J.) (issuing 

report and recommendation, instead of final judgment, in debtor's action 

to recover fees for legal services rendered to the debtor, where court was 

doubtful that claim was sufficiently “specific in its terms as to amount 

due and date payable,” and observing that “[a] turnover action may be 

inappropriate where the debtor's claim lacks such certainty”). 

Geron v. Peebler (In re Pali Holdings, Inc.), 488 B.R. 841, 851 n.39 (Bankr. S.D.N.Y. 

2013). Donlen Trust contends that this is just such a case, one involving a contract 

dispute in which there is a significant dispute over what, if anything, is owed. 

Donlen Trust claims that Count One is Wayne Services’ attempt to improperly 

establish bankruptcy court jurisdiction by fabricating a turnover action when there 

is no basis for such a characterization. 

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There is a flip side to Donlen Trust’s argument in that a defendant may 

dispute that a debt has matured in order to avoid litigating the matter in 

bankruptcy court. At this stage of the proceedings, when the Court must view the 

Complaint in the context of a motion to dismiss under Rule 12(b)(6), the allegations 

that the Proceeds are property of the estate,11 that the debt has matured and the 

Toys-Delaware Proceeds are due in a set amount (even if the amount has been 

computed but not disclosed by the defendant) is sufficient to plead an action under 

§ 542(b)(2). See also Nat’l Enters., Inc. v. Koger P’ship, Ltd. (In re Nat’l Enters., Inc.),

128 B.R. 956, 959 (E.D. Va. 1991) (“For an action to be a turnover proceeding, it is 

not relevant that the defendant disputes the existence of the debt by, perhaps, 

denying the complaint’s allegations, as long as those allegations state the existence 

of a mature debt.”). Accordingly, Count One will not be dismissed for failure to state 

a claim for relief. 

The Bankruptcy Court retained jurisdiction following Plan confirmation 

and Wayne Trust has standing to bring the Complaint 

A turnover action may be brought after plan confirmation if the confirmation 

order preserves the debtor’s, or its successor’s, right to bring turnover actions. See 

In re Crescent Res., LLC, 455 B.R. 115 (Bankr. W.D. Tex. 2011); Petrowax P.A., Inc. 

v. C & C Petroleum & Chem. Grp. (In re Petrowax P.A., Inc.), 200 B.R. 538 (Bankr. 

11 The commencement of a bankruptcy case creates an estate comprised of all legal and 

equitable interests of the debtor. 11 U.S.C. § 541(a); see In re Circuit City Stores, Inc., 2016 

WL 1714515, at *4. “What constitutes property of a bankruptcy estate is ultimately a 

question of federal bankruptcy law.” Id. The Complaint alleges the existence of Proceeds 

owed Wayne Trust under the Lease; “the right to recover such proceeds is property of the 

estate.” Id. at *8. 

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D. Del. 1996). Article IV, § L of the Plan preserves “any and all Causes of Action.” 

Article I, § A ¶ 35, defines “Causes of Action” as including “avoidance actions;” ¶ 29 

defines “Avoidance Actions” to include any and all causes of action “arising under 

Chapter 5 of the Bankruptcy Code . . . .” Chapter 5 includes § 542.12 The 

Confirmation Order states that the Court retains jurisdiction over all matters 

arising out of and related to the chapter 11 cases of Toys-Delaware, and the Plan 

preserves the right of Toys-Delaware’s successor, Wayne Services, to bring the 

turnover claim. 

 Donlen Trust cites Ice Cream Liquidation, Inc. v. Calip Dairies, Inc. (In re Ice 

Cream Liquidations, Inc.), 319 B.R. 324 (Bankr. D. Conn. 2005), as support for its 

contention that the failure of the Plan to make a specific reference to “turnover” or 

“§ 542,” or a claim against Donlen Trust, renders it insufficient to effectively 

preserve and transfer this § 542 action to Wayne Services. The court in Ice Cream

held that the successor entity lacked standing to bring a § 542 action because the 

plan in that case failed to include language identifying § 542, turnover actions, 

accounts receivable claims, and setoff invalidations as having been assigned to it. 

Id. at 333. However, unlike the present case, the plan in Ice Cream made no 

reference to the retention of any chapter 5 claims. In Ice Cream, the court found 

12 Chapter 5 of the Bankruptcy Code, 11 U.S.C. §§ 501-562, is entitled “Creditors, the 

Debtor, and the Estate” and contains provisions that give a bankruptcy trustee the ability 

to avoid certain prepetition transfers made by a debtor. The trustee’s avoidance powers 

“prevent[] the depletion of the estate, promote[] an equitable distribution of the debtor's 

assets, and protect[] creditors who advanced credit in ignorance of fraud.” Dzikowski v. N. 

Trust Bank of Fla., N.A. (In re Prudential of Fla. Leasing Inc.), 478 F.3d 1291, 1299 (11th 

Cir. 2007). 

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that there was no language in the confirmed plan that would have given the debtor 

the ability to pursue chapter 5 causes of action.13

Contrary to Donlen Trust’s assertion, Ice Cream’s ruling supports a finding 

that the preservation of claims language in the Plan is sufficient to entitle Wayne 

Service to bring the Complaint. The court in Ice Cream, citing the analysis in

Petrowax, 200 B.R. 538, acknowledged that turnover actions may be retained when 

the confirmed chapter 11 plan contains language that satisfies the requirements of 

Bankruptcy Code § 1123(b)(3)(B). 319 B.R. at 333. That section states that “a plan 

may ... provide for ... the retention and enforcement by the debtor . . . of any . . . 

claim or interest [belonging to the debtor or to the estate].” While the plan in Ice 

Cream was found to lack the requisite specificity, the same cannot be said of the 

Plan here, which specifically preserves causes of action under chapter 5 of the 

Bankruptcy Code. There is no question that § 542 is a cause of action under chapter 

5 of the Bankruptcy Code. 

Donlen Trust argues that the court’s conclusion in Ice Cream that the plan at 

issue lacked sufficient specificity is more in keeping with the “growing trend” in 

favor of “realistic and meaningful disclosure as to the rights being reserved and 

transferred.” Dkt. 37, p. 9-10. The Court finds no support for Donlen Trust’s 

contention that Ice Cream represents a jurisprudential shift toward requiring 

13 The plan instead authorized the debtor to “compromise or settle” any chapter 5 litigation. 

The court found that to be insufficient to conclude that the plan had provided for the 

retention of the chapter 5 claims. Ice Cream Liquidation, Inc. v. Calip Dairies, Inc. (In re Ice 

Cream Liquidations, Inc.), 319 B.R. 324, 333 n.14 (Bankr. D. Conn. 2005). 

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chapter 11 plans to itemize particular causes of action in order to preserve them. Ice 

Cream does not so hold, nor does it support Donlen Trust’s contention that the 

retention language in the Plan is inadequate to comply with § 1123(b)(3)(B). The 

Court finds that the Plan satisfies the requirements of § 1123(b)(3)(B) as to both the 

adequacy of the language retaining the § 542(b) cause of action against Donlen 

Trust and the standing of Wayne Services to enforce the claim as the representative 

of the estate.14

Regardless, in this instance, Crescent is more on point than Ice Cream. As in 

the present case, the plan in Crescent included language transferring causes of 

action under Chapter 5 of the Bankruptcy Code. The court found that the reference 

to Chapter 5 was sufficiently “specific and unequivocal” to preserve a turnover 

action despite the omission of a specific reference to § 542. 455 B.R at 130. In doing 

so, the court adopted the test established in Spicer v. Laguna Madre Oil & Gas II, 

LLC (Tex. Wyo. Drilling), 422 B.R. 612, 627-628 (Bankr. N.D. Tex. 2010), of whether 

the plan language is sufficient to put creditors on notice that the debtor intends to 

pursue the claim after confirmation. The court concluded that it would be “farfetched to believe that a creditor would not be on notice that the Trust anticipated 

pursuing turnover claims after confirmation.” 455 B.R. at 129-30. Likewise, it would 

be far-fetched to believe that Donlen Trust was not on notice that the Plan 

14 For the same reason, the Court rejects Donlen Trust’s contention that Count One of the 

Complaint fails because the estate ceased to exist upon confirmation, or the effective date, 

of the Plan. Even if the Toys-Delaware estate ceased to exist, Wayne Services and its 

entitlement to administer assets survived. 

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contemplated that turnover actions were going to be pursued post confirmation. The 

Complaint alleges that the parties continued to perform pursuant to the Lease after 

the bankruptcy filing and that Donlen Trust would provide a global reconciliation 

after the final vehicle was surrendered. Dkt. 1, ¶¶ 22-24. Assuming these 

allegations to be true, it would be even more improbable to think that Donlen Trust 

interpreted the retention language in the Plan to mean that Toys-Delaware was 

relinquishing its claim for turnover of the Proceeds.15 Thus, the language in the 

Plan was sufficient to put Donlen Trust on notice that the Toys-Delaware intended 

to pursue its turnover claim after confirmation. 

Donlen Trust is not entitled to judgment on the pleadings as to Count One 

Rule 12(c) of the Federal Rules of Civil Procedure, Fed. R. Civ. P. 12(c), made 

applicable in this adversary proceeding by Fed. R. Bankr. P. 7012(b), states that 

after the pleadings are closed, a party may move for judgment on the pleadings. 

Donlen Trust, without conceding that the Court lacks jurisdiction over Count One, 

alternatively seeks a judgment on the pleadings as to Count One in the event the 

Court declines to entertain its motion to dismiss Count One for failure to state a 

claim upon which relief may be granted. 

The Court, having considered the arguments before it, has determined that it 

will deny Donlen Trust’s Rule 12(b)(6) motion. For similar reasons, Donlen Trust’s 

15 The Plan also provides that no entity “may rely on the absence of a specific reference in 

the Plan, the Plan Supplement, or the Disclosure Statement to any Cause of Action against 

them as any indication that [Wayne Services] will not pursue any and all available Causes 

of Action against them.” Art. IV § L. 

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Rule 12(c) motion will also be denied.16 The record does not support the entry of 

judgment on the pleadings in favor of Donlen Trust. 

The Court has subject matter jurisdiction over Counts 

Two, Three and Four of the Complaint 

The Court has determined that Count One of the Complaint states a cause of 

action under § 542(b) and is a core proceeding pursuant to 28 U.S.C. 

§ 157(b)(2)(E).17 Counts Two, Three and Four involve claims under state law that 

are related to Count One. The Answer raises defenses that are inextricably tied to 

the Toys-Delaware bankruptcy, including setoff rights and alleged defaults 

stemming from pre- and post-bankruptcy acts of Toys-Delaware. Inasmuch as the 

list of core proceedings is not limited to those enumerated in § 157(b)(2), and all of 

the counts contained in the Complaint arise out of the same transaction as the core 

proceeding under Count One, there is a commonality of issues that renders Counts 

Two, Three and Four “core.” See text accompanying discussion of In re Adelphia 

Communications Corp, supra p. 9. See also Enron Corp. v. Citigroup, Inc. (In re 

Enron Corp.), 349 B.R. 108, 112 (Bankr. S.D.N.Y. 2006) (“courts have concluded 

that where a creditor has filed a proof of claim and initiated a proceeding that 

affects the allowance or disallowance of a claim, adversary proceedings commenced 

by the debtor and which are tantamount to a counterclaim are also properly 

16 “A Rule 12(c) motion for judgment on the pleadings utilizes the same standard as a 

12(b)(6) motion.” King v. Deutsche Bank Nat’l Trust Co., No. 3:10cv41, 2010 WL 3745599, at 

*1 (E.D. Va. Sept. 21, 2010). 

17 Allowance or disallowance of the Donlen Claim, as it relates to Donlen Trust’s assertion 

of setoff rights or otherwise, is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(B). 

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considered core.”); In re Connelly, 476 B.R. at 234 (By filing a proof of claim, the 

creditor “consent[s] to the resolution of these claims by this Court, including any 

state law issues that must be resolved in the process of adjudicating [its] claim.”). 

Again, this Court’s opinion in Circuit City provides guidance. There, the 

Court found that it had subject matter jurisdiction over the complaint’s state law 

claims because they were related to18 the bankruptcy case. 2016 WL 1714515, at *4. 

The state law claims were not only causes of action that constituted property of the 

estate but would “directly affect the distributions under the Liquidating Plan, and 

ha[d] a ‘close nexus’ to th[e] bankruptcy case.” Id.19 The same holds true in this 

case. Accordingly, the Court has subject matter jurisdiction over Counts Two, Three 

and Four of the Complaint. 28 U.S.C. § 157(b)(2)(C) and (O). 

Conclusion 

The Court has personal jurisdiction over Donlen Trust as a result of the proof 

of claim it filed in this proceeding. Count One of the Complaint states a cause of 

action under 11 U.S.C. § 542(b) and is a core proceeding pursuant to 28 U.S.C. 

§ 157(b)(2)(E). Counts Two, Three and Four of the Complaint bear a close nexus and 

are inextricably tied to Count One as all counts involve the Lease; therefore, the 

Court has subject matter jurisdiction over all counts of the Complaint. For these 

reasons, the Motion is denied. 

18 See 28 U.S.C. § 1334(b). 

19 Additionally, Donlen Trust, “consented to the core jurisdiction of this Court by filing its 

proof of claim and otherwise participating in the Debtors’ bankruptcy case,” as did the 

creditor in Circuit City. 2016 WL 1714515, at *4.

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A separate order will issue. 

Dated: January 28, 2020 /s/ Keith L. Phillips 

 United States Bankruptcy Judge 

Copies: 

John Ronald Smith 

Hunton Andrews Kurth LLP 

Riverfront Plaza, East Tower 

951 East Byrd Street 

Richmond, VA 23219 

Jennifer Ellen Wuebker 

Hunton Andrews Kurth LLP 

Riverfront Plaza, East Tower 

951 East Byrd Street 

Richmond, VA 23219 

David S Catuogno 

K&L Gates LLP 

One Newark Center 

10th Floor 

Newark, NJ 07102 

Amy J. Eldridge 

K&L Gates LLP 

1601 K Street NW 

Washington, DC 20009 

Entered on Docket: Jan 28 2020

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