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RECOMMENDED FOR FULL-TEXT PUBLICATION

Pursuant to Sixth Circuit Rule 206

ELECTRONIC CITATION: 2004 FED App. 0113P (6th Cir.)

File Name: 04a0113p.06

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

_________________

SALLY PRATT, et al.,

Plaintiffs-Appellants/

Cross-Appellees,

v.

VENTAS, INC., a/k/a Vencor,

Inc., et al.,

 Defendants-Appellees/

Cross-Appellants,

JOHN DOES, #1 through #5,

Defendant-Appellee.

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Nos. 02-5632/5638

Appeal from the United States District Court

for the Western District of Kentucky at Louisville.

No. 01-00317—John G. Heyburn II, Chief District Judge.

Argued: March 18, 2004

Decided and Filed: April 20, 2004 

2 Pratt, et al. v.

Ventas, Inc., et al.

Nos. 02-5632/5638

*William W Schwarzer, Senior United States District Judge for the

Northern District of California, sitting by designation.

Before: COLE and GILMAN, Circuit Judges;

SCHWARZER, Senior District Judge.*

_________________

COUNSEL

ARGUED: James M. Morris, MORRIS & MORRIS,

Lexington, Kentucky, for Appellants. David B. Tachau,

TACHAU, MADDOX, HOVIOUS & DICKENS, Louisville,

Kentucky, for Appellees. ON BRIEF: James M. Morris,

Sharon K. Morris, MORRIS & MORRIS, Lexington,

Kentucky, for Appellants. David B. Tachau, John D. Dyche,

TACHAU, MADDOX, HOVIOUS & DICKENS, Louisville,

Kentucky, for Appellees.

_________________

OPINION

_________________

RONALD LEE GILMAN, Circuit Judge. Sally Pratt and

others (Plaintiffs) filed various state-law claims against a

large health care provider, Vencor, Inc., which subsequently

spun off a subsidiary with the same name as the parent

company, and then changed the name of the parent company

to Ventas, Inc. When “New Vencor,” the subsidiary, filed for

Chapter 11 bankruptcy in the Bankruptcy Court for the

District of Delaware, Ventas agreed to make substantial

financial contributionstowards New Vencor’s reorganization.

In exchange, New Vencor’s Reorganization Plan granted

Ventas a full release from Plaintiffs’ claims. The bankruptcy

court entered a Confirmation Order approving the Plan, which
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permanently enjoined Plaintiffs from pursuing their claims

against Ventas. 

Ignoring the injunction, Plaintiffs sued Ventas in the district

court below, which subsequently dismissed their case for lack

of subject matter jurisdiction. Plaintiffs then filed a motion

to vacate the Confirmation Order in the Delaware bankruptcy

court. Because Supreme Court precedent requires us to

accord preclusive effect to the Delaware bankruptcy court’s

conclusion that it had jurisdiction over this matter, Plaintiffs

are barred by res judicata from continuing their suit in this

court. We therefore AFFIRM the judgment of the district

court. 

I. BACKGROUND

A. Factual background

Two lower court opinions, one in Delaware and the other in

Kentucky, have summarized the relevant facts of the present

case. See In re Vencor, Inc., 284 B.R. 79 (Bankr. D. Del.

2002), and Pratt v. Ventas, Inc., 273 B.R. 108 (W.D. Ky.

2002). Because the principal issues on appeal are questions

of law, we abstract the following undisputed facts from the

lower courts’ opinions: 

Prior to May, 1998, Ventas operated, inter alia, several

nursing homes under the name Vencor, Inc. (“Old

Vencor”). On May 1, 1998, Old Vencor changed its

name to Ventas and spun off its nursing home operations

to a newly incorporated entity named Vencor, Inc. (“New

Vencor”). Ventas retained ownership of the real estate

and became New Vencor’s landlord at many of the

facilities. . . . On September 13, 1999, New Vencor and

several of its affiliates filed for relief under chapter 11 of

the Bankruptcy Code. 

In re Vencor, Inc., 284 B.R. at 81. 

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Nos. 02-5632/5638

Each of the named Plaintiffs in this case had filed a state

court suit against one of the Vencor entities prior to or

soon after the commencement of its bankruptcy

proceedings. In September 1996, Plaintiff Sally Pratt

filed suit against “old” Vencor . . . for age discrimination

and wrongful termination. In March 1998, Plaintiff

Valiza Nystromfiled suit against Vencor Hospitals Texas

. . . for constructive discharge. In October 1998, Mark

Dayman, Executor of the Estate of Liesel Dayman, filed

suit against “new” Vencor . . . for negligence. In

November 1999, Plaintiff Robert McCray, pursuant to a

Power of Attorney for Lee Ona Lee, sued Vencor

Nursing Centers East . . . for negligence. 

Pratt, 273 B.R. at 110. Finally, Nystrom’s attorney Mark

Byrne filed suit against Vencor for tortious interference with

his prospective contractual advantage with his client. Id. at

n.2.

After New Vencor filed for bankruptcy, it filed motions

pursuant to 11 U.S.C. § 362 for an automatic stay in each of

Plaintiffs’ respective state-court actions. Pratt, Damon, and

McCray responded by filing proofs of claim in the bankruptcy

court. On December 14, 2000, a Reorganization Plan for

New Vencor was proposed, and notice of the Plan was mailed

to each of the Plaintiffs who had filed a proof of claim. The

bankruptcy court confirmed the Plan in a Confirmation Order

issued on March 19, 2001, with the Plan becoming effective

on April 20, 2001. A key component of the Plan was

summarized as follows:

As part of that Plan, Ventas agreed to contribute $40

million to the funding of a settlement with the United

States and agreed to amendments of certain leases which

it had with [New Vencor], thereby reducing [New

Vencor’s] rental obligations. In exchange, Ventas was

given a release of [Plaintiffs’ personal injury and other]
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claims arising from operation of the nursing homes prior

to May 1, 1998.

In re Vencor, Inc., 284 B.R. at 81. The terms of the Plan thus

incorporated an injunction proscribing suits against New

Vencor and Ventas for “any alleged improprieties committed

in connection with [New] Vencor’s bankruptcy, prior to the

date of confirmation.” Pratt, 273 B.R. at 111.

B. Procedural background

Plaintiffs filed suit in the United States District Court for

the Western District of Kentucky, alleging that Ventas

obtained the releases in the Confirmation Order through

fraudulent means. They argued that in overseeing New

Vencor’s bankruptcy proceedings, the bankruptcy court

lacked jurisdiction over Plaintiffs’ third-party action against

Ventas. As a consequence, Plaintiffs contended that the

Confirmation Order’s injunction barring suit against Ventas

had no preclusive effect on Plaintiffs’ suit filed in the federal

district court in Kentucky. Ventas responded by filing a

motion to dismiss the complaint pursuant to Rules (9)(b) and

12(b)(6) of the Federal Rules of Civil Procedure.

Relying on the Supreme Court’s decision in Celotex Corp.

v. Edwards, 514 U.S. 300 (1995), the district court held that

Plaintiffs were barred from collaterally attacking the

Confirmation Order issued by the Delaware bankruptcy court.

Pratt, 273 B.R. at 116. The district court subsequently

granted Ventas’s motion based upon a lack of subject matter

jurisdiction. It also expressly declined to consider whether

the bankruptcy court exceeded its statutory authority in

granting injunctive relief to Ventas. Id. The court concluded

that it could “not properly exercise appellate review over

these earlier bankruptcy proceedings.” Id. ((quoting 28

U.S.C. § 158(a): “An appeal . . . shall be taken only to the

6 Pratt, et al. v.

Ventas, Inc., et al.

Nos. 02-5632/5638

district court for the judicial district in which the bankruptcy

court is serving.”) (emphasis in Pratt)) 

Plaintiffs were encouraged to pursue their claim in the

Delaware bankruptcy court, in the United States District

Court for the District of Delaware, and if necessary, in the

United States Court of Appeals for the Third Circuit. Id. The

complaint was initially dismissed with prejudice, but the

district court later modified the order to make it “without

prejudice,” presumably so that Plaintiffs could raise their

claims against Ventas in the proper forum.

Each side appealed the district court’s decision, but this

court held both appeals in abeyance while Plaintiffs pursued

the merits of their claims in the Delaware bankruptcy court.

The bankruptcy court subsequently held that there was no

basis for Plaintiffs’ assertion that it lacked jurisdiction to

grant the releases to Ventas contained in New Vencor’s Plan.

In re Vencor, Inc., 284 B.R. at 86. Plaintiffs did not appeal

this latter decision.

On December 6, 2002, this court lifted the stay on the

present appeal of the district court’s decision in Pratt v.

Ventas, 273 B.R. 108 (W.D. Ky. 2002). This matter is now

ripe for disposition.

II. ANALYSIS

A. Standard of review

This court reviews whether the district court properly

dismissed a claim pursuant to Rule 12(b)(6) of the Federal

Rules of Civil Procedure using a de novo standard. Sistrunk

v. City of Strongsville, 99 F.3d 194, 197 (6th Cir. 1996). A

motion to dismiss may be granted “only if it is clear that no

relief could be granted under any set of facts that could be

proved consistent with the allegations.” Id. (citation omitted).
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B. Application of the “collateral attack” doctrine

The district court held that Plaintiffs’ suit filed in the

Western District of Kentucky was an impermissible collateral

attack on the bankruptcy court’s Confirmation Order. Pratt,

273 B.R. at 116. A “collateral attack” is a tactic whereby a

party seeks to circumvent an earlier ruling of one court by

filing a subsequent action in another court. Id. at 114 (citing

Willy v. Coastal Corp., 503 U.S. 131, 137 (1992)). As

applied to the present case, the district court below believed

that Plaintiffs’ suit against Ventas in Kentucky was an

improper attempt to circumvent the Delaware bankruptcy

court’s Confirmation Order that enjoined Plaintiffs from

pursuing their claims against Ventas. 

The district court found that the Supreme Court’s decision

in Celotex Corp. v. Edwards, 514 U.S. 300 (1995), controlled

the disposition of Plaintiffs’ action. In Celotex, Bennie and

Joann Edwards won a judgment against Celotex in the

District Court for the Northern District of Texas for asbestosrelated injuries. Celotex posted a supersedeas bond to stay

the execution of the judgment pending its appeal to the Fifth

Circuit. Northbrook Property and Casualty Insurance

Company served as surety on the bond. The Fifth Circuit

affirmed the judgment for the Edwardses, but, on that very

day, Celotex filed a Chapter 11 petition for reorganization in

the Bankruptcy Court for the Middle District of Florida. An

injunction was issued by the bankruptcy court, pursuant to 11

U.S.C. § 105(a), which stayed all actions against Celotex.

The district court in Texas nevertheless permitted the

Edwardses to enforce the bond against Northbrook. Although

the Fifth Circuit affirmed the district court’s decision, it was

subsequently reversed by the Supreme Court.

Because the Supreme Court concluded that the district

court’s action would “seriously undercut[] the orderly process

8 Pratt, et al. v.

Ventas, Inc., et al.

Nos. 02-5632/5638

of the law,” id. at 313, it held that the Edwardses would not

be permitted to collaterally attack the Florida bankruptcy

court’s § 105 injunction in the federal courts in Texas. The

Court reasoned: 

It is for the court of first instance to determine the

question of the validity of the law, and until its decision

is reversed for error by orderly review, either by itself or

by a higher court, its orders based on its decision are to

be respected. If respondents believed the Section 105

Injunction was improper, they should have challenged it

in the Bankruptcy Court, like other similarly situated

bonded judgment creditors have done. If dissatisfied

with the Bankruptcy Court’s ultimate decision,

respondents can appeal to the district court for the

judicial district in which the bankruptcy judge is serving,

see 28 U.S.C. § 158(a), and then to the Court of Appeals

for the Eleventh Circuit, see §158(d).

Celotex, 514 U.S. at 313 (quotation marks and citation

omitted). 

In the present case, the district court found that Celotex was

controlling, reasoning as follows: 

Like the claimants in [Celotex], Plaintiffs . . . assert that

the Bankruptcy Court exceeded its jurisdictional bounds

byenjoining post-confirmation suits against a non-debtor

third-party for its pre-confirmation action. Celotex

reaffirmed the rule that such a challenge cannot be

sustained . . . . 

. . .

[I]f the Confirmation Order wasissued in error—whether

the result of either fraud or lack of jurisdiction—it

remains the responsibility of the Delaware Bankruptcy
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Court, Delaware District Court, and, if necessary, the

Third Circuit, to effect any necessary corrections.

Pratt, 273 B.R. at 116 (emphasis added). 

In Celotex, the Supreme Court reaffirmed

the well-established rule that ‘persons subject to an

injunctive order issued by a court with jurisdiction are

expected to obey that decree until it is modified or

reversed, even if they have proper grounds to object to

the order.’

514 U.S. at 306 (quoting GTE Sylvania, Inc. v Consumers

Union, 445 U.S. 375, 386 (1980)) (emphasis added). The

bankruptcy court’s injunction in Celotex, therefore, was to be

honored only if it was acting “with jurisdiction.”

Accordingly, the Celotex court examined whether the Florida

bankruptcy court had jurisdiction to enjoin the Edwardses

from proceeding against the third-party surety. The Court

ultimately held that the Edwardses’ action fell within the

bankruptcy court’s jurisdiction to adjudicate matters that are

“related to” a case under Title 11. Id. at 310; see 28 U.S.C.

§ 1334(b), 28 U.S.C. § 157(a). Because the Court found that

the bankruptcy court did have jurisdiction, the Edwardses

were barred from collaterally attacking theFlorida bankruptcy

court’s injunction in the federal courts of Texas.

The district court in the present case, by contrast,

“expressly decline[d] to consider whether the Bankruptcy

Court exceeded its statutory authority in granting injunctive

relief to Defendants.” Pratt, 273 B. R. at 116. As excerpted

above, the district court stated that it was the responsibility of

the Delaware bankruptcy court, the Delaware district court,

and the Third Circuit to correct any jurisdictional errors. Id.

The district court’s reliance on Celotex for the proposition

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that litigants must go through the “proper channels of the

statutorily-defined appellate process,” id. at 116, to challenge

a bankruptcy court’s judgment was perfectly appropriate. But

the district court should not have dismissed the Plaintiffs’

case under the collateral attack doctrine without first

determining that the Delaware bankruptcy court in fact had

jurisdiction to enter the Confirmation Order. Its failure to do

so, however, is harmless in light of the Plaintiffs subsequent

return to the bankruptcy court for the very purpose of

challenging that court’s authority to grant Ventas a full

release from their claims. 

C. Application of res judicata

While the present appeal was held in abeyance, Plaintiffs

returned to Delaware to litigate their claim that the

bankruptcy court lacked jurisdiction to release Ventas. See In

re Vencor, Inc., 284 B.R. 79 (Bankr. D. Del. 2002). The

bankruptcy court reviewed two rounds of briefs and held two

hearings on the myriad of claims raised by Plaintiffs. Id. at

82. Following these proceedings, the court issued an opinion

with a section dedicated specifically to Plaintiffs’

jurisdictional argument. The court “conclud[ed] that the

Confirmation Order was not beyond [its] jurisdiction.” Id. at

86.

Now that the Delaware bankruptcy court has adjudicated

the issue of its jurisdiction in In re Vencor, Inc., the Plaintiffs’

right to question that decision in Kentucky is barred by both

the collateral attack and res judicata doctrines. “A party that

has had an opportunity to litigate the question of subjectmatter jurisdiction may not . . . reopen that question in a

collateral attack upon an adverse judgment.” Ins. Corp. of

Ireland v. Compagnie des Bauxites de Guinee, 456 U.S. 694,

702 n.9 (1982). 

Plaintiffs argue, however, that the timeliness of their

motion was the real issue before the Delaware bankruptcy
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court, not jurisdiction. At oral argument, Plaintiffs’ counsel

contended that the court’s conclusion that it was not acting in

excess of its jurisdiction was simply dicta. We read the

bankruptcy court’s discussion of Plaintiffs’ jurisdictional

issue not as dicta, however, but as an alternative holding.

After concluding that the Plaintiffs’ motion to set aside the

Confirmation Order was untimely, In re Vencor, Inc., 284

B.R. at 83-84, the court stated:

The [Plaintiffs] assert that the relief requested in their

Motion can nonetheless be granted. They argue that

Rule 60(b)(4) permits the modification of the

Confirmation Order because it was entered by this Court

beyond its jurisdiction and is, therefore, void.

Id. at 85 (emphasis added). The above-quoted language

indicates that the bankruptcy court considered the Plaintiffs’

jurisdictional claim to be an alternative basis for relief. After

examining that alternative ground, the court “conclude[d] that

there is no basis for an assertion that this Court lacked

jurisdiction to consider and grant the releases contained in the

Plan.” Id. at 86. We therefore conclude that the bankruptcy

court’s decision in In re Vencor, Inc. is a judgment on the

merits of this jurisdictional issue. See Gillespie v. U.S. Steel

Corp., 321 F.2d 518, 529-30 (6th Cir. 1963) (holding that

where a matter is argued before the court, and the court’s

opinion passes on the issue, the language is not dicta).

 A judgment is “any order from which an appeal lies.” Fed.

R. Civ. P. 54(a). Because Plaintiffs did not appeal the

bankruptcy court’s decision to the district court in Delaware,

the judgment of the bankruptcy court is now final. See Chicot

County Drainage Dist. v. Baxter State Bank, 308 U.S. 371,

377 (1940) (“The court has the authority to pass upon its own

jurisdiction and its decree sustaining jurisdiction against

attack, while open to direct review, is res judicata in a

12 Pratt, et al. v.

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Nos. 02-5632/5638

collateral action.”); see also Trulis v. Barton, 107 F.3d 685,

691 (9th Cir. 1995) (holding that plaintiffs could not

challenge the bankruptcy court’s subject matter jurisdiction

because they failed to appeal the bankruptcy court’s

confirmation order). 

The Supreme Court addressed similar circumstances in

Stoll v. Gottlieb, 305 U.S. 165 (1938). In Stoll, a bankruptcy

court confirmed a debtor’s reorganization plan that included

a release of the debtor’s bond guarantors. Gottlieb, one of the

bondholders, did not appear at the hearing on the

reorganization plan. The plan was confirmed over the

objection of other bondholders, but no one appealed the

confirmation order. Instead, Gottlieb launched a two-pronged

attack. He first instituted an action against the bond

guarantors in the Illinois state court system. Second, Gottlieb

filed a motion to vacate the bankruptcy court’s confirmation

order on the basis that it did not have jurisdiction to cancel the

bond guaranty. The bankruptcy court denied Gottlieb’s

contested motion. Back in state court, the bond guarantors

defended themselves on the ground that the bankruptcy

court’s initial confirmation order and its subsequent order

denying Gottlieb’s jurisdictional claim were res judicata. The

Supreme Court of Illinois found in favor of Gottlieb, but the

United States Supreme Court reversed, explaining:

We see no reason why a court in the absence of an

allegation of fraud in obtaining the judgment, should

examine again the question whether the court making the

earlier determination on an actual contest over

jurisdiction between the parties, did have jurisdiction of

the subject matter of the litigation. In this case, the order

upon the petition to vacate the confirmation settled the

contest over jurisdiction.

Id. at 172. 
Nos. 02-5632/5638 Pratt, et al. v.

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In the present case, there are no allegations of fraud

regarding the decision handed down in In re Vencor, Inc. As

in Stoll, Plaintiffs engaged Ventas in “an actual contest over

jurisdiction,” and therefore “the order upon the petition to

vacate the confirmation settled” this issue. See also Republic

Supply Co. v. Shoaf, 815 F.2d 1046, 1053-54 (5th Cir. 1987)

(holding that where a bankruptcy court determined that it had

subject matter jurisdiction, its confirmation of a

reorganization plan that released a third-party guarantor had

res judicata effect in a subsequent suit). 

We note, moreover, that the Stoll court “express[ed] no

opinion as to whether the Bankruptcy Court did or did not

have jurisdiction of the subject matter.” Id. at 171 n.8. In

fact, the Supreme Court assumed that the bankruptcy court

“did not have jurisdiction of the subject matter of the order.”

Id. at 171 (emphasis added). Whether the bankruptcy court

erred in its determination was immaterial to the Court, which

held that

we base our conclusion here on the fact that in an actual

controversy the question of the jurisdiction over the

subject matter was raised and determined adversely to the

respondent. That determination is res judicata of that

issue in this action . . . .

Id. at 177. We likewise pass no judgment on whether the

Delaware bankruptcy court erred in determining that it had

jurisdiction to enter the Confirmation Order and the releases

contained therein. For our purposes, the fact that the Delaware

bankruptcy court has decided the matter is enough to preclude

us from entertaining an identical claim in this court.

14 Pratt, et al. v.

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D. Ventas’s cross-appeal

In its original order, the district court dismissed Plaintiffs’

complaint “with prejudice.” Pratt, 273 B.R. at 116. The

court subsequently amended its dismissal as being “without

prejudice” because the “order was limited solely to the

question of whether jurisdiction was proper in the Western

District of Kentucky, and did not reach the merits of the

parties’ underlying substantive claims.” In doing so, the court

explained that it had not intended to preclude Plaintiffs from

litigating their claims in an appropriate venue, i.e., the

Delaware bankruptcy court. 

On its face, the motion presented by Ventas to the district

court was brought pursuant to Rule 12(b)(6), which authorizes

a dismissal for failure to state a claim. A “dismissal for failure

to state a claim under Federal Rule of Civil Procedure

12(b)(6) is a ‘judgment on the merits,’” and is therefore done

with prejudice. Federated Dep’t Stores, Inc. v. Moitie, 452

U.S. 394, 399 n.3 (1981). By contrast, “a dismissal for lack

of subject matter jurisdiction does not operate as an

adjudication on the merits for preclusive purposes.”

Holloway v. Brush, 220 F.3d 767, 778 (6th Cir. 2000) (citing

Rule 41(b) of the Federal Rules of Civil Procedure)

(quotation marks omitted). This court has explained: 

The rationale behind this is that merely because one court

does not have jurisdiction over a dispute does not

necessarily mean that another court is precluded from

properly exercising jurisdiction over the matter.

Moreover, if a court does not have jurisdiction over a

matter, it cannot properly reach the merits of the case. 

Wilkins v. Jakeway, 183 F.3d 528, 533 n.6 (6th Cir. 1999)

(citation omitted).

Ventas is technically correct that the district court

dismissed Plaintiffs’ claim pursuant to Ventas’s Rule 12(b)(6)
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motion and that such dismissals are presumptively “with

prejudice.” But a plain reading of the district court’s opinion

and amended order indicates that the district court’s basis for

dismissing Plaintiffs’ claim was jurisdictional in nature and

was therefore “without prejudice.” Because the district court

amended its order to be “without prejudice,” Plaintiffs were

able, while the present appeal was being held in abeyance, to

pursue their claim in the Delaware bankruptcy court.

Whether the district court erred in amending its order is

therefore moot.

III. CONCLUSION

For all the reasons set forth above, we AFFIRM the

judgment of the district court.