PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

VALLEY HISTORIC LIMITED 

PARTNERSHIP,

Plaintiff-Appellant,  No. 06-1571

v.

THE BANK OF NEW YORK,

Defendant-Appellee. 

Appeal from the United States District Court

for the Eastern District of Virginia, at Alexandria.

Gerald Bruce Lee, District Judge.

(1:05-cv-01268-GBL-LO; BK-05-01362)

Argued: March 13, 2007

Decided: May 17, 2007

Before SHEDD and DUNCAN, Circuit Judges, and

Samuel G. WILSON, United States District Judge for the

Western District of Virginia, sitting by designation.

Affirmed in part, vacated in part, and remanded with instructions by

published opinion. Judge Wilson wrote the opinion, in which Judge

Shedd and Judge Duncan joined.

COUNSEL

ARGUED: Steven Bret Ramsdell, TYLER, BARTL, GORMAN &

RAMSDELL, P.L.C., Alexandria, Virginia, for Appellant. Benjamin

C. Ackerly, Sr., HUNTON & WILLIAMS, Richmond, Virginia, for
Appellee. ON BRIEF: Thomas P. Gorman, TYLER, BARTL, GORMAN & RAMSDELL, P.L.C., Alexandria, Virginia, for Appellant.

Michael C. Shepherd, HUNTON & WILLIAMS, Richmond, Virginia, for Appellee.

OPINION

WILSON, District Judge:

This is an appeal by appellant, Chapter 11 debtor, Valley Historic

Limited Partnership ("Debtor"), from the district court’s determination that the bankruptcy court lacked jurisdiction over the Debtor’s

post-confirmation adversary proceeding against appellee, the Bank of

New York ("Bank"), for breach of contract and for tortious interference. We affirm the district court’s determination that the bankruptcy

court lacked jurisdiction.

I.

In May 1992, Valley Historic Properties, Inc. ("Borrower")

acquired two office buildings in downtown Staunton, Virginia. The

Borrower financed the acquisition and renovation of the buildings

through the issuance of economic development bonds. First Vantage

Bank, First Virginia Bank, Inc., and First Bank & Trust Co. owned

the beneficial interest in the bonds. The bonds were payable solely

from revenues derived from payments under a loan agreement and

promissory note, which were ultimately assigned to the Bank as successor indenture trustee. The loan agreement, which was secured by

a first priority lien on the property and an assignment of leases, rents,

and profits, called for scheduled payments over a ten-year period,

with all payments to have been completed by May 2002. Lease payments, under a ten-year lease of the property by a single tenant, Valley Community Services Board, provided the Borrower the source of

funds to make the monthly payments to the Bank that the loan agreement required. Following the execution of the loan agreement and the

issuance of the bonds, the Borrower conveyed its interest in the property to the Debtor.

2 VALLEY HISTORIC v. BANK OF NEW YORK
In mid-2001, the Bank apprised the Debtor that the loan agreement

required the Debtor to increase its monthly payments nearly tenfold

to $100,000 per month for the period of May 2001 through May 2002

so that the loan would be paid fully, rather than simply mature, in

May 2002. The Debtor disagreed and continued to pay at the same

rate it had in the past. Consequently, in February 2002 the Bank

issued a notice of default, and the Debtor responded by filing its

Chapter 11 bankruptcy petition that same month.

The Debtor filed a plan of reorganization ("Plan") on September

20, 2002. The Bank objected to the Plan and filed a proof of claim

in the amount of $1,051,866.43, to which the Debtor objected. The

bankruptcy court ultimately confirmed the Plan on December 30,

2003, granting the Bank an allowed secured claim in the amount of

$967,148.17. The Plan provided, in part, that the court would fix and

liquidate the amount of the Bank’s claim "subject to the Debtor’s

claims, setoffs, etc. which [would] be liquidated at another date via

an adversary proceeding" and that the bankruptcy court would "retain

jurisdiction" over the "adversary proceeding filed by the Debtor

against [the Bank]." The Plan did not provide for the use of any

recovery from the adversary proceeding but instead provided for the

satisfaction of the Debtor’s obligations "entirely from the postpetition rents and earnings of the Debtor through the operation of its

real estate."

After confirmation, the tenant vacated the Debtor’s property, and

the Debtor sold that property on March 1, 2005, and used the proceeds to pay all of its creditors, including the Bank. Approximately

three months later, the Debtor filed an adversary proceeding raising

two claims against the Bank. In Count I, the Debtor alleged that the

Bank breached the loan agreement when it increased the monthly

lease payments and declared the Debtor to be in default. In Count II,

the Debtor alleged that the Bank and the three beneficial owners of

the bonds tortiously interfered with the Debtor’s contractual relationship with its tenant in December 2002 by meeting with the tenant and

offering to sell the property to the tenant below fair market value.

The Bank moved to dismiss on the grounds that the bankruptcy

court lacked subject matter jurisdiction, that the proceeding was not

a core proceeding, and that the Debtor’s complaint failed to state a

VALLEY HISTORIC v. BANK OF NEW YORK 3
claim upon which relief could be granted. The bankruptcy court held

that it had jurisdiction, that the proceeding was a core proceeding, and

that the Debtor’s complaint stated valid claims. The Bank took an

interlocutory appeal pursuant to 28 U.S.C. § 158(a)(3), and the district

court reversed. The district court found no "related to" jurisdiction

over Count I, the pre-petition contract claim, because the Debtor’s

plan of reorganization had been confirmed and substantially consummated by the time the Debtor filed the complaint. It found no "arising

in" jurisdiction over Count II, the post-petition tortious interference

claim, because, according to our precedent, "proceedings or claims

arising in Title 11 are those that ‘are not based on any right expressly

created by Title 11, but nevertheless, would have no existence outside

of the bankruptcy.’" Grausz v. Englander, 321 F.3d 467, 471 (4th Cir.

2003) (quoting Bergstrom v. Dalkon Shield Claimants Trust (In re A.

H. Robins Co.), 86 F.3d 364, 372 (4th Cir. 1996)). It also found that

neither Count I nor Count II was a core proceeding and that because

there was no privity between the Debtor and the Bank, Count I failed

to state a claim upon which relief could be granted. 

II.

Because the district court sits as an appellate court in bankruptcy,

our review of the district court’s decision is plenary. See Bowers v.

Atlanta Motor Speedway, Inc. (In re Se. Hotel Props. Ltd.), 99 F.3d

151, 154 (4th Cir. 1996). Therefore, we review the district court’s

decision "by applying the same standard of review that it applied to

the bankruptcy court’s decision. That is, we review findings of fact

for clear error and conclusions of law de novo." Kielisch v. Educ.

Credit Mgmt. Corp. (In re Kielisch), 258 F.3d 315, 319 (4th Cir.

2001) (citations omitted). 

III.

The bankruptcy court derives its jurisdiction from the district court.

See 28 U.S.C. § 157(a), (b)(1). District courts 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 Debtor maintains that the bankruptcy court had both "arising in"

and "related to" jurisdiction over its post-confirmation adversary pro4 VALLEY HISTORIC v. BANK OF NEW YORK
ceeding against the Bank as well as jurisdiction to adjudicate its

claims under 28 U.S.C. § 1334(e), which gives the district court in a

case under Title 11 exclusive jurisdiction over a debtor’s property "as

of the commencement" of the case and "of property of the estate."

Additionally, it maintains that the confirmation order, which reserved

jurisdiction over the Debtor’s adversary proceeding, is preclusive and

bars the Bank from relitigating the bankruptcy court’s jurisdiction.

We conclude, however, as did the district court, that the bankruptcy

court did not have post-confirmation jurisdiction to adjudicate the

Debtor’s claims. 

A proceeding or claim "arising in" Title 11 is one that is "‘not

based on any right expressly created by Title 11, but nevertheless,

would have no existence outside of the bankruptcy.’" Grausz v.

Englander, 321 F.3d 467, 471 (4th Cir. 2003) (quoting Bergstrom v.

Dalkon Shield Claimants Trust (In re A.H. Robins Co.), 86 F.3d 364,

372 (4th Cir. 1996)). Therefore, a "‘controversy arises in Title 11’

when ‘it would have no practical existence but for the bankruptcy.’"

Id. (quoting Bergstrom, 86 F.3d at 372). The Debtor argues that there

is "arising in" jurisdiction under § 1334(b) because the breach of contract caused its bankruptcy and the tortious interference complicated

the administration of the bankruptcy case. We do not find the argument persuasive. 

It seems self-evident that a claim, like the Debtor’s breach of contract claim, that pre-dates the filing of the Chapter 11 case cannot be

said to have arisen within that case, and whether it caused the bankruptcy is immaterial. Indeed, if causation were a sufficient touchstone,

then any debt would confer "arising in" jurisdiction. However, the

very purpose of bankruptcy is to discharge or restructure the debt that

has caused the bankruptcy. Nor is it sufficient to establish "arising in"

jurisdiction that a claim, like the Debtor’s tortious interference claim,

arises during the pendency of the Chapter 11. Here, the Debtor’s

claims bear only a coincidental relationship to the Debtor’s bankruptcy case. They would have existed whether or not the Debtor filed

bankruptcy. It follows that because the Debtor’s breach of contract

claim and tortious interference claim would have existence outside of

the bankruptcy, they were not within the bankruptcy court’s "arising

in" jurisdiction. 

VALLEY HISTORIC v. BANK OF NEW YORK 5
The Debtor also asserts that the bankruptcy court had subject matter jurisdiction because his claims are "related to" a case under Title

11. This Court, like the majority of the other circuits, has adopted the

test articulated by the Third Circuit in Pacor, Inc. v. Higgins, 743

F.2d 984, 994 (3d Cir. 1984), for determining "related to" jurisdiction.

See A. H. Robins Co. v. Piccinin, 788 F.2d 994, 1002 n.11 (4th Cir.

1986).1 In short, "‘the test for determining whether a civil proceeding

is related to bankruptcy is whether the outcome of that proceeding

could conceivably have any effect on the estate being administered in

bankruptcy.’" Owens-Ill., Inc. v. Rapid Am. Corp. (In re Celotex

Corp.), 124 F.3d 619, 625 (4th Cir. 1997) (quoting Pacor, 743 F.2d

at 994). Therefore, "[a]n action is related to bankruptcy if the outcome

could alter the debtor’s rights, liabilities, options or freedom of action

(either positively or negatively) and [it] in any way impacts upon the

handling and administration of the bankruptcy estate." Id. at 625-26;

see also Spartan Mills v. Bank of Am. Ill., 112 F.3d 1251, 1255-56

(4th Cir. 1997). 

Pacor was decided in a pre-confirmation context, however, and the

Third Circuit has since examined "related to" jurisdiction from a

somewhat different analytical perspective, in a post-confirmation context. Recognizing that "[c]ourts have applied varying standards to

determine whether ‘related to’ jurisdiction should be upheld postconfirmation," it endeavored to distill the "essential inquiry" or common thread throughout the decisions, including our decision in Bergstrom. Binder v. Price Waterhouse & Co. (In re Resorts Int’l, Inc.),

372 F.3d 154, 166 (3d Cir. 2004). In its view, "the essential inquiry

appears to be whether there is a close nexus to the bankruptcy plan

or proceeding sufficient to uphold bankruptcy court jurisdiction over

the matter." Id. at 166-67. According to the court, for "related to"

jurisdiction to exist at "the post-confirmation stage, the claim must

affect an integral aspect of the bankruptcy process — there must be

a close nexus to the bankruptcy plan or proceeding." Id. at 167. Practically speaking, under this inquiry "[m]atters that affect the interpre1Although the Supreme Court has overturned Pacor in part, see Things

Remembered, Inc. v. Petrarca, 516 U.S. 124 (1995) (overruling Pacor’s

holding that the prohibition against review of a remand order in 28

U.S.C. § 1447(d) is not applicable in a bankruptcy case), the Court has

not disturbed Pacor’s "related to" jurisdictional test. 

6 VALLEY HISTORIC v. BANK OF NEW YORK
tation, implementation, consummation, execution, or administration

of the confirmed plan will typically have the requisite close nexus."

Id.

We find the Third Circuit’s "close nexus" requirement to be a logical corollary of "related to" jurisdiction. Analytically, it insures that

the proceeding serves a bankruptcy administration purpose on the

date the bankruptcy court exercises that jurisdiction. Without such a

purpose, "related to" jurisdiction would extend beyond the limited

jurisdiction conferred upon bankruptcy courts in the postconfirmation context. See In re Resorts Int’l, Inc., 372 F.3d at 164-69.

Moreover, although we agree with the Third Circuit that under this

inquiry that "[m]atters that affect the interpretation, implementation,

consummation, execution, or administration of the confirmed plan

will typically have the requisite close nexus," we do not find the facts

and circumstances here to be typical. We find no conceivable bankruptcy administration purpose to be served by the Debtor’s adversary

proceeding because the Plan made no provision for the use of any

recovery from the adversary proceeding but instead provided for the

satisfaction of the Debtor’s obligations "entirely from the postpetition rents and earnings of the Debtor through the operation of its

real estate." Here, the Debtor had paid all its creditors, including the

Bank before instituting the adversary proceeding, and the Plan was

substantially consummated.

Despite there being no conceivable bankruptcy administration purpose in providing a forum for this dispute, the Debtor essentially

argues that it was proper for the bankruptcy court to exercise jurisdiction pursuant to the Plan’s retention of jurisdiction provision. However, neither the parties nor the bankruptcy court can create § 1334

jurisdiction by simply inserting a retention of jurisdiction provision in

a plan of reorganization if jurisdiction otherwise is lacking, as it is

here. See New Horizon of N.Y., L.L.C. v. Jacobs, 231 F.3d 143, 155

(4th Cir. 2000) ("The plan cannot confer jurisdiction upon a bankruptcy court or a federal district court . . ., rather 28 U.S.C. § 1334

governs jurisdiction.") (citations omitted); Zerand-Bernal Group, Inc.

v. Cox, 23 F.3d 159, 164 (7th Cir. 1994) (concluding that the bankruptcy court lacked jurisdiction post-confirmation to adjudicate an

adversary proceeding concerning a bankruptcy sale, notwithstanding

inclusion of language purporting to retain jurisdiction in the order

VALLEY HISTORIC v. BANK OF NEW YORK 7
confirming the sale and in the plan of reorganization). Simply put, the

Debtor cannot "write its own jurisdictional ticket." Id.

The Debtor also argues that even if this court does not have "arising in" or "related to" jurisdiction under § 1334(b), it has subject matter jurisdiction to hear the Debtor’s adversary proceeding under

§ 1334(e), which gives the district court in a case under Title 11

exclusive jurisdiction over a debtor’s property "as of the commencement" of the case and over "property of the estate." We disagree.

The Debtor is viewing two conceptually distinct jurisdictional

grants as if they are the same and ignoring the effect of confirmation.

28 U.S.C. § 1334(b) invests district courts with original but not exclusive jurisdiction over "civil proceedings." In contrast, § 1334(e) is a

broad grant of exclusive jurisdiction over a debtor’s property; it does

not invest district courts with jurisdiction to conduct civil proceedings. Instead, in the context of a Chapter 11 proceeding in connection

with other provisions of Title 11, it creates exclusive jurisdiction over

"property" for a limited period of time — until confirmation and the

property vests in the reorganized debtor. 11 U.S.C. § 1141(b)

("Except as otherwise provided in the plan or the order confirming the

plan, the confirmation of a plan vests all of the property of the estate

in the debtor."). 

Here, neither the Plan nor the order confirming the Plan provided

that the breach of contract claim or the tortious interference claim

would remain property of the bankruptcy estate following the confirmation of the Plan. Consequently, upon Plan confirmation, the claims

vested in the reorganized Debtor and could no longer be considered

"property of the estate" under § 1334(e). See Still v. Rossville Bank

(In re Chattanooga Wholesale Antiques, Inc.), 930 F.2d 458, 462 (6th

Cir. 1991); Carter v. Peoples Bank & Trust Co. (In re BNW, Inc.),

201 B.R. 838, 848-49 (Bankr. S.D. Ala. 1996) (noting that "upon confirmation, all property of the estate vests in the Debtor (the reorganized one) ‘except as otherwise provided in the plan or order

confirming the plan’ . . . [so that] the property is no longer ‘property

of the estate’ which is subject to bankruptcy jurisdiction") (citations

omitted). However, even if the contract and tortious interference

claims had remained in the bankruptcy estate post-confirmation, the

Debtor would still have had to establish jurisdiction under § 1334(b),

8 VALLEY HISTORIC v. BANK OF NEW YORK
since § 1334(e) does not by itself create jurisdiction to conduct civil

proceedings. Therefore, finding no jurisdiction under § 1334(b), the

court finds no federal jurisdiction over the Debtor’s adversary proceeding.2

IV.

The Debtor also argues that the Plan’s retention of jurisdiction provision, which purportedly contemplates the Debtor’s adversary proceeding for breach of contract and tortious interference, is preclusive,

barring the bank from relitigating the bankruptcy court’s jurisdiction

over the contemplated adversary proceeding. We again disagree.

"A bankruptcy court’s order of confirmation is treated as a final

judgment with res judicata effect," binding the parties by its terms

and precluding them "from raising claims or issues that they could

have or should have raised before confirmation." First Union Commercial Corp. v. Nelson, Mullins, Riley & Scarborough (In re Varat

Enters., Inc.), 81 F.3d 1310, 1315 (4th Cir. 1996). With those principles in mind this Court has held that res judicata precluded a Chapter

11 creditor from lodging post-confirmation objections to claims by a

debtor’s law firm provided for by the confirmed plan. Id. at 1315-17.

We do not find that these principles and our precedent, however, can

be read or extended to preclude the bankruptcy court from exercising

its unflagging obligation to examine its subject matter jurisdiction at

every stage of the proceedings. Here, the Bank’s challenge is not an

impermissible collateral attack on the bankruptcy court’s subject matter jurisdiction, but rather a permissible direct challenge to its then

current exercise of jurisdiction.

2Citing Humboldt Express Inc. v. Wise Co. (In re Apex Express Corp.),

190 F.3d 624, 630-33 (4th Cir. 1999), the Debtor also argues that the

Bank consented to bankruptcy court jurisdiction by filing a proof of

claim with the bankruptcy court. This is of course true in one sense.

"[B]y 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) (quoting Granfinanciera, S.A. v. Nordberg, 492

U.S. 33, 58-59 (1989)). However, there still must be jurisdiction over the

proceeding under 28 U.S.C. § 1334. 

VALLEY HISTORIC v. BANK OF NEW YORK 9
A bankruptcy 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 collateral action." Chicot Co.

Drainage Dist. v. Baxter State Bank, 308 U.S. 371, 377 (1940). "The

rule applies with equal force to suits in which jurisdiction has been

expressly determined and those in which resolution of the jurisdictional question is merely implicit." Cooper v. Productive Transp.

Servs., Inc. (In re Bulldog Trucking, Inc.), 147 F.3d 347, 352 (4th Cir.

1998). But it does not follow that because an order of confirmation

is treated as a final judgment for res judicata purposes that the Bank

is precluded from challenging the bankruptcy court’s jurisdiction over

the Debtor’s adversary proceeding. Jurisdictionally speaking, the

bankruptcy court’s confirmation order could resolve only its then current authority to enter a confirmation order. It could not bootstrap

future jurisdiction over an unfiled adversary proceeding, as a bankruptcy court always has an obligation to examine its jurisdiction to

hear post-confirmation adversary proceedings. Compare U.S. Home

Corp. v. Los Prados Cmty. Assoc. (In re U.S.H. Corp. of N.Y.), 280

B.R. 330, 334-35 (Bankr. S.D.N.Y. 2002) (explaining that a bankruptcy court must always determine that subject matter jurisdiction is

proper over an adversary proceeding even if a plan of reorganization

provides for retention of jurisdiction), with Finova Capitol Corp. v.

Larson Pharmacy Inc. (In re Optical Techs., Inc.), 425 F.3d 1294,

1306-08 (11th Cir. 2005) (explaining that the bankruptcy court could

not collaterally reexamine its subject matter jurisdiction to have

entered a confirmation order modifying leases).

V.

The district court correctly found that the bankruptcy court lacked

jurisdiction over the Debtor’s adversary proceeding. The district court

also decided that the breach of contract claim failed to state a claim

upon which relief could be granted and that neither the breach of contract claim nor the tortious interference claim was a "core" proceeding. Without subject matter jurisdiction over the adversary

proceeding, however, neither the bankruptcy court nor the district

court had jurisdiction to determine these additional issues.3

3Whether a bankruptcy court may exercise subject matter jurisdiction

over a proceeding is determined by reference to 28 U.S.C. § 1334. Only

10 VALLEY HISTORIC v. BANK OF NEW YORK
Accordingly, we affirm the district court’s decision that the bankruptcy court does not have jurisdiction over the Debtor’s adversary

proceeding but vacate its additional determinations. We therefore

remand to the district court with instructions to dismiss for lack of

subject matter jurisdiction.

AFFIRMED IN PART, VACATED IN PART,

AND REMANDED WITH INSTRUCTIONS

after jurisdiction is established pursuant to § 1334 is resort made to 28

U.S.C. § 157 to determine whether the proceeding is "core" or "noncore." Bankruptcy courts are authorized to enter appropriate judgments

and orders in core proceedings, 28 U.S.C. § 157(b)(1), and may enter

final orders in non-core related proceedings with the consent of all the

parties. 28 U.S.C. §157(c)(2). The determination that a claim is core or

non-core is one that should not be reached, however, if subject matter

jurisdiction does not exist. See Abner v. Mate Creek Loading, Inc. (In re

Mid-Atl. Res. Corp.), 283 B.R. 176, 186 (S.D.W.Va. 2002) ("[A]n assertion that the action is a core or non-core proceeding is not an allegation

of federal jurisdiction; rather, it relates to the power of the bankruptcy

court to resolve the issues brought before it after jurisdiction is established."). 

VALLEY HISTORIC v. BANK OF NEW YORK 11