UNITED STATES DISTRICT COURT

DISTRICT OF NEW JERSEY

)

In re: )

)

NICKELS MIDWAY PIER, LLC )

)

Debtor. )

)

)

NICKELS MIDWAY PIER, LLC; )

JOHN NICKELS; ANGELO NICKELS; )

and STEVEN NICKELS, )

)

Appellants, )

)

v. )

)

WILD WAVES, LLC, )

)

Appellee. )

)

Appearances:

TEICH GROH

By: Brian W. Hofmeister, Esq.

691 State Highway 33

Trenton, New Jersey 08619

Counsel for Nickels Midway Pier, LLC

SHERMAN, SILVERSTEIN, KOHL, ROSE & PODOLSKY

By: Fredric R. Cohen, Esq.

Fairway Corporate Center

4300 Haddonfield Road

Pennsauken, New Jersey 08109

Special Litigation Counsel for Nickels Midway Pier, LLC

ARCHER & GREINER, P.C.

By: Jerrold S. Kulback, Esq.

One Centennial Square

Haddonfield, New Jersey 08033

Counsel for John, Steven and Angelo Nickels

HONORABLE JOSEPH E. IRENAS

CIVIL ACTION 

NO. 11-289 (JEI)

BANKRUPTCY NO. 03-49462(GMB)

OPINION

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HORNSTINE WERTHEIMER & PELLONI, LLC

By: Louis F. Hornstine, Esq.

1518 Walnut Street, Suite 1600

Philadelphia, Pennsylvania 19102

Counsel for John, Steven and Angelo Nickels

COZEN O’CONNOR

By: Arthur J. Abramowitz, Esq.

Jerrold N. Poslusny, Jr., Esq.

Liberty View, Suite 300

457 Haddonfield Road

Cherry Hill, New Jersey 08002

Counsel for Wild Waves, LLC

FORD, FLOWER & HASBROUCK

By: Willis F. Flower, Esq.

Central Square

New Road & Central Avenue, Suite 42A

P.O. Box 405

Linwood, New Jersey 08221

Counsel for Wild Waves, LLC

IRENAS, Senior District Judge:

This matter comes before the Court on the appeal of Debtor

Nickels Midway Pier, LLC (“Nickels”) and John, Steven and Angelo

Nickels (“the Nickels Brothers”) , from the Bankruptcy Court’s 1

order of October 8, 2010 estimating the claim of Wild Waves, LLC

(“Wild Waves”). For the reasons that follow, the Court will 2

affirm in part and remand in part.

 The Court will refer to Nickels and the Nickels Brothers 1

collectively as “Nickels” unless otherwise indicated.

 For mainly procedural reasons not relevant to the instant 2

appeal, this Court previously vacated and remanded the Bankruptcy

Court’s Order of October 8, 2010. However, upon remand, in an

Order dated December 17, 2010, the Bankruptcy Court reaffirmed

the October 8 Order. th

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I.

Both Nickels (the debtor) and Wild Waves proposed plans of

reorganization. An estimation of Wild Waves claim, pursuant to 3

11 U.S.C. § 502(c)(1) , was necessary to determine the 4

feasibility of Nickels’ plan. The Bankruptcy Court held an 5

estimation hearing on June 16 and 18, 2010. With regard to the

conduct of the hearing, the Bankruptcy Court explained,

 The parties’ related disputes in and out of the instant 3

bankruptcy suit, and the appeals of those disputes, are too

numerous to cogently discuss in any one opinion. Thus, the

instant opinion only contains the facts most relevant to the

issues raised by the instant appeal. Additional discussions of

the facts and procedural history of this case, and related

litigation, may be found at Nickels Midway Pier, LLC v. Wild

Waves, LLC, 341 B.R. 486 (D.N.J. 2006), aff’d 255 F.App’x 633 (3d

Cir. 2007); Nickels Midway Pier, LLC v. Wild Waves, LLC, 372

B.R. 218 (D.N.J. 2007); In re: Nickels Midway Pier, LLC (Nickels

Midway Pier, LLC v. Wild Waves, LLC), 383 B.R. 595 (D.N.J. 2008),

aff’d 348 F.App’x 781 (3d Cir. 2009); In re: Nickels Midway Pier,

LLC, 2010 WL 415328 (D.N.J. Jan. 28, 2010); Scottsdale Ins. Co.

v. Weiner, 2010 WL 445649 (D.N.J. Feb. 1, 2010); In re: Nickels

Midway Pier, LLC (Nickels Midway Pier, LLC v. Wild Waves, LLC),

2010 WL 3881376 (D.N.J. Sept. 28, 2010). 

 “There shall be estimated for purpose of allowance under 4

this section--(1) any contingent or unliquidated claim, the

fixing or liquidation of which, as the case may be, would unduly

delay the administration of the case.” 11 U.S.C. § 502(c)(1). 

“The essence of section 502(c) is that ‘all claims against the

debtor be converted into dollar amounts.’” 4-502 Collier on

Bankruptcy ¶ 502.04 (quoting H.R. Rep. No. 595, 95th Cong., 1st

Sess. 354 (1977) Rep. 989, 95th Cong., 2d Sess. 65 (1978)).

 Wild Waves’ plan, not Nickels’ plan, was ultimately 5

confirmed. However, the Bankruptcy Court’s rulings with respect

to Wild Waves’ claim are still relevant insofar as they affect

any payment the equity interest holders (i.e., the Nickels

Brothers) will receive under the confirmed plan.

3

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[i]n order to obtain an overall valuation of the claim

of Wild Waves without the extensive [sic] and cost

required for a full blown claims hearing which the

parties have suggested would require weeks of

hearings, this Court has allowed the claimant, Wild

Waves to present evidence related to the merits of its

claim, including opinion of experts, on an expedited

basis, and then allowing the debtor and principals to

rebut claimant’s evidence though the use of fact and

expert testimony.

(Pa183-- Transcript of Motion Decision)

The following issues were addressed at the estimation

hearing, and decided by the Bankruptcy Court in an oral opinion

on September 27, 2010.

Wild Waves’ claim is based on two agreements concerning an

amusement pier (“the Pier”) in Wildwood, New Jersey. The first

is an agreement whereby Nickels agreed to sell the Pier to Wild

Waves (“the Sale Agreement”). The second is an agreement

pursuant to which Nickels leased a portion of the Pier to Wild

Waves (“the Lease Agreement”) for the operation of a water park.

With regard to the Sale Agreement, it is undisputed that the

parties did not close on the sale of the Pier in January, 2003,

as the agreement contemplated. The Bankruptcy Court found that 6

Nickels did not intend to convey the property (because it has

always asserted that there is no enforceable Sale Agreement) and

therefore breached the Sale Agreement.

 Indeed, the parties did not close on the sale until 2011, 6

pursuant to the confirmed Third Modified, First Amended Plan for

Liquidation of Nickels Midway Pier, LLC.

4

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In calculating the damages resulting from Nickels’ breach,

the Bankruptcy Court estimated Wild Waves’ loss of rental income

from January, 2003 forward to be $2.3 million, and also credited

Wild Waves with $3,171,668.00-- the balance of insurance proceeds

Nickels received from a fire that occurred on the Pier in 2002.7

With regard to the Lease Agreement, the Bankruptcy Court

held that Nickels breached paragraph 19 of the lease, which

obligated Nickels “to maintain the existing access to and egress

from the Leased Premises,” by placing game kiosks in front of the

water park entrance. The Bankruptcy Court estimated damages, in

the form of lost revenue due to lower attendance, to be

$1,052,948.8

In the instant appeal, Nickels challenges almost every

decision the Bankruptcy Court made in estimating Wild Waves’

claim.

II.

The District Court has jurisdiction to hear appeals from

final judgments, orders and decrees of the Bankruptcy Court in

cases and proceedings referred pursuant to 28 U.S.C. § 157(a) to

 The parties signed the Sale Agreement in 1999. As will 7

be discussed further infra, the Bankruptcy Court held that the

Sale Agreement placed the risk of loss on Nickels.

 The Bankruptcy Court estimated Wild Waves’ total claim to 8

be $6,524,616 ($1,052,948 + $3,171,668 + $1,052,948).

5

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the Bankruptcy Court. 28 U.S.C. § 158(a). 

The District Court reviews de novo the legal determinations

of the Bankruptcy Court. In re: Jersey City Medical Center, 817

F.2d 1055, 1059 (3d Cir. 1987). The Bankruptcy Court’s factual

determinations will be left undisturbed on appeal unless they are

clearly erroneous. Fed. R. Bankr. P. 8013.

With respect to estimation hearings, “[i]n reviewing the

method by which a bankruptcy court has ascertained the value of a

claim under Section 502(c)(1), an appellate court may only

reverse if the bankruptcy court has abused its discretion.” 

Bittner v. Borne Chemical Co., 691 F.2d 134, 135 (3d Cir. 1983).

III.

Nickels asserts that the Bankruptcy Court made many errors

in estimating Wild Waves’ claim. Specifically, Nickels asserts

that the Bankruptcy Court erred in holding that Nickels breached

either the Sale Agreement or the Lease Agreement. Alternatively,

Nickels asserts that even if the Bankruptcy Court was correct

about the breaches, it made many errors in calculating damages. 

Lastly, Nickels asserts that the Bankruptcy Court failed to

address its substantial claims against Wild Waves, which, Nickels

argues, should be set-off against Wild Waves’ claim.

6

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A.

(1)

With regard to the breach of the Sale Agreement, the

Bankruptcy Court opined,

[b]ecause the agreement of sale provided that the

closing would take place in January of 2003, Wild

Waves seeks damages for losses alleged for the failure

of the debtor to close at that time. Although the

debtor asserts that Wild Waves was also not prepared

to close in January 2003, it is clear to this Court,

as it was to Judge Seltzer as provided in his opinion,

and consistently uncontested in both Courts, that the

debtor disputed its obligation to sell the pier to

Wild Waves, and regardless of what preparations Wild

Waves made to close, the debtor would not go forward

with the sale.

(Pa190-- Transcript of Motion Decision)

Before this Court Nickels asserts the same argument that it

did below; namely, that it could not have breached the Sale

Agreement because Wild Waves never tendered the purchase price

for the Pier. Quoting Vidal v. Transcontinental & Western Air.,

Inc., Nickels apparently suggests that neither it, nor Wild

Waves, should be liable for a breach:

Payment and delivery are concurrent conditions since

both parties are bound to render performance at the

same time. . . . In such a case, as Williston 1 points

out, neither party can maintain an action against the

other without first making an offer of performance

himself. Otherwise, if each stayed at home ready and

willing to perform each would have a right of action

against the other. . . . to maintain an action at law

the plaintiff must not only be ready and willing but

he must have manifested this before bringing his

action, by some offer of performance to the defendant,

. . . It is one of the consequences of concurrent

conditions that a situation may arise where no right

7

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of action ever arises against either party . . . so

long as both parties remain inactive, neither is

liable. 

120 F.2d 67, 68 (3d Cir. 1941).

The principle set forth in Vidal is inapplicable here

because, as the Bankruptcy Court found, Nickels did not simply

“stay[] at home ready and willing to perform” on January 31,

2003. Id. To the contrary, Nickels repudiated the Sale 9

Agreement in 2001 when it vigorously opposed Wild Waves’ claim

for specific performance in the state court litigation before

Judge Seltzer, asserting that no enforceable contract existed. 

(See Pa1-Pa14–- Judge Seltzer’s letter opinion) Because Nickels

repudiated the agreement, Wild Waves was not required to tender

the purchase price. See Levy v. Mass. Acc. Co., 124 N.J. Eq.

420, 430-31 (Ch. 1938) (“Where one party wrongfully repudiates a

contract, -- says that he will no longer perform or be bound by

its terms, . . . the wronged party may refuse to consider the

contract terminated and may sue to compel the wrongdoer to

perform its terms. On the other hand, upon such wrongful

repudiation there thereby accrues to the wronged party the right,

if he so chooses, to terminate the contract, -- to say that the

contract has become terminated by the defendant’s wrongful act,

-- and to sue for damages therefor.”); Albert v. Ford Motor Co.,

 Vidal is also distinguishable insofar as it applied New 9

York and Missouri law, 120 F.2d at 69, whereas New Jersey law

applies to the issue presented here.

8

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112 N.J.L. 597, 603 (E. & A. 1934) (holding that once one party

conclusively manifests its intention not to perform a bilateral

contract, “[o]f course the law does not compel [the other party]

to do a useless act.”); see generally 10-54 Corbin on Contracts

§ 975 (“In the case of a bilateral contract for an agreed

exchange of performances, a repudiation of his duty by one of the

parties terminates the duty of the other.”).

The Bankruptcy Court did not err in holding that Nickels

breached the Sale Agreement.

(2)

Next Nickels asserts that the Bankruptcy Court miscalculated

the damages resulting from the breach of the Sale Agreement,

which consisted of: (a) “loss of rental income from [January,

2003] forward, and . . . [(b)] the insurance proceeds from the

loss of the income producing [portion] of the Pier.” (Pa191--

Transcript of Motion Decision)

Lost rental income

The Bankruptcy Court relied upon the report of Wild Waves’

expert (Mr. Baratz) which calculated lost net rental income by 10

deducting “a vacancy credit, operating expenses, replacement

 It does not appear that Nickels submitted its own expert 10

report or testimony on this issue.

9

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reserve and management fee” (Pa192-- Transcript of Motion

Decision; see also, Pa221-- Schedule 4 to Baratz Report) from the

tenant rent (i.e., gross rents) figure. Nickels argues that the

Baratz Report’s expenses figure was too low, and that the tenant

rent figure was too high.

Nickels argues that the Baratz report failed to take into

account other significant expenses-- namely, real estate taxes

and interest on Wild Waves’ purchase money financing-- thereby

resulting in an inflated figure for lost net rental income.

With regard to real estate taxes, Wild Waves has

conclusively demonstrated that the Baratz Report did, indeed,

include real estate taxes as part of “operating expenses,” and 11

thus, this Court concludes that the Bankruptcy Court did not fail

to incorporate real estate taxes into its estimation of lost net

rental income.

With regard to interest on Wild Waves’ purchase money

financing, Nickels asserts that “interest . . . on the $2

million purchase money financing at 8.5% [which] amounts to

$170,000/year,” (Nickels’ Brief, p. 11) was omitted from the

Baratz Report’s calculation of expenses. However, Wild Waves

 The Baratz report relied upon a previous expert report 11

by Mr. Bainbridge, which explicitly incorporates real estate

taxes into the category “operating expenses.” (Pa284) The

operating expenses in the Baratz report are identical to the

operating expenses in the Bainbridge report. (Compare Pa284 with

Pa221)

10

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asserts that interest was properly excluded because it was

“effectively offset” by the “money freed up by the termination of

[Wild Waves’] rental obligation to [Nickels],”-- $250,000 per

year-- upon the sale of the Pier. (Wild Waves’ Brief, p. 13)

In their reply brief, Nickels asserts that Wild Waves’

argument is flawed because “it incorrectly assumes that mortgage

interest should not be included as an expense” and the “$702,350

of gross rent utilized by Mr. Bainbridge was already net of the

$115,000 of rents from [Wild Waves].” (Nickels Reply Brief, p.

6)

It does not appear that the Bankruptcy Court addressed the

issue of mortgage interest. As the case will be remanded for

additional reasons, this Court will leave this issue for

determination by the Bankruptcy Court in the first instance.

Nickels also argues that the tenant rent figure was too high

because it was undisputedly based on market rents, rather than

actual rents. The Bankruptcy Court explained why market rents

were used: “the Court rejects [Nickels’ suggested] approach [of

using actual rents] because some of the debtor’s tenants are

insiders or entities owned by insiders , which makes those 12

figures less reliable in a fair market valuation.” (Pa192,

Transcript of Motion Decision) This Court finds the Bankruptcy

 Nickels states that 5 of 11 leases were granted to 12

insiders. (Nickels Brief, p. 12)

11

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Court’s decision to be logical and not an abuse of discretion.13

Insurance proceeds

With regard to insurance proceeds, the Bankruptcy Court

stated, 

the debtor received $3,992,920 in insurance proceeds

after the fire loss of the Castle and Dungeon, which

covered loss of the structures and contents, which

 Nickels makes two other unavailing arguments. 13

First, it asserts that the tenant rent figure was too high

because it improperly included rent from a “Frogger” game kiosk

that Wild Waves would have moved upon the sale of the Pier

because it blocked the entrance to the waterpark. The Court

agrees with Wild Waves’ observation that Nickels’ argument

assumes without any factual support that Wild Waves would have

removed the kiosk from the Pier rather than merely relocating it

to a different position on the Pier. (It is also worth noting

that even by Nickels’ own estimate, the total rent from the

Frogger kiosk was only $145,000-- 6.3% of the total tenant rent

figure.)

Second, Nickels asserts that the Bankruptcy Court should

have “retroactively charged Wild Waves with interest on the Pier

purchase price.” (Nickels Brief, p. 14) This argument makes no

sense when one remembers that the issue presented is the amount

of damages Wild Waves suffered as a result of Nickels’ breach of

the Sale Agreement. It is basic hornbook law that “[c]ompensatory damages are designed to put the injured party in as good a

position as he would have had if performance had been rendered as

promised.” Donovan v. Bachstadt, 91 N.J. 434, 444 (1982); see

also Restatement (Second) of Contracts § 347, comment a

(“[c]ontract damages are ordinarily based on the injured party’s

expectation interest and are intended to give him the benefit of

his bargain by awarding him a sum of money that will, to the

extent possible, put him in as good a position as he would have

been in had the contract been performed.”). If the contract had

been performed, Wild Waves would have paid the purchase price in

exchange for the Pier. Thus, its damages are the value of the

Pier minus the purchase price; not the value of the Pier minus

the purchase price with interest. Nickels repudiated the

contract, therefore it may not benefit from any increase in the

property’s value after 2003.

12

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would have belonged to Wild Waves had the sale gone

forward and the fires not occurred, or if the debtor

had rebuilt the income-producing structures from the

insurance proceeds.

Steven Nickels testified that the debtor invested

$821,252 back into . . . the pier. Using that figure,

Wild Waves would be entitled to an estimated claim of

$3,171,668 [$3,992,920 - $821,252] as its loss. 

Because the agreement of sale placed the risk of loss

on the debtor, and the debtor failed to replace the

income-producing structures and to close, Wild Waves

suffered losses which this Court estimates to be

$3,171,668.

(Pa191– Transcript of Motion Hearing)

From these few sentences, this Court cannot clearly discern

why the Bankruptcy Court awarded the insurance proceeds to Wild

Waves. And perhaps more importantly, the award seems to be

inconsistent with the Bankruptcy Court’s method of calculating

the reduced purchase price for the Pier under the Sale Agreement. 

(See pages 13-14 of this Court’s opinion, issued on even date

herewith, affirming the Bankruptcy Court’s confirmation of Wild

Waves’ Third Modified, First Amended Plan of Liquidation.)

Wild Waves puts forth two arguments for why they should

receive the insurance proceeds: (1) Nickels separately breached

Paragraph 12(b) of the Sale Agreement, wherein Nickels promised

to add Wild Waves as an “additional insured” under its property

damage insurance policy; and (2) the Sale Agreement required

Nickels to rebuild the Dungeon and Castle. However, Nickels

asserts several counter-arguments, to which Wild Waves has

several responses.

13

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These issues were not discussed by the Bankruptcy Court in

its oral opinion, and this Court cannot infer how the Bankruptcy

Court ruled on these arguments. While the Bankruptcy Court’s

statement that Nickels “failed to replace the income-producing

structures” of the Pier might suggest that the Bankruptcy Court

implicitly held that Nickels had a duty to replace the Dungeon

and Castle, it is not clear from where that duty arose. Nickels

and Wild Waves dispute whether the Sale Agreement incorporates

the Lease’s provision that Nickels will “repair” the leased

premises in the event it is “partially damaged by fire” (Pa613–

Lease Paragraph 24), and even assuming arguendo that the Sale

Agreement does incorporate the provision, “repair” does not

necessarily mean “rebuild.”

Accordingly, this Court will remand to the Bankruptcy Court

the issue of damages for Nickels’ breach of the Sale Agreement.

B.

(1)

The Bankruptcy Court held that Nickels breached Paragraph 19

of the Lease which provides, in relevant part, “[Nickels] agrees

to maintain the existing access to and egress from the Leased

Premises in its current condition, so as to ensure a free flow of

pedestrian traffic into and out of the Leased Premises.” (Pa612-

- Lease Paragraph 19) Specifically, the Bankruptcy Court found

14

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that Nickels placed the Frogger game kiosk in the entranceway to

the waterpark, thereby “somewhat” obstructing access. (Pa675-- 14

Bankruptcy Court’s Opinion of September 30, 2009, incorporated by

reference in the oral opinion of September 27, 2010 (Pa184))

Nickels argues that the Bankruptcy Court’s factual finding

as to the placement of the Frogger kiosk was “without any basis,”

(Nickels Brief, p. 22) and therefore clearly erroneous. The

Court disagrees. The Bankruptcy Court expressly stated that its

decision was based on photographs in which “it is visible . . .

that the entranceway is obstructed.” (Pa184-- Transcript of

Motion Hearing) Nickels ignores these photographs.

The Bankruptcy Court’s finding was not clearly erroneous,

therefore its holding that Nickels (non-materially) breached the

Lease will be affirmed.

(2)

Nickels next argues that even if the Bankruptcy Court

correctly held that Nickels breached the lease, Wild Waves cannot

carry its burden of proving that the breach caused any damages

because the expert reports it relied upon failed to meet the

requirements of Fed. R. Evid. 702 and Daubert v. Merell Dow

Pharm., Inc., 509 U.S 579 (1993), and therefore, should have been

 The Bankruptcy Court held that the breach was not 14

material-- that pedestrians could “easily negotiate around” the

kiosks-- but that Wild Waves “has a claim for damages.” (Pa675)

15

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excluded.15

To establish damages resulting from the partial obstruction

of the entranceway to the waterpark, Wild Waves relied upon the

expert reports of Dr. Francis, a cognitive psychologist, and Mr.

Baratz, a certified public accountant. Dr. Francis opined that

the obstruction to the entranceway reduced attendance by one

third (due to factors such as reduced visibility to passers-by)

(Pa186), and Mr. Baratz then “value[d] the decrease in

attendance” in terms of lost revenue. (Pa186)

At the estimation hearing, Nickels’ counsel twice objected

to Dr. Francis’s report and testimony asserting that it was

inadmissible (Pa377-79; Pa536-38) ; and also objected to the 16

admissibility of Mr. Baratz’s report and testimony (Pa534-38). 

The Bankruptcy Court stated that it would “take [the objections]

under advisement.” (Pa379) 

17

In issuing its estimation decision, however, the Bankruptcy

Court never conducted a Rule 702 / Daubert analysis. With

respect to Dr. Francis, the Bankruptcy Court’s merely stated,

 The Federal Rules of Evidence apply in bankruptcy 15

proceedings. Fed. R. Bankr. P. 9017.

 Mr. Kulback specifically objected to Dr. Francis’ 16

methodology, asserting that it was “well beyond any degree of

reasonable scientific certainty.” (Pa379)

 The Bankruptcy Court later stated to Nickels’ counsel, 17

“I’m overruling your objection. You’re on the record,” (Pa538),

but the hearing transcript is not clear as to what objection was

being overruled.

16

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“[w]hile [Dr. Francis’] methodology appears to follow scientific

methods and suggests that reduced attendance has resulted, the

one-third calculation [for decreased attendance] seems high when

considering the actual relationship of visibility to attendance.” 

(Pa185) The Bankruptcy Court then said, “[i]t is this Court’s

conclusion that a loss of attendance resulted from the

obstruction by the kiosks, but in a much smaller percentage. . .

. For the purpose of this estimation hearing, Court will utilize

a ten-percent reduction related to the loss of attendance.” 

(Pa189)

Similarly, with respect to Mr. Baratz’s report and

testimony, the Bankruptcy Court said that it “consider[ed] the

data he relied upon in reaching his conclusions and the

methodology he employed,” but did not explicitly analyze whether

his methods “‘rest[ed] on a reliable foundation.’” Kumho Tire

Company, Ltd. v. Carmichael, 526 U.S. 137, 141 (1999) (quoting

Daubert).

Accordingly, this Court will remand the issue of Wild Waves’

damages resulting from the breach of the Lease for a Rule 702 /

Daubert analysis of the admissibility of the expert reports and

testimony of Dr. Francis and Mr. Baratz.18

 Quoting Bittner, Wild Waves suggests that the Bankruptcy 18

Court was not required to conduct a Rule 702 / Daubert analysis.

691 F.2d at 135 (stating that the Bankruptcy Court may use

“whatever method is best suited to the particular contingencies

at issue” in estimating claims). However, the Bankruptcy Court

17

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C.

Lastly, Nickels asserts that the Bankruptcy Court erred by

apparently ignoring its claims against Wild Waves which include:

(a) the $389,182.50 judgment Judge Simandle entered in favor of

Nickels in the fire insurance litigation, see 2010 WL 445649; (b)

Nickels’ claim for pre-petition rent and taxes, which Judge

Hillman stated was “approximately $594,007.50” but remanded to

the Bankruptcy Court for determination in “a single integrated

proceeding” consistent with the Bankruptcy Court’s stated

intention to address together breaches of the Sale Agreement and

Lease, 2010 WL 3881376 at *7-8; and (c) Nickels asserts, without

much explanation, that it is entitled to the $900,000 Wild Waves

received from its business interruption insurance after the

Castle & Dungeon fire because, Wild Waves succeeded in getting

rent abated as a result of the fire. Nickels reasons that Wild

Waves saved $1,517,823 in rent, therefore Nickels should get the

$900,000.

The Bankruptcy Court did not address these issues, and Wild

itself seemed to indicate that it intended to conduct such an

analysis when it said it would take under advisement Nickels’

objections to the expert reports and testimony. 

Moreover, nothing in Bittner supports a conclusion that a

Bankruptcy Court may estimate claims based on potentially

unreliable expert evidence, over the express objection of a

party. In Bittner, the Third Circuit affirmed the bankruptcy

court’s decision to “forego an extraneous Estimation Hearing

under § 502(c)” in favor of a “trial on the papers” procedure

where “the claims were actually adjudicated.” 300 F.3d at 357.

18

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Waves’ submission ignores these issues. The Bankruptcy Court

should address these issues on remand.19

IV.

For the reasons set forth above, the Bankruptcy Court’s

Order of October 8, 2010, will be affirmed as to its holdings

that Nickels breached the Sale Agreement and the Lease. As to

Wild Waves’ damages resulting from the beaches, and any

appropriate set-off to which Nickels may, or may not, be

entitled, the Court will remand for further proceedings

consistent with this opinion. The Court will enter an

appropriate order.

Dated: April 25, 2011

 s/ Joseph E. Irenas 

JOSEPH E. IRENAS, S.U.S.D.J.

 As the Court discussed with counsel at oral argument, 19

the issues are relevant only insofar as they may or may not be

set-off against Wild Waves’ claim. No adversary actions have

been filed against Wild Waves, therefore the Bankruptcy Court has

not been asked to enter a judgment against Wild Waves.

19

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