1 UNITED STATES COURT OF APPEALS 1
FOR THE SECOND CIRCUIT 2 3 August Term 2002 4 (Argued June 23, 2003 Decided August 21, 2003) 5 Docket No. 02-5060 6

------------------------------------------------------x 7 CENTRAL VERMONT PUBLIC SERVICE CORPORATION, 8 9 Defendant-Appellant , 10 11 12 -- v.-- 13 14 15 HAROLD HERBERT and EDITH HERBERT, 16 17 Plaintiffs-Appellees. 18 19 ------------------------------------------------------x 20 21 B e f o r e : WALKER, Chief Judge , STRAUB and POOLER, Circuit 22 Judges
. 23 Appeal from an order by the United States District Court for 24 the District of Vermont ( J. Garvan Murtha, Judge ), denying 25 appellant’s Fed. R. Civ. P. 60(b)(4) motion for relief from a 26 bankruptcy court order permanently enjoining it from pursuing 27 civil claims against the appellees. 28
AFFIRMED. 29 30 JAMES B. ANDERSON, Ryan, Smith 31 & Carbine, Ltd., Rutland, VT, 32 for Appellant
. 332 MARY P. KEHOE, Lisman, 1 Webster, Kirkpatrick & 2 Leckerling, P.C., Burlington, 3 VT, for Appellee
. 4 5 6 JOHN M. WALKER, JR., Chief Judge : 7 Defendant-appellant Central Vermont Public Service Corp. 8 (“CVPS”) appeals from the district court’s order denying its Fed. 9 R. Civ. P. 60(b)(4) motion. In that motion, CVPS sought relief 10 from a bankruptcy court order permanently enjoining it from 11 pursuing civil claims against the appellees Harold and Edith 12 Herbert (“the Herberts”). After waiting more than four years to 13 challenge the bankruptcy court injunction, CVPS contended that 14 the bankruptcy court order was void for lack of jurisdiction. 15 The district court ruled that the Rule 60(b)(4) motion was 16 untimely and rejected CVPS’s jurisdictional argument. Although 17 the district court’s untimeliness ruling was in error, we agree 18 that the bankruptcy court at least had an arguable basis for 19 exercising its jurisdiction, and accordingly, we affirm the 20 district court’s denial of CVPS’s Rule 60(b)(4) motion. 21 I. BACKGROUND 22 In 1993, the Herberts purchased the mortgage and security 23 agreements encumbering Pico Ski Resort in southern Vermont. In 24 1995, they foreclosed against the resort and incorporated it as 25 “Pico Mountain, Inc.” (d/b/a Pico Mountain Resort), which they 26 owned and controlled as shareholders, officers, and directors. 273

In July 1996, the Herberts formed two new entities: Sherburne 1 Pass Mountain Properties, LLC, to which the Herberts conveyed all 2 of the resort’s real estate; and Pico Mountain Operating Company, 3 to which they conveyed all of the resort’s personal property 4 assets. Less than one month later, their original company, Pico 5 Mountain, Inc. filed a Chapter 7 petition in bankruptcy, listing 6 no significant assets and $2.7 million in unsecured debts. In 7 December 1996, the Herberts conveyed the resort’s real property 8 from Sherburne Pass Mountain Properties, LLC, to Pico Management 9 and conveyed the personal assets of Pico Mountain Operating 10 Company to American Skiing Company. It appears from the 11 appellate record that the Herberts controlled Pico Management, 12 but not American Skiing Company. The December 1996 sales 13 directly and indirectly yielded $2.5 million in benefits to the 14 Herberts, which they did not disburse to the creditors of Pico 15 Mountain, Inc., including CVPS. 16 In January 1997, CVPS filed a proof of claim in the Pico 17 Mountain, Inc. Chapter 7 proceeding for the cost of the 18 electrical power it had supplied to the resort. Pico Management 19 placed $214,802.79 in escrow to pay the CVPS electrical power 20 bill for utilties. Meanwhile, the trustee of the bankruptcy 21 estate of Pico Mountain, Inc. investigated causes of action 22 against the Herberts for alleged breaches of fiduciary duty 23 toward the debtor. This issue was resolved when the trustee 241 CVPS asserts that “[i]t is not even clear that [it]

ever received the summons, complaint, and pre-trial order the Trustee mailed on June 6, 1997. With 249 defendants served by first class mail, it is possible clerical errors were made.” When asked about this assertion at oral argument, CVPS admitted that there is nothing to support it beyond the claim that CVPS’s files did not contain the referenced documents when they were searched in preparation for the filing of the complaint in the instant action. In other words, the assertion is pure speculation, and it should not have been made. 4 entered into a settlement agreement whereby the Herberts agreed 1 to pay the lesser of $120,000 or thirty percent of the allowed 2 unsecured claims against the debtor. In an adversary proceeding, 3 the trustee sought bankruptcy court approval of the settlement 4 and filed a complaint in that court to enjoin all creditors, 5 including CVPS, from bringing actions against the Herberts 6 “through any derivative or alter ego claim[s] regarding a Pico 7 Mountain, Inc. debt.” 8 On June 16, 1997, the trustee’s summons and complaint were 9 served on CVPS. CVPS does not dispute that it failed to enter an 10 appearance or defend against the trustee’s action. 1 On October 11 29, 1997, Bankruptcy Judge Francis G. Conrad approved the 12 settlement and entered an injunction barring creditors of the 13 bankruptcy estate from pursuing any claim, direct or derivative, 14 against the Herberts. Canney v. AEI Music Network( In re Pico 15 Mountain, Inc. ), No. 96-10756, Adv. Proceeding No. 97-1036 16 (Bankr. D. Vt. Oct. 29, 1997). On December 2, 1997, Judge Conrad 17 entered a default judgment against those defendants that had not 185

answered the trustee’s complaint, including CVPS, and ordered 1 that the trustee was not required to serve those defendants with 2 copies of the injunction. 3 CVPS concedes that it learned of the injunction from the 4 Herberts’ counsel on December 15, 1997, less than two months 5 after the injunction and less than two weeks after the default 6 judgment was entered against it. Nevertheless, CVPS waited more 7 than four years – until February 13, 2002 – to challenge the 8 injunction by filing a Rule 60(b)(4) motion. This attack on the 9 injunction was prompted by a suit filed by the Herberts in 10 Chittenden Superior Court. That suit seeks to reclaim the moneys 11 that Pico Management had placed in escrow, on the basis that the 12 settlement and the related injunction barred CVPS’s claims for 13 those moneys. In its motion papers, CVPS invoked Rule 60(b)(4)’s 14 provision that “the court may relieve a party . . . from a final 15 judgment, order, or proceeding [if] the judgment is void,” and 16 argued that the injunction was void for lack of subject-matter 17 jurisdiction. 18 In an oral ruling on June 18, 2002, the bankruptcy court 19 denied the motion as both untimely, citing Beller & Keller v. 20 Tyler, 120 F.3d 21 (2d Cir. 1997), and without merit because the 21 bankruptcy court had an arguable jurisdictional basis for its 22 order, citing Nemaizer v. Baker , 793 F.2d 58 (2d Cir. 1986)
. On 23 October 3, 2002, the district court affirmed the bankruptcy 246

court’s denial of the motion on both grounds. CVPS now appeals 1 from the judgment of the district court. 2 II. DISCUSSION 3 A. Standard of Review 4 Generally, we review Rule 60(b) motions for abuse of 5 discretion. Lawrence v. Wink, 293 F.3d 615, 623 (2d Cir. 2002). 6 However, a district court’s ruling on a Rule 60(b)(4) motion is 7 reviewed de novowhere “there are no disputes over the subsidiary 8 facts pertaining to [the] issue” of jurisdiction. United States 9
v. Forma , 42 F.3d 759, 762 (2d Cir. 1994). “Under Rule 60(b)(4) 10 a deferential standard of review is not appropriate because if 11 the underlying judgment is void, it is a per seabuse of 12 discretion for a district court to deny a movant's motion to 13 vacate the judgment under Rule 60(b)(4)." Jalapeno Prop. Mgmt., 14 LLC v. Dukas , 265 F.3d 506, 515 (6th Cir. 2001) (Batchelder, J., 15 concurring) (citations and quotation marks omitted); see also 16 Recreational Properties, Inc. v. Southwest Mortgage Serv. Corp. , 17 804 F.2d 311, 314 (5th Cir. 1986) (“[T]he district court has no 18 discretion [in ruling on a 60(b)(4) motion], the judgment is 19 either void or it is not.”). Almost every Circuit has adopted 20 de novoreview of Rule 60(b)(4) motions, and we know of no 21 Circuit that defers to the district court on a Rule 60(b)(4) 22 ruling. See Vinten v. Jeantot Marine Alliances, S.A. , 191 F. 23 Supp. 2d 642, 649-50 & nn.12-13 (D. S.C. 2002) (collecting 247

cases); see also Page v. Schweiker, 786 F.2d 150, 152 (3d Cir. 1 1986)
. 2 B. Timeliness 3 At the outset, CVPS argues that the district court erred in 4 ruling that the motion was not timely. Even though Rule 60(b) 5 states that “[t]he motion must be made in a reasonable time,” 6 courts have been “exceedingly lenient in defining the term 7 ‘reasonable time,’ with respect to voidness challenges. In fact, 8 it has been oft-stated that, for all intents and purposes, a 9 motion to vacate a default judgment as void ‘may be brought at 10 any time.’” Beller & Keller , 120 F.3d at 24 (quoting 12 James 11 Wm. Moore, et al., Moore’s Federal Practice§ 60.44[5][c] (3d ed. 12 2003)) . We conclude that the district court erred in finding 13 that CVPS’s motion was untimely. 14 C. Bankruptcy Court Jurisdiction to Enter the Underlying Order 15 CVPS argues that the bankruptcy court’s order was void for 16 lack of subject matter jurisdiction. CVPS contends that the 17 bankruptcy court issued a final order in a non-core proceeding 18 without the parties’ consent and without a district court’s de 19

novoreview, and that therefore it exceeded its jurisdiction 20 under Northern Pipeline Constr. Co. v. Marathon Pipe Line Co. , 21 458 U.S. 50 (1982) (plurality opinion), and 28 U.S.C. § 157. 22 Where bankruptcy courts have exceeded their jurisdiction in non23 core proceedings, we have not hesitated to vacate the bankruptcy 248

court judgment on direct appeal. See , e.g. , Orion Pictures Corp. 1 v. Showtime Networks, Inc. ( In re Orion Pictures Corp. ), 4 F.3d 2 1095, 1102-03 (2d Cir. 1993) ; see also Cathedral of the 3 Incarnation v. Garden City Co. ( In re Cathedral of the 4 Incarnation ), 90 F.3d 28, 34 n.5 (2d Cir. 1996) ; Gallucci v. 5
Grant( In re Gallucci ), 931 F.2d 738, 744 (11th Cir. 1991) . 6 However, this case comes to us, not on direct appeal, but on 7 appeal from a denial of a Rule 60(b)(4) motion through which CVPS 8 seeks to overturn a final default judgment. Because “final 9 judgments should not be lightly reopened, [Rule 60(b)] may not be 10 used as a substitute for timely appeal. . . . Since 60(b) allows 11 extraordinary relief, it is invoked only upon a showing of 12 exceptional circumstances.” Nemaizer, 793 F.2d at 61-62 13 (citations omitted). In the context of a Rule 60(b)(4) motion, a 14 judgment may be declared void for want of jurisdiction only when 15 the court “plainly usurped jurisdiction,” or, put somewhat 16 differently, when “there is a total want of jurisdiction and no 17 arguable basis on which it could have rested a finding that it 18 had jurisdiction.” Id. at 65 (internal quotation marks and 19 citations omitted). 20 CVPS claims that the bankruptcy court’s injunction is void 21 under Marathonbecause the court lacked jurisdiction to 22 adjudicate pre-petition state law rights. In Marathon , the 23 Supreme Court held that Congress could not constitutionally 249

empower a bankruptcy court, which is not an Article III court, to 1 adjudicate a state breach-of-contract action (based on a pre2 petition contract) brought by a debtor against a defendant that 3 had not filed a claim with the bankruptcy court. See458 U.S. at 4 85. The Supreme Court observed that "our Constitution reserves 5 for Art[icle] III courts" traditional functions of the judicial 6 power such as adjudicating state breach-of-contract claims like 7 debtor’s claim in that case. Id. at 83. The MarathonCourt 8 found unconstitutional the Bankruptcy Act of 1978’s broad grant 9 of jurisdiction to the bankruptcy courts to adjudicate such state 10 law claims. 11 In the wake of Marathon , Congress passed the Bankruptcy 12 Amendments and Federal Judgeship Act of 1984 (“1984 Amendments”), 13 categorizing “core” and “non-core” proceedings. 28 U.S.C. § 157. 14 Core proceedings are actions essential or basic to the 15 administration of a bankruptcy case, and Congress offered a non16 exhaustive list of such actions. 28 U.S.C. § 157(b)(2). In a 17 core proceeding, a bankruptcy court may “enter appropriate 18 [final] orders and judgments.” § 157(b)(1). Where a bankruptcy 19 court acts in a non-core proceeding, a final order may be issued 20 only in one of two ways: by the district court after de novo 21 review of the bankruptcy court’s proposed factual findings and 22 legal conclusions, § 157(c)(1); or by the bankruptcy court with 23 the consent of the parties, § 157(c)(2). See generally Orion 2410

Pictures Corp. , 4 F.3d at 1100-01. In this case, because the 1 district court did not originally review nor independently 2 adjudicate the bankruptcy court’s order enjoining CVPS from 3 pursuing its state claims against the Herberts, bankruptcy 4 jurisdiction can exist only if the proceeding was core or was 5 consented to by the parties. 6 As noted above, when reviewing the denial of a Rule 60(b)(4) 7 motion to vacate for want of jurisdiction, we consider only 8 whether there is at least an arguable basis for jurisdiction. If 9 so, we will not disturb the judgment on jurisdictional grounds. 10 In this case, we easily conclude that there is, at a minimum, an 11 arguable basis for bankruptcy court jurisdiction, because CVPS’s 12 claims are arguably part of the core proceeding before the 13 bankruptcy court and because CVPS consented to the bankruptcy 14 court’s jurisdiction. 15 The non-exhaustive list of “core proceedings” in the 1984 16 Amendments includes: “matters concerning administration of the 17 estate,” 28 U.S.C. § 157(b)(2)(A), “proceedings to . . . recover 18 fraudulent conveyances,” § 157(b)(2)(H), and “other proceedings 19 affecting . . . the adjustment of the debtor-creditor . . . 20 relationship,” § 157(b)(2)(O). The 1984 Amendments clarified 21 that “[a] determination that a proceeding is not a core 22 proceeding shall not be made solely on the basis that its 23 resolution may be affected by State law.” § 157(b)(3). Since 2411

the 1984 Amendments, “both the Supreme Court and this court have 1 concluded that the Marathonholding was a narrow one and have 2 broadly construed the jurisdictional grant in the 1984 Bankruptcy 3 Amendments.” See S.G. Phillips Constructors, Inc. v. City of 4 Burlington( In re S.G. Phillips Constructors, Inc. ), 45 F.3d 702, 5 707 (2d Cir. 1995) (citations omitted)
. “[B]ankruptcy courts are 6 not precluded from adjudicating state-law claims [as core 7 proceedings] when such claims are at the heart of the 8 administration of the bankruptcy estate.” Ben Cooper, Inc. v. 9 Ins. Co. of the State of Pa. ( In re Ben Cooper ), 896 F.2d 1394, 10 1399 (2d Cir.), vacated, 498 U.S. 964 (1990), reinstated, 924 11 F.3d 36 (2d Cir. 1991)
. A finding that a proceeding is core, we 12 have held, may be based upon the “nature of the proceeding,” S.G. 13 Phillips Constructors , 45 F.3d at 706, and “the ramifications of 14 the dispute on the administration of the estate,” Shugrue v. Air 15 Line Pilots Ass’n Int’l( In re Ionosphere Clubs, Inc. ), 922 F.2d 16 984, 994 (2d Cir. 1990). 17 The distinction between core and non-core is somewhat 18 subjective and contextual, and we need not determine whether the 19 injunction in this case was actually part of a core proceeding, 20 because the issue before us is only whether the bankruptcy court 21 arguably had jurisdiction. Here we conclude that the proceeding 22 was arguably core. As part of a settlement by which the Herberts 23 contributed to the bankruptcy estate, the injunction, at least 2412

arguably, was “at the heart of the administration of the 1 bankruptcy estate,” had significant “ramifications . . . for the 2 administration of the estate,” or was core because of the “nature 3 of the proceeding.” 4 Moreover, even if the injunction in itself was not part of a 5 core proceeding as defined by the 1984 Amendments, CVPS’s claims 6 against the Herberts also were arguably subject to bankruptcy 7 court jurisdiction based upon CVPS’s filing a proof of claim in 8 the bankruptcy court in January 1997, almost a year before the 9 bankruptcy court’s injunction. Our cases have upheld bankruptcy 10 jurisdiction in what would otherwise be non-core proceedings 11 where the party opposing the finding of jurisdiction has filed a 12 proof of claim. In doing so, we have relied on two theories: (1) 13 the proof of claim transforms litigation into a core proceeding; 14 and (2) by filing the proof of claim, the creditor consents to 15 the bankruptcy court’s broad equitable jurisdiction. See S.G. 16 Phillips Constructors , 45 F.3d at 706 (“The City, by filing its 17 proof of claim in this case, not only triggered § 157(b)(2)(B) [a 18 listed core proceeding in allowing claims against an estate and 19 estimating claims for the purposes of confirming a plan], but 20 also necessarily submitted to the court’s equitable power to 21 resolve its claims.”); see also Cibro Petroleum Prods. v. City of 22 Albany( In re Winmo Realty Corp. ), 270 B.R. 108, 120 & n.7 23 (S.D.N.Y. 2001) (citing numerous cases in which filing proof of 2413

claim is a sufficient basis for finding the proceeding core); Pan 1 American World Airways, Inc. v. Evergreen Int’l Airlines , 132 2 B.R. 4, 7 (S.D.N.Y. 1991) (“When a creditor files a proof of 3 claim it submits itself to the bankruptcy court's equitable 4 power, and the claims, even though arising under state law, 5 become core proceedings within the jurisdiction of the bankruptcy 6 court.”); cf. Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 59 7 n.14 (1989) (“[B]y submitting a claim against the bankruptcy 8 estate, creditors subject themselves to the court's equitable 9 power to disallow those claims . . . ."); Orion Pictures Corp. , 4 10 F.3d at 1102 (holding “breach-of-contract action by a debtor 11 against a party to a pre-petition contract, who has filed no 12 claim with the bankruptcy court, is non-core”). The foregoing 13 authorities establish that after CVPS filed its proof of claim 14 against Pico Mountain, the bankruptcy court had an arguable basis 15 for jurisdiction to enter its injunction against CVPS. 16 One could argue that CVPS’s proof of claim gave the 17 bankruptcy court core jurisdiction only over CVPS’s claims 18 against Pico Mountain, Inc. and not over its claims against the 19 Herberts. However, CVPS’s claims against the Herberts are state 20 law claims arising from the Herberts’ alter ego relationship with 21 Pico Mountain or the Herberts’ liability for Pico Mountain’s 22 debts. In the context of cases such as this, we have ruled that 23 the trustee is “the proper person to assert claims . . . . 2414

against the debtor’s alter ego or others who have misused the 1 debtors property in some fashion,” and by extension, we have held 2 that such alter ego claims are core proceedings. St. Paul Fire 3 and Marine Ins. Co. v. Pepsico, Inc ., 884 F.2d 688, 701 (2d Cir. 4 1989) . As long as state law permits alter ego tort claims or 5 similar actions, such actions are core proceedings because they 6 “relate[] to the property of the estate,” and “bring[] property 7 into the estate of the debtor,” particularly as a proceeding to 8 “recover fraudulent conveyances” under 28 U.S.C. 157(b)(2)(H). 9 Id . (internal quotations and citations omitted). 10 In this case, the trustee’s complaint for injunctive relief 11 specifically cited the creditors’ “derivative or alter-ego 12 claim[s],” and CVPS now bases its state claims against the 13 Herberts, in part, on Vermont’s alter ego doctrine and similar 14 claims of incorporator liability and breach of fiduciary duty, 15 citing Winey v. Cutler, 678 A.2d 1261 (Vt. 1996), Hardwick16 Morrison Co. v. Albertsson , 605 A.2d 529 (Vt. 1992), Herbert v. 17 Boardman , 349 A.2d 710 (Vt. 1975) . CVPS cannot pursue alter ego 18 liability and similar derivative liability claims against the 19 Herberts under Vermont state law, and, at the same time, assert 20 that core jurisdiction is absent because Vermont does not 21 recognize alter ego or derivative liability. One might argue 22 that the injunction exceeds the bankruptcy court’s core 23 jurisdiction for alter ego and derivative liability claims 2415

because it protects the Herberts from all claims “of any kind of 1 nature, direct or derivative.” Canney, Adv. Proceeding No. 97- 2 1036, at 2. However, we need not consider whether there was an 3 arguable jurisdictional basis for the potential reach of the 4 injunction because all of CVPS’s state claims are based on alter 5 ego or derivative liability, or relate to the debtor-creditor 6 relationship, and hence are at least arguably part of the core 7 proceedings in the bankruptcy court. 8 In sum, we conclude that the bankruptcy court did not 9 “plainly usurp[]” its power and that there was an arguable basis 10 for jurisdiction. Nemaizer, 793 F.2d at 65. Therefore we 11 conclude that the district court properly denied CVPS’s Rule 12 60(b)(4) motion. 13 III. CONCLUSION 14 For the foregoing reasons, we AFFIRM the district court’s 15 denial of CVPS’s Rule 60(b)(4) motion. 16