Opinion ID: 77980
Heading Depth: 2
Heading Rank: 3

Heading: All Media

Text: Ordinarily, our discussion would end here. However, Trusted Net contends that we are not free to apply our own judgment to the interpretation of § 303(b) because this Court's predecessor, in All Media, already decided the issue presented. See In re All Media Properties, Inc., 646 F.2d 193 (5th Cir.1981), aff'g 5 B.R. 126 (Bankr.S.D.Tex.1980). In All Media, the former Fifth Circuit issued a summary affirmance on the basis of the Memorandum Opinion of Bankruptcy Judge E.H. Patton, Jr., reported at 5 B.R. 126 (Bkrtcy., 1980). Id. at 193. Thus, it adopted both the holding and the reasoning of the bankruptcy court's published opinion in the case. [6] The parties do not dispute that the All Media decision is binding upon this Court. [7] What they do contest is whether All Media controls: In other words, whether All Media actually and squarely held that § 303(b)'s requirements are subject matter jurisdictional. All Media concerned involuntary Chapter 11 petitions brought against two related (parent and wholly owned subsidiary) companies involved in the operation of a radio station. The involuntary petitions were brought under the then-recently-enacted Bankruptcy Code. [8] All Media, 5 B.R. at 130-31. The two debtors, All Media and Artlite, contested the petitions; the bankruptcy court consolidated the cases and conducted a trial. Id. at 131. The court then issued its memorandum opinion on the debtors' challenges to the involuntary petitions. As the court described it, [t]he issues to be determined include whether each of the petitioning creditors meets the Code requirements for a creditor entitled to bring an involuntary petition, whether the requisite jurisdictional grounds exist and whether each of the alleged debtors is generally not paying its debts as such debts become due. Id. [9] The bankruptcy court first analyzed involuntary proceedings under the new Code framework, discussing how to determine whether a petitioning creditor's claim is not contingent as to liability. Id. at 131-33. Next, since both debtorsAll Media and Artlitehad asserted defenses to the petitioning creditors' claims, the bankruptcy court examined to what extent defenses can be asserted to defeat an involuntary petition under the Code. Id. at 133-36. After reviewing the evidence, the court concluded that the petitioning creditors' claims were not contingent as to liability and therefore they satisfied the requirements of § 303(b). Id. at 136-42. Consequently, the court held, it was entitled to reach the ultimate issue of whether All Media and Artlite had been failing generally to pay their debts as such became due. Id. at 138, 142. It decided this final issue, as to each debtor, in favor of the petitioning creditors. Id. at 142-48. The procedural posture of All Media differed dramatically from that of the present case, in that both All Media debtors immediately appeared and challenged the petitioning creditors' status and, thus, there was no waiver issue. Rather, the relevant issue before the All Media court was whether the petitioning creditors' claims were non-contingent as to liability and were valued, in the aggregate, at least $5,000 more than the value of any liens on the debtor's property that secured the claims, as required by § 303(b). Nevertheless, the All Media opinion is riddled with references to § 303(b)'s requirements as jurisdictional. For example, the court stated, This is not to say that the requirement that the petitioning creditors be holders of claims that are not contingent as to liability is not jurisdictional. It is only to say that this requirement does not mean that all claims must necessarily be liquidated, undisputed, matured, or reduced to judgment for the court to have jurisdiction. Id. at 133. Additionally, the court stated that [s]ince [All Media's petitioning creditors] are holders of claims not contingent as to liability and together their claims exceed $5,000 this court has jurisdiction to determine whether All Media has been generally paying its debts as they become due. Id. at 142. And, with respect to Artlite, the court concluded that because its petitioning creditors possessed non-liability-contingent claims, the jurisdictional requirements of § 303(h)(1) have been met and ... there is jurisdiction to determine whether Artlite was generally not paying its debts as they became due. Id. at 138. In this case, Morrison argues that although All Media repeatedly referred to the involuntary petition filing requirements as jurisdictional, it never stated that they are subject matter jurisdictional. Morrison is correct that All Media never actually used the term subject matter jurisdiction. Moreover, there is some language in the All Media opinion that suggests that the court, in speaking of jurisdiction, may have been referring not to the court's power to hear involuntary bankruptcy cases, but rather to the court's authority to bring an involuntary debtor before it, or to a substantive matter that must be proven only if put in issue. See id. at 137 (The intent of § 303(b) is that those who are not meeting their obligations can be forced to submit to the jurisdiction of the bankruptcy court.); see also id. at 134 ([W]here the issues concerning defenses to a claim of a petitioning creditor are not clear and require adjudication of either substantial factual or legal questions, the creditor should be recognized as qualified to join in the bringing of an involuntary bankruptcy petition. On the other hand, if it is clear that the claim is barred and the alleged debtor raises that defense, then that creditor should not be allowed to participate in the involuntary petition.). However, in spite of this somewhat loose language, the All Media court made clear elsewhere in its opinion that the jurisdictional nature of § 303(b) to which it referred was in fact of the non-waivable, subject matter jurisdiction variety. In the clearest example, the court stated: In its brief All Media states that Best, Inc. is not entitled to bring an involuntary petition because its claims are fully secured. Although this issue was not raised by the pleadings or at trial, it may go to jurisdiction and it should be considered since a court can take notice and dismiss a claim for lack of jurisdiction on its own motion. Id. at 140. To place this statement in context, the debtor All Media (after the trial) made a full security argument, contending that the creditor Best, Inc. could not comply with the § 303(b) requirement that debt to petitioning creditors exceed the value of any liens securing that debt. [10] Although the court rejected All Media's argument about Best's claim on the facts, the court expressly reached the issue, despite All Media's failure to plead it or raise it at trial. The above-quoted language demonstrates that the court did so because it considered non-compliance with § 303(b) to be a non-waivable jurisdictional defect. [11] Id. at 140-41. Under our prior panel precedent rule, holdings made or adopted by an earlier panelincluding express jurisdictional holdingsmust be followed. [12] See Main Drug, Inc. v. Aetna U.S. Healthcare, Inc., 475 F.3d 1228, 1231 (11th Cir.2007); Knight v. Columbus, Ga., 19 F.3d 579, 585 (11th Cir.1994). And All Media 's characterization of § 303(b) as imposing non-waivable jurisdictional requirements upon the bankruptcy court is holding, rather than dictum, because a determination that § 303(b) is subject matter jurisdictional was a necessary predicate for the court's consideration of All Media's argument which was raised neither in the pleadings nor at trialthat the creditor Best, Inc. did not satisfy the statutory requirement of having an unsecured or undersecured claim. See Black v. United States, 373 F.3d 1140, 1144 (11th Cir.2004) (Dictum is a term that has been variously defined as a statement that neither constitutes the holding of a case, nor arises from a part of the opinion that is necessary to the holding of the case.); see also United States v. Shields, 49 F.3d 707, 710 n. 11 (11th Cir.) (interpreting United States v. Osburn, 955 F.2d 1500 (11th Cir.1992), and stating that certain language was holding rather than dictum because a determination that the statutory scheme in fact favored growers who have just completed their harvest over growers who have not yet harvested their marijuana plants was a necessary predicate to the Osburn court's subsequent consideration of the defendants' constitutional challenge to that sentencing distinction), vacated, 65 F.3d 900 (11th Cir.1995) (en banc). Therefore, we conclude that we are bound by All Media 's decision that the requirements of § 303(b) must be satisfied in order for the bankruptcy court to have subject matter jurisdiction over an involuntary bankruptcy case. We recognize that the weight of authorityand, in our view, the superior reasoninglie against that holding. Nevertheless, All Media 's holding in this regard is prior panel precedent, and therefore controls. See United States v. Steele, 147 F.3d 1316, 1317-18 (11th Cir.1998) (en banc) (Under our prior precedent rule, a panel cannot overrule a prior one's holding even though convinced it is wrong.).