Opinion ID: 3013814
Heading Depth: 1
Heading Rank: 1

Heading: U.S. 124, 129 (1995); In re Federal-Mogul

Text: Global, Inc., 300 F.3d 368, 379-84 (3d Cir. Appellate jurisdiction over this 2002), cert. denied, 537 U.S. 1148 (2003). appeal is founded on 28 U.S.C. §§ 158(d) However, in this case the outcome of the 6 both core and non-core matters, see 28 the suit was a core proceeding because it U.S.C. §§ 157(b) and (c), and [w]hether a required the court to interpret and give particular proceeding is core represents a effect to its previous sale orders. See In re question wholly separate from that of Marcus Hook, 943 F.2d at 267 (motion to subject-matter jurisdiction. In re enforce bankruptcy sale order is core proceeding). Marcus Hook Dev. Park, Inc., 943 F.2d 261, 266 (3d Cir. 1991). The significance However, we must conclude that of the distinction between core and non- the bankruptcy court erred in determining core jurisdiction is that in core proceedings that it had no jurisdiction over Tenet's the bankruptcy court can enter a final Count IB to vacate the arbitration award j u d g m e n t , w h e r e a s i n n o n -c o r e concerning the prospective sick leave proceedings the bankruptcy court's power obligation or over District 1199C's is limited to submitting proposed findings counterclaim to enforce that part of the of fact and conclusions of law to the arbitration award. The bankruptcy court district court for entry of a final order after reasoned: de novo review (unless the parties consent [I]f, and to the extent that, to adjudication by the bankruptcy judge). the Sales Orders and the Id.; 28 U.S.C. §§ 157(b) and (c). Because [asset purchase agreement] the district court considered this case are construed such that under both the standard appropriate for Tenet . . . assumed liability appeals of core-matter decisions and the de for the Sick Leave novo standard, in the alternative, District Obligations, then (a) such 1199C's argument about the core/non-core liability is not that of . . . the distinction has little practical import in this Trustee and the instant case. However, in order to clarify debtor's bankruptcy estate, procedure on remand, we hold that the (b) Tenet cannot recover on bankruptcy court correctly determined that a claim for indemnification against the instant debtor's bankruptcy estate, and (c) suit between District 1199C and Tenet the debtor's bankruptcy could have an immediate effect on the estate thus cannot bankruptcy estate since Tenet's indemnity conceivably be impacted by claim, if it is meritorious at all, has already the outcome of litigation matured. The asset purchase agreement regarding whethe r the requires Allegheny to defend Tenet or else Arbitration Award should be pay for its defense of third-party claims set aside or enforced. covered by the indemnity agreement, and Tenet has already made demand on Allegheny to defend it against District 265 B.R. at 97. In other words, the court 1199C's claim on the arbitration award. 7 reasoned that if the court decided to a Better Env't, 523 U.S. 83, 88-102 (1998). interpret the asset purchase agreement to Because the bankruptcy court correctly place responsibility on Tenet for the determined that Tenet's suit to vacate the prospective leave obligation, then arbitration award and District 1199C's Allegheny could not be liable to indemnify counterclaim to enforce it required the Tenet and the claim for prospective leave court to interpret and enforce the sale would not have any potential to affect orders, 265 B.R. at 96, it was error then to Allegheny's estate. If the claim could have hold that jurisdiction disappeared once the no effect on the estate, there should be no court construed the asset purchase bankruptcy jurisdiction. Accordingly, agreement and sale orders to bind Tenet to when the court decided that Tenet had the collective bargaining agreement. The assumed liability for the prospective sick bankruptcy court had subject matter leave obligation, it held: jurisdiction over the entire suit and counterclaim. [B]ecause the Sales Orders do not operate to preclude II. the Union from pursuing On the merits, District 1199C Tenet for payment of the argues that Tenet is bound by the Prospective Sick Leave collective bargaining agreements in their Obligation, the Court lacks entirety because Tenet assumed them in even noncore subject matter the asset purchase agreement with jurisdiction over Tenet's 1st Allegh en y, notwithstand ing T enet's Count and the Union's attempt to limit its liabilities under that counterclaim to the extent agreement. District 1199C argues that this that the same seek to set obligation follows from our opinion in a si de or enforce the American Flint Glass Workers Union v. Arbitration Award as it Anchor Resolution Corp., 197 F.3d 76 (3d pertains to the Prospective Cir. 1997), which District 1199C interprets Sick Leave Obligation. to mean that a party that assumes any part of a contract's obligations automatically assumes all of them. 265 B.R. at 118. Thus, the bankruptcy court's holding that it lacked jurisdiction This is a misreading of American was based on its resolution of the merits of Flint Glass. American Flint Glass held the claim. that in order to effect a novation by operation of law under 11 U.S.C. § 365(k), The existence of subject matter a bankruptcy debtor-in-possession must jurisdiction is determined before, not after, assign the old contract cum onere, with all adjudication of the merits and depends on rights and obligations intact. Id. at 80. A the nature, not the validity, of the partial assignment does not suffice to plaintiff's claim. See Steel Co. v. Cit. for 8 effect a novation, releasing the original we interpret American Flint Glass to bind obligor from its duties under the contract. Tenet to terms of the collective bargaining The result in American Flint Glass of the agreement that it was not willing to employer-debtor's attempt to make a assume, we will have disenfranchise[d] partial assignment was that the debtor the Union by allowing the successor remained liable for the entire collective employer to discard burdensome terms bargaining agreement. The decision in without bargaining. We do nothing of the American Flint Glass bound the debtor kind. To the extent that Tenet has been only; it did not hold that the partial- able to enjoy the benefits of the collective assignee became obliged to perform duties bargaining agreements without having to it never agreed to undertake and which it pay for sick leave that accrued under them, expressly disavowed in the asset purchase District 1199C has itself to blame. The agreement. Therefore, American Flint division of responsibility between Tenet Glass might be authority for holding and Allegheny was ordained by the asset Allegheny liable on the collective purchase agreement. At the time the bargaining agreements, but it does not bankruptcy court was considering the provide authority for holding Tenet liable motion to approve the asset purchase for the parts of the collective bargaining agreement, District 1199C neither objected agreements that it declined to assume.8 to the pr opose d agreeme nt n or affirmatively endorsed it. Deciding District 1199C argues that unless whether District 1199C became bound by the terms of the asset purchase agreement 8 under such circumstances would require us American Flint Glass also held to consider difficult questions of that when a debtor-in-possession makes a bankruptcy and labor law. However this partial assignment of a collective inquiry has been rendered unnecessary bargaining agreement in connection with because in the briefs before us, District a sale of substantially all its assets, this 1199C has conceded that the asset amounts to an attempt to reject the purchase agreement binds it. The collective bargaining agreement, and bankruptcy court held, [T]he Sales compliance with 11 U.S.C. § 1113 is Orders, which approved the [asset required. Under § 1113, before a debtor- purchase agreement] . . . are final orders, in-possession can reject a labor which fact, when coupled with the notice agreement, there must be negotiations to the Union as just described, means that, and a hearing. §§ 1113(b), (c), and (d). by virtue of collateral estoppel . . . the In American Flint Glass there was no Union can no longer press, and the Court attempt to comply with § 1113. The is not now free to entertain, collateral remedy was that the debtor remained attacks upon said orders . . . . 265 B.R. at liable under the collective bargaining 112. District 1199C does not contest this agreement, not that the assignee became holding that it is bound by the terms of the liable. 197 F.3d at 82. 9 asset purchase agreement, as enshrined in A. the sale orders: The asset purchase agreement [T]he Union is not objecting excludes from Tenet's obligations any to the approval of the [asset liability for liabilities or obligations purchase agreement] or arising from any Assumed Contract before seeking to make a collateral the Closing Date. Conversely, Tenet attack upon it. Rather, the assumed Allegheny's obligations arising Union is arguing that the on or after the Closing Date with respect to [asset purchase agreement] any period commencing on the Closing did not, and should not be Date under the Assumed Contracts. The construed as if it did, collective bargaining agreements provide establish an incomplete for the accrual of leave upon completion assumption of the collective of specified periods of employment; the bargaining agreements. leave accumulates and is then available for employees to use in case of illness or injury. Most of the collective bargaining Thus, District 1199C does not dispute that agreements provide that the employees it is bound by the asset purchase who retire will be paid for some agreement; instead, it only argues about accumulated sick leave. how to interpret the asset purchase District 1199C contends that the agreement. We will therefore assume that asset purchase agreement's exclusion of the asset purchase agreement is binding on liabilities or obligations arising from any both Tenet and District 1199C. Assumed Contract before the Closing