Court Opinion

ID: 2795270
Source: CourtListenerOpinion
Date Created: 2015-04-21 15:00:53.361952+00
Date Added: 2024-06-11T11:29:13.134370
License: Public Domain

14-2585-bk
Empire State Bldg. Co. v. N.Y. Skyline, Inc.
 
                                   UNITED STATES COURT OF APPEALS
                                       FOR THE SECOND CIRCUIT

                                               SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A
SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED
BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1.
WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY
MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE
NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY
OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

       At a stated term of the United States Court of Appeals for the Second Circuit, held
at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New
York, on the 21st day of April, two thousand fifteen.

PRESENT: JOHN M. WALKER, JR.,
                 GUIDO CALABRESI,
                 REENA RAGGI,
                                 Circuit Judges.
----------------------------------------------------------------------
IN RE NEW YORK SKYLINE, INC.,
                                 Debtor,
----------------------------------------------------------------------
EMPIRE STATE BUILDING COMPANY L.L.C.,
EMPIRE STATE BUILDING, INC., EMPIRE STATE
BUILDING ASSOCIATES L.L.C.,
                                 Appellants,
                 v.                                                      No. 14-2585-bk

NEW YORK SKYLINE, INC.,
                                 Debtor-Appellee.
----------------------------------------------------------------------
APPEARING FOR APPELLANTS:                                 FRANCINE     NISIM    (David  S.
                                                          Tannenbaum, on the brief), Stern
                                                          Tannenbaum & Bell LLP, New York,
                                                          New York.

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APPEARING FOR APPELLEE:                         JAMES W. PERKINS, Greenberg
                                                Traurig, LLP (Daniel E. Clarkson,
                                                Greenberg Traurig, LLP, and Charles A.
                                                Stewart, III, Stewart Occhipinti, LLP, on
                                                the brief), New York, New York.

      Appeal from an order of the United States District Court for the Southern District

of New York (Shira A. Scheindlin, Judge) vacating an injunction.

      UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED,

AND DECREED that the June 16, 2014 order vacating the bankruptcy court’s September

11, 2013 judgment is AFFIRMED.

      Appellants Empire State Building L.L.C., Empire State Building, Inc., and Empire

State Building Associates L.L.C. (collectively, “ESB”) appeal from an order of the

district court vacating a judgment entered by the United States Bankruptcy Court for the

Southern District of New York (Stuart M. Bernstein, Bankruptcy Judge). See 28 U.S.C.

§ 158(a) (granting district courts jurisdiction to hear appeals from bankruptcy courts).

The district court (1) held that the bankruptcy court had exceeded its authority by

entering a final judgment on non-core claims without the consent of all parties, see 28

U.S.C. § 157(c) (authorizing bankruptcy judges to enter final orders and judgments in

non-core proceeding only with “consent of all the parties to the proceeding”); (2) vacated

the bankruptcy court’s judgment, including injunctions against debtor New York Skyline,

Inc. (“Skyline”); and (3) remanded the case to the bankruptcy court for initial

determination of whether each of the claims in the case was core, non-core, or unrelated

to the bankruptcy case when decided. See New York Skyline, Inc. v. Empire State Bldg.

Trust Co. (In re N.Y. Skyline, Inc.) (“Skyline I”), 512 B.R. 159 (S.D.N.Y. 2014). On

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appeal, ESB argues that (1) Skyline consented to the bankruptcy court’s final

determination of the claims at issue; (2) even if the district court properly held that the

bankruptcy court lacked authority to enter a final judgment, it nevertheless erred in

dissolving the injunctions; and (3) the district court erred in remanding the case to the

bankruptcy court. We assume the parties’ familiarity with the facts and record of prior

proceedings, which we reference only as necessary to explain our decision to affirm.

1.     Skyline Did Not Consent to Final Adjudication by the Bankruptcy Court

       A bankruptcy court may not finally adjudicate a non-core claim unless the parties

have unambiguously consented to such non-Article III adjudication. See 28 U.S.C.

§ 157(c); Men’s Sportswear, Inc. v. Sasson Jeans, Inc. (In re Men’s Sportswear, Inc.),

834 F.2d 1134, 1138 (2d Cir. 1987) (“[A] court should not lightly infer from a litigant’s

conduct consent to have private state-created rights adjudicated by a non-Article III

bankruptcy judge.”). ESB contends that Skyline consented to the bankruptcy court’s

adjudication in its pleadings, in its reorganization plan (the “Plan”), and by not objecting

throughout the proceedings. Even assuming, as ESB argues, that the bankruptcy court’s

determination that Skyline had consented is entitled to deference, ESB’s arguments fail.

       A litigant can consent to bankruptcy court adjudication through its conduct. See

In re Men’s Sportswear, Inc., 834 F.2d at 1137–38; see also Stern v. Marshall, 131 S. Ct.
2594, 2607–2608 (2011) (“Given Pierce’s course of conduct before the Bankruptcy

Court, we conclude that he consented to that court's resolution of his defamation claim

(and forfeited any argument to the contrary).”). Skyline’s conduct here, however, must

be understood in light of the bankruptcy court’s pre-Stern v. Marshall holding that it had

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authority to adjudicate the claims because they were core, and its post-Stern v. Marshall

holding that it had authority to adjudicate the claims because Skyline had consented. See

J.A. 143 (pre-Stern v. Marshall holding); Empire State Bldg. Trust Co. v. N.Y. Skyline,

Inc. (In re N.Y. Skyline, Inc.), 471 B.R. 69, 78–80 (Bankr. S.D.N.Y. 2012) (post-Stern v.

Marshall holding).    Simply put, Skyline twice objected to the bankruptcy court’s

authority, and the bankruptcy court twice rejected its arguments.            Under those

circumstances, Skyline’s acquiescence to the bankruptcy court’s rulings does not

establish unambiguous consent, waiver, or forfeiture. See Jacques v. DiMarzio, Inc., 386
F.3d 192, 201 (2d Cir. 2004) (holding argument not waived for failure to object where

party previously raised argument and district court considered and rejected it); Anderson

v. Branen, 17 F.3d 552, 557 (2d Cir. 1994) (finding no waiver where “further objection

. . . on a ground already thoroughly discussed[] would have been futile”).

      Moreover, even absent Skyline’s other objections, the Plan does not constitute its

unambiguous consent to bankruptcy court adjudication. The Plan states, in relevant part:

      11.1 Retention of Jurisdiction The Court shall have jurisdiction over all
      matters arising under, arising in, or relating to the Debtor’s Bankruptcy
      Case including, but not limited to, proceedings:

      ...

             (b) To determine any and all adversary proceedings, applications,
             and contested matters that are pending on the Effective Date;

      ...

             (i) To hear and determine all Claims, controversies, suits and
             disputes against the Debtor to the full extent permitted under 28
             U.S.C. § 1334 and 28 U.S.C. § 157;

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              (j) To hear, determine and enforce all Claims and causes of action
              which may exist on behalf of the Debtor or the Debtor’s Estate,
              including, but not limited to, any right of the Debtor or the Debtor’s
              Estate to recover assets pursuant to the provisions of the Bankruptcy
              Code . . . .

J.A. 842–843; see also 7 Collier on Bankruptcy ¶ 1123.02[6] (16th ed. 2015) (noting that

such jurisdiction-retention provisions are commonly included in reorganization plans).

Although ESB claims that Skyline’s agreement that “the Court” shall retain jurisdiction

to hear and determine all claims and adversary proceedings is consent to adjudication of

those claims by the bankruptcy court, it is not clear that, under the Plan, “the Court”

refers to the bankruptcy court. Rather, “the Court” retaining jurisdiction might well

reference the district court, which, with minor exceptions, is the only federal tribunal with

jurisdiction over bankruptcy proceedings. See 28 U.S.C. § 1334. Indeed, when the Plan

refers to the bankruptcy court elsewhere, it refers to it as “the Bankruptcy Court,” which

is a defined term under the Plan. See J.A. 819 (defining “Bankruptcy Court” as “the

United States Bankruptcy Court for the Southern District of New York”); see, e.g., J.A.

819, 822, 835 (referring to orders of “the Bankruptcy Court”); see also J.A. 842–843

(stating that “[t]he Court shall have jurisdiction . . . [t]o hear and determine disputes or

issues arising in connection with the interpretation, implementation, or enforcement

of . . . any settlement approved by the Bankruptcy Court” (emphasis added)).

       In this case, pursuant to 28 U.S.C. § 157, the district court referred all proceedings

to the bankruptcy court, a “unit of the district court.” 28 U.S.C. § 151; see also id.

§ 152(a)(1) (“Bankruptcy judges shall serve as judicial officers of the United States

district court established under Article III of the Constitution.”). That referral, however,

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does not alter the fact that the district court, rather than the bankruptcy court, ultimately

has jurisdiction. See Stern v. Marshall, 131 S. Ct. at 2607 (stating that allocation of

authority between district courts and bankruptcy courts under 28 U.S.C. § 157 “does not

implicate questions of subject matter jurisdiction”); see also Universal Oil Ltd. v. Allfirst

Bank (In re Millenium Seacarriers, Inc.), 419 F.3d 83, 96 (2d Cir. 2005) (referring to

bankruptcy courts as “delegated adjuncts of the district court”). Thus, the Plan could be

read merely to allow the district court to maintain jurisdiction after plan confirmation—

and, to the extent permitted under 28 U.S.C. § 157, to refer matters to the bankruptcy

court. Under these circumstances, the Plan does not manifest Skyline’s unambiguous

consent to final adjudication of non-core claims by the bankruptcy court. See generally

Weisfelner v. Blavatnik (In re Lyondell Chem. Co.), 467 B.R. 712, 722 (S.D.N.Y. 2012)

(Cote, J.) (“Jurisdiction retention language from a Plan, by itself, does not confer upon a

bankruptcy court authority to enter final orders.”).

       Accordingly, we identify no error in the district court’s determination that Skyline

did not consent to bankruptcy court adjudication.

2.     Vacatur of the Injunctions

       The district court properly vacated the judgment upon holding that the bankruptcy

court lacked authority to enter it. See Central Vt. Pub. Serv. Corp. v. Herbert, 341 F.3d
186, 189 (2d Cir. 2003) (“Where bankruptcy courts have exceeded their jurisdiction in

non-core proceedings, we have not hesitated to vacate the bankruptcy court judgment on

direct appeal.”). Nevertheless, ESB argues that the district court should have left the

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injunctions in place while proceedings continued in the bankruptcy and district courts.

This argument is also meritless.

       We review a district court’s decisions regarding permanent injunctions for abuse

of discretion. See Shain v. Ellison, 356 F.3d 211, 214 (2d Cir. 2004); Carlos v. Santos,

123 F.3d 61, 67 (2d Cir. 1997). Because the bankruptcy court lacked authority to enter

the injunctions in the first place, there were no valid injunctions for the district court to

extend. Thus, the only way the district could have left the injunctions in place was if it

made the findings necessary to support the injunctions and entered them under its own

authority. We conclude that the district court did not abuse its discretion by declining to

enter the injunctions under its own authority at this stage in the proceedings, when the

district court has not yet had the opportunity to assess the merits of the claims for itself.

The cases cited by ESB are not to the contrary, for the reasons explained by the district

court in its denial of ESB’s motion for an injunction or stay of the vacatur of the

bankruptcy court’s judgment. See New York Skyline, Inc. v. Empire State Bldg. Trust

Co. (In re N.Y. Skyline, Inc.) (“Skyline II”), 520 B.R. 1, 8–9 (S.D.N.Y. 2014).

3.     Remand to the Bankruptcy Court

       ESB argues that the district court erred in remanding the case to the bankruptcy

court for further proceedings. The argument raises serious concerns about the proper

construction of Stern v. Marshall and whether it (1) held 28 U.S.C. § 157(b)(2)(C) was

unconstitutional on its face or as applied in that case; (2) limits bankruptcy courts’ ability

to treat core claims implicating Article III powers as non-core claims, see Executive

Benefits Ins. Agency v. Arkison, 134 S. Ct. 2165, 2172–73 (2014); and (3) affected

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bankruptcy courts’ power over non-core claims. We cannot conclusively decide those

questions on this appeal, however, because we lack jurisdiction to review the remand

issue.    Thus, our affirmance should not be read to endorse the district court’s

interpretation of Stern.

         The only basis for appellate jurisdiction asserted by ESB is 28 U.S.C.

§ 1292(a)(1), which permits us to hear appeals from “interlocutory orders . . . granting,

continuing, modifying, refusing or dissolving injunctions, or refusing to dissolve or

modify injunctions.” 28 U.S.C. § 1292(a)(1). That jurisdiction does not extend to the

district court’s remand order, which had no impact on any injunction. Moreover, even if

ESB had asserted jurisdiction pursuant to 28 U.S.C. § 158(d)(1), which allows appeals

from “final decisions, judgments, orders, and decrees” of district courts in bankruptcy

appeals, the order remanding the case was not an appealable final decision. See COR

Route 5 Co. v. Penn Traffic Co. (In re Penn Traffic Co.), 466 F.3d 75, 79 (2d Cir. 2006)

(holding that order remanding to bankruptcy court for proceedings “calling for the

exercise of judgment and discretion by the Bankruptcy Court,” as opposed to remand for

“ministerial act,” is not appealable under 28 U.S.C. § 158(d)). We do not, however,

foreclose the district court from giving further consideration to its decision to remand.

         We have considered ESB’s remaining arguments and conclude that they are

without merit. We therefore AFFIRM the vacatur order of the district court.

                                   FOR THE COURT:
                                   CATHERINE O’HAGAN WOLFE, Clerk of Court

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