Court Opinion

ID: 617938
Source: CourtListenerOpinion
Date Created: 2011-11-29 16:15:52+00
Date Added: 2024-06-11T17:50:42.667656
License: Public Domain

10-4170-bk
     In re DPH Holdings Corp.

                          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.

 1            At a stated term of the United States Court of Appeals
 2       for the Second Circuit, held at the Daniel Patrick Moynihan
 3       United States Courthouse, 500 Pearl Street, in the City of
 4       New York, on the 29th day of November, two thousand eleven.
 5
 6       PRESENT: DENNIS JACOBS,
 7                              Chief Judge,
 8                ROBERT D. SACK,
 9                REENA RAGGI,
10                              Circuit Judges.
11
12       - - - - - - - - - - - - - - - - - - - -X
13       IN RE DPH HOLDINGS CORP.:
14
15       Ace Am. Ins. Co. and Pac. Employers
16       Ins. Co.,
17                 Plaintiffs-Appellees,
18
19                    -v.-                                               10-4170-bk
20
21       DPH Holdings Corp.,
22                Defendant-Appellee
23
24                    and
25
26       State of Mich. Workers’ Comp. Ins.
27       Agency and State of Mich. Funds
28       Admin.
29                Defendants-Appellants.*
30       - - - - - - - - - - - - - - - - - - - -X

                *
               The Clerk of Court is directed to amend the official
         caption as shown above.
                                                  1
 1   FOR DEFENDANTS-APPELLANTS:   Melanie L. Cyganowski,
 2                                Otterbourg, Steindler, Houston &
 3                                Rosen, P.C., New York, NY (on
 4                                brief Richard G. Haddad and Mark
 5                                S. Sedlander, Otterbourg,
 6                                Steindler, Houston & Rosen,
 7                                P.C., New York, NY; and Bill
 8                                Schuette, B. Eric Restuccia,
 9                                Susan Przekop-Shaw, and Dennis
10                                J. Raterink, Office of the
11                                Attorney General, State of
12                                Michigan, Lansing, MI).
13
14   FOR PLAINTIFFS-APPELLEES:    Jonathan D. Hacker, O’Melveny &
15                                Myers, LLP, Washington, D.C. (on
16                                brief Anton Metlitsky, O’Melveny
17                                & Myers, LLP, Washington D.C.;
18                                Lewis R. Olshin, Wendy M.
19                                Simkulak, Lawrence J. Kotler,
20                                and William C. Heuer, Duane
21                                Morris LLP, New York, NY; Robert
22                                G. Kamenec, Plunkett Cooney,
23                                Bloomfield Hills, MI; and Martin
24                                G. Bunin, Catherin R. Fenoglio,
25                                and William Hao, Alston & Bird
26                                LLP, New York, NY).
27
28   FOR DEFENDANT-APPELLEE:      Albert Hogan III, Skadden, Arps,
29                                Slate, Meagher & Flom LLP,
30                                Chicago, IL (on brief John K.
31                                Lyons, Skadden, Arps, Slate,
32                                Meagher & Flom LLP, Chicago,
33                                IL).
34
35       Appeal from a judgment of the United States District

36   Court for the Southern District of New York (Marrero, J.).

37

38       UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED,

39   AND DECREED that the District Court’s judgment is AFFIRMED.

40

                                   2
1        Defendants-Appellants (State of Michigan Funds

2    Administration and State of Michigan Workers’ Compensation

3    Agency, collectively “Michigan Defendants”) brought this

4    collateral-order appeal of the District Court’s decision

5    denying, in relevant part, their motion to dismiss the

6    adversary complaint brought by Plaintiffs-Appellees Ace

7    American Insurance Company and Pacific Employers Insurance

8    Company (collectively, “the Insurers”) against Appellee-

9    Defendant DPH Holdings Corporation and the Michigan

10   Defendants.   We assume the parties’ familiarity with the

11   underlying facts, the procedural history of the case, and

12   the issues on appeal.

13   [1] The Michigan Defendants argue that the Bankruptcy Court

14   lacks jurisdiction because the adversary proceeding is not a

15   core or a non-core proceeding.    Whether a proceeding is core

16   or non-core is beside the point for determining jurisdiction

17   because “[t]hat allocation [of core and non-core] does not

18   implicate questions of subject matter jurisdiction.”     Stern

19   v. Marshall, 131 S. Ct. 2594, 2607 (2011).    So long as a

20   proceeding is one or the other, the Bankruptcy Court

21   possessed subject-matter jurisdiction.    We conclude that the

22   adversary proceeding falls within the Bankruptcy Court’s

23   subject-matter jurisdiction as a core proceeding.

                                   3
1        A core proceeding is one that arises under Title 11 or

2    arises in a case under Title 11.      28 U.S.C. § 157(b)(1); see

3    Stern, 131 S. Ct. at 2604-05.       Section 157(b)(2) provides a

4    non-exhaustive list of core proceedings, including: “matters

5    concerning the administration of the estate,” proceedings

6    seeking the “allowance or disallowance of claims against the

7    estate,” and “other proceedings affecting the liquidation of

8    the assets of the estate or the adjustment of the debtor-

9    creditor . . . relationship.”       28 U.S.C. § 157(b)(2)(A),

10   (B), (O).   This Circuit interprets “core proceedings” as

11   broadly as permitted under the Constitution.      U.S. Lines,

12   Inc. v. Am. S.S. Owners Mut. Prot. & Indem. Ass’n., Inc. (In

13   re U.S. Lines, Inc.), 197 F.3d 631, 637 (2d Cir. 1999).

14       If (as here) an adversary proceeding involves a

15   contract matter, whether it is core depends on “(1) whether

16   the contract is antecedent to the reorganization petition[]

17   and (2) the degree to which the proceeding is independent of

18   the reorganization.”   Id.    The degree to which the

19   proceeding is independent of reorganization “hinges on ‘the

20   nature of the proceeding.’”    Id. (quoting S.G. Phillips

21   Constructors, Inc. v. City of Burlington (In re S.G.

22   Phillips Constructors, Inc.), 45 F.3d 702, 707 (2d Cir.

23   1995)).   “Proceedings can be core by virtue of their nature

24   if either (1) the type of proceeding is unique to or

                                     4
1    uniquely affected by the bankruptcy proceedings or (2) the

2    proceedings directly affect a core bankruptcy function.”

3    Id. (internal citations omitted).       It is not enough that a

4    claim somehow affects the property of the estate.      Id.

5        This contract-based adversary proceeding is core.        Six

6    of the eighteen contracts at issue are post-petition

7    contracts, which are part of the estate.      Proceedings

8    involving those contracts are core.      Id. (citing Ben Cooper,

9    Inc. v. Ins. Co. (In re Ben Cooper, Inc.), 896 F.2d 1394,

10   1399-1400 (2d Cir.), vacated on other grounds, 498 U.S. 964,

11   opinion reinstated, 924 F.2d 36 (2d Cir. 1991)).

12       Moreover, the proceeding as to the pre-petition

13   contracts is also core because the nature of the adversary

14   proceeding is one that is likely to “directly affect a core

15   bankruptcy function.”   U.S. Lines, Inc., 197 F.3d at 637.

16   The adversary proceeding bears upon Delphi’s liability for

17   workers’ compensation claims.       If, as the Insurers believe,

18   Delphi assumed the pre-petition contracts and agreed to be

19   liable for all amounts owed to injured employees up to the

20   retention limits, then the $67 million reimbursement claim

21   filed against Delphi by the Insurers would be disallowed

22   because Delphi itself would pay the underlying liability.

23   If, as the Michigan Defendants believe, the Insurers -- and

24   not Delphi -- are liable for the injured workers’ claims,

                                     5
1    then the Michigan Defendants’ claims against Delphi would be

2    disallowed because the claims would run against the Insurers

3    instead.    Core proceedings include those seeking the

4    “allowance or disallowance of claims against the estate,” 28

5    U.S.C. § 157(b)(2)(B), and, here, the resolution of whether

6    Delphi’s estate is liable for those workers’ claims will

7    determine whether the claims asserted against the estate

8    should be allowed or disallowed.

9           The contract matter is also core because its resolution

10   “concern[s] the administration of the estate” and “affect[s]

11   the liquidation of the assets of the estate.” 28 U.S.C. §

12   158(b)(2)(A), (O).    Resolution of the workers’-compensation-

13   liability issue could also have substantial implications on

14   both the estate and the priority of the creditors and could

15   “set the table for the determination of matters under title

16   11.”    See PSINet, Inc. v. Cisco Sys. Capital Corp. (In re

17   PSINet, Inc.), 271 B.R. 1, 12 (Bankr. S.D.N.Y. 2001).

18          The adversary proceeding arose post-confirmation; but

19   that does not change this result.    A party can invoke the

20   authority of the bankruptcy court to exercise post-

21   confirmation jurisdiction if the matter has a close nexus to

22   the bankruptcy plan, see Reese v. Beacon Hotel Corp., 149

23   F.2d 610, 611 (2d Cir. 1945) (limiting reservation of post-

24   confirmation jurisdiction to that “requisite to effectuate a

                                    6
1    plan of reorganization”); Penthouse Media Group v. Guccione

2    (In re General Media Inc.), 335 B.R. 66, 73-74 (Bankr.

3    S.D.N.Y. 2005) (discussing Binder v. Price Waterhouse & Co.

4    (In re Resorts Int’l, Inc.), 372 F.3d 154, 168-69 (3d Cir.

5    2004)), and the plan provides for the retention of such

6    jurisdiction, Hosp. & Univ. Prop. Damage Claimants v. Johns-

7    Manville Corp. (In re Johns-Manville Corp.), 7 F.3d 32, 34

8    (2d Cir. 1993).    This case fits those well-established

9    criteria.   The resolution of Delphi’s liability for the

10   workers’ compensation claim will impact the implementation,

11   execution, and administration of its confirmation plan, and

12   the plan provides for the retention of the Bankruptcy

13   Court’s jurisdiction over disputes such as that raised in

14   the adversary proceeding.    Resorts Int’l, Inc., 372 F.3d at

15   167.

16   [2] The Michigan Defendants’ sovereign-immunity defense

17   fares no better.   The States’ ratification of the Consti-

18   tution signified their agreement “not to assert any sov-

19   ereign immunity defense they might have had in proceedings

20   brought pursuant to ‘Laws on the subject of Bankruptcies.’”

21   Cent. Va. Comm. Coll. v. Katz, 546 U.S. 356, 377 (2006)

22   (quoting U.S. CONST., art. I, § 8, cl. 2); accord id. at 369

23   n. 9.   The scope of the States’ waiver of sovereign immunity

                                    7
1    includes proceedings implicating the bankruptcy court’s

2    traditional in rem authority -- “a narrow jurisdiction that

3    does not implicate state sovereignty to nearly the same

4    degree as other kinds of jurisdiction,” id. at 378; see also

5    Tenn. Student Assistance Corp. v. Hood, 541 U.S. 440, 448

6    (2004) -- as well as “proceedings necessary to effectuate

7    the in rem jurisdiction of bankruptcy courts,” Katz, 546

8    U.S. at 378.   Since the adversary proceeding here is an in

9    rem proceeding (or, at least, is otherwise necessary to

10   effectuate the in rem jurisdiction of the Bankruptcy Court),

11   it does not offend the Michigan Defendants’ sovereign

12   immunity.

13       The Michigan Defendants’ argue that the adversary

14   proceeding is only nominally about the insurance contracts

15   and is actually about whether the Insurers are liable under

16   Michigan law for filing Form 400 Notices of coverage.   We

17   disagree.   As the District Court and the Bankruptcy Court

18   concluded, the dispute at issue in the adversary proceeding

19   is one sounding in contract.   The adversary complaint makes

20   clear that the proceeding is focused on the parties’

21   responsibilities under the contracts.   See Compl. at ¶¶ 1,

22   37, 46.   There is no Form 400-based claim in the Insurers’

23   adversary complaint.   Although the Michigan Defendants may

24   ultimately prevail on the merits on their Form 400 theory,

                                    8
1    that argument ultimately bears on the merits of whether the

2    Insurers are liable apart from their contractual

3    obligations, which is not the question before us on

4    collateral review of the District Court’s denial of the

5    motion to dismiss the adversary complaint.

6        Once it is determined that the adversary proceeding is

7    concerned with the insurance contracts, it follows that the

8    adversary proceeding implicates the Bankruptcy Court’s in

9    rem jurisdiction.    The contracts, which include potential

10   liabilities and responsibilities for Delphi, are part of

11   Delphi’s estate.    See 11 U.S.C. § 541(a)(1), (7); accord St.

12   Clare's Hosp. & Health Ctr. v. Ins. Co. of N. Am. (In re St.

13   Clare's Hosp. & Health Ctr.), 934 F.2d 15, 18-19 (2d Cir.

14   1991); Johns-Manville Corp. v. Chubb Indem. Ins. Co. (In re

15   Johns-Manville Corp.), 600 F.3d 135, 153 n.13 (2d Cir. 2010)

16   (per curiam).   The interpretation and reformation of those

17   contracts involve adjudication of the estate: the res.

18   Because the contracts between the Insurers and Delphi are

19   part of Delphi’s estate and the district courts “have

20   exclusive jurisdiction . . . of all the property, wherever

21   located, of the debtor as of the commencement of [a case

22   under Title 11] and of property of the estate,” the

23   adversary proceeding implicates the in rem authority of the

                                    9
1    lower courts.   28 U.S.C. § 1334(e).1   In addition, to the

2    extent that the contract question will decide whether Delphi

3    is liable for its employees’ workers’ compensation claims,

4    the adversary proceeding could have substantial

5    ramifications for the size of the estate, the allowance and

6    disallowance of claims against it, and the priority of

7    creditors, all of which implicates the in rem jurisdiction

8    of the bankruptcy court.

9        We have considered all of the Michigan Defendants’

10   additional arguments and find them to be without merit.2

11   Accordingly, the judgment of the District Court is AFFIRMED.

12
13                               FOR THE COURT:
14                               Catherine O’Hagan Wolfe, Clerk
15
16

         1
           Pursuant to 28 U.S.C. § 157(a), the District Court’s
     authority has been delegated by the United States District
     Court for the Southern District of New York to the United
     States Bankruptcy Court for the Southern District of New
     York. See also Standing Order of Referral of Cases to
     Bankruptcy Judges, United States District Court for the
     Southern District of New York (July 10, 1984).
         2
           This decision is limited to the matters before us.
     We express no view and render no decision as to whether the
     Bankruptcy Court has jurisdiction over any claim or
     challenge to the liability of the Insurers for filing the
     Form 400 Notices. Likewise, we express no view and render
     no decision as to whether resolution of any such claim
     brought in federal court against the Michigan Defendants
     would invade their sovereign immunity.
                                   10