Court Opinion

ID: 3013124
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Date Created: 2015-10-13 21:53:58.342493+00
Date Added: 2024-06-11T15:03:21.233202
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Opinions of the United
2003 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit

5-22-2003

In Re: RFE Ind
Precedential or Non-Precedential: Non-Precedential

Docket 02-2451

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Recommended Citation
"In Re: RFE Ind " (2003). 2003 Decisions. Paper 537.
http://digitalcommons.law.villanova.edu/thirdcircuit_2003/537

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                                                             NOT PRECEDENTIAL

                       UNITED STATES COURT OF APPEALS
                            FOR THE THIRD CIRCUIT
                                 ___________

                                     No. 02-2451
                                     ___________

                              IN RE: RFE INDUSTRIES,
                                                 Debtor

                JOHN J. GIBBONS, TRUSTEE FOR THE ESTATE OF
                            RFE INDUSTRIES, INC.

                                           v.

                    ANTON NOLL, INC.; FRY’S M ETALS, INC.;
                         WESTBURY ALLOYS, INC.

                                FRY’S METALS, INC.,
                                           Defendant/Third-Party Plaintiff

                                           v.

                  SPARFVEN & CO., INC; MICHAEL SPARFVEN;
                       CAMERON & MITTLEMAN, LLP,
                                         Third-Party Defendants

                                FRY'S METALS, INC.,
                                            Appellant
                                    __________
                                             Appellant

                    On Appeal from the United States District Court
                              for the District of New Jersey
                                 (D.C. No. 99-cv-00334)
                  District Judge: The Honorable Dennis M. Cavanaugh
                                       _________

                         Argued on December 10, 2002
       Before: FUENTES and GARTH, Circuit Judges, and WALLACH,* Judge

                             (Opinion Filed: May 22, 2003)
                                     ___________

* The Honorable Evan J. Wallach, United States Court of International Trade, sitting by
designation.
                                            ______________________________

                                            Jonathon I. Rabinowitz (argued)
                                            Booker Rabinowitz Trenk Lubetkin &
                                            Tully, P.C.
                                            100 Executive Drive, Suite 100
                                            West Orange, NJ 07052-3303

                                                   Attorney for Appellant

                                            Michael A. Saffer (argued)
                                            Chapman, Kessler, Peduto & Saffer
                                            425 Eagle Rock Avenue
                                            P.O. Box F
                                            Roseland, NJ 07068

                                                   Attorney for Appellee

                                ________________________

                                 OPINION OF THE COURT
                                ________________________

FUENTES, Circuit Judge.

       This is an appeal from the denial of the motion of appellant, Fry’s Metals, Inc.

(“Fry’s”), to reopen a case in the District Court. In that earlier case, the District Court

had denied a motion to withdraw the reference of an adversary proceeding in bankruptcy

pursuant to 28 U.S.C. § 157(d). The case thus remained in the Bankruptcy Court.

       The District Court denied the motion to reopen the matter, and Fry’s appeals. As a

result of recent intervening events–namely, the Bankruptcy Court’s disposition of a

motion to approve a settlement in the same adversary proceeding which Fry’s seeks to

reopen here–there no longer exists a basis for federal court jurisdiction. As a

consequence, we lack jurisdiction to review Fry’s appeal. For the reasons set forth below,

we will dismiss Fry’s appeal.

                                               2
                                              I.

       As we intimated in our recent Order of M arch 14, 2003, In re RFE Industries, No.

02-2451, 2003 WL 1228017 (3d Cir. Mar. 14, 2003), this case has a complex procedural

history. The case originated in the United States Bankruptcy Court for the District of

New Jersey, when RFE Industries, Inc. (“RFE”) 1 filed a petition for relief pursuant to

Chapter 11 of the Bankruptcy Code on August 19, 1997. Shortly thereafter, RFE sold a

part of its operations to a third party, Anton Noll, Inc. (“Anton”), in a transaction that was

approved by the Bankruptcy Court on October 27, 1997. The operations consisted of a

metal refining and processing business known as the “MFE Division.”

       On November 10, 1997, the Bankruptcy Court appointed John J. Gibbons as

Chapter 11 Trustee (the “Trustee”) of the debtor’s estate. On February 13, 1998, Anton

sold the MFE Division to Fry’s and another entity, Sparfven & Co., Inc. (“Sparfven”), for

substantially more than Anton had originally paid RFE.2 Furthermore, Fry’s and Sparfven

refused to pay certain royalties that had been agreed upon in the sale of the MFE Division

from RFE to Anton.

       On May 13, 1998, the Trustee instituted an adversary proceeding in the

Bankruptcy Court against Fry’s and others, alleging breach of contract, breach of the

covenant of good faith and fair dealing, conversion, fraud, negligent misrepresentation,

and tortious interference in connection with the non-payment of royalties. On January 15,

       1
        RFE is now known as Metallix, Inc. (“Metallix”). In our review of the
procedural history, we continue to refer to the original debtor as RFE, when appropriate.
       2
         When Anton initially acquired the MFE Division, it paid $400,000 to RFE and
agreed to pay royalties estimated to be as much as $360,000 per year. When Anton sold
the M FE Division to Fry’s and others, it received $950,000. See In re RFE Industries,
Inc., 283 F.3d 159, 162 (3d Cir. 2002) (“RFE I”).

                                              3
1999, Fry’s and the other defendants in the adversary proceeding filed a motion to

withdraw the reference of the matter pursuant to 28 U.S.C. § 157(d), seeking a trial on the

merits of the dispute in the United States District Court for the District of New Jersey.

The motion was heard by the Honorable Maryanne Trump Barry before her appointment

to this Court. Although the District Court found cause to withdraw the reference, it

denied the motion without prejudice to refiling when the matter was trial-ready. See In re

RFE Industries, Inc., No. 99 Civ. 334, slip op. at 7-9 (D.N.J. Mar. 24, 1999). The case

was closed for administrative purposes.

       Apart from Fry’s failed attempt to withdraw the reference of the adversary

proceeding, the parties were also pursuing a negotiated disposition of the dispute. In the

months following Judge Barry’s denial of the motion to withdraw the reference, the

Trustee and the defendants in the adversary proceeding reached a tentative settlement.

See In re RFE Industries, Inc., No. 99 Civ. 334, slip op. at 2 (D.N.J. Apr. 23, 2002)

(Cavanaugh, J.).3

       On yet another related track, the underlying bankruptcy petition of RFE proceeded

in the normal course. RFE was successful in challenging some claims and settling others.

Ultimately, RFE was able to pay its creditors in full, and the Bankruptcy Court entered an

order dismissing RFE’s case on November 29, 1999. See id. The Bankruptcy Court

expressly retained jurisdiction to enforce the proposed settlement between the Trustee and

the defendants in the adversary proceeding. Nevertheless, after the dismissal of the

underlying bankruptcy case, the Court denied approval of the proposed settlement. Fry’s

       3
        After Judge Barry’s appointment to this Court, the matter was transferred to the
docket of the Honorable Dennis M. Cavanaugh.

                                             4
appealed the denial of the settlement to the District Court, which affirmed. Subsequently,

Fry’s appealed that judgment to this Court, which gave rise to our first decision in this

matter in RFE I, 283 F.3d at 163.

       Separately, Metallix, having succeeded RFE, brought an action in New Jersey state

court on May 23, 2000, alleging substantially the same claims asserted by the Trustee in

the adversary proceeding. Metallix’s state court action was dismissed without prejudice

to reinstatement pending the various federal court proceedings.

       While the appeal in RFE I was pending, Fry’s nevertheless filed a motion on July

31, 2001, in the District Court to reopen the matter denied by Judge Barry earlier. The

District Court denied Fry’s motion in an opinion filed on April 23, 2002. See In re RFE

Industries, Inc., No. 99 Civ. 334, slip op. at 7 (D.N.J. Apr. 23, 2002) (Cavanaugh, J.)

(“RFE II”). Between the filing of the motion to reopen and the District Court’s entry of

judgment denying the same, another panel of this Court issued its decision in RFE I,

holding that the Bankruptcy Court had erred in denying the proposed settlement without

applying the factors set forth in In re M artin, 91 F.3d 389 (3d Cir. 1996). See RFE I, 283

F.3d at 165. The case was remanded to the Bankruptcy Court for further proceedings

consistent with our opinion in RFE I.4

       Subsequently, while the appeal in RFE II was pending before us, the Bankruptcy

Court addressed the proposed settlement on remand. This time, it applied the Martin

factors, and again on February 7, 2003, the Bankruptcy Court denied the settlement

tentatively reached between the Trustee and Fry’s.

       4
         We are of the impression that neither party informed Judge Cavanaugh of our
decision in RFE I.

                                             5
                                             II.

       In light of the Bankruptcy Court’s most recent denial of the proposed settlement,

the threshold issue is whether there exists any jurisdictional basis upon which the present

matter may proceed. As we have noted in the past, “[a]s a general rule, the dismissal of a

bankruptcy case should result in the dismissal of ‘related proceedings’ because the court’s

jurisdiction of the latter depends, in the first instance, upon the underlying nexus between

the underlying bankruptcy case and the related proceedings.” In re Smith, 866 F.2d 576,

580 (3d Cir. 1989); see also In re Pruitt, 910 F.2d 1160, 1170 (3d Cir. 1990) (Mansmann,

J., concurring) (“It [is] only ‘common sense’ that withdrawal must occur prior to

dismissal of the bankruptcy proceeding. . . . [U]pon the final disposition of a core

proceeding, a district court must proceed under its appellate jurisdiction.”) (citations

omitted). This is especially true when a party in an adversary proceeding attempts to

withdraw a matter that originated in bankruptcy proceedings to the District Court long

after the underlying bankruptcy case is dismissed and after all bankruptcy-related

proceedings have concluded.

       As Bankruptcy Judge Stern remarked in his denial of the proposed settlement on

remand, all of the bankruptcy proceedings, including our remand in RFE I, have

concluded: “[t]he bankruptcy proceeding is over. The Trustee is discharged with the

gratitude of the Court. The creditors are paid in full. The case will not be tried in this

Court.” In re RFE Industries, Inc., No. 97-2964 (Bankr. D.N.J. Feb. 7, 2003) (transcript

of decision). All that remains, then, is a dispute which originated as an adversary

proceeding, detached from the bankruptcy case that gave rise to it. The conclusion of the

bankruptcy case caused the bankruptcy basis for federal jurisdiction to cease to exist.

                                              6
There is no independent source of jurisdiction under which federal subject matter

jurisdiction exists, inasmuch as the dispute is between New Jersey citizens who are not

diverse and relates solely to state law causes of action.5

       Given the final disposition of all bankruptcy proceedings on February 7, 2003,

there is no jurisdictional basis for entertaining Fry’s motion in federal court. As a result,

we have no jurisdiction over Fry’s appeal. See U.S. Bancorp Mortgage Co. v. Bonner

Mall Partnership, 513 U.S. 18, 21 (1994) (in general, “a case must exist at all the stages of

appellate review” for an appellate court to exercise jurisdiction). Any assertion of

continuing jurisdiction over the matter would also contravene Smith and Pruitt.

                                             III.

       For the reasons set forth above, we will dismiss Fry’s appeal.

              _____________________________

TO THE CLERK OF THE COURT:

Kindly file the foregoing Opinion.

                                                             /s/ Julio M. Fuentes
                                                             Circuit Judge

       5
          The litigants are also not without recourse here. Metallix and Fry’s may
reinstate the state court action and either reach the merits or pursue a negotiated
disposition as they have previously attempted. We understand that a state action between
Metallix and Fry’s remains pending and is available to the parties to resolve their dispute.

                                              7