Court Opinion

ID: 1035707
Source: CourtListenerOpinion
Date Created: 2013-07-31 00:00:11.057606+00
Date Added: 2024-06-11T15:26:21.280423
License: Public Domain

PRECEDENTIAL

     UNITED STATES COURT OF APPEALS
          FOR THE THIRD CIRCUIT
               ___________

                    No. 12-4047
                    ___________

    In re: LAZY DAYS’ RV CENTER INC., et al,

                                   Reorganized Debtors

Lazy Days’ RV Center, Inc. and LDRV Holdings Corp.,

                                    Appellants
                    __________

   On Appeal from the United States District Court
              for the District of Delaware
                (D.C. No. 11-cv-00626)
   District Judge: Honorable Richard G. Andrews
                      ___________

               Argued June 13, 2013
        Before: SCIRICA, HARDIMAN and
            ALDISERT, Circuit Judges.

                (Filed: July 30, 2013)
Peter J. Rusthoven [ARGUED]
Barnes & Thornburg
11 South Meridian Street
Indianapolis, IN 46204

Maris J. Kandestin
Edmon L. Morton
Young, Conaway, Stargatt & Taylor
1000 North King Street
Rodney Square
Wilmington, DE 19801
       Attorneys for Appellants

R. Craig Martin [ARGUED]
Stuart M. Brown
DLA Piper
919 North Market Street
Suite 1500
Wilmington, DE 19801

Ronald S. Holliday
DLA Piper
Suite 2200
100 North Tampa
Suite 2200
Tampa, FL 33602-5809

Andrew Zaron
Suite 2300
200 South Biscayne Boulevard
Miami, FL 33131
       Attorneys for Appellee

                            2
                       ____________

                OPINION OF THE COURT
                     ____________

HARDIMAN, Circuit Judge.

       Lazy Days’ R.V. Center, Inc. and LDRV Holding
Corp. (collectively, the Reorganized Debtors) appeal an order
of the United States District Court for the District of
Delaware that vacated an order of the United States
Bankruptcy Court. According to the District Court, the
Bankruptcy Court lacked jurisdiction to adjudicate the motion
to reopen filed by the Reorganized Debtors. Because we
disagree with the District Court’s conclusion that the
Bankruptcy Court issued an advisory opinion, we will reverse
the judgment of the District Court.

                              I

       Appellee I-4 Land Holding Limited Co. owns a parcel
of land in Florida. In July 1999, I-4 leased that land to Lazy
Days pursuant to a written lease (Lease) that gave Lazy Days
an option to purchase the property subject to certain
conditions not relevant here. The Lease also prohibited Lazy
Days from “assign[ing] or transfer[ring]” its interest in the
Lease “without the prior written consent of” I-4, except to
related entities under certain circumstances. App. 1249.
Beginning in 2008, Lazy Days failed to pay rent as it came
due and informed I-4 of its intention to file for Chapter 11
bankruptcy and assign the Lease to LDRV.

       Prior to filing a petition under Chapter 11, Lazy Days
negotiated with I-4 and reached a settlement agreement in

                              3
October 2009 (the Settlement Agreement), pursuant to which
I-4 consented to Lazy Days’s assignment of the Lease to
LDRV. As part of the Settlement Agreement, Lazy Days
agreed not to “argue against the Bankruptcy Court abstaining
from consideration of Lease interpretation issues . . . except to
the extent necessary in connection with the assumption and
assignment of the Lease as contemplated herein.” App. 1485.
The Settlement Agreement also provided that “there is no
intent to, nor is the Lease modified in any respect and the
Lease and all terms and conditions thereof remain in full
force and effect.” App. 1487. It did not explicitly state
whether the purchase option would survive, however.

       In November 2009, Lazy Days filed a Chapter 11
petition. The Bankruptcy Court confirmed a reorganization
plan incorporating the Settlement Agreement in December
2009 and closed the case in March 2010. Thereafter, the
Lease was assigned to LDRV.

       On May 12, 2011, LDRV attempted to exercise the
purchase option, but I-4 refused to honor it. On June 1 and
June 7, 2011, the parties each filed lawsuits in Florida state
court seeking a determination of their respective rights under
the Lease. Also on June 7, the Reorganized Debtors filed an
emergency motion to reopen in the Bankruptcy Court,
seeking a ruling that the Lease’s anti-assignment provision
was unenforceable pursuant to 11 U.S.C. § 365(f)(3), which
renders unenforceable any “provision in an . . . unexpired
lease of the debtor . . . that terminates or modifies . . . a right .
. . under such . . . lease on account of an assignment” of the
lease. Nine days later, after allowing I-4 to file an opposition
and holding a hearing, the Bankruptcy Court held that the
anti-assignment provision was unenforceable and that I-4’s
refusal to honor the purchase option violated the Settlement

                                 4
Agreement. The Bankruptcy Court then ordered I-4 to honor
the option.

       I-4 appealed to the District Court, which vacated the
Bankruptcy Court’s order, holding that the Bankruptcy
Court’s judgment was an advisory opinion directed at the
Florida state courts. The Reorganized Debtors now appeal.

                               II

        The Reorganized Debtors invoked the Bankruptcy
Court’s jurisdiction under 11 U.S.C. § 350(b). The District
Court had jurisdiction over the appeal of the Bankruptcy
Court’s decision under 28 U.S.C. § 158(a), and we have
jurisdiction pursuant to 28 U.S.C. §§ 158(d) and 1291. In
reviewing the Bankruptcy Court proceedings, we apply the
same standard as the District Court. Accordingly, we review
the Bankruptcy Court’s legal determinations de novo, its
findings of historical fact for clear error, and its decision to
reopen for abuse of discretion. See In re Zinchiak, 406 F.3d
214, 221–22 (3d Cir. 2005).

                              III

        We first consider whether the Bankruptcy Court had
jurisdiction to reopen the proceedings. The District Court
held that the Bankruptcy Court lacked jurisdiction because
the Bankruptcy Court issued an advisory opinion. In addition
to the District Court’s holding, I-4 offers alternative grounds
for affirmance. In I-4’s view, the Bankruptcy Court lacked
statutory subject matter jurisdiction and constitutional
authority to reopen the case and it was required to abstain
under 28 U.S.C. § 1334(c). We will address these three
arguments seriatim.

                               5
                              A

        Federal courts have no jurisdiction to render advisory
opinions. Put another way, they “may not decide questions
that cannot affect the rights of litigants in the case before
them or give opinions advising what the law would be upon a
hypothetical state of facts.” Chafin v. Chafin, 133 S. Ct.
1017, 1023 (2013) (citation, internal quotation marks, and
alteration omitted). In this case, the Bankruptcy Court issued
a two-page decree, declaring the anti-assignment clause
invalid and ordering I-4 to honor the purchase option.
Because this decree actually invalidated the anti-assignment
clause and ordered the parties to do something, it “affect[ed]
the rights of litigants,” id., and was not an advisory opinion.
See In re McDonald, 205 F.3d 606, 609 (3d Cir. 2000)
(bankruptcy court opinion was not advisory when it “resolved
the litigation”).

       Relying on the opinion of a panel of this Court in In re
Martin’s Aquarium, Inc., 98 F. App’x 911 (3d Cir. 2004), I-4
argues that the Bankruptcy Court issued an advisory opinion
because the Reorganized Debtors sought the Bankruptcy
Court’s judgment in order to influence the state proceedings.
Apart from the fact that it has no precedential value, Martin’s
Aquarium is easily distinguishable from this case. There, the
Bankruptcy Court issued a judgment that was entered in the
Pennsylvania state courts. Id. at 912. One party filed
motions to stay execution claiming that the judgments were
fraudulently entered. Id. While those motions were pending
in state court, the other party moved to reopen in the
bankruptcy court “for the purpose of seeking confirmation of
the Judgment.” Id. (internal quotation marks and alteration
omitted). The bankruptcy court acknowledged that “the
underlying dispute centers around the interpretation of

                              6
Pennsylvania law, not federal bankruptcy law,” yet agreed to
reopen “for the limited purpose of ruling that [its earlier
order] was a judgment within the meaning of Federal Rule of
Civil Procedure 54(a).” Id. at 912 (internal quotation marks
omitted). The bankruptcy court’s opinion that its earlier
judgment was a judgment under the Federal Rules of Civil
Procedure did nothing to resolve whether the Pennsylvania
courts would be required to abide by it under Pennsylvania
procedural rules. Thus, the opinion had no legal effect; it was
merely advisory.

       Unlike in Martin’s Aquarium, here the Bankruptcy
Court’s order had the legal effect of voiding the anti-
assignment clause. Thus, its opinion was not advisory,
regardless of whether the Reorganized Debtors sought to
impact the state proceedings. See Matter of Shondel, 950
F.2d 1301, 1309 (7th Cir. 1991) (bankruptcy court decision
modifying its previous injunction to allow a wrongful death
claimant to proceed in state court against a bankrupt estate
“gave actual relief” and was therefore not advisory); cf.
Travelers Indem. Co. v. Bailey, 557 U.S. 137, 143, 151
(2009) (bankruptcy court had jurisdiction “to enjoin 26 Direct
Actions pending in state courts” when those actions violated
its order). Accordingly, even were we inclined to follow
Martin’s Aquarium in this appeal, it would be unavailing to I-
4.

                              B

        Having determined that the Bankruptcy Court did not
issue an advisory opinion, we next address I-4’s contention
that the Bankruptcy Court lacked statutory subject matter
jurisdiction over the motion to reopen.

                              7
        As a preliminary matter, we note that the question of
whether the Bankruptcy Court had jurisdiction to confirm the
reorganization plan that included the Settlement Agreement in
the first place is not before us, as no party challenged the
Bankruptcy Court’s jurisdiction over that proceeding. See
Travelers, 557 U.S. at 148, 151–52 (“Once the [initial orders]
became final on direct review (whether or not proper
exercises of bankruptcy court jurisdiction and power), they
became res judicata to the parties and . . . even subject-matter
jurisdiction may not be attacked collaterally.” (internal
quotation marks and alterations omitted)). Thus, “the only
question left is whether the Bankruptcy Court had subject-
matter jurisdiction to enter the” 2011 order that is the subject
of this appeal. See id. at 151.

       Under 11 U.S.C. § 350(b), a bankruptcy court may
reopen a closed case “to administer assets, to accord relief to
the debtor, or for other cause.” We have interpreted § 350(b)
to give “bankruptcy courts . . . broad discretion to reopen
cases after an estate has been administered.” Zinchiak, 406
F.3d at 223. “In exercising its discretion to reopen, a
bankruptcy court should consider whether similar
proceedings are already pending in state court as well as
make a determination as to which forum—state court or
bankruptcy court—is most appropriate to adjudicate the
issues raised by a motion to reopen.” See id. at 225. In
Zinchiak, we found that a bankruptcy court had jurisdiction
under § 350(b) to reopen a proceeding to determine whether
“the filing of a deficiency petition . . . was encompassed
within, and thus barred by, the automatic stay” the bankruptcy
court had modified in an earlier issued order. Id. at 223–24.
We noted that this issue was “properly to be decided by the
Bankruptcy Court after reopening” because the bankruptcy

                               8
court was “well suited to provide the best interpretation of its
own order.” Id. at 224 (internal quotation marks omitted).
We reached this conclusion even though “several related
deficiency actions were pending in Pennsylvania state
courts.” Id. at 225.

       As in Zinchiak, here the Bankruptcy Court was asked
to reopen proceedings to resolve a dispute regarding the
Settlement Agreement it had previously confirmed. And
because the Bankruptcy Court here was “well suited to
provide the best interpretation of its own order,” id. at 224, it
had jurisdiction to reopen. See Travelers, 557 U.S. at 151
(“[T]he only question left is whether the Bankruptcy Court
had subject-matter jurisdiction to enter the Clarifying Order.
The answer here is easy: . . . the Bankruptcy Court plainly
had jurisdiction to interpret and enforce its own prior
orders.”).

                               C

        Relying on three Supreme Court decisions, I-4 next
argues that the Bankruptcy Court unconstitutionally asserted
subject matter jurisdiction over a private rights dispute. See
Stern v. Marshall, 131 S. Ct. 2594 (2011); Granfinanciera,
S.A. v. Nordberg, 492 U.S. 33 (1989); N. Pipeline Const. Co.
v. Marathon Pipe Line Co., 458 U.S. 50 (1982). But all three
of those cases dealt with the difficult question of when a
bankruptcy court may constitutionally exercise jurisdiction
over common law claims. See Stern, 131 S. Ct. at 2611
(bankruptcy court lacked constitutional authority to “resolve
and enter final judgment on a state common law claim”);
Granfinanciera, 492 U.S. at 55–56 (bankruptcy court lacked
jurisdiction to adjudicate a fraudulent conveyance claim by a
bankruptcy trustee against a third party because fraudulent

                               9
transfer claims “are quintessentially suits at common law that
more nearly resemble state-law contract claims brought by a
bankrupt corporation to augment the bankruptcy estate than
they do creditors’ hierarchically ordered claims to a pro rata
share of the bankruptcy res”); N. Pipeline, 458 U.S. at 90
(Rehnquist, J., concurring) (bankrupt debtor sued a third party
for “breach of contract, misrepresentation, and other counts
which are the stuff of the traditional actions at common law
tried by the courts at Westminster in 1789”).

        By contrast, the Bankruptcy Court in this case did not
decide a question of state common law, but rather determined
whether, in light of 11 U.S.C. § 365(f)(3), an anti-assignment
clause survived the Settlement Agreement it had confirmed as
part of a Chapter 11 bankruptcy. Here, the Reorganized
Debtors’ claim for relief was based on a federal bankruptcy
law provision with no common law analogue, so the Stern
line of cases is plainly inapposite. See, e.g., Travelers, 557
U.S. 137 (a pre-Stern case deciding a bankruptcy court’s
jurisdiction to enjoin state law actions without citing either
Granfinanciera or Northern Pipeline).

                                D

        Finally, I-4 argues that the Bankruptcy Court was
required to abstain under 28 U.S.C. § 1334(c)(2), which
requires abstention from certain “proceeding[s] based upon a
State law claim or State law cause of action, related to a case
under title 11 but not arising under title 11 or arising in a case
under title 11.”      As we noted already, although this
proceeding may have been provoked by state court actions
and surely impacted them, the proceeding in the Bankruptcy
Court was founded upon a quintessentially federal claim, viz.,
whether the anti-assignment clause was invalid under 11

                               10
U.S.C. § 365(f)(3). Furthermore, this dispute “aris[es] in a
case under title 11” as the Bankruptcy Court was asked to
interpret and enforce a reorganization plan which was entered
as part of Lazy Days’s Chapter 11 bankruptcy.

       I-4’s argument that the Reorganized Debtors agreed
not to argue against abstention is also unavailing. The
Settlement Agreement provided that the Reorganized Debtors
would not argue against abstention “except to the extent
necessary in connection with the assumption and assignment
of the Lease as contemplated herein.” App. 1485. That
exception plainly applies because this proceeding was
brought “in connection with the . . . assignment of the Lease.”

                              III

       Having concluded that the Bankruptcy Court properly
exercised jurisdiction over this dispute, we now address I-4’s
challenges to the Bankruptcy Court’s order on the merits. In
particular, I-4 argues that: (1) the parties agreed to waive the
application of 11 U.S.C. § 365(f)(3) in the Settlement
Agreement; (2) the Bankruptcy Court committed a taking
under the Fifth Amendment; and (3) the Bankruptcy Court
denied I-4 due process. We are unpersuaded by any of these
arguments.

                               A

        I-4’s first argument is premised on the claim that “the
unambiguous plain language of the Settlement Agreement
result[ed] in the elimination of the Purchase Option.” I-4 Br.
50. However, the section of the Settlement Agreement I-4
cites provides merely that LDRV “agrees that it shall remain
liable for all obligations on the Lease, after assignment.”

                              11
App. 1480. Another section of the Settlement Agreement
states that “[e]xcept as otherwise provided in this Agreement,
there is no intent to, nor is the Lease modified in any respect
and the Lease and all terms and conditions thereof remain in
full force and effect.” App. 1487. Even assuming arguendo
that the parties may waive the protections of § 365(f)(3),
neither of these provisions unambiguously eliminates the
purchase option, as both could be read to mean that LDRV
steps into Lazy Days’s shoes and acquires all the rights and
obligations that Lazy Days had, notwithstanding any anti-
assignment provisions.

        Our reading of the Settlement Agreement is buttressed
by two factors. First, one of its essential purposes was for I-4
to consent to the assignment of the Lease. To that end, I-4
agreed to “hereby waive the asserted defaults of Tenant
consenting to the commencement of a bankruptcy and the
contemplated assignment of the Lease without notice to the
Landlord and Landlord’s written consent.” App. 1480. This
provision is most naturally read to give LDRV the same
rights in the Lease that Lazy Days had, including the purchase
option. Second, the principle established by § 365(f)(3) is
that anti-assignment clauses are unenforceable in bankruptcy.
As “contracts . . . are enacted against a background of
common-sense understandings and legal principles that the
parties may not have bothered to incorporate expressly but
that operate as default rules to govern in the absence of a
clear expression of the parties’ intent that they not govern,”
Wal-Mart Stores, Inc. Assocs.’ Health & Welfare Plan v.
Wells, 213 F.3d 398, 402 (7th Cir. 2000), we do not read the
Settlement Agreement to waive § 365(f)(3).

       I-4 also argues that the Reorganized Debtors waited
too long to seek to void the anti-assignment clause, and that

                              12
the Bankruptcy Court impermissibly modified the Settlement
Agreement after it had been substantially consummated.
These two arguments fail for the same reason. Because the
Reorganized Debtors could have reasonably read the purchase
option to survive the Settlement Agreement, they would have
had no reason to sue to enforce the option until I-4 actually
decided not to honor it. Soon after I-4 refused to honor the
purchase option, the Reorganized Debtors brought suit to
vindicate their rights. Likewise, the Bankruptcy Court did not
modify the Settlement Agreement, but only clarified that it
did not void that option.

                               B

       I-4 next argues that the Bankruptcy Court’s order was
a taking under the Fifth Amendment. We disagree. The
Bankruptcy Court did not take any of I-4’s established
property rights, but rather adjudicated the parties’ bona fide
dispute regarding their rights under the Settlement
Agreement. This sort of adjudication of disputed and
competing claims cannot be a taking. See Stop the Beach
Renourishment, Inc. v. Fla. Dep’t. of Env’t Prot., 130 S. Ct.
2592, 2612–13 (2010) (“The Takings Clause only protects
property rights as they are established . . . , not as they might
have been established or ought to have been established.”).

                               C

       Finally, I-4 argues that the Bankruptcy Court violated
its due process rights by not allowing it to “present its case in
a meaningful way” and “address[] the effect of Bankruptcy
Code § 365 in the context of the consensual assignment of the
Lease.” I-4 Br. 58. In particular, I-4 argues that, under
Federal Rule of Bankruptcy Procedure 7001, the Bankruptcy

                               13
Court should have held an adversary proceeding to determine
the enforceability of the anti-assignment clause rather than
proceeding by motion.

       As for I-4’s more general due process argument, the
record shows that I-4 was able to present its case—it filed a
lengthy opposition to LDRV’s motion for reopening, and the
Bankruptcy Court conducted a hearing with oral argument on
that motion.

        I-4’s specific challenge based on Federal Rule of
Bankruptcy Procedure 7001 is also unpersuasive. Although
that rule provides that “a proceeding to determine the validity,
priority, or extent of a lien or other interest in property” must
be an “adversary proceeding” subject to the procedural rules
in Part VII of the Rules of Bankruptcy Procedure as a general
matter, Fed. R. Bankr. P. 7001(2), this case is different
because the Bankruptcy Court was only adjudicating a motion
to reopen in order to interpret and enforce its existing prior
order.     This procedural posture renders many of the
requirements of an adversary proceeding (such as a formal
complaint and service of process) superfluous. As explained
by one bankruptcy court:

       While it is true as a general proposition that a
       claim to recover money or property or to obtain
       an injunction or other equitable relief must be
       brought as an adversary proceeding, that
       general rule is not applicable to this case. In this
       case, the Debtors are merely seeking to enforce
       an order already in place. The case was
       originally brought by the Debtors as an
       adversary      proceeding.      The      adversary
       proceeding was resolved by a Settlement

                               14
       Agreement pursuant to which we issued the
       order the Debtors now seek to enforce. Thus,
       we conclude that an adversary proceeding is not
       necessary where the relief sought is the
       enforcement of an order previously obtained.

In re WorldCorp, Inc., 252 B.R. 890, 895 (Bankr. D. Del.
2000). And although we have not previously said so, the
Fourth Circuit has held that adversary proceedings are not
required for motions to reopen. See In re Collins, 173 F.3d
924, 929 (4th Cir. 1999) (“An adversary proceeding . . . is not
required to reopen a case because the bankruptcy court’s
power to reopen flows from its jurisdiction over debtors and
their estates.”); see also In re Ellett, 254 F.3d 1135, 1140 (9th
Cir. 2001). We now join that court and hold that an adversary
proceeding is not required for a bankruptcy court to reopen a
case.

                               IV

      For the foregoing reasons, we will reverse the
judgment of the District Court and remand the case.

                               15