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IN RE JESS MEDICAL SYSTEMS

June 13, 2005.

In re: JESS Medical Systems, LLC, Debtors.


The opinion of the court was delivered by: STANLEY CHESLER, Magistrate Judge

OPINION AND ORDER

THIS MATTER comes before the Court on Appellant Valmed Management Corporation's appeal from two orders entered by the United States Bankruptcy Court on October 4, 2004, and November 16, 2004 (docket entry #1). The Court, having considered the papers submitted by the parties, having heard oral argument, and for the reasons set forth in the record on oral argument of February 22, 2005, affirms in part and reverses in part.

I. BACKGROUND

  Jess Medical Systems filed for bankruptcy pursuant to Chapter 11 of the bankruptcy code on October 27, 2003 and a trustee was appointed on November 5, 2003. On December 9, 2003, the Bankruptcy Court converted the case to a Chapter 7 liquidation and Nancy Isaacson, Esq. was appointed Trustee of the Chapter 7 estate.

  On December 11, 2003, the Trustee filed an Information for Notice of Abandonment of property in the estate described as a "Potential claim against WebMD under the New Jersey Franchise Act, N.J.S.A. 56:10-3 FMV: Unknown." The Clerk of the Court issued a corresponding Notice, which was served upon the parties in interest in accordance with the rules of the Court. No objections were filed in response to the Notice, therefore, the Clerk filed a Certificate of No Objection on January 5, 2004, and the potential claim against WebMD under the NJFPA was abandoned.

  In March 2004, the Trustee and WebMD entered a Stipulation of Settlement settling claims between the Debtor and WebMD. On April 22, 2004, the Trustee filed an Information for Notice of Settlement. A corresponding Notice issued by the Clerk and served upon the interested parties stated that "WebMD . . . has agreed to pay the sum of $24,539.00 in settlement of the Trustee's claims." Appellant Valmed Management filed an objection to this settlement on May 10, 2004, and the Bankruptcy Court held a hearing on May 24, 2004, to resolve the objection.

  The Court overruled Appellant Valmed's objection and approved the settlement between the Trustee and WebMD. In the Court's May 24 ruling, the Court noted that the Trustee did not ignore the causes of action as alleged by Valmed, but instead evaluated the tort and contract claims and determined they were not viable. (May 24 Tr., p. 15, lines 6-15.) The Court found that the Trustee used the release of those claims as a bargaining chip in striking a more favorable deal on a preference action. (Id.)

  Following this ruling, in the closing colloquy, Appellant Valmed's attorney asked the Judge whether she agreed with the Trustee's analysis that the contract claim had been abandoned. The Judge responded affirmatively. (Id. at pp. 16-17.) This final interaction between the Appellant's attorney and the Judge is central to the instant appeal. In September 2004, in response to arguments made by Appellant Valmed in the course of motion practice in a related case between the parties,*fn1 Appellee WebMD moved for a clarification of the Bankruptcy Court's May 24, 2004 Order ("Clarification Motion"). Appellant Valmed held the position that on May 24, the Bankruptcy Court ruled that the NJFPA Claim also included any breach of contract claims by JESS against WebMD. However, Appellee WebMD contended that WebMD obtained a release encompassing all of the Debtor's claims against WebMD, including any "theft of business claims," whether characterized as a tort or contract claim. The release, according to WebMD, did not include any specific claim previously abandoned by the Trustee, but such a claim was limited to a potential statutory claim under the NJFPA existing as of the commencement of the bankruptcy case.

  The Bankruptcy Court held a hearing on October 4, 2004, on the Clarification Motion. Following oral argument, the Court ruled that "the Trustee intended to release the contract claim and that the court intended to approve the release fo the contract claims." (Oct. 4 Tr., p. 14, lines 6-8.) The Court signed the form of order proposed by WebMD, which stated in part: "Potential claims against WebMD abandoned by the Chapter 7 Trustee on January 5, 2004 . . . include only potential statutory claims under the New Jersey Franchise Practices Act, if any, existing as of the commencement of the instant bankruptcy case." (Oct. 4, 2004 Order, see Appellee's Br. App., Ex. A.) The October 4 Order is one of the orders on appeal to this Court in the instant case.

  On October 15, 2004, Appellant Valmed filed a Motion for Reconsideration of the October 4, 2004 Order, which was denied. The Bankruptcy Court's denial of the Reconsideration Motion of the Clarification Order ("November 16 Order") is also on appeal to this Court.

  The instant appeal is very narrow. Specifically, Appellant Valmed contends that the Bankruptcy Court had no authority to revisit and clarify its May 24 ruling. Appellant maintains the position that when the Bankruptcy Court heard the Clarification Motion and issued the October 4 Order, the Bankruptcy Court effectively reconsidered and reversed the May 24 decision. As such, Appellant contends that the Bankruptcy Court lacked jurisdiction to hear the Motion and improperly issued the October 4 Order. Further, Appellant Valmed appeals the November 16 Order, which denied its Motion for Reconsideration of October 4 Clarification Order.

  This Court, having heard oral argument on February 22, 2005, and having reviewed the papers submitted by the parties, affirms in part and denies in part, for the reasons set forth below.

  II. STANDARD OF REVIEW

  The proper standard of review to be applied by a district court when reviewing a ruling of a bankruptcy court is determined by the nature of the issues presented on appeal. Legal conclusions of the bankruptcy court are subject to de novo or plenary review by the district court. Donaldson v. Bernstein, 104 F.3d 547, 551 (3d Cir. 1997); Chemetron Corp. v. Jones, 72 F.3d 341, 345 (3d Cir. 1995). In contrast, factual determinations of the bankruptcy court are not to be set aside unless "clearly erroneous." See Fed.R.Bankr.P. 8013; Chemetron, 72 F.3d at 345; In re Indian Plans Assocs., Ltd., 61 F.3d 197, 203 (3d Cir. 1995). On review of the factual findings of a bankruptcy court, a district court must "give due regard to the opportunity of that court to judge, first-hand, the credibility of the witnesses." Fellheimer, Eichen & Braverman, P.C. v. Charter Technologies, Inc., 57 F.3d 1215, 1223 (3d Cir. 1995). The fact that the reviewing court could have decided a matter differently does not render a finding of fact clearly erroneous. In re Halvajian, 216 B.R. 502, 508 (D.N.J. 1998). When reviewing a matter committed to the ...


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