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Thomas & Betts Corp. v. Myers Power Products

January 30, 2006

THOMAS & BETTS CORPORATION, ET AL., APPELLANTS,
v.
MYERS POWER PRODUCTS, INC., ET AL., APPELLEES.



The opinion of the court was delivered by: Cooper, District Judge

MEMORANDUM OPINION

This matter comes before the Court on the appeal by Thomas & Betts Corp. ("T&B"), WESCO Distribution, Inc., and Avon Electrical Supplies (collectively "Appellants") of an order entered by the United States Bankruptcy Court for the District of New Jersey ("Bankruptcy Court") on June 6, 2005 ("June 6 order").*fn1 Appellants argue that the Bankruptcy Court did not have jurisdiction to reopen a closed bankruptcy proceeding to interpret an order issued prior to the close of the case. For the reasons stated herein, the Court will affirm the order of the Bankruptcy Court.

BACKGROUND

This appeal arises out of the bankruptcy case, In re Computer Power, Inc., No. 01-58149 (KCF). Debtor Computer Power, Inc. ("Computer Power") filed a voluntary petition under Chapter 11 of the Bankruptcy Code on July 10, 2001. (Bankr. dkt. no. 1.) As part of the bankruptcy proceeding, on August 10, 2001 ("August 10 order"), the Bankruptcy Court entered an order authorizing an asset purchase agreement ("APA") between Computer Power and the United States Traffic Corp. ("UST"). (Bankr. dkt. no. 56.) Appellee Myers Power Products, Inc. ("Myers") is an affiliate of UST formed to carry out the sale of the assets. (Myers Motion, Bankr. dkt. no 187, at 1-2.)

The provisions of the August 10 order set out, inter alia that (1) UST would buy the assets "free and clear of all liens, claims, interests, set-offs, rights of recoupment, actions, causes of action . . . ," (2) the purchase was in contemplation of, and necessary to the confirmation of a reorganization plan, (3) the order continued to be valid after the close of the case, and (4) the Bankruptcy Court retained jurisdiction to interpret and enforce the APA order. (8-10-01, Bankr. Ct. Order, at ¶¶ 7, 14, 18-19.) An order confirmed Computer Power's Chapter 11 reorganization plan on May 13, 2002 (Bankr. dkt. no. 125), and the bankruptcy case was closed on August 23, 2004. (Bankr. dkt. no. 186.)

Myers brought a motion on May 26, 2005, to reopen the case to enforce the terms of APA as articulated in the August 10 order. (Bankr. dkt. no. 187.) Specifically, Myers wanted the Bankruptcy Court to enjoin proceedings brought against Myers in federal and state court in New York ("New York actions").

The New York actions are products liability actions brought by Geoffrey Gross ("Gross") against the Appellants, among others. (Appellants Br., at 7.) Gross alleges he was injured on February 2, 2000, when he was exposed to smokey conditions caused by an AC Inverter System and its batteries. (Id.) Myers was impleaded as a third-party defendant in the actions. (Id. at 8.) It is alleged that (1) Computer Power manufactured and sold the AC Inverter, and (2) Myers is liable because it is an affiliate of UST, the successor to Computer Power. (Id.) The defendants in the New York actions seek indemnification and contribution from Myers. (Id.)

In its motion before the Bankruptcy Court seeking the injunction of the New York actions, Myers argued that UST purchased the assets of Computer Power "free and clear of any liens, claims, and encumbrances of any kind," and therefore an order enjoining the New York actions was appropriate. (Myers Motion, Bankr. dkt. no. 187, at 2.) In response to Myer's motion, the Bankruptcy Court reopened the Computer Power bankruptcy action. The Bankruptcy Court characterized Myer's motion to enforce the terms of the August 10 order as one seeking "an interpretation of that Order [August 10 order] since the sale has already been fully implemented." (6-6-05, Bankr. Ct. Order, at 17.)

The Bankruptcy Court, asserting that federal courts have the inherent power to interpret and enforce their own orders, restated the "free and clear" language from the August 10 order, and determined that the successor liability claims at issue in the New York actions were "interests in property" pursuant to Section 363(f) of the Bankruptcy Code, and therefore Section 363(f) allows assets to be sold free and clear of such claims. (Id. at 18-19); see also 11 U.S.C. § 363(f). The "free and clear" language in the August 10 order "included the assets being sold free and clear of any successor claims based on product liability." (6-6-05 Bankr. Ct. Order, at 20-21.) The Bankruptcy Court did not, however, enjoin the New York actions because it stated that an injunction could only be awarded in an adversary proceeding. (Id. at 21.) The Appellants filed a notice of appeal on June 13, 2005, seeking review of the June 6 order. (Bankr. dkt. no. 197.)

Subsequent to the filing of the appeal, Myers brought an adversary action against Gross, among others, in the Bankruptcy Court to enjoin the New York actions. (Bankr. dkt. no. 199.) In a ruling from the bench on June 27, 2005 ("June 27 order"), the Bankruptcy Court determined that it did not have jurisdiction to enter the requested restraints. (6-27-05, Bankr. Ct. Order, at 18.) The court, however, acknowledged that the June 27 order did not vitiate the June 6 order, "the Court stands by that decision [June 6 order] and its interpretation of the Sale Order." (Id.)

The appeal of the June 6 order is now before this Court. The June 27 order has not been appealed. The Appellants argue that the Bankruptcy Court (1) did not have jurisdiction to issue the June 6 order, (2) recognized its lack of jurisdiction to issue the June 6 order in the June 27 order, and (3) interpreted August 10 order erroneously. (Appellants Br., at 10-11, 21.)

DISCUSSION

Appellants argue that the Bankruptcy Court (1) did not have subject matter jurisdiction to reopen the bankruptcy action, (2) should have abstained from exercising jurisdiction, and (3) incorrectly determined that Myers cannot be held as a corporate successor. (Id. at 10, 18, 21.) Myers argues (1) that the Bankruptcy Court has broad discretion to reopen closed cases, and (2) it was within the court's discretion to do so in the Computer Power action. (Myers Br., at 8.)

I. Jurisdiction of the Bankruptcy Court

The jurisdiction of bankruptcy courts is limited because they derive their authority from federal statutes, not Article III of the Constitution. In re Resorts Int'l Inc., 372 F.3d 154, 161 (3d Cir. 2004). Title 28, section 1334 of the United States Code provides the district courts with original, but not exclusive jurisdiction over "all civil proceedings arising under title 11 [the Bankruptcy Code], or arising in or related to cases under title 11." 28 U.S.C § 1334(b). The district courts have discretion to refer "any or all cases under title 11 and any or all proceedings arising under title 11 or arising in or related to a case under title 11" to the bankruptcy court. 28 U.S.C. § 157(a).

Bankruptcy courts have jurisdiction over (1) cases under title 11, (2) proceedings arising under title 11, (3) proceedings arising in a case under title 11, and (4) proceedings related to a case under title 11. In re Resorts, 372 F.3d at 162. The bankruptcy court has full authority to adjudicate "core-proceedings." Id. Core proceedings are cases and proceedings arising under title 11, and proceedings arising in a case under title 11. Id. They invoke a substantive right provided by the federal bankruptcy law, or by nature are cases or proceedings that could only arise ...


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