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In re Nickels Midway Pier

January 28, 2010

IN RE: NICKELS MIDWAY PIER, L.L.C., DEBTOR.


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

OPINION

Debtor, Nickels Midway Pier, L.L.C. ("Nickels"), and Wild Waves, L.L.C. have been entangled in litigation against one another since 2001. In 2003, Nickels initiated Chapter 11 bankruptcy proceedings in the Bankruptcy Court for this District. After years of litigation before the Bankruptcy Court, entailing numerous motions, hearings, and appeals, Nickels now has filed its Motion to Withdraw the Chapter 11 Proceeding from the Bankruptcy Court to the District Court. Wild Waves challenges Nickels's motion.

For the reasons expressed below, Nickels's motion to withdraw the reference is denied.

I. JURISDICTION

This Court exercises subject matter jurisdiction pursuant to 28 U.S.C. § 1334, which grants district courts "original and exclusive jurisdiction of all cases under title 11," 28 U.S.C. § 1334(a), and "original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11," 28 U.S.C. § 1334(b). Pursuant to 28 U.S.C. § 157(a), "[e]ach district court may provide that 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 shall be referred to the bankruptcy judges for the district." "Accordingly, the District Court of New Jersey has referred all proceedings arising under Title 11 to the bankruptcy court pursuant to a standing order of reference dated July 23, 1984." Mass. Mut. Life Ins. Co. v. Marinari, 2008 U.S. Dist. LEXIS 37550, at *5 (D.N.J. May 6, 2008) (citation and internal quotation marks omitted). However, even when a case is referred to a bankruptcy court, the district court has the authority to withdraw the case or proceeding referred. 28 U.S.C. § 157(d).

II. BACKGROUND

Nickels owns boardwalk property in Wildwood, New Jersey, including an amusement pier that it operates. In 1999, Nickels and Wild Waves entered into a lease agreement whereby Wild Waves would lease a substantial portion of the pier, on which it would construct and operate a water park. Wild Waves maintains that, as part of their deal, Nickels agreed to sell the pier to Wild Waves. Nickels disputes that assertion. In 2001, Nickels filed a suit against Wild Waves in the Superior Court of New Jersey, seeking rent due under the lease. Wild Waves counterclaimed, arguing that Nickels was obligated to sell the pier pursuant to the parties' oral agreement.

During the pendency of the state court litigation, fire ravaged Nickels's pier on two separate occasions, including the portion leased by Wild Waves.*fn1 As a result, Nickels brought claims in this District against several parties, including Wild Waves. For the first fire, Wild Waves was found to be responsible for 30% of the damage, leading to a judgment in Nickels's favor of $389,182.50. See Scottsdale Ins. Co. v. Weiner, No. 03-cv-3857 (D.N.J. June 17, 2009). Wild Waves was exonerated of any liability with regard to the second fire. See id.

On December 8, 2003, just days after the trial commenced in state court, Nickels initiated Chapter 11 bankruptcy proceedings in the Bankruptcy Court. The Bankruptcy Court, however, stayed its consideration of the lease until after the state court had reached its decision. In the meantime, the Bankruptcy Court decided that until the lease and sale issues were resolved, Wild Waves would make court-determined use and occupancy payments to Nickels in lieu of the usual rent.

In April 2005, the state court held that the parties had entered into an integrated agreement in which Nickels agreed to lease and, ultimately, sell the pier to Wild Waves. Upon resolution of the state court litigation, Nickels, in July 2005, sought to proceed with its motion before the Bankruptcy Court to reject the agreement. Ultimately, the matter was appealed to the District Court, which reversed the Bankruptcy Court and concluded that, for purposes of bankruptcy law, the parties' lease and sale agreements constituted two divisible, independent agreements. See Nickels Midway Pier, L.L.C. v. Wild Waves, L.L.C., 341 B.R. 486 (D.N.J. 2006). The District Court remanded the matter to the Bankruptcy Court for determinations as to whether, under the circumstances, Nickels could reject the lease or sale agreement and what the possible legal consequences would be. See id. The Third Circuit Court of Appeals affirmed the District Court's decision. See In re Nickels Midway Pier, L.L.C., 255 Fed. Appx. 633 (3d Cir. 2007). On remand, the Bankruptcy Court determined that the agreements were executory and were not terminated pre-petition. See In re Nickels Midway Pier, 2006 Bankr. LEXIS 4123 (Bankr. D.N.J. Sept. 15, 2006). The District Court affirmed in part and vacated in part the Bankruptcy Court's decision, ordering that the Bankruptcy Court address whether either party breached the lease. See In re Nickels Midway Pier, 372 B.R. 218 (D.N.J. 2007).

Further, in May 2006, Nickels filed a motion before the Bankruptcy Court seeking to compel Wild Waves to pay the full amount of rent and real estate taxes as well as a $400,000 deposit into escrow. After several hearings, the Bankruptcy Court, in March 2007, held that Wild Waves was entitled to a rent abatement on account of the loss of income resulting from the pier's fire, but that Wild Waves was required to deposit $400,000 in escrow. Both issues were appealed to the District Court and, subsequently, the Third Circuit. Both courts affirmed the Bankruptcy Court's decision, respectively. See In re Nickels Midway Pier, 383 B.R. 595 (D.N.J. 2008), aff'd 2009 U.S. App. LEXIS 22766 (3d Cir. Oct. 15, 2009).

In June and September of 2007, the Bankruptcy Court conducted a trial to consider Wild Waves's proof of claim against Nickels and Nickels's contention that the lease had been terminated prior to its Chapter 11 petition. On September 30, 2009, the Bankruptcy Court determined that Wild Waves possessed a claim against Nickels and that the lease and sale agreements remain executory. In November 2009, Wild Waves moved for further findings relating to its action against Nickels, and a hearing was scheduled before the Bankruptcy Court.

Meanwhile, Nickels again moved to eliminate the reduction in rent and to compel Wild Waves to pay all past rent allegedly due. The Bankruptcy Court affirmed its previous decision and did not order any change in the rent owed by Wild Waves. Nickels has appealed that decision to this Court.

Finally, at a status conference on November 9, 2009, the Bankruptcy Court ordered that Nickels submit a plan of reorganization and a disclosure statement by January 8, 2010. Wild Waves submitted its own ...


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