Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

In re East Orange General Hospital, Inc.

United States District Court, D. New Jersey

June 27, 2018

In re East Orange General Hospital, Inc., et al., [1]Debtors.
Ivy Holdings, Inc.; Ivy Intermediate Holdings, Inc.; Prospect Medical Holdings, Inc.; Prospect New Jersey, Inc.; Prospect Eogh, Inc.; Defendants. Roseann Denunzio, Plaintiff,



         This is an appeal from orders of Judge Vincent F. Papalia of the U.S. Bankruptcy Court for the District of New Jersey. The debtor, a hospital, was sold free and clear in bankruptcy after due notice to creditors, including the plaintiff, who then remained silent but now seeks to assert her claims against the purchaser. Three orders are relevant:

(1) Order dated January 21, 2016, authorizing, inter alia, sale of all the debtor's assets free and clear of liens, claims, and encumbrances. ("Sale Order", Bankruptcy EOF no. 330);
(2) Order dated November 23, 2016, granting the motion of Prospect[2] to enforce the Sale Order and ordering Ms. DeNunzio to dismiss, without prejudice, her pending lawsuit against Prospect in the Superior Court of New Jersey, Law Division, Essex County. ("Sale Enforcement Order". Bankruptcy ECF No. 867); and
(3) Order dated February 21, 2017, denying Ms. Denunzio's motion for reconsideration of the Sale Enforcement Order and denying the parties' applications for sanctions. ("Reconsideration Order", Bankruptcy ECF No. 912, copy at ECF No. 1-1).

         Ms. Denunzio appeals from the second and third orders. For the reasons stated herein, the appeal is denied, and the Sale Enforcement Order and the Reconsideration Order are affirmed.

         I. Background

         The facts, which are not substantially in dispute, are as follows:

On May 28, 2014, East Orange General Hospital, Inc. and Essex Valley Healthcare, Inc. (collectively, "Debtors") entered into an asset purchase agreement with Prospect EOGH, Inc ("original APA").[3] (Bankruptcy ECF No. 57 at ¶ 9).[4] See also (Bankruptcy ECF No. 330-1 at 1) (referring to the May 28, 2014 Asset Purchase Agreement as the "Original Agreement").

         Over a year later, on August 19, 2015, Ms. Denunzio, Appellant here, was terminated from her employment with Debtor East Orange Hospital. (Compl. ¶ 6). She had been working as a laboratory aide and department administrative assistant in the Hospital's Pathology Department since March 1968. [Id. at ¶¶ 4-6).

         The next month, "[o]n September 16, 2015, the Debtors received approval of a Certificate of Need from the New Jersey Department of Health for the sale of the Hospital's assets to Prospect [EOGH, Inc.], subject to certain conditions." (Bankruptcy ECF No. 57 at ¶ 10). See also (Compl. ¶ 30). Then, on October 7, 2015, the proposed sale was approved by New Jersey Acting Attorney General John J. Hoffman pursuant to the Community Health Care Assets Protection Act. (Bankruptcy ECF No. 57 at ¶ 10). The proposed sale was also approved by the Superior Court of New Jersey on October 28, 2015. (Id.) The original APA did not close, however. [Id. at ¶ 11).

         Nearly three months after Ms. Denunzio's termination from the Hospital, on November 10, 2015, East Orange General Hospital filed for relief under Chapter 11 of the Bankruptcy Code. (ECF No. 1 of Bankruptcy Case No. 15-31232). On that same date, Essex Valley Healthcare, which is the parent company of East Orange General Hospital, also filed for relief under Chapter 11. (ECF No. 1 of Bankruptcy Case No. 15-31233). On November 13, 2015, Judge Papalia ordered the Chapter 11 cases of East Orange General Hospital and Essex Valley Healthcare to be "consolidated for procedural purposes only and jointly administered under lead Case No. 15-31232." (ECF No. 22 of Bankruptcy Case No. 15-31232, ¶ 2); (ECF No. 4 of Bankruptcy Case No. 15-31233, ¶ 2). Judge Papalia also issued an Order authorizing Debtors to retain and appoint Prime Clerk LLC ("Prime Clerk") as the claims and noticing agent for the Debtors. (Bankruptcy ECF No. 25).[5]

         On November 20, 2015, the Debtors as sellers and Prospect EOGH, Inc. as buyer entered into an Amended and Restated Asset Purchase Agreement ("APA").[6] (Bankruptcy ECF No. 57-2, Exh. B). See (Bankruptcy ECF No. 57 at ¶ 11). See also (Compl. ¶ 31). On that same date, the Debtors filed a Motion for the entry of orders "(i) approving (a) bidding procedures, including bid protections for the stalking horse bidder, (b) form and manner of sale notices, and (c) sale hearing date, and (ii) authorizing and approving (a) the sale of substantially all of the Debtors' assets free and clear of liens, claims, and encumbrances and (b) assumption and assignment of certain executory contracts and unexpired leases." ("Sale Motion"). (Bankruptcy ECF No. 57).

         On November 25, 2015, Prime Clerk served Ms. Denunzio and her counsel via First Class Mail with a copy of die Notice of Commencement of Chapter 11 Bankruptcy Cases and the Meeting of Creditors ("Notice of Commencement") (Bankruptcy ECF No. 83). See Affidavit of Service, Exh. B (Bankruptcy ECF No. 89 at 43) (listing "Roseann Denunzio" and "Roseann Denunzio v. EOGH, et al.").[7]

         On December 9, 2015, East Orange General Hospital filed a list of all creditors.[8] (Bankruptcy ECF No. 124). The list included Ms. Denunzio and her counsel. [Id. at 33) (listing "Roseann Denunzio" and "Roseann Denunzio v. EOGH, et al.").

         Six days later, on December 15, 2015, the Bankruptcy Court entered an Order approving die bidding procedures and form and manner of notices, and setting a sale hearing date ("Bidding Procedures Order"). (Bankruptcy ECF No. 171).

         The next day, on December 16, 2015, East Orange Hospital filed its Schedules of Assets and Liabilities (Bankruptcy ECF No. 175), and Statement of Financial Affairs (Bankruptcy ECF No. 176).[9] The Hospital's "Schedule F-Creditors Holding Unsecured Nonpriority Claims" form listed "Roseann Denunzio v. EOGH, et al." as a contingent, unliquidated, and disputed "litigation claim." [Id. at 29).[10] The "Amount of Claim" was described as "unknown." [Id.)

         On December 18, 2015, Prime Clerk served Ms. Denunzio, through her counsel, via first class mail with a copy of the Notice of Sale of Certain Assets at Auction ("Sale Notice").[11] (Bankruptcy ECF No. 208, Exh. A). See Affidavit of Service (Bankruptcy ECF No. 208 at 47) (listing "Roseann Denunzio v. EOGH, et al."). The Sale Notice informed Ms. Denunzio's counsel of the sale-related hearing to be held on January 20, 2016 and the January 6, 2016 deadline for objections. (Bankruptcy ECF No. 208, Exh. A at 4-6). A copy of the Bidding Procedures Order and the Bidding Procedures was attached to the Notice. [Id. at 1 n.2, 7-21).

         On January 19, 2016, the Bankruptcy Court issued an Order establishing, inter alia, deadlines to file proofs of claim "(as defined in section 101(5) of the Bankruptcy Code), including but not limited to all claims of setoff or recoupment and claims arising under section 503(b)(9) of the Bankruptcy Code, against the Debtors that arose on or prior to the Petition Date." (Bankruptcy ECF No. 313 at 2-3). The deadline for all creditors (except governmental units) was set for February 26, 2016 at 5:00 p.m. (Id. at 2-3).

         After a hearing on January 20, 2016, the Bankruptcy Court entered its Order authorizing the Debtors to (a) sell substantially all of their assets free and clear of liens, claims, and encumbrances, and (b) assume and assign certain executory contracts and unexpired leases ("Sale Order", Bankruptcy ECF No. 330). See also Bankruptcy ECF No. 337 (copy of the transcript of the Sale Hearing). The Sale Order, filed on January 21, 2016, included a copy of the APA, as amended, as Exhibit A. (Bankruptcy ECF Nos. 330-1 to -8). See also (Sale Order ¶ 31) (providing that the Sale, including, but not limited to, the terms and conditions of the APA and other agreements and transfers, "are hereby authorized and approved in all respects.").

         In particular, the Sale Order addressed successor liability. Paragraph 13 of the Order provided as follows:

The Successful Bidder[12] is not a mere continuation of the Debtors, there is not substantial continuity between the Successful Bidder and the Debtors, and there is no continuity of enterprise and no common identity between the Debtors and the Successful Bidder. The Successful Bidder is not holding itself out to the public as a continuation of any Debtor. The Successful Bidder is not a successor to any Debtor or any Debtor's estate by reason of any theory of law or equity, and the Sale does not amount to a consolidation, merger, or de facto merger of Buyer and the Debtors.

[Id. at ¶ 13).[13] Moreover, in accordance with Section 363(f) of the Bankruptcy Code, paragraph 33 of the Order provided that all claims and interests, known or unknown, would be extinguished by the sale:

[U]pon the Closing Date and pursuant to and except as otherwise set forth in the Agreement, the Assets shall be transferred to Buyer free and clear of all Encumbrances, Claims, interests, and liens. . . liabilities related to the Internal Revenue Code, or any other liability relating to Debtors or any of the Debtors' predecessors or Affiliates, whether known or unknown, choate or inchoate, filed or untiled, scheduled or unscheduled, noticed or unnoticed, recorded or unrecorded, perfected or unperfected, allowed or disallowed, contingent or non-contingent, liquidated or unliquidated, matured or unmatured, material or nonmaterial, direct or indirect, disputed or undisputed, whether arising prior to or subsequent to the commencement of these chapter 11 cases, and whether imposed by agreement, understanding, law, equity or otherwise, including claims otherwise arising under doctrines of successor liability (other than Assumed Liabilities and Permitted Liens) (collectively, the "Claims and Interests"), with all such Claims and Interests to attach to the cash proceeds of the Sale in the order of their priority, with the same validity, force, and effect that they now have as against the Purchased Assets, subject to any claims and defenses the Debtors may possess with respect thereto.

[Id. at ¶ 33).[14]

         The Sale Order also permanently enjoined all entities from seeking to enforce successor liability claims against Prospect. It provided that:

all entities, including all . . . litigation claimants, employees and former employees, and trade or other creditors holding Claims and Interests against the Debtors of the Purchased Assets arising under or out of, in connection with, or in any way relating to, the Assets or the transfer of the Assets to Buyer, hereby are forever barred, estopped, and permanently enjoined from asserting any Claims and Interests relating to the Assets or the transfer of the Assets against Buyer and its Affiliates, successors, designees, assigns, or property or the Assets including, without limitation taking any of the following actions with respect to or based on any Interest or Claim relating to the Assets or the transfer of die Assets (other than Assumed Liabilities): (a) commencing or continuing in any manner any action or other proceeding against Buyer, its Affiliates, successors or assigns, assets or properties . . .

[Id. ¶ 38). Accordingly, the Order also provided, in part, that it is "binding in all respects" upon "all creditors" and "all holders of any Interests or Claims (whether known or unknown) against any Debtor, [and] any holders of Claims and Interests against or on all or any portion of the Purchased Assets." [Id. at ¶ 58).

         Furthermore, under the APA, which was incorporated in the Sale Order, Prospect assumed only the "Assumed Liabilities" and not the "Excluded Liabilities."[15] See (Bankruptcy ECF No. 330-1 at Sections 2.3, 2.4; see also Sale Order, Bankruptcy ECF No. 330 ¶ 41) (stating "[t]he Successful Bidder is assuming the Assumed Liabilities, as set forth in the Agreement, and is not assuming any obligations other than the Assumed Liabilities."). The "Excluded Liabilities" were specified as follows:

Notwithstanding anything herein to the contrary, Buyer is assuming only the Assumed Liabilities and is not assuming and shall not become liable for the payment or performance of any other Liability of Sellers (collectively, the 'Excluded Liabilities'). The Excluded Liabilities are and shall remain Liabilities of the Sellers. Without limiting the generality of the foregoing, the term 'Excluded Liabilities' includes any Liability of Sellers:
(x) arising in connection with the employment by the Sellers, or the termination of any employment by the Sellers, of any Persons, whether as full-time employees, part-time employees, consultants or temporary workers, and including Liabilities for compensation, Claims[16] for workers' compensation or OSHA, or Claims or other grievances by Employees asserting wrongful termination, breach of contract, tort, or other violation of Law by Sellers or any of their Affiliates arising from any facts, events or circumstances arising on or prior to the Closing Date.

         (Bankruptcy ECF No. 330-1 at Section 2.4(x)).

         On that same day, Prime Clerk served Denunzio, through counsel, via first class mail, with a copy of the "Order (i) Establishing Procedures for Compliance by the Official Committee of Unsecured Creditors for East Orange General Hospital, Inc., and (ii) Authorizing the Retention of Prime Clerk as Information Agent for the Official Committee of Unsecured Creditors Effective as of November 23, 2015," (Bankruptcy ECF No. 300). See also Affidavit of Service (Bankruptcy ECF No. 356, Exh. A at 21) (listing "Roseann Denunzio v. EOGH, et al.").

         The next day, on January 22, 2016, Prime Clerk served DeNunzio and her counsel via first class mail with a copy of the Notice of Deadline for Filing Proofs of Claim Against the Debtors ("Bar Date Notice") and a proof of claim form. See Affidavit of Service (Bankruptcy ECF No. 364 at 68) (listing "Roseann Denunzio" and "Roseann Denunzio v. EOGH, et al.").[17] Ms. Denunzio did not file a proof of claim by the specified deadline, February 26, 2016 at 5:00 p.m., or indeed ever. (Bankruptcy ECF No. 313 at 2-3). See also (Bankruptcy ECF No. 850-1, Hager Cert, at ¶ 5) (acknowledging that Ms. Denunzio did not make a claim in the Bankruptcy Court); (Appellant Br. at 3) ("[t]here is no dispute that Plaintiff Denunzio never filed a proof of claim.").

         The closing date of the sale was March 1, 2016. (Bankruptcy ECF No. 836 at ¶ 7).

         About three months after the sale closed (and nine months after being terminated from the Hospital), on June 9, 2016, Ms. Denunzio filed a one-count lawsuit against die purchaser, Prospect, in the Superior Court of New Jersey, Law Division, Essex County. That state court complaint alleged age discrimination, in violation of the New Jersey Law Against Discrimination ("NJLAD"), N.J. Stat. Ann. § 10:5-1, et seq.[18] (Compl., Bankruptcy ECF No. 836-3). Ms. Denunzio's state court complaint sought back pay, front pay, emotional distress compensatory damages, aggravation of preexisting condition damages, punitive damages, interest, "monetary gross up to compensate for any negative tax consequences," attorneys' fees, and legal costs. Id. At 8.

         The Complaint alleged that the successor Prospect entities, jointly and severally, were her employer and were subject to successor liability under the NJLAD. [Id. at ¶ 14). It further alleged that those entities were not "mere successors" to the Hospital "because they were sufficiently connected to the culpable conduct that terminated [Ms. Denunzio] in violation] of her rights under the LAD." [Id. at ¶ 15). According to Ms. Denunzio, as of August 2015, Mr. Krouse, the individual who terminated her employment on the 19th of that month, was an upper manager employed by Prospect. [Id. at ¶ 17).

         Ms. Denunzio's NJLAD Complaint alleged that on January 28, 2014, Prospect Medical Holdings, Inc. issued a Letter of Intent regarding its purchase of the Hospital's assets and liabilities. [Id. at ¶ 26). By that date, and thereafter, Prospect allegedly exercised control and/or direction over the Hospital's operations and employees in preparation for purchasing its assets. [Id. at ¶¶ 26-27). Ms. Denunzio further alleged that a few months later, on May 1, 2014, Prospect Medical Holdings, Inc. submitted a Certificate of Need application to the New Jersey Department of Health for the transfer of ownership of the Hospital from Essex Valley Healthcare and its subsidiary East Orange General Hospital to Prospect EOGH, Inc. [Id. at ¶ 28). That application was approved on September 16, 2015. [Id. at¶ 30). According to Ms. Denunzio, the Certificate "evidenced" Prospect's "continuation of and identity with" the Hospital. [Id. at Section B., p. 4). Moreover, the Complaint alleges, the November 20, 2015 APA incorporated the New Jersey Department of Health's Certificate approval. [Id. at ¶32).

         In Bankruptcy Court, on June 28, 2016, the debtors filed a joint plan of liquidation (Bankruptcy ECF No. 690), and accompanying disclosure statement (Bankruptcy ECF No. 691).[19] The plan includes the proposed classification and treatment of claims for all purposes, including voting, confirmation, and distribution. (Bankruptcy ECF No. 690 at 16-20). It also includes an injunction provision, exculpation provision, and release provisions, including a provision entitled "Release by Holders of Claims and Equity Interests."[20] [Id. at 32-36). As for the disclosure statement, it includes a $13, 000, 000 estimated recovery amount for general unsecured claims, and a 39.4% estimated percentage recovery. (Bankruptcy ECF No. 691 at 11). The recovery amount "excludes contingent and unliquidated litigation claims totaling approximately $9, 600, 000, many of which are covered by insurance." [Id. at n.5).

         On July 13, 2016, after holding a hearing, the Bankruptcy Court filed an Order conditionally approving the disclosure statement for solicitation purposes only ("Conditional Approval Order"). (Bankruptcy ECF No. 715).

         On the next day, July 14, 2016, Prime Clerk served Ms. DeNunzio and her counsel via first class mail with a copy of the Notice of (a) Conditional Approval of Disclosure Statement, (b) Combined Hearing on Final Approval of Disclosure Statement and Confirmation of the Plan, and (c) Procedures and Deadline for Voting on the Plan, among other plan-related documents (the "Plan Confirmation Hearing Notice").[21] See Affidavit of Service (Bankruptcy ECF No. 730, Exh. C at 63) (listing "Roseann Denunzio" and "Roseann Denunzio v. EOGH, et al.").

         Eleven days later, on July 25, 2016, counsel for Prospect sent a cease-and-desist letter to Ms. Denunzio's counsel. (Bankruptcy ECF No. 836-4). Relying on New Jersey Court Rule 1:4-8, Prospect stated that the letter constituted notice and demand that Ms. Denunzio voluntarily dismiss the State Court action against Prospect with prejudice. (Id. at 1, 5). According to Prospect, Ms. Denunzio's claim was barred by the Bankruptcy Court's Sale Order. (Id. at 1). A copy of the Sale Order was attached to the letter. See (id.)

         The next month, on August 23, 2016, the Bankruptcy Court conducted a hearing to consider whether the disclosure statement should be approved and whether the plan should be confirmed ("Confirmation Hearing"). (Bankruptcy ECF No. 794 at 5). Two days later, on August 25, 2016, the Court issued an Order approving the disclosure statement and confirming the joint plan of liquidation ("Confirmation Order"). (Bankruptcy ECF No. 794).

         On August 29, 2016, in New Jersey State Court, Prospect moved to dismiss the State Court action on die grounds that Ms. Denunzio's claims failed as a matter of law under New Jersey Court Rule 4:6-2(e). See (Bankruptcy ECF Nos. 836 ¶ 21, 850-1 at 25-41).

         On September 9, 2016, Prime Clerk served Ms. DeNunzio and her counsel via first class mail with a copy of the Notice of (I) Entry of Confirmation Order and (II) Effective Date ("Notice of Effective Date") (Bankruptcy ECF No. 803). See Affidavit of Service (Bankruptcy ECF No. 807 at 29, 79) (listing "Roseann Denunzio" and "Roseann Denunzio v. EOGH, et al.").

         Later that month, on September 30, 2016, the Superior Court Presiding Judge, Dennis F. Carey, III, denied Prospect's motion to dismiss. (Bankruptcy ECF No. 850-1 at 19-20). About two weeks later, on October 14, 2016, Prospect filed a second motion to dismiss, arguing lack of subject matter jurisdiction or in the alternative requesting a stay pending a ruling by the Bankruptcy Court on Prospect's action to enforce the Bankruptcy Court's Sale Order. (Bankruptcy ECF No. 836-5). Prospect asserted that it intended to file that application with the Bankruptcy Court within the next few weeks. [Id. at 9).

         While that motion was pending before the New Jersey Superior Court, on October 26, 2016, Prospect filed a motion ("Motion to Enforce the Sale Order") in Bankruptcy Court requesting that die Court 1) enforce its Sale Order by granting injunctive relief barring Ms. Denunzio from pursuing the State Court action, and 2) direct Ms. Denunzio to dismiss her State Court action. (Bankruptcy ECF No. 836). It also requested that the Court assess attorney's fees as a sanction for Ms. Denunzio's willful violation of the Sale Order. (Id.)

         On November 4, 2016, Judge Carey denied the second motion to dismiss, in its entirety. (Bankruptcy ECF No. 850-1 at 22-23).

         On November 15, 2016, in Bankruptcy Court, Ms. Denunzio filed her opposition to Prospect's motion. (Bankruptcy ECF No. 850). She argued that Prospect's motion should be denied because her State Court action was not within die Bankruptcy Court's jurisdiction. [Id. at 3-5). Ms. Denunzio also maintained that Prospect's motion for sanctions should be denied, and requested leave to file a motion for the award of attorney's fees. [Id. at 6). On die next day, November 16, 2016, Prospect filed its reply brief. (Bankruptcy ECF No. 851).

         On November 22, 2016, Bankruptcy Judge Papalia heard oral argument on Prospect's motion and issued an oral ruling granting it. (Transcript of Nov. 22, 2016 Hearing, Bankruptcy ECF No. 874). The next day, on November 23, 2016, Judge Papalia issued an Order granting Prospect's Motion to enforce the Sale Order and denying the parties' applications for sanctions ("Sale Enforcement Order," Bankruptcy ECF No. 867). He found that "(t]he claims and causes of action asserted against die Prospect Entities in die State Court Action constitute Excluded Liabilities (as defined in die Sale Order), that were not assumed by the Prospect Entities under the Asset Purchase Agreement and were therefore enjoined and barred against the Prospect Entities by the Sale Order." (Id. at ¶ 4).

         The Sale Enforcement Order also barred Ms. Denunzio from continuing to prosecute the state court NJLAD action:

7. DeNunzio shall cease and desist from (i) prosecuting the State Court Action and (ii) from asserting any additional claims against the Prospect Entities or any of their affiliates that relate to, arise from, or concern the subject matter of the State Court Action.
8. DeNunzio shall immediately dismiss the action entitled Roseann DeNunzio vs. Ivy Holdings. Inc.; Ivy Intermediate Holdings, Inc.; Prospect Medical Holdings, Inc.; Prospect New Jersey, Inc.; Prospect EOGH, Inc.; ABC Corporations) 1-5; and John and/or Jane Doe(s) 1-5, Docket No. ESX-L-4013-16 pending in the Superior Court of New Jersey, Law Division, Essex County (the "State Court Action"), without prejudice.

[Id. at ¶¶ 7-8).[22]

         Nine days later, on December 2, 2016, pursuant to Federal Rule of Bankruptcy Procedure 9024, Ms. Denunzio filed a motion for reconsideration, requesting that Bankruptcy Judge Papalia vacate the Sale Enforcement Order and remand the State Court action to the New Jersey Superior Court pursuant to the mandatory abstention doctrine contained in 28 U.S.C. § 1334(c)(2) ("Motion for Reconsideration"). (Bankruptcy ECF No. 871). Prospect filed its opposition on December 21, 2016. (Bankruptcy ECF No. 885), and Ms. Denunzio filed her reply on January 3, 2017. (Bankruptcy ECF No. 889).

         Judge Papalia held a hearing on Ms. Denunzio's reconsideration motion on February 7, 2017 and issued an oral ruling denying that motion. (See Transcript of Feb. 7, 2017 Hearing, Bankruptcy ECF No. 920). Two weeks later, on February 21, 2017, the Judge issued an Order denying Ms. Denunzio's motion for reconsideration "for the reasons set forth in the record" ("Reconsideration Order," Bankruptcy ECF No. 912).[23]

         On March 8, 2017, Ms. Denunzio filed a Notice of Appeal to this Court. (ECF No. 1). Pursuant to Rule 8003(a)(3)(B) of the Federal Rules of Bankruptcy Procedure, she attached a copy of the Reconsideration Order. (ECF No. 1-1). Ms. Denunzio now asks this Court to reverse and vacate both the Bankruptcy Court's Sale Enforcement Order and Reconsideration Order. (Appellant Br. at 39). She also seeks to have her NJLAD case "remanded" to the New Jersey Superior Court. [Id.)

         II. Standard of Review

         This District Court has jurisdiction to hear appeals of final judgments and orders of the Bankruptcy Court pursuant to 28 U.S.C. § 158(a)(1). In general, a district court reviews "'the bankruptcy court's legal determinations de novo, its factual findings for clear error and its exercise of discretion for abuse thereof.'" In re American Pad & Paper Co., 478 F.3d 546, 551 (3d Cir. 2007) (quoting In re United Healthcare Sys., Inc., 396 F.3d 247, 249 (3d Cir. 2005) (quotation and citation omitted)). A district court must separately analyze mixed findings of fact and conclusions of law, and appropriately apply the applicable standards-clearly erroneous or de novo-to each component. Meridian Bank v. Alten, 958 F.2d 1226, 1229 (3d Cir. 1992) (citing In re Sharon Steel Corp., 871 F.2d 1217, 1222 (3d Cir. 1989) and Universal Minerals, Inc. v. C.A. Hughes & Co., 669 F.2d 98, 102-03 (3d Cir. 1981)).

         III. Scope of Appeal

         Prospect contends that only the Reconsideration Order is properly on appeal.[24] Ms. Denunzio maintains that both the Sale Enforcement Order and the Reconsideration Order are on appeal. I agree with Ms. Denunzio that, despite the lack of clarity in her notice of appeal, this appeal should be construed to encompass both orders, which are intertwined.

         Under Bankruptcy Rule 8003(a)(1), "[a]n appeal from a judgment, order, or decree of a bankruptcy court to a district court or BAP under 28 U.S.C. § 158(a)(1) or (a)(2) may be taken only by filing a notice of appeal with the bankruptcy clerk within the time allowed by Rule 8002." Fed.R.Bankr.P. 8003(a)(1). The Notice of Appeal must "be accompanied by the judgment, order, or decree, or the part of it, being appealed." Fed.R.Bankr.P. 8003(a)(3)(B).

         Ms. Denunzio's Notice of Appeal explicitly states that the February 21, 2017 Reconsideration Order is the subject of the appeal. (ECF No. 1; Bankruptcy ECF No. 916). As required by Rule 8OO3(a)(3)(B), it attaches a copy of the Reconsideration Order. In her briefing to this Court, however, Ms. Denunzio seeks to reverse and vacate both the Sale Enforcement Order and the Reconsideration Order. (Appellant Br. 17-20, 33, 39).

         Appellees assert that because Ms. Denunzio's Notice of Appeal attaches only the Reconsideration Order, the scope of the appeal does not include the underlying Sale Enforcement Order.[25] (Appellees Br. at 2-3) (citing Browder v. Director of Dep't of Corrections, 434 U.S. 257, 263 n.7 (1978) ("an appeal from denial of Rule 60(b) relief does not bring up the underlying judgment for review"); Erie v. Cty. of Crawford, 161 Fed.Appx. 227, 228; Wells Fargo Bank v. Alexander (In re Alexander), 05-2467 (MLC), 2006 U.S. Dist. LEXIS 16564, at *21 (D.N.J. Mar. 22, 2006)). Therefore, according to Prospect, "the sole issue on review is whether the Bankruptcy Court abused [its] discretion" to grant reconsideration. [Id. at 3) (citing Alexander, 2006 U.S. Dist. LEXIS 16564, at *21; Page v. Schweiker, 786 F.2d 150, 152 (3d Cir. 1986)).

         Because Federal Rule of Bankruptcy Procedure 8003(a)(3) is nearly identical to Federal Rule of Appellate Procedure 3(c)(1), I take case law interpreting the latter as a guide. See 10 Collier on Bankruptcy ¶ 8003.06 (16th ed.). Notices of appeal filed under Federal Rule of Appellate Procedure 3 are construed liberally. Witasick v. Minnesota Mut Life Ins. Co., 803 F.3d 184, 190 (3d Cir. 2015) (citing Smith v. Barry, 502 U.S. 244 (1992)).

The purpose 'of a notice of appeal, of course, is to notify the court of appeals and the opposing party that an appeal is being taken.' Courts employ a commonsense, purposive approach to determine whether a notice of appeal complies with the rules. Thus, the Supreme Court has said that 'imperfections in noticing an appeal should not be fatal where no genuine doubt exists about who is appealing, from what judgment, to which appellate court.'

Gov't of Virgin Islands v. Mills, 634 F.3d 746, 751-52 (3d Cir. 2011) (internal citations omitted).

         Therefore, the Third Circuit has held that it "can exercise jurisdiction over orders not specified in the Notice of Appeal if: (1) there is a connection between the specified and unspecified orders; (2) the intention to appeal the unspecified order is apparent; and (3) the opposing party is not prejudiced and has a full opportunity to brief the issues." Sulima v. Tobyhanna Army Depot, 602 F.3d 177, 184 (3d Cir. 2010) (internal quotation marks and citation omitted).

         In Matute v. Procoast Nav. Ltd, for example, the plaintiff filed a Notice of Appeal in which he designated the order denying a motion for reconsideration and did not designate the underlying dismissal order. 928 F.2d 627, 629 (3d Cir. 1991). The Court nevertheless considered the appeal as relating to both:

[I]n the absence of a showing of prejudice by (defendant], it appears that [plaintiff]'s mistake in failing to state specifically that he was appealing from the underlying dismissal should be viewed as harmless error and not a jurisdictional bar to his appeal. Indeed, [plaintiff] did mention the Order of Dismissal in his notice of appeal; the intent to appeal from that Order, thus, can be inferred fairly from the notice.

Id. at 629-30 (emphasis in original).[26]

         Applying Matute and construing Ms. Denunzio's Notice of Appeal liberally, 1 find that the three-part Sulima standard is satisfied. First, there is undoubtedly a connection between the Reconsideration Order and the underlying Sale Enforcement Order; Ms. Denunzio's reconsideration motion was a request that the Court reverse the Sale Enforcement Order's bar to her state NJLAD lawsuit. It is frankly difficult to consider one without considering the other. Second, because review of the Reconsideration Order is intertwined with the Sale Enforcement Order, I infer that Ms. Denunzio intended her appeal to include the underlying Sale Enforcement Order. Ms. Denunzio's other filings also indicate an intention to appeal from that Order. Third, and finally, there is no prejudice to Prospect. Ms. Denunzio's counsel inquired about appeal deadlines and gave every indication that he intended to appeal the Sale Enforcement Order (Transcript of Nov. 22, 2016 Hearing, Bankruptcy ECF No. 874 at 61:5-: 19). Prospect had a full opportunity to, and did, address the Sale Enforcement Order in its appellate brief. (See Appellees Br. at 22-28).

         I therefore conclude that this appeal encompasses both the Bankruptcy Court's Sale Enforcement Order and its Order denying Ms. Denunzio's Motion for Reconsideration.[27] I will now address the merits of this appeal.

         IV. Bankruptcy Court Jurisdiction

         Ms. Denunzio argues that the Bankruptcy Court had no jurisdiction over the State Court action, and therefore lacked the power to order Ms. Denunzio to dismiss it without prejudice.[28] (Appellant Br. 16-30). She also argues [id. at 31-38) that by (in effect) entering a ruling in the State Court action, die Bankruptcy Court violated the mandatory abstention doctrine. See 28 U.S.C. § 1334(c)(2).[29] I consider those arguments in turn.

         Ms. Denunzio's jurisdictional arguments depend on 28 U.S.C. § 1334, which vests bankruptcy jurisdiction in the district courts, and 28 U.S.C. § 157, which governs core and non-core proceedings within die bankruptcy courts. I first (i, ii) survey those two provisions and case law interpreting them, and then (iii) apply them to the facts. Finally (iv), I consider the applicability of Celotex Corp. v. Edwards, 514 U.S. 300 (1995), to the jurisdictional question.

         i. 28 U.S.C. § 1334

         Section 1334 of title 28 of the United States Code "describes the jurisdictional boundaries of a district court over bankruptcy cases and proceedings but, by itself, does not vest any authority in the bankruptcy courts." In re Seven Fields Dev. Corp.,505 F.3d 237, 253 (3d Cir. 2007). Under that Section, District Courts have "original and exclusive jurisdiction of all cases under title 11." 28 U.S.C. § 1334(a). The District Courts also have "original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11." Id. ยง 1334(b). (emphasis added). The District Court "in which a case under title 11 is commenced or is pending" has exclusive jurisdiction "of all the property, wherever located, of the debtor as of the commencement of such case, and of property of the estate," and "over all claims ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.