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In re IMMC Corp

United States Court of Appeals, Third Circuit

November 28, 2018

In re: IMMC CORPORATION, f/k/a Immunicon Corporation, et al., Debtors
v.
EDWARD L. ERICKSON; BYRON HEWETT; LEON TERSTAPPEN; JAMES L. WILCOX; ELIZABETH E. TALLETT; J. WILLIAM FREYTAG; ZOLA P. HOROVITZ; JAMES G. MURPHY; BRIAN GEIGER; JONATHAN COOL; ALLEN J. LAUER ROBERT F. TROISIO, as Liquidating Trustee of IMMC Corporation, f/k/a Immunicon Corporation, Appellant

          Argued July 12, 2018

          On Appeal from the United States District Court for the District of Delaware (District Court No.: 1-15-cv-01043) District Judge: Honorable Gregory M. Sleet

          Mara Beth Sommers Bales, Sommers & Klein, P.A. Counsel for Appellant Robert F. Troisio

          Michael Eidel Clair E. Wischusen [ARGUED] Fox Rothschild LLP Counsel for Appellees

          Before: SHWARTZ, ROTH, and RENDELL, Circuit Judges

          OPINION

          RENDELL, CIRCUIT JUDGE:

         This appeal requires us to decide whether the Bankruptcy Court for the District of Delaware had the authority to transfer an adversary proceeding to the District Court for the Eastern District of Pennsylvania under 28 U.S.C. § 1631. While the issue as presented would have us determine whether the Bankruptcy Court is a "court" under 28 U.S.C. § 610, we adopt a different rationale in upholding the orders of the Bankruptcy Court and the District Court. Because the Bankruptcy Court lacked power to adjudicate the adversary proceeding brought by the trustee, its transfer of the adversary proceeding would have been ultra vires. Thus, the Bankruptcy Court correctly denied the motion to transfer the adversary proceeding.

         I.

         In 2008, IMMC Corporation filed a petition for relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court for the District of Delaware. Appellant was appointed as the liquidating trustee under the plan of liquidation approved by the Court. In 2010, the trustee filed an adversary proceeding in the Bankruptcy Court, alleging that Appellees, IMMC's former officers and directors, had breached their fiduciary duties by pursuing a risky and costly litigation strategy in an unrelated suit against a competitor, overcompensating themselves in the process.

         In December 2011, the Bankruptcy Court held that it lacked jurisdiction to hear the claims asserted in the adversary proceeding. See Troisio v. Erickson (In re IMMC Corp.), Ch. 11 Case No. 08-11178 (KJC), Adv. No. 10-53063-KJC, 2011 WL 6832900 (Bankr. D. Del. Dec. 29, 2011). The Court rejected the notion that the adversary proceeding was a "core" proceeding. Id. at *2-4. It also rejected the trustee's argument that the adversary proceeding was a non-core proceeding "related to" a Chapter 11 case because the claims in the adversary proceeding lacked a "close nexus" to the Chapter 11 plan. Id. at *2, *4; see Resorts Int'l, Inc. Litig. Tr. v. Price Waterhouse (In re Resorts Int'l, Inc.), 372 F.3d 154, 168-69 (3d Cir. 2004) (after plan confirmation, a bankruptcy court's "related to" jurisdiction is limited to matters in which "there is a close nexus to the bankruptcy plan or a proceeding, as when a matter affects the interpretation, implementation, consummation, execution, or administration of a confirmed plan or incorporated litigation trust agreement"). The trustee did not appeal that ruling.

         After briefing and a separate hearing, the Bankruptcy Court considered the trustee's request that the Bankruptcy Court transfer the adversary proceeding to the United States District Court for the Eastern District of Pennsylvania under 28 U.S.C. § 1631, which provides:

Whenever a civil action is filed in a court as defined in section 610 of this title or an appeal, including a petition for review of administrative action, is noticed for or filed with such a court and that court finds that there is a want of jurisdiction, the court shall, if it is in the interest of justice, transfer such action or appeal to any other such court in which the action or appeal could have been brought at the time it was filed or noticed, and the action or appeal shall proceed as if it had been filed in or noticed for the court to which it is transferred on the date upon which it was actually filed in or noticed for the court from which it is transferred.

According to 28 U.S.C. § 610:

As used in this chapter the word "courts" includes the courts of appeals and district courts of the United States, the United States District Court for the District of the Canal Zone, the District Court of Guam, the District Court of the Virgin Islands, the United States Court ...

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