John Q. Hammons Fall 2006, LLC v. United States Bankruptcy Court for the District of Kansas - Kansas City ( 2017 )

FILED
U.S. Bankruptcy Appellate Panel
of the Tenth Circuit
December 28, 2017
Blaine F. Bates
NOT FOR PUBLICATION Clerk
UNITED STATES BANKRUPTCY APPELLATE PANEL
OF THE TENTH CIRCUIT
IN RE JOHN Q. HAMMONS FALL BAP No. KS-16-037
2006, LLC, et al.,
Debtors.
JD HOLDINGS, L.L.C., Bankr. No. 16-21142
Chapter 11
Appellant,
v. OPINION *
JOHN Q. HAMMONS FALL 2006,
LLC, et al.,
Appellee.
Appeal from the United States Bankruptcy Court
for the District of Kansas
Before MICHAEL, ROMERO, and HALL, Bankruptcy Judges.
MICHAEL, Bankruptcy Judge.
By and large, appellate review is a simple and straightforward process. A
trial court makes its findings of fact and conclusions of law, and enters a
judgment in accordance with those findings and conclusions. If there is a timely
*
This unpublished opinion may be cited for its persuasive value, but is not
precedential, except under the doctrines of law of the case, claim preclusion, and
issue preclusion. 10th Cir. BAP L.R. 8026-6.
appeal, an appellate court reviews those findings and conclusions using well
established standards to determine whether an error has been made. Right or
wrong, affirmed or reversed, the appellate process has one constant: the appeals
court is reviewing an actual decision of the lower court. This appeal marks the
first time in over seventeen years on the bankruptcy appellate panel that this
judge has been asked to decide an issue pending—but not decided by the trial
judge—when this appeal was taken; namely, whether the Chapter 11 cases that
spawned this appeal should be dismissed. For the reasons set forth herein, we
limit our review to the matter actually decided by the bankruptcy court. With
respect to that issue, whether rejection of an executory contract was within the
realm of the debtors’ proper business judgment, there is no contest, and we find
no error.
I. FACTUAL AND PROCEDURAL HISTORY
Appellees consist of the Revocable Trust of John Q. Hammons, dated
December 28, 1989 (the “Trust”) and seventy-one of its directly or indirectly
wholly owned subsidiaries or affiliates (the “Affiliates”) (collectively referred to
as the “Debtors”). In the 1950s, John Q. Hammons (“Hammons”) began
developing hotels and continued to do business as a hotelier until his death. As
part of this endeavor, Hammons formed the Trust and other subsidiaries.
In 2005, the Trust agreed to sell its majority interest in a wholly owned
subsidiary, which held a portfolio of forty-three hotels, to JD Holdings L.L.C.
2
(“JD Holdings”) and related parties. As part of that transaction, the Trust and
certain Affiliates executed a right of first refusal (the “ROFR”) on the sale of
certain other hotels (the “JQH Subject Hotels”) in favor of JD Holdings. 1 The
ROFR provided, in relevant part, that upon Hammons’s death, the JQH Subject
Hotels would be sold within two years or upon other certain conditions. 2 The
ROFR also provided that in the event of a material breach by the Trust or
Affiliates, JD Holdings had the right to purchase any JQH Subject Hotels at
eighty percent of the price otherwise required to be paid under the sale
agreement. 3
In May 2012, JD Holdings commenced an action against the Trust and the
Affiliates (the “Delaware Litigation”) in the Chancery Court of Delaware (the
“Delaware Court”), alleging the Affiliates breached their obligations under the
ROFR. In May 2013, while the Delaware Litigation was pending, Hammons died.
In the Delaware Litigation, JD Holdings filed a motion for status quo order,
requesting the entry of an order precluding the Affiliates from engaging in any
1
Sponsor Entity Right of First Refusal Agreement, in Appellant’s App. at
537.
2
Id. at 7, in Appellant’s App. at 544.
3
Id. at 10-11, in Appellant’s App. at 547-48. In 2008, the parties amended
the ROFR to state that the Affiliates would provide JD Holdings with 22.5%
subordinated seller financing with respect to any JQH Subject Hotel that was
actually acquired by JD Holdings pursuant to the ROFR. Agreement and
Amendment, Schedule 2, in Appellant’s App. at 689.
3
conduct related to the JQH Subject Hotels outside of the ordinary course of
business. 4 On October 28, 2015, the Delaware Court granted that request. 5
On June 26, 2016 and July 5, 2016, the Debtors filed for Chapter 11
protection. Almost a month later, on July 25, 2016, JD Holdings filed its motion
to dismiss, abstain, or lift the automatic stay to allow JD Holdings to renew the
Delaware Litigation (the “Dismissal Motion”). 6 JD Holdings argued three separate
bases for dismissal of the bankruptcy cases: (1) the Affiliates’ cases must be
dismissed because the Affiliates lacked proper authorization to file for bankruptcy
following the status quo order in the Delaware Litigation; (2) the Trust’s case
must be dismissed because the Trust was not eligible to be a debtor; and (3) all of
the bankruptcy cases should be dismissed because they served no valid
bankruptcy purpose and were filed in bad faith as a means to obtain a tactical
litigation advantage in the Delaware Litigation. In the Dismissal Motion, JD
Holdings did not explicitly argue the bankruptcy court lacked subject matter
jurisdiction to hear the cases.
On August 16, 2016, the Debtors filed their Motion for Entry of an Order
4
Plaintiff JD Holdings, L.L.C.’s Motion for Status Quo Order, in
Appellant’s App. at 465.
5
Status Quo Order, in Appellant’s App. at 477.
6
JD Holdings’ Motion to Dismiss Debtors’ Chapter 11 Petitions, Abstain
from these Chapter 11 Cases, or Alternatively to Lift or Modify the Automatic
Stay and Memorandum of Law in Support Thereof, in Appellant’s App. at 211.
4
Authorizing Rejection of Sponsor Entity Right of First Refusal Agreement, Dated
September 16, 2005 and Agreement and Amendment, Dated December 10, 2008
(the “Rejection Motion”), 7 arguing the ROFR was an executory contract to which
the business judgment test applied, and, in the Debtors’ business judgment,
retroactive rejection of the ROFR benefitted the estate. 8 On September 19, 2016,
JD Holdings filed its objection to the Rejection Motion, arguing, in part, the
Rejection Motion was premature because JD Holdings sought dismissal “on
multiple grounds, some of which [were] jurisdictional, and all of which . . .
present[ed] gateway issues that challenge[d] the existence of Debtors’ bankruptcy
cases.” 9 The parties also submitted prehearing briefs. In its brief, JD Holdings
noted it did not “intend to challenge the Debtors’ exercise of their business
7
Rejection Motion, in Appellant’s App. at 706.
8
The business judgment test applies to authorize rejection of an executory
contract under 11 U.S.C. § 365. NLRB v. Bildisco & Bildisco, 465 U.S. 513, 523
(1984). Courts routinely approve motions to reject executory contracts upon a
showing that the debtor’s decision to reject the contract is an exercise of sound
business judgment. 3 Collier on Bankruptcy ¶ 365.03 (16th ed. 2016); In re
Spoverlook, LLC, 560 B.R. 358, 361 (Bankr. D.N.M. 2016) (stating that under the
business judgment test “[d]eference is given to the debtor’s decision, provided it
demonstrates” that rejecting the contract is advantageous).
9
JD Holdings’ Objection to Debtors’ Motion for Entry of an Order
Authorizing Rejection of Sponsor Entity Right of First Refusal Agreement, Dated
September 16, 2005, and Agreement and Amendment, Dated December 10, 2008
at 4, in Appellant’s App. at 1042.
5
judgment as a basis for opposing rejection of the ROFR” 10 and limited its
argument to whether the bankruptcy court could, or should, resolve the eligibility
issues before ruling on the Rejection Motion. 11 On August 22, 2016, the
bankruptcy court held a hearing to address various uncontested motions and the
Dismissal Motion. At this hearing, JD Holdings argued “there needs to be a
decision about whether or not these Debtors’ [sic] are properly here [in
bankruptcy][ ] before the Court can address the rejection motion.” 12
On December 9, 2016, the bankruptcy court conducted a hearing on the
Rejection Motion (the “Rejection Motion Hearing”). In oral findings made on the
record at the conclusion of the Rejection Motion Hearing, the bankruptcy court
acknowledged JD Holdings’ express concession of any challenge to the exercise
of the Debtors’ business judgment. 13 The bankruptcy court concluded that a
debtor’s eligibility to seek bankruptcy relief is not jurisdictional. 14 The
10
JD Holdings’ Pre-hearing Brief in Opposition to Debtors’ Motion for Entry
of an Order Authorizing Rejection of Sponsor Entity Right of First Refusal
Agreement, Dated September 16, 2005, and Agreement and Amendment, Dated
December 10, 2008 at 1-2, in Appellant’s App. at 1174-75. JD Holdings noted it
longer believed an evidentiary hearing was necessary.
11
Id. at 8, in Appellant’s App. at 1181.
12
Aug. 22 Hearing Tr. at 32, in Appellant’s App. at 1065.
13
Rejection Order Hearing Tr. at 62-63, in Appellant’s App. at 1703-04.
14
Order Granting Motion to Reject Right of First Refusal Agreement
Pursuant to 11 U.S.C. § 365 at 2 n.1, in Appellant’s App. at 1637.
6
bankruptcy court further determined the Debtors had exercised proper business
judgment in their decision to reject the ROFR. On December 13, 2016, the
bankruptcy court entered its Order Granting Motion to Reject Right of First
Refusal Agreement Pursuant to 11 U.S.C. § 365 (the “Rejection Order”), 15
granting the Rejection Motion and approving the rejection of the ROFR pursuant
to § 365(a) as to each Debtor and as to each asset subject to the ROFR. 16 JD
Holdings filed a timely notice of appeal.
II. STANDARD OF REVIEW
A determination of a trial court’s subject matter jurisdiction is a question of
law, reviewed de novo. 17 We review a bankruptcy court’s underlying factual
findings for clear error. 18 Issues relating to a trial court’s supervision of litigation
are most commonly reviewed under an abuse of discretion standard. 19 Under the
abuse of discretion standard, a trial court’s decision will not be disturbed unless
the appellate court has a definite and firm conviction that the lower court made a
15
Id. at 1, in Appellant’s App. at 1636.
16
Id. at 3, in Appellant’s App. at 1638.
17
Plaza Speedway Inc. v. United States, 311 F.3d 1262, 1266 (10th Cir.
2002).
18
Paul v. Iglehart (In re Paul), 534 F.3d 1303, 1310 (10th Cir. 2008) (citing
Ahammed v. Sec. Inv’r Prot. Corp. (In re Primeline Sec. Corp.), 295 F.3d 1100,
1105 (10th Cir. 2002)).
19
In re Westby, 486 B.R. 509, 517 (10th Cir. BAP 2013) (citing Beaird v.
Seagate Tech., Inc., 145 F.3d 1159, 1164 (10th Cir. 1998)).
7
clear error of judgment or exceeded the bounds of permissible choice in the
circumstances. 20
III. DISCUSSION
A substantial portion of JD Holdings’ brief focuses on the factual issues of
whether the Trust was either eligible to be a debtor or authorized to file
bankruptcy on behalf of the Affiliates. The issue of whether the bankruptcy cases
should be dismissed is not before this Court. 21 We are tasked with reviewing the
Rejection Order. Because the bankruptcy court did not rule on these issues in the
Rejection Order, they are not properly before this Court and will not be
addressed. 22 In any event, we are not in a position to review any issue pertaining
to eligibility. The record before us does not relate to the Dismissal Motion. We
have no authority to or interest in trying the Dismissal Motion de novo.
20
Id. at 515 (citing Moothart v. Bell, 21 F.3d 1499, 1504 (10th Cir. 1994)).
21
We are aware that, on October 13, 2017, the bankruptcy court entered its
Memorandum Opinion and Order denying the Dismissal Motion. JD Holdings has
also appealed that Order to this Court. See BAP No. 17-043. That appeal remains
in the briefing stages as of the date of this Opinion, and will be decided by the
Bankruptcy Appellate Panel of the Tenth Circuit in the ordinary course of
business.
22
Tele-Commc’ns, Inc. v. Comm’r of Internal Revenue, 104 F.3d 1229, 1233
(10th Cir. 1997) (quoting Lyons v. Jefferson Bank & Tr., 994 F.2d 716, 721 (10th
Cir. 1993) (“an issue must be ‘presented to, considered [and] decided by the trial
court’ before it can be raised on appeal.”)).
8
A. The bankruptcy court did not err in determining it had jurisdiction to
resolve the Rejection Motion without deciding whether the Trust is
eligible to be debtor within the meaning of 11 U.S.C. § 109(a).22
JD Holdings argues the bankruptcy court did not have the authority to enter
the Rejection Order because the Trust is not a business trust, within the meaning
of § 101(9)(A)(v), eligible to file bankruptcy under § 109(a). 23 JD Holdings
argues the Trust “had to prove that it was a ‘business trust’” 24 before it could
reject the ROFR because eligibility for relief under the Bankruptcy Code is “an
essential element of its ‘claim’ for rejection pursuant to Section 365.” 25 JD
Holdings contends this is not an argument that the bankruptcy court abused its
discretion in managing its docket or should have first resolved the Dismissal
Motion. 26 While the semantics are interesting, they are not persuasive. JD
22
All future references to “Code,” “Section,” and “§” are to the Bankruptcy
Code, Title 11 of the United States Code, unless otherwise indicated.
23
Appellant’s Br. 19. Section 101(13) defines debtor as a “person or
municipality concerning which a case under this title has been commenced.”
Section 101(41) states the term person “includes individual, partnership, [and]
corporation, . . .” Section 101(9)(A)(v) defines corporation to include a business
trust. The Bankruptcy Code does not define business trust.
24
Appellant’s Br. 20; see also Appellant’s Br. 19. (“Section 365 does not
apply to a contract to which no debtor is a party.”).
25
Appellant’s Br. 21.
26
Appellant’s Reply Br. 7 (“[T]his issue does not relate merely to the
Bankruptcy Court’s ‘docket management decisions’ or the order in which the
Bankruptcy Court resolved certain motions before it but rather . . . [whether] the
Bankruptcy Court was [] required to first resolve Appellee’s eligibility to obtain
[] relief.”).
9
Holdings contends the bankruptcy court was required to rule that the Debtors
were eligible to be Chapter 11 debtors before considering and ultimately granting
the Rejection Motion. We do not find this argument persuasive.
The bankruptcy court determined “a debtor’s eligibility to seek bankruptcy
relief is not jurisdictional,” 27 relying on the Tenth Circuit’s decision in In re
Hamilton Creek Metropolitan District. 28 In Hamilton Creek, a metropolitan
district filed a Chapter 9 bankruptcy petition. One creditor objected, arguing the
debtor was not eligible to file because it had paid its debts as they became due
and thus was not insolvent. The bankruptcy court dismissed the case, finding that
the metropolitan district was not insolvent, and the district court affirmed. The
Tenth Circuit also affirmed, holding that to be eligible for Chapter 9 relief an
entity must be insolvent and that the bankruptcy court did not err in finding the
metropolitan district was not insolvent. In disposing of the case, the Tenth Circuit
highlighted that it was not assuming jurisdiction for the purpose of deciding the
merits following a jurisdictional objection in contravention of Steel Co. v.
Citizens for a Better Environment. 29 The Tenth Circuit noted the issue of
eligibility was not jurisdictional as § 109(c) uses “terms of eligibility rather than
27
Rejection Order at 2 n.1, in Appellant’s App. at 1637. The bankruptcy court
also relied on 2 Collier on Bankruptcy ¶109.01[2] (1998).
28
143 F.3d 1381 (10th Cir. 1998)).
29
523 U.S. 83 (1998) (rejecting the approach of assuming jurisdiction and
proceeding to the merits, despite jurisdictional objections).
10
jurisdiction” 30 and “none of the § 109(c) criteria is jurisdictional in nature.” 31
We are bound by the Tenth Circuit’s ruling in Hamilton Creek. 32 Although
Hamilton Creek specifically focused on subsection (c) of § 109, and JD Holdings’
argument is predicated on subsection (a), Hamilton Creek is nonetheless
dispositive. In determining bankruptcy court jurisdiction, there is no reasonable
basis to differentiate eligibility of a trust to be a debtor under Chapter 11 from the
eligibility of a municipality to be a debtor under Chapter 9. We conclude the
bankruptcy court had jurisdiction to resolve the Rejection Motion while the
argument that the Trust was not a debtor within the meaning of § 109(a) remained
pending.
A Chapter 11 case is fluid. In most cases, there is an operating business
that must buy materials, generate services or product, pay employees, and so on.
Under the operative provisions of the Bankruptcy Code, many of these ongoing
tasks require the debtor to seek and obtain permission and an order from the
bankruptcy court. No creditor can be allowed to hold the process hostage by the
mere allegation that a debtor does not belong in bankruptcy court. Were we to so
hold, the concepts of providing debtors with breathing room or a fresh start would
30
Hamilton Creek, 143 F.3d at 1385 n.2.
31
Id.
32
Davis v. Chapman (In re Chapman), No. 02-025, 2002 WL 1926137, at 2
(10th Cir. BAP Aug. 21, 2002) (“This court, of course, is bound to follow the
Tenth Circuit’s decisions, and is without authority to overrule them.”).
11
be thwarted. A single creditor would have the ability to derail a Chapter 11
reorganization, or, at a minimum, hold the process hostage to its demands. We are
confident this is not the result Congress intended when it enacted the Bankruptcy
Code.
.
B. The bankruptcy court did not err in determining it had jurisdiction to
consider the Rejection Motion without deciding whether the Affiliates
had authority under state law to file bankruptcy.
JD Holdings argues the Trust lacked the authority to file bankruptcy for the
Affiliates under state law. 33 JD Holdings further contends a bankruptcy court does
not have subject matter jurisdiction over a case filed on behalf of an entity
without authority. In granting the Rejection Motion, the bankruptcy court did not
explicitly address whether the Affiliates were authorized to file bankruptcy. The
bankruptcy court, however, noted generally “[i]f the Court felt it did not have
subject matter jurisdiction, it would not proceed[.]” 34
JD Holdings relies on the Supreme Court’s opinion in Price v. Gurney. 35 JD
Holdings argues Price provides an independent basis for dismissal based on lack
of jurisdiction when an entity’s bankruptcy is filed without proper authority. In
Price, a corporation sought bankruptcy relief under Chapter X of the pre-Code
33
JD Holdings presents argument as to why the Affiliates lacked authority.
Appellant’s Br. 32-38. As previously discussed, this factual issue is not properly
before the Court and will not be considered.
34
Rejection Order Hearing Tr. at 60, in Appellant’s App. at 1701.
35
324 U.S. 100 (1945).
12
Bankruptcy Act. The Chapter X petition was filed by a stockholder of the
corporation and accompanied by an affidavit alleging wrongful conduct by the
corporation’s directors. Subsequently, the directors on behalf of the corporation
brought a motion to dismiss on the grounds that the stockholder was not
authorized to file the petition. A hearing was held and the district court dismissed
the case. The United States Court of Appeals for the Sixth Circuit reversed,
holding that a stockholder is authorized to file a petition on behalf of a
corporation when directors refuse to act and the directors “have an interest
antagonistic to the corporation.” 36 The United States Supreme Court reversed the
Sixth Circuit, holding that the Bankruptcy Act does not give stockholders the
right to file petitions under Chapter X. 37 The Supreme Court further stated:
[N]owhere is there any indication that Congress bestowed on the
bankruptcy court jurisdiction to determine that those who in fact do
not have the authority to speak for the corporation . . . should be
empowered to file a petition on behalf of the corporation. 38
JD Holdings also relies on this Court’s opinion in In re DB Capital Holdings,
36
In re W. Tool & Mfg. Co., 142 F.2d 404, 409 (6th Cir 1944), rev’d sub nom.
Price v. Gurney, 324 U.S. 100, 103 (1945).
37
Price, 324 U.S. at 104 (“Chapter X provides in § 126 that ‘A corporation,
or three or more creditors who have claims against a corporation or its property
amounting in the aggregate to $5,000 or over, liquidated as to amount and not
contingent as to liability, or an indenture trustee where the securities outstanding
under the indenture are liquidated as to amount and not contingent as to liability,
may, if no other petition by or against such corporation is pending under this
chapter, file a petition under this chapter.’”).
38
Id. at 107.
13
LLC. 39 In DB Capital, the general partner of a managing entity filed a Chapter 11
bankruptcy petition on behalf of the LLC it managed. One of the LLC members
brought a motion to dismiss, arguing that the general partner of the managing
entity did not have authority to file the bankruptcy petition. Following an
evidentiary hearing, the bankruptcy court granted the motion to dismiss, finding
that the controlling operating agreement precluded the general partner of the
managing entity from filing for bankruptcy on the LLC’s behalf. 40 On appeal, this
Court affirmed, holding “[a] bankruptcy case filed on behalf of an entity without
authority under state law to act for that entity is improper and must be
dismissed.” 41
JD Holdings’ reliance on Price and DB Capital is misplaced. Price and DB
Capital stand for the proposition that a case filed without the proper corporate
authority must be dismissed. JD Holdings’ reference to jurisdiction in these cases
demonstrates that a bankruptcy court cannot retain jurisdiction after it determines
39
No. CO-10-046, 2010 WL 4925811, at *1 (10th Cir. BAP Dec. 6, 2010)
(reviewing a motion to dismiss under § 1112(b) and examining the issue of the
authority to file on a debtor’s behalf).
40
Id. at *2. The operating agreement provided that “[t]he Company . . . will not
institute proceedings to be adjudicated bankrupt or insolvent; or consent to the
institution of bankruptcy or insolvency proceedings against it; or file a petition seeking,
or consent to, reorganization or relief under any applicable federal or state law relating
to bankruptcy. . . .” Id.
41
Id. (citing In re Real Homes, LLC, 352 B.R. 221, 225 (Bankr. D. Idaho
2005)).
14
the case was filed on behalf of any entity without proper authority. These cases
do not address the issue before this Court: whether the bankruptcy court has
jurisdiction to consider other matters before resolving whether a debtor is
properly in bankruptcy.
Appellees argue Arbaugh v. Y&H Corp. 42 is applicable here. We agree. In
Arbaugh, the plaintiff brought a sexual harassment claim against her former
employer under Title VII of the Civil Rights Act. After a two-day trial, the
district court found in favor of the plaintiff, awarding actual and punitive
damages in the amount of $40,000. Two weeks after judgment was entered,
defendant moved to dismiss the case for lack of subject-matter jurisdiction.
Defendant argued that it had less than 15 employees and, as a result, was not an
employer within the definition of—and could not be sued under—Title VII. On
that basis, Defendant argued that the federal court lacked subject-matter
jurisdiction. After conducting an evidentiary hearing to determine the number of
defendant’s employees, the district court found that defendant did in fact have
less than fifteen employees, vacated the judgment, and dismissed the case. The
United States Court of Appeals for the Fifth Circuit affirmed, holding that the
defendant’s failure to have the requisite employees to be considered an employer
under Title VII deprived the federal court of subject-matter jurisdiction. In a
42
546 U.S. 500 (2006).
15
unanimous decision, the United States Supreme Court reversed the Fifth Circuit. 43
Justice Ginsberg delivered the opinion. She admitted the Supreme Court
and other courts have been “less than meticulous” 44 in analyzing whether a law’s
limitations are jurisdictional. The Court recognized that subject-matter
jurisdiction is sometimes
erroneously conflated with a plaintiff’s need and ability to prove the
defendant bound by the federal law asserted as the predicate for
relief—a merits-related determination. [Courts] often obscure the
issue by stating that the court is dismissing “for lack of jurisdiction”
when some threshold fact has not been established, without explicitly
considering whether the dismissal should be for lack of subject
matter jurisdiction or for failure to state a claim. We have described
such unrefined dispositions as “drive-by jurisdictional rulings” that
should be accorded “no precedential effect” on the question whether
the federal court had authority to adjudicate the claim[.]45
The Supreme Court held that the issue of whether the defendant qualified as an
employer under Title VII related to the merits of the plaintiff’s claim, and not to
the subject-matter jurisdiction of the federal court. Applying this analysis to the
present case, we conclude that the issue of Debtors’ eligibility goes to the merits
of the Dismissal Motion, and not to the subject-matter jurisdiction of the
bankruptcy court.
43
Id. The decision was 8-0. Justice Alito took no part in the decision.
44
Id. at 511.
45
Id. (citations omitted).
16
Further, in Henderson ex rel. Henderson v. Shinseki, 46 the United States
Supreme Court reviewed whether a procedural Department of Veterans’ Affairs’
rule was jurisdictional. The Supreme Court acknowledged that, while courts
generally address the arguments raised by the parties, federal courts have an
independent obligation to review their jurisdiction, and must raise and consider
jurisdictional issues, even when overlooked by the litigants. In attempting to
“bring some discipline” 47 to the determination of whether a rule is jurisdictional,
the Supreme Court recognized that the pivotal question in examining whether a
jurisdictional predicate exists “is whether Congress mandated” a limitation to be
“jurisdictional.” 48 Following Arbaugh’s precedent, the Supreme Court “look[ed]
to see if there [wa]s any ‘clear’ indication” 49 that Congress wanted the
Department of Veterans’ Affairs’ procedural rule to be jurisdictional and, after
analyzing the attributes of the procedural rule, determined that the terms of the
rule did not suggest, let alone “provide clear evidence” 50 that the rule “was meant
to carry jurisdictional consequences.” 51
46
562 U.S. 428 (2011).
47
Id. at 435.
48
Id.
49
Id. at 436.
50
Id. at 438.
51
Id.
17
Here, the bankruptcy court correctly concluded the authority-to-file
limitation is not jurisdictional. The bankruptcy court had subject-matter
jurisdiction over the Affiliates regardless of whether the Affiliates’ petitions were
filed with the proper authority. JD Holdings cites no authority indicating that
Congress mandated the authority-to-file limitation to be jurisdictional. Further,
the Tenth Circuit has not explicitly addressed the issue of whether the
authority-to-file limitation is jurisdictional. Arbaugh is applicable and controlling.
We find no error in the bankruptcy court’s conclusion that it had jurisdiction to
consider the Rejection Motion.
The only operative issue in this appeal is whether the rejection of the
ROFR by the Debtor was a proper exercise of its business judgment. JD Holdings
admits this point. We cannot find error when a bankruptcy court rules in favor of
one party on an issue conceded by the opposing party.
IV. Conclusion
The Rejection Order is AFFIRMED.
18