Quincy Medical Center v. Gupta

United States Court of Appeals
For the First Circuit
No. 15-1183
APURV GUPTA, M.D.; VICTOR MUNGER,
Plaintiffs, Appellants,
v.
QUINCY MEDICAL CENTER, A STEWARD FAMILY HOSPITAL, INC.,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Rya W. Zobel, U.S. District Judge]
Before
Howard, Chief Judge,
Souter, Associate Justice,
Lipez, Circuit Judge.
Leah L. Miraldi, with whom Bruce W. Gladstone, Cameron &
Mittleman LLP, Charles R. Bennett, Jr., and Murphy & King, P.C.
were on brief, for appellants.
Jonathan W. Young, with whom Scott R. Magee and Locke Lord
LLP were on brief, for appellee.
June 2, 2017

The Hon. David H. Souter, Associate Justice (Ret.) of the
Supreme Court of the United States, sitting by designation.
LIPEZ, Circuit Judge. This appeal involves the
bankruptcy of Quincy Medical Center, Inc., QMC ED Physicians, Inc.
and Quincy Physician Corporation ("Debtors"). Apurv Gupta and
Victor Munger ("Appellants"), former senior executives of Debtors,
appeal the district court's ruling that the bankruptcy court lacked
subject matter jurisdiction over their post-confirmation claims
for severance payments against the purchaser of Debtors' assets.
Because we agree that the bankruptcy court had no jurisdiction
over Gupta's and Munger's claims, we affirm.
I.
The facts pertinent to this appeal -- none of which are
disputed -- are fully set forth in the opinions of the bankruptcy
court and the district court. See Quincy Med. Ctr. v. Gupta, Nos.
12-cv-40128-RWZ and 12-cv-40131-RWZ, 2015 WL 58633, at *1-2 (D.
Mass. Jan. 5, 2015); In re Quincy Med. Ctr., Inc., 479 B.R. 229,
231-33 (Bankr. D. Mass. 2012); In re Quincy Med. Ctr., Inc., 466
B.R. 26, 27-32 (Bankr. D. Mass. 2012). We assume familiarity with
the decisions below and discuss only the pertinent facts here.
Gupta and Munger were senior executives at Quincy
Medical Center, a hospital operated by Debtors in Quincy,
Massachusetts. On June 30, 2011, Debtors signed an Asset Purchase
Agreement (the "APA") whereby they agreed to sell substantially
all of their assets to Quincy Medical Center, a Steward Family
Hospital, Inc. f/k/a Steward Medical Holdings Subsidiary Five,
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Inc. ("Steward").1 One day later, on July 1, 2011, Debtors filed
voluntary petitions under Chapter 11 of the Bankruptcy Code, and
a motion (the "Sale Motion") under sections 363 and 365 of the
Bankruptcy Code seeking bankruptcy court approval of the APA. See
11 U.S.C. § § 363, 365.
Sections 5 and 9 of the APA, which deal with the
continued employment of Debtors' former employees, are relevant to
Appellants' claims. Specifically, section 9.1 provides:
Not later than ten (10) Business Days prior to the
Closing, [Steward] shall offer employment by
[Steward] to each of the Employees who remain
employed by [Debtors] as of a recent date,
. . . such employment to commence immediately
following the Closing. . . . Such individuals who
accept such offer of employment are hereinafter
referred to as the "Transferred Employees."
Section 9.2 further provides that Steward is obligated to pay each
transferred employee "base wage and salary levels provided to such
Employees immediately prior to the Closing" for no less than three
months after the closing date. Additionally, section 5.14(c) of
the APA provides that "upon [Steward's] termination of the
employment . . . of any employees . . . of [Debtors] at or following
the Closing, [Steward] shall be liable to any of such persons for
severance or retention pay or any other payments otherwise due
them as employees . . . for [Debtors]."
1Steward is a subsidiary of Steward Health Care System, a
Boston-based for-profit healthcare company that operates hospitals
in New England.
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On September 26, 2011, the bankruptcy court issued an
order (the "Sale Order") approving the APA as requested in the
Sale Motion. The sale closed on October 1, 2011. Six days later,
Debtors filed a proposed Chapter 11 plan of reorganization (the
"Plan"). The bankruptcy court thereafter confirmed the Plan (the
"Confirmation Order").
The Sale Order and the Plan each contain provisions
regarding the retention of jurisdiction by the bankruptcy court
over any disputes arising under them. The Sale Order provides:
It is necessary and appropriate, in order to ensure the
validity of the sale of the Assets to Steward and to
ensure compliance with this Order, for this Court to
retain jurisdiction to: (a) interpret and enforce the
provisions of the APA, the Assigned Agreements, the Sale
Motion and this Order; (b) protect Steward and any of
the Assets against any Lien or Claim; (c) resolve any
disputes arising under or relating to the APA, the
Assigned Agreements, the Sale Motion and this Order; and
(d) determine the validity, extent and priority of
asserted pre-Closing Liens or Claims on, and the
disposition of the gross proceeds of sale of, the Assets.
Similarly, the Plan provides that
Notwithstanding the entry of the Confirmation Order and
the occurrence of the Effective Date, on and after the
Effective Date, the Bankruptcy Court shall, to the
maximum extent permitted by applicable law, retain
exclusive jurisdiction over all matters arising out of,
or related to, the Chapter 11 Cases and the Plan pursuant
to sections 105(a) and 1142 of the Bankruptcy Code,
including jurisdiction to: . . .
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15. Enter and enforce any order for the sale of property
pursuant to sections 363, 1123, or 1146(a) of the
Bankruptcy Code; . . . .
29. Enforce all orders previously entered by the
Bankruptcy Court; . . . .
The Confirmation Order also incorporates the retention of
jurisdiction provision from the Plan.
On October 7, 2011, Appellants received letters from
Debtors stating that their employment was terminated effective
October 1, i.e., the day the sale closed. Appellants subsequently
sought severance pay from Debtors by filing motions in the
bankruptcy court for allowance of administrative expenses against
Debtors. The bankruptcy court denied administrative expense
status to both claims. However, the court held that Appellants'
motions should be treated as "seeking relief in the alternative
. . . for an order directing Steward to pay the claims."2 The
2In the proceedings before the bankruptcy court, Appellants
originally argued that their claims for severance pay against
Debtors qualified as expenses of administration of a Chapter 11
case under 11 U.S.C. § 503(b)(1). In opposing these claims,
Debtors argued that the claims were properly against Steward
because Steward had violated the APA by not offering employment to
Appellants. Citing our opinions in Mason v. Official Comm. of
Unsecured Creditors (In re FBI Distrib. Corp.), 330 F.3d 36, 41
(1st Cir. 2003) and Cramer v. Mammoth Mart, Inc. (In re Mammoth
Mart, Inc.), 536 F.2d 950, 954 (1st Cir. 1976), the court denied
Appellants' claims against Debtors, holding that "[s]everance pay
is entitled to administrative expense priority only to the extent
it is tied to the employee's length of service" and only for the
portion of severance pay "attributable to post petition services."
Hence, the court held that, because the severance pay claims were
unrelated to Appellants' salaries and lengths of service with
Debtors, the claims were "not entitled to treatment as expenses of
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court found that it had subject matter jurisdiction to hear the
claims against Steward pursuant to the retention of jurisdiction
provisions of the Sale Order and the court's authority to interpret
and enforce its own prior orders. The bankruptcy court offered
Steward an opportunity to respond, and Steward filed its
objections.
Following a non-evidentiary hearing at which Gupta,
Munger, and Steward were heard, the bankruptcy court found Steward
liable to Appellants under the APA for their severance pay.
Steward appealed to the district court, which concluded that the
bankruptcy court lacked subject matter jurisdiction over
Appellants' claims. Specifically, the district court found that
Appellants' claims against Steward fell outside the bankruptcy
court's statutorily granted jurisdiction and that the retention of
jurisdiction provision relied upon by the bankruptcy court did not
change this analysis. The district court therefore vacated the
judgments against Steward and remanded with instructions to
dismiss Appellants' claims. This appeal followed.
administration under Bankruptcy Code § 503(b)(1)." The court went
on to find, however, that because Appellants' claims also alleged
that "Steward violated the terms of the APA by not offering them
employment post-closing" and because the APA was made binding on
both Appellants and Steward, the court would treat the claims as
"seeking . . . an order directing Steward to pay [the claims]."
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II.
A. Jurisdictional Principles
Appellants contend that the district court erred in
concluding that their severance claims against Steward fell
outside the bankruptcy court's statutorily granted jurisdiction.
Thus, we first must examine the statutory scheme establishing the
bankruptcy court's jurisdiction, understanding that the
"jurisdiction of the bankruptcy courts, like that of other federal
courts, is grounded in, and limited by, statute." Celotex Corp.
v. Edwards, 514 U.S. 300, 307 (1995). We examine the bankruptcy
court's findings of fact for clear error and afford de novo review
to its conclusions of law. See Razzaboni v. Schifano (In re
Schifano), 378 F.3d 60, 66 (1st Cir. 2004).
The general grant of bankruptcy jurisdiction is found in
28 U.S.C. § 1334, which establishes two main categories of
bankruptcy matters over which the district courts have
jurisdiction: "cases under title 11," 28 U.S.C. § 1334(a), and
"proceedings arising under title 11, or arising in or related to
cases under title 11," 28 U.S.C. § 1334(b). See also Middlesex
Power Equip. & Marine, Inc. v. Town of Tyngsborough, Mass. (In re
Middlesex Power Equip. & Marine, Inc.), 292 F.3d 61, 66 (1st Cir.
2002). "[C]ases under title 11" refers only to the bankruptcy
petition itself, and it is the umbrella under which all of the
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proceedings3 that follow the filing of a bankruptcy petition take
place. Id. In turn, 28 U.S.C. § 157 permits the district courts
to refer to bankruptcy courts all "proceedings arising under title
11 or arising in or related to cases under title 11."4 This broad
jurisdictional grant allows the bankruptcy courts to "deal
efficiently and expeditiously with all matters connected with the
bankruptcy estate."5 Celotex, 514 U.S. at 308 (quoting Pacor, Inc.
v. Higgins, 743 F.2d 984, 994 (3d Cir. 1984)).
3 The term "proceeding," as used in 28 U.S.C. § 1334(b),
refers "to the steps within the 'case' and to any subaction within
the case that may raise a disputed or litigated matter." Mich.
Emp't Sec. Comm'n v. Wolverine Radio Co. (In re Wolverine Radio
Co.), 930 F.2d 1132, 1141 n.14 (6th Cir. 1991).
4 Section 157(a) leaves it up to the district courts whether
to refer or not to refer cases and proceedings to the bankruptcy
courts. In practice, however, "each district court has provided
by rule for automatic reference to bankruptcy judges." Collier on
Bankruptcy ¶ 3.02 (Alan N. Resnick & Henry J. Sommer eds., 16th
ed. 2016). Accordingly, the District of Massachusetts, by standing
order, has delegated to the bankruptcy court all cases in which
jurisdiction is premised on § 1334, see D. Mass. R. 201, subject
to review by the district court (or, in the alternative, by the
bankruptcy appellate panel) in accordance with 28 U.S.C. § 157(a).
See also LeBlanc v. Salem (In re Mailman Steam Carpet Cleaning
Corp.), 196 F.3d 1, 5 (1st Cir. 1999) (discussing D. Mass. R. 201).
5 Section 157 also divides bankruptcy proceedings into two
further categories: "core" and "non-core." Stern v. Marshall, 564
U.S. 462, 473-76 (2011). These categories determine "[t]he manner
in which a bankruptcy judge may act on a referred matter."
Id. at 473. Proceedings "arising under title 11, or arising in a
case under title 11," are both considered "core proceedings" in
which the bankruptcy court may enter final orders and judgments.
Id. at 474 (citing 28 U.S.C. § 157(b)). Proceedings merely
"related to" a case under title 11 are considered "non-core"
proceedings. Stern, 564 U.S. at 477 (citing Collier on Bankruptcy
¶ 3.02[2], p. 3-26, n.5 (16th ed. 2010)("The terms 'non-core' and
'related' are synonymous."). Although whether a bankruptcy
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Hence, in order for Appellants' severance claims to fall
within 28 U.S.C. § 1334's statutory grant of jurisdiction, the
claims must "arise under," "arise in," or "relate to" a case under
title 11. We have observed that the boundaries between these types
of proceedings are not always easy to distinguish from each other.
See In re Middlesex Power Equip. & Marine, Inc., 292 F.3d at 68
(noting that "[t]he dividing line is unclear between proceedings
that 'arise under' as opposed to 'arise in' and as opposed to
'relate to' title 11. The statute itself provides no
definitions."). Nonetheless, each term has a particular scope
that matters for the jurisdictional analysis here.
The “arising under” language of § 1334(b) is "analogous
to the 'arising under' language in 28 U.S.C. § 1331." In re
Middlesex Power Equip. & Marine, Inc., 292 F.3d at 68 (comparing
"arising under" jurisdiction to federal question jurisdiction).
In other words, proceedings "aris[e] under title 11" when the
Bankruptcy Code itself creates the cause of action. See Stoe v.
Flaherty, 436 F.3d 209, 217 (3d Cir. 2006) (noting that "arising
under" jurisdiction is limited to proceedings where "the
Bankruptcy Code creates the cause of action or provides the
proceeding is a core proceeding is analytically separate from
whether there is jurisdiction, "by definition all core proceedings
are within the bankruptcy court's jurisdiction." Continental
Nat'l Bank v. Sanchez (In re Toledo), 170 F.3d 1340, 1345 n.6 (11th
Cir. 1999) (citing 28 U.S.C. §§ 157(b)(1), 1334(b)).
- 9 -
substantive right invoked"); Wood v. Wood (In re Wood), 825 F.2d
90, 96 (5th Cir. 1987) ("Congress used the phrase 'arising under
title 11' to describe those proceedings that involve a cause of
action created or determined by a statutory provision of title
11.").
We have defined "arising in" proceedings generally as
"those that are not based on any right expressly created by title
11, but nevertheless, would have no existence outside of the
bankruptcy." In re Middlesex Power Equip. & Marine, Inc., 292
F.3d at 68; see also Stoe, 436 F.3d at 218 ("[C]laims that 'arise
in' a bankruptcy case are claims that by their nature, not their
particular factual circumstance, could only arise in the context
of a bankruptcy case."); In re Toledo, 170 F.3d at 1345 (stating
that proceedings "arising in" bankruptcy are "matters that could
arise only in bankruptcy"). "Arising in" proceedings include such
things as administrative matters, orders to turn over property of
the estate, and determinations of the validity, extent, or priority
of liens. See Collier on Bankruptcy ¶ 3.01[3][e][iv] (Alan N.
Resnick & Henry J. Sommer eds., 16th ed. 2016)[hereinafter Collier]
(noting that “administrative matters” such as allowance and
disallowance of claims, orders in respect to obtaining credit,
determining the dischargeability of debts, discharges,
confirmation of plans, orders permitting the assumption or
rejection of contracts, are the principal constituents of “arising
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in” jurisdiction, and that "[i]n none of these instances is there
a 'cause of action' created by statute, nor could any of the
matters illustrated have been the subject of a lawsuit absent the
filing of a bankruptcy case").
By contrast, "related to" proceedings are those "which
'potentially have some effect on the bankruptcy estate, such as
altering debtor's rights, liabilities, options, or freedom of
action, or otherwise have an impact upon the handling and
administration of the bankrupt estate.'" In re Middlesex Power
Equip. & Marine, Inc., 292 F.3d at 68 (quoting In re G.S.F. Corp.,
938 F.2d 1467, 1475 (1st Cir. 1991)); see also Celotex, 514 U.S.
at 308 ("The usual articulation of the test for determining whether
a civil proceeding is related to bankruptcy is whether the outcome
of that proceeding could conceivably have any effect on the estate
being administered in bankruptcy." (emphasis omitted) (citing
Pacor, 743 F.2d at 994)). Although "related to" jurisdiction
"cannot be limitless," Celotex, 514 U.S. at 308, it is nonetheless
"quite broad." Boston Reg'l Med. Ctr., Inc. v. Reynolds (In re
Boston Reg'l Med. Ctr., Inc.), 410 F.3d 100, 105 (1st Cir. 2005)
(noting that Congress deliberately allowed the cession of wide-
ranging "related to" jurisdiction to the bankruptcy courts "to
enable them to deal efficiently and effectively with the entire
universe of matters connected with bankruptcy estates").
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B. Application of the Jurisdictional Principles
The bankruptcy court never determined whether it had
"arising under," "arising in," or "related to" jurisdiction over
Appellants' claims. Instead, the court concluded that it had
jurisdiction solely on the basis of the retention of jurisdiction
provisions in the Sale Order and the Plan. This approach was
erroneous.
Bankruptcy courts -- like all federal courts -- may
retain jurisdiction to interpret and enforce their prior orders.
See Travelers Indem. Co. v. Bailey, 557 U.S. 137, 151 (2009)
(Souter, J.) (noting that bankruptcy courts "plainly ha[ve]
jurisdiction to interpret and enforce . . . prior orders").
However, a bankruptcy court may not "retain" jurisdiction it never
had -- i.e., over matters that do not fall within § 1334's
statutory grant. See Celotex, 514 U.S. at 307. A retention of
jurisdiction provision may not alter the fact that "the source of
the bankruptcy court's subject matter jurisdiction is neither the
Bankruptcy Code nor the express terms of the Plan. The source of
the bankruptcy court's jurisdiction is 28 U.S.C. §§ 1334 and 157."
U.S. Brass Corp. v. Travelers, Ins. Group (In re U.S. Brass Corp.),
301 F.3d 296, 303 (5th Cir. 2002).
Hence, despite the routine inclusion of retention-of-
jurisdiction provisions in Chapter 11 plans, see Collier ¶ 1123.02,
they may be given effect only if there is jurisdiction under 28
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U.S.C. § 1334. See Valley Historic Ltd. P'ship. v. Bank of N.Y.,
486 F.3d 831, 837 (4th Cir. 2007) ("[N]either the parties nor the
bankruptcy court can create § 1334 jurisdiction by simply inserting
a retention of jurisdiction provision in a plan of reorganization
if jurisdiction otherwise is lacking . . . ."); Binder v. Price
Waterhouse & Co., (In re Resorts Int'l., Inc.), 372 F.3d 154, 161
(3d Cir. 2004) (stating that, absent jurisdiction under § 1334,
"retention of jurisdiction provisions in a plan of reorganization
or trust agreement are fundamentally irrelevant"); Zerand-Bernal
Group, Inc. v. Cox, 23 F.3d 159, 164 (7th Cir. 1994) ("[O]rders
approving [a] bankruptcy sale [or] . . . plan of reorganization .
. . [cannot] confer jurisdiction. A court cannot write its own
jurisdictional ticket.").
Therefore, the question before us is whether Appellants'
claims for severance pay from Steward are proceedings which "arise
under," "arise in," or are "related to" the chapter 11 bankruptcy
such that they fall within the grant of jurisdiction contained in
28 U.S.C. § 1334. Given Appellants' silence in their briefing on
"arising under" and "related to" jurisdiction, they do not appear
to dispute that neither form of jurisdiction applies to their
claims for severance pay. Their failure to expressly argue that
either form of jurisdiction applies is understandable.
Appellants' claims for severance pay from Steward derive solely
from Steward's alleged breach of sections 5 and 9 of the APA.
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Hence, their claims do not "arise under" title 11 because
Massachusetts contract law, rather than the Bankruptcy Code,
creates their cause of action. See In re Middlesex Power Equip.
& Marine, Inc., 292 F.3d at 68; In re Wood, 825 F.2d at 96.
Similarly, these claims fall outside even the broad statutory grant
of "related to" jurisdiction in that Appellants' claims against
Steward could have no conceivable impact upon Debtors' bankruptcy
estate. See Celotex, 514 U.S. at 307; In re Boston, 410 F.3d at
105. Indeed, Appellants state in their brief that "the Bankruptcy
Court's subject matter jurisdiction here is not based on 'related
to' jurisdiction."
Appellants insist, however, that their claims against
Steward "arise in" a bankruptcy case because the APA was approved
by the bankruptcy court in the Sale Order pursuant to 11
U.S.C. §§ 363 and 365, and, invoking language from one of our prior
cases, such an order may "only be issued by a bankruptcy court."
In re Middlesex Power Equip. & Marine, Inc., 292 F.3d at 68-69.
Thus, Appellants contend, their state law claims "arise in"
Debtors' bankruptcy case because, "but for" Debtors' Chapter 11
case and the Sale Order approving the sale of Debtors' assets to
Steward in the APA, their claims for severance pay would not exist.
This argument misapprehends the relevant law. As we
have explained, it is not enough for "arising in" jurisdiction
that a claim arose in the context of a bankruptcy case. Instead,
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our case law makes clear that for "arising in" jurisdiction to
apply, the relevant proceeding must have "no existence outside of
the bankruptcy." Id. at 68 (quoting In re Wood, 825 F.2d at 97).
Hence, there is no "but for" test for "arising in" jurisdiction as
Appellants suggest. That is, "the fact that a matter would not
have arisen had there not been a bankruptcy case does not ipso
facto mean that the proceeding qualifies as an 'arising in'
proceeding." Collier ¶ 3.01[3][e][iv]. Instead, the fundamental
question is whether the proceeding by its nature, not its
particular factual circumstance, could arise only in the context
of a bankruptcy case. In re Middlesex Power Equip. & Marine, Inc.,
292 F.3d at 68. In other words, it is not enough that Appellants'
claims arose in the context of a bankruptcy case or even that those
claims exist only because Debtors (Appellants' former employer)
declared bankruptcy; rather, "arising in" jurisdiction exists only
if Appellants' claims are the type of claims that can only exist
in a bankruptcy case.
In re Middlesex Power Equip. & Marine, Inc. provides no
support for Appellants' contrary position. In that case, we held,
inter alia, that a bankruptcy court had "arising under" or "arising
in" jurisdiction to decide the scope of a sale order provision
authorizing certain assets to be sold "free and clear of liens."
292 F.3d at 68; see also Elliott v. GM LLC (In re Motors Liquidation
Co.), 829 F.3d 135, 153 (2d Cir. 2016) ("A bankruptcy court's
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decision to interpret and enforce a prior sale order falls under
. . . 'arising in' jurisdiction."). Appellants point to this
language, insisting that their claims, "although framed as state
law claims . . . depend upon an interpretation of the Bankruptcy
Court's Sale Order." Appellants' argument misses the mark,
however, because the bankruptcy court's mere approval of Debtors'
sale of assets to Steward did not automatically create jurisdiction
over all future contract disputes somehow related to the APA.6
Hence, unlike Middlesex Power Equip. & Marine, Inc., which involved
the interpretation of a specific provision of a sale order,
Appellants here have failed to identify any provision of the Sale
Order itself or any related questions of bankruptcy law underlying
their claims that would require interpretation by the bankruptcy
court. Indeed, the bankruptcy court's own analysis of Appellants'
claims was based entirely on the terms of the APA and state
contract law. The court mentioned the Sale Order only in reference
to the retention-of-jurisdiction provision.
6 Indeed, the "but for" test articulated by Appellants for
"arising in" jurisdiction would potentially eliminate the
boundaries of "related to" jurisdiction, allowing a party to invoke
the "core" jurisdiction of the bankruptcy court even for claims
that could have no conceivable impact "upon the handling and
administration of the bankrupt estate." In re Boston, 410 F.3d at
105; See also Celotex, 514 U.S. at 308 n.6 ("[B]ankruptcy courts
have no jurisdiction over proceedings that have no effect on the
estate of the debtor."); Collier ¶ 3.01[3][e][iv](noting that a
"but for" test for "arising in" jurisdiction "would surely expand
bankruptcy jurisdiction well beyond that which is
constitutional").
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Therefore, a court deciding Appellants' claims on the
merits would only need to perform a state law breach of contract
analysis. As the district court explained, Appellants' claims
"look like ones that could have arisen entirely outside the
bankruptcy context. They are essentially employment disputes that
could arise in any asset sale, regardless of whether the sale
involved a bankruptcy proceeding." Appellants' claims are
therefore not merely "framed as state law claims," but are claims
which may be decided solely under Massachusetts law. See Stoe,
436 F.3d at 218 (holding that state-law action to recover unpaid
severance benefits from officers of former employer did not "arise
in" a bankruptcy case). See also Marotta Gund Budd & Dzera LLC v.
Costa, 340 B.R. 661, 669 (D.N.H. 2006) (holding that defamation
action is not a proceeding "arising in" a bankruptcy case).7
7 Our conclusion here is buttressed by the fact that
Appellants filed almost identical claims for breach of the APA
against Steward in Massachusetts state court while this appeal was
pending. See Munger et al. v. Quincy Medical Center, a Steward
Family Hospital, Inc., Civil Action No. 15-2099-C. On October 11,
2016, the state court granted summary judgment for Steward on
Appellants' claims. Id. In deciding the summary judgment motion,
the state court made no reference to any part of the Sale Order
itself, instead relying only on the existence vel non of
Appellants' contractual rights under the APA. Given these facts,
Appellants' claims can hardly "depend upon an interpretation of
the Bankruptcy Court's Sale Order."
We further note that both parties were remiss in failing to
inform this court of the outcome of the state court proceedings.
The state court's grant of summary judgment does not, however,
moot the question of whether the bankruptcy court had subject
matter jurisdiction over Appellants' claims in federal court.
Rather, if we were to conclude that the bankruptcy court had
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In short, Appellants' claims do not fit into the narrow
category of matters that "have no existence outside of the
bankruptcy," In re Middlesex Power Equip. & Marine, Inc., 292 F.3d
at 68, or that "could only arise in the context of a bankruptcy,"
Stoe, 436 F.3d at 218. Hence, the bankruptcy court did not possess
"arising in" jurisdiction over Appellants' claims.
AFFIRMED
jurisdiction, the district court on remand would have to address
a number of complex procedural questions, including the potential
preclusive effect of the state court proceedings. However, because
we find that the bankruptcy court lacked subject matter
jurisdiction over Appellants' claims, those issues do not arise.
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