Alderwoods Group, Inc. v. Reyvis Garcia

[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT FILED
________________________ U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
MAY 30, 2012
No. 10-14726
JOHN LEY
________________________
CLERK
D.C. Docket Nos. 1:10-cv-20509-KMM,
08-01266-RAM
ALDERWOODS GROUP, INC.,
OSIRIS HOLDING OF FLORIDA, INC.,
NORTHSTAR GRACELAND, LLC,
Plaintiffs - Appellants,
versus
REYVIS GARCIA,
RAMONA JOHNSON,
MERCEDES WOODBURY,
Defendants - Appellees.
________________________
Appeal from the United States District Court
for the Southern District of Florida
________________________
(May 30, 2012)
Before TJOFLAT and MARTIN, Circuit Judges, and DAWSON,* District Judge.
TJOFLAT, Circuit Judge:
The threshold issue this appeal presents is whether a bankruptcy court in
one federal district has jurisdiction to determine whether a debt was discharged in
a bankruptcy case litigated in another federal district. We hold that the court lacks
jurisdiction and therefore do not reach the other issues the appeal presents.
I.
A.
The debt at issue consists of claims of tort liability possessed by relatives of
people buried in a Miami, Florida cemetery, known as Graceland. The claims are
set out in the class action complaint filed in the Circuit Court for Miami-Dade
County, Florida (“State Court”) by Reyvis Garcia, Ramona Johnson, and Mercedes
Woodberry (“Creditors”) in March 2008.1 The defendants are Alderwoods Group,
Inc., Osiris Holding of Florida, Inc., and Northstar Graceland, LLC (“Debtors”),
*
Honorable Robert T. Dawson, United States District Judge for the Western District of
Arkansas, sitting by designation.
1
The class action complaint was Creditors’ fourth amended complaint. Creditors filed
their first complaint in December 2004. The allegations of that complaint and of the second and
third amended complaints are not pertinent here.
2
Graceland’s owners.2 Creditors allege that Debtors are liable to them and the
members of their class for damages because, due to inadequate record keeping,
Debtors are unable to locate upon request the grave sites of family members or
close relatives buried in Graceland. This liability is based on the common law
theories of tortious interference with dead bodies, intentional or reckless infliction
of emotional distress, and gross negligence under Florida tort law.
Debtors contend that Creditors’ claims were discharged in a Chapter 11
bankruptcy case in the United States Bankruptcy Court for the District of
Delaware (“Delaware Bankruptcy Court”), a case they initiated on June 1, 1999,
when they petitioned that court for Chapter 11 relief (“Chapter 11 Case”) under
the Bankruptcy Code.3 On October 21, 1999, the Delaware Bankruptcy Court
entered an order establishing bar dates for filing proofs of claim and approving the
notice of the bankruptcy proceedings to be mailed to all known creditors and
2
Alderwoods Group, Inc. (“Alderwoods”) was previously known as Loewen Group
International, Inc. It and 816 Alderwoods subsidiaries—including Osiris Holding of Florida, Inc.
(“Osiris”)—operated cemeteries or other funerary facilities in dozens of states and were the
debtors in the Chapter 11 bankruptcy cases referred to infra. These cases were consolidated and
jointly administered under case number 99-01244 (PJW) in the Bankruptcy Court for the District
of Delaware. As indicated infra, we refer to all of the cases as the “Chapter 11 Case.”
Osiris purchased Graceland in 1991. Four years later, Alderwoods acquired Osiris. On
December 19, 2006, Northstar Graceland, LLC (“Northstar”) acquired Graceland from Osiris.
Northstar is included in the term Debtors even though it was not a debtor in any of the
consolidated Chapter 11 cases referred to in note 2, supra.
3
See 11 U.S.C. § 101 et seq.
3
published for the benefit of all unknown creditors (the “Bar Date Order”).4 Later
that October and in November 1999, Debtors published the notice in the Wall
Street Journal, the New York Times, and USA Today.
On December 5, 2001, the Delaware Bankruptcy Court entered an Order
confirming Debtors’ plan of reorganization (“Confirmation Order”) and fixing
January 2, 2002, as the plan’s “Effective Date.” The Confirmation Order
discharged all claims against Debtors, including unknown claims such as those
Creditors asserted in the State Court case, that arose on or before the Effective
Date and provided that the court retained jurisdiction over the reorganization after
the Effective Date.
B.
On April 7, 2008, Debtors filed a “complaint” against Creditors in the
United States Bankruptcy Court for the Southern District of Florida (“Florida
Bankruptcy Court”). The complaint invoked that court’s jurisdiction under 28
U.S.C. §§ 157 and 13345 and sought (1) a declaration6 that the claims Creditors
4
The Bar Date Order provided that any creditor that did not file a proof of claim before
the bar date could no longer assert its claim against Alderwoods or its subsidiaries.
5
Section 157 states, in pertinent part:
Each district court may provide that any or all cases under title 11 and any or all
proceedings arising under title 11 or arising in or related to a case under title 11
shall be referred to the bankruptcy judges for the district. Bankruptcy judges may
4
were attempting to litigate in State Court were discharged in the Chapter 11 Case,
as of January 2, 2002, pursuant to § 1141 of the Bankruptcy Code,7 and (2) an
order, entered pursuant to § 524 of the Bankruptcy Code,8 enjoining Creditors
from pursuing their case in State Court.9
hear and determine all cases under title 11 and all core proceedings arising under
title 11, or arising in a case under title 11 . . . .
28 U.S.C. § 157(a)–(b)(1).
Section 1334 states, in pertinent part: “[T]he district courts shall have original but not
exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to
cases under title 11.” 28 U.S.C. § 1334(b).
6
The complaint invoked the Declaratory Judgment Act, 28 U.S.C. § 2201, which
provides that “[i]n a case of actual controversy within its jurisdiction, . . . any court of the United
States, upon the filing of an appropriate pleading, may declare the rights and other legal relations
of any interested party seeking such declaration.”
7
Section 1141 states, in pertinent part: “Except as otherwise provided in this subsection,
in the plan, or in the order confirming the plan, the confirmation of a plan discharges the debtor
from any debt that arose before the date of such confirmation . . . .” 11. U.S.C. § 1141(d)(1)(A).
8
Section 524 states, in pertinent part:
A discharge in a case under this title voids any judgment at any time obtained, to
the extent that such judgment is a determination of the personal liability of the
debtor with respect to any debt discharged . . . .
....
After notice and hearing, a court that enters an order confirming a plan of
reorganization under chapter 11 may issue, in connection with such order, an
injunction in accordance with this subsection to supplement the injunctive effect
of a discharge under this section.
11 U.S.C. § 524(a)(2), (g)(1)(A).
9
Compl. for Declaratory Relief at 5–6, Alderwoods Grp. v. Garcia, No. 08-1266-BKC-
RAM-A (Bankr. S.D. Fla. Apr. 7, 2008). In addition to damages and injunctive relief, the
5
In response, Creditors moved the Florida Bankruptcy Court to dismiss the
Debtors’ complaint for lack of subject matter jurisdiction or, in the alternative, to
abstain from exercising jurisdiction and/or to remand the case to state court.10 The
Florida Bankruptcy Court heard Creditors’ motion and denied it, concluding that it
had subject matter jurisdiction over the dispute and that neither abstention nor
remand was required or appropriate.
On June 9, 2008, Creditors answered Debtors’ complaint. Creditors alleged
that the the notice to unknown creditors published in the Chapter 11 Case pursuant
to the Bar Date Order was constitutionally inadequate; therefore, their claims had
not been discharged.
After the pleadings closed, the parties filed cross-motions for summary
judgment.11 Addressing Creditors’ assertion concerning the notice to unknown
complaint sought “such other and further relief as the Court deems just and proper.” Id. at 6.
10
The gist of the Creditors’ motion was that the Florida Bankruptcy Court could not
exercise jurisdiction over what was effectively an affirmative defense of discharge masquerading
as a request for declaratory relief—in essence, that Debtors were asserting no federally created
right. Debtors, in turn, argued that the Chapter 11 Case discharge injunction was a matter of
federal bankruptcy law and that, in determining whether Creditors’ State Court action was barred
by that discharge, the Florida Bankruptcy Court was properly exercising federal jurisdiction.
11
At the hearing held on the motions for summary judgment, Creditors’ counsel
apparently conceded that the State Court claims were subject to discharge provided that adequate
notice of the Chapter 11 Case had been provided. Presumably because of this concession, the
Florida Bankruptcy Court framed the issues before it as whether Creditors’ requested injunctive
relief was a claim subject to discharge and whether the notice published in the Chapter 11 Case
provided adequate notice as to all of Creditors’ claims.
6
creditors, the Florida Bankruptcy Court ruled that the publication of the notice was
inadequate. The publication failed to meet the standard set by the Fifth
Amendment’s Due Process Clause, as explicated by Mullane v. Central Hanover
Bank & Trust Co., 339 U.S. 306, 70 S. Ct. 652, 94 L. Ed. 865 (1950), because it
was not “reasonably calculated, under all the circumstances, to apprise interested
parties of the pendency of the action.” Alderwoods Grp. v. Garcia, No.
08-1266-BKC-RAM-A, slip op. at 16 (Bankr. S.D. Fla. Nov. 25, 2009) (quoting
Mullane, 339 U.S. at 314, 70 S. Ct. at 657) (emphasis omitted) (internal quotation
marks omitted). In the court’s view, the publication failed to meet this standard
because the notice did not contain the name of the Graceland cemetery and its
operator at the time the Chapter 11 Case was pending; moreover, the notice was
not published in Miami’s local newspaper.12 The Florida Bankruptcy Court
therefore denied Debtors’ motion for summary judgment and granted Creditors’
motion, declaring that the claims Creditors were prosecuting in State Court had
not been discharged in the Chapter 11 Case.
12
The Bankruptcy Court reasoned that because “prior to the Effective Date of their plan
of reorganization, [Debtors] knew enough about record-keeping problems and lost burials, or at
the very least, the difficulties it was experiencing locating grave-sites at Graceland,” Debtors
could “reasonably expect future problems and future claims from family members like
[Creditors] here.” Alderwoods Grp. v. Garcia, No. 08-1266-BKC-RAM-A, slip op. at 27–28
(Bankr. S.D. Fla. Nov. 25, 2009). The Florida Bankruptcy Court found the notice inadequate in
that Creditors could not have known from reading the notice that it referred to Graceland.
7
C.
Debtors appealed the court’s decision to the United States District Court for
the Southern District of Florida,13 presenting four arguments for reversal: (1) One
of the Creditors was a nonresident alien at the time the Chapter 11 Case was being
heard and therefore had no right to due process; (2) the published notice
comported with due process; (3) even if the notice did not meet Mullane’s due
process standard, Creditors suffered no prejudice; and (4) the State Court claims
should be considered discharged because the notice contained Debtors’ names.
The District Court rejected all four arguments and affirmed. The District Court
thereafter denied Debtors’ motion to alter or amend judgment.14 See Fed. R. Civ.
P. 59(e). Debtors now appeal the District Court’s judgment and the order denying
Rule 59(e) relief.15
13
The District Court had appellate jurisdiction pursuant to 28 U.S.C. § 158(a): “The
district courts of the United States shall have jurisdiction to hear appeals . . . from final
judgments, orders, and decrees . . . entered in cases and proceedings referred to the bankruptcy
judges . . . .”
14
In its Rule 59(e) motion, Debtors argued that the nonresident alien Creditor—who
lived in Cuba at the time of the Chapter 11 Case—did not enjoy the right of due process and thus
was not entitled to adequate notice of the bankruptcy proceeding.
15
We have jurisdiction pursuant to 28 U.S.C. § 158(d)(1), which gives the courts of
appeals appellate jurisdiction over “final decisions, judgments, orders, and decrees entered” by
the district courts in exercise of their appellate jurisdiction under 28 U.S.C. § 158(a). “The plain
meaning of this provision grants this court jurisdiction of appeals only where the district court
exercised appellate jurisdiction from a decision by a bankruptcy judge, not where the district
court exercised original jurisdiction.” Jove Eng’g, Inc. v. I.R.S., 92 F.3d 1539, 1547 (11th Cir.
8
In its brief to this court, Debtors raise four issues: (1) whether the Florida
Bankruptcy Court had subject matter jurisdiction to consider Creditors’ due
process defense; (2) whether the District Court erred in denying Debtors’ motion
to alter or amend judgment; (3) whether the Florida Bankruptcy Court erred in
granting Creditors summary judgment; and (4) whether the Florida Bankruptcy
Court erred in denying Debtors’ motion for summary judgment. We do not
address these issues because we conclude that the Florida Bankruptcy Court
lacked jurisdiction to entertain Debtors’ complaint for declaratory relief.
II.
A.
The Bankruptcy Code provides that “the confirmation of a
plan . . . discharges the debtor from any debt that arose before the date of such
confirmation” and that “after confirmation of a plan, the property dealt with by the
plan is free and clear of all claims and interests of creditors.” 11 U.S.C. § 1141(c),
(d)(1)(A). Moreover, the discharge “operates as an injunction against the
commencement or continuation of an action, the employment of process, or an act,
1996). Of course, “[a] court of appeals’ jurisdiction over a district court’s review of a bankruptcy
court order can only be based on a proper exercise of the district court’s jurisdiction.” In re
Vlasek, 325 F.3d 955, 960 (7th Cir. 2003). We nevertheless also have jurisdiction over this
appeal pursuant to 28 U.S.C. § 1291.
9
to collect, recover or offset any such debt as a personal liability of the debtor.” Id.
§ 524(a)(2). “[The] court that enters an order confirming a plan of reorganization
under chapter 11 may issue, in connection with such order, an injunction in
accordance with this subsection to supplement the injunctive effect of a discharge
under [§ 524].” Id. § 524(g)(1)(A). Indeed, the Confirmation Order so provided:
“as of the Effective Date, all entities that . . . hold a Claim or other debt or liability
that is discharged . . . are permanently enjoined from . . . commencing or
continuing in any manner any action . . . against the Debtors.” In re Loewen Grp.
Int’l, Jointly Administered Case No. 99-1244 (PJW), slip op. at 60–61 (Bankr. D.
Del. Dec. 5, 2001) (Confirmation Order).
Once Debtors were served with Creditors’ complaint in the State Court case,
they had four options to challenge Creditors’ prosecution of that case. Debtors
could (1) assert the discharge provided by the Confirmation Order as an
affirmative defense in the State Court case; (2) remove the case to the United
States District Court for the Southern District of Florida under 28 U.S.C. §
1452(a); (3) move the Delaware Bankruptcy Court to reopen the Chapter 11 Case
pursuant to 11 U.S.C. § 350(b);16 or (4) initiate a proceeding in the Delaware
16
Section 350(b) states, in pertinent part, that “[a] case may be reopened . . . to accord
relief to the debtor, or for other cause.” 11 U.S.C. § 350(b).
10
Bankruptcy Court for the enforcement of the statutory injunction provided by 11
U.S.C. § 524(a)(2), as reflected in the Confirmation Order. In re Kewanee Boiler
Corp., 270 B.R. 912, 918 (Bankr. N.D. Ill. 2002) (citing Stucker v. Cardinal Bldg.
Materials, Inc. (In re Stucker), 153 B.R. 219, 222 (Bankr. N.D. Ill. 1993)); see also
In re James, 184 B.R. 147, 150–51 (Bankr. N.D. Ala. 1995) (listing the four
options discussed above). Debtors eschewed the first three options17 and chose the
17
Debtors rejected option (1) by not pleading the discharge as an affirmative defense in
the State Court case.
As for option (2), 28 U.S.C. § 1452 gives the district courts removal jurisdiction for
“claims related to bankruptcy cases”:
A party may remove any claim or cause of action in a civil action other than a
proceeding before the United States Tax Court or a civil action by a governmental
unit to enforce such governmental unit’s police or regulatory power, to the district
court for the district where such civil action is pending, if such district court has
jurisdiction of such claim or cause of action under section 1334 of this title.
28 U.S.C. § 1452(a). Removal of cases under § 1452(a) is possible only within “30 days after
receipt, through service or otherwise, of a copy of the initial pleading setting forth the claim or
cause of action sought to be removed.” Fed. R. Bankr. P. 9027(a)(3)(A); see also 28 U.S.C.
§ 1446(b) (“The notice of removal of a civil action or proceeding shall be filed within thirty days
after the receipt by the defendant, through service or otherwise, of a copy of the initial pleading
setting forth the claim for relief upon which such action or proceeding is based.”). Section 1334
refers to 28 U.S.C. § 1334, “Bankruptcy Cases and Proceedings,” which gives “the district
courts . . . original and exclusive jurisdiction of all cases under [the Bankruptcy Code], ” id.
§ 1334(a), and for “original but not exclusive jurisdiction of all civil proceedings arising under
[the Bankruptcy Code], or arising in or related to cases under [the Bankruptcy Code],” id.
§ 1334(b).
Debtors did not choose option (2) by timely removing the State Court case —in whole or
in part—to federal court. Debtors did not file their complaint for declaratory relief in the Florida
Bankruptcy Court until April 2008, nearly four years after Creditors filed the State Court action,
in December 2004. Thus, even if the Florida Bankruptcy Court had treated the complaint as a de
facto removal under 28 U.S.C. § 1452(a), that removal would have been untimely. And the
general removal statute, 28 U.S.C. § 1441, would not have applied; the State Court case,
consisting only of state-law claims, was not one “of which the district courts of the United States
11
fourth, except that they initiated the proceeding by filing a complaint for
declaratory and injunctive relief in the Florida Bankruptcy Court instead of
petitioning the Delaware Bankruptcy Court to enforce the discharge injunction.
B.
Bankruptcy judges, like district judges, have the power to coerce
compliance with injunctive orders. In the bankruptcy context, “the creditor who
attempts to collect a discharged debt is violating not only a statute but also an
have original jurisdiction.” 28 U.S.C. § 1441(a).
As for option (3), 11 U.S.C. § 350 provides for the bankruptcy courts’ administrative
powers to open and close bankruptcy cases:
(a) After an estate is fully administered and the court has discharged the trustee,
the court shall close the case.
(b) A case may be reopened in the court in which such case was closed to
administer assets, to accord relief to the debtor, or for other cause.
11 U.S.C. § 350. “[U]nder Bankruptcy Rule 4007(b) either the debtor or the creditor can move
to reopen the case for the purpose of filing a complaint to determine dischargeability.” In re
James, 184 B.R. 147, 150–51 (Bankr. N.D. Ala. 1995) (quoting In re Mendiola, 99 B.R. 864, 870
(Bankr. N.D. Ill. 1989) (internal quotation marks omitted). Bankruptcy Rule 4007 provides that
“[a] debtor or any creditor may file a complaint to obtain a determination of the dischargeability
of any debt.” Fed. R. Bankr. P. 4007(a). “This rule prescribes the procedure to be followed
when a party requests the court to determine dischargeability of a debt pursuant to §523 of the
Code,” id. note, which in turn lists exceptions to discharge under, inter alia, 11 U.S.C. § 1141,
see 11 U.S.C. § 523. Thus, § 350(b) provides a mechanism whereby, after an estate has been
administered according to a confirmed reorganization plan, the debtor or a creditor may reopen a
bankruptcy case to obtain a determination of whether the creditor’s claim is of a type exempted
from discharge pursuant to 11 U.S.C. § 523.
Debtors did not choose option (3) because they did not—and could not—move the
Florida Bankruptcy Court to reopen the Chapter 11 Case. The case would have to be reopened, if
at all, by the Delaware Bankruptcy Court which had administered the case. See 11 U.S.C.
§ 350(b) (“A case may be reopened in the court in which such case was closed to administer
assets, to accord relief to the debtor, or for other cause.”)
12
injunction and is therefore in contempt of the bankruptcy court that issued the
order of discharge.” Cox v. Zale Del., Inc., 239 F.3d 910, 915 (7th Cir. 2001)
(citing Pertuso v. Ford Motor Credit Co., 233 F.3d 417, 421 (6th Cir. 2000); Ins.
Co. of N. Am. v. NGC Settlement Trust & Asbestos Claims Mgmt. Corp. (In re
Nat’l Gypsum Co.), 118 F.3d 1056, 1063 (5th Cir. 1997)); accord Hardy v. United
States ex rel. I.R.S. (In re Hardy), 97 F.3d 1384, 1390 (11th Cir. 1996) (“[Creditor]
may be liable for contempt . . . if it willfully violated the permanent injunction of
§ 524.” (emphasis omitted)). In addition to the traditional sanctions for coercing
compliance with an injunction—incarceration or financial penalty, see Newman v.
Alabama, 683 F.2d 1312, 1318 (11th Cir. 1982)—a bankruptcy court may issue
orders to obviate conduct that stands to frustrate administration of the Bankruptcy
Code, see In re Hardy, 97 F.3d at 1389 (explaining that a bankruptcy court may
issue “any type of order, whether injunctive, compensative or punitive, as long as
it is necessary or appropriate to carry out the provisions of the Bankruptcy Code.”
(quoting Jove Eng’g, Inc. v. I.R.S., 92 F.3d 1539, 1553–54 (11th Cir. 1996)
(quoting 28 U.S.C. § 105)) (internal quotation marks omitted)).18 A bankruptcy
18
Federal judges have inherent power under Article III of the United States Constitution
to hold litigants in civil contempt for violating court orders, see Chambers v. NASCO, Inc., 501
U.S. 32, 44, 111 S. Ct. 2123, 2132, 115 L. Ed. 2d 27 (1991), such as an injunction effected by 11
U.S.C. § 524(a)(2), see, e.g., Matthews v. United States (In re Matthews), 184 B.R. 594, 598
(Bankr. S.D. Ala. 1995) (“Civil contempt power is inherent in bankruptcy courts since all courts
have authority to enforce compliance with their lawful orders. This inherent authority extends to
13
court thus has the additional power to enjoin litigants from prosecuting in state
court claims against former debtors. In Travelers Indemnity Co. v. Bailey, 557
U.S. 137, 129 S. Ct. 2195, 174 L. Ed. 2d 99 (2009), for instance, the Supreme
Court cited “Travelers[’s] invo[cation of] the terms of the [discharge] [o]rders in
moving the Bankruptcy Court to enjoin 26 [suits] pending in state courts” and the
Bankruptcy Court’s subsequent order clarifying that the suits “were, and remained,
prohibited by the [discharge] [o]rders” as an uncontroversial exercise of the
bankruptcy court’s “jurisdiction to interpret and enforce its own prior orders.” Id.
at 143, 151, 129 S. Ct. at 2200, 2205; see also Cont’l Ill. Nat’l Bank v. Chicago,
294 U.S. 648, 675, 55 S. Ct. 595, 606, 79 L. Ed. 1110 (1935) (“The power to issue
statutory ‘orders’ such as . . . the discharge injunction.” (citing In re Galvez, 119 B.R. 849, 849
(Bankr. M.D. Fla. 1990)).
Bankruptcy-court power in this respect is given also by § 105(a) of the Bankruptcy Code:
The court may issue any order, process, or judgment that is necessary or
appropriate to carry out the provisions of this title. No provision of this title
providing for the raising of an issue by a party in interest shall be construed to
preclude the court from, sua sponte, taking any action or making any
determination necessary or appropriate to enforce or implement court orders or
rules, or to prevent an abuse of process.
11 U.S.C. § 105(a); see also Hardy v. United States ex rel. I.R.S. (In re Hardy), 97 F.3d 1384,
1389 (11th Cir. 1996) (“Section 105 creates a statutory contempt power, distinct from the court’s
inherent contempt powers in bankruptcy proceedings.”). “While a defendant may be cited for
contempt under the court’s inherent powers only upon a showing of ‘bad faith,’ [Creditor] may
be liable for contempt under § 105 if it willfully violated the permanent injunction of § 524.” In
re Hardy, 97 F.3d at 1390 (quoting Glatter v. Mroz (In re Mroz), 65 F.3d 1567, 1575 (11th Cir.
1995)) (emphasis omitted).
14
an injunction when necessary to prevent the defeat or impairment of its
jurisdiction is inherent in a court of bankruptcy, as it is in a duly established court
of equity.”); Local Loan Co. v. Hunt, 292 U.S. 234, 241, 54 S. Ct. 695, 697–98, 78
L. Ed. 1230 (1934) (“[It is] the authority of the bankruptcy court to entertain the
present proceeding, determine the effect of the adjudication and [discharge] order,
and enjoin petitioner from its threatened interference therewith.”).19
The party seeking to enforce an injunction cannot, however, obtain a
successive injunction—i.e., an injunction ordering compliance with an existing
injunction. See, e.g., Barrientos v. Wells Fargo Bank, N.A., 633 F.3d 1186, 1190
(9th Cir. 2011) (“An injunction against violating an existing injunction would be
superfluous, adding no judicial action and providing no additional relief.” (citing
Solow v. Kalikow (In re Kalikow), 602 F.3d 82, 93–94 (2d Cir. 2010); 1 Dan B.
Dobbs, Law of Remedies § 2.8(1), at 186–89 (2d ed. 1993)).
19
11 U.S.C. § 105(a) empowers the bankruptcy courts to enjoin state suits. See In re
Hardy, 97 F.3d at 1389. The Anti-Injunction Act, 28 U.S.C. § 2283, does provide that “[a] court
of the United States may not grant an injunction to stay proceedings in a State court except as
expressly authorized by Act of Congress, or where necessary in aid of its jurisdiction, or to
protect or effectuate its judgments.” The current version of the Anti-Injunction Act, however,
expanded upon the earlier version; “[a]n exception as to Acts of Congress relating to bankruptcy
was omitted and the general exception substituted to cover all exceptions.” Id. note. Hence,
“[t]he language of § 105 encompasses any type of order, whether injunctive, compensative or
punitive, as long as it is necessary or appropriate to carry out the provisions of the Bankruptcy
Code,” In re Hardy, 97 F.3d at 1389 (quoting Jove Eng’g, 92 F.3d at 1553–54 (quoting 28 U.S.C.
§ 105)) (internal quotation marks omitted)), such as when allowing a state-court claimant to
prosecute his suit would frustrate administration of the bankruptcy estate.
15
In this case, Debtors seek to prevent Creditors from pursuing in State Court
claims purportedly discharged in the Chapter 11 Case. If the claims were
discharged, Creditors may be in contempt of the discharge injunction for
maintaining the State Court action. See Cox, 239 F.3d at 915; In re Hardy, 97
F.3d at 1390. But Debtors, in drafting their complaint for declaratory relief, did
not frame the pleading as a motion for an order to show cause why Creditors
should not be held in contempt for violating the discharge injunction. Instead,
Debtors moved the court to declare that Creditors’ claims had been discharged in
the Chapter 11 Case pursuant to § 1141 of the Bankruptcy Code, Compl. for
Declaratory Relief ¶ 27, Alderwoods Grp. v. Garcia, No. 08-1266-BKC-RAM-A
(Bankr. S.D. Fla. Apr. 7, 2008), and to enjoin Creditors “from continuing the
[State Court action], pursuant to § 524 of the Bankruptcy Code.” Id. at 5-6.
Debtors requested relief is either a misguided attempt to have the court sanction
Creditors purported contempt of the Chapter 11 Case’s discharge provision by
enjoining Creditors from prosecuting their State Court action,20 cf. Travelers
20
We say misguided because Alderwoods’s complaint does not reflect the proper
procedure to invoke the court’s civil contempt power.
If the plaintiff (the party obtaining the writ) believes that the defendant (the
enjoined party) is failing to comply with the decree’s mandate, the plaintiff moves
the court to issue an order to show cause why the defendant should not be
adjudged in civil contempt and sanctioned. The plaintiff’s motion cites the
injunctive provision at issue and alleges that the defendant has refused to obey its
16
Indem. Co., 557 U.S. at 148–52, 129 S. Ct. at 2203–05, or it is an impermissible
pursuit of a successive injunction, cf. Barrientos, 633 F.3d at 1190.
We think it unnecessary to distill any further the relief Debtors’ complaint
seeks. What Debtors want is the enforcement of their discharge injunction. If
they meant to obtain it by having a bankruptcy court sanction Creditors’ contempt
for disregarding the injunction by, for example, enjoining Creditors from
prosecuting the State Court action, then the Florida Bankruptcy Court was not the
court with the power to do so.
C.
The ultimate question in a case like this one is which court has the power to
enforce the discharge injunction. To answer this question, we must understand the
relationship between a bankrupt’s estate and the administration of the estate.
1.
mandate. If satisfied that the plaintiff’s motion states a case of non-compliance,
the court orders the defendant to show cause why he should not be held in
contempt and schedules a hearing for that purpose. At the hearing, if the plaintiff
proves what he has alleged in his motion for an order to show cause, the court
hears from the defendant. At the end of the day, the court determines whether the
defendant has complied with the injunctive provision at issue and, if not, the
sanction(s) necessary to ensure compliance.
Reynolds v. Roberts, 207 F.3d 1288, 1298 (11th Cir. 2000) (footnote omitted) (citations
omitted).
17
As a matter of basic policy, “[b]ankruptcy jurisdiction, as understood today
and at the time of the framing, is principally in rem jurisdiction.” Cent. Va. Cmty.
Coll. v. Katz, 546 U.S. 356, 369, 126 S. Ct. 990, 1000, 163 L. Ed. 2d 945 (2006).
“[T]he jurisdiction of courts adjudicating rights in the bankrupt estate included the
power to issue compulsory orders to facilitate the administration and distribution
of the res.” Id. at 362, 126 S. Ct. at 996. A court, however, must have possession
of the res in order to obtain in rem jurisdiction over its distribution. For example,
by analogy to in rem admiralty cases21—an analogy the Supreme Court has found
applicable to bankruptcy, see Tenn. Student Assistance Corp. v. Hood, 541 U.S.
440, 446–47, 124 S. Ct. 1905, 1910, 158 L. Ed. 2d 764 (2004)—we have said that
“[o]nly if the court has exclusive custody and control over the [res] does it have
jurisdiction over the [res] so as to be able to adjudicate rights in it that are binding
against the world,” Odyssey Marine Exploration, Inc. v. Unidentified Shipwrecked
Vessel, 657 F.3d 1159, 1171 (11th Cir. 2011) (quoting R.M.S. Titanic, Inc. v.
Haver, 171 F.3d 943, 964 (4th Cir. 1999)) (internal quotation marks omitted).22
21
Libels against salvaged vessels or the proceeds thereof are in rem proceedings. The
Sabine, 101 U.S. (11 Otto) 384, 386, 25 L. Ed. 982 (1880).
22
The same is true of civil forfeiture proceedings. “[I]t long has been understood that a
valid seizure of the res is a prerequisite to the initiation of an in rem civil forfeiture proceeding.”
Republic Nat’l Bank of Miami v. United States, 506 U.S. 80, 84, 113 S. Ct. 554, 557, 121 L. Ed.
2d 474 (1992) (emphasis omitted).
18
The Bankruptcy Code provides that “[t]he district court in which a case
under title 11 is commenced or is pending shall have exclusive jurisdiction of all
the property, wherever located, of the debtor as of the commencement of such
case, and of property of the estate.” 28 U.S.C. § 1334(e)(1). Because
“[b]ankruptcy courts have exclusive jurisdiction over a debtor’s property,
wherever located, and over the estate,” it follows that “the court’s jurisdiction is
premised on the debtor and his estate.” Hood, 541 U.S. at 447, 124 S. Ct. at 1910
(citing 28 U.S.C. § 1334(e)). It is this aspect of a bankruptcy court’s jurisdiction
that “permits it to ‘determin[e] all claims that anyone, whether named in the action
or not, has to the property or thing in question,’” in that “‘[t]he proceeding is “one
against the world.”’” Id. at 448, 124 S. Ct. at 1911 (quoting 16 J. Moore et al.,
Moore’s Federal Practice § 108.70[1] (3d ed. 2004)) (alteration in original).
Accordingly, the court administering the bankrupt’s estate—the res—is the court
with the power to enter orders effecting its distribution and to “adjudicate rights in
it that are binding against the world.” Odyssey Marine, 657 F.3d at 1171 (quoting
R.M.S. Titanic, 171 F.3d at 964) (internal quotation marks omitted).
Logically, then, a bankruptcy court necessarily has power to enforce its own
orders regarding its administration of the estate. Local Loan Co., 292 U.S. at 241,
54 S. Ct. at 697–98. When, in a Chapter 11 case, a bankruptcy court issues an
19
order confirming a reorganization plan, that court “retains postconfirmation
jurisdiction to complete any action pertinent to the plan.” 9D Am. Jur. 2d
Bankruptcy § 3014 (2012); see also 28 U.S.C. §§ 157, 1334 (providing the
bankruptcy courts—by operation of referral under § 157—“original but not
exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or
related to cases under title 11”). Indeed, “[t]he retention of jurisdiction by the
bankruptcy court after confirmation is particularly appropriate where . . . the
bankruptcy court expressly retains jurisdiction under the plan.” LTV Corp. v.
Back (In re Chateaugay Corp.), 201 B.R. 48, 66 (Bankr. S.D.N.Y. 1996) (citing
Hosp. & Univ. Prop. Damage Claimants v. Johns-Manville Corp. (In re
Johns-Manville Corp.), 7 F.3d 32, 34 (2d Cir. 1993)). These principles ought to
be self-evident; it would wreak havoc on the federal courts to leave enforcement
of the injunctive order of a bankruptcy court in one district to the interpretive
whims of a bankruptcy court in another district.
Moreover, the court that enters an injunctive order retains jurisdiction to
enforce its order. In this respect, a bankruptcy court is no different than any other
federal court, which possesses the inherent power to sanction contempt of its
orders. See Chambers v. NASCO, Inc., 501 U.S. 32, 50, 111 S. Ct. 2123, 2136,
115 L. Ed. 2d 27 (1991). The bankruptcy court that confirms a reorganization
20
plan thus enters an injunctive order—the confirmation order, see 11 U.S.C.
§§ 524, 1141—the violation of which it can sanction. That said, although a
federal court’s injunction applies nationwide, “[v]iolation of an injunctive order is
cognizable in the court which issued the injunction.” Waffenschmidt v. MacKay,
763 F.2d 711, 716 (5th Cir. 1985) (quoting Stiller v. Hardman, 324 F.2d 626, 628
(2d Cir. 1963)) (alteration in original) (emphasis added) (quotation marks
omitted); see also Cox, 239 F.3d at 915 (“the creditor who attempts to collect a
discharged debt is violating not only a statute but also an injunction and is
therefore in contempt of the bankruptcy court that issued the order of discharge.”
(emphasis added)).
Perhaps most importantly, then, the power to sanction contempt is
jurisdictional.
[T]he power of a court to make an order carries with it the equal
power to punish for a disobedience of that order, and the inquiry as to
the question of disobedience has been, from time immemorial, the
special function of the [ordering] court. . . . To submit the question of
disobedience to another tribunal . . . would operate to deprive the
proceeding of half its efficiency. . . . [T]he sole adjudication of
contempts, and the punishments thereof [belong] exclusively . . . to
each respective court.
In re Debs, 158 U.S. 564, 594–95, 15 S. Ct. 900, 910, 39 L. Ed. 1092 (1895)
(citation omitted) (internal quotation marks omitted), abrogated on other grounds
21
by Bloom v. Illinois, 391 U.S. 194, 88 S. Ct. 1477, 20 L. Ed. 2d 522 (1968); see
also Baker ex rel. Thomas v. Gen. Motors Corp., 522 U.S. 222, 118 S. Ct. 657, L.
Ed. 2d 580 (1998) (“[The] nonrendition forum enforces the monetary relief portion
of a judgment but leaves enforcement of the injunctive portion to the rendition
forum.” (citing Stiller v. Hardman, 324 F.2d 626, 628 (2d Cir. 1963))).
Thus, the court that issued the injunctive order alone possesses the power to
enforce compliance with and punish contempt of that order. In re Debs, 158 U.S.
at 595, 15 S. Ct. at 910; see also Waffenschmidt, 763 F.2d at 716 (“Enforcement
of an injunction through a contempt proceeding must occur in the issuing
jurisdiction because contempt is an affront to the court issuing the order.”); Suntex
Dairy v. Bergland, 591 F.2d 1063, 1068 (5th Cir. 1979) (“If [conduct] is found by
the Missouri court to be in violation of its injunction, it may be in contempt of that
court. The appropriate response to such contempt, if it exists, is a matter for the
Missouri district court under that court’s continuing jurisdiction to enforce or
protect its injunction order.”);23 Sullivan v. United States, 4 F.2d 100, 101 (8th Cir.
1925) (“[T]he court which issues the injunction is the court against which the
23
In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc), this
court adopted as binding precedent all decisions of the former Fifth Circuit handed down prior to
October 1, 1981.
22
contempt is committed and the court which has jurisdiction to deal with it.”).
Other courts are without jurisdiction to do so.
In the case at hand, it is apparent that if Creditors’ filing of the State Court
action indeed violated the discharge injunction contained in the Confirmation
Order, then it was the Delaware Bankruptcy Court’s injunction to enforce—not the
Florida Bankruptcy Court’s. The Chapter 11 Case was administered by the
Delaware Bankruptcy Court; that court confirmed Debtors’ reorganization plan
and entered the order discharging Debtors’ preconfirmation liabilities. As the
court that controlled the res of Debtors’ estate, the Delaware Bankruptcy Court
retained jurisdiction to effectuate and enforce the discharge injunction. This is
even more apparent considering that the Confirmation Order explicitly enjoined
suits to collect on discharged debts and vested continuing jurisdiction in the
Delaware Bankruptcy Court to enforce violations of the discharge injunction. See
In re Chateaugay Corp., 201 B.R. at 66. If Creditors’ claims were discharged, then
the Delaware Bankruptcy Court alone had the power to sanction Creditors’ alleged
contempt for prosecuting discharged claims in violation of the injunction. See,
e.g., Waffenschmidt, 763 F.2d at 716. Thus, regardless of how Debtors framed the
allegations of the complaint they filed in the Florida Bankruptcy Court—as
seeking the sanctioning of Creditors’ alleged contempt, an injunction against
23
further violation of the discharge injunction, or an order enjoining the State Court
case from proceeding further—the Florida Bankruptcy Court lacked jurisdiction to
entertain the complaint because the discharge injunction was never its to enforce.
2.
That alleged contemnors are without the territorial jurisdiction of the
rendition forum is of no moment. As a general principle, the Due Process Clause
requires that a federal court have jurisdiction over a person in order to bind that
person through judgment. See U.S. Const. amend. V; Omni Capital Int’l, Ltd. v.
Rudolf Wolff & Co., Ltd., 484 U.S. 97, 104, 108 S. Ct. 404, 409, 98 L. Ed. 2d 415
(1987) (“The requirement that a court have personal jurisdiction flows . . . from
the Due Process Clause. . . . It represents a restriction on judicial power not as a
matter of sovereignty, but as a matter of individual liberty.” (quotation omitted)
(second alteration in original)). Notwithstanding this general requirement,
nonparties who engage in enjoined conduct can be sanctioned when their conduct
would frustrate the court’s “ability to render a binding judgment.” United States v.
Hall, 472 F.2d 261, 267 (11th Cir. 1972). Accordingly, the courts that have
considered the issue generally agree that this sanction power extends to a person
outside the territorial limits of the court that issued the injunctive order, provided
that the person had actual notice of the order and acted in concert with the party
24
explicitly enjoined. ClearOne Communications, Inc. v. Bowers, 651 F.3d 1200,
1215–16 (10th Cir. 2011); Sec. & Exch. Comm’n v. Homa, 514 F.3d 661, 673–75
(7th Cir. 2008); Waffenschmidt, 763 F.2d at 714. Analogously, in cases that are
essentially in rem—and therefore concern the orderly and efficient distribution of
a res—the court’s power to enjoin and to sanction extends to the whole world, to
any person who comes into contact with the res. See Hall, 472 F.2d at 265–66
(“Federal courts have issued injunctions binding on all persons, regardless of
notice, who come into contact with property which is the subject of a judicial
decree.”); see also Klay v. United Healthgroup, Inc., 376 F.3d 1092, 1103 (11th
Cir. 2004) (“When particular property is before the district court . . . such as when
it is the subject of an in rem proceeding or in the custody of a bankruptcy trustee,
the court may generally enjoin proceedings in any other court regarding that
property.” (citing Macon Uplands Venture v. Metro. Life Ins. Co. (In re Macon
Uplands Venture), 624 F.2d 26, 28 (5th Cir. 1980))).24
24
An injunction to cease prosecuting a claim that was discharged in bankruptcy is such
an injunction. The discharge granted by operation of 11 U.S.C. § 524 “embodies the ‘fresh start'
concept of the bankruptcy code.” In re Hardy, 97 F.3d at 1388–89. In this sense, the discharge
injunction itself is like an All Writs Act injunction issued “in aid of” a court’s jurisdiction, see 28
U.S.C. § 1651, in that the discharge injunction is “in aid of” the purpose of the Bankruptcy Code.
Similarly, enjoining prosecution of a discharged claim would also be “in aid of” the court’s
jurisdiction as a necessary means of effectuating the discharge injunction. See, e.g., Local Loan
Co. v. Hunt, 292 U.S. 234, 241, 54 S. Ct. 695, 697–98, 78 L. Ed. 1230 (1934) (“[It is] the
authority of the bankruptcy court to entertain the present proceeding, determine the effect of the
adjudication and [discharge] order, and enjoin petitioner from its threatened interference
25
In the bankruptcy context, a bar-date notice, published to unknown
creditors, suffices to bring creditors within the power of the bankruptcy court
administering the estate. This is true regardless of whether actual notice is
received—provided that the means of publication are those “reasonably calculated,
under all the circumstances, to apprise interested parties of the pendency of the
action.” Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 314, 70 S.
Ct. 652, 657, 94 L. Ed. 865 (1950); see also City of New York v. N.Y., N. H. & H.
R. Co., 344 U.S. 293, 296, 73 S. Ct. 299, 301, 97 L. Ed. 333 (1953) (“[W]hen the
names, interests and addresses of [creditors] are unknown, plain necessity may
cause a resort to publication.”). Because the bankruptcy court has exclusive
jurisdiction over the debtor’s estate, 28 U.S.C. § 1334(e), the published notice
gives potential creditors sufficient “contact” with the debtor’s estate such that the
court may properly enjoin those who are not present within the court’s federal
district consistent with Fifth Amendment due process. That court, then, may
properly sanction those without the district when their conduct violates or
frustrates the court’s injunctive orders. So, too, could the Delaware Bankruptcy
therewith.”). The bankruptcy court may issue such an injunctive order pursuant to 11 U.S.C. §
105(a), see In re Hardy, 97 F.3d at 1389–90, rather than under the All Writs Act. To be clear,
however, the order is distinct from an injunctive order issued as the remedy for the defendant’s
breach of the right asserted in the plaintiff’s complaint. See Klay v. United Healthgroup, Inc.,
376 F.3d 1092, 1092–1103 (11th Cir. 2004) (explaining the differences between “traditional,”
“statutory,” and “All Writs Act” injunctions).
26
Court adjudicate the rights of Creditors and the members of their class,
notwithstanding that Creditors and those similarly situated may or may not have
independent jurisdictional ties to the District of Delaware.25
3.
This conclusion does not fully resolve the matter at hand, for there remains
the issue of how we are to dispose of this appeal. Above all, the Delaware
25
By analogy, posit one alternative to Debtors’ course in the present setting: rather than
Creditors suing Debtors in state court, Creditors sue Debtors in federal court seeking relief from
Debtor’s bankruptcy discharge. Creditors’ remedy is not an in personam action against Debtors,
but relief through Fed. R. Civ. P. 60(d)—made applicable to the bankruptcy courts, with certain
exceptions, by Fed. R. Bankr. P. 9024—which provides that a court may “entertain an
independent action to relieve a party from a judgment, order, or proceeding; grant relief . . . to a
defendant who was not personally notified of the action; or set aside a judgment for fraud on the
court.” Indeed, one such ground for relief from the discharge injunction is lack of notice:
A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title
does not discharge an individual debtor from any debt neither listed nor scheduled
under section 521(a)(1) of this title, with the name, if known to the debtor, of the
creditor to whom such debt is owed, in time to permit—
(A) if such debt is not of a kind specified in paragraph (2), (4), or
(6) of this subsection, timely filing of a proof of claim, unless such
creditor had notice or actual knowledge of the case in time for such
timely filing; or
(B) if such debt is of a kind specified in paragraph (2), (4), or (6) of
this subsection, timely filing of a proof of claim and timely request
for a determination of dischargeability of such debt under one of
such paragraphs, unless such creditor had notice or actual
knowledge of the case in time for such timely filing and
request . . . .
11 U.S.C. § 523(a)(3). This is because in an in rem proceeding, the enforceability of an in rem
judgment is premised upon either actual or constructive notice to any persons who may have a
claim to the res. See, e.g., Betty K Agencies, Ltd. v. M/V MONADA, 432 F.3d 1333, 1342 (11th
Cir. 2005).
27
Bankruptcy Court should be the court to consider the merits of Debtors’ assertion
that Creditors are pursuing discharged claims. The simplest option would be to
remand the case with the instruction that Debtors’ complaint be dismissed without
prejudice. If that were the disposition, Debtors presumably would turn to the
Delaware Bankruptcy Court for relief. Taking that course, however, would seem
unnecessarily cumbersome and wasteful of judicial resources.
Instead, we believe that transferring the case to the United States District
Court for the District of Delaware would be more efficient. The bankruptcy
jurisdiction and venue statutes provide that “[a] district court may transfer a case
or proceeding under title 11 to a district court for another district, in the interest of
justice or for the convenience of the parties.” 28 U.S.C. § 1412. First, if
characterized as an attempt to enforce the Confirmation Order’s discharge
injunction, Debtors’ complaint initiated a “proceeding under title 11,” 28 U.S.C.
§ 1412, that triggered the Florida Bankruptcy Court’s statutory transfer power, see
Cont’l Nat’l Bank of Miami v. Sanchez (In re Toledo), 170 F.3d 1340, 1345 (11th
Cir. 1999) (“‘Arising under’ proceedings are matters invoking a substantive right
created by the Bankruptcy Code.” (citing Wood v. Wood (In re Wood), 825 F.2d
90, 97 (5th Cir. 1987))); see also 28 U.S.C. § 1334(b) (giving the district courts
original jurisdiction “of all civil proceedings arising under title 11”); Ins. Co. of N.
28
Am. v. NGC Settlement Trust & Asbestos Claims Mgmt. Corp. (In re Nat’l
Gypsum Co.), 118 F.3d 1056, 1063–64 (5th Cir. 1997) (“[An] action to enforce
the discharge injunction . . . is a federal cause of action, asserting a statutory right
under the Bankruptcy Code.”). Thus, § 1412’s case-or-proceeding prerequisite is
satisfied.
Second, although courts cite myriad factors in determining whether to
transfer a case under § 1412 “in the interest of justice,”26 we think no factors favor
transfer more heavily here than that (1) the transferor forum has no power to
adjudicate Debtors’ claim for relief and (2) the transferee forum is the only court
with jurisdiction to provide the relief Debtors seek. If the case is transferred to the
United States District Court for the District of Delaware, that court may refer it to
the Delaware Bankruptcy Court pursuant to that District Court’s procedures. See
28 U.S.C. § 157(a) (“Each district court may provide that any or
all . . . proceedings arising under title 11 or arising in or related to a case under
title 11 shall be referred to the bankruptcy judges for the district.”). Accordingly,
we shall vacate the District Court’s judgment and remand the case with the
26
See, for example, the interest-of-justice factors listed in A.B. Real Estate, Inc. v.
Bruno’s, Inc. (In re Brunos, Inc.), 227 B.R. 311 (Bankr. N.D. Ala. 1998): (1) “[e]conomics of
estate administration”; (2) “[p]resumption in favor of the ‘home court’”; (3) “[j]udicial
efficiency”; (4) “[a]bility to receive a fair trial”; (6) “[t]he state’s interest in having local
controversies decided within its borders, by those familiar with its laws”; (7) “[e]nforceability of
any judgment rendered”; and (8) “[p]laintiff’s original choice of forum.” Id. at 324–25.
29
instruction that the District Court transfer the case to the United States District
Court for the District of Delaware.
III.
For the foregoing reasons, the judgment of the District Court is VACATED,
and the case is REMANDED to the District Court for the disposition set out
above.
SO ORDERED.
30