Winchester Global Trust Co. v. Entrust NPL, Corp. (In Re Ryan)

[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FILED
FOR THE ELEVENTH CIRCUIT U.S. COURT OF APPEALS
________________________ ELEVENTH CIRCUIT
MAY 8, 2008
THOMAS K. KAHN
No. 07-10845
CLERK
________________________
D. C. Docket Nos. 06-60677 CV-CMA &02-22260 BKC-PG
IN RE:
THOMAS J. RYAN, III,
Debtor.
__________________________________________________________________
WINCHESTER GLOBAL TRUST CO.,
Plaintiff-Appellee,
versus
ENTRUST NPL, CORP.,
Defendant-Appellant.
________________________
Appeal from the United States District Court
for the Southern District of Florida
_________________________
(May 8, 2008)
Before WILSON, COX and BOWMAN,* Circuit Judges.
PER CURIAM:
The sole issue before us is whether the bankruptcy court has subject matter
jurisdiction to resolve a dispute between two non-debtors—Winchester Global
Trust Company Limited and Entrust NPL Corporation—over which entity owns
certain business records relating to property sold as part of the bankruptcy estate of
debtor Thomas J. Ryan, III. The district court determined that the bankruptcy court
does not have jurisdiction over the dispute, and Entrust appealed. Because we find
that the dispute over the business records is "related to" the administration of a
bankruptcy estate, we conclude that the bankruptcy court has jurisdiction under 28
U.S.C. § 1334(b) and reverse the judgment of the district court.
I.
Ryan filed a voluntary petition for bankruptcy in early 2002. At the time, he
owned 100% of the stock in a number of corporate entities ("the Entities"),
including Riverside Capital Advisors, Inc. On August 7, 2002, the bankruptcy
trustee sold Ryan's interests in the Entities to Entrust for the sum of $60,000. In an
order approving the sale, the bankruptcy court stated, in relevant part:
Any original books and records, and/or assets of the Entities . . . for
*
Honorable Pasco Bowman, II, United States Circuit Judge for the Eighth Circuit, sitting
by designation.
2
which the Debtor has possession, custody, or control, shall be turned
over to the Trustee forthwith. The Court shall retain jurisdiction to
ensure that the Trustee and/or the Debtor turn over the books, records,
or assets of the Entities to Entrust . . . .
Bankr. Ct. Order of Aug. 16, 2002, at 2. The trustee then turned over most of the
business records of the Entities to Entrust. There remain, however, business
records of Riverside that have not been turned over because Entrust and
Winchester disagree about who owns them.
The dispute over the Riverside documents has its start in events that
occurred prior to Ryan's bankruptcy. At some point before 2001, Winchester, a
trust company that acts as sole trustee for several trusts, retained Riverside to
provide investment advice. Ryan was an officer, director, and sole stockholder of
Riverside. In August 2001, Winchester and Riverside terminated their business
relationship. Pursuant to severance agreements, Ryan and Riverside were required
to return to Winchester all files, books, and records related to the Winchester trusts.
Ryan returned most of the records, but failed to return 26 boxes of records that had
been stored in a warehouse with Ryan's property and were not located until after
Ryan filed his bankruptcy petition. Winchester asserts that it owns these records
pursuant to the severance agreements. Entrust asserts that it owns these records
pursuant to its purchase of Riverside in the bankruptcy sale.
Winchester and Entrust filed various motions in the bankruptcy proceeding
3
regarding the documents. Entrust filed a motion for the bankruptcy court to
establish a procedure for determining ownership, which the bankruptcy court
granted. Winchester then filed a motion to dismiss for lack of subject matter
jurisdiction, arguing that the disputed records had never been part of the
bankruptcy estate and that the matter therefore did not arise under federal
bankruptcy law and was not related to the bankruptcy case. The bankruptcy court
denied Winchester's motion to dismiss, stating:
The Court finds and concludes it has jurisdiction to determine
ownership of the records because the order approving the sale of the
stock of the [Entities] specifically retained jurisdiction to resolve any
disputes, the dispute concerns the enforcement of its order regarding
the sale of estate assets and this court has inherent jurisdiction to
enforce its own orders.
Bankr. Ct. Order of Feb. 9, 2006, at 3.
On February 17, 2006, Winchester appealed the jurisdictional order to the
district court. The district court reversed the bankruptcy court, holding that the
bankruptcy court did not have jurisdiction to resolve the dispute over the Riverside
documents because the dispute did not "arise in" and was not "related to" the
bankruptcy case. D. Ct. Order of Jan. 23, 2007, at 7–11. The district court
remanded the case to the bankruptcy court "for further proceedings consistent with
4
[the district court's] opinion." Id. at 11. Entrust appeals the district court's order.1
II.
We review de novo the district court's determination that the bankruptcy
court does not have subject matter jurisdiction to determine ownership of the
Riverside business records. Munford v. Munford, Inc. (In re Munford, Inc.), 97
F.3d 449, 453 (11th Cir. 1996); Cmty. Bank of Homestead v. Boone (In re Boone),
52 F.3d 958, 960 (11th Cir. 1995).
Bankruptcy courts have jurisdiction over "civil proceedings arising under
title 11, or arising in or related to cases under title 11." 2 28 U.S.C. § 1334(b); see
also id. § 157(a) (permitting district courts to refer proceedings under title 11 to
bankruptcy judges). Entrust argues that the bankruptcy court has jurisdiction under
both the "arising in" and the "related to" language of § 1334(b). Winchester
maintains that the dispute is a simple contract matter over the effect of the 2001
severance agreements and therefore neither arises in nor is related to the
bankruptcy case. We conclude that the bankruptcy court has "related to"
1
While a district court order remanding a case for further proceedings is ordinarily not
final, an order that leaves nothing for the bankruptcy court to do on remand but carry out a
ministerial duty is final. See Jove Eng'g, Inc. v. I.R.S., 92 F.3d 1539, 1547–48 (11th Cir. 1996).
Here, the district court's order left nothing for the bankruptcy court to do but dismiss the
adversary proceeding initiated by Entrust for lack of subject matter jurisdiction. The district
court's order was thus final and immediately appealable, giving us jurisdiction over this case.
2
Title 11 of the United States Code contains the Bankruptcy Code.
5
jurisdiction and therefore do not proceed to address "arising in" jurisdiction.
III.
A dispute is "related to" a case under title 11 when its result "'could
conceivably'" have an "'effect on the estate being administered in bankruptcy.'"
Miller v. Kemira, Inc. (In re Lemco Gypsum, Inc.), 910 F.2d 784, 788 (11th Cir.
1990) (quoting Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3rd Cir. 1984), overruled
on other grounds by Things Remembered, Inc. v. Petrarca, 516 U.S. 124, 129
(1995)). The "'proceeding need not necessarily be against the debtor or against the
debtor's property,'" if it could affect the administration of the bankruptcy estate. Id.
(quoting Pacor, Inc., 743 F.2d at 994); see also Celotex Corp. v. Edwards, 514 U.S.
300, 307 n.5 (1995) ("Proceedings 'related to' the bankruptcy include . . . suits
between third parties which have an effect on the bankruptcy estate."). "The key
word in the Lemco Gypsum/Pacor test is 'conceivable,' which makes the
jurisdictional grant extremely broad." Cont'l Nat'l Bank of Miami v. Sanchez (In
re Toledo), 170 F.3d 1340, 1345 (11th Cir. 1999). As the Supreme Court
recognized in Celotex Corp., "'Congress intended to grant comprehensive
jurisdiction to the bankruptcy courts so that they might deal efficiently and
expeditiously with all matters connected with the bankruptcy estate.'" 514 U.S. at
308 (quoting Pacor, Inc., 743 F.2d at 994).
6
In this case, we find the Lemco Gypsum/Pacor "conceivable effect" test
satisfied. The dispute between Winchester and Entrust over the Riverside
documents could conceivably affect the bankruptcy estate because the resolution of
the dispute could impact the amount of money in the estate. If the documents are
not turned over to Entrust as arguably required by the bankruptcy court's order
approving the sale of the Entities, Entrust will have a viable claim for a refund
from the estate of all or part of the $60,000 purchase price.3 We have recognized
that a bankruptcy court has jurisdiction over a dispute when the resolution of that
dispute could conceivably have an impact on the amount of money in the
bankruptcy estate. See Carter v. Rodgers, 220 F.3d 1249, 1253–54 (11th Cir.
2000) (holding that bankruptcy court had jurisdiction where the outcome of a
dispute concerning the sale of property that belonged to the bankruptcy estate
would affect the amount of estate property available to satisfy creditors' claims),
cert. denied, 531 U.S. 1077 (2001); Munford, Inc., 97 F.3d at 454 (holding that
bankruptcy court had jurisdiction to bar claims for contribution and indemnity by
one nondebtor against another nondebtor because the claims, if allowed to be
3
Indeed, Entrust notes, "If Entrust does not receive the benefit of its bargained for
consideration, i.e., the books and records relating to the . . . Entities, it will assert a claim against
the bankruptcy estate in the amount of at least $60,000.00 (the purchase price paid to the
bankruptcy trustee)." Reply Br. of Appellant at 7.
We express no opinion about who is the rightful owner of the Riverside documents. We
simply hold that the bankruptcy court has jurisdiction to address this issue in the first instance.
7
brought, would affect the amount of money in the bankruptcy estate).
Winchester asserts that Lemco Gypsum is analogous to this case and
forecloses a finding of "related to" bankruptcy jurisdiction, but we disagree. In
Lemco Gypsum, the debtor's landlord filed a motion in the bankruptcy court
seeking an award of damages against the purchaser of the debtor's property because
the purchaser failed to remove the property from the landlord's land. 910 F.2d at
786. Our Court ruled that the bankruptcy court lacked jurisdiction over the dispute
because the outcome of the dispute—an order requiring the purchaser to pay
damages directly to the landlord—would have no conceivable effect on the
bankruptcy estate. Id. at 789. We explained, "Overlap between the bankrupt's
affairs and another dispute is insufficient [for bankruptcy jurisdiction to lie] unless
its resolution also affects the bankrupt's estate or the allocation of assets among
creditors." Id. In the case presently before us, the dispute between Entrust and
Winchester does have a conceivable effect on the bankruptcy estate, which could
be subject to a $60,000 refund claim. Thus, our holding today is consistent with
Lemco Gypsum.
For the reasons stated herein, the judgment of the district court is reversed.
REVERSED.
8