TC Healthcare I, LLC v. Dupuis (In Re Haven Eldercare, LLC)

12-468-bk
In re Haven Eldercare, LLC
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A
SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY
FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN
CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE
EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION
“SUMMARY ORDER”). A PARTY CITING TO A SUMMARY ORDER MUST SERVE A COPY OF IT ON
ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit, held at
the Daniel Patrick Moynihan United States Courthouse, 500 Pearl Street, in the City of New
York, on the 15th day of November, two thousand twelve.
PRESENT: BARRINGTON D. PARKER,
REENA RAGGI,
GERARD E. LYNCH,
Circuit Judges.
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IN RE HAVEN ELDERCARE, LLC,
Debtor.
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TC HEALTHCARE I, LLC,
Plaintiff-Appellant,
v. No. 12-468-bk
RACHEAL DUPUIS,
Defendant-Appellee.
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FOR APPELLANT: Dominic Fulco III, Emily A. Gianquinto, Reid
and Riege, P.C., Hartford, Connecticut.
FOR APPELLEES: Racheal Dupuis, pro se, Whitehall, New York.
Appeal from a judgment of the United States District Court for the District of
Connecticut (Mark R. Kravitz, Judge).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND
DECREED that the judgment entered on January 12, 2012, is AFFIRMED.
Appellant TC Healthcare I, LLC (“TC Healthcare”) filed a motion in the Bankruptcy
Court for the District of Connecticut seeking to have the bankruptcy court enforce its June
2008 order (the “Sale Order”) authorizing the sale of certain assets belonging to Debtors
Haven Eldercare, LLC and its subsidiaries (“Haven”) free and clear of any liens, claims, or
encumbrances pursuant to 11 U.S.C. § 363. Specifically, TC Healthcare, which had entered
into an agreement in the course of the Haven bankruptcy to purchase and operate certain
Haven facilities, sought an order from the bankruptcy court declaring that it was not liable
to appellee Racheal Dupuis under the terms of a pre-bankruptcy contract between Dupuis and
Haven relating to tuition reimbursement. Before TC Healthcare filed its motion in the
bankruptcy court, a Vermont small claims court had entered a judgment holding TC
Healthcare liable to Dupuis under that contract. The bankruptcy court denied TC
Healthcare’s motion on the ground that it was barred by the doctrine set forth in Rooker v.
Fidelity Trust Co., 263 U.S. 413 (1923), and District of Columbia Court of Appeals v.
Feldman, 460 U.S. 462 (1983). TC Healthcare appealed, and the district court affirmed the
bankruptcy court on the alternate ground that the motion was barred by res judicata. This
appeal followed. We assume the parties’ familiarity with the underlying facts and the
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procedural history of the case, which we reference only as necessary to explain our decision
to affirm.
“An appeal from a district court’s review of a bankruptcy court ruling is subject to
plenary review.” In re Halstead Energy Corp., 367 F.3d 110, 113 (2d Cir. 2004). “We
accept [a] bankruptcy court’s findings of fact unless clearly erroneous, but review its
conclusions of law de novo.” Id. at 114.
Like the district court, we conclude that TC Healthcare’s enforcement motion is
barred by res judicata, making it unnecessary to discuss the applicability of the Rooker-
Feldman doctrine to the facts of this case. See Thyroff v. Nationwide Mut. Ins. Co., 460 F.3d
400, 405 (2d Cir. 2006) (noting that court may affirm on any ground supported by the
record). In analyzing the application of res judicata, federal courts must “give to a state-court
judgment the same preclusive effect as would be given that judgment under the law of the
State in which the judgment was rendered.” Migra v. Warren City Sch. Dist., 465 U.S. 75,
81 (1984). Accordingly, to determine the preclusive effect of the judgment of the Vermont
small claims court, we must look to Vermont law.
Under that law, res judicata “will preclude a claim from being litigated if (1) a
previous final judgment on the merits exists, (2) the case was between the same parties or
parties in privity, and (3) the claim has been or could have been fully litigated in the prior
proceeding.” Iannarone v. Limoggio, 190 Vt. 272, 279 (2011) (internal quotation marks
omitted). “The doctrine does not require that claims must have been actually litigated in an
earlier proceeding; rather, res judicata bars parties from litigating claims or causes of action
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that were or should have been raised in previous litigation.” Lamb v. Geovjian, 165 Vt. 375,
380 (1996). Moreover, under Vermont law, a party is generally barred by res judicata from
mounting a collateral attack on the subject matter jurisdiction of the court rendering a prior
decision. “Unless a court has usurped power not accorded to it, its exercise of subject matter
jurisdiction is binding in subsequent proceedings as long as the jurisdictional question was
litigated and decided or the parties had an opportunity to contest subject-matter jurisdiction
but failed to do so.” In re B.C., 169 Vt. 1, 8 (1999) (citing Nemaizer v. Baker, 793 F.2d 58,
65 (2d Cir. 1986)). A mere error in the court’s exercise of jurisdiction does not constitute
such a usurpation; rather “a court will be deemed to have plainly usurped jurisdiction only
when there is a total want of jurisdiction and no arguable basis on which it could have rested
a finding that it had jurisdiction.” Nemaizer v. Baker, 793 F.2d at 65 (internal quotation
marks omitted).
TC Healthcare first argues that res judicata does not apply because the Vermont small
claims court was without jurisdiction to enter the judgment. Specifically, TC Healthcare
contends that the bankruptcy court, in its July 2008 Sale Order, retained exclusive
jurisdiction over any disputes relating to that order. This argument is without merit. First,
despite the wording of the Sale Order, the bankruptcy court’s jurisdiction was concurrent
rather than exclusive, because 28 U.S.C. § 1334(b) provides bankruptcy courts with “original
but not exclusive jurisdiction” over claims such as Dupuis’s, which are related to bankruptcy
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proceedings.1 Second, even if the bankruptcy court’s jurisdiction were exclusive, TC
Healthcare would be unable to show that the Vermont court had “usurped” jurisdiction. TC
Healthcare had an opportunity to contest the jurisdiction of the small claims court during a
December 2010 hearing that was held on Dupuis’s complaint. See In re B.C., 169 Vt. at 8.
Indeed, it appears that it unsuccessfully attempted to enter into evidence a copy of the
bankruptcy court’s Sale Order, which would have informed the Vermont court that the
bankruptcy court had purported to retain exclusive jurisdiction. Unfortunately for TC
Healthcare, it was not prepared at the hearing to offer the Sale Order in an admissible form.
Having failed to admit the order into evidence, TC Healthcare cannot show that the small
claims court “usurped jurisdiction” because, in the absence of the order, the matter before the
small claims court was a simple state common law action for an amount under $5,000, which
was well within that court’s jurisdiction. See Vt. R. Small Cls. P. 2(a) (affording the small
claims court jurisdiction over “[a]ctions on claims for money damages not exceeding
$5,000”).
TC Healthcare next argues, as it did in the district court, that the judgments of the
Vermont small claims courts are without res judicata effect pursuant to the decision of the
Supreme Court of Vermont in Cold Springs Farm Development, Inc. v. Ball, 163 Vt. 466(1995). The district court addressed this issue in both its January 10, 2012 order affirming
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In re Hotel Syracuse, Inc., 155 B.R. 824 (Bankr. N.D.N.Y. 1993), cited by TC
Healthcare, is inapposite because the jurisdiction there arose under what is now 28 U.S.C.§
1334(e), which grants to the district courts exclusive jurisdiction over all property of the
debtor and the estate. Id. at 833. Flanagan v. Arnaiz, 143 F.3d 540 (9th Cir. 1998), also
involved a finding of exclusive jurisdiction.
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the bankruptcy court’s denial of TC Healthcare’s enforcement motion and its January 23,
2012 order denying TC Healthcare’s motion for reconsideration. Having conducted an
independent review of the relevant case law, we reject TC Healthcare’s reliance on Cold
Springs Farm for substantially the reasons set forth by the district court in the above
decisions.
Finally, TC Healthcare argues for the first time on appeal that res judicata does not
preclude an order barring enforcement of the Vermont judgment. This argument is waived,
see Virgilio v. City of New York, 407 F.3d 105, 116 (2d Cir. 2005) (“In general we refrain
from passing on issues not raised below.” (internal quotation marks omitted)), and in any
event is without merit. Allowing collateral attack on a judgment when framed as a challenge
to enforcement of the judgment “would be to make a mockery of the well settled doctrine of
res judicata.” United States v. Secor, 476 F.2d 766, 770 (2d Cir. 1973); see Lerman v.
Lerman, 148 Vt. 629 (1987) (applying res judicata to bar attack on enforcement);
Wursthaus, Inc. v. Cerrata, 149 Vt. 54 (1987) (same).
We have considered TC Healthcare’s other arguments and conclude that they are
without merit. Accordingly, the judgment of the district court is AFFIRMED. Dupuis’s
motion to include documents is DENIED as moot. TC Healthcare’s motion to strike portions
of Dupuis’s brief is also DENIED.
FOR THE COURT:
CATHERINE O’HAGAN WOLFE, Clerk of Court
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