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Wilkins v. Rymes Heating Oils, Inc.

United States District Court, D. New Hampshire

March 7, 2018

Nichole T. Wilkins and Estate of Beverly L. Mulcahey
v.
Rymes Heating Oils, Inc. and Rymes Energy Holdings, LLC

          MEMORANDUM ORDER

          Joseph N. Laplante United States District Judge

         Whether this court retains the plaintiffs' action or refers it to the Bankruptcy Court turns on whether that court has jurisdiction to resolve the plaintiffs' successor liability claims. In this case, it does.

         Plaintiffs Nichole T. Wilkins and Beverly L. Mulcahey, [1] sued Fred Fuller Oil & Propane Co., Inc. (“FFOP”) and its president, Fred J. Fuller, for discrimination, a hostile work environment, assault, and retaliation arising from events that occurred during the plaintiffs' employment with FFOP.[2] On the eve of trial, FFOP filed for bankruptcy protection.[3] Two weeks later, defendant Rymes Heating Oils, Inc. purchased FFOP's assets in a sale approved by the Bankruptcy Court (Deasy, B.J.).[4] Though plaintiffs' counsel was present at the hearing held in connection with the sale, they lodged no objection to the sale itself. The plaintiffs settled their claims against FFOP after the sale.[5] Upon discovering that FFOP may be unable to pay the $3.7 million settlement (which was also approved by the Bankruptcy Court), they now seek to recover their damages from the Rymes defendants under a theory of successor liability.

         For the reasons discussed infra, this court has jurisdiction over the plaintiffs' claims pursuant to 28 U.S.C. § 1334 (bankruptcy).[6] Rymes moves this court to refer this action to the Bankruptcy Court for this District. In doing so, it invokes both the Bankruptcy Court's statutory authority as well as its retention in the Sale Order of jurisdiction to interpret the terms and provisions of that order, which appears to provide that Rymes purchased FFOP's assets free and clear of claims such as the plaintiffs'.[7] The plaintiffs object on the grounds that, under the standard set by the First Circuit Court of Appeals in Gupta v. Quincy Med. Center, 858 F.3d 657 (1st Cir. 2017), the Bankruptcy Court lacks jurisdiction to adjudicate this dispute because it arises under Title VII. Concluding that the Bankruptcy Court has jurisdiction to determine whether Rymes acquired FFOP's assets free and clear of the plaintiffs' claims, because that dispute “arises in” or “arises under” the Bankruptcy Code, the court grants Rymes's motion to refer the case to that court.

         “[J]urisdiction of the bankruptcy courts, like that of other federal courts, is grounded in, and limited by, statute.” Gupta, 858 F.3d at 661 (quoting Celotex Corp. v. Edwards, 514 U.S. 300, 307 (1995)). District courts have jurisdiction over “any or all 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, ” Id. § 1334(b). See also Gupta, 858 F.3d at 661. In turn, district courts may, as this District has, see LR 77.4(a), refer to the bankruptcy courts of the district “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, ” 28 U.S.C. § 157(a). Under this statutory regime, therefore, “in order for [Rymes's] 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.” Gupta, 858 F.3d at 662.

         “[P]roceedings ‘aris[e] under title 11' when the Bankruptcy Code itself creates the cause of action.” Id. “Arising in” proceedings are defined “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, '” such as “administrative matters, orders to turn over property of the estate, and determinations of the validity, extent, or priority of liens.” Id. at 662-63 (quoting Middlesex Power Equip. & Marine, Inc. v. Town of Tyngsborough, Mass. (In re Middlesex Power Equip. & Marine, Inc.), 292 F.3d 61, 68 (1st Cir. 2002)). “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.'” Id. at 663 (quoting In re Middlesex Power Equip. & Marine, 292 F.3d at 68).

         Rymes argues that it purchased FFOP's assets free and clear of any claims against FFOP, including the plaintiffs' claims, under several of the Sale Order's provisions, [8] rendering interpretation of those provisions integral to resolution of the plaintiffs' successor liability claims. As it points out, through the Sale Order, the Bankruptcy Court retained jurisdiction during the pendency of the bankruptcy action to, among other things, “[i]nterpret, implement and enforce the terms and provisions of” the agreement, “[r]esolve any disputes arising under or relating to” the agreement, and “[a]djudicate any disputes concerning (asserted) pre-Closing Liens or Claims on, and the proceeds of the sale of, the Assets . . . .”[9] The Bankruptcy Court, however, “may not ‘retain' jurisdiction it never had -- i.e., over matters that do not fall within § 1334's statutory grant.” Gupta, 858 F.3d at 664. Thus, for the Bankruptcy Court's retention of jurisdiction in the Sale Order to operate, the underlying claim must satisfy the jurisdictional criteria -- that is, it must “arise under, ” “arise in, ” or “relate to” a case under Title 11. Id.

         The underlying claim here does so. It is not, as the plaintiffs propose, a claim “in the nature of personal injury or tort claims, ” arising under Title VII.[10] Liability for the plaintiffs' Title VII claims against FFOP and the amount of damages owed them has been resolved through the plaintiffs' and FFOP's settlement of those claims. In light of that settlement, the only claim at issue here is whether Rymes may be held to account for the settlement as FFOP's alleged successor. And the First Circuit Court of Appeals has unequivocally determined that when “[t]he underlying dispute . . . involves a subsequent purchaser's interpretation of a sale order ‘free and clear of liens' under 11 U.S.C. § 363(b), an order that can only be issued by a bankruptcy court, . . . it is one that arises in a case under title 11 or perhaps arises under title 11.” In re Middlesex Power Equip. & Marine, 292 F.3d at 68. It reaffirmed that conclusion in Gupta, describing its holding in In re Middlesex Power Equip. & Marine as, “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.'” 858 F.3d at 665.

         The plaintiffs' claims turn on whether the defendants may be held liable as FFOP's successors. That, in turn, depends on the terms of the Sale Order. The Bankruptcy Court has jurisdiction to interpret those terms and determine whether the defendants may be held so liable. The court therefore GRANTS the defendants' motion to refer.[11]

         SO ORDERED.

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Notes:

[1] Mulcahey is represented in this action by her estate as administered by her husband, Raymond Mulcahey. Compl. (doc. no. 1-1) ¶ 3.

[2] Compl. (doc. no. 1-1) ΒΆΒΆ 8-13. Specifically, the plaintiffs sued Fuller in his individual capacity and joined as intervenors the Equal Employment Opportunity Commission's action against FFOP. ...


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