Opinion
No. 7:19-CV-134-D
03-30-2020
Brian Keith KEESEE, Appellant, v. Kimberly Nifong MITCHELL, Appellee.
Christopher A. Chleborowicz, Chleborowicz Law Firm, PLLC, Wilmington, NC, for Appellant. Alan E. Toll, Toll and Associates, PLLC, Wilmington, NC, David J. Haidt, Ayers & Haidt, P.A., New Bern, NC, for Appellee.
Christopher A. Chleborowicz, Chleborowicz Law Firm, PLLC, Wilmington, NC, for Appellant.
Alan E. Toll, Toll and Associates, PLLC, Wilmington, NC, David J. Haidt, Ayers & Haidt, P.A., New Bern, NC, for Appellee.
ORDER
JAMES C. DEVER III, United States District Judge
On July 9, 2019, the United States Bankruptcy Court for the Eastern District of North Carolina (the "bankruptcy court") permanently enjoined Brian Keith Keesee ("Keesee" or "appellant") from pursuing claims that arose from or are related to a divorce action in state court between Keesee and his ex-wife Kimberly Nifong Mitchell ("Mitchell" or "appellee"), an equitable distribution agreement between Keesee and Mitchell, or Mitchell's chapter 11 bankruptcy proceedings [D.E. 1-1]. The bankruptcy court also specifically enjoined Keesee from litigating two state court lawsuits against Mitchell alleging, inter alia, malicious prosecution (collectively, the "State Court Actions"), and ordered Keesee to dismiss the State Court Actions. See id. at 17. On July 23, 2019, Keesee appealed [D.E. 1]. As explained below, the court affirms the bankruptcy court's order of July 9, 2019.
I.
In 2003, Keesee and Mitchell married. See [D.E. 9-1] 56. In 2009, Mitchell filed an action in New Hanover County District Court seeking equitable distribution and divorce (the "Domestic Action"). See id. at 56-57. On February 11, 2011, the parties signed an equitable distribution agreement (the "Agreement"). See [D.E. 8-2] 46–48. On November 21, 2011, Mitchell filed a voluntary petition for relief under chapter 11 of the bankruptcy code. See [D.E. 1-1] 2. When Mitchell filed the bankruptcy petition, the Domestic Action was pending in state court. See id. Because Keesee and Mitchell's Domestic Action was pending, Keesee was listed as a potential creditor in Mitchell's chapter 11 proceeding. See id. On December 6, 2012, the parties entered a consent order stating that Keesee did not have any existing claim in Mitchell's bankruptcy. See id.; [D.E. 9-1] 3. The consent order arose out of the Domestic Action and the Agreement between Keesee and Mitchell concerning equitable distribution, including the disposition of a 96.32-acre tract of property in Brunswick County. See [D.E. 1-1] 2; [D.E. 9-1] 29–32. In relevant part, the Agreement provided that Keesee would pay Mitchell $750,000 in cash upon the sale of the property to which both Keesee and Mitchell claimed ownership and which was encumbered by a deed of trust in Brunswick County, North Carolina. See [D.E. 1-1] 2–3. In exchange, the Agreement provided that the property would be allocated to Keesee. See id. In accordance with the Agreement, Mitchell executed a quitclaim deed concerning her interest in the property in favor of Keesee. See id. at 3. Following Mitchell's transfer of her interest in the property, a corporation that Keesee owned and controlled, Oak Island Building Supply, Inc. ("Oak Island"), purchased the deed of trust and promissory note associated with the property. See id.
After Oak Island purchased the deed of trust and promissory note, Keesee failed to pay Mitchell the $750,000. See id. Mitchell then filed an adversary proceeding in her chapter 11 case. See id. In essence, Mitchell claimed that Keesee conveyed the Brunswick County property to a third party without paying Mitchell the $750,000 she was due under the Agreement. See id. On March 21, 2013, the bankruptcy court granted Mitchell's petition for attachment against the property, entered an order of attachment that allowed Mitchell to file a lis pendens against the property, and permissively abstained from resolving the legal question in the proceeding under 28 U.S.C. § 1334. See id.
On April 30, 2013, the bankruptcy court confirmed Mitchell's reorganization plan. See id. at 4. On November 27, 2013, Keesee filed a motion in the Domestic Action asserting that Mitchell initiated a "wrongful bankruptcy proceeding," that certain actions of Mitchell in the bankruptcy case were wrongful, and that Keesee was entitled to indemnity or contribution from Mitchell. See id. On December 4, 2013, Mitchell moved for sanctions in the bankruptcy action against Keesee and alleged that Keesee violated the bankruptcy court's confirmation injunction imposed on all creditors through 11 U.S.C. § 1141(a). See id.; [D.E. 9-1] 23–25.
On February 18, 2014, the bankruptcy court entered an order imposing sanctions on Keesee (the "Sanctions Order"). See [D.E. 1-1] 4; [D.E. 9-1] 56. In the Sanctions Order, the bankruptcy court detailed the history of the Domestic Action and the bankruptcy action. See [D.E. 9-1] 56–58. The bankruptcy court concluded that "[i]t is in the best interests of [Mitchell] and bankruptcy estate that Keesee be permanently enjoined from pursuing damages, claims or related actions arising from or related to any matter in existence as of April 30, 2013, including all matters related to the Lawsuit and [Mitchell's] bankruptcy proceeding." Id. at 58. The bankruptcy court defined the "Lawsuit" as the Domestic Action. Id. at 56. The bankruptcy court then ordered that Keesee pay Mitchell $5,000 in sanctions and that "Keesee shall be permanently enjoined from initiating or pursuing any claim or action against Mitchell that arises from, or relates to, the Lawsuit or [Mitchell's] bankruptcy proceeding." Id. at 58. The bankruptcy court also ordered that it "shall retain jurisdiction over the matters addressed in this [Sanctions] Order." Id.
On July 31, 2014, Mitchell filed a complaint in Brunswick County Superior Court that, in essence, sought to enforce the Agreement's provisions concerning the Brunswick County property. Specifically, Mitchell claimed that Keesee breached the Agreement, committed fraud, was unjustly enriched, and that Mitchell should be allowed to pierce the corporate veil of Keesee's corporation (i.e., Oak Island) to recover proceeds from the sale of the Brunswick County property in the amount due to her under the Agreement. See [D.E. 1-1] 4–5. On June 29, 2015, the Brunswick County Superior Court dismissed Mitchell's claims for lack of standing and subject-matter jurisdiction. Mitchell appealed the Brunswick County Superior Court order, but on November 2, 2015, Mitchell voluntarily dismissed her appeal. See id. at 5.
On July 11, 2016, Keesee filed a complaint against Mitchell in Brunswick County Superior Court alleging abuse of process, malicious prosecution, and slander to title of real estate. See id. Keesee based his complaint on the following: (1) Mitchell's December 16, 2013 motion in the Domestic Action for attachment concerning the Brunswick County property, to hold Keesee in contempt, and attorney's fees; (2) Mitchell's July 31, 2014 state court action; (3) Mitchell's July 31, 2014 filing of a lis pendens; (4) Mitchell's motion on July 14, 2015, to hold Keesee in contempt; and (5) Mitchell's filing of a notice of appeal in Mitchell's state court action. See id.
In November 2016, Keesee sent a letter to Mitchell demanding that Mitchell assist him in the sale of a separate, unrelated property under the Agreement. See id. On December 20, 2016, Keesee moved for contempt in the Domestic Action for Mitchell's failure to comply with the terms of the demand letter. See id. On January 10, 2017, Mitchell moved for Keesee to show cause concerning his alleged violations of the bankruptcy court's orders and to sanction Keesee for violating the automatic stay and confirmation injunction. See id. at 6. On January 24, 2017, Keesee responded. See id. On March 9, 2017, the bankruptcy court held a hearing on Mitchell's motion and referred the parties to mediation. See id. Mediation was unsuccessful. See id. On July 12, 2017, the bankruptcy court held a hearing. See id. On July 13, 2017, the bankruptcy court ordered the parties to address whether Mitchell's claim for $750,000 under the Agreement from the sale of the Brunswick County property was viable. See id. On September 9, 2017, Mitchell moved to reopen the adversary proceeding to address her claim for $750,000 under the Agreement. See id. On November 13, 2017, Keesee responded. See id. On December 17, 2017, the bankruptcy court held a hearing. See id. On March 29, 2018, the court denied Mitchell's motion to reopen the adversary proceeding because Mitchell's state court proceedings precluded the bankruptcy court from addressing the claim for $750,000 within the bankruptcy. See id.
On December 4, 2017, Mitchell filed a supplement to her show cause motion related to texts Keesee sent to Mitchell. See id. at 6–7. On August 20, 2018, Mitchell filed another supplement. See id. at 7. According to this supplement, on August 3, 2018, Keesee filed a lawsuit against Mitchell in Brunswick County Superior Court asserting the same claims and factual bases for those claims that Keesee alleged in his 2016 state court lawsuit. See id. On August 22, 2018, the bankruptcy court ordered Keesee to show cause. See id. On January 16, 2019, Mitchell supplemented the show cause motion with Keesee's texts and letters concerning "bankruptcy fraud." Id.; see [D.E. 9-1] 67–70. On January 17, 2019, the bankruptcy court held an extensive hearing on the motion and took the motion under advisement. See [D.E. 10]. On July 1, 2019, Mitchell filed another supplement to her show cause motion alleging that after the bankruptcy court's January 2019 hearing, Keesee filed "extensive discovery requests" in Keesee's 2016 state court action. [D.E. 1-1] 7.
On July 9, 2019, the bankruptcy court issued its order (the "Bankruptcy Court Order"). See id. at 1. In the Bankruptcy Court Order, the bankruptcy court held that Keesee violated the automatic stay because the State Court Actions are a judicial proceeding to recover a claim that "arose before the commencement" of the bankruptcy case in violation of 11 U.S.C. § 362(a)(1) or, in the alternative, the State Court Actions are an "act to collect, assess or recover a claim against [Mitchell] that arose before" the commencement of the bankruptcy case in violation of 11 U.S.C. § 362(a)(6). See id. at 10. The bankruptcy court noted that the automatic stay remained in effect in Mitchell's bankruptcy. See id. at 9; 11 U.S.C. § 1141(d). The bankruptcy court then addressed the State Court Actions and reasoned that, although the State Court Actions are based solely on Mitchell's acts that occurred between 2013 and 2015 (i.e., after Mitchell filed the her voluntary bankruptcy petition), the substance of the State Court Actions concern the Agreement that Keesee and Mitchell signed before Mitchell's bankruptcy petition. See [D.E. 1-1] 9–10. Thus, the bankruptcy court found that the State Court Actions were claims that arose before Mitchell filed her bankruptcy petition. In support, the bankruptcy court noted that each of Mitchell's actions have been, in essence, an effort to recover the $750,000 from the sale of the Brunswick County property as stated in the Agreement. See id. at 10–11. Furthermore, the bankruptcy court found that each of Keesee's actions were an effort "to punish [Mitchell] for attempting to enforce the [Agreement]." Id. at 10. Accordingly, the bankruptcy court held that Keesee's State Court Actions violated the automatic stay under either section 362(a)(1) or (a)(6). See id.
The bankruptcy court also addressed whether Keesee violated the Sanctions Order. See id. at 12. The parties disputed whether the Sanctions Order permanently enjoined Keesee from pursuing any claim "that arises from, or relates to," the Domestic Action or Mitchell's bankruptcy proceeding (i.e., Mitchell's view), or whether the Sanctions Order only permanently enjoined Keesee from pursuing those claims "in existence as of April 30, 2013" (i.e., Keesee's view). Id. at 12–13. The bankruptcy court found that both interpretations were "plausible," but concluded that Mitchell's interpretation of the Sanctions Order was correct. Id. at 13–14. Thus, the bankruptcy court held that the Sanctions Order enjoined all actions against Mitchell that "related to any matter in existence at confirmation," including the Domestic Action. Id. at 14–15. The bankruptcy court reasoned that the State Court Actions "arise out of, and are clearly related to, the Domestic Action," the Agreement, and the bankruptcy because both parties continually litigated only those issues related to the Brunswick County property—and thus, the Agreement—throughout the bankruptcy. Id. at 14. The bankruptcy court also noted that a litigation injunction can exceed the scope of the automatic stay. See id. at 15; A.H. Robins Co. v. Piccinin, 788 F.2d 994, 1002 (4th Cir. 1986). Moreover, the bankruptcy court observed that the Sanctions Order was not "overbroad" because Keesee remains able to pursue claims against Mitchell other than those identified in the Sanctions Order. Id. In reaching its conclusions, the bankruptcy court relied, in part, on its understanding of "the history between the parties, their animosity toward each other, and its distinct feeling that Judge Small [who issued the Sanctions Order] intended to stop the incessant litigation and punitive behavior." Id.
The divorce action between the parties began in 2009. On February 11, 2011, the parties signed the equitable distribution agreement. On November 21, 2011, Mitchell filed her bankruptcy petition. Three different bankruptcy judges have handled the bankruptcy case, including two who are now retired. Cf. Charles Dickens, Bleak House (1852).
The bankruptcy court issued a permanent injunction barring Keesee from pursuing claims arising from or related to the Domestic Action, the Agreement, or the bankruptcy. See id. at 17. The bankruptcy court specifically enjoined Keesee from litigating the State Court Actions, and ordered Keesee to dismiss those actions. See id. The bankruptcy court found that it retained its power to issue injunctions in the bankruptcy proceeding because, inter alia, the automatic stay remained in place and 11 U.S.C. § 105(a) provides the court with authority to enter orders to carry out provisions of the bankruptcy code and the bankruptcy court's orders. See id. at 15–16. The bankruptcy court also found that the State Court Actions were, in essence, collateral attacks on Mitchell's bankruptcy, and that a litigation injunction was the only way to prevent Keesee from continued litigation. See id. at 16–17.
Keesee raises three issues on appeal: (1) whether the bankruptcy court had subject-matter jurisdiction over the State Court Actions; (2) whether the bankruptcy court erred in holding that Keesee's filing of the State Court Actions violated the Sanctions Order; and (3) whether the bankruptcy court erred in holding that Keesee violated the automatic stay under 11 U.S.C. § 362(a)(1) or (a)(6). See [D.E. 16] 6–7.
II.
Under 28 U.S.C. § 158(a)(1), district courts have jurisdiction to hear appeals from "final judgments, orders, and decrees." In bankruptcy proceedings, "the concept of finality is more flexibly applied than with regard to district court judgments." Brandt v. Wand Partners, 242 F.3d 6, 13 (1st Cir. 2001) ; see Mort Ranta v. Gorman, 721 F.3d 241, 246 (4th Cir. 2013) ; McDow v. Dudley, 662 F.3d 284, 287 (4th Cir. 2011) ; In re Comput. Learning Ctrs., Inc., 407 F.3d 656, 660 (4th Cir. 2005) ; Piccinin, 788 F.2d at 1009. No uniform rule, however, has developed to determine when an order or judgment is final. See Brandt 242 F.3d at 13. "[A]n Order which ends a discrete judicial unit in the larger case concludes a bankruptcy proceeding and is a final judgment for the purposes of 28 U.S.C. § 158." In re Kitty Hawk, Inc., 204 F. App'x 341, 343 (5th Cir. 2006) (per curiam) (unpublished) (alteration omitted); see Mort Ranta, 721 F.3d at 246 ; McDow, 662 F.3d at 287 ; In re Comput. Learning Ctrs., Inc., 407 F.3d at 660.
The court has jurisdiction over this appeal because the bankruptcy court's order on July 9, 2019, ended a discrete unit of a larger case. In a bankruptcy appeal, a district court reviews a bankruptcy court's legal determinations de novo and its factual findings for clear error. See In re White, 487 F.3d 199, 204 (4th Cir. 2007) ; In re Official Comm. of Unsecured Creditors for Dornier Aviation (N. Am.), Inc., 453 F.3d 225, 231 (4th Cir. 2006) ; Schlossberg v. Barney, 380 F.3d 174, 178 (4th Cir. 2004). In doing so, the court may consider the original papers and exhibits, the transcript of proceedings, and the docket. See Fed. R. App. P. 10(a) ; Union Bank v. Blum, 460 F.2d 197, 202 (9th Cir. 1972) ; Arcari v. Marder, 225 B.R. 253, 256 (D. Mass. 1998) ; In re Bartlett, 92 B.R. 142, 143 (E.D.N.C. 1988).
Keesee argues that the bankruptcy court did not have subject-matter jurisdiction over the State Court Actions because they neither "arose in" nor "related to" Mitchell's chapter 11 bankruptcy proceeding. See [D.E. 16] 15–21. Two statutes, 28 U.S.C. §§ 157 and 1334, govern bankruptcy court jurisdiction. See Educ. Credit Mgmt. Corp. v. Kirkland (In re Kirkland ), 600 F.3d 310, 315 (4th Cir. 2010). Under section 1334, United States district courts have "original and exclusive jurisdiction of all cases under title 11" of the bankruptcy code. 28 U.S.C. § 1334(a). Additionally, the United States district courts have "original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11." Id. § 1334(b). Under section 157(a), "district courts can refer § 1334(a) and (b) cases to bankruptcy courts." In re Kirkland, 600 F.3d at 315 ; 28 U.S.C. § 157(a). Although section 1334 determines subject-matter jurisdiction, sections 157(b) and 157(c) determine "the bankruptcy court's authority to act once jurisdiction is established." In re Kirkland, 600 F.3d at 315. Under section 157(a), this court referred any and all cases under title 11 and any and all proceedings arising under title 11 or arising in or related to a case under title 11 to the bankruptcy judges for the Eastern District of North Carolina. See Referral of Bankruptcy Matters to Bankruptcy Judges (E.D.N.C. Aug. 3, 1984).
"Critical features of every bankruptcy proceeding are the exercise of exclusive jurisdiction over all of the debtor's property, the equitable distribution of that property among the debtor's creditors, and the ultimate discharge that gives the debtor a ‘fresh start’ by releasing [her] from further liability for old debts." Central Va. Comm. Coll. v. Katz, 546 U.S. 356, 364–65, 126 S.Ct. 990, 163 L.Ed.2d 945 (2006) (quotation omitted); see Lamar, Archer & Cofrin, LLP v. Appling, ––– U.S. ––––, 138 S. Ct. 1752, 1758, 201 L.Ed.2d 102 (2018) ; Local Loan Co. v. Hunt, 292 U.S. 234, 244, 54 S.Ct. 695, 78 L.Ed. 1230 (1934). The "fresh start" affords a debtor the opportunity, inter alia, to "enjoy a new opportunity in life with a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt." Grogan v. Garner, 498 U.S. 279, 286, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991) (quotation omitted); see Hunt, 292 U.S. at 244, 54 S.Ct. 695. Accordingly, "Congress intended to grant comprehensive jurisdiction to the bankruptcy courts so that they might deal efficiently and expeditiously with all matters connected to the bankruptcy estate." Celotex Corp. v. Edwards, 514 U.S. 300, 308, 115 S.Ct. 1493, 131 L.Ed.2d 403 (1995) (quotation omitted); see Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3d Cir. 1984). To that end, section 1334(b) gives bankruptcy courts "jurisdiction over more than simple proceedings involving the property of the debtor or the estate." Edwards, 514 U.S. at 308, 115 S.Ct. 1493. Bankruptcy court jurisdiction under 1334(b), however, is not "limitless." Id.
A civil proceeding "arises under" title 11 of the bankruptcy code "if it invokes a substantive right created by the [b]ankruptcy [c]ode." L. Ardan Dev. Corp. v. Newell (In re Newell ), 424 B.R. 730, 733 (Bankr. E.D.N.C. 2010) (quotation omitted); see Wood v. Wood (In re Wood ), 825 F.2d 90, 97 (5th Cir. 1987) ; In re Murphy, 569 B.R. 402, 412 (Bankr. E.D.N.C. 2017). Additionally, a civil action "arising in" a case under title 11 of the bankruptcy code "is one that is not based on any right expressly created by [t]itle 11, but nevertheless, would have no existence outside of the bankruptcy." Valley Historic Ltd. v. Bank of N.Y., 486 F.3d 831, 835 (4th Cir. 2007) (quotation omitted); Grausz v. Englander, 321 F.3d 467, 471 (4th Cir. 2003) ; Bergstrom v. Dalkon Shield Claimants Tr. (In re A.H. Robins Co. ), 86 F.3d 364, 372 (4th Cir. 1996). In other words, the civil proceeding must have "no practical existence but for the bankruptcy." Valley Historic, 486 F.3d at 835 (emphasis in original); Grausz, 321 F.3d at 471.
When analyzing whether a civil proceeding is "related to" a chapter 11 case, the Fourth Circuit has adopted both the general test in Pacor and the more specific post-confirmation "close nexus" approach in In re Resorts Int'l, Inc., 372 F.3d 154, 166 (3d Cir. 2004). See Pacor, 743 F.2d. at 994 ; see also Valley Historic, 486 F.3d at 836–37 ; MDC Innovations, LLC v. Hall, 726 F. App'x 168, 171 (4th Cir. 2018) (per curiam) (unpublished). Under Pacor, the court determines "whether the outcome of [the civil] proceeding could conceivably have any effect on the estate being administered in bankruptcy." Pacor, 743 F.2d at 994 (emphasis omitted); Ownes-Illinois, Corp. v. Rapid Am. Corp (In re Celotex Corp. ), 124 F.3d 619, 625 (4th Cir. 1997). Accordingly, "[a]n action is related to bankruptcy if the outcome could alter the debtor's rights, liabilities, options, or freedom of action (either positively or negatively) and which in any way impacts upon the handling and administration of the bankrupt estate." Pacor, 743 F.2d at 994. In Pacor, a private party brought a products liability suit against a company that, in turn, impleaded the third-party manufacturing company who later filed a chapter 11 bankruptcy petition. See id. at 986. The Third Circuit held that, although the indemnity claim involved the debtor company and was thereby "related to" the debtor company's bankruptcy, the products liability suit was not "related to" the bankruptcy. See id. at 995. The Pacor court reasoned that the products liability action "would have no effect on the [debtor company's] bankruptcy estate" because it was only "a mere precursor to the potential third party claim for indemnification." Id.
In Edwards, the Supreme Court endorsed the Pacor test for "related to" jurisdiction under section 1334(b). See Edwards, 514 U.S. at 307–08, 115 S.Ct. 1493. The Court noted that "[p]roceedings ‘related to’ the bankruptcy include (1) causes of action owned by the debtor which become property of the estate pursuant to 11 U.S.C. § 541, and (2) suits between third parties which have an effect on the bankruptcy estate." Id. at 307, 115 S.Ct. 1493 n.5. In Edwards, a private individual secured a judgment against Celotex in a products liability suit. Celotex posted a bond with a third-party insurance company in the amount of the judgment, and the insurance company retained amounts that it owed to Celotex as collateral for the bond. See id. at 302–03, 115 S.Ct. 1493. Celotex then filed a bankruptcy petition under Chapter 11, and the private individual judgment creditor sought payment on the judgment from the third-party insurance company. See id. The Court held that the private individual's action to recover the judgment amount was "related to" Celotex's bankruptcy. See id. at 309, 115 S.Ct. 1493. The Court noted that "the jurisdiction of bankruptcy courts may extend more broadly in [chapter 11 cases] than [chapter 7 cases]" because the debtor seeks reorganization in the former, and liquidation in the latter. Id. at 310, 115 S.Ct. 1493. The Court reasoned that if the private individual judgment creditor was successful in recovering the judgment amount from the third-party insurer, the insurer would immediately pursue payment from Celotex during the bankruptcy proceedings. See id. The result, the Court reasoned, would affect Celotex's ability to reorganize effectively. See id.
Once the court confirms a debtor's plan in a chapter 11 bankruptcy, any civil proceeding must have a "close nexus" to the bankruptcy in order to be "related to" the bankruptcy proceedings. Valley Historic, 486 F.3d at 836–37 ; see Resorts Int'l, 372 F.3d at 167. A close nexus typically exists if the civil proceeding is one which "affect[s] the interpretation, implementation, consummation, execution, or administration of the confirmed plan." Resorts Int'l, 372 F.3d at 167.
Keesee argues that the State Court Actions are not "related to" Mitchell's bankruptcy because Mitchell's confirmed plan is substantially consummated under 11 U.S.C. § 1101(2) and, therefore, the State Court Actions will not affect Mitchell's confirmed plan. See [D.E. 16] 19–21. Additionally, Keesee contends that the State Court Actions will not affect "the interpretation, implementation, consummation, execution, or administration of the [d]ebtor's confirmed plan." Id. at 20-21. In support, Keesee cites Resorts International and Valley Historic. See id. at 19–20.
As for Resorts International, the Third Circuit held that the bankruptcy court lacked subject-matter jurisdiction over the bankruptcy trustee's malpractice claim against an accounting firm for the firm's services rendered to a portion of the bankruptcy trust. See Resorts Int'l, 372 F.3d at 156–57. In reaching this conclusion, the Third Circuit noted that the debtor from whose bankruptcy the trust originated was not a party to the bankruptcy trustee's claim. See id. at 157. The Third Circuit then held that the bankruptcy trustee's claim was not "related to" the debtor's bankruptcy because the effects of the claim were collateral to the debtor's bankruptcy. See id. at 170. Furthermore, the Third Circuit found that, while the trust beneficiaries were once creditors of the debtor's bankruptcy, the beneficiaries had extinguished their creditor status to receive the benefits of the trust which further attenuated the nexus between the bankruptcy trustee's claim and the debtor's bankruptcy. See id. at 170.
Resorts International offers Keesee no comfort. Mitchell is a party to Keesee's claims, and Keesee's claims have a "close nexus" to Mitchell's bankruptcy and are thereby "related to" it. See, e.g., Valley Historic, 486 F.3d at 836–37.
As for Valley Historic, the Fourth Circuit concluded that a debtor's adversary proceeding against a bank creditor concerning a pre-petition contract claim was not "related to" the debtor's bankruptcy because the debtor's plan of reorganization had been confirmed and substantially consummated when the debtor filed the adversary proceeding and the plan made no provision for using any recovery from such adversary proceeding to satisfy the debtor's obligations. See Valley Historic, 486 F.3d at 837. Rather, the plan provided for the debtor's satisfaction of obligations entirely from post-petition rents and earnings of the debtor through the operation of its real estate. See id. Moreover, before the debtor instituted the adversary proceeding, the debtor had paid all its creditors, including the bank creditor, and the plan was substantially consummated. See id.
In contrast to Valley Historic, the debtor in this case (i.e., Mitchell) is not seeking to file an adversary proceeding against a creditor concerning a substantially consummated plan. Rather, the bankruptcy court instead focused on the core of the transactions at issue in the bankruptcy case and the effect of the State Court Actions on the bankruptcy estate. See Grady v. A.H. Robins Co., Inc., 839 F.2d 198, 200-03 (4th Cir. 1988) ; Piccinin, 788 F.2d at 1002 n.11 ; Pacor, 743 F.2d at 994. Tellingly, in the State Court Actions, Keesee sued Mitchell and accused Mitchell of tortious conduct in pursuing the $750,000 allegedly owed to her under the Agreement. The Agreement directly stems from the Domestic Action, and because the Domestic Action is a contingent liability to Mitchell in her bankruptcy case, the State Court Actions are "related to" Mitchell's bankruptcy. Cf. Piccinin, 788 F.2d at 1002 n.11. Moreover, although Mitchell's plan is substantially consummated, it is still being administered.
Here, the bankruptcy court found that the State Court Actions "improperly interfere with the administration of the bankruptcy estate[,] ... seek to collaterally attack bankruptcy court orders which permitted [Mitchell] to take those actions [related to the Agreement,] ... [and] allowing the [State Court Actions] to go forward could create conflicting judgments between the bankruptcy court and the state court." [D.E. 1-1] 16. The record amply supports these findings. Furthermore, the bankruptcy court's findings demonstrate both the effect of the State Court Actions on the administration of Mitchell's bankruptcy, see Pacor, 743 F.2d at 994, and the "close nexus" between the State Court Actions and Mitchell's bankruptcy. Resorts Int'l, 372 F.3d at 167. Accordingly, the court has subject-matter jurisdiction over the State Court Actions.
In light of this conclusion, the court declines to address the parties' dispute about whether the State Court Actions "arise in" Mitchell's bankruptcy.
III.
Keesee raises numerous challenges to the bankruptcy court's interpretation of the Sanctions Order. Keesee first asserts that the Sanctions Order does not comply with Federal Rule of Civil Procedure 65 because Keesee must reference other documents to understand what acts are enjoined. See [D.E. 16] 21–24. Specifically, Keesee argues that, under the Sanctions Order, he "would necessarily have to reference all pleadings, motions, and other papers in the New Hanover County District Court's file" and "the voluminous documents contained in [Mitchell's] bankruptcy filings" to determine if a claim arises from or relates to the Domestic Action or Mitchell's bankruptcy. [D.E. 16] 23.
Rule 65 requires a court to "(A) state the reasons why [the court's injunction order] issued; (B) state its terms specifically; and (C) describe in reasonable detail–and not by referring to the complaint or other document–the acts or acts restrained or required." Fed. R. Civ. P. 65(d). The requirements "are mandatory and must be observed in every instance." Alberti v. Cruise, 383 F.2d 268, 272 (4th Cir. 1967) ; see CPC Int'l, Inc. v. Skippy Inc., 214 F.3d 456, 459 (4th Cir. 2000) ; Thomas v. Brock, 810 F.2d 448, 450 (4th Cir. 1987) ; Scott v. Clarke, 355 F. Supp. 3d 472, 491 (W.D. Va. 2019). Rule 65 helps provide "fair notice" to the sanctioned party of what conduct is enjoined, and assists appellate courts faced with challenges to the injunction order. See Skippy, 214 F.3d at 459 ; Brock, 810 F.2d at 450.
Rule 65 applies in bankruptcy proceedings under the Federal Rule of Bankruptcy Procedure 7065.
Although Keesee asserts that other documents are required to understand the Sanctions Order, the Sanctions Order, by its terms, does not require or reference other documents. See [D.E. 9-1] 56–58. This fact alone demonstrates compliance with Rule 65(d). Accordingly, the court rejects Keesee's Rule 65 argument.
Alternatively, Keesee argues that the bankruptcy court improperly interpreted the Sanctions Order. See [D.E. 16] 24–26. "[A] court speaks through its judgments and orders." Murdaugh Volkswagen, Inc. v. First Nat'l Bank of S.C., 741 F.2d 41, 44 (4th Cir. 1984). If the court determines that its order has a clear meaning, that meaning controls. See Spearman v. J & S Farms, Inc., 755 F. Supp. 137, 140 (D.S.C. 1990). If the order is ambiguous, the court "must construe its meaning, and in so doing may resort to the record upon which the [order] was based." See id. The reviewing court must construe the order so as "to give it full effect." Anderson v. Stephens, 875 F.2d 76, 80 (4th Cir. 1989). In so doing, the court considers "what preceded [the order] and what [the order] was intended to execute." Id. (quotation omitted); see Union Pac. R.R. v. Mason City & Fort Dodge R.R., 222 U.S. 237, 247, 32 S.Ct. 86, 56 L.Ed. 180 (1911).
An appellate court reviews a lower court's interpretation of its own orders in light of the fact that the issuing court is best situated to interpret its orders, and that the issuing court's interpretation is entitled to "substantial deference," which equates to review for abuse of discretion. United States v. Parris, 639 F. App'x 923, 927 (4th Cir. 2016) (per curiam) (unpublished); see Wolfe v. Clarke, 718 F.3d 277, 284 (4th Cir. 2013) ; United States v. Moussaoui, 483 F.3d 220, 231 (4th Cir. 2007) ; Vaughns by Vaughns v. Bd. of Educ. of Prince George's Cty., 758 F.2d 983, 989 (4th Cir. 1985) ; Stephens, 875 F.2d at 80 n.8. When interpreting its orders, an issuing court "abuses its discretion if a decision is guided by erroneous legal principles or rests upon clearly erroneous factual findings." Parris, 639 F. App'x at 927 ; see United States v. Barber, 119 F.3d 276, 283 (4th Cir. 1997) (en banc); Wilson v. Volkswagen of Am., Inc., 561 F.2d 494, 506 (4th Cir. 1977).
Keesee first asserts that a court must construe any ambiguity in the Sanctions Order to his benefit, citing a line of out-of-circuit cases discussing contempt orders. See [D.E. 16] 24–25. Those cases are not analogous to this case, and the Fourth Circuit does not require the approach described in those cases. See Wolfe, 718 F.3d at 284 ; Vaughns, 758 F.2d at 989.
Next, Keesee argues that the bankruptcy court interpreted the Sanctions Order to prohibit all litigation between Keesee and Mitchell. See [D.E. 16] 25–26. Keesee raised the argument with the bankruptcy court, and the bankruptcy court rejected it. See [D.E. 1-1] 15. The argument has not gotten better with age, and this court rejects it as well. The Sanctions Order limits the injunction against Keesee to "any claim or action against [Mitchell] that arises from, or relates to, the [Divorce Action] or [Mitchell's] bankruptcy proceeding." [D.E. 9-1] 58. By its terms, the Sanctions Order allows Keesee to litigate a universe of claims against Mitchell not related to the limited world of claims that the bankruptcy court identified in the Sanctions Order.
Finally, Keesee argues that the record does not support the bankruptcy court's construction of the Sanctions Order because the court relied on "a distinct feeling that Judge Small intended to stop the incessant litigation and punitive behavior." [D.E. 16] 26. Although Keesee accurately quotes one sentence of the bankruptcy court's order, Keesee's argument rips that one sentence from the rest of the bankruptcy court's thorough and comprehensive order. After reciting the underlying facts and explaining its legal reasoning in detail, the bankruptcy court carefully considered "the history between the parties [and] their animosity toward each other." [D.E. 1-1] 15; cf. id. at 16–17. The bankruptcy court is intimately familiar with both. This bankruptcy case is almost nine years old, and the parties have been at each other's throats (through their lawyers) for eleven years. The bankruptcy court held extensive hearings on March 9, 2017, December 7, 2017, and January 17, 2019, that related to ongoing disputes between the parties. Two of the hearings followed Mitchell's show cause motions. The bankruptcy court did not abuse its discretion when it held that Keesee violated the Sanctions Order, specifically enjoined the State Court Actions, and ordered Keesee to dismiss the State Court Actions. See id. at 17. Thus, the court affirms the bankruptcy court's order.
In light of this conclusion, the court need not address whether Keesee's filing of the State Court Actions violate the automatic stay. Cf. [D.E. 16] 11–15.
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IV.
In sum, the court AFFIRMS the Bankruptcy Court Order of July 9, 2019. Keesee is specifically enjoined from litigating the State Court Actions, and SHALL DISMISS the State Court Actions. Keesee is PERMANENTLY ENJOINED from initiating or pursuing any claim or action against Mitchell that arises from or relates to the Domestic Action, the Agreement, or Mitchell's bankruptcy proceedings. The clerk shall close the case.
SO ORDERED. This 30th day of March 2020.