Opinion
02-CV-492
October 24, 2002
CARTER H. STRICKLAND, ESQ., MACKENZIE HUGHES LLP, Syracuse, NY, STANLEY M. GORINSON, ESQ., CRAIG BERTSCHI, ESQ., JENNIFER W. PERSICO, ESQ., KILPATRICK STOCKTON LLP, Washington, DC, WILLIAM J. BULSIEWICZ, ESQ., OCRRA Agency Counsel, North Syracuse, NY, Attorneys for Plaintiff.
LEE E. WOODARD, ESQ., WENDY A. KINSELLA, ESQ., DAVID M. CAPRIOTTI, ESQ., MARTIN, MARTIN WOODARD, LLP, Syracuse, NY, Attorneys for Defendant.
MEMORANDUM DECISION AND ORDER
Plaintiff Covanta Onondaga Limited Partnership, ("Covanta") has moved pursuant to Rule 62(c) of the Federal Rules of Civil Procedure and 8(a)(1)(c) of the Federal Rules for Appellate Procedure for an Injunction Pending Appeal, requesting that Defendant Onondaga County Resource Recovery Agency ("OCRRA") be restrained and enjoined from proceeding in this action in the New York State Supreme Court, Onondaga County ("the State Court"), and from beginning any other action in any court for the purpose of asserting any matter that has been or could be maintained in the State Court action, pending resolution of Covanta's appeal of this court's September 23, 2002 Memorandum Decision and Order ("the Permanent Injunction") to the United States Court of Appeals for the Second Circuit.
BACKGROUND
On March 1, 2002, Covanta instituted a lawsuit in the State Court alleging that OCRRA breached the conditions of a solid waste disposal agreement ("the Service Agreement") between the parties. OCRRA answered the complaint and moved for partial summary judgment. On April 8, 2002, Covanta then removed the case to the United States District Court for the Northern District of New York, and then moved to transfer the case to the United States Bankruptcy Court for the Southern District of New York. On April 12, 2002, OCRRA moved in the Northern District Court to remand or abstain and remand the case to the State Court, or, in the alternative, for the Northern District Court to retain jurisdiction and hear the case and resolve it on the merits. By order dated August 13, 2002, this court granted OCRRA's motion and remanded the case to the State Court pursuant to the mandatory abstention provisions of 28 U.S.C. § 1334(c)(2).
On September 5, 2002, Covanta instituted an adversary proceeding in the Southern District Bankruptcy Court seeking a declaration from the Bankruptcy Court that the automatic stay set forth in 11 U.S.C § 362 applied to the State Court action initiated by Covanta, or in the alternative, an injunction under the equitable powers granted to the Bankruptcy Court under 11 U.S.C. § 105. On September 12, 2002, OCRRA moved in the Northern District Court for an Order to Show Cause and Temporary Restraining Order barring Covanta's prosecution of the adversary proceeding in the Southern District Bankruptcy Court. After reviewing the papers submitted by the respective parties hearing their oral arguments thereon, in an order dated September 23, 2002, this court granted OCRRA's motion and permanently enjoined Covanta from proceeding with the adversary proceeding in the Southern District Bankruptcy Court.
Covanta filed a Notice of Appeal in the Northern District Court and a Motion to Expedite Appeal in the United States Circuit of Appeals for the Second Circuit, alleging that special exemplary facts exist to warrant an extraordinary finding by the Second Circuit to expedite the appeal over any other pending before it. The Motion to Expedite Appeal motion was granted by the Second Circuit on October 3, 2002.
On October 1, 2002, Covanta moved for an order from this court requesting injunctive relief pending appeal, and a temporary restraining order ("TRO") pending oral argument on the motion. On October 4, 2002, this court denied the request for a TRO. The parties presented there oral argument on the motion to the court on October 11, 2002.
DISCUSSION
The standard for granting a stay pending appeal is well established. The party seeking the stay must demonstrate:
(1) whether the movant will suffer irreparable injury absent a stay,
(2) whether a party will suffer a substantial injury if a stay is issued,
(3) whether a movant has demonstrated "a substantial possibility, although less than a likelihood of, success on appeal," and
(4) the public interest that may be effected.
Hirschfeld v. Board of Elections, 984 F.2d 35, 39 (2d Cir. 1993). The moving party must show satisfactory evidence of all four criteria. In re Charles Lilian Brown's Hotel, Inc., 93 B.R. 49, 53 (Bankr.S.D.N.Y. 1988). "[Movant's] failure to satisfy one prong of the standard for granting a stay pending appeal dooms this motion." Green Point Bank v. Treston, 188 B.R. 9,12 (S.D.N.Y. 1995).
Covanta's request for a stay pending appeal cannot succeed, since it has not satisfied all criteria of the standard. It has not demonstrated "a substantial possibility although less than the likelihood of success on the merits." Hirschfeld, 984 F.2d at 39, and cannot do so. The question of stay application in this action is moot because a federal bankruptcy court is not empowered to hear this case.
As this court explained in its abstention Memorandum Decision and Order of August 13, 2002: In Northern Pipeline Construction Co. v. Marathon Pipe Line Co., 450 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982) (plurality opinion), the Supreme Court held that it is unconstitutional for "a bankruptcy court to adjudicate a state breach of contract claim brought by a debtor against a defendant who has not filed a claim with the Bankruptcy Court, when the contract was executed prior to the filing of the bankruptcy petition." 458 U.S. at 87, 102 S.Ct. at 2880) McMahon v. Providence Capitol Enterprises, Inc., 222 B.R. 205, 207 (S.D.N.Y. 1998). The fact that Coventa's state court action also requests declaratory relief does not obscure the essentially legal nature of the action. The questions involved are traditional common law issues which can and should be decided by a jury. Simler v. Connor, 372 U.S. 221, 223, 83 S.Ct. 609, 611, 9 L.Ed.2d 691 (1963). Following Marathon, it is well-settled that [the Constitution] prohibits bankruptcy courts from adjudicating pre-petition contract claims — that is, claims arising prior to the bankruptcy." Tultex Corp. v. Freeze Lids, L.L.C., 252 B.R. 32, 36 (S.D.N.Y. 2000) (citing Phillips Constructors v. City of Burlington, Vermont, 45 F.3d 702, 705 (2d Cir. 1995). Hence, the Second Circuit has held that "a breach of contract action by a debtor against a party to a pre-petition contract, who filed no claim with the bankruptcy court is non-core." Orion Pictures Corp v. Showtime Networks, Inc., 4 F.3d 1095, 1102 (2d Cir. 1993). In light of the Second Circuit's admonition that district court's should be ever mindful that "there is no evidence of any Congressional intent to contravene the Supreme Court's ruling in Marathon," Orion Pictures Corporation v. Showtime Networks, Inc., 4 F.3d 1095 (2d Cir. 1993), and not wanting to create an "exception to Marathon that would swallow the rule," id, this court finds that because the proceedings in the instant case duplicate those in Orion, i.e. a debtor instituted a pre-petition breach of contract action, and the defendant not filing a proof of claim or counterclaims against the bankrupt estate, it is also non-core, and therefore not subject to bankruptcy court jurisdiction without the consent of the parties.
Accordingly, for the reasons set forth above, Plaintiff-Appellant Covanta's motion for an injunction pending appeal is DENIED.
IT IS SO ORDERED