Opinion
No. 13-01-15799 MA, Adversary No. 02-1163 M
April 22, 2004
Michael K. Daniels, Albuquerque, NM, for Plaintiffs
William R. Keleher, Albuquerque, NM, for Defendant
ORDER GRANTING MOTION TO DISMISS
THIS MATTER is before the Court on the Motion to Dismiss filed by Defendant Discover Novus Network, d/ b/ a Novus Network Services ( Discover), by and through its attorneys of record, Modrall, Sperling, Roehl, Harris, Sisk, P. A. (William R. Keleher). Plaintiffs are represented by Michael K. Daniels. The Court heard final argument on the Motion to Dismiss on April 13, 204, at which time the Court took the matter under advisement.
Discover seeks dismissal of this adversary proceeding on grounds that the cause of action raised by this adversary proceeding is property of Alcayata Corporation (Alcayata), not Albert and Mary Ellen Schimmel (together, the Schimmels), and is, therefore, not a core proceeding within the meaning of 28 U.S.C. § 157. Plaintiffs assert that this Court should exercise its related to jurisdiction over this adversary proceeding because the Schimmels are 100% shareholders of Alcayata Corporation, which is no longer doing business, and because they propose to contribute any recovery under this adversary proceeding to their chapter 13 plan of reorganization. This Court finds that this adversary proceeding is neither core nor related to the Schimmels bankruptcy proceeding; therefore, it is appropriate to grant Discovers Motion to Dismiss. Bankruptcy courts have jurisdiction over core proceedings and proceedings that are otherwise related to cases under title 11. 28 U.S.C. § 1334; 28 U.S.C. § 157. Core proceedings include those types of proceedings enumerated under 28 U.S.C. § 157(b)(2). Generally, a proceeding is core when it would not otherwise exist outside the bankruptcy context. Gardner v. United States (In re Gardner), 913 F.2d 1515, 1518 (10 th Cir. 1990) (citing In re Alexander, 49 B.R. 733, 736 (Bankr. D. N. D. 1985)). A proceeding is otherwise related to a case under title 11 only if the outcome of the adversary proceeding could conceivably have any effect on the estate being administered in bankruptcy. Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3d Cir. 1984). This adversary proceeding concerns alleged breach of contract claims between Alcayata and Discover. As a preliminary observation, the Court notes that breach of contract claims generally are not core matters. See, e. g., Reed v. Mississippi Farm Bureau Mut. Ins. Co., 299 B.R. 804, 807 (S.D. Miss. 2003 ) (Debtors claims against homeowners insurer and mortgagee for breach of contract and other claims were not core proceedings). Moreover, none of the allegations in the Complaint concern application of the bankruptcy laws. Therefore, this adversary proceeding is not a core proceeding.
More importantly, this adversary proceeding is not within the Courts related to jurisdiction because it involves a dispute between non-debtor parties that will have no direct impact on the bankruptcy estate. See Beneficial National Bank USA v. Best Reception Systems, Inc. (In re Best Reception Systems, Inc.), 220 B.R. 932, 947 (Bankr. E. D. Tenn. 1998) (noting that generally, bankruptcy courts do not have related to jurisdiction over disputes between non-debtor third parties) (citing Sanders Confectionery Prods., Inc. v. Heller Fin. Inc., 973 F.2d 474, 483 (6 th Cir. 1992)). Bankruptcy courts can have related to jurisdiction over disputes between non-debtor parties, but only if the outcome of the lawsuit will effect the bankruptcy estate. Id. at 944. Here, because the cause of action is owned by Alcayata, not the Schimmels, any recovery under this adversary proceeding would belong to Alcayata, and would not have a direct effect on the Schimmels individual bankruptcy estate. The fact that the Schimmels own 100% of the outstanding shares of Alcayata, that Alcayata no longer conducts business, and that the Schimmels plan to contribute any recovery from this adversary proceeding to fund their chapter 13 plan does not change this analysis. But cf. Kolinsky v. Russ (In re Kolinsky), 100 B.R. 695, 703 (Bankr. S.D. N.Y. 1989) (holding that dispute between non-debtor parties over rescission of contract between chapter 11 debtors wholly-owned subsidiary and purchasers of that subsidiarys assets would have sufficient impact on the estate for the bankruptcy court to have related to jurisdiction; all parties to the proceeding recognized that the proceeds would be used to fund the debtors plan). The cause of action raised by this adversary proceeding is a corporate asset of Alcayata that has not been transferred or assigned to the Schimmels. It is not, therefore, sufficiently related to the bankruptcy estate for this Court to exercise its jurisdiction. Based on the foregoing, the Court concludes that this adversary proceeding is neither a core proceeding nor a proceeding otherwise related to a case under title 11. WHEREFORE, IT IS HEREBY ORDERED that the Motion to Dismiss is GRANTED.
This adversary proceeding is DISMISSED without prejudice to its being filed in an appropriate forum.
I hereby certify that a true and correct copy of the foregoing was either electronically transmitted, faxed, delivered, or mailed to the listed counsel and parties, on the date file-stamped above.