11th Circuit Reverses, Says Court Where Bankruptcy Case Was Filed Has Jurisdiction

ATLANTA - (Mealey's) A panel of the 11th Circuit U.S. Court of Appeals on May 30 reversed and remanded a case and ruled that the bankruptcy court in which a debtor filed its petition has jurisdiction over whether a claim against the estate was discharged (Alderwoods Group Inc., et al. v. Reyvis Garcia, et al., No. 10-14726, Chapter 11, 11th Cir.; 2012 U.S. App. LEXIS 10891) [an enhanced version of this opinion is available to lexis.com subscribers].
 
In 1999, the Alderwoods Group Inc. filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the District of Delaware.
 
Petition, Discharge

Alderwoods had purchased Osiris Holding of Florida Inc., which operated Graceland Cemetery. Later, Northstar Graceland LLC purchased the cemetery from Alderwoods.

The Bankruptcy Court confirmed a reorganization plan, and the bankruptcy was discharged in 2002.

In 2008, Reyvis Garcia, Ramona Johnson and Mercedes Woodberry filed a class action tort claim against Alderwoods in the Miami-Dade County, Fla., Circuit Court against Alderwoods, naming also its successors Osiris and Northstar.
 
Tort Alleged

The class contended that Alderwoods was unable to locate the gravesites of their family members, causing them damages. The claims were based on common law theories of tortious interference with dead bodies, intentional or reckless infliction of emotional distress, and gross negligence under Florida tort law.

Alderwoods filed a complaint against the class members in the U.S. Bankruptcy Court for the Southern District of Florida, contending that under 28 U.S. Code Sections 157 and 13345 the claims had been discharged in bankruptcy.

Alderwoods sought a Bankruptcy Court order enjoining the class members from pursuing their case in state court.
 
Jurisdiction

The class members moved in the Florida Bankruptcy Court for an order dismissing Alderwoods' complaint for lack of subject matter jurisdiction. In the alternative, the class members asked that the court abstain from exercising jurisdiction and/or remand the case to state court.

The Bankruptcy Court denied the class members' motion and concluded that it had jurisdiction and that neither abstention nor remand was required or appropriate.

The Bankruptcy Court also held that the claims brought by the class members in Florida state court had not been discharged in bankruptcy.
 
Discharge Injunction

Alderwoods appealed to the U.S. District Court for the Southern District of Florida, which affirmed the Bankruptcy Court's ruling. Alderwoods then appealed to the 11th Circuit, where the case was heard by a panel comprising Circuit Judges Gerald Bard Tjoflat and Beverly B. Martin and U.S. Judge Robert T. Dawson of the Western District of Arkansas, sitting by designation.

The panel said that the crucial issue in the case was determining which court has the power to enforce the discharge injunction, given the fact that two separate bankruptcy courts were used in the filing of the initial petition and the subsequent lawsuit filed by the debtor after the discharge was granted by the first bankruptcy court.

In light of the jurisdictional issue, the panel said, pursuant to 28 U.S. Code Section 1334(e)(1), the District Court in which a case under Title 11 of the Bankruptcy Code is commenced or is pending shall have exclusive jurisdiction of all the property involved in the bankruptcy proceeding wherever it may be located.
 
28 U.S. Code Section 1334

In the case at hand, it is apparent that if the class members' filing of the state court action indeed violated the discharge injunction contained in the confirmation order, then it was the Delaware Bankruptcy Court's injunction to enforce, not the Florida Bankruptcy Court's, the panel said.

The Chapter 11 case was administered by the Delaware Bankruptcy Court and that court confirmed Alderwoods' reorganization plan and entered the order discharging its preconfirmation liabilities, the panel added; therefore, the Delaware Bankruptcy Court must be the one to determine if the class members' claims were discharged in bankruptcy.

Alderwoods and Osiris are represented by Ted Christopher Craig of GrayRobinson in Miami and Samuel Danon, Jamie Zysk Isani and Andrew D. Zaron of Hunton & Williams in Miami.

Northstar is represented by Robin Corwin Campbell of Kopelowitz Ostrow in Fort Lauderdale, Fla., and Alan J. Perlman of Yoss in Fort Lauderdale. The class members are represented by Charles W. Throckmorton, David Aaron Samole, Kozyak Tropin & Throckmorton in Coral Gables, Fla.
 
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