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In re Bay Point Associates

March 19, 2008

IN RE: BAY POINT ASSOCIATES, DEBTOR.


The opinion of the court was delivered by: Seybert, District Judge

E.D. Bankr. Case No. 05-1356

MEMORANDUM AND ORDER

Pending before this Court is Waterways Development Corporation's appeal from an order of the United States Bankruptcy Court, dated February 7, 2007, whereby United States Bankruptcy Judge Dorothy Eisenberg permissively abstained from hearing an adversary proceeding commenced by Appellant. For the reasons stated herein, the Order of the Bankruptcy Court is AFFIRMED.

BACKGROUND

I. The Facts

Appellant, Waterways Development Corporation, is the owner of certain property located in the Town of Brookhaven, New York (the "Property"). Appellant acquired the Property in 1997 from Post Village, Inc. ("Post"), which in turn purchased the property with permission of the Bankruptcy Court from the Chapter 7 bankruptcy estate of Bay Pointe Associates ("Bay Pointe").

Appellee, the Town of Brookhaven ("Town"), is a local municipal agency in Suffolk County, New York. In 1984, the Town approved a site plan (the "Site Plan") proposed by Bay Pointe for the construction of three-story "mid-rises" on the property (the "Mid-Rises"). In 1985, the Town of Brookhaven's Planning Board granted Bay Point a height variance which enabled Bay Pointe to build the Mid-Rises. In 1986, the Planning Board granted a continuation of the variance (the "1986 Height Variance"). The 1986 Height Variance was granted and "approved for life of job."

In 1993, an involuntary bankruptcy petition was filed against Bay Point under Chapter 11 of the Bankruptcy Code. In 1994, the case was converted to a Chapter 7 proceeding, and by 1999, the bankruptcy case was closed. On or about November of 1995, the Chapter 7 Trustee conveyed the remaining parcels of the Mid-Rises to Post.

On or about January 29, 1996, Post commenced an action in state court seeking to extinguish certain covenants. The parties ultimately settled the action, and the state court "so-ordered" the settlement on January 21, 1997 (the "State Court Order"). The day after that order was signed, the Trustee, Town, and Post settled ongoing claims in the bankruptcy court concerning the property, and on January 21, 1997, the late Chief Bankruptcy Judge Conrad B. Duberstein "so-ordered" the stipulation (the "1997 Bankruptcy Order"). The 1997 Bankruptcy Order and the State Court Order contained a nearly identical provision whereby the parties acknowledged that the site plan would be binding, as revised, between Post and the Town and Post could continue construction on the Mid-Rises without any further approval from the Town. Sometime thereafter, Appellant purchased the property with the intent of completing construction of the Mid-Rises.

In 2001, the Town Attorney for the Town of Brookhaven advised Appellant that the 1986 Variance had lapsed, and Appellant would have to apply for a new variance. Appellant disagreed, and argued that the 1986 Variance had not lapsed because it was valid "for life of job."

In July 2003, Appellant commenced an action in New York Supreme Court for the County of Suffolk seeking, inter alia, a judgment against the Town declaring that the 1986 Variance was valid for the life of the project, and that the State Court Order and the 1997 Bankruptcy Court Order allowed Appellant to continue construction on the Mid-Rises without any further approval from the Town. The state court dismissed the case as not ripe for adjudication because Appellant failed to exhaust its administrative options before the Town Zoning Board of Appeals.

On April 14, 2005, Appellant filed a motion before the bankruptcy court to reopen Bay Point's bankruptcy proceeding for the purpose of enforcing the 1997 Bankruptcy Order and validating the 1986 Height Variance as to Appellant. The case was reopened on August 17, 2005. In September of 2005, Appellant commenced an adversary proceeding against the Town seeking to enforce the 1997 Bankruptcy Order and validate the 1986 Height Variance. In November of 2005, the presiding judge, the Honorable Conrad B. Duberstein, passed away. The matter was reassigned to Judge Eisenberg in December of 2005. Sometime thereafter, Appellees' filed a motion for mandatory abstention under 28 U.S.C. § 1334(c)(2), or in the alternative, permissive abstention under 28 U.S.C. § 1334(c)(1). On February 7, 2007, the Bankruptcy Court permissively abstained from hearing Waterway's adversary proceeding. In granting Appellees' motion for permissive abstention, the Court found that abstention was warranted "in the interest of justice, or in the interest of comity with state courts or respect for State law."

In determining whether abstention is warranted, a bankruptcy court may consider some or all of the following twelve factors:

(1) the effect, or lack thereof, of abstention on the debtor's estate; (2) the extent to which state law issues predominate over bankruptcy issues; (3) the difficulty or unsettled nature of the applicable state law; (4) the presence of a related proceeding commenced in state court; (5) the jurisdictional basis, if any, other than 28 U.S.C. ยง 1334; (6) the degree of relatedness or remoteness of the proceeding to the main bankruptcy case; (7) the substance rather than the form of an asserted "core" proceeding; (8) the feasibility of severing state law claims from core bankruptcy matters to allow judgment to be entered into state court with enforcement left to the Bankruptcy Court; (9) the burden on the court's ...


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