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Vornado Realty Trust v. Marubeni Sustainable Energy

November 4, 2009


The opinion of the court was delivered by: Dora L. Irizarry, United States District Judge


Pursuant to 28 U.S.C. §§ 157 and 1404(a), defendant Castlton Environmental Contractors, LLC ("CEC") moves to transfer the claims asserted against it in the instant action from this court to the United States District Court for the Southern District of New York ("S.D.N.Y."), with a recommendation that the matter be referred to the S.D.N.Y. Bankruptcy Court. Plaintiffs oppose the motion on the grounds that such a transfer would be both inefficient, and contrary to their strong interest in litigating this matter in this district. For the reasons set forth below, defendant's motion is denied.

I. Background

In September of 2000, Castlton Environmental Contractors, Inc. (the "Original Entity," not to be confused with defendant CEC) assisted in the design and installation of a system of oil storage tanks on property owned by Vornado Realty Trust, Alexander's Inc., Alexander's of Brooklyn, Inc., Alexander's Kings Plaza Center, Inc., and Alexander's Kings Plaza, LLC (collectively, the "plaintiffs") at the Kings Plaza Shopping Center in Brooklyn, New York. (Amend. Compl. at 2, 5.) On September 30, 2003, the Original Entity filed for Chapter 11 bankruptcy protection in the S.D.N.Y. (Pls.' Declr. in Opp. Mot. to Trans. Ven. ("Doc. 53"), Ex. E at 1.) During the bankruptcy proceedings, on March 26, 2004, CEC became incorporated under the laws of the state of Delaware. (Mot. to Trans. Ven. ("Doc. 32-1") at 3.) CEC then purchased certain liquidated assets of the Original Entity, in accordance with the bankruptcy court's April 16, 2004 sale order.*fn1

On July 6, 2006, plaintiffs discovered a petroleum leak at the Kings Plaza site, allegedly from the storage tanks installed, in part, by the Original Entity. (Amend. Compl. at 6.) Plaintiffs then commenced the instant action against CEC and other named and unnamed defendants, pursuant to the federal Resource Conservation and Recovery Act and several state causes of action. (Amend. Compl. at 1--3.) On January 29, 2009, CEC filed the instant motion, requesting that the claims against it be transferred to the S.D.N.Y. with a recommendation for referral to the bankruptcy court.*fn2

The first issue before this court is whether the Order precludes it from adjudicating the instant matter. If the Order does not, this court must nevertheless determine whether to transfer venue pursuant to its discretion under 28 U.S.C. § 1404. For the reasons set forth below, the court finds it is not precluded from adjudicating this matter and the motion to transfer venue is denied.

II. Discussion

A. Bankruptcy Court's Power to Preclude District Court Proceedings

Defendant CEC contends that the following language contained in the Order deprives this court of jurisdiction over this matter, retaining for the bankruptcy court: sole and exclusive jurisdiction with respect to (a) any matter arising from or related to [the Order]; (b) the enforcement and implementation of [the Order]; (c) the resolution of any and all disputes under or related to [the Order]; and (d) the interpretation of [the] Order. (Order ¶ 18.) CEC further contends that only the S.D.N.Y. Bankruptcy Court may interpret and enforce its Order. Plaintiffs oppose defendant's motion, arguing that this court may in fact adjudicate their claims and CEC's defense.*fn3 With respect to the court's exercise of discretion to transfer this matter, plaintiffs oppose transfer on the grounds that it would be inefficient, creating duplicate litigation from the same nexus of facts in two different venues.*fn4 Furthermore, plaintiffs argue that their choice of the Eastern District as the forum to litigate their claims weighs heavily against a transfer.

In the Second Circuit, "[a] bankruptcy court retains post-confirmation jurisdiction in a Chapter 11 proceeding only to the extent provided in the plan of reorganization." In re Johns-Manville Corp., 7 F.3d 32, 34 (2d Cir. 1993) (citations omitted). For this reason, jurisdictional retention language similar to that contained in the Order is common. See, e.g., Savoy Senior Housing Corp. v. TRBC Ministries, LLC, 401 B.R. 589, 596--97 (S.D.N.Y. 2009); CarcasoleLacal v. American Airlines, Inc., No. 02-CV-4359, 2003 WL 21525484, at *4 n.12 (E.D.N.Y. July 8, 2003). Such language ensures that bankruptcy courts retain jurisdiction to "interpret and enforce [their] own orders, particularly when disputes arise over a . . . plan of reorganization." In re Petrie Retail, Inc., 304 F.3d 223, 230 (2d Cir. 2002).

Although a bankruptcy court may retain jurisdiction via its own order, it cannot divest a district court of jurisdiction, especially after the underlying bankruptcy proceeding has been closed. See Savoy Senior Housing Corp. v. TRBC Ministries, LLC, 401 B.R. 589, 596 (S.D.N.Y. 2009). In Savoy Senior Housing Corp., the court rejected an argument similar to CEC's, noting that "regardless of how a confirmation order may read, it does not 'confer' jurisdiction." Id. at 597. The S.D.N.Y. further noted that "the Bankruptcy Court is an arm of this Court; if this Court lacks subject matter jurisdiction, then so does the Bankruptcy Court."*fn5

CEC cites two cases in support of its novel position, neither of which is persuasive.*fn6 In 176-60 Union Turnpike, Inc. v. Howard Beach Fitness Center, 209 B.R. 307, 311--12 (S.D.N.Y. 1997), the defendant successfully moved to transfer a breach of contract action from the S.D.N.Y. to the bankruptcy court in this district. However, unlike the instant case, that defendant was a party in a pending bankruptcy, with which the breach of contract action was consolidated. Id. at 310. The instant case is distinguishable because the bankruptcy here was resolved and closed several years before the instant action was filed. (See Doc. 53, Ex. E at 2--4.)

The second case relied on by CEC stands for the proposition that a bankruptcy court can, pursuant to its own order, enjoin a contradictory state court proceeding. See In re Birting Fisheries, Inc., 300 B.R. 489, 501 (9th Cir. 2003). CEC's reliance on this case is misplaced. State courts do not stand in the same position as federal districtcourts, to which bankruptcy courts are clearly subordinate.*fn7 The court declines to adopt CEC's unsupported proposition, and finds that is not bound by ...

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