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In re IMMC Corp.

United States District Court, D. Delaware

January 2, 2018

IN RE IMMC CORPORATION, f/k/a IMMUNICON CORPORATION, et al., Debtors.
v.
EDWARD L. ERICKSON, BYRON HEWETT, LEON TERSTAPPEN, JAMES L. WILCOX, ELIZABETH E. TALLETT, J. WILLIAM FREYTAG, ZOLA P. HOROVITZ, JAMES G. MURPHY, BRIAN GEIGER, JONATHAN COOL, and ALLEN J. LAUER, Appellees. ROBERT F. TROISIO, as Liquidating Trustee of IMMC CORPORATION, Appellant, Bankr No. 08-11178 (KJC)

          MEMORANDUM OPINION

         I. INTRODUCTION

         Presently before the court is the appeal (D.I. 1) of Robert F. Troisio ("Appellant"), liquidating trustee of IMMC Corporation (f/k/a Immunicon Corporation), of the Bankruptcy Court's decision denying Appellant's motion to transfer an adversary proceeding, [1] pursuant to 28 U.S.C. § 1631, to the United States District Court for the Eastern District of Pennsylvania (the "E.D.Pa. Court"), and denying Appellant's renewed motion regarding same, based on the Bankruptcy Court's conclusion that it lacked authority under 28 U.S.C. § 1631 to transfer the proceeding. For the reasons set forth below, the court will affirm the Bankruptcy Court's decision.

         II. BACKGROUND

         On June 11, 2008, the above-captioned debtors filed a petition for relief under Chapter 11 of the Bankruptcy Code. On November 7, 2008, the Bankruptcy Court confirmed the debtors' plan of liquidation. Pursuant to the plan, Appellant was appointed as liquidating trustee to implement wind-down of the debtors' affairs and liquidation of the debtors' property, and also to pursue certain causes of action. On September 18, 2010, Appellant filed a complaint initiating the adversary proceeding and asserting breach of fiduciary duty claims against the debtors' former officers and directors ("Appellees"). (See B.D.I. 1.)

         By Memorandum Order dated December 29, 2011, the Bankruptcy Court determined that it was without jurisdiction to decide the claims asserted in the adversary proceeding but scheduled a further hearing to consider Appellant's request that the Bankruptcy Court transfer the adversary proceeding to the E.D.Pa. Court pursuant to 28 U.S.C. § 1631, rather than dismiss the case for want of jurisdiction. See Troisio v. Erickson (In re IMMC Corp.), 2011 WL 6832900, *4 (Bankr. D. Del. Dec. 29, 2011). Whether the Bankruptcy Court has authority to transfer the adversary proceeding to the E.D.Pa. Court is governed by 28 U.S.C. § 1631, which provides:

Whenever a civil action is filed in a court as defined in section 610 of this title or an appeal, including a petition for review of administrative action, is noticed for or filed with such a court and that court finds that there is a want of jurisdiction, the court shall, if it is in the interest of justice, transfer such action or appeal to any other such court in which the action or appeal could have been brought at the time it was filed or noticed, and the action or appeal shall proceed as if it had been filed in or noticed for the court to which it is transferred on the date upon which it was actually filed in or noticed for the court from which it is transferred.

28 U.S.C. § 1631 (emphasis added); see also McLaughlin v. Arco Polymers, Inc., 721 F.2d 426, 428 n.2 (3d Cir. 1983) (quoting statute with same emphasis)). In response to Appellant's transfer request, Appellees argued that the Bankruptcy Court lacked authority to transfer the adversary proceeding under § 1631 because a bankruptcy court is not a "court" as defined in 28 U.S.C. § 610, which provides:

As used in this chapter the word "courts" includes the courts of appeals and district courts of the United States, the United States District Court for the District of the Canal Zone, the District Court of Guam, the District Court of the Virgin Islands, the United States Court of Federal Claims, and the Court of International Trade.

28 U.S.C. § 610. Appellees argued that bankruptcy courts are not included in the express language of 28 U.S.C. § 610. Appellees further asserted that a review of legislative history demonstrates Congressional intent to limit the transfer power of § 1631 and likewise to exclude bankruptcy courts from the definition of "courts" under § 610. Conversely, Appellant argued that the Third Circuit has recognized a bankruptcy court's authority to transfer cases pursuant to § 1631 in the Seven Fields case, which included a footnote stating: "[W]hen a civil action is filed with a district court (of which the bankruptcy court is a unit) with a want of jurisdiction the court shall in the interest of justice transfer the case to a court in which it could have been filed originally." See Seven Fields Dev. Corp., 505 F.3d 237, 247 n.8 (3d Cir. 2007).

         A. The 2012 Decision

         Following briefing and oral argument, the Bankruptcy Court denied the request to transfer the adversary proceeding to the E.D.Pa. Court. See Troisio v. Erickson (In re IMMC Liquidating Estate), 2012 WL 523632, at *4 (Bankr. D. Del. Feb. 14, 2012) (the "2012 Decision"). In reaching its conclusion, the Bankruptcy Court noted the exclusion of bankruptcy courts from the statute and rejected the argument that the statute should be construed broadly based on legislative intent:

The Defendants contend that the legislative history demonstrates Congressional intent to limit the transfer power of § 1631, since an early draft of the proposed language allowed for a transfer between any two courts of the United States to cure defects in venue as well as jurisdiction; but "[t]he final version enacted by Congress is more narrow and permits transfer between any two federal courts, as defined in 28 U.S.C. § 610 (1986), to cure a defect in jurisdiction, and eliminates any reference to a transfer to cure a defect in venue."

IMMC, 2012 WL 523632, *2 (quoting J. Tayon, The Federal Transfer Statute: 28 U.S.C. § 1631, 29 S. Tex. L. Rev. 189, 199 n. 58 (1987) (emphasis in original)). The Bankruptcy Court found that a review of legislative history of § 610 likewise demonstrated Congressional intent to exclude bankruptcy courts from its definition of "courts":

The "Historical and Statutory Notes" to 28 U.S.C. § 610 advise that Congress amended § 610 in 1978 by substituting "district courts, and bankruptcy courts" for the phrase "and district courts" (the "1978 Amendment"). However, due to extensions of this provision's effective date, the 1978 Amendment was valid for only a 12-day period (from June 28, 1984 to July 10, 1984) because a 1984 statute provided that the 1978 Amendment "shall not be effective." These legislative gymnastics ultimately kept bankruptcy courts from express inclusion in § 610, supporting the view that the failure to include bankruptcy courts in § 610 was not an oversight, but a purposeful act.

IMMC, 2012 WL 523632, at *2 (citations and footnotes omitted). The Bankruptcy Court further concluded that the footnote in Seven Fields was dicta and that the exclusion of bankruptcy courts from the express language of §§ 1631 and 610, together with the legislative history of those sections, cast doubt on the Bankruptcy Court's authority to transfer the adversary proceeding. See id. at *2.[2]

         B. The 2015 Decision

         On February 19, 2015, Appellant filed with the Bankruptcy Court a renewed motion to transfer the adversary proceeding to the E.D.Pa. Court, which cited In re DMW Marine, LLC, 509 B.R. 497 (Bankr. E.D. Pa. 2014) in support. (See B.D.I. 58.) In support of the renewed motion, Appellant also submitted a Notice of Supplemental Authority, which cited Wellness Int'l Network, Ltd. v. Sharif, 135 S.Ct. 1932 (2015). (See B.D.I. 64.) Following oral argument (see B.D.I. 65), the Bankruptcy Court denied the renewed motion, finding that neither of the decisions cited by Appellant changed the law or addressed the authority of a bankruptcy court to transfer a case pursuant to § 1631; rather, the Bankruptcy Court concluded, those cases were "offered in support of [Appellant's] initial position - that this Court is a 'court' within the meaning of 28 U.S.C. § 610." See Troisio v. Erickson (In re IMMC Corp.), 2015 WL 6684638, at *2 (Bankr. D. Del. Oct. 30, 2015) (the "2015 Decision"). The Bankruptcy Court denied the renewed motion as it "remain[ed] convinced that the express language and legislative history of § 610 supports the proposition that Congress did not intend to include bankruptcy courts in the definition of 'courts.'" Id.

         C. Request for Certification of Direct Appeal to the Third Circuit

         On November 11, 2015, Appellant filed a notice of appeal with respect to both the 2012 Decision and the 2015 Decision. (See D.I. 1.) On the same day, Appellant filed a motion seeking certification of the appeal directly to the United States Court of Appeals for the Third Circuit pursuant to 28 U.S.C. § 158(d)(2)(A). (See D.I. 2.) According to the Certification Motion, the appeal presented the following issue: "Whether bankruptcy judges have the authority to order a transfer of an adversary proceeding pursuant to 28 U.S.C. § 1631." (D.I. 2 at 1.) On January 28, 2016, the court certified the issue for direct appeal to the Third Circuit, pursuant to 28 U.S.C. § l58(d)(2)(A)(i), on the basis that the appeal raised a question of law as to which there is no controlling decision of the Third Circuit or of the Supreme Court. Troisio v. Erickson (In re IMMC Corp.), 2016 WL 356026 (D. Del. Jan. 28, 2016). However, Appellant subsequently failed to perfect the appeal by filing a petition for permission with the circuit clerk as required by Federal Rule of Bankruptcy Procedure 8006(g). Consequently, on April 12, 2016, Appellant filed a motion to reopen and proceed with the appeal in this court (D.I. 9) ("Motion to Reopen"). On May 17, 2016, the court granted the Motion to Reopen. Troisio v. Erickson (In re IMMC Corp.), 2016 WL 2899247 (D. Del. May 17, 2016). Briefing on the merits of the appeal concluded on June 19, 2017. (See D.I. 24, 25, 26.)

         III. PARTIES' CONTENTIONS

         Appellant argues that bankruptcy courts should be deemed one of the "courts" with transfer authority because § 610 includes the "district courts of the United States." (See D.I. 24 at 5 (quoting 28 U.S.C. § 610)) Appellant primarily relies on language in 28 U.S.C. § 151, which describes bankruptcy judges as a "unit" of the district court. (See Id. at 7.) Appellant further argues that the Bankruptcy Court's interpretation is at odds with legislative intent behind § 1631, which is to ensure that litigants have their day in court unimpeded by technicalities of procedure. (See Id. at 5, 11-12.) Appellant further argues that the Bankruptcy Court's conclusion ignored the Third Circuit's statement in Seven Fields, as well as the reasoning set forth in Schaefer Salt Recovery, Inc., 542 F.3d 90, 105 (3d Cir. 2008). (See Id. at 10.) In Schaefer, Appellant contends, "[t]he Third Circuit held unequivocally that bankruptcy courts, as units of the district court, come within the definition of 'courts' in 28 U.S.C. § 451 and therefore have the authority to impose sanctions under Rule 11 [of the Federal Rules of Civil Procedure], " and that this reasoning should "appl[y] equally to 28 U.S.C. §§ 610 and 1631." (See Id. at 5) Finally, Appellant argues that, even if the Bankruptcy Court was not authorized under section 1631 to transfer the adversary proceeding to the E.D.Pa. Court, the Bankruptcy Court was authorized under § 105(a) of the Bankruptcy Code[3]and/or 28 U.S.C. §§ 157[4] or 1412.[5] (See Id. at 12-14.) On this basis, Appellant urges the court to reverse the Bankruptcy Court's 2012 and 2015 Decisions, reinstate the adversary proceeding, and transfer same to the E.D.Pa. Court. (Id. at 15.)

         Conversely, Appellees argue that the plain language of the statute is dispositive of the issue on appeal and that legislative history of both sections demonstrates Congressional intent to limit courts with transfer authority. (See D.I 25 at 6-11.) While early drafts of the Federal Courts Improvement Act of 1984, which enacted § 1631, proposed language that would have allowed transfer between any two courts of the United States to cure defects in venue and jurisdiction, the final version as enacted did not. According to Appellees, the legislative history of § 610 further supports the Bankruptcy Court's conclusion that "the failure to include bankruptcy courts in § 610 was not an oversight, but a purposeful act." IMMC, 2012 WL 523632 at *2. Appellees argue that the Bankruptcy Court was correct not to give any weight to the Third Circuit's dicta in Seven Fields in this case, and that because the Schaefer decision did not address a bankruptcy court's transfer authority, its reasoning does not control on this issue either. (Id. at 13-17.) Appellant's alternative arguments - that the Bankruptcy Court erred in denying transfer because transfer was authorized under 11 U.S.C. § 105(a), 28 U.S.C. § 157, and/or 28 U.S.C. § 1412 - must be denied, according to Appellees, because those arguments were waived, are outside of the scope of this appeal, and are otherwise meritless. (See Id. at 19-22.)

         IV. JURISDICTION AND ...


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