TC Healthcare I, LLC v. Dupuis (In re Haven Eldercare, LLC)
- Summarized by Weston Eguchi , Willkie Farr & Gallagher LLP
- 12 years 1 month ago
- Citation:
- TC Healthcare I, LLC v. Dupuis (In re Haven Eldercare, LLC), Case No. 12-468-bk (2d Cir. Nov. 15, 2012) (summary order) [Not Precedential]
- Tag(s):
-
- Ruling:
- The Circuit Court AFFIRMED the District Court judgment barring, as res judicata, the motion of the Appellant, a Section 363 purchaser of the Debtor's assets, seeking an order declaring that Appellant is not liable to the Appellee, the counterparty to a prepetition contract with the Debtor, where Appellee obtained a state small claims court judgment prior to the filing of the motion. (1) Appellant argued that the bankruptcy court retained exclusive jurisdiction over any disputes relating that order, therefore res judicata does not apply because the state court was without jurisdiction. The Second Circuit rejected Appellant's argument, despite the wording of the sale order, because 28 U.S.C. Sec. 1334(b) provides bankruptcy courts with "original but not exclusive jurisdiction" over claims such as the Appellee's which are related to bankruptcy proceedings; therefore, the bankruptcy court's jurisdiction was concurrent, not exclusive. Moreover, even if jurisdiction were exclusive, the doctrine of res judicata applied because the state court had not "usurped" the bankruptcy court's jurisdiction where the Appellant has the opportunity to contest jurisdiction at a hearing but failed to do so. (2) The Second Circuit also rejected Appellant's argument that small claims courts are without res judicata effect as contrary to relevant case law. (3) Lastly, the Second Circuit rejected Appellant's last argument (that res judicata does not preclude an order barring enforcement of the judgment) because Appellant only raised it for the first time on appeal, and therefore waived the argument.
- Procedural context:
- Debtors sold certain facilities to Appellant TC Healthcare I, LLC ("TC Healthcare") pursuant to a Section 363 sale order authorizing the sale free and clear of all liens, claims or encumbrances. After the sale, Appellee Racheal Dupuis ("Ms. Dupuis") successfully obtained a judgment in Vermont state court holding TC Healthcare liable to Ms. Dupuis under Ms. Dupuis' prepetition contract with the Debtors. TC Healthcare subsequently filed a motion in the bankruptcy court seeking to enforce its sale order and seeking an order declaring that it was not liable to Ms. Dupuis. The U.S. Bankruptcy Court for the District of Connecticut denied TC Healthcare's motion as barred by the Rooker-Feldman Doctrine. Appellant appealed, and the District Court affirmed the bankruptcy court's on the alternate ground that the motion was barred by res judicata. The Second Circuit affirmed the District Court's decision.
- Facts:
- Appellee Ms. Dupuis and the Debtors were parties to a prepetition contract regarding tuition reimbursement. In the course of the Debtors' bankruptcy, the Appellant TC Healthcare entered into an agreement to purchase and operate certain of the Debtors' facilities, which sale was approved pursuant to a Section 363 order, authorizing the sale free and clear of any liens, claims or encumbrances.
- Judge(s):
- Barrington D. Parker, Reena Raggi, and Gerard Lynch.
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