SAI Holdings Limited, Athol Mfg Corp, Sandusky Liq

UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF OHIO
WESTERN DIVISION
In Re:
SAI Holdings Limited, et al.,
Debtors.
) 	Case No. 	06-33227
) 	(Jointly Administered)
)
) 	Chapter 11
)
)
) 	JUDGE MARY ANN WHIPPLE
MEMORANDUM OF DECISION AND ORDER DENYING
MOTION TO ORDER ABANDONMENT
This case is before the court on Toncee, Inc.’s motion (“Motion”) brought pursuant to 11 U.S.C.
§ 554(b) for an order requiring the Liquidating Agent to abandon real estate that is part of the SAI
Administrative Claim and Creditor Trust (“SAI Trust”), [Doc. # 1522], and the response filed by the SAI
Trust, [Doc. # 1529]. Specifically, Toncee, Inc. (“Toncee”) seeks an order requiring the Liquidating Agent
of the SAI Trust to abandon real property formerly owned by Debtor Athol Manufacturing Corporation that
is located in Butner, North Carolina. At a hearing on the Motion, the court raised the issue of its subject
matter jurisdiction with respect to this matter, and the parties subsequently filed supplemental briefs
addressing the issue. [Doc. ## 1534 & 1536]. Having considered the parties arguments, for the reasons that
follow, the Motion will be denied for lack of jurisdiction.
Pursuant to 28 U.S.C. § 1334, the district court has jurisdiction over “all cases under title 11” and
proceedings “arising under,” “arising in,” or “related to a case under title 11.” 	Since these categories
the record of the United States Bankruptcy Court for the Northern District of Ohio.
of this court the document set forth below. This document has been entered electronically in
The court incorporates by reference in this paragraph and adopts as the findings and orders
Dated: August 3 2012
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operate conjunctively to define the scope of jurisdiction, the Sixth Circuit has stated that “it is necessary
only to determine whether a matter is at least ‘related to’ the bankruptcy.” Mich. Employment Sec. Comm'n
v. Wolverine Radio Co. (In re Wolverine Radio Co.), 930 F.2d 1132, 1141 (6th Cir.1991). In determining
“related to” jurisdiction in the post-confirmation context where the estate does not continue in existence,
“the essential inquiry appears to be whether there is a close nexus to the bankruptcy plan or proceeding
sufficient to uphold bankruptcy court jurisdiction over the matter.” 	Thickstun Bros. Equip. Co. v.
Encompass Servs. Corp. (In re Thickstun Bros. Equip. Co.), 344 B.R. 515, 521 (B.A.P. 6th Cir. 2006)
(quoting Binder v. Price Waterhouse & Co. (In re Resorts Int’l, Inc.), 372 F.3d 154, 166-67 (3rd Cir. 2004)).
“‘[M]atters that affect the interpretation, implementation, consummation, execution, or administration of
the confirmed plan will typically have the requisite close nexus.’” Id. (quoting In re Resorts Int’l, Inc., 372
F.3d at 167). On the other hand, as one court has recently summarized, most decisions evaluating post-
confirmation jurisdiction “agree that ‘related to’ jurisdiction requires more than a vague notion that litigation
might increase a dividend to creditors under the plan.” Equip. Finders, Inc. v. Fireman’s Fund Ins. Co. (In
re Equip. Finders, Inc.), No. 3:09-bk-10426, Adv. No. 3:11-ap-00252, 2012 Bankr. LEXIS 2666, *34, 2012
WL 2126312 (Bankr. M.D. Tenn. June 12, 2012).
Initially, the court notes that the provision in Debtors’ Chapter 11 Plan that the court retains
jurisdiction until the plan is fully consummated and in the SAI Trust that the court shall retain jurisdiction
over the Trust and the Trust property is not a source of this court’s subject matter jurisdiction. Bankruptcy
courts are courts of limited jurisdiction and have only the authority conferred on them by federal statutes.
Chao v. Hospital Staffing Services, Inc., 270 F.3d 374, 383 (6th Cir. 2001). Where a court lacks subject
matter jurisdiction over a dispute, neither the court nor the parties by agreement can create it by simply
providing for it in a plan of reorganization. Thickstun Bros. Equip. Co., 344 B.R. at 521. In this case, the
court finds persuasive the argument advanced by the SAI Trust that this court lacks jurisdiction over the
subject matter of the Motion.
As stated above, Toncee’s Motion seeks an order requiring the Liquidating Agent of the SAI Trust
to abandon real property formerly owned by Debtor Athol Manufacturing Corporation that is located in
Butner, North Carolina (“Real Property”). As the basis for its Motion, Toncee argues that the Real Property
is of no value or benefit to the estate, yet the Liquidating Agent continues to spend money and professional
fees administering this property. Thus, the Motion does impact a post-confirmation liquidation trust in that
it challenges the Liquidating Agent’s business decisions regarding an asset of the trust. However, the court
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agrees that alone that fact is insufficient to find the required “close nexus” to the bankruptcy proceeding.
See McKinstry v. Sergent, 442 B.R. 567, 573 (E.D. Ky. 2011)(distinguishes claims involving pre-petition
and mid-bankruptcy conduct from “ancillary matters that arose after confirmation of the bankruptcy plan.”).
The court further agrees that any nexus between Toncee’s Motion and the bankruptcy plan and
proceeding is remote. The Motion is an objection to the Liquidating Agent’s business judgment in deciding
to administer a Trust asset made four years after confirmation of Debtors’ Chapter 11 plan. Unlike the cases
cited in support of Toncee’s position that this court has jurisdiction over the matter, the Motion does not
involve a pre-petition or pre-confirmation claim. It involves only a challenge to post-confirmation decisions
made by the Liquidating Agent. 	Nor does this matter involve enforcement of the court’s orders, an
interpretation of the Plan or any specific provision of the Plan, a challenge to the Plan, or disbursements
under the Plan.
In addition, Toncee styling the Motion as a motion to compel abandonment under § 554(b) does not
provide the close nexus required to bring the matter under the court’s “related to” jurisdiction as that section
is inapplicable in this case. Under § 554(b), upon request of a party in interest, “the court may order the
trustee to abandon any property of the estate that is burdensome to the estate or that is of inconsequential
value and benefit to the estate.” 	11 U.S.C. § 554(b). 	By its express terms, § 554(b) applies only to
abandonment of “property of the estate.” The term “property of the estate” refers to the estate created by
commencement of a case under §§ 301, 302 or 303 of Title 11 and includes “all legal or equitable interests
of the debtor in property as of the commencement of the case.” 11 U.S.C. § 541(a)(1).
Toncee’s Motion was filed nearly four years after confirmation of Debtors’ Plan. [Doc. # 984]. The
Plan provides that on its effective date, title to property of the Debtors vests in the SAI Trust. [Id. at ¶ 8.1];
see 11 U.S.C. § 1141(b) (providing that “[e]xcept as otherwise provided in the plan or the order confirming
the plan, the confirmation of a plan vests all of the property of the estate in the debtor.”). The Plan became
effective on November 20, 2007.1 Consequently, there is no estate, as contemplated in § 554(b) and § 541,
now in existence and no property of the estate that the court can order to be abandoned. Thus, as the SAI
Trust correctly argues, § 554(b) does not apply to the Real Property, title to which has vested in the SAI
Trust. Cf. Diagnostic Int’l, Inc. v. Aerobic Life Prod. Co. (In re Diagnostic Int’l., Inc.), 257 B.R. 511, 515
(Bankr. D. Ariz. 2000) (finding that turnover action under § 542 cannot exist once the bankruptcy court
1 The Plan provides that the effective date is the first business day after the Confirmation Order becomes a final order.
[Doc. # 984, ¶ 1.1.31]. The Confirmation Order was entered on November 8, 2007. In accordance with Fed. R. Bankr. P. 8002
and 9006(a) in effect in 2007, the Confirmation Order became a final order on November 19, 2007.
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confirms the debtor’s plan because the estate ceases to exist upon plan confirmation). Instead, the SAI Trust
document provides that state (Michigan) law governs “all questions relating to management, administration
and investment of the SAI Trust and the Trust Property. “ [Doc. # 1550, ¶ 8.5].
For the foregoing reasons, the court finds that the Motion lacks the close nexus necessary for “related
to” subject matter jurisdiction. Therefore, good cause appearing,
IT IS ORDERED that Toncee, Inc.’s Motion [Doc. # 1522] be, and hereby is, DENIED.
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