Opinions of the United
2003 Decisions States Court of Appeals
for the Third Circuit
5-22-2003
In Re: RFE Ind
Precedential or Non-Precedential: Non-Precedential
Docket 02-2451
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Recommended Citation
"In Re: RFE Ind " (2003). 2003 Decisions. Paper 537.
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NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
___________
No. 02-2451
___________
IN RE: RFE INDUSTRIES,
Debtor
JOHN J. GIBBONS, TRUSTEE FOR THE ESTATE OF
RFE INDUSTRIES, INC.
v.
ANTON NOLL, INC.; FRY’S M ETALS, INC.;
WESTBURY ALLOYS, INC.
FRY’S METALS, INC.,
Defendant/Third-Party Plaintiff
v.
SPARFVEN & CO., INC; MICHAEL SPARFVEN;
CAMERON & MITTLEMAN, LLP,
Third-Party Defendants
FRY'S METALS, INC.,
Appellant
__________
Appellant
On Appeal from the United States District Court
for the District of New Jersey
(D.C. No. 99-cv-00334)
District Judge: The Honorable Dennis M. Cavanaugh
_________
Argued on December 10, 2002
Before: FUENTES and GARTH, Circuit Judges, and WALLACH,* Judge
(Opinion Filed: May 22, 2003)
___________
* The Honorable Evan J. Wallach, United States Court of International Trade, sitting by
designation.
______________________________
Jonathon I. Rabinowitz (argued)
Booker Rabinowitz Trenk Lubetkin &
Tully, P.C.
100 Executive Drive, Suite 100
West Orange, NJ 07052-3303
Attorney for Appellant
Michael A. Saffer (argued)
Chapman, Kessler, Peduto & Saffer
425 Eagle Rock Avenue
P.O. Box F
Roseland, NJ 07068
Attorney for Appellee
________________________
OPINION OF THE COURT
________________________
FUENTES, Circuit Judge.
This is an appeal from the denial of the motion of appellant, Fry’s Metals, Inc.
(“Fry’s”), to reopen a case in the District Court. In that earlier case, the District Court
had denied a motion to withdraw the reference of an adversary proceeding in bankruptcy
pursuant to 28 U.S.C. § 157(d). The case thus remained in the Bankruptcy Court.
The District Court denied the motion to reopen the matter, and Fry’s appeals. As a
result of recent intervening events–namely, the Bankruptcy Court’s disposition of a
motion to approve a settlement in the same adversary proceeding which Fry’s seeks to
reopen here–there no longer exists a basis for federal court jurisdiction. As a
consequence, we lack jurisdiction to review Fry’s appeal. For the reasons set forth below,
we will dismiss Fry’s appeal.
2
I.
As we intimated in our recent Order of M arch 14, 2003, In re RFE Industries, No.
02-2451, 2003 WL 1228017 (3d Cir. Mar. 14, 2003), this case has a complex procedural
history. The case originated in the United States Bankruptcy Court for the District of
New Jersey, when RFE Industries, Inc. (“RFE”) 1 filed a petition for relief pursuant to
Chapter 11 of the Bankruptcy Code on August 19, 1997. Shortly thereafter, RFE sold a
part of its operations to a third party, Anton Noll, Inc. (“Anton”), in a transaction that was
approved by the Bankruptcy Court on October 27, 1997. The operations consisted of a
metal refining and processing business known as the “MFE Division.”
On November 10, 1997, the Bankruptcy Court appointed John J. Gibbons as
Chapter 11 Trustee (the “Trustee”) of the debtor’s estate. On February 13, 1998, Anton
sold the MFE Division to Fry’s and another entity, Sparfven & Co., Inc. (“Sparfven”), for
substantially more than Anton had originally paid RFE.2 Furthermore, Fry’s and Sparfven
refused to pay certain royalties that had been agreed upon in the sale of the MFE Division
from RFE to Anton.
On May 13, 1998, the Trustee instituted an adversary proceeding in the
Bankruptcy Court against Fry’s and others, alleging breach of contract, breach of the
covenant of good faith and fair dealing, conversion, fraud, negligent misrepresentation,
and tortious interference in connection with the non-payment of royalties. On January 15,
1
RFE is now known as Metallix, Inc. (“Metallix”). In our review of the
procedural history, we continue to refer to the original debtor as RFE, when appropriate.
2
When Anton initially acquired the MFE Division, it paid $400,000 to RFE and
agreed to pay royalties estimated to be as much as $360,000 per year. When Anton sold
the M FE Division to Fry’s and others, it received $950,000. See In re RFE Industries,
Inc., 283 F.3d 159, 162 (3d Cir. 2002) (“RFE I”).
3
1999, Fry’s and the other defendants in the adversary proceeding filed a motion to
withdraw the reference of the matter pursuant to 28 U.S.C. § 157(d), seeking a trial on the
merits of the dispute in the United States District Court for the District of New Jersey.
The motion was heard by the Honorable Maryanne Trump Barry before her appointment
to this Court. Although the District Court found cause to withdraw the reference, it
denied the motion without prejudice to refiling when the matter was trial-ready. See In re
RFE Industries, Inc., No. 99 Civ. 334, slip op. at 7-9 (D.N.J. Mar. 24, 1999). The case
was closed for administrative purposes.
Apart from Fry’s failed attempt to withdraw the reference of the adversary
proceeding, the parties were also pursuing a negotiated disposition of the dispute. In the
months following Judge Barry’s denial of the motion to withdraw the reference, the
Trustee and the defendants in the adversary proceeding reached a tentative settlement.
See In re RFE Industries, Inc., No. 99 Civ. 334, slip op. at 2 (D.N.J. Apr. 23, 2002)
(Cavanaugh, J.).3
On yet another related track, the underlying bankruptcy petition of RFE proceeded
in the normal course. RFE was successful in challenging some claims and settling others.
Ultimately, RFE was able to pay its creditors in full, and the Bankruptcy Court entered an
order dismissing RFE’s case on November 29, 1999. See id. The Bankruptcy Court
expressly retained jurisdiction to enforce the proposed settlement between the Trustee and
the defendants in the adversary proceeding. Nevertheless, after the dismissal of the
underlying bankruptcy case, the Court denied approval of the proposed settlement. Fry’s
3
After Judge Barry’s appointment to this Court, the matter was transferred to the
docket of the Honorable Dennis M. Cavanaugh.
4
appealed the denial of the settlement to the District Court, which affirmed. Subsequently,
Fry’s appealed that judgment to this Court, which gave rise to our first decision in this
matter in RFE I, 283 F.3d at 163.
Separately, Metallix, having succeeded RFE, brought an action in New Jersey state
court on May 23, 2000, alleging substantially the same claims asserted by the Trustee in
the adversary proceeding. Metallix’s state court action was dismissed without prejudice
to reinstatement pending the various federal court proceedings.
While the appeal in RFE I was pending, Fry’s nevertheless filed a motion on July
31, 2001, in the District Court to reopen the matter denied by Judge Barry earlier. The
District Court denied Fry’s motion in an opinion filed on April 23, 2002. See In re RFE
Industries, Inc., No. 99 Civ. 334, slip op. at 7 (D.N.J. Apr. 23, 2002) (Cavanaugh, J.)
(“RFE II”). Between the filing of the motion to reopen and the District Court’s entry of
judgment denying the same, another panel of this Court issued its decision in RFE I,
holding that the Bankruptcy Court had erred in denying the proposed settlement without
applying the factors set forth in In re M artin, 91 F.3d 389 (3d Cir. 1996). See RFE I, 283
F.3d at 165. The case was remanded to the Bankruptcy Court for further proceedings
consistent with our opinion in RFE I.4
Subsequently, while the appeal in RFE II was pending before us, the Bankruptcy
Court addressed the proposed settlement on remand. This time, it applied the Martin
factors, and again on February 7, 2003, the Bankruptcy Court denied the settlement
tentatively reached between the Trustee and Fry’s.
4
We are of the impression that neither party informed Judge Cavanaugh of our
decision in RFE I.
5
II.
In light of the Bankruptcy Court’s most recent denial of the proposed settlement,
the threshold issue is whether there exists any jurisdictional basis upon which the present
matter may proceed. As we have noted in the past, “[a]s a general rule, the dismissal of a
bankruptcy case should result in the dismissal of ‘related proceedings’ because the court’s
jurisdiction of the latter depends, in the first instance, upon the underlying nexus between
the underlying bankruptcy case and the related proceedings.” In re Smith, 866 F.2d 576,
580 (3d Cir. 1989); see also In re Pruitt, 910 F.2d 1160, 1170 (3d Cir. 1990) (Mansmann,
J., concurring) (“It [is] only ‘common sense’ that withdrawal must occur prior to
dismissal of the bankruptcy proceeding. . . . [U]pon the final disposition of a core
proceeding, a district court must proceed under its appellate jurisdiction.”) (citations
omitted). This is especially true when a party in an adversary proceeding attempts to
withdraw a matter that originated in bankruptcy proceedings to the District Court long
after the underlying bankruptcy case is dismissed and after all bankruptcy-related
proceedings have concluded.
As Bankruptcy Judge Stern remarked in his denial of the proposed settlement on
remand, all of the bankruptcy proceedings, including our remand in RFE I, have
concluded: “[t]he bankruptcy proceeding is over. The Trustee is discharged with the
gratitude of the Court. The creditors are paid in full. The case will not be tried in this
Court.” In re RFE Industries, Inc., No. 97-2964 (Bankr. D.N.J. Feb. 7, 2003) (transcript
of decision). All that remains, then, is a dispute which originated as an adversary
proceeding, detached from the bankruptcy case that gave rise to it. The conclusion of the
bankruptcy case caused the bankruptcy basis for federal jurisdiction to cease to exist.
6
There is no independent source of jurisdiction under which federal subject matter
jurisdiction exists, inasmuch as the dispute is between New Jersey citizens who are not
diverse and relates solely to state law causes of action.5
Given the final disposition of all bankruptcy proceedings on February 7, 2003,
there is no jurisdictional basis for entertaining Fry’s motion in federal court. As a result,
we have no jurisdiction over Fry’s appeal. See U.S. Bancorp Mortgage Co. v. Bonner
Mall Partnership, 513 U.S. 18, 21 (1994) (in general, “a case must exist at all the stages of
appellate review” for an appellate court to exercise jurisdiction). Any assertion of
continuing jurisdiction over the matter would also contravene Smith and Pruitt.
III.
For the reasons set forth above, we will dismiss Fry’s appeal.
_____________________________
TO THE CLERK OF THE COURT:
Kindly file the foregoing Opinion.
/s/ Julio M. Fuentes
Circuit Judge
5
The litigants are also not without recourse here. Metallix and Fry’s may
reinstate the state court action and either reach the merits or pursue a negotiated
disposition as they have previously attempted. We understand that a state action between
Metallix and Fry’s remains pending and is available to the parties to resolve their dispute.
7