Third Circuit disposition — 084210np-pdf

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
Nos. 08-4210 & 08-4211
In Re: QDN LLC,
Debtor
SYNERGISTIC EQUITIES, LTD.,
Appellant
Appeal from the United States District Court
for the District of New Jersey
(D.C. Civil Action Nos. 2-07-cv-05467 / 2-08-cv-01107)
District Judge: Honorable Katharine S. Hayden
Submitted Under Third Circuit LAR 34.1(a)
November 16, 2009
Before: AMBRO, ALDISERT, and ROTH, Circuit Judges
Opinion filed: February 8, 2010
OPINION
AMBRO, Circuit Judge
Synergistic Equities, Ltd. (“Synergistic”) appeals the judgment of the District
Court, which, among other things, affirmed the Bankruptcy Court’s determination that
subject matter jurisdiction existed. We agree that there is subject matter jurisdiction, but

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Notably, it is the validity of the filing in Case No. 2 that makes the check issued to1
Synergistic a payment to a creditor within the preference period. This seems to be the
motivation behind this appeal.
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we vacate and remand with instructions to dismiss the remaining claims because
Synergistic does not have any right to contest an involuntary petition.
I. Facts and Procedural Background
A. Filings
This case stems from three separate bankruptcy petitions. We discuss them briefly
to provide the relevant context.
The first petition was an involuntary bankruptcy petition filed against Quality
Distribution Network, Inc. (“Quality Inc.”), on January 24, 2007 (Case No. 1). A Chapter
7 Trustee was appointed. At some time during the proceedings, it was discovered that
Inc. was circumventing the bankruptcy process by offloading its operations to a successor
firm, QDN, LLC (“QDN”). Adversary proceedings began against QDN in Case No. 1
and resulted in a Consent Order, which included limitations on the actions QDN would be
permitted to take. About the same time, QDN issued a check to Synergistic, a creditor
and the appellant in this case, that appears to be a preference payment.
The second petition was an involuntary bankruptcy petition filed against Quality
Distribution Network, LLC (“Quality LLC”), on June 6, 2007 (Case No. 2). It appears1
that the petition was meant to be filed against QDN and not Quality LLC. Indeed, QDN
was served at its correct address (the same address as Quality Inc.), QDN’s federal

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identification number was on the filing, and QDN appeared to contest the matter in court.
It answered with a statement that it was not the party named in the petition and that the
petition named a non-existent alleged debtor. However, QDN also attempted to benefit
from the protections of an automatic stay in correspondence with Chase Bank after the
filing of Case No. 2, but prior to the filing of Case No. 3, by claiming that an involuntary
petition was filed against it in June, 2007.
On September 11, 2007, the Trustee in Case No. 1 filed a motion to appoint a
trustee in Case No. 2. On September 14, 2007, Synergistic filed an objection to the
appointment of a trustee alleging that the Bankruptcy Court did not have subject matter
jurisdiction over the case.
That same day, September 14, 2007, the third petition was filed by QDN (Case No.
3). Unlike the two prior petitions, the third petition was voluntary and filed by the debtor
itself.
B. Proceedings
The Bankruptcy Court held hearings on September 17 and 21, 2007, to decide
whether to appoint a trustee in Case No. 2. In the interim, on September 20, 2007, the
petitioning creditors in Case No. 2 filed a motion to amend the petition to correct the
name to reflect QDN’s true legal name. The Bankruptcy Court ruled that the dispute in
Case No. 2 was simply a case of misnomer, and was not a jurisdictional issue. The Court
noted that the federal ID number was identical, the proper party was served, no one was

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We recognize that Synergistic disputes the existence of subject matter jurisdiction in2
the Bankruptcy Court. As discussed below, we agree with the Bankruptcy Court that it
had jurisdiction.
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confused or surprised as to the identity of the parties involved (in light of the adversary
proceedings in Case No. 1 as well as QDN’s appearance in Case No. 2), and allowed the
petition to be amended to correct the name nunc pro tunc to June 6, 2007. Cases Nos. 2
and 3 were consolidated, and a trustee was appointed in the consolidated case.
The District Court affirmed the finding of subject matter jurisdiction, affirmed the
consolidation of cases, and affirmed the appointment of the trustee in the consolidated
case. This appeal followed.
II. Jurisdiction and Standard of Review
The Bankruptcy Court had jurisdiction pursuant to 28 U.S.C. § 157(b)(1) to hear
and determine a case under the Bankruptcy Code. The District Court had jurisdiction to2
review the Bankruptcy Court orders pursuant to 28 U.S.C. § 158(a)(1). We have
jurisdiction under 28 U.S.C. §§ 1291 and 158(d).
We exercise plenary review over the District Court’s conclusions of law, including
matters of statutory interpretation. In re Tower Air, Inc., 397 F.3d 191, 195 (3d Cir.
2005) (citing In re Prof’l Ins. Mgmt., 285 F.3d 268, 282–83 (3d Cir. 2002)). Because the
District Court sat as an appellate court to review the Bankruptcy Court, we review the
Bankruptcy Court’s legal determinations de novo, its factual findings for clear error, and
its exercises of discretion for abuse thereof. Id. (citing In re Engel, 124 F.3d 567, 571 (3d

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Synergistic alleges that the Bankruptcy Court should not have appointed a trustee,3
should not have consolidated the two involuntary cases, failed to hold an evidentiary
hearing, and erred by considering the answer to the petition in Case No. 2 withdrawn
upon the filing of the voluntary petition in Case No. 3. Because Synergistic lacks
standing to raise these objections, we express no opinion concerning them.
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Cir. 1997)).
III. Analysis
While Synergistic raises a host of issues, they essentially devolve to two claims:
(1) the Bankruptcy Court lacked subject matter jurisdiction over Case No. 2; and (2) it
mishandled Case No. 2. Synergistic, in characterizing its claim as an attack on the3
subject matter jurisdiction of the Court, is attempting to confer on itself as a creditor the
“standing” to oppose an involuntary bankruptcy petition that it would otherwise lack. If,
as Synergistic claims, the courts lacked subject matter jurisdiction, then the Bankruptcy
Court, the District Court, and our Court would be obligated to notice that defect sua
sponte and dismiss for want of jurisdiction. See In re Earl’s Tire Serv., Inc., 6 B.R. 1019,
1021–22 (D. Del. 1980), superseded by rule on other grounds, as recognized in In re
Memorex Telex Corp., 241 B.R. 841 (D. Del. 1999). On the other hand, if we are
satisfied that we have subject matter jurisdiction, Synergistic has no right to plead defects
in the involuntary petition or in the Bankruptcy Court’s handling of that petition. Id.
A. As a non-filing creditor, Synergistic has no standing to contest the filing
of an involuntary bankruptcy petition
As a preliminary matter, § 303(d) of the Bankruptcy Code allows a “debtor . . . [to]

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file any answer to a[n] [involuntary] petition.” 11 U.S.C. § 303(d) (emphasis added). It
is well-established that a creditor, in contrast, does not have standing to contest an
involuntary bankruptcy filing. In re Earl’s Tire Serv., Inc., 6 B.R. at 1021–22; In re
Westerleigh Dev. Corp., 141 B.R. 38, 40 (Bankr. S.D.N.Y. 1992); In re New Era Co., 115
B.R. 41, 45 (Bankr. S.D.N.Y. 1990), aff’d, 125 B.R. 725 (S.D.N.Y. 1991); In re
MacFarlane Webster Assocs., 121 B.R. 694, 700 (Bankr. S.D.N.Y. 1990); In re Manson
Billard, Inc., 82 B.R. 769, 771–72 (Bankr. E.D. Pa. 1988); see also In re Carden, 118
F.2d 677, 679 (2d Cir. 1941); In re Spohn Motor Co., 158 F. Supp. 855, 855 (W.D. Pa.
1958); In re T.J. Ronan Co., 114 F. Supp. 299, 300 (S.D.N.Y. 1953). The filing of an
involuntary petition is an adversarial proceeding between the filers and the debtor, which
may contest the filing at a hearing. See generally 11 U.S.C. § 303. Congress chose to
preclude creditors from opposing involuntary petitions because such opposition invariably
was to protect a preference or to gain some unfair advantage at the expense of other
creditors, contrary to the policy of providing equitable distribution of assets among all
creditors. In re Earl’s Tire Serv., Inc., 6 B.R. at 1021–22.
Synergistic does not cite any authority that indicates it has standing to do anything
more than bring the issue of subject matter jurisdiction to the court’s attention. It is not
the debtor, and therefore under 11 U.S.C. § 303(d) and Federal Rule of Bankruptcy
Procedure 1011 it does not have the right to contest the involuntary petition on the merits.
Indeed, the only reason Synergistic is contesting the involuntary petition appears to be to

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Limited liability companies are eligible to file bankruptcy petitions because they are4
sufficiently similar to a corporation and limit responsibility for the debts to the capital
subscribed. See 11 U.S.C. § 101(9)(A)(ii); In re 4 Whip, LLC, 332 B.R. 670, 672 (Bankr.
D. Conn. 2005); In re Giampietro, 317 B.R. 841, 844 n.3 (Bankr. D. Nev. 2004); In re
ICLNDS Notes Acquisition, LLC, 259 B.R. 289, 293 (Bankr. N.D. Ohio 2001). That is
obvious here because QDN has filed a voluntary Chapter 11 petition in Case No. 3
without objection as to eligibility.
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protect itself from having a preference voided by moving the petition date to a later date,
the very situation Congress tried to avoid. Thus, we review only the question of subject
matter jurisdiction.
B. There is subject matter jurisdiction in this case
The jurisdiction of the Bankruptcy Court allows it to “hear and determine all cases
under title 11.” 28 U.S.C. § 157(b)(1). Essential to any case under the Bankruptcy Code
is a debtor, which includes any person (including a corporation) that resides in the United
States. 11 U.S.C. § 109(a). A case naming QDN as the debtor falls within the
Bankruptcy Court’s jurisdiction. The complication in this case is whether the4
Bankruptcy Court had jurisdiction over a petition naming “Quality Distribution Network,
LLC” as the debtor instead of “QDN, LLC.” Synergistic argues that this
misidentification is fatal and requires dismissal of the involuntary petition in Case No. 2.
Under the facts before us, we disagree.
There is no question that a debtor (QDN) was brought before the Bankruptcy
Court, and that QDN knew exactly why it was there. It was served at its address of

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record, was identified by its federal ID number, appeared numerous times in the
Bankruptcy Court, and sent at least one letter to a creditor to inform it of the proceedings
against QDN in Case No. 2. The only mistake was a misnomer in the identification of the
debtor in the caption of the case, and this was corrected prior to the appointment of a
trustee. Other than that mistake, there is no question that QDN was properly before and
within the jurisdiction of the Bankruptcy Court.
Misnomer—typically when a plaintiff misnames or misidentifies a party in its
pleadings but correctly serves that party—is the classic example of mistake that can be
corrected via amendment. In such a case, relation back is appropriate because the party
that was served is already before the court. See 3 James Wm. Moore et al., Moore’s
Federal Practice § 15.19[3][d] (3d ed. 2009) [hereinafter Moore’s]. In contested
proceedings in the Bankruptcy Court, Rule 7015 provides for the application of Federal
Rule of Civil Procedure 15. See Fed. R. Bankr. P. 7015. Rule 15, in turn, is the
appropriate avenue to correct misnomers via amendment to avoid the situation where a
legitimate legal claim is squelched by a party mistakenly identifying the party to be used.
Moore’s § 15.19[3][d].
As recognized by the District Court and the Bankruptcy Court, a misnomer is
appropriately remedied by amendment in cases when a plaintiff sues a parent instead of a
subsidiary, a corporation instead of a partnership, a building instead of its corporate
owner, or a corporation in liquidation instead of its successor. See id. § 15.19[3][d] &

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nn.37–39 (citing cases). In any event, misnomer is simply not a matter implicating
subject matter jurisdiction.
We find Synergistic’s sole case citation indicating a lack of subject matter
jurisdiction unpersuasive. Specifically, In re Westville Distribution & Transportation,
293 B.R. 101 (Bankr. D. Conn. 2003), dealt solely with a purported voluntary petition
filed on behalf of a non-existent debtor. The non-existent debtor had a name similar to
that of another entity that never intended to file a bankruptcy petition. Westville does not
address the situation involving an involuntary petition for relief, and it explicitly
recognized that the two scenarios are “fundamentally different.” Id. at 102. In the case of
an involuntary petition, a scrivener’s error can be amended by a filer through the normal
process of amendments.
The policy concerns behind Westville do not apply in our case. Westville was most
concerned with non-filers attempting to “vitalize a non-existing entity and then force it
into bankruptcy without observing the statutory predicates for involuntary cases.” Id.
That simply is not the case here because we have an involuntary case under § 303 that
observed the statutory predicates. The debtor was properly served and did, in fact, show
up in court notwithstanding the scrivener’s error in naming the entity. The only party
objecting to the appointment of a trustee at this point is Synergistic, a non-filing creditor.
Thus, we put Westville aside.

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While it lacks standing even to make the argument, we note that Synergistic also5
attempts to invoke our decision in In re Owens Corning, 419 F.3d 195 (3d Cir. 2007), and
the principles of substantive consolidation. That argument completely misses the mark
because this case has nothing to do with substantive consolidation.
This is borne out in Synergistic’s Reply Brief at 8–9.6
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Other policy concerns raised by Synergistic are also unavailing. First, this is not a5
case of a “John Doe” debtor named for purposes of an illicit, secret bankruptcy; all
involved knew the identity of the debtor, the debtor appeared, and even Synergistic
recognizes that it is making a strictly technical objection.6
Second, the analogy to Article 9 of the Uniform Commercial Code is simply off
point. The granting of security interests requires strict compliance on the name of the
debtor because it is intended to give notice to other potential creditors. In contrast, until
the order for relief is entered, an involuntary case only involves the petitioning creditors
and the debtor. Furthermore, Article 9 is not jurisdictional—an error in name does not
deprive a court of jurisdiction, but only acts to deprive a noncompliant creditor of secured
status and priority.
Third, an additional reason why these policy concerns are more muted in the case
of an involuntary filing is given by § 303(f). Unless and until an order for relief is
granted, an involuntary filing has no effect on the affairs of the debtor. 11 U.S.C.
§ 303(f).
Thus, a debtor actually served and actually appearing to contest an involuntary
proceeding cannot dispute subject matter jurisdiction when an amendment later corrects a

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misnomer. Nor can potential creditors who were not among those to file an involuntary
petition. The party the Bankruptcy Code is concerned about, prior to the appointment of a
trustee and the entry of an order for relief, is the debtor. It would be a different story if
the debtor were not made aware, leading to a true “secret bankruptcy,” and an order for
relief entered without giving the debtor a chance to object, all because of a misnomer.
Here, everyone knew who the debtor was; between Case No. 1 and Case No. 2, there was
no confusion as to which entity was before the Court, and the Court’s subject matter
jurisdiction is not at issue.
In sum, Synergistic’s attempt to cast this case of misnomer as a question of subject
matter jurisdiction fails. Here, the involuntary debtor was properly served, appeared
numerous times in court, and informed a creditor of Case No. 2. Moreover, there is no
evidence to suggest anyone was misled. As such, there is no doubt that the Bankruptcy
Court had subject matter jurisdiction.
* * * * *
We therefore affirm the District Court on the issue of subject matter jurisdiction,
but vacate and remand with instructions to dismiss the appeal on all other grounds raised
by Synergistic.

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