NCP Enterprises, LLC v. Freudenberg Household Products LP

UNITED STATES BANKRUPTCY COURT
FOR THE SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION AT DAYTON
Judge Waldron
Case No. 05-3169
DECISION ON ORDER (1)
DENYING DEFENDANT’S MOTION
TO DISMISS, WITHOUT
PREJUDICE TO A FINAL
DETERMINATION IN AN
APPROPRIATE COURT; (2)
DENYING PLAINTIFF’S MOTION
TO REMAND CASE TO THE
BUTLER COUNTY COURT OF
COMMON PLEAS OR ABSTAIN;
(3) AND GRANTING
DEFENDANT’S MOTION TO
TRANSFER CASE TO THE
BANKRUPTCY COURT FOR THE
DISTRICT OF DELAWARE
NCP ENTERPRISES, LLC,
Plaintiff
v.
FREUDENBERG HOUSEHOLD PRODUCTS
LP,
Defendant
DATED AT DAYTON, OHIO this 24th Day of May, 2005:
This document has been electronically entered in the records of the United
States Bankruptcy Court for the Southern District of Ohio.
IT IS SO ORDERED.
Dated: May 24, 2005
____________________________________________________________
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On 	April 	4, 	2005, 	Defendant, 	Freudenberg 	Household 	Products 	LP
(“FHP”) filed a Notice of Removal (Doc. 1) which, pursuant to 28 U.S.C. §
1452(a), 28 U.S.C. § 1334 and Bankruptcy Rule 9027 1 , removed this case from
the Clark County Court of Common Pleas to this Court to this court’s jurisdiction. 2
The case is a declaratory judgment action which seeks to enforce a trademark
license agreement. 	On April 6, 2005, FHP filed Defendant’s Motion to Transfer
or Dismiss and Memorandum in Support (Doc. 2) The motion sought to have the
case dismissed for failure to state a claim [Federal Rule of Civil Procedure
12(b)(6), 	incorporated 	by 	Bankruptcy 	Rule 	7012] 	or, 	transferred 	to 	the
Bankruptcy Court for the District of Delaware. 	On April 14, 2005, the Plaintiff,
NCP 	Enterprises, 	LLC 	(“NCP”) 	filed 	its 	statement 	under 	Bankruptcy 	Rule
9027(e)(3) denying that this was a core proceeding and not consenting to final
judgment by this court. (Doc. 4) 	On April 26, 2005, NCP filed Motion of Plaintiff
NCP Enterprises, LLC to Remand Case to State Court or Abstain and Opposition
to Defendant’s Motion to Transfer or Dismiss. (Doc. 5) 	In short, NCP seeks the
case returned to the Clark County Court of Common Pleas. 	On May 16, 2005,
FHP filed Memorandum of Defendant Frudenberg Household Products LP in
1 FHP also sought removal under 28 U.S.C. § 1441, based on diversity jurisdiction under 28
U.S.C. § 1332(a)(1). This removal is a “nullity and superfluous to its removal under 28 U.S.C.A. §
1452.” Diversity actions are not a proper basis for removal to a bankruptcy court. Home Cable
Concepts, Inc. v. Household Retail Svcs. (In re Best Reception Sys.), 219 B.R. 980, 984-85
(Bankr. E.D. Tenn. 1998).
2 The Judge of the Clark County Court of Common Pleas signed a default entry which was filed
on 8:37 a.m. on April 5, 2005. 	The Notice of Removal was filed with this court on April 4, 2005
and with the Clark County Court of Common Pleas on April 5, 2005. 	It was journalized on April
6, 2005. Pursuant to Ohio Rule of Civil Procedure 58(a), an order is not effective until journalized
by the clerk. The State ex rel. R.W. Sidley, Inc. v. Crawford, 100 Ohio St.3d 113, 117, 796 N.E.
2d 929, 933 (Ohio 2003). 	Additionally, the Notice of Removal appears before the state court
order on the state court docket. Accordingly, the default entry may be void. Sweeney v. RTC, 16
F.3d 1, 4 (1st Cir. 1994). However, this court makes no finding as to this jurisdictional issue as it
is more appropriately addressed to the home bankruptcy court in the District of Delaware.
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Response to Motion of Plaintiff NCP Enterprises, LLC to Remand Case to State
Court or Abstain, and in Support of Defendant’s Motion to Transfer or Dismiss
(Doc. 6).
Some brief background is necessary. NCP was a licensee of a trademark.
(Doc. 1 – Exhibit A) 	The licensor was O-Cedar Brands, Inc. 	Subsequent to the
license agreement being entered, O-Cedar Brands, Inc. and a related affiliate
(collectively, the “Debtors”) filed a chapter 11 case in the Bankruptcy Court for
the District of Delaware.3 As a part of that bankruptcy case, substantially all of
the Debtors’ assets were sold to FHP pursuant to an order of the Delaware
Bankruptcy Court. See 11 U.S.C. § 363. 	Following the sale, the chapter 11 case
was converted to a chapter 7 case. 	For purposes of this decision, it is sufficient
to note the parties dispute whether the license agreement was included in the
sale and, therefore, whether FHP is liable under the terms of the agreement.
(This court makes no finding in that regard, nor any finding on many of the legal
and factual disputes between the parties.)
The focus for the resolution of the pending issues is the language of the
declaratory judgment action. The complaint requests “that Plaintiff [NCP] have a
declaratory judgment herein that the Agreement is a valid and binding agreement
between NCP and FHP.” 4 “The Agreement” is “a Trademark License Agreement
. . . with O-Cedar Brands, Inc. . . . .” 	The legal issue presented in not simply a
matter of contractual interpretation under Ohio law. The court accepts that the
3 In re O-Cedar Holdings, Inc. et al., 03-12267
4 Despite the many state law issues raised in NCP’s filings, the complaint does not raise any of
these issues. The complaint addresses a specific trademark license agreement originally entered
into by the Debtors and NCP and whether FHP is bound by that agreement.
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Agreement states that Clark County Court of Common Pleas has exclusive
jurisdiction to interpret the Agreement under section 20.1; however, the predicate
issue 	is 	whether 	FHP, 	a 	non-signatory 	to 	the 	Agreement, 	purchased 	the
Agreement in the bankruptcy court sale or whether it was excluded in the sale of
assets and ultimately rejected during the chapter 7 pursuant to 11 U.S.C. §
365(d)(1).5
The court believes this case is appropriately transferred to the Bankruptcy
Court for the District of Delaware because (1) the relief sought in the complaint
raises core bankruptcy issues concerning an executory contract [See 28 U.S.C. §
157(b)(2)], 	not 	merely 	state 	law 	contract 	interpretation 	issues 	and 	(2) 	the
Bankruptcy Court for the District of Delaware retained jurisdiction to interpret this
sale order.
Although the court is cognizant this dispute concerns two non-debtors, the
resolution of this dispute may affect whether NCP has a claim in the Debtors’
estates in Delaware. 	Moreover, in the sale order, the Delaware Bankruptcy
Court concluded that disputes concerning the sale order are core proceedings to
be determined in the Delaware Bankruptcy Court. 	See Notice of Removal (Doc.
1 – Exhibit B – Order Under U.S.C. §§ 105, 363, and 365 and Fed. R. Bankr. P.
2002, 6004 and 6006 Approving (A) Sale of All or Substantially All of the Debtors’
Assets Related to Its Business Free and Clear of All Liens, Claims, Interests, and
5 11 U.S.C. § 365(d)(1) provides that “[i]n a case under chapter 7 of this title, if the trustee does
not assume or reject an executory contract or unexpired lease of residential real property or of
personal property of the debtor within 60 days after the order for relief, or within such additional
time as the court, for cause, within such 60-day period, fixes, then such contract or lease is
deemed rejected.”
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Encumbrances (Other Than Permitted Encumbrances), and (B) Assumption and
Assignment of Executory Contracts and Unexpired Leases, pg.13, Paragraph
AA).
This court concludes FHP has met is burden to have this case transferred
to 	the 	Bankruptcy 	Court 	for 	the 	District 	of 	Delaware. 	Any 	determination
concerning 	the 	motion 	to 	dismiss 	and/or 	discretionary 	abstention 	is 	more
appropriately addressed to the home bankruptcy court in Delaware.
Accordingly, 	Defendant’s 	motion 	(Doc. 	2), 	to 	the 	extent 	it 	requests
dismissal, is DENIED, without prejudice to a final determination in an appropriate
court. 	Plaintiff’s motion to remand this case to the Butler County Court of
Common Pleas or abstain (Doc. 5) is DENIED. 	Defendant’s motion to transfer
this case to the Bankruptcy Court for the District of Delaware (Doc. 2) is
GRANTED. 	Pursuant to 28 U.S.C. § 1412, this case is TRANSFERRED to the
Bankruptcy Court for the District of Delaware.
An order in accordance with this decision is simultaneously entered.
SO ORDERED.
c:
Counsel for the Defendant:
Donald W. Mallory, Dinsmore & Shohl, LLP, 255 East Fifth Street, Suite 1900,
Cincinnati, Ohio 45202
B. Joseph Schaeff, Dinsmore & Shohl, LLP, One South Main Street, Dayton,
Ohio 45402-2023
Kevin C. Parks/Lynn A. Sullivan, Leydig, Voit & Mayer, LTD., Two Prudential
Plaza, Suite 4900, Chicago, Illinois 60601-6780
Lee P. Whidden, Salans, Rockefeller Center, 620 Fifth Avenue, New York, N.Y.
10020-2457
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E. Timothy McAuliffe, E. Timothy McAuliffe, PLLC, Rockefeller Center, 620 Fifth
Avenue 10020-2457
Counsel for the Plaintiff:
Jack R. Pigman/Jay A. Yurkiw, Porter Wright Morris & Arthur LLP, 41 South High
Street, Columbus, Ohio 43215
Barry P. Reich, Cole Action Harmon & Dunn, 333 North Limestone Street,
Springfield, Ohio 45503
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