Pierce v. Breitburn Operating LP., Entities et al

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
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In re: 	:
: 	Chapter 11
BREITBURN ENERGY 	:
PARTNERS L.P., et al.,1 	: 	Case No.: 16-11390 (SMB)
:
Debtors. 	:
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FELICIA PIERCE, 	:
:
Plaintiff, 	:
:
‒ against ‒ 	: 	Adv. Proc. No.: 16-01198 (SMB)
:
BREITBURN ENERGY LP., ENTITIES, :
:
Defendants. 	:
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MEMORANDUM DECISION AND ORDER
DENYING MOTION TO VACATE JUDGMENT
A P P E A R A N C E S:
FELICIA PIERCE
Pro Se
9764 Water Tree Drive
McKinney, Texas 75070
WEIL, GOTSHAL & MANGES LLP
Attorneys for Defendants
767 Fifth Avenue
New York, New York 10153
Ray C. Schrock, P.C. Esq.
Stephen Karotkin, Esq.
Edward Soto, Esq.
Of Counsel
1 	The debtors in these chapter 11 cases (collectively, the “Debtors”) are as follows: Breitburn Energy
Partners LP; Breitburn GP LLC; Breitburn Operating LP; Breitburn Operating GP LLC; Breitburn
Management Company LLC; Breitburn Finance Corporation; Alamitos Company; Beaver Creek Pipeline,
L.L.C.; Breitburn Florida LLC; Breitburn Oklahoma LLC; Breitburn Sawtelle LLC; Breitburn Transpetco
GP LLC; Breitburn Transpetco LP LLC; GTG Pipeline LLC; Mercury Michigan Company, LLC; Phoenix
Production Company; QR Energy, LP; QRE GP, LLC; QRE Operating, LLC; Terra Energy Company LLC;
Terra Pipeline Company LLC; and Transpetco Pipeline Company, L.P.
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STUART M. BERNSTEIN
United States Bankruptcy Judge:
Felicia Pierce (“Pierce”) filed this adversary proceeding to obtain declaratory,
monetary and injunctive relief to stop the Debtors (collectively, “Breitburn”) from
drilling on certain property in Texas (the “Texas Property”) that Pierce claimed to own
or have an interest in. The Court concluded that her claims were barred by res judicata
based on a decision by the County Court at Law of Gregg County, Texas (the “Texas
Court”) (see Memorandum Decision Granting Motion to Dismiss Complaint, dated
Mar. 17, 2017 (the “Memorandum Decision”) (ECF # 27),2 and entered judgment
dismissing the complaint. (Judgment for Dismissal of Adversary Proceeding, dated
March 24, 2017 (the “Judgment”) (ECF # 29).)
Pierce has moved to vacate the Judgment and also seeks to assert a new claim.
(Plaintiff's Motion Concerning Matters Related to Order Modifying the Automatic
Stay, Motion to Vacate Judgment Due to Fraud on the Court and Plaintiff's Motion for
Damages Due to Deprivation Caused by Debtor's Bankruptcy Filing for
Reorganization, dated Dec. 22, 2017 (the “Motion”) (ECF # 30).) Breitburn opposed
the Motion, (Debtors’ Response to Motion of Felicia Pierce, dated Feb. 12, 2018
(“Breitburn Response”) (ECF # 38)), and Pierce filed several more submissions in
support of her arguments and to request oral argument. 3 For the reasons that follow,
2 	“ECF # __” refers to the document number listed on the electronic docket of this adversary
proceeding. “ECF Main # __” refers to the document number listed on the electronic docket of the main
case.
3 	(See ECF Doc. ## 34, 36, 37, 38 and 40; see also ECF Main ## 1985, 2366.)
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the Motion is denied.
BACKGROUND
The relevant facts and procedural history predating the Motion are set forth in
the Memorandum Decision. Briefly, Pierce contended that she owned or had an interest
in certain property located in Texas (the “Property”) which she alleged was wrongfully
acquired by A.A. King (“King”) from Pierce’s predecessors in interest earlier in the
Twentieth Century. Prior to the commencement of these chapter 11 cases, she
commenced litigation in Texas (the “Texas Action”) seeking various forms of relief all
dependent on the finding that she owned the Property or had an interest in it.
When the debtors filed these chapter 11 cases on March 15, 2016, several
Breitburn entities were already defendants in the Texas Action. Pierce moved for relief
from the automatic stay to continue the Texas Action, and limited stay relief was granted
on consent. The relevant provisions of the Court’s order stated:
ORDERED that the automatic stay applicable in these chapter 11
cases pursuant to section 362(a) of the Bankruptcy Code is modified solely
to the limited extent necessary to permit Pierce (but not any other
claimant, successor to or assignee of Pierce or any other party in the Texas
Action) to prosecute the Pierce Claims to judgment in the Texas Action so
that the Pierce Claims, if any, may be liquidated; and it is further
ORDERED that the automatic stay is not modified in any other
respect and shall continue in full force and effect, including, without
limitation, with respect to (i) any assertion of new claims (in the Texas
Action or otherwise) against the Debtors; (ii) any effort to collect money or
property from the Debtors; or (iii) any effort to enforce any judgment or
other relief that may be entered against or settlement entered into by the
Debtors
(Order Pursuant to 11 U.S.C. § 362(d) Granting Limited Modification of the Automatic
Stay, dated June 23, 2016 (“Stay Relief Order”), at 2 (emphasis in original) (ECF Main
Doc. # 161).) The “Pierce Claims” referred to in the Stay Relief Order meant “[a]ll rights
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and claims belonging solely to Pierce and asserted in or related to the Petition and the
Texas Action.” (Debtors’ Response to Motion of Felicia Pierce for Relief from the
Automatic Stay, dated June 22, 2016, at ¶ 6 (ECF Main Doc. 158); Stay Relief Order at 1
n. 2 (“Capitalized terms used but not defined herein shall have the meanings set forth in
the Response.”).)
Pierce then returned to the Texas Court to litigate the Pierce Claims. As a result
of Pierce’s failure despite repeated warnings by the Texas Court to join all parties and
entities whose rights would be affected in the event the Court concluded that she owned
or had an interest in the Property, the Texas Court granted the Texas defendants’ second
motion to dismiss the Texas Action with prejudice. Under Texas law, the dismissal with
prejudice constituted an adjudication on the merits. Accordingly, I dismissed this
adversary proceeding based on res judicata, (Memorandum Decision at 9), and the
Court entered the Judgment.
The Court did not completely shut the door. The Memorandum Decision
concluded that “[s]hould Pierce succeed in Texas in vacating, reversing or modifying the
dismissal order in a manner that removes the res judicata bar, she may refile her
adversary proceeding and Breitburn may renew its motion to dismiss or abstain.” (Id. at
9-10.) However, the Texas Court of Appeals subsequently affirmed the judgment of the
Texas Court dismissing the Texas Action with prejudice based upon Pierce’s repeated
failure to join necessary parties. Pierce v. Blalack, 535 S.W.3d 35, 43-44 (Tex. Ct. App.
2017).
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Following the affirmance in Texas, Pierce filed the Motion which was clarified by
Pierce at oral argument. She seeks to vacate the Judgment on the ground that the Texas
Court lacked subject matter jurisdiction to render the judgment which formed the basis
of this Court’s dismissal on res judicata grounds and Breitburn’s attorneys committed a
fraud on this Court and on the Texas Court whose judgment I relied on in dismissing the
adversary proceeding. Pierce also asserts a new claim for money damages under 18
U.S.C. § 242. Breitburn contends, among other things, that section 242 is part of the
U.S. criminal code, and does not give rise to a private right of action. The Court need
not decide this question because even if it did give Pierce a right of action, it is a newly
asserted claim that does not provide a basis to vacate the Judgment.
DISCUSSION
Rule 60(b) of the Federal Rules of Civil Procedure, made applicable to this
adversary proceeding with certain immaterial differences by Rule 9024 of the Federal
Rules of Bankruptcy Procedure, governs motions to vacate final judgments. It provides
in pertinent part:
(b) GROUNDS FOR RELIEF FROM A FINAL JUDGMENT, ORDER, OR
PROCEEDING. On motion and just terms, the court may relieve a party
or its legal representative from a final judgment, order, or proceeding for
the following reasons:
. . . .
(3) fraud (whether previously called intrinsic or extrinsic),
misrepresentation, or misconduct by an opposing party;
(4) the judgment is void. . . .
Rule 60(d) further provides in pertinent part:
(d) OTHER POWERS TO GRANT RELIEF. This rule does not limit a
court’s power to:
(1) entertain an independent action to relieve a party from a judgment,
order, or proceeding; [or]
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. . . .
(3) set aside a judgment for fraud on the court. 4
A. 	Lack of Jurisdiction
Pierce does not challenge this Court’s jurisdiction to enter the Judgment.
Instead, she argues that the effect of the automatic stay and the Stay Relief Order
deprived the Texas Court of jurisdiction to render the judgment on which this Court
relied in dismissing the adversary proceeding. A judgment rendered by a court lacking
subject matter jurisdiction is void and subject to collateral attack. Da Silva v. Kinsho
Int'l Corp., 229 F.3d 358, 362 (2d Cir. 2000). Similarly, with the exception of
ministerial acts by the clerk of court, the continuation of pre-petition litigation and the
entry of a judgment against the debtor in violation of the automatic stay are also void.
Rexnord Holdings, Inc. v. Bidermann, 21 F.3d 522, 527 (2d Cir. 1994).
That said, Pierce’s “voidness” argument is based on a misunderstanding of the
Stay Relief Order. The Stay Relief Order is typical of the type entered in a bankruptcy
case to expedite the resolution of all of the issues raised in prepetition litigation
especially when they are intertwined with the issues involving non-debtor parties.
While the automatic stay does not apply to non-debtors, the non-bankruptcy litigation
cannot proceed as a practical matter without the debtor. A stay relief order of the type
entered in this case allows the party suing the debtor to liquidate its claims or declare its
rights, but also requires the party, now a judgment creditor, to return to the bankruptcy
court to enforce the judgment. For example, if the non-bankruptcy court enters a
4 	Prior to December 2007, the provisions in Rule 60(d) were part of Rule 60(b). Rule 60 was
restyled in 2007, but the changes were stylistic only and were not intended to make substantive changes.
FED . R. CIV . P. 60 advisory committee’s note to 2007 amendment.
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money judgment, the judgment creditor must collect that judgment through the claims
allowance process – it cannot seize and liquidate property of the estate to satisfy the
judgment. If the non-bankruptcy court declares rights, the judgment creditor must still
return to the Bankruptcy Court to enforce those rights in accordance with the scheme
laid out by the Bankruptcy Code.
The Stay Relief Order was designed to achieve this goal. The debtors were part of
a much larger group of defendants and potential, additional defendants who could be
adversely affected by a Texas Court determination that Pierce owned or had an interest
in the Property. The Stay Relief Order expressly granted Pierce the right “to prosecute
the Pierce Claims to judgment in the Texas Action so that the Pierce Claims, if any, may
be liquidated.” If Pierce prevailed, she would have to return to this Court to enforce her
rights (or seek further stay relief to enforce her rights in Texas).
Pierce argues that she believed that the Stay Relief Order precluded her from
litigating against Breitburn in the Texas Action, based on a representation by one of
Breitburn’s lawyers in that case. (Motion at ECF pp. 3 of 15) 5 (“Pierce’s interpretation of
the Order Modifying Automatic Stay was that she could not move forward in the Texas
suit with Breitburn Entities, yet she could proceed with her case against all other
defendants, because as stated by legal counsel Don Westbrook, Breitburn Entities fall
under the ‘same’ claim as some of the other named defendants (not the top surface
claimants) in Pierce’s suit.”) Pierce seems to imply that she was misled by Breitburn’s
5 	“ECF pp.” refers to the page numbers at the top of each docketed document imprinted by the
Court’s CM/ECF system.
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counsel, but she has not pointed to a transcript or pleading in which the statement was
made.
Furthermore, any claim that she was misled or misinterpreted the Stay Relief
Order is belied by her conduct. The Stay Relief Order is dated June 22, 2016. Pierce
filed the Plaintiff’s Thirteenth Amended Petition for Trespass to Try Title and Slander
of Title (the “Thirteenth Amended Petition”) 6 on September 2, 2016. Despite her
professed belief that she could not proceed against the debtors in these cases, the
Thirteenth Amended Petition named numerous Breitburn entities as defendants.
(Breitburn Dismissal Motion, Ex. F, at ECF pp. 420 at 466.) In addition, the Texas
Court heard the motions to dismiss on September 2, 2016. There is no indication in the
Texas Court’s decision, (see id. at ECF pp. 464-66 of 466), or the subsequent appeal, 535
S.W.3d 35, that Pierce argued that the Texas Action could not proceed or that the Texas
Court lacked jurisdiction in light of the automatic stay or the Stay Relief Order.
In short, the Stay Relief Order authorized Pierce to prosecute the Pierce Claims
in Texas to judgment. The Pierce Claims included any claim for relief, whether
monetary, declaratory or injunctive, that depended on a determination that she owned
the Property or had an interest in it. The Texas Court had jurisdiction to decide those
questions, and its dismissal with prejudice based on Pierce’s failure to join necessary
parties has been upheld on appeal in Texas.
6 	A copy of the Thirteenth Amended Petition is annexed to the Notice of Motion of Debtors
Pursuant to 28 U.S.C. § 1334 and Fed. R. Bankr. P. 7009 and 7012 for Dismissal of or Abstention from
Adversary Proceeding, dated Sept. 15, 2016 (“Breitburn Dismissal Motion”) (ECF Doc. # 8), as Exhibit F,
at ECF pp. 461 of 466.
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B. 	Fraud on the Court
“‘Fraud on the court’ encompasses conduct which represents an attempt to defile
the court itself, or a fraud perpetrated by officers of the court so that the judicial
machinery cannot perform its impartial task of judging cases.” Gazes v. DelPrete (In re
Clinton Street Food Corp.), 254 B.R. 523, 532 (Bankr. S.D.N.Y. 2000); accord Armatas
v. Maroulleti, 690 F. App’x 731, 732 (2d Cir. 2017) (summary order) (quoting Hadges v.
Yonkers Racing Corp., 48 F.3d 1320, 1325 (2d Cir.1995). “‘[F]raud upon the court’ as
distinguished from fraud on an adverse party is limited to fraud which seriously affects
the integrity of the normal process of adjudication.” Gleason v. Jandrucko, 860 F.2d
556, 559 (2d Cir. 1988); accord Linkco, Inc. v. Akikusa, 367 F. App’x 180, 182 (2d Cir.)
(summary order), cert. denied, 562 U.S. 833 (2010). A party seeking to vacate a
judgment for fraud on the court must show, by clear and convincing evidence, “that a
party has sentiently set in motion some unconscionable scheme calculated to interfere
with the judicial system's ability impartially to adjudicate a matter by ... unfairly
hampering the presentation of the opposing party's claim or defense.” McMunn v.
Mem'l Sloan–Kettering Cancer Ctr., 191 F.Supp.2d 440, 445 (S.D.N.Y.2002) (quoting
Aoude v. Mobil Oil Corp., 892 F.2d 1115, 1118 (1st Cir.1989)); see also Passlogix, Inc. v.
2FA Tech., LLC, 708 F. Supp. 2d 378, 393 (S.D.N.Y. 2010).
A claim of fraud on the court must be made in the court that was allegedly
defrauded. O’Neill v. Hernandez, No. 08 Civ. 1689 (KMW), 2010 WL 1257512, at *14
(S.D.N.Y. Mar. 25, 2010); Pandozy v. Segan, 518 F. Supp. 2d 550, 555 (S.D.N.Y. 2007),
aff’d, 340 F. App’x 723 (2d Cir. 2009); Wagner Spray Tech Corp. v. Wolf, 113 F.R.D. 50,
52 (S.D.N.Y. 1986); Chambers v. NASCO, Inc., 501 U.S. 32, 44 (1991) (“[T]he inherent
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power also allows a federal court to vacate its own judgment upon proof that a fraud has
been perpetrated upon the court.”) (emphasis added). Thus, Pierce cannot seek an
order from this Court vacating a judgment entered by the Texas Court based upon an
alleged fraud on the Texas Court. Moreover, she recently moved in the Texas Court to
vacate its judgment based on lack of jurisdiction and fraud on that court, (see Plaintiff’s
Motion to Vacate Void Judgment Due to Lack of Jurisdiction Pursuant FRCP
60(B)(3)(4)(6) and Fraud Upon the Court, (ECF Doc. # 43), but the Texas Court
declined to set a hearing concluding that the Texas appellate court’s mandate affirming
the dismissal deprived the Texas Court of any further jurisdiction over Pierce’s claims.
(ECF Doc. # 44, at ECF pp. 21 of 21.) She is, therefore, foreclosed from making any
further arguments in the Texas Court that Breitburn committed a fraud on the Texas
Court.
Pierce also claims that Breitburn committed a fraud on this Court by
misrepresenting that she filed her Thirteenth Amended Petition in the Texas Court on
September 12, 2016 rather than September 2, 2016. This argument requires some
amplification. The Texas defendants had moved to dismiss the Twelfth Amended
Petition, and their motion was heard on September 2, 2016. On that same day, Pierce
filed her Thirteenth Amended Petition. She argues that the Thirteenth Amended
Petition superseded the Twelfth Amended Petition, and by implication, Breitburn
misrepresented the filing date as September 12 in order to argue that the only
outstanding pleading on the hearing date was the Twelfth Amended Petition.
The Debtors did represent to this Court that the Thirteenth Amended Petition
was filed on September 12, 2016, (Breitburn Dismissal Motion ¶ 9), and the Court
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mentioned the erroneous filing date in the Memorandum Decision. The error, however,
was immaterial to this Court’s disposition of the adversary proceeding, and did not
involve conduct that affected the integrity of the judicial process. The Texas Court had
previously ruled that Pierce had to join “those persons or entities that would be
adversely affected by ruling in favor of Plaintiff.” (Breitburn Dismissal Motion, Ex. G, at
ECF pp. 465 of 466.) These included parties, like Breitburn, that had acquired their
interests in the Property from King or his successors in interest. The Texas Court had
entered an Order on Plea of Abatement, giving Pierce ninety days to join the necessary
parties, and thereafter granted Pierce an additional ninety days to join the necessary
parties. (Id.)7
The Texas Court acknowledged the filing of the Thirteenth Amended Petition on
September 2, 2016, (Breitburn Dismissal Motion, Ex. G, at ECF pp. 465 of 466.) The
Thirteenth Amended Petition asserted claims for Trespass to Try Title and Slander of
Title, and according to the Texas Court, Pierce dropped all of the unserved defendants
and involuntary plaintiffs because, she argued, the relevant Texas rule “only requires the
addition of those persons or entities in possession of the real property made the subject
of the Trespass to Try Title suit.” (Id.)
The Texas Court disagreed; the Thirteenth Amended Petition did not cure the
fundamental defect of non-joinder. It ruled that the joinder provisions of Rule 39 of the
7 	Pierce had moved in the Texas Court to lift the Abatement, (Motion, Ex. F), and the Texas Court
entered an Order Lifting Abatement on Mar. 4, 2016. (Id., Ex. G.) Pierce argues that this shows that she
complied with the Texas Court’s earlier directives to join the necessary parties. Obviously, her
interpretation of the order does not square with the Texas Court’s subsequent dismissal of the Texas
Action for failure to join necessary parties. Moreover, she could have raised this issue in Texas, and the
Court of Appeals affirmance necessarily rejected her argument that she had joined all necessary parties.
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Texas Rules of Civil Procedure 8 applied to her action for trespass to try title as well as
her declaratory judgment claims, (id.) (citing Longoria v. Exxon Mobil Corp., 255
S.W.3d 174, 180 (Tex. Ct. App. 2008)), and Rule 39, required the joinder of everyone
whose interest in the Property might be affected, e.g., those persons and entities that
acquired their interests through the King line. Accordingly, it dismissed the Texas
Action with prejudice in the exercise of its discretion, and the Texas Court of Appeals
affirmed. Furthermore, as explained in the Memorandum Decision, although the Texas
Court did not reach the merits of Pierce’s claim, the dismissal with prejudice constituted
a final adjudication on the merits for purposes of res judicata under Texas law.
In conclusion, the Motion is denied and the Clerk’s office is respectfully directed
to close this adversary proceeding.
So ordered.
Dated:New York, New York
May 7, 2018
/s/ Stuart M. Bernstein
STUART M. BERNSTEIN
United States Bankruptcy Judge
8 	Rule 39(a) of the Texas Rules of Civil Procedure provides:
(a) Persons to be Joined if Feasible. A person who is subject to service of process shall
be joined as a party in the action if (1) in his absence complete relief cannot be accorded
among those already parties, or (2) he claims an interest relating to the subject of the action
and is so situated that the disposition of the action in his absence may (i) as a practical
matter impair or impede his ability to protect that interest or (ii) leave any of the persons
already parties subject to a substantial risk of incurring double, multiple, or otherwise
inconsistent obligations by reason of his claimed interest. If he has not been so joined, the
court shall order that he be made a party. If he should join as a plaintiff but refuses to do
so, he may be made a defendant, or, in a proper case, an involuntary plaintiff.
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