Phoenix Enviornmental, LLC v. Johnson et al

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF NEW MEXICO
In re:
PHOENIX ENVIRONMENTAL, LLC,
Debtor. 	No. 11-11-15031 SA
PHOENIX ENVIRONMENTAL, LLC,
Plaintiff,
v. 	Adv. No. 12-1007 S
XERIC OIL AND GAS, INC.,
BAKER MO SERVICES, INC.,
and DAN JOHNSON and COLLEEN JOHNSON,
dba DC Energy,
Defendants.
MEMORANDUM OPINION IN SUPPORT OF ORDER
GRANTING [SECOND] MOTION FOR RECONSIDERATION
AND/OR CLARIFICATION OF ORDER
ABSTAINING FROM HEARING ADVERSARY PROCEEDING
AND REMANDING ADVERSARY PROCEEDING TO STATE COURT
Dan and Colleen Johnson and DC Energy, LLC (“Defendants”)
have asked this Court to amend or clarify its Order Abstaining
from Hearing Adversary Proceeding and Remanding Adversary
Proceeding to State Court (doc 41) (“Abstention Order”) to state
whether in abstaining from adjudicating, and remanding, the State
Court Action, the Court intended by the same token to modify the
automatic stay to permit the State Court Action to go forward.
The Court grants the motion to clarify that it did not so intend.
Background
Debtor in possession Phoenix Environmental, LLC
(“Plaintiff/Debtor”) moved this Court to abstain from
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adjudicating this adversary proceeding (“Abstention Motion”).
Doc 13. 	After two false starts (docs 29 and 34), the Court
issued its “Abstention Order” and its Replacement Memorandum in
Support of Order Abstaining from Hearing Adversary Proceeding and
Remanding Adversary Proceeding to State Court (doc 40). 	The
Abstention Order was issued following the well taken Defendants
Dan and Collen [sic] Johnson d/b/a DC Energy’s [sic] Motion for
Reconsideration of Order Abstaining from Hearing Adversary
Proceeding and Remanding Adversary Proceeding to State Court (doc
33) (“[First] Reconsideration Motion”), citing Rule 9023 F.R.B.P
(incorporating Rule 59 F.R.Civ.P.). 	As the Replacement
Memorandum stated, the Court had improperly analyzed for its
first two orders the citizenship of DC Energy, LLC, a New Mexico
limited liability company, and based on that incorrect analysis,
had ordered mandatory abstention as provided by 28 U.S.C.
§1334(c)(2). 	The (final) Abstention Order (doc 41) granted the
[First] Reconsideration Motion (in the sense that the Court
reviewed the first two abstention orders, docs 29 and 34) but
still ordered abstention, albeit this time on the grounds of
discretionary abstention pursuant to 28 U.S.C. §1334(c)(1).
Defendants have now filed Dan and Colleen Johnson’s Motion for
Reconsideration and/or Clarification of Order Abstaining from
Hearing Adversary Proceeding And Remanding Adversary Proceeding
to State Court (doc 42) (“Second Reconsideration Motion”), to
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which Plaintiff/Debtor Phoenix Environmental, LLC has responded
in opposition (doc 43). 	For the reasons set out below, the Court
grants the Second Reconsideration Motion by “clarifying” that its
Abstention Order (doc 41) was not intended to address any issue
of the automatic stay. 1
Analysis
F.R.Bank.P. 9023 2 incorporates F.R.Civ.P. 59 3 which provides
the basis for Defendants’ Second Reconsideration Motion.
1 	The Court has subject matter and personal jurisdiction
pursuant to 28 U.S.C. §§1334 and 157(b); this is a core
proceeding pursuant to 28 U.S.C. §157(b)(2)(A); and these are
findings of fact and conclusions of law as may be required by
Rule 7052 F.R.B.P.
2 That rule provides as follows:
New Trials; Amendment of Judgments
Except as provided in this rule and Rule 3008, Rule 59
F.R.Civ.P. applies in cases under the Code. A motion
for a new trial or to alter or amend a judgment shall
be filed, and a court may on its own order a new trial,
no later than 14 days after entry of judgment.
3 That rule provides in relevant part as follows:
New Trial; Altering or Amending a Judgment
(a) In General.
(1) Grounds for New Trial. The court may, on motion,
grant a new trial on all or some of the issues--and to
any party--as follows:
...
(B) after a nonjury trial, for any reason for which a
rehearing has heretofore been granted in a suit in
equity in federal court.
(2) Further Action After a Nonjury Trial. After a
nonjury trial, the court may, on motion for a new
trial, open the judgment if one has been entered, take
additional testimony, amend findings of fact and
conclusions of law or make new ones, and direct the
entry of a new judgment.
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Grounds warranting a motion to reconsider include (1)
an intervening change in the controlling law, (2) new
evidence previously unavailable, and (3) the need to
correct clear error or prevent manifest injustice. See
Brumark Corp. v. Samson Resources Corp., 57 F.3d 941,
948 (10th Cir. 1995). Thus, a motion for
reconsideration is appropriate where the court has
misapprehended the facts, a party's position, or the
controlling law. Cf. Fed.R.App.P. 40(a)(2) (grounds
for rehearing). It is not appropriate to revisit
issues already addressed or advance arguments that
could have been raised in prior briefing. See Van
Skiver v. United States, 952 F.2d 1241, 1243 (10th Cir.
1991).
Servants of the Paraclete v. Does, 204 F.3d 1005, 1012 (10 th Cir.
2000).
The Second Reconsideration Motion asks for reconsideration
and/or clarification of whether, in remanding the removed action
back to the State District Court as part of the process of
abstaining, the Court did or did not intend to modify the stay so
that the action could resume in the State District Court.
Defendants are correct that the Court did not address this issue,
but that was because it was not raised by Defendants (or
Plaintiff/Debtor for that matter).
Nothing in this adversary proceeding, including any of the
papers addressed to the abstention issue, sought a ruling one way
or the other concerning the automatic stay. 	Perhaps that is not
too surprising, since ordinarily a motion for stay relief would
be filed in the underlying chapter 11 case. 	However, no such
motion was filed there either. 	No request having been directed
to the Court seeking a ruling on the automatic stay, the Court
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has made no such ruling, including in the Abstention Order (doc
41). 	And since this was not an issue raised by either party
prior to the ruling, there is no occasion to “revisit” the issue
pursuant to Rule 9023 or Rule 59. 	Servants of the Paraclete v.
Does, supra.
Nevertheless, Defendants appear to argue or at least suggest
that implicit (or, more accurately, explicit) in the process of
ruling to abstain, the Court should also have issued a ruling or
statement about the status of the automatic stay in the action
remanded to the State District Court. 	However, as
Plaintiff/Debtor correctly argues, whether the action at issue
stays in the Bankruptcy Court or returns to the State Court does
not as such require a ruling on whether the action, remanded or
not, should go forward. 	The language of §1334(d) makes that
clear, in that it provides in part that “[s]ubsection (c) and
this subsection shall not be construed to limit the applicability
of the stay provided for by section 362 of title 11, United
States Code, as such section applies to an action affecting the
property of the estate in bankruptcy.”
While the operation of the automatic stay affects the
power of entities other than the court presiding over
the bankruptcy to resolve claims involving the debtor
or the estate, the abstention provided for in § 1334(c)
deals with the exercise of jurisdiction by the court
presiding over the bankruptcy itself. Thus, a decision
to abstain affects the power of the court presiding
over the bankruptcy only, and does not give any other
entity the power to resolve claims involving the debtor
or the estate. Even where the court has abstained
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pursuant to § 1334(c), the stay granted under § 362
must be modified in order to allow the resolution of
claims other than in the court with jurisdiction over
the bankruptcy.
Pursifull v. Eakin, 814 F.2d 1501, 1504-5 (10 th Cir. 1987)
(footnote omitted); see Benedor Corp. v. Conejo Enterprises, Inc.
(In re Conejo Enterprises, Inc.), 96 F.3d 346 (9 th Cir. 1996):
[I]f Congress had intended pending state actions that
are determined to be non-core proceedings to be exempt
from the automatic stay, it would have explicitly so
provided.
As pointed out previously, § 362(b) provides explicit
exceptions to § 362(a)'s automatic stay. Pending state
actions that are determined to be non-core proceedings
are not listed among the explicit exemptions.
Therefore, it is clear that Congress did not intend to
provide an exception to the automatic stay for non-core
pending state actions which are subject to mandatory
abstention. In fact, Congress has made it clear that it
intended just the opposite by providing that a decision
to abstain under § 1334(c)(2) “shall not be construed
to limit the applicability of the stay provided for by
[§ 362]....” 28 U.S.C. § 1334(c)(2) (1986).
Id. at 353.
It is true that in the underlying chapter 11 case this Court
entered an order modifying the automatic stay to permit the
primary dispute that led to the filing of this chapter 11
petition to go forward in the state district court where that
dispute originated, after having determined that that removed
action should be remanded to the state district court. 4 	In the
order modifying the automatic stay – Order Granting IBEX Energy
4 See Phoenix Energy Services, LLC v. Phoenix Environmental,
LLC et al., Adv. Pro. 11-1199.
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Services, LLC’s (f/k/a Phoenix Energy Services, LLC) Amended
Motion for Relief from Stay to Permit State Court to Proceed with
Remanded Case (Main Case doc 154), the Court stated that it had
intended that the state court action continue to judgment once it
had been remanded. 5 	Id. at 1-2. 	That was because the heart of
the chapter 11 case would be determined by that litigation. 	More
to the point, however, the order modifying the stay was entered
as a result of a motion to modify the stay: IBEX Energy Services,
LLC’s Amended Motion for Relief from Stay to Permit Remanded
State Court Action to Proceed And for Award of Attorney Fees
(Main Case doc 141) (and a response thereto – Main Case doc 144).
Conclusion
Defendants have sought a “clarification” of the Court’s
Abstention Order. 	The Court grants Defendants’ motion for a
clarification and holds that the Abstention Order by itself did
not serve, nor was it intended to serve, as a ruling on whether
the automatic stay was or should be modified to permit the State
Court Action to proceed. 	In so ruling, the Court makes no
statement whether, if Defendants wish to proceed in the State
Court, they will need to obtain stay relief. 	See TW Telecom
Holdings Inc. v. Carolina Internet Ltd., 661 F.3d 495 (10 th Cir.
2011). 	An order will enter.
5 To the extent it is relevant, it appears that this State
Court Action is much less central to the resolution of the
chapter 11 case than was the dispute with IBEX Energy.
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Honorable James S. Starzynski
United States Bankruptcy Judge
Date Entered on Docket: 	October 26, 2012
Copies to:
Louis Puccini, Jr
Puccini Law, P.A.
PO Box 50700
Albuquerque, NM 87181-0700
Casey S Stevenson
Scotthulse, PC
201 E. Main Drive
El Paso, TX 79901
Robert R Feuille
PO Box 99123
El Paso, TX 79999-9123
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