2013 Judge Stern - Opinions

Judge Morris Stern -- Opinions signed in 2013

In re Christ Hospital 12-12906 December 3, 2013

Hudson was the successful bidder in bankruptcy for essentially all of the assets of Chapter 11 debtor Christ Hospital.  The sale, pursuant to a court-ordered auction process, was approved by order of this court (the “Sale Approval Order”).  That Order provided Hudson with the benefits of broad “free and clear” protections as a purchaser of hospital assets per 11 U.S.C. § 363(f).  Hudson moved to enjoin Prime Healthcare Services, Inc. from pursuing a certain pending lawsuit against Hudson in the New Jersey Superior Court.  There, Prime, a prepetition contract party with Christ Hospital (that contract having been terminated), asserts claims of “Tortious Interference in Contractual Relations,” “Tortious Interference with Prospective Economic Gain” and “Unfair Competition” relating to Hudson’s acquisition of hospital assets but with origins before the hospital filed its Chapter 11 bankruptcy petition.   The bankruptcy court, holding that the Sale Approval Order and its order confirming the hospital’s plan of liquidation (the “Confirmation Order”) were being collaterally attacked by Prime’s pursuit in the State litigation, has enjoined Prime from pursuing that litigation.  

The bankruptcy court determined: (i)  Prime’s economic tort claims are “interests” per § 363(f), and as such, are subject to a § 363 sale “free and clear” of them; (ii)  though Prime did not bid nor appear at the bankruptcy sale, it had complete notice and knowledge of the terms of the § 363(b) sale of hospital assets but did not object to the sale or apply for any adequate protection of its interests, said failure to object to the asset sale “free and clear” of its interests being properly considered consent to the auction sale on that basis pursuant to § 363(f)(2); (iii) Prime eschewed any application to the bankruptcy court for relief from its orders (whether per Fed. R. Bankr. P. 9024 or otherwise), and went forward during the pendency of this case (indeed, preconfirmation) with the State litigation which, in fact, was a prohibited and a collateral attack; (iv) Prime’s would-be State litigation remedy – damages from Hudson – presents a frontal attack on the economic integrity of the § 363(b) sale and the bankruptcy court’s “good faith” purchase finding; (v) the bankruptcy  court’s jurisdiction to interpret and enforce its sale and confirmation orders is historic and unimpeded by Stern v. Marshall or other recent developments in the law; rather, the in rem aspect of § 363(b) sales remains unaltered by currently debated jurisdiction issues, and “arising under,” “arising in” and “core” requirements of 28 U.S.C. §§ 1334(b) and 157(b)(2)(L) and (N) are well satisfied; and  (vi) the bankruptcy court is authorized to issue an injunction under the circumstances of this case, unimpeded by Anti-Injunction Act restrictions and supported by the All Writs Act and 11 U.S.C. § 105(a).