876 F2d 894 In Re Delorean Motor Company
876 F.2d 894
In re DeLOREAN MOTOR COMPANY, Debtor,
David W. ALLARD, Jr., Trustee, Plaintiff-Appellee,
John Z. DeLOREAN, Douglas Elliman Gibbons & Ives; Eric M.
Javits; Javits & Javits; a New York partnership; Javits,
Hinckley, Rabin & Engler, a New York Partnership; Thomas W.
Kimmerly, and Thomas W. Kimmerly, P.C., a Michigan
Professional Corporation, Defendants-Appellees,
834 Fifth Avenue Corporation, the Board of Directors of 834
Fifth Avenue Corporation, Laurance S. Rockefeller, Clayton
W. Frye, Jr., Robert W. Johnson, IV, Anne M. Johnson,
Carroll Petrie, A. Alfred Taubman, and Alexander
Marchessini, Brown Harris Stevens, Inc., William R. Miller,
and John P.B. Eddy, Non-Party Appellants,
United States Court of Appeals, Sixth Circuit.
June 14, 1989.
NOTICE: Sixth Circuit Rule 24(c) states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Sixth Circuit.
Before KRUPANSKY and BOGGS, Circuits Judges and GEORGE CLIFTON EDWARDS, Jr., Senior Circuit Judge.
This is an appeal from a February 23, 1988 order of district judge George Woods, which preliminarily enjoined appellants1 herein from taking action to evict defendant-appellee John Z. DeLorean (DeLorean) from his apartment in New York City or otherwise interfering with the district court's jurisdiction over the shares of stock and proprietary lease reflecting DeLorean's ownership and possessory interest in the apartment.
The instant controversy is related to the bankruptcy proceeding of DeLorean Motor Co. (DMC) pending in the Eastern District of Michigan from the date of its filing on October 25, 1982. On August 19, 1983, the trustee in DMC's bankruptcy, David W. Allard (Allard), initiated this lawsuit in the Southern District of New York (S.D.N.Y. case number 83 CIV 6232) against John DeLorean and several other co-defendants2 seeking monetary damages resulting from charged violations of civil RICO, 18 U.S.C. Sec. 1961, et seq. Case number 83 CIV 6232, pending in the S.D.N.Y., was subsequently transferred to Judge Woods in the Eastern District of Michigan because of his ongoing supervisory control over the D.M.C. bankruptcy. The case was settled on May 28, 1987, when DeLorean agreed that, inter alia, he would personally guarantee certain payments to the trustee and that his guarantee would be "secured by liens on John Z. DeLorean's New York City Cooperative apartment," the apartment at issue herein. Judge Woods retained continuing jurisdiction to oversee the payments pursuant to and in compliance with this settlement.
Despite knowledge of the outstanding liens on DeLorean's apartment and of the May 28, 1987 settlement, 834, the owner of DeLorean's apartment building, initiated a legal proceeding in New York state court on November 3, 1987 to summarily evict DeLorean from his apartment, and to compel the "surrender [of] his original stock certificate [representing his ownership interest in the apartment]."
On November 24, 1987, DeLorean petitioned Judge Woods for a restraining order to enjoin the New York state court eviction proceeding, asserting that it impaired his ability to comply with the May 28, 1987 settlement. After a December 2, 1987 hearing, Judge Woods granted DeLorean's request for a preliminary injunction on February 23, 1988. Judge Woods decided that the apartment was the pledged security for the May 28, 1987 settlement agreement, without which the unsecured creditors would be irreparably disadvantaged.
In pertinent part, Judge Woods' decision read as follows:
DeLorean's success is likely, irreparable harm would occur if DeLorean were evicted from his apartment, 834 Corporation does not incur substantial harm by retaining DeLorean as a tenant, and the public interest is served by retaining the lien to secure that DeLorean pays his creditors the amount agreed upon in the settlement agreement. In re DeLorean Motor Company, 755 F.2d 1223, 1227-28 (6th Cir.1985).
From this decision, appellants initiated the instant timely appeal.
Appellants argue that the district court lacked jurisdiction to enter its injunction. However, it is well-settled that a bankruptcy court may "issue any order, process, or judgment that is necessary or appropriate to carry out the provisions" of the bankruptcy code. 11 U.S.C. Sec. 105. See also A.H. Robins Co. Inc. v. Piccinin, 788 F.2d 994, 1003 (4th Cir.1986) (Sec. 105 gives bankruptcy court power to enjoin suits against non-parties in state court if failure to enjoin would adversely affect bankruptcy estate or "pressure the debtor"). See also In re Salem Mortgage Co., 783 F.2d 626, 634 (6th Cir.1986) (bankruptcy court subject matter jurisdiction extends to any proceeding which "could conceivably have any effect" upon the estate being administered in bankruptcy); In re Wiltse Brothers Corp., 361 F.2d 295 (6th Cir.1966) (bankruptcy court has jurisdiction to enjoin proceedings in other courts which interfere with the proper administration of the bankrupt's estate).
Assuming arguendo, that the February, 1988 order was not a bankruptcy-related order, the district court nonetheless had jurisdiction under the All Writs Act, 28 U.S.C. Sec. 1651, to "issue all writs necessary or appropriate in and of [its] respective jurisdictions." In the case at bar, the injunction against the New York state court proceedings endangered the district court's authority to enforce the settlement between DeLorean and the trustee. In such instances, an injunction restraining the state court proceeding, pursuant to the authority of the All Writs Act, was appropriate. See In re Baldwin-United Corp., 770 F.2d 328, 337 (2d Cir.1985) (where state court actions impaired federal court's "efforts to craft a settlement," such state actions could be enjoined). Moreover, in the instant case, Judge Woods had assumed jurisdiction over the res (the New York City apartment) and had already ordered that the apartment serve as security for DeLorean's settlement payments to the trustee. Once the district court acquired jurisdiction over the res, it was "empowered to enjoin any state court proceeding affecting that res." Baldwin-United, 770 F.2d at 536.3
Apart from the jurisdictional issue, appellants charged that the injunction was improperly granted because the district court erred in concluding that DeLorean would suffer irreparable injury; that likelihood of success on the merits of the case favored DeLorean; that 834 Corporation incurred no harm by retaining DeLorean as a tenant and that the public interest would be served by an injunction.
A district court's injunction will not be overturned absent an abuse of discretion. Forry, Inc. v. Neundorfer, Inc., 837 F.2d 259, 262 (6th Cir.1988). No abuse of discretion occurred in the instant case. If the state court eviction action is permitted to proceed, DeLorean could be divested of both his possessory and ownership interest in the apartment; see State Tax Commission v. Shor, 43 N.Y.2d 151 (1977) (possessory interest in a proprietary lease and its accompanying stock are inseparable), thereby jeopardizing his personal guarantee to pay the amounts stipulated in the May 28, 1987 settlement agreement.
This court cautions, however, that the district court must closely monitor the developments of the bankruptcy proceedings pending before it and continuously re-assess the factual dynamics supporting its injunction and perhaps consider the possibility of permitting the directors of 834 to sell the apartment and escrow the proceeds as security for the May 28, 1987 settlement agreement.
This court has reviewed appellants' remaining assignments of error and concludes that they are without merit. Accordingly, the decision of the district court is AFFIRMED.
Appellants herein are the 834 Fifth Avenue Corporation (834), which owns the building in which DeLorean's apartment is located and the individual members of its board of directors; Brown Harris Stevens, Inc., the managing agent of 834 (Brown Harris Stevens, Inc.); William R. Miller (Miller), Secretary of 834 and president of Brown Harris; and John P.B. Eddy (Eddy), assistant secretary of 834
These co-defendants named in the August 19, 1983 complaint are Douglas Ellman Gibbons & Ives, Inc.; Eric M. Javits; Javits & Javits; Javits, Hinkley, Rabin & Engler; and Thomas W. Kimmerly, P.C
Because either Bankruptcy Code Sec. 105 or the All Writs Act authorizes the instant injunction, the Anti-Injunction Act, 28 U.S.C. Sec. 2283 is inapplicable. Section 2283 expressly provides that a federal court injunction of a state court proceeding is permissible if it is "necessary in aid" of a federal court's jurisdiction. See Atlantic Coast Line Railroad Co. v. Brotherhood of Locomotive Engineers, 398 U.S. 281 (1970)