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Tort Claim Against Bankrupt Graceland to be Resolved in Delaware?

By Robyn Hagan Cain on June 06, 2012 | Last updated on March 21, 2019

Bankruptcy is a complex legal issue. Throw in a Chapter 11 cross-jurisdictional showdown between a state court and two bankruptcy courts, and it becomes a completely muddled mess.

The Eleventh Circuit Court of Appeals recently attempted to un-muddle that mess in Alderwoods Group, Inc., et al v. Reyvis Garcia, et al.

The debt in this case stemmed from tort liability claims possessed by relatives of people buried at Graceland, a Miami cemetery. (The relatives are the Creditors.) The claims were part of a class action complaint filed in a Miami state court. The defendants are Alderwoods Group, Inc., Osiris Holding of Florida, Inc., and Northstar Graceland, LLC (Debtors). The Creditors sued the Debtors, alleging that Debtors are liable for misplacing their loved ones buried in Graceland.

In 1999, Debtors filed for Chapter 11 in the Delaware Bankruptcy Court. The Delaware Bankruptcy Court confirmed Debtors' plan of reorganization. The Confirmation Order, which became effective January 2, 2002, discharged all claims against Debtors, including unknown claims such as those Creditors asserted in the state court case, and provided that the court retained jurisdiction over the reorganization after the January 2, 2002.

In 2008, Debtors filed a complaint against Creditors in a Florida Bankruptcy Court seeking a declaration that the claims Creditors were attempting to litigate in State Court were discharged in the Chapter 11 case, and an order enjoining Creditors from pursuing their case in State Court. The Creditors responded by asking the Florida Bankruptcy Court to dismiss the Debtors' complaint for lack of subject matter jurisdiction or, in the alternative, to abstain from exercising jurisdiction and/or to remand the case to state court.

The Florida Bankruptcy Court sided with Creditors, finding that the claims Creditors were prosecuting in State Court had not been discharged in the Chapter 11 case because Debtors' publication of notice of the bankruptcy proceedings was inadequate. Debtors appealed to the Eleventh Circuit Court of Appeals on four issues, none of which are relevant because the Eleventh Circuit concluded that the Florida Bankruptcy Court lacked jurisdiction to hear Debtors' complaint for declaratory relief.

The appellate court concluded, "In the case at hand, it is apparent that if Creditors' filing of the State Court action indeed violated the discharge injunction contained in the Confirmation Order, then it was the Delaware Bankruptcy Court's injunction to enforce -- not the Florida Bankruptcy Court's."

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