In re Ryan, No. 07-10845, 2008 WL 1969593 (11th Cir. May 8, 2008) (click for pdf).
Ryan filed a voluntary petition for bankruptcy in early 2002. At the time, he owned 100% of the stock in a number of corporate entities (“the Entities”), including Riverside Capital Advisors, Inc. On August 7, 2002, the bankruptcy trustee sold Ryan’s interests in the Entities to Entrust for the sum of $60,000. In an order approving the sale, the bankruptcy court stated, in relevant part:
Any original books and records, and/or assets of the Entities … for which the Debtor has possession, custody, or control, shall be turned over to the Trustee forthwith. The Court shall retain jurisdiction to ensure that the Trustee and/or the Debtor turn over the books, records, or assets of the Entities to Entrust….
Bankr.Ct. Order of Aug. 16, 2002, at 2. The trustee then turned over most of the business records of the Entities to Entrust. There remain, however, business records of Riverside that have not been turned over because Entrust and Winchester disagree about who owns them. …
At some point before 2001, Winchester, a trust company that acts as sole trustee for several trusts, retained Riverside to provide investment advice. Ryan was an officer, director, and sole stockholder of Riverside. In August 2001, Winchester and Riverside terminated their business relationship. Pursuant to severance agreements, Ryan and Riverside were required to return to Winchester all files, books, and records related to the Winchester trusts. Ryan returned most of the records, but failed to return 26 boxes of records that had been stored in a warehouse with Ryan’s property and were not located until after Ryan filed his bankruptcy petition. Winchester asserts that it owns these records pursuant to the severance agreements. Entrust asserts that it owns these records pursuant to its purchase of Riverside in the bankruptcy sale.
The Bankruptcy Court held that it did have jurisdiction over the dispute between the two non-debtors, but the District Court reversed and remanded. The Eleventh Circuit held that the Bankruptcy Court did have jurisdiction.
Entrust argues that the bankruptcy court has jurisdiction under both the “arising in” and the “related to” language of § 1334(b). Winchester maintains that the dispute is a simple contract matter over the effect of the 2001 severance agreements and therefore neither arises in nor is related to the bankruptcy case. We conclude that the bankruptcy court has “related to” jurisdiction and therefore do not proceed to address “arising in” jurisdiction.
A dispute is “related to” a case under title 11 when its result “ ‘could conceivably’ ” have an “ ‘effect on the estate being administered in bankruptcy.’ ” Miller v. Kemira, Inc. (In re Lemco Gypsum, Inc.), 910 F.2d 784, 788 (11th Cir.1990)… In this case, we find the Lemco Gypsum/Pacor “conceivable effect” test satisfied. The dispute between Winchester and Entrust over the Riverside documents could conceivably affect the bankruptcy estate because the resolution of the dispute could impact the amount of money in the estate. If the documents are not turned over to Entrust as arguably required by the bankruptcy court’s order approving the sale of the Entities, Entrust will have a viable claim for a refund from the estate of all or part of the $60,000 purchase price…In the case presently before us, the dispute between Entrust and Winchester does have a conceivable effect on the bankruptcy estate, which could be subject to a $60,000 refund claim.