It is very common for bankruptcy court orders to provide that the court retains jurisdiction to enforce such orders. Similarly, chapter 11 confirmation orders routinely provide that the bankruptcy court retains jurisdiction over all orders previously entered in the case. The enforceability of these “retention of jurisdiction” provisions, however, will not rest on the plain language in the order but on the bankruptcy court’s statutory jurisdiction. Because no court can simply create its own jurisdiction, whether these provisions are enforceable hinges on whether the dispute in question “arises under”, “arises in” or “relates to” the bankruptcy case as set forth by statute at 28 U.S.C. §§ 1334 and 157.
Recently, the First Circuit opined that a dispute involving a provision in a chapter 11 sale order did not “arise in” the bankruptcy case merely because the sale was approved by the bankruptcy court and the sale order included a “retention of jurisdiction” provision. Gupta v. Quincy Medical Center, 2017 WL 2389407, Case No. 15-1183 (1st Cir. June 2, 2017). The First Circuit recognized that “retention of jurisdiction” provisions are not sufficient to establish “arising in” jurisdiction—instead the bankruptcy court must consider the nature of the proceeding to independently determine if the matter could arise only in the context of a bankruptcy case.
The facts underlying Gupta are relatively straightforward. Quincy Medical Center (QMC) entered into an asset purchase agreement (APA) to sell substantially all of their assets to an entity created by Steward Health Care System (Steward). The APA required Steward to offer new employment to all QMC employees that were employed immediately prior to the sale closing. The APA also provided that if Steward terminated any employee after the sale closed, then Steward would be liable for severance pay. Immediately after executing the APA, QMC filed for chapter 11 to consummate the sale and liquidate...
