MIKE K. NAKAGAWA, Bankruptcy Judge.
On July 13, 2016, the court heard Venetian Casino Resort, LLC's Motion for Preliminary Injunction ("Preliminary Injunction Motion"). The appearances of counsel were noted on the record. After arguments were presented, the matter was taken under submission.
On March 30, 2016, Jonathan A. Molnar ("Molnar") along with his wife, Joey A. Molnar, filed a joint Chapter 7 petition. (ECF No. 1). The bankruptcy case was assigned for administration to Victoria Nelson as Chapter 7 trustee ("Trustee"). A meeting of creditors required by Section 341(a) was scheduled for May 6, 2016, and a deadline of July 5, 2016, was established for any interested parties to object to discharge under Section 727(a) and to object to the discharge of particular debts under Section 523(a). (ECF No. 4).
On April 13, 2016, Molnar and his wife (jointly, "Debtors") filed their schedules of assets and liabilities ("Schedules"), statement of financial affairs ("SOFA"), and other information required by Section 521(a). (ECF No. 11). On their Schedule "E/F," Debtors listed Venetian Casino Resort, LLC ("Venetian"), as the holder of a nonpriority unsecured claim, in an unknown amount, based on a lawsuit. In Part 4 of their SOFA, Debtors disclosed a lawsuit pending in the Eighth Judicial District Court, Clark County, Nevada ("State Court"), styled as
On May 6, 2016, the Trustee docketed a report of no distribution stating that there is no non-exempt property available for distribution to creditors in the case ("No-Asset Report"). (ECF No. 16).
On May 20, 2016, a motion for an order finding that the automatic stay does not apply, or, for relief from automatic stay to proceed with discovery ("MRAS") was filed on behalf of Kate O'Keeffe ("O'Keeffe"), a journalist who wrote an article that appeared in the Wall Street Journal. (ECF No. 17). Upon an ex parte motion, an expedited hearing on the MRAS was scheduled for May 25, 2016. (ECF No. 23).
On May 24, 2016, Venetian removed the State Court Action to the bankruptcy court by filing a Notice of Removal ("Removal Notice") under 28 U.S.C. § 1452(a) and FRBP 9027. Upon removal, the State Court Action was assigned Adversary Proceeding No. 16-01074-MKN. The attachments to the Removal Notice reveal that Venetian commenced the State Court Action on March 9, 2016, by filing a complaint seeking damages against Molnar for breach of a confidentiality agreement
The attachments to the Removal Notice also reveal that on March 11, 2016, Venetian filed the instant Preliminary Injunction Motion that was scheduled to be heard in the State Court on March 31, 2016. The attachments to the Removal Notice also include a copy of an ex parte application filed in the United States District Court for the District of Nevada ("USDC") on January 7, 2016, for issuance of a subpoena to Molnar requiring him to appear for a deposition and to produce documents for use in a foreign proceeding ("Subpoena"). That application was made on behalf of O'Keeffe ("Subpoena Application") in a miscellaneous proceeding that she had commenced in the USDC on September 18, 2014. The miscellaneous proceeding subsequently was determined to be a contested matter and assigned Case No. 2:14-cv-01518-RFB-CWH. That proceeding had been commenced by O'Keeffe so that she could obtain discovery to defend herself against a libel claim that Adelson had brought against her in Hong Kong. The discovery apparently is intended to establish that certain statements about Adelson made by O'Keeffe in an article published in the Wall Street Journal are truthful and therefore not libelous.
On May 25, 2016, an initial hearing was conducted on the MRAS. Counsel appeared on behalf of O'Keeffe, Venetian, and the Debtors. The court continued the hearing one week to see if counsel could resolve the MRAS as well as the Preliminary Injunction Motion.
On June 1, 2016, counsel agreed to continue the MRAS to July 13, 2016,
On June 7, 2016, an order was entered approving a stipulation setting a briefing schedule on the MRAS. (ECF No. 32). Additionally, the order established a briefing schedule for the Preliminary Injunction Motion and set that motion to be heard on July 13, 2016, concurrently with the MRAS.
On June 30, 2016, O'Keeffe filed a motion to intervene in the State Court Action removed to the bankruptcy court. (AECF No. 5).
On July 5, 2016, O'Keeffe filed an amended motion to intervene in the Debtors' Chapter 7 proceeding. (ECF No. 42). An order shortening time was entered so that the motion could be heard concurrently with the other matters scheduled for July 13, 2016. (ECF No. 46).
On July 6, 2016, the Debtors' discharge was entered under Section 727(b). (ECF No. 48). The court's docket reveals that no creditor, including Venetian, timely filed a complaint seeking a determination of dischargeability of indebtedness under Section 523(a).
On July 7, 2016, Venetian filed its reply in support of the Preliminary Injunction Motion. (AECF No. 13).
On July 13, 2016, counsel for the parties appeared in connection with the Preliminary Injunction Motion as well as all other matters scheduled for hearing.
At the inception of the hearing, the court expressed its concern over its jurisdiction in light of the No-Asset Report establishing that no creditors, including Venetian, will receive a distribution from this bankruptcy case. More important, since the time the Preliminary Injunction Motion was scheduled for hearing, the Debtors had received their Chapter 7 discharge of all prebankruptcy debts, including the damage claims alleged in the State Court Action.
While acknowledging that any prepetition debts arising from the confidentiality agreement and the employment agreement have been discharged, Venetian maintains that it is still entitled to seek an order requiring Molnar to "use his best efforts" to comply with the confidentiality provisions. It argues that those obligations survived the Debtors' bankruptcy discharge and might include efforts such as seeking a protective order from the USDC. Venetian acknowledged that even though the outcome of Molnar's best efforts still might not prevent him from disclosing confidential information regarding Adelson, Molnar is still contractually obligated to make those efforts. Venetian therefore seeks the equitable remedy of a preliminary injunction requiring Molnar to comply with the terms of the prebankruptcy confidentiality agreement.
O'Keeffe maintains that the USDC already has considered and rejected Venetian's arguments in ruling on the Subpoena Application. On April 4, 2016, an order was entered by United States Magistrate Judge Hoffman granting the Subpoena Application over the objections of Venetian ("Subpoena Order").
Molnar agrees, of course, that his personal liability under the confidentiality agreement has been discharged.
Having considered the arguments of counsel, the court concludes that there is no case and controversy before the bankruptcy court that can be decided.
At the time the Removal Notice was filed on May 24, 2016, the Trustee already had determined that there were no non-exempt assets available for distribution to creditors in this bankruptcy case. At the time the Removal Notice was filed, the USDC had already determined that the confidentiality agreement could not be enforced to preclude O'Keeffe from obtaining information from Molnar. At the time the Removal Notice was filed, the deadline to object to dischargeability of debt had not expired, but issuance of the Subpoena Order likely precluded Venetian from establishing that Molnar's conduct is the proximate cause of any nondischargeable damages. Thus, Venetian's failure to commence an adversary proceeding to determine dischargeability of debt under Section 523 is not dispositive, but is notable primarily for its futility once the Subpoena Order was issued authorizing O'Keeffe to serve the Subpoena requiring Molnar to testify.
The absence of any impact of the State Court Action on the Debtors' fresh start runs parallel with the absence of any impact on the Debtors' creditors. The Trustee already has determined the Chapter 7 case to be a no-asset proceeding that will result in no distribution to any creditors, including Venetian. The enforceability of the confidentiality agreement as to Molnar already has been determined by the Subpoena Order and the enforcement of the same or similar language as to other parties has been the subject of numerous other orders and proceedings. Under these circumstances, resolution of the State Court Action has no bankruptcy purpose and the State Court has concurrent jurisdiction to resolve any remaining issues.
