# PROTOPAPAS v. WHITTAKER, CLARK & DANIELS, INC.

> District Court, D. New Jersey · May 31, 2024

URL: https://www.frixlaw.com/law-library/cases/10656076

## Case

- **Court:** District Court, D. New Jersey
- **Decided:** May 31, 2024
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10656076

## How later opinions describe it (automated extraction)

- noting states are limited “by their status as coequal sovereigns in a federal system”
- applying New Jersey law for a New Jersey corporation
- observing the history of the Anglo-American legal tradition’s recognition that “a tribunal’s competence was generally constrained only by the ‘territorial limits’ of the sovereign that created it”

## Opinion text

NOT FOR PUBLICATION

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

PETER PROTOPAPAS in his capacity as
Court-Appointed Receiver and THE
OFFICIAL COMMITTEE OF TALC
CLAIMANTS,

Civil Action No. 23-4151 (ZNQ)
Appellants,

OPINION
v.

WHITTAKER, CLARK & DANIELS,
INC.,

Appellee.

QURAISHI, District Judge
THIS MATTER comes before the Court upon Peter Protopapas’, in his capacity as a Court
Appointed Receiver (“Receiver”), and the Official Committee of Talc Claimants’ (“Talc
Claimants,” together “Appellants”) joint filing of an appeal of the District of New Jersey
Bankruptcy Court’s (“Bankruptcy Court”) decision to deny a motion to dismiss a Chapter 11
bankruptcy filed by Whittaker, Clark & Daniels (“WCD” or “Appellee”). (ECF No. 1.)1 The
Court has carefully considered the parties’ submissions and decides the Motion without oral
argument pursuant to Federal Rule of Civil Procedure 78 and Local Civil Rule 78.1. For the
reasons set forth below, the Court DISMISSES Appellants’ appeal.

1 This case was consolidated with Docket Number 23-4156 following a joint motion by the parties in this case. (ECF
No. 6.)
I. BACKGROUND AND PROCEDURAL HISTORY
A. BACKGROUND ON WCD
WCD was a New York corporation that from 1918 through 2004 supplied “minerals and
pigments” to industrial customers. (WCD Brief (“WCD Br.”), ECF No 22 at 15.)2 WCD

reincorporated in New Jersey in 1972. (Id.) At its peak, WCD was “one of the largest talc and
industrial compound supply and distribution businesses in the United States.” (ECF No. 18-1 at
851; see also WCD Br. at 15.) Brilliant National Services (“Brilliant”) purchased WCD’s stock
in 1988. (Appellants’ Brief (“App. Br.”), ECF No. 18 at 18.) WCD, Brilliant, and affiliate entities
L.A. Terminals, Inc. (“LAT”) and Soco West, Inc. (“Soco”, collectively, “Debtors”), are all owned
by Berkshire Hathaway. (App. Br. at 18.) WCD, LAT, and Soco are direct or indirect subsidiaries
of Brilliant. (Id.)
In 2004 the operating assets and intellectual property of WCD and the affiliate entities were
sold to Bain Capital under the umbrella of Benntag N.A., at which time WCD “kept tort liabilities
involving asbestos and talc.”3 (WCD Br. at 15; App. Br. at 19.) WCD, Soco, and Brilliant also

retained liability for environmental remediation costs and obligations relating to their, and their
predecessors in interest, “production or handling of hazardous materials which contaminated
certain properties” as well as specific assets including “asbestos- and environmental-related
insurance receivables and certain real estate.” (App. Br. at 19-20.) In 2004 WCD stopped

2 Throughout this opinion, references to documents from the various bankruptcy court dockets will be cited as:
[Applicable District] Bk. Dkt. [No.]. References to the South Carolina action Sarah J. Plant and Parker Plant v. Avon
Products, Inc., et al., C/A No. 2022-CP-40-1265 (S.C. C.P.) will be cited, as appropriate, from documents filed either
with this Court or with the District of New Jersey Bankruptcy Court. All references to documents filed with the
district court’s docket in this case will cite to the document’s ECF No. as filed with the district court. For consistency
across the many filings in this case, all page numbers across filing systems will refer to those stamped by the relevant
court’s e-filing system and not to the internal pagination of the parties, and internal citations will be converted
accordingly.
3 Specifically, WCD, Soco, and Brilliant “retained [] all liability for [] tort claims resulting from exposure to products
containing talc, asbestos, or chemical compounds that they (or their predecessors in interest) processed or distributed.”
(App. Brief at 19.)
operating commercially, and became what Appellants in this case characterize as “a nonoperating
shell entity whose corporate existence has been maintained for the sole purpose of managing
legacy asbestos- and talc-related liabilities.” (Id. at 20.)
In 2007 the Debtors were purchased by National Indemnity Company, an affiliate of

Berkshire Hathaway. (Id.) Since the purchase, the Debtors have paid out $300 million related to
asbestos and environmental claims. (Id.) As of Appellants’ Petition Date, there were
approximately 1,012 asbestos- and talc- related litigation claims pending against WCD, and one
environmental-related claim. (Id.)
B. THE SOUTH CAROLINA ACTION
On March 3, 2023 a jury rendered a verdict of over $29 million against WCD in the South
Carolina Court of Common Pleas (“South Carolina court”) case Sarah J. Plant and Parker Plant
v. Avon Products, Inc., et al., C/A No. 2022-CP-40-1265 (S.C. C.P.) related to asbestos exposure
in cosmetics leading to mesothelioma. (Id.) Following the verdict, plaintiffs in the South Carolina
action Sarah J. Plant and Parker Plant (together, “Plant”) filed a motion asking the South Carolina

court to appoint a receiver for WCD under the South Carolina Code § 15-65-10(4) (“S.C. § 15-65-
10(4)”). (Id. at 21 (citing ECF No. 18-1 at 91).) S.C. § 15-65-10(4) allows for the appointment of
a receiver by a judge of the circuit court in cases where, “a corporation . . . is insolvent or in
imminent danger of insolvency . . . and, in like cases, of the property within this state of foreign
corporations.” S.C. § 15-65-10(4).
Justice Jean Hoefer Toal (ret.), a retired Chief Justice of the Supreme Court of South
Carolina who has now been appointed to the trial court bench to oversee South Carolina’s asbestos
cases, presided over the case. (App. Br. at 21.) Justice Toal granted the motion on an expedited
basis on March 10, 2023, finding that based on documents in front of the court, existing jury
verdicts, and the court’s knowledge of additional pending litigations against WCD, “WCD appears
to actually be insolvent and it is certainly in imminent danger of insolvency.” (“Receivership
Order”, ECF No. 18-1 at 12.) Justice Toal appointed Peter Protopapas as receiver under the statute
“pursuant to the South Carolina Law” and conferred the “power and authority [sic] fully administer

all assets of WCD, accept service on behalf of WCD, engage counsel on behalf of WCD and take
any and all steps necessary to protect the interests of WCD whatever they may be.” (See generally
id. at 8-15.) The Receivership Order specified “the powers of a receiver are as broad as the law
permits” and noted “[n]othing in this order is intended to limit the power of the receiver to bring
claims against any entity or individual.” (Id. at 12.) The Receivership Order further enumerated
additional rights of the Receiver including collecting accounts receivable from tenants and
changing locks to premises at which property was situated. (Id. at 13.)
On March 16, 2023, WCD filed a motion for reconsideration of the Receivership Order,
asking Justice Toal to vacate the receivership. (App. Br. at 22 (citing ECF No. 18-1 at 111); see
generally ECF No. 18-1 at 211-222.) During the reconsideration hearing (“Reconsideration

Hearing”) on April 18, 2023, Plant’s counsel argued on the record “to the extent there is a
consideration of a bankruptcy filing . . . I just want it in the record for any bankruptcy judge that’s
looking at this issue that at the present time a receivership is in place” and that during a receivership
“the property of [WCD] . . . it’s in the property of the Court.” (ECF No. 18-1 at 218.) Counsel
further urged Justice Toal to agree on the record that once a receivership was in place WCD did
not “have the authority to enter a bankruptcy. They don’t control [the property].” (Id.)
Justice Toal replied on the record that she was “well aware” of the asset situation and “that
was the main factor in [her] signing the order so quickly” given she was not clear on WCD’s asset
picture and wanted to make sure someone “would not simply declare bankruptcy and that entity
would still be controlling things.” (Id.) In an oral decision, Justice Toal then held that she was
“deny[ing] the motion to reconsider and dissolve the receivership” and that she was
“satisfied . . . there [were] sufficient connections with South Carolina of the [WCD] assets . . . to
justify the receivership.” (Id. at 220.) Her order did not modify the existing Receivership Order.

(Id. at 220.) Justice Toal ordered the parties to submit proposed final orders that would be “in
some kind of shape for Appellate Courts to review.” (App. Br. at 23 (citing ECF No. 18-1 at 221).)
On April 24, 2023, Plant’s counsel submitted a proposed order to the South Carolina court,
which included language in a footnote that stated “WCD no longer has the rights to administer [the
property of the corporation]. This removal of rights includes . . . the ability of the company to
institute a bankruptcy proceeding.” (WCD Br. at 23 (citing ECF No. 18-1 at 1006 n.12).) WCD’s
counsel was required to submit their comments on the proposed order to the South Carolina court
on April 27, 2023. (App. Br. at 26.)
C. THE CHAPTER 11 BANKRUPTCY PETITION
One day before the due date for its submission to the South Carolina court on Plant’s

proposed Reconsideration Order, WCD and its affiliate debtor entities filed a Chapter 11
bankruptcy in the District of New Jersey. (Id.)4 A newly constituted WCD Board of Directors
(the “Filing BOD”) approved the filing of the bankruptcy petition. (Id.)5 WCD’s bankruptcy
docket in the District of New Jersey Bankruptcy Court is number 23-13575.
The Receiver filed a motion to dismiss the bankruptcy action on May 3, 2023 (N.J. Bk.
Dkt. 62), followed by an Amended Motion to Dismiss on May 19, 2023 (N.J. Bk. Dkt. 117).

4 Only the WCD bankruptcy is at issue in this appeal.
5 The Filing BOD was not constituted at the time Justice Toal issued the Receivership Order. Because a different
WCD Board of Directors was constituted at the time of the Order, in this Opinion the Court differentiates between the
newly the Filing BOD that approved the Chapter 11 Petition and the WCD Board of Directors more generally
addressed in Justice Toal’s Receivership Order.
Creditors were appointed to the Official Committee of Talc Claimants by the United States Trustee
Martha Hildebrandt according to § 1102(a)(1) of the Bankruptcy Code on May 24, 2023. (N.J.
Bk. Dkt. 121.) The Talc Claimants then joined the Receiver’s Amended Motion to Dismiss. (N.J.
Bk. Dkt. 132.) On June 6, 2023, a hearing on the joint motion took place in front of the Honorable

Michael B. Kaplan, C.J.B.C. (N.J. Bk. Dkt. 175; see generally ECF No. 18-1 at 1115-1191.)
Appellants’ arguments in front of the Bankruptcy Court relied on the Filing BOD’s lack of
authority to file a Chapter 11 Bankruptcy Petition in light of the Receivership Order, and further
argued that the Rooker-Feldman doctrine applied, which prohibits federal appellate review of a
state court judgment.6 (Id.) Following oral argument, the Bankruptcy Court denied the joint
Amended Motion to Dismiss, resulting in the order under appeal in the instant action. (ECF No.
1-2; N.J. Bk. Dkt. 211; see generally “Bk. Op.,” N.J. Bk. Dkt. 210.)
In an 18-page Letter Opinion filed on June 20, 2023, the Bankruptcy Court held that
“WCD’s bankruptcy was filed by entities with proper authority” and that “there exists no cause
for dismissal.” (Bk. Op. at 4-5.) Further, the Bankruptcy Court wrote its opinion did not “intend

to examine the merits of the South Carolina Court’s ruling with respect to the appointment of the
Receiver”, “revisit[] whether the South Carolina Court had jurisdiction to enter the Receivership
Order” or “look[] behind the Receivership Order into the Receiver’s motives, experience, or
qualifications.” (Id. at 3.) As such, the Bankruptcy Court determined the Rooker-Feldman
doctrine did not apply since the Bankruptcy Court’s ruling was not violative of Justice Toal’s order
and did not “review[] or reject[] the underlying judgment.” (Id. at 5.)

6 The Rooker-Feldman doctrine prevents a federal court from exercising jurisdiction where the relief sought by the
plaintiff would essentially “reverse a state court decision or void its ruling.” Taliaferro v. Darby Twp. Zoning Bd.,
458 F.3d 181, 192 (3d Cir. 2006).
Next, the Bankruptcy Court held that the Receivership Order in this case did not remove
the WCD Board of Directors’ authority to file for bankruptcy. (Id. at 6.) The Bankruptcy Court
relied on the text of the Receivership Order itself, a review of South Carolina laws on the power
of receivers, and federal bankruptcy law to determine that the order of appointment of the Receiver

did not give him the exclusive authority to file for bankruptcy. (Id. at 7.) The Bankruptcy Court
held that under New Jersey state law, the applicable law for a New Jersey corporation, the Board
of Directors was authorized to file for bankruptcy. (Id. at 9.)
The Bankruptcy Court then examined the impact of Justice Toal’s statements at the
Reconsideration Hearing regarding a potential bankruptcy filing. (Id. at 8.) However, he found
that neither South Carolina law nor the Receivership Order itself vested a receiver with the power
to divest the board of a foreign corporation of its power to declare bankruptcy. (Id. at 9.) The
Bankruptcy Court held that Appellants’ counsel had a “mistaken understanding of the
Receivership Order’s effect” and that such an interpretation did not square either with federal
bankruptcy law or available authorities. (Id. at 10.) Further, the Bankruptcy Court found that

Justice Toal’s comments at the Reconsideration Hearing did not amount to either a separate
holding or modification of her existing order, and the Bankruptcy Court could not interpret it as
supplanting the language of the enacted Receivership Order. (Id. at 12.)
Appellants filed an appeal in the District Court on July 3, 2023 (N.J. Bk. Dkt. 246)
concurrently with a Motion for Certification of Direct Appeal to the United States Court of Appeals
for the Third Circuit (N.J. Bk. Dkt. 248). Appellees filed an Objection to the Motion for
Certification of Direct Appeal (N.J. Bk. Dkt. 289), and Appellants replied (N.J. Bk. Dkt. 314).
After a hearing on July, 27, 2023 (N.J. Bk. Dkt. 328) the Bankruptcy Court denied the application
for certification to the Third Circuit on July 31, 2023 (N.J. Bk. Dkt. Nos. 331, 337). The District
Court received the Notice of Appeal from the Bankruptcy Court and the Designation of
Bankruptcy record on August 3, 2023. (ECF Nos. 1 and 2.) Appellants filed their brief with the
District Court on September 12, 2023 (App. Br.), Appellee responded (WCD Br.), and Appellants
replied (ECF No. 23).

II. LEGAL STANDARD
A district court has appellate jurisdiction over a bankruptcy court’s final judgments, orders,
and decrees. 28 U.S.C. § 158(a). A district court reviews a bankruptcy court’s “legal
determinations de novo, its factual findings for clear error and its exercise of discretion for an
abuse thereof.” In re Rashid, 210 F.3d 201, 205 (3d Cir. 2000); see In re Cohn, 54 F.3d 1108,
1113 (3d Cir. 1995) (“On appeal the district court . . . may affirm, modify, or reverse a bankruptcy
judge’s judgment, order, or decree or remand with instructions for further proceedings. Findings
of fact, whether based on oral or documentary evidence, shall not be set aside unless clearly
erroneous . . . .”) (quoting Frmr. Fed. R. Bankr. P. 8013); see also In re Great Atl. & Pac. Tea Co.,
Inc., Civ. No. 14-4170, 2015 WL 6395967, at *2 n.1 (S.D.N.Y. Oct. 21, 2015) (although Fed. R.

Bankr. P. 8013 was removed in the new Federal Rules of Bankruptcy Procedure “logic still
compels the same conclusion with respect to the appellate powers of the District Court”). When
addressing mixed questions of law and fact, the Court divides the questions into their respective
components and applies the appropriate standard to each. In re Brown, 951 F.2d 564, 567
(3d Cir. 1991).
III. DISCUSSION
Section 1112(b) of the Bankruptcy Code provides that bankruptcy actions may be
dismissed if the movant establishes cause. 11 U.S.C. § 1112(b)(1). Appellants contend that
WCD’s bankruptcy petition was filed by a party with no standing to do so - and as a result,
unauthorized - and therefore should have been properly dismissed under Section 1112(b). This
case comes down to the question of whether the Bankruptcy Court erred in finding there was no
cause to dismiss the bankruptcy action.
Appellants in this case argue error on three grounds regarding the bankruptcy court’s denial

of the motion to dismiss: (1) the Bankruptcy Court “ignor[ed] the plain text of the receivership
order and substitut[ed] its own flawed interpretation”, (2) the Bankruptcy Court erred by not
interpreting the Receivership Order consistently with Justice Toal’s on-the-record remarks during
the Reconsideration Hearing, and (3) the Bankruptcy Court erred by “relying on its policy
preferences” and created an “exception to the rule that state law dictates who may authorize a
bankruptcy petition on behalf of a corporate debtor.” (App. Br. at 17-18.) All issues in this appeal
are legal issues rather than factual issues, and therefore the Court will review the Bankruptcy
Court’s legal determinations de novo.
For the reasons below, this Court finds the Bankruptcy Court did not err and affirms its
judgment in this case.

A. INTERPRETATION OF THE RECEIVERSHIP ORDER
Appellants argue that the Filing BOD lacked authority to petition for bankruptcy on WCD’s
behalf. (App. Br. at 33.) The meat of Appellants’ argument is that under South Carolina law
Justice Toal divested the WCD Board of Directors of its ability to authorize a bankruptcy. (Id.)
Appellants’ position is that “when a state court appoints a general receiver to manage a
corporation’s affairs, that receiver obtains the sole authority to put the corporation into
bankruptcy.” (Id. at 34 (citing In re WC 1st & Trinity GP, LLC v. Milligan, Civ. No. 20-995, 2021
WL 6750934, at *2 (W.D. Tex. Mar. 18, 2021).) Appellants further argue the text of the
Receivership Order plainly divested the WCD Board of Directors of its power by its terms, and
that interpretation otherwise is an error by the Bankruptcy Court. (Id. at 37.)
Appellees argue the opposite: that the Bankruptcy Court made “precisely the right call”
when he determined that the only proper place to look to the Receiver’s powers was the text of the

Receivership Order itself, which was silent on the question of the Board of Directors and power to
declare bankruptcy. (WCD Br. at 14, 50-51.) The Bankruptcy Court properly determined that
“under South Carolina law, the Receiver’s power derived solely from the order of appointment,”
and the plain language of the order of appointment here did not “expressly grant[] the Receiver
exclusive authority to file for bankruptcy or otherwise displace[] the [WCD Board of Director’s]
authority to manage WCD’s corporate affairs.” (Id. at 25-26.) Further, because WCD is
incorporated in New Jersey, it is a “foreign corporation” under South Carolina law and therefore
the Receiver’s powers are limited by the enacting receivership statute. (Id. at 29, 63 (citing S.C.
Code Ann. § 33-1-400 (“defining ‘foreign corporation’ as a ‘corporation for profit incorporated
pursuant to a law other than the law of this State’”).)

1. The Bankruptcy Court’s Analysis of the Receivership Order
This Court finds that the Bankruptcy Court did not err in its analysis of the plain language
of the Receivership Order and the powers it conferred under South Carolina law under its enacting
statute S.C. § 15-65-10(4). The Bankruptcy Court appropriately applied South Carolina law and
the text of the Receivership Order itself to determine the powers explicitly conferred on the
Receiver by Justice Toal’s order. The Bankruptcy Court held that while the case law that exists
for receiverships under S.C. § 15-65-10(4) is sparse, such caselaw “clearly establishes that—
because a receiver’s authority is derived solely from the court . . . —a receiver has no power other
than that given him or her by the order of appointment.” (Bk. Op. at 7 (citing Kirven v. Lawrence,
244 S.C. 572 (1964); In re Fifty-Four First Mortg. Bonds, 15 S.C. 304 (1881)).) The Bankruptcy
Court’s review of the Receivership Order found it silent on the question of the WCD Board of
Directors and power to declare bankruptcy, and that it only in passing referenced WCD’s status as
a foreign corporation and how that impacted the enactment of the Receiver’s role under South

Carolina law. (Id. at 8-9.)
Under South Carolina law, “[a] court order or judgment is construed like any written
instrument.” Campione v. Best, 435 S.C. 451, 458 (Ct. App. 2021) (citation omitted). “Whether
a court order is clear and unambiguous is a question of law for the court.” Id. Further, “[i]f the
language employed is plain and unambiguous, there is no room for construction or interpretation,
and the effect thereof must be declared in the light of the literal meaning of the language used.”
Doe v. Bishop of Charleston, 407 S.C. 128, 135 (2014) (quoting Weil v. Weil, 299 S.C. 84, 90 (Ct.
App. 1989)). The Bankruptcy Court correctly held that absent language or authority in the
alternative, the plain language of the Receivership Order did not supplant New Jersey’s default
rule that the Filing BOD was authorized to file for bankruptcy. (Bk. Op. at 9.)

The Bankruptcy Court pointed out that while the language of the Receivership Order is
broad, it is still enacted “pursuant to the South Carolina Law” and expressly included the limiting
language that it is “as broad as the law permits” (Id. at 6 (citing ECF No. 18-1 at 12) (emphasis
added in opinion)).) The enacting statute in question limits the power of a receiver over a foreign
corporation to “the property within this state.” S.C. § 15-65-10(4). This is intuitive – traditionally,
a state court’s power is limited to its territorial boundaries. See Mallory v. Norfolk S. Ry. Co., 600
U.S. 122, 128 (2023) (observing the history of the Anglo-American legal tradition’s recognition
that “a tribunal’s competence was generally constrained only by the ‘territorial limits’ of the
sovereign that created it”); see also World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292
(1980) (noting states are limited “by their status as coequal sovereigns in a federal system”).
WCD correctly points out that this is why mechanisms such as ancillary receiverships, in
which receivers can apply to secure out of state property from local courts, exist in states including
New Jersey and South Carolina.7 (App. Br. at 34 (citing Umland v. United Pub. Serv. Co., 111

N.J. Eq. 563, 567 (Ch. 1932) (“[I]t is the customary practice for the receiver to apply to the courts
of the state where the property is located for what is ordinarily denominated ancillary
receivership.”)); see also N.J. Stat. Ann. § 14A:14-2 (observing in the 1968 Commissioner’s notes
on decisions that “[w]hile this section makes no mention of foreign corporations . . . when read in
connection with R.S. 14:14-4 and 14:15-2, [they] confer a limited jurisdiction on the New Jersey
courts to appoint receivers for the New Jersey property of foreign corporations”); Farmer v. CAGC
Ins. Co., 424 S.C. 579, 583 (Ct. App. 2018) (referring to an ancillary receivership in South Carolina
relating to a primary receivership established by North Carolina). If, as Appellants argue, the
South Carolina state court receivership automatically reached past the boundaries of the state, there

would be no need for such a system.
2. Legal Authorities
Further, there is little evidence in the case law stemming from S.C. § 15-65-10(4), and
Appellants have not provided any, that receiverships under the statute commonly block foreign
corporations from declaring bankruptcy or that receivers otherwise enjoy extensive control over
foreign corporations.8 Although Appellants argue that the Bankruptcy Court did not “seriously

7 There is no evidence in the record showing that the Receiver in this case applied to the New Jersey court for an
ancillary receivership. (WCD Br. at 35.)
8 There appears to be only one other trial court order citing S.C. § 15-65-10(4) with regard to a foreign corporation,
from a case also in front of Justice Toal. The party in that case made a similar argument to the Appellee’s here
regarding the limitations of the receivership over foreign corporations. See, e.g., Childers v. Davis Mechanical
Contractors, Inc., Civ. No. 2021-CP-40-03484, 2023 WL 10365071, at *1 (S.C. Com. Pl. Mar. 30, 2023) (in which
engage[] with the Receivership Order’s text” and was looking for “magic words,” this position is
not supported by either the language of the order itself or any caselaw showing South Carolina
courts relying on S.C. § 15-65-10(4) to create the type of cross-territorial receiverships endorsed
by the Appellants. (App. Br. at 34, 37.) More generally, the case law Appellants provide to support

their arguments does not persuasively argue otherwise.
Generally, this Court agrees with the Bankruptcy Court that the cases Appellants rely on
“for the proposition that the appointment of a receiver automatically displaces a board” are
“factually distinguishable and . . . not controlling.” (Bk. Op. at 17 n.6.) Appellants cite In re WC
1st & Trinity GP, LLC v. Milligan for the proposition that “a state court can vest authority to file
a bankruptcy petition entirely in a receiver.” (App. Br. at 34 (citing WC 1st, 2021 WL 6750934,
at *2.) However, several factors distinguish WC 1st from the present case. First, the district court
in WC 1st examined the effect of a state court receivership order over domestic Texas debtors
governed by the Texas Business Organizations Code. In re WC1st and Trinity LP, No. 20-10886,
W.D. Tex. Bk. Dkt. 51 (“WC 1st Bk. Op.”) at 2 (Bankr. W.D. Tx. Sept. 14, 2020). Since it is

undisputed that WCD is a New Jersey corporation incorporated under the laws of New Jersey, i.e.,

Justice Toal’s order assumed arguendo that a party’s interpretation that S.C. § 15-65-10(4) only applied to its property
within South Carolina was correct). Other court judgments citing the statute do not address the issue.

South Carolina precedent more broadly also pulls against Appellants’ contention that the Receivership Order would
automatically reach beyond its borders and into the governance of a foreign corporation without any specific language
indicating as much. In Clark v. Preferred Accident Insurance Company of New York, the South Carolina Supreme
Court wrote that “[e]very State has jurisdiction to determine for itself the liability of property within its territorial
limits, to seize and sell such under the process of its Courts.” 231 S.C. 167, 175 (1957). The Preferred Accident
Insurance court held that in cases where a receiver has been appointed by an out-of-state court, a local receiver could
still sequester local property within South Carolina on behalf of local creditors, regardless of the decision by the out-
of-state court. See Preferred Acc. Ins. Co. of N. Y., 231 S.C. at 174–75 (“[T]he local property in a state of a foreign
corporation for which [a] receiver . . . has been appointed in another state is subject . . . to sequestration by the
appointment of a local receiver [] by the creditors of the corporation, which . . . will take precedence over the rights
or title of the [out-of-state] receiver.” (citing Clark v. Williard, 294 U.S. 211, 214-215). The Preferred Accident
Insurance court would be unlikely to hold that a local receiver had precedence over property within the territory over
a receiver appointed by an out-of-state court if, as Appellants argue, state court receivers automatically controlled
corporations and assets beyond their state borders. Further, such a position would violate the rights of other states to
dispose of the property within their territories discussed elsewhere in the decision.
a foreign corporation under South Carolina law, the comparison here is inapposite. Second, the
Texas statute enacting the receivership in question in WC 1st is entirely distinct from the South
Carolina enacting statute and is, in fact, limited to domestic entities, as evidenced by its title Ҥ
11.404 Appointment of Receiver to Rehabilitate Domestic Entity.” W.D. Tex. Bk. Dkt. 8-13 at

204, 216 (recording the Texas state trial court agreeing at hearing that the receivership was enacted
under Texas Business Organizations Code § 11.404). Third, the Receivership Order in WC 1st
specifically included language that clarified that “[t]he Receiver is granted the sole and exclusive
right to file voluntary petitions for relief” under the Bankruptcy code. WC 1st Bk. Op. at 2
(emphasis in original); see also W.D. Tex. Bk. Dkt. 8-2 ¶ 39. Even if the other facts of the cases
were not distinguishable, in WC 1st the bankruptcy court clearly stated “[h]ere, we have a state
court order that gave the Receiver the sole authority to file bankruptcy.” (Id. at 3.) The
Receivership Order at issue in the instant case indisputably does not include explicit language
delegating such power. Compare Receivership Order, ECF No. 18-1 at 8-15, with W.D. Tex. Bk.
Dkt. 8-2 ¶ 39. When WC 1st is read as a whole, the case supports the Bankruptcy Court’s decision

to rely squarely on the Receivership Order’s plain language and its boundaries within South
Carolina law, and provides an example of a receivership order in which a state court clearly gave
sole authority to file for bankruptcy to the local receiver.
Appellants’ other case on this point, In re Monroe Heights Development Corporation Inc.,
is also inapposite and unpersuasive. No. 17-10176, 2017 WL 3701857, at *1 (Bankr. W.D. Pa.
Aug. 22, 2017); dismissed, 573 B.R. 613 (Bankr. W.D. Pa. 2017). The bankruptcy court in Monroe
found (1) the debtor was a domestic corporation subject to a court order in its home state; (2) the
person who filed for bankruptcy was a shareholder rather than the Board of Directors, and under
the default Pennsylvania law would not have had authority to file for bankruptcy; and (3) the
Receivership Order itself also clearly specified that no agent of the debtor had authority to
commence a bankruptcy proceeding. 2017 WL 3701857, at *1; see also Monroe Receivership
Order, W.D. Pa. Bk. Dkt. 9-2 at 16.
In the case at hand, the Court agrees with the Bankruptcy Court’s assessment that,

“[d]espite the Receiver’s arguments to the contrary, he is unable to identify any South Carolina
state law or language in the Receivership Order that provides for” the WCD Board of Directors to
be displaced or divested of its ability to file for bankruptcy. (Bk. Op. at 17.) Having reviewed the
authorities, this Court reaches the same conclusion on appeal. The Bankruptcy Court therefore
correctly held that absent plain language in the Receivership Order, caselaw, or authorities
otherwise, the law of the state of incorporation controls who can properly file a bankruptcy
petition. Matter of Giggles Restaurant, Inc., 103 B.R. 549, 552-54 (Bankr. D.N.J. 1989) (applying
New Jersey law for a New Jersey corporation). The Court affirms the Bankruptcy Court’s opinion
that under New Jersey state law, the text of the Receivership Order did not change the fact that
WCD’s Board of Directors held the power to file for bankruptcy and properly did so.

B. THE RECONSIDERATION HEARING
Appellants further argue that the Bankruptcy Court should have looked beyond the four
corners of the Order and taken into account Justice Toal’s comments at the Reconsideration
Hearing. (App. Br. at 39-51.) Appellants’ position is that Justice Toal’s comments at the hearing
amounted to an official interpretation of her order, and that by not deferring to said interpretation
the Bankruptcy Court violated the Rooker-Feldman doctrine. (Id. at 47.) Appellees disagree.
The Court affirms the Bankruptcy Court’s holding that Justice Toal’s comments at the
hearing do not change the limits of the Receivership Order itself and “do[] not constitute a ruling.”
(Bk. Op. at 12.) The Receivership Order itself was not ambiguous, and under South Carolina law
there was no room for additional interpretation without ambiguity. Bishop of Charleston, 407 S.C.
at 135 (“If the language employed is plain and unambiguous, there is no room for construction or
interpretation, and the effect thereof must be declared in the light of the literal meaning of the
language used.”) (citation omitted).

While courts are “empowered to interpret their orders,” it does not necessarily hold that
comments made briefly during a related hearing automatically add language or powers to an
unambiguous prior order. Campione, 435 S.C. at 458. Justice Toal’s comments at the
Reconsideration Hearing were not, in themselves, an “order” construing her “own previous order,”
and therefore do not benefit from the same level of “due deference and great weight” as if she had
made a holding interpreting her previous order. Eddins v. Eddins, 304 S.C. 133, 136 (Ct. App.
1991); see also ECF No. 18-1 at 219-220 (recording Justice Toal’s statements that she was “simply
hearing these motions about whether to reconsider and whether to vacate” the Receivership Motion
and that the holding was that she was “going to deny the motion to reconsider and to dissolve the
receivership.”) The Bankruptcy Court was correct to refuse to “read further into any colloquy

undertaken in the context of the Reconsideration Motion” and to focus instead on the textual
interpretation of the unambiguous Receivership Order and its contextual legal framework. (Bk.
Op. at 12) (emphasis removed).
Further, because Justice Toal’s commentary is not in itself a holding, the Bankruptcy
Court’s decision not to rely on it cannot be violative of the Rooker-Feldman doctrine, which only
applies to federal review of state court orders.9

9 Given that the Court has affirmed the Bankruptcy Court’s decision that the Filing BOD had the proper authority to
file for WCD’s bankruptcy, it does not reach Appellants’ argument regarding what they called the Bankruptcy Court’s
“secondary holding” and any alleged exception to the default bankruptcy rules.
IV. CONCLUSION
For the reasons stated above, the Court will affirm the decision of the Bankruptcy Court
and will DISMISS this appeal. An appropriate Order will follow.

Date: May 31, 2024
s/ Zahid N. Quraishi
ZAHID N. QURAISHI
UNITED STATES DISTRICT JUDGE

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10656076. Public record. Not legal advice.