U.S. Bankruptcy Court for Western Pennsylvania has no jurisdiction whether the purchase agreement of Conneaut Lake Park may have been violated, according a filing made Monday by the Pennsylvania Office of Attorney General.
Even if U.S. Bankruptcy Court were to find it still has jurisdiction, residents and homeowners within the amusement park who want that court to intervene do not have standing in the case under Pennsylvania law, the filing said.
In September, residents and property owners within Conneaut Lake Park wrote U.S. Bankruptcy Court Judge Jeffery Deller alleging Keldon Holdings LLC violated its purchase agreement of the park. Keldon Holdings LLC bought the park from Trustees of Conneaut Lake Park for $1.2 million on March 2 at a U.S. Bankruptcy Court hearing before Deller.
Deller subsequently ordered Trustees of Conneaut Lake Park and Keldon Holdings to file responses to the allegations. The Pennsylvania Office of Attorney General also was invited to file a written response as the state has the ability to protect persons who are legally unable to act on their own behalf.
Trustees of Conneaut Lake Park is the nonprofit corporation that oversaw the amusement park’s operations. Trustees filed for federal Chapter 11 bankruptcy protection in December 2014 to reorganize its debts and needed U.S. Bankruptcy Court approval for any sale.
In September 2016, Bankruptcy Court approved Trustees Chapter 11 which included the ability of Pennsylvania, through the Office of Attorney General, to enforce a preexisting "charitable use restriction" that applied to specific parcels of property, and file to file suit to ensure charitable assets were not improperly diverted from their charitable purpose.
Bankruptcy Court’s approval of the sale required public access to the park’s property to continue. Parts of the property have deed restrictions requiring it to be open for use by the general public.
The sale to Keldon included the amusement park and its rides, water park, beach area, Hotel Conneaut, Camperland campground, and any active leases on assets such as the hotel and the park’s water system.
The filing from Attorney General Josh Shapiro's office points out in the sales agreement between Trustees to Keldon, Keldon acknowledged the property was subject to a "public use" provision in the deed, which said:
"In Trust, Nevertheless, for the use of the general public forever, subject, however, to the rules and regulation for the use of said land to be known as 'Conneaut Lake Park' as may be made from time-to-time by the Trustees of Conneaut Lake Park, Inc., and their successors; And Further specifically, in part for use as a public amusement park and the like, and in part for use as a public park with open parkland and the like, and in part for use of public buildings and the like, forever; And Further, in addition specifically, in part for public access to and use of Conneaut Lake and the lake shore, for swimming and boating and the like, forever; And Further, for other like and similar and related public purposes; all forever."
The sales agreement also included language that any legal action to resolve a dispute under the terms of sales agreement would be filed in Crawford County court, according to the attorney general's filing.
The attorney general's filing notes Trustees Chapter 11 bankruptcy was closed by Bankruptcy Court on July 7, 2021.
Letters sent to Bankruptcy Court in September from residents and homeowners in the park claim access to their properties has been restricted by Keldon erecting fences across rights of way. Residents and homeowners also claimed problems with water utilities and streets.
However, the attorney general's filing states the residents can't ask Bankruptcy Court to enforce the requirements of Pennsylvania law just because the the requirements were reflected in the order approving the sale of the park to Keldon.
"Indeed, the Agreement approved by the (Bankruptcy) Court specifically declared that 'any dispute' arising thereunder would need to be 'maintained in a court of competent jurisdiction' sitting in Crawford County," according to the attorney general's filing. "If the (Bankruptcy) Court were to adopt the interpretation of its order advanced by the residents, there would be no conceivable end to its jurisdiction to oversee the implementation and enforcement of state law at Conneaut Lake Park."
The attorney general's filing states the sales agreement between Trustees and Keldon does not give the residents any standing in federal Bankruptcy Court as they are not parties to it.
"The terms of the agreement are governed by Pennsylvania law," the filing states. "Under Pennsylvania law, an individual who is not a party to a contract cannot enforce its provisions without showing that both contracting parties intended for that individual to be a third-party beneficiary."
The filing states "because the residents have not shown that Trustees and Keldon intended to provide them with enforceable contractual rights at the time of the agreement’s execution, they would not be entitled to relief even if this (Bankruptcy) Court did have jurisdiction to consider their arguments."
The filing adds Pennsylvania will continue to monitor the situation involving the park "to ensure charitable assets are not improperly diverted from the charitable purposes reflected in the deed, the (sales) agreement and this (Bankruptcy) Court's order approving the transfer of those assets from the Debtor (Trustees) to Keldon."
The filing said if legal action becomes necessary in the future, Pennsylvania will file and conform with applicable legal requirements.
Keith Gushard can be reached at (814) 724-6370 or by email at email@example.com.