Summary
noting that § 1452(b)'s reference to "equitable ground" means one that is fair and reasonable
Summary of this case from Levin v. Johnson & JohnsonOpinion
C-02-0472 EDL
April 10, 2002
ORDER GRANTING CHONG'S MOTION TO REMAND AND DENYING CHRISTIE'S MOTION TO TRANSFER
I. Introduction
Petitioner Marisa Christie ("Christie") has removed a divorce action from the Superior Court for the County of San Francisco, pursuant to 28 U.S.C. § 1452 (a), and now moves to transfer that case to the United States District Court for the Northern District of Texas, so that it can be consolidated with her Chapter II bankruptcy proceedings in the bankruptcy court there. Respondent Alfred Chong ("Chong") has filed a cross-motion to remand the action, pursuant to 28 U.S.C. § 1452(b). For the reasons set forth below, the Court grants Chong's motion to remand the action, and denies Christie's motion to transfer, as moot.
II. Background
The procedural history of this case is unusually complex. Christie and Chong were mated on September 17, 1989. On August 4, 1995, the couple separated, and that same month Christie filed for divorce in San Francisco Superior Court ("the California action"). Shortly thereafter, they attempted to reconcile and moved to Dallas, Texas. Christie instructed her counsel to dismiss the California action and believed that Chong had instructed his counsel to do the same. In fact, the California action was not dismissed, and lay dormant for several years.
On December 28, 1995, the couple entered into an Interspousal Transfer, Partition, and Exchange Agreement, by which each spouse purported to partition certain community property assets and transfer them to the other spouse as separate property. On February 4, 1996, they entered into a Spousal Support Agreement, by which Chong purported to agree to provide spousal support to Christie if they separated or divorced, for a term equal to the length of their marriage or until she remarried, whichever came first. The couple entered into both agreements in Texas.
The attempt at reconcihation failed and the couple separated again in June 1997. Chong moved to Malaysia. In September 1997, Christie again filed for divorce, this time filing in the 303rd Judicial District Court in Dallas County, Texas ("the first Texas action"). On May 21, 1998, the Hon. Richard Johnson granted Christie's motion for partial summary judgment on the enforceability of the Spousal Support Agreement. On June 24, 1998, Judge Johnson granted Christie's motion for partial summary judgment on the enforceability of the Interspousal Transfer, Partition, and Exchange Agreement. Later, apparently on June 25, 1999, the first Texas action was dismissed for lack of prosecution. Chong never appealed Judge Johnson's partial summary judgment orders.
Christie later filed a third divorce action, apparently on August 27, 1999, which was also assigned to Judge Johnson ("the second Texas action").
In September 1999, Chong resumed the California action. On October 13, 1999, the court issued a judgment dissolving the marriage, while retaining jurisdiction over the issues of support and the division of the marital estate.
On November 12, 1999, Christie filed a motion in the California action seeking to dismiss or stay the action, or transfer it to Texas. The court denied the motion on March 31, 2000.
In the interim, Judge Johnson dismissed the second Texas action in favor of the California action. On April 24, 2000, however, he issued an order finding that his May 21, 1998 and June 24, 1998 partial summary judgment orders in the first Texas action are final judgments under Texas law. In the California action, Christie argued that the May 21, 1998 and June 24, 1998 partial summary judgment orders from the first Texas action were entitled to full faith and credit in the California action and were binding under principles of res judicata. On January 4, 2001, the California court rejected Christie's arguments, finding that Judge Johnson lacked jurisdiction because of the pre-existing California action. The California court determined that it would revisit the enforceability of the Spousal Support Agreement and Interspousal Transfer, Partition, and Exchange Agreement. The court also ordered Christie to pay Chong $85,000 in attorneys' fees.
According to Chong, Christie refused to pay the attorneys' fees and he was forced to pursue enforcement to obtain payment. Chong also contends that Christie dissipated assets that were placed in a court trust account, transferred disputed funds to undisclosed locations and attempted to sell the couple's former home in Texas despite the existence of a restraining order preventing her from selling or dissipating any assets.
On September 13, 2001, the California court issued an order announcing its intent to impose $100,000 in monetary sanctions upon Christie due to her willful violations of court orders. The court gave Christie additional time to comply with its prior orders, however, and announced that the final amount of sanctions would be determined at trial on October 11, 2001. In a separate order, the court ordered the former family home in Texas to be sold, and the proceeds deposited in a trust account.
According to Chong, closing arguments in the California trial were scheduled for November 15, 2001. On either November 14 or 15, 2001, but before closing arguments began in the California trial, Christie filed a Chapter 11 bankruptcy petition in the United States Bankruptcy Court for the Northern District of Texas.
On December 10, 2001, Chong filed a motion in the bankruptcy court to dismiss the bankruptcy petition, or alternatively, for relief from the automatic stay, so that the California action could continue.
On January 25, 2002, Christie removed the California action to this Court, pursuant to 28 U.S.C. § 1452, due to its connection with her Chapter 11 petition. The same day, she filed a motion to transfer the action to the United States District Court for the Northern District of Texas.
On February 12, 2002, the Texas bankruptcy court granted Chong's motion for relief from the automatic stay and terminated the stay so that Chong "may pursue all pending matters in the State and Federal courts of the State of California."
On March 26, 2002, Chong filed his opposition to Christie's motion to transfer and a cross-motion to remand this action to state court.
III. Analysis
A. Jurisdiction
Christie's removal of this action is based solely on 28 U.S.C. § 1452, which provides, in relevant part:
A party may remove any claim or cause of action in a civil proceeding . . . to the district court for the district where such civil action is pending, if such district court has jurisdiction of such claim or cause of action under section 1334 of this title.28 U.S.C. § 1452(a). The relevant portion of 28 U.S.C. § 1334 provides:
Notwithstanding any Act of Congress that confers exclusive jurisdiction on a court or courts other than the district courts, the district courts shall have original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases undertitle 11.28 U.S.C. § 1334(b). "Congress used the phrase "arising under title 11' to describe those proceedings that involve a cause of action created or determined by a statutory provision of title 11." Maitland v. Mitchell (In re Harris Pine Mills), 44 F.3d 1431,1435 (9th Cir. 1995) (citations omitted). "`[A]rising in' proceedings are those that are not based on any right expressly created by title 11, but nevertheless, would have no existence outside of the bankruptcy." Id. The United States Supreme Court has held that "related to" jurisdiction, pursuant to § 1334(b), should be interpreted broadly. Celotex Corporation v. Edwards, 514 U.S. 300, 307-08 (1995). Proceedings "related to" the bankruptcy include, for example, "suits between third parties which have an effect on the bankruptcy estate." Id. at 307 n. 5. The Supreme Court also quoted, but did not expressly adopt, the test set forth by the Third Circuit in Pacor. Inc. v. Higgins, 743 F.2d 984, 994 (1984):
The usual articulation of the test for determining whether a civil proceeding is related to bankruptcy is whether the outcome of that proceeding could conceivably have any effect on the estate being administered in bankruptcy. . . . Thus, the proceeding need not necessarily be against the debtor or against the debtor's property. An action is related to bankruptcy if the outcome could alter the debtor's rights, liabilities, options, or freedom of action (either positively or negatively) and which in any way impacts upon the handling and administration of the bankrupt estate.Celotex, 514 U.S. at 308 n. 6 (quoting Pacor, 743 F.2d at 994) (emphasis in original). Although the Supreme Court did not expressly adopt thePacor test, that test has been expressly adopted by the Ninth Circuit.See, e.g., Fietz v. Great Western Savings (In re Fietz), 852 F.2d 455, 457 (9th Cir. 1988). As the divorce proceedings involve allocation of property that Christie contends is part of her bankruptcy estate, the outcome of the divorce proceedings could have an effect on her estate. Thus, the action is at least related to the Chapter 11 proceedings, and was properly removed to this Court, pursuant to 28 U.S.C. § 1452(a).
B. Remand
This court is not required to adjudicate claims related to bankruptcy cases that have been properly removed pursuant to 28 U.S.C. § 1452(a). Section 1452(b) expressly provides that: "The court to which such claim or cause of action is removed may remand such claim or cause of action on any equitable ground."
There is no controlling authority on the meaning of this statute, because § 1452(b) also provides that: "An order entered under this subsection remanding a claim or cause of action, or a decision not to remand, is not reviewable by appeal or otherwise by the court of appeals under section 158(d), 1291, or 1292 of this title or by the Supreme Court of the United States under section 1254 of this title." There is a hint of Supreme Court guidance, however, in a concurring opinion by Justices Ginsburg and Stevens, who interpreted "equitable ground" as not narrowly focused on archaic distinctions between law and equity, but as broadly permitting remands based on general fairness. Things Remembered. Inc. v. Petrarca, 516 U.S. 124, 132-36 (1995) (Ginsburg, J. and Stevens, J., concurring). The Second Circuit has held that § 1452(b)'s reference to "equitable ground" simply means one that is fair and reasonable.Cathedral of the Incarnation in the Diocese of Long Island v. Garden City Co., Inc., 99 F.3d 66,69 (2d Cir. 1996). A Ninth Circuit Bankruptcy Appellate Panel has held that this "equitable ground" standard is "an unusually broad grant of authority" which "subsumes and reaches beyond all of the reasons for remand under nonbankruptcy removal statutes."McCarthy v. Prince (In re McCarthy), 230 B.R. 414,417 (9th Cir. BAP 1999). The Southern District of California has held that consideration of the following factors may be appropriate in determining whether to remand: (1) the effect of the action on the administration of the bankruptcy estate; (2) the extent to which issues of state law predominate; (3) the difficulty of applicable state law; (4) comity; (5) the relatedness or remoteness of the action to the bankruptcy case; (6) the existence of a right to jury trial; and (7) prejudice to the party involuntarily removed from state court. Williams v. Shell Oil Co.. 169 B.R. 684, 692-93 (S.D. Cal. 1994).
Here, fairness requires that the action be remanded so that it can finally be concluded. The parties have been litigating these issues for years in three different lawsuits in two different courts. The California court is intimately familiar with the issues, and with the state law that governs them. The action is well under way in that court. Moreover, although the outcome of the action certainly may have an effect on Christie's bankruptcy estate, the Texas bankruptcy court has already lifted the automatic stay so that Chong can litigate these matters in California. There is simply no reason to send this action to a third court, the Texas bankruptcy court, to begin the litigation again, when that court has already indicated its willingness to allow the action to proceed in California state court. This action must conclude sometime.
Applying the Williams factors, the Court concludes that the divorce action may have a significant effect on the administration of the bankruptcy estate, and is controlled by state law on the division of marital property. That law is not difficult, per se, but the California court certainly has a greater degree of expertise in the area than does this Court or the Texas bankruptcy court. Notions of comity support allowing the California court to decide the matter, particularly in light of the time invested by that court in the case and its usual jurisdiction over family law matters. Although the divorce case is related to the bankruptcy proceeding, the bankruptcy court's order lifting the stay to allow Chong to continue to litigate the divorce proceedings in California indicates that the bankruptcy court does not consider it essential to administer the distribution of marital property itself Wherever the issues are decided, the right to a jury trial will not be affected. Finally, if Chong's allegations concerning Christie's efforts to evade the jurisdiction of the San Francisco Superior Court are true (as they seem to be, based on the orders from that court that have been submitted to this Court in connection with these motions), there would be substantial injustice to Chong if this action were not remanded so that the California court can conclude the action, and issue the orders that it deems necessary.
III. Conclusion
For the reasons set forth above,
1. Chong's motion to remand the action (docket #11) is GRANTED. The clerk of the court will remand the action to the Superior Court for the County of San Francisco forthwith.
2. Christie's motion to transfer the action to the United States District Court for the Northern District of Texas (docket #2 and 7) is denied as MOOT.