Opinion
No. 11-98-17429 MA, Adversary No. 01-1004 M
July 12, 2001
Mr. Scott E. Turner, Attorney at Law Albuquerque, NM.
Mr. John W. Boyd, Attorney at Law, Albuquerque, NM.
ORDER GRANTING DEFENDANTS MOTION TO REMAND
THIS MATTER is before the court on the Motion to Remand or Abstain and Remand (Motion to Remand) filed by Neelchine Engineering, Inc. (hereinafter Neelchine) on February 9, 2001. After a hearing on April 11, 2001, the court took the matter under advisement.
After reviewing the briefs, considering the pleadings and arguments of both sides and otherwise being fully informed and advised the court finds:
1. The Plaintiff, Bank of America (hereinafter, the Bank) filed a complaint against Neelchine on October 29, 1998 in the Thirteenth Judicial District Court of Sandoval County, New Mexico, CV 98-00700. In the complaint the Bank sought to collect amounts due under several promissory notes; to foreclose on collateral pledged under several security agreements; and to have a receiver appointed.
The Bank also claimed it had a security interest in a patent owned by Neelchine for a valve lockout device, U.S. Patent No. 5,664,447 (the Patent) and sought to prevent the sale of the Patent.
2. On December 9, 1998, Neelchine filed a Chapter 11 bankruptcy petition.
3. On December 23, 1998, the Bank filed its proof of claim in the bankruptcy proceeding.
4. On May 26, 1999, Neelchine filed an adversary proceeding in the bankruptcy (Adv. No. 99-1101 M) for a declaratory judgment that the Bank had no security interest in its Patent. On June 2, 2000, this Court granted summary judgment in favor of Neelchine holding that the Bank did not have a security interest in the Patent.
5. On January 22, 2001 after opposition by the Bank, this Court denied Neelchines motion to amend its complaint in the adversary proceeding to include a damages claim against the Bank.
6. On December 14, 2000 Neelchine filed its Answer and Counterclaim to the complaint in state district court alleging offset, abandonment of claims, breach of contract and/ or the covenant of good faith and fair dealing as set forth in the loan documents. Neelchine also claimed that the Bank fraudulently asserted a security interest in the Patent, slandered title to the Patent and participated in unfair trade practices. Neelchine requested an award of compensatory and punitive damages, plus attorneys fees and treble damages under New Mexicos Unfair Trade Practices Act.
7. On January 12, 2001, the Bank filed a Notice of Removal in this Court initiating this adversary proceeding.
8. On February 2, 2001, Neelchine filed a Demand for Jury Trial.
9. On February 9, 2001 Neelchine filed the Motion for Remand, seeking to return the case to the state district court.
DISCUSSION
Section 1452 of Title 28 is specially designed to effect removal of claims related to bankruptcy cases. It provides:
(a) A party may remove any claim or cause of action in a civil action . . . 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.
The Bank argues that this court should exercise its jurisdiction under 28 U.S.C. § 1334(a) and (b). Specifically, the Bank argues that the issues here are core proceedings. 28 U.S.C. § 157(b)(2).
Neelchine contends that even if this court has jurisdiction, this case should be remanded under 28 U.S.C. § 1452(b) or this court should abstain from deciding this case under 28 U.S.C. § 1334(c) and remand to the state court.
In this circuit, the types of proceedings considered within bankruptcy court core jurisdiction are construed narrowly. 28 U.S.C. § 157(b)(2)(A)-(O). See, Miramar Resources, Inc. v. Webb (In re Miramar Resources, Inc.), 176 B.R. 45, 48 (Bankr.D.Colo. 1994) (citing, Gardner v. United States (In re Gardner), 913 F.2d 1515, 1518 (10th Cir. 1990) (stating that the court should apply the categories listed in 28 U.S.C. § 157(b)(2) narrowly, then test its conclusions against the mandate of Marathon). The Tenth Circuit Bankruptcy Appellate Panel explained bankruptcy court jurisdiction as follows:
Id. citing, Northern Pipeline Construction Co. v. Marathon Pipe Line Co.), 458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982) (holding that bankruptcy courts could not finally adjudicate private, state law rights).
A proceeding arises under the Bankruptcy Code if it asserts a cause of action created by the Code. . . . Proceedings arising in a bankruptcy case are those that could not exist outside of a bankruptcy case, but that are not causes of action created by the Bankruptcy Code . . . .
A proceeding is related to a bankruptcy case if it could have been commenced in federal or state court independently of the bankruptcy case, but the outcome of that proceeding could conceivably have an effect on the estate being administered in bankruptcy. Personette v. Kennedy (In re Midgard Corp.), 204 B.R. 764, 770 (10 th Cir BAP 1997) (citations omitted).
The Banks basic contention is that Neelchines counterclaims and the Banks claim in bankruptcy are inextricably interwoven, thereby invoking core jurisdiction. Zweygardt v. Colorado Nat. Bank of Denver, 52 B.R. 229, 232 (Bankr.D.Colo. 1985). According to the Bank, the matters raised in state court concern administration of the estate, constitute counterclaims by the estate against a claimant, involve the determination of the validity, extent or priority of liens and also involve preferential or fraudulent transfers pursuant to 28 U.S.C. § 157(b)(2)(A), (B), (C), (F), (H), (K) and (O), and as such, are core issues. Courts in the Tenth Circuit do not apply § 157(b)(2) that expansively. In this circuit, a creditor cannot bring a pre-petition dispute into the realm of core jurisdiction simply by asserting a claim in the debtors bankruptcy. The circumstances surrounding this cause of action and counterclaim arose pre-petition, and the claims raised by both sides arose independently of and separate from the bankruptcy case. See, Zweygardt, 52 B. R. at 232 (ruling that debtors cause of action against bank for fraud, false representation, breach of contract and outrageous conduct was not a core proceeding).
The Bank finally contends that this court has core jurisdiction because issues of patent law provide a separate basis for federal court jurisdiction. Plaintiff has failed to show that patent law issues, if any, would be better adjudicated in this court. See, Roddam v. Metro Loans, Inc. (In re Roddam), 193 B.R. 971, 976 (Bankr.N.D.Ala. 1996) (stating that state law issues should be tried in state court where there is no basis for federal jurisdiction other than bankruptcy). This matter is within the jurisdiction of this court only because it might possibly effect the estate being administered, therefore it falls under this Courts related to jurisdiction.
The Bank asserts that Neelchine has consented to this courts core jurisdiction, therefore, has waived its right to remand by failing to timely file a statement under Federal Rule of Bankruptcy Procedure 9027(e)(3). This is patently incorrect. The Bank cites cases involving waiver of the right to object to the entry of a final decree by the bankruptcy court under 157(c)(2). A motion to remand due to a defect in removal procedure must be made within 30 days after the notice of removal is filed. 28 U.S.C. § 1447(c). Section 1447(c) is applicable to cases removed under 28 U.S.C. § 1452(b). See, Things Remembered, Inc. v. Petrarca, 516 U.S. 124, 116 S.Ct. 494, 497, 133 L.Ed.2d 461 (1995) (recognizing that there is no specific statute setting forth time limits for remand motions in bankruptcy, but stating that since § 1447(d) applies to cases removed under § 1452, it would follow that the § 1447(c) time period for remand motion would also apply). Remand for lack of subject matter jurisdiction can be raised anytime, cannot be waived and can be raised by the court sua sponte. Laughlin v. Kmart Corp., 50 F.3d 871, 873 (10 th Cir.), cert. denied 516 U.S. 863, (1995). In sum, Neelchine properly filed its Motion to Remand.
Section 1452(b) of Title 28 states: The court to which [a cause of action] is removed may remand such . . . cause of action on any equitable ground. 28 U.S.C. § 1452(b). The equitable factors the court should consider in a decision to remand include:
1. The courts duty to decide matters properly before it;
2. Plaintiffs choice of forum between state and federal courts;
3. The nature of the claim or claims, that is, whether purely state law matters which could be better addressed by the state court are involved;
4. Prejudice to involuntarily removed parties;
5. Comity considerations;
6. Economical and/or duplicative use of judicial resources; and
7. Effect a remand decision would have on the efficient and economic administration of the estate.
In re Lone Star Industries, Inc., 131 B.R. 269, 273 (D.Del. 1991). In this action, the court concludes that the equities favor remand. At most, this court would have related to jurisdiction. The Bank chose the state forum and opposed Neelchines attempt to amend its complaint in this court to add a damages claim. Except for the bankruptcy filing, all of the circumstances that the Bank now argues support its decision to change forums were present when it originally chose the state forum. Id. As stated above, the issues here involve state law rights sounding in tort and contract. Comity considerations warrant remand in respect for the state courts role in deciding these state law rights. See, Roddam, 193 B. R. at 976 (stating that sections 1452(b) and 1334(c) strongly evince a congressional policy that, absent countervailing circumstances, the trial of state law created issues and rights should be allowed to proceed in state court.).
A ruling on the portion of the Remand Motion requesting abstention, either mandatory or discretionary, is not necessary as the remand issue is dispositive of the motion. Lone Star, 131 B. R. at 272.
The Bank has failed to refute Neelchines evidence that the case could proceed in a timely manner in the state court. Also, a remand would eliminate the need for de novo review by the district court if the matter remained in bankruptcy court. Neelchine has requested a jury trial, which is another equitable ground favoring remand. See, Lone Star 131 B.R. 269, 275 (D.Del. 1985) (finding that related to proceeding in which debtors were entitled to a jury warranted remand); Zweygardt v. Colorado National Bank of Denver, 52 B.R. 229, 234-35 (Bankr.D.Colo. 1985) (remanding case in which court determined warranted jury trial). For the foregoing reasons, this court will exercise its discretion under 28 U.S.C. § 1452(b) and remand to state court.
De novo review is required in cases falling under the bankruptcy courts related to jurisdiction unless the parties consent to the entry of a final judgment by the bankruptcy court. 28 U.S.C. § 157(c)(1) and (2). Fed R. Bankr. P. 9027(e)(3).
IT IS ORDERED that Neelchines Motion to Remand is hereby granted and the case is remanded to the District Court in Sandoval County, New Mexico.