Summary
granting discretionary abstention and remand though automatic stay had not been lifted
Summary of this case from Beamon v. Triad Financial CorporationOpinion
Civil Action No: 00-2859, Section: "J"(2).
January 30, 2001
MINUTE ENTRY
Before the Court is Whitney National Bank's ("WNB") Motion to Remand (Rec. Doc. 5), set for hearing on November 8, 2000, and opposed by the trustee for the bankruptcy estates of defendants Mary G. Bunch and BLT Farms, Inc. Also before the Court is the bankruptcy trustee's Motion to Transfer Venue (Rec. Doc. 7) which was set for hearing on November 22, 2000. WNB opposes the motion. Both motions are before the Court on briefs without oral argument.
This suit arises out of an alleged check kiting scheme involving ten defendants. Three of the defendants have bankruptcies pending in the Bankruptcy Court for the Southern District of Mississippi. Three defendants have bankruptcies pending in the Bankruptcy Court for the Eastern District of Louisiana. After WNB filed this suit in Louisiana state court, the trustee for two of the Mississippi bankruptcies ("the Trustee") removed the case to this Court seeking to have it transferred to the Southern District of Mississippi for consolidation with the Mississippi bankruptcies. WNB wants the case remanded to state court on equitable grounds pursuant to 28 U.S.C. § 1452(b).
The following individuals and entities were named as defendants in this suit: Mary G. Bunch, Mary G. Bunch Coffee, Miles G. Bunch, Lloyd N. Nicaud, Kent G. Nicaud, BLT Farms, Inc., L M Distributors, Inc., Ralph C. Richards, Inc., Mark P. Lemonier, and Susan Laraja Lemonier (collectively "Defendants").
Mary G. Bunch d/b/a Mary Bunch Coffee, BLT Farms, and L M Distributors, Inc.
Ralph C. Richards, Inc., Mark Lemonier, and Susan Laraja Lemonier.
Although multiple bankruptcies are involved in this case, the Trustee referred to throughout this order is involved only in two of the three Mississippi bankruptcies — the two trustees for the Louisiana bankruptcies and the third Mississippi trustee made no appearance with respect to the pending motions.
The Court will assume throughout this order that if the case were transferred to the Southern District of Mississippi, it would in fact be referred to the bankruptcy court. That decision would be left for the district court in Mississippi. See 28 U.S.C. § 157(a).
As an initial matter, WNB does not argue that removal was improper. Both sides agree that the instant suit is at the very least "related to" the pending bankruptcies making the case removable pursuant to 28 U.S.C. § 1334(b) and 1452(a). The parties are at odds, however, as to which court, the Louisiana state court or the Mississippi bankruptcy court, is better suited to hear this case. Neither party argues that this Court should hear the case, or that the Court should refer it to the bankruptcy court in this district, and given that removal was permissible only by virtue of the fact that the case is "related to" the bankruptcies, the Court would indeed be disinclined to deprive WNB of its chosen forum if the case was not in fact transferred to the bankruptcy court. Thus, the real issue before the Court is whether this case could best be decided in the Mississippi bankruptcy court.
Although the parties agree as such, the "related to" status of this case is a requisite to subject matter jurisdiction in a federal court. In re Cannon, 196 F.3d 579, 584-85 (5th Cir. 1999). Accordingly, the parties agreement on this issue is not controlling as they cannot confer subject matter jurisdiction by consent. Id. at 585. The Court will assume, for purposes of the instant motions, without deciding, that the suit is in fact "related to" the bankruptcies.
"Related to" is a term of art. In re Cannon, 196 F.3d at 585. "A proceeding is `related to' a bankruptcy `if the outcome of that proceeding could conceivably have any effect on the estate being administered in bankruptcy.'" Id. (quoting Bass v. Denny, 171 F.3d 1016 (5th Cir. 1999)).
In his Removal Filing Pursuant to Fed.R.Br.Proc. 9027(e)(3), the Trustee averred that this suit was a "core proceeding." Rec. Doc. 6. However, the memoranda submitted in conjunction with the motions at issue indicate that he has since retreated from that position.
WNB argues that it would be a waste of judicial resources to transfer this case to the Mississippi bankruptcy court. In particular, WNB asserts that transferring the case to Mississippi will necessitate trying WNB's fraud claims multiple times given that bankruptcies are pending in Mississippi and Louisiana, and given that three of the defendants are not even in bankruptcy. However, if WNB were allowed to proceed in state court, a single court, with jurisdiction as to all defendants, would determine the liability of all ten defendants in a single proceeding. Then under principles of collateral estoppel and res judicata both bankruptcy courts (in the dischargeability proceedings) would be bound by the same determinations as to the fraud issue.
Naturally, this argument does not weigh heavily in favor of remand because this Court also has jurisdiction to render a judgment against all ten defendants in a single proceeding. Given that the suit is merely "related to" the pending bankruptcies, the parties would have to consent to having the bankruptcy court decide the merits. 28 U.S.C. § 157(c).
The Trustee, on the other hand, argues that remanding the case to state court would be an inefficient use of the bankruptcy estate funds because he would have to defend the suit in state court as well present the same set of facts in other proceedings before the Mississippi bankruptcy court. He also argues that the Mississippi bankruptcy court would be a more efficient forum due to the bankruptcy judge's knowledge of matters relating to allowability of proofs of claims and exceptions to discharge.
After reviewing the complaint and considering the arguments of counsel, the Court concludes that this case should be remanded to state court on equitable grounds. Factors to be considered in conjunction with a request for equitable remand include: forum non conveniens, the expertise of the particular courts involved, duplicative and uneconomic effort of judicial resources, and a lessened possibility of an inconsistent result. Hills v. Hernandez, 1998 WL 241518 (E.D. La. May 12, 1998) (citing Browning v. Navarro, 743 F.2d 1069 n. 21. (5th Cir. 1984; Massey v. Genco, 1997 WL 61449 (E.D. La. Feb. 6, 1997)).
Considering the factors listed above, the Court finds the Trustee's arguments unpersuasive for several reasons. of most significance is that three of the defendants have bankruptcies pending in the Eastern District of Louisiana. In fact, five of the six counts alleged in WNB's state court petition involve defendants whose bankruptcies are pending in Louisiana whereas only three of the six involve a defendant with a bankruptcy pending in Mississippi. The Trustee avoided this issue altogether, making no attempt in his memoranda to explain how his arguments could have merit when the Louisiana bankruptcies are taken into consideration, and the Louisiana defendants did not join in the Trustee's motion. Without such an explanation from the Trustee, the Court is left assuming, as WNB contends, that this case is no more related to the Mississippi bankruptcies than to those pending in Louisiana.
Although WNB did not raise the point, the Court also notes that the non-removing defendants have not consented on the record to the removal. 28 U.S.C. § 1446(b) requires that all defendants either join in the notice of removal or file some type of written document indicating consent. Hills v. Hernandez, 1998 WL 241518 (E.D. La. May 12, 1998) (citing Getty Oil v. Insurance Co. of N. Am., 841 F.2d 1254 (5th Cir. 1988)). The rule also applies to "related to" removals pursuant to 28 U.S.C. § 1452. See id.
Likewise, the Court is also unpersuaded that the bankruptcy court, whether in Mississippi or Louisiana, would be superior to the Louisiana state court. Given that this suit is a non-core proceeding, all parties would have to consent to having the bankruptcy court make a determination on the merits. 28 U.S.C. § 157. At least one party, WNB, has already filed notice that it would not consent. Rec. Doc. 3. And while the Trustee gives WNB's strategy of invoking collateral estoppel a somewhat nefarious characterization, judicial economy would be better served by having one court, in which consent is not a concern, determine the fraud issue as to all ten defendants.
While the bankruptcy judge surely has superior knowledge of matters relating to allowability of claims and exceptions to discharge, the claims at issue here are state law claims based on fraud and several continuing guarantees executed by Defendants. Although WNB strangely did not raise this point, the Trustee indicated that the claims are to be decided under Louisiana law. See Memorandum in Support of Motion to Transfer Venue, at 11. Surely the Louisiana state court judge is better situated to decide issues of Louisiana state law.
Finally, although the Trustee's argues that the bankruptcy estate assets would be used more efficiently if the case were transferred to Mississippi, the Court notes that the bankruptcy judges involved in this case have yet to lift the automatic stays against the bankrupt defendants. Thus, even if the case is remanded to state court, the suit could not proceed against the defendants for whose estates the Trustee is responsible anyway. If WNB moves to lift the stays, the Trustee can reurge his arguments, to the appropriate bankruptcy judge, as to why allowing the state court action to proceed would waste estate assets.
In sum, the fact that this case is related to bankruptcies pending in more than one district and involves other defendants not involved in any type of bankruptcy, militates strongly in favor of remanding this case back to state court. Given that the sole purpose in removing the case to this Court was to effectuate a change of venue, and given that the Court is denying that motion, the Court remands this case to state court pursuant to 28 U.S.C. § 1452 (b). Accordingly,
IT IS ORDERED that the Trustee's Motion to Transfer Venue should be and is hereby DENIED; IT IS FURTHER ORDERED that WNB's Motion to Remand should be and is hereby GRANTED.