Opinion
Civil Action No. 00-1561. Section: "R" (3).
August 2, 2000.
ORDER AND REASONS
Before this Court are defendant AA Plumbing, Inc.'s response to notice of federal removal and defendant Wayne M. Seymour's motions to vacate state court judgments rendered subsequent to federal removal, for summary judgment and to set aside default judgment. For the following reasons, the Court remands this action to state court, vacates the state court judgment entered subsequent to federal removal but before remand, and declines to address the merits of defendant Seymour's motions for summary judgment and to set aside default judgment.
I. Background
The tortured path of this case arises from the February 12, 1996 lease of a Ford pick-up truck by AA Plumbing, whose financial commitments were guaranteed by Wayne M. Seymour. After AA Plumbing defaulted on the lease, Ford Motor Credit Company ("Ford") sued AA Plumbing and Seymour, as guarantor, on May 18, 1999, in the Twenty-Second Judicial District, St. Tammany Parish, State of Louisiana to recover the outstanding balance. AA Plumbing received service, but did not answer the complaint. Seymour filed a series of motions after the 30-day period to answer had expired. On August 16, 1999, the state court entered a preliminary default, and, on January 12, 2000, the state court confirmed that default judgment against Seymour in the amount of $2,475.00 plus interest and costs. Seymour then suspensively appealed to the First Circuit of Appeals on January 14, 2000.
On February 14, 2000, Seymour filed a third party and a cross-claim demand against AA Plumbing and a petition for nullity of judgment rendered January 12, 2000. While those demands were pending, AA Plumbing filed for Chapter 7 bankruptcy on March 3, 2000 in the United States District Court for the Eastern District of Louisiana. On May 24, 2000, Seymour filed a petition for federal removal. Seymour then filed a copy of the removal notice with the St. Tammany Parish Clerk on May 30, 2000. The same day, Seymour also gave copies to the state court judge as well as Ford's and AA Plumbing's attorneys. Despite the notice, the state court proceeded with a hearing on May 31, 2000 and dismissed Seymour's third-party demand and cross-claim against AA Plumbing. Seymour then filed a motion to vacate that judgment before this Court on June 9, 2000. He also filed motions for summary judgment pursuant to Federal Rule of Civil Procedure 56 and to set aside default judgment pursuant to Rules 55 and 60.
AA Plumbing challenges the removal. It argues that the amount in controversy does not exceed the jurisdictional amount and that there is not complete diversity.
II. Discussion
Before addressing the merits of Seymour's motions, the Court must first analyze whether it has jurisdiction. See, e.g., Bass v. Denney (In re Bass), 171 F.3d 1016, 1021 (5th Cir. 1999) (noting that "[f]ederal courts must be assured of their subject matter jurisdiction at all times"). And even though AA Plumbing only challenges the Court's jurisdiction under section 1332, the Court will examine the basis for its section 1452 jurisdiction sua sponte. See, e.g., Simon v. Wal-Mart Stores, Inc., 193 F.3d 848, 850 (5th Cir. 1999); Gober v. Terra + Corp. (In re Gober), 100 F.3d 1195, 1206 n. 9 (5th Cir. 1996).
A. Federal Jurisdiction
Although Seymour's notice of federal removal only asserts removal pursuant to 28 U.S.C. § 1452 and Federal Bankruptcy Rule 9027, (Notice Federal Removal at 1), his notice to the state court and the other parties states that he also removed pursuant to 28 U.S.C. § 1332. (Notice Clerk Parties Federal Removal at 1.) Because Seymour is appearing in proper person, the Court liberally construes his pro se pleadings and analyses its jurisdiction under both section 1332 and section 1452. See United States v. Riascos, 76 F.3d 93, 94 (5th Cir. 1996)).
1. Section 1332
Under section 1332, a district court has "original jurisdiction in cases where the matter in controversy exceeds the value or sum of $75,000 . . . and is between . . . citizens of different States." 28 U.S.C. § 1332 (a). And "it is well settled that the removing party bears the burden in establishing the facts necessary to show that federal jurisdiction exists . . . ." Allen v. R H Oil Gas Co., 63 F.3d 1326, 1335 (5th Cir. 1995) In determining whether the moving party has carried that burden, "[t]he general federal rule has long been to decide what the amount in controversy is from the complaint itself, unless it appears or is in some way shown that the amount stated in the complaint is not claimed in `good faith.'" Horton v. Liberty Mut. Ins. Co., 367 U.S. 348, 353, 81 S.Ct. 1570, 1573 (1961) (citing St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283, 288, 58 S.Ct. 586, 590 (1938)).
Although the parties are diverse (despite AA Plumbing's assertion to the contrary), Seymour has not shown that the amount in controversy exceeds the jurisdictional amount. Specifically, Ford only claimed $2,475.00 in its state complaint, (Ford's Pet. at 1-2), and Seymour's claims against AA Plumbing only add up to $19,143.00. (Third Party Cross Claim Demand at 3.) Therefore, the Court finds that it cannot exercise diversity jurisdiction over this case.
2. Section 1452
Seymour also asserts that section 1452 confers jurisdiction on this Court. "Section 1452 permits a party to remove a claim to federal district court if that court has jurisdiction over the claim under 28 U.S.C. § 1334. Section 1334 provides that federal district courts have original jurisdiction over all civil proceedings related to title 11 bankruptcy proceedings." Doddy v. OXY USA, Inc., 101 F.3d 448, 455 (5th Cir. 1996). "Related to" is a term of art. "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.'" Bass, 171 F.3d at 1022 (quoting Walker v. Cadle Co. (In re Walker), 51 F.3d 562, 569 (5th Cir. 1995)). More specifically, "[f]or jurisdiction to attach, the anticipated outcome of the action must both (1) alter the rights, obligations, and choices of action of the debtor, and (2) have an effect on the administration of the estate." Id. Critically, "it is the relation of dispute to estate, and not of party to estate, that establishes jurisdiction." Id. at 1023 (quoting Feld v. Zale Corp. (In re Zale Corp.), 62 F.3d 746, 755 (5th Cir. 1995)). Should AA Plumbing be found liable to Seymour, such a determination would alter its obligations and necessarily effect the administration of the estate. Therefore, the Court finds that this case is "related to" AA Plumbing's bankruptcy.
This finding, however, is not the end of the jurisdictional analysis because sections 1334(c)(1) and (c)(2) allow (and may even require) the Court to abstain from exercising jurisdiction. Under the "permissive abstention" doctrine embodied in section 1334(c)(1), "courts have broad discretion to abstain from hearing state law claims whenever appropriate "in the interest of justice, or in the interest of comity with State courts or respect for State law." Gober, 100 F.3d at 1206 (quoting 28 U.S.C. § 1334 (c)(1)). See also Wood v. Wood (In re Wood), 825 F.2d 90, 93 (5th Cir. 1987) (noting that section 1334(c)(1) "demonstrate[s] the intent of Congress that concerns of comity and judicial convenience should be met, not by rigid limitations on the jurisdiction of federal courts, but by the discretionary exercise of abstention when appropriate in a particular case."). Moreover, "[p]ermissive abstention under [section] 1334(c)(1) may be raised by the court sua sponte." Gober, 100 F.3d at 1206 n. 9 (citing Austin v. Cockings, 195 B.R. 915, 917 n. 3 (Bankr. E.D. Ark. 1996); Roddam v. Metro Loans, Inc., 193 B.R. 971, 975 n. 3 (Bankr N.D. Ala. 1996); Scherer v. Carroll, 150 B.R. 549, 552 (D. Vt. 1993); Richmond Tank Car Co. v. CTC Invs., 119 B.R. 124, 125 (S.D. Tex. 1989)).
Under Section 1334(c)(2) the Court must abstain from hearing Seymour's claims upon timely motion of a party if the following requirements are met: "(1) The claim has no independent basis for federal jurisdiction, other than § 1334(b); (2) the claim is a non-core proceeding, i.e., it is related to a case under title 11 but does not arise under or in a case under title 11; (3) an action has been commenced in state court; and (4) the action could be adjudicated timely in state court. Rupp Bowman Co. v. Schuster, 109 F.3d 237, 239 (5th Cir. 1997) (citing Gober, 100 F.3d at 1206; 28 U.S.C. § 1334 (c)(2), 157(b) (1)). See also Southmark Corp. v. Coopers Lybrand (In re Southmark Corp.), 163 F.3d 925, 929 (5th Cir. 1999) ("If the suit. . . . is merely `related to' bankruptcy, the bankruptcy court was required to abstain from hearing it."). "Nothing, however, prevents a court from permissively abstaining under [section] 1334(c)(1) where some, but not all, of the requirements for mandatory abstention are met." Gober, 100 F.3d at 1206-07.
Here, although neither Ford nor AA Plumbing has filed a timely motion arguing that section 1334(c)(2) compels mandatory abstention, Seymour's claims satisfy the four requirements. First, as already discussed, there is no independent basis for jurisdiction other than section 1334(b). Second, the claims are non-core. Third, an action is well established in state court. And fourth, the matter can clearly be adjudicated in a timely manner is state court. Accordingly, if a timely motion had been filed, the Court would have been compelled to abstain from exercising its jurisdiction. As the parties have not filed a timely motion, the Court exercises its discretion, sua sponte, under section 1334(c)(1) and abstains from exercising its jurisdiction. Therefore, as the Court does not have jurisdiction under section 1332 and abstains from exercising its jurisdiction under section 1452, the Court remands the case back to state court. Because the Court is remanding the case, it will not address the merits of Seymour's motions for summary judgment and to set aside default judgment.
B. The Effect of Federal Removal
There remains, however, the issue of the validity of the state court's judgment rendered after Seymour removed this case to federal court. Removal is a three step process. Section 1446(d) requires a removing party to "(1) file the notice of removal in the federal court; (2) give written notice to all adverse parties; and (3) file a copy of the notice with the clerk of the state court." Hampton v. Union Pacific R.R. Co., 81 F. Supp.2d 703, 707 (E.D. Tex. 1999). See 28 U.S.C. § 1446 (d). Critically, "[r]emoval is a matter of federal right," regardless of the merits of Seymour's petition for removal. Butler v. Polk, 592 F.2d 1293, 1296 (5th Cir. 1979). And 28 U.S.C. § 1446 (d) "clearly requires that the state stop all proceedings, once notice is given, until a determination on the merits of the petition for removal is made in federal court." Medrano v. Texas, 580 F.2d 803, 804 (5th Cir. 1978) (per curiam). If the state court conducts further proceedings despite the notice of removal, those state proceedings are "void." Medrano, 580 F.2d at 804. See also Murray v. Ford Motor Co., 770 F.2d 461, 463 (5th Cir. 1985) (noting that the state court has "no power" once removal has been effected); Hampton, 81 F. Supp.2d at 705 (" 28 U.S.C. § 1446 (d) requires that the state stop all proceedings once the court has notice that the case has been removed."); CHARLES A. WRIGHT, ET AL., FEDERAL PRACTICE AND PROCEDURE: JURISDICTION § 3737 (3d ed. 1998) ("[A]ny further proceedings in the state court are considered coram non judice and will be vacated by the federal court. . . ."). "A later remand does not alter the fact that removal took place." Murray, 770 F.2d at 465. See also WRIGHT, supra, § 3737 (noting that vacation is appropriate "even if the removal subsequently is found to have been improper and the case is remanded back to the state Court")
Here, Seymour filed a notice of removal in federal court on May 24, 2000. (Notice Federal Removal at 1.) He then filed a copy of that notice with the St. Tammany Parish Clerk of Court on May 30, 2000, and gave copies to the state Court judge and the other parties on the same day. (Mot. Vacate State Ct. Judgments at 2.) Having satisfied section 1446(d)'s requirements, Seymour effectively removed the case to federal court, irrespective of the merits of the removal. Accordingly, as of May 30, 2000, the state court was divested of its authority until the case was remanded by this Court. Therefore, the state court's judgment of May 31, 2000, issued one day after the case was removed, is void, even though the Court is now remanding the case. Congress has mandated this result in section 1446(d).
III. Conclusion
For the foregoing reasons, the Court remands this action to state court, vacates the state court judgment entered subsequent to federal removal but before remand, and declines to address the merits of defendant Seymour's motions for summary judgment and to set aside default judgment.
New Orleans, Louisiana, this 2 day of August, 2000.