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In re Pacor Inc.

decided: August 27, 1984.

IN RE PACOR, INC., APPELLANT
v.
JOHN HIGGINS, JR. AND LOUISE HIGGINS APPELLEES



On Appeal From The United States District Court for the Eastern District of Pennsylvania

Garth and Sloviter, Circuit Judges, and Fisher, District Judge.*fn*

Author: Garth

Opinion OF THE COURT

GARTH, Circuit Judge:

Philadelphia Asbestos Co. (trading as "Pacor, Inc.") appeals from a district court order which remanded a products liability action, brought against Pacor by John Higgins and his wife, to Pennsylvania state court. This case, as well as Hanna v. Philadelphia Asbestos Co., 743 F.2d 996, also decided this day, requires a determination of the limits to federal bankruptcy jurisdiction in proceedings "related to" bankruptcy under 28 U.S.C. § 1471(b).

While on its face, this appeal appears superficially simple, it nevertheless presents us with a complex of jurisdictional hurdles which must be surmounted before we may confront the merits of the controversy. The jurisdictional questions to be considered are: (1) Does an order of the district court in bankruptcy context, which order remanded an earlier state court proceeding to the state court, satisfy the final order criteria of Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 93 L. Ed. 1528, 69 S. Ct. 1221 (1949)? (2) Did Congress intend that appeal from such a remand order be controlled by the removal provisions of statutes pertaining to the district court, 28 U.S.C. §§ 1441-1447 (1982), or be controlled by 28 U.S.C. § 1478 (1982), the bankruptcy remand statute? (3) If governed by section 1478(b), is review authorized where the proceeding is not "related to" bankruptcy, and thus is an action in which no jurisdiction can attach? Only after answering those questions and finding that appellate jurisdiction inheres, and that appeal is not proscribed,*fn1 do we reach the merits of this action.

Because we decide that we have appellate jurisdiction, and because we agree with the district court that the action between Higgins and Pacor was not a proceeding "related to" bankruptcy, we will affirm the judgment below which remanded the Higgins-Pacor action to state court.

I.

John and Louise Higgins initially brought suit against Pacor in the Pennsylvania Court of Common Pleas. They sought damages allegedly caused by Mr. Higgins' work-related exposure to asbestos supplied by Pacor, a distributor of chemical supplies. In response, Pacor filed a third party complaint impleading the Johns-Manville Corporation, which Pacor claims was the original manufacturer of the asbestos.

On August 26, 1982, Johns-Manville filed a chapter 11 petition in bankruptcy in the United States Bankruptcy Court for the Southern District of New York. In re Johns-Manville Corp., Nos. 82 B 11656 to 82 B 11676 (Bankr. S.D.N.Y. filed Aug. 26, 1982). In September, 1982, however, the Court of Common Pleas severed the third party action (Pacor against Johns-Manville) from the Higgins action against Pacor. On February 16, 1983, as the Court of Common Pleas was preparing to bring to trial the Higgins-Pacor claim, Pacor filed a Petition for Removal in the Bankruptcy Court for the Eastern District of Pennsylvania, seeking to remove the entire Higgins-Pacor-Manville controversy to federal bankruptcy court. Simultaneously, Pacor moved the Eastern District bankruptcy court to transfer the matter(s) to the Southern District of New York, where it would be joined with the rest of the Johns-Manville bankruptcy administration.

The bankruptcy court in the Eastern District of Pennsylvania, upon considering Pacor's removal application, was of the opinion that the entire Higgins-Pacor-Manville matter should be remanded back to the Court of Common Pleas. It reasoned that Pacor's removal petition was filed beyond the thirty day time limit prescribed by Interim Bankruptcy Rule 7004(a),*fn2 and therefore was fatally defective. Although that time limit had been extended by Bankruptcy Judge Lifland, who is handling the Manville bankruptcy administration in the Southern District of New York, the bankruptcy court below held that the time limit was mandatory and could not be extended.

Upon "appeal"*fn3 to the district court, Pacor argued that the bankruptcy judge administering the Manville chapter 11 proceedings was empowered to grant a motion to enlarge the time for filing removal petitions in matters related to the Manville case. It further contended that the entire Higgins-Pacor-Manville dispute, including the original action between Higgins and Pacor, was "related to" bankruptcy and therefore should be joined with all other Manville matters in the Southern District of New York.

The district court agreed with Pacor that the thirty day limit on filing petitions for removal could be extended by an appropriate order of the Manville chapter 11 court, and therefore Pacor was not time-barred from attempting to remove the actions to federal bankruptcy court. The district judge also ruled, however, that the original suit by Higgins against Pacor was not "related to" the Manville bankruptcy proceedings, and therefore there was no jurisdiction in the bankruptcy court to hear the matter under 28 U.S.C. § 1471(b). Thus, it ordered the Higgins-Pacor action remanded to state court.

The district court did agree, on the other hand, that the Pacor-Manville third party claim was a proceeding "related to" bankruptcy, and it remanded that portion of the action to the bankruptcy court for consideration of the transfer of venue motion made by Pacor. Pacor now appeals to this court from that portion of the district court's order which remanded the Higgins-Pacor lawsuit to state court.

II.

Our first concern on this appeal is whether we have appellate jurisdiction to review the district court's order. Because of the complex statutory provisions involved, and the interrelationship between the roles of the bankruptcy court and the district court, it is necessary to analyze our jurisdiction in a three step mode.

First, we must determine whether the district court's order entered in a bankruptcy context and which granted remand to the state court satisfies the requirements of "finality" for general purposes of appealability. This determination, in turn, rests upon a "collateral order" analysis. See Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 93 L. Ed. 1528, 69 S. Ct. 1221 (1949).

Second, assuming that we conclude (as we do) that such a remand order is a final collateral order, we next examine whether our appellate jurisdiction has nevertheless been affirmatively precluded by Congress, pursuant to 28 U.S.C. § 1447(d).

Third, holding as we do that our answers to the first two inquiries permit appellate review of the remand order in question here, we must then consider whether our jurisdiction has been proscribed by the provisions of 28 U.S.C. § 1478(b) (1982).*fn4 We hold that it has not.

A.

Under both 28 U.S.C. § 1291 (general final appeals from district court) and 28 U.S.C. § 1293 (bankruptcy appeals), for an order to be reviewable in this court, it must be "final."*fn5 While, in this case, it is true that there is no final judgment on the merits over all claims and parties, we believe that the remand order falls within the small class of orders, collateral to the rest of the litigation, which are appealable under the doctrine of Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 93 L. Ed. 1528, 69 S. Ct. 1221 (1949). For an order to be appealable under the Cohen collateral order doctrine, three requirements must be met: (1) it must conclusively determine the disputed question; (2) it must resolve an important question completely separate from the merits of the action; and (3) it must be effectively unreviewable on appeal from final judgment. Coopers & Lybrand v. Livesay, 437 U.S. 463, 468, 57 L. Ed. 2d 351, 98 S. Ct. 2454 (1978). We find that these conditions have been satisfied.

It is first apparent that the remand order conclusively determines the disputed question of whether the Higgins-Pacor claim is "related to" bankruptcy for purposes of 28 U.S.C. § 1471(b) (1982).*fn6 Indeed, the very fact that the district court remanded to the state court, indicates that it will not ...


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