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SHUBERT v. ROCHE HOLDING AG

August 3, 2001

CHRISTINE C. SHUBERT, ESQUIRE, AS TRUSTEE OF THE ESTATE OF EDWARD M. MEZVINSKY, ET AL., PLAINTIFFS,
V.
ROCHE HOLDING AG, ET AL., DEFENDANT.



The opinion of the court was delivered by: Lowell A. Reed, Jr., District Judge.

MEMORANDUM

Defendants removed the action pursuant to 28 U.S.C. § 1446(a) and 1452(a), asserting that jurisdiction was proper under 28 U.S.C. § 1334(b) because this civil action is related to two bankruptcy cases, In re Edward M. Mezvinsky, Civ. A. No. 00-10745, and In re Marjorie Margolies-Mezvinsky, 265 B.R. 681 (Bkrtcy.E.D.Pa. 2001), which are pending in the United States Bankruptcy Court for the Eastern District of Pennsylvania, Philadelphia Division.*fn1 Presently before the Court is the motion of plaintiffs to abstain and remand this case to the Philadelphia Court of Common Pleas (Document No. 8), pursuant to 28 U.S.C. § 1446(b) and 1334(c). Plaintiffs also move this court to grant costs and attorney fees in their favor pursuant to 28 U.S.C. § 1447(c). Upon consideration of the motions, the response, and the reply, and for the following reasons, I will grant the motion of plaintiffs to remand, and will deny their motion for fees and costs.

Analysis

A. Motion to Remand and Abstain

Under 28 U.S.C. § 1452(a), a party may remove any claim or cause of action to the district court as long as the district court has jurisdiction under 28 U.S.C. § 1334(b).*fn2 Under 28 U.S.C. § 1452(b), the district court may remand such removed claim or cause of action "on any equitable ground." A decision to grant or deny remand is not reviewable by the court of appeals. See 28 U.S.C. § 1452(b). For the reasons which follow, I conclude that even if this Court were to have jurisdiction under § 1334(b), the factors which govern whether a district court should remand under § 1452(b) weigh in favor of remand.*fn3

Courts have broad discretion in remanding cases. See In re Grace Community, Inc., 262 B.R. 625, 2001 WL 589462 (Bankr.E.D.Pa. 2001) (publication page references not available). In determining whether to grant remand on any equitable ground, most courts have been guided by the following seven factor test:

(1) the effect on the efficient administration of the bankruptcy estate, (2) the extent to which issues of state law predominate, (3) the difficulty or unsettled nature of the applicable state law, (4) comity, (5) the degree of relatedness or remoteness of the proceeding to the main bankruptcy case, (6) the existence of a right to a jury trial, and (7) prejudice to the involuntarily removed [parties].

See, e.g., Id., 262 B.R. 625, 2001 WL 589462. at n. 6 (collecting cases); In re RBGSC Inv. Corp., 253 B.R. 369, 381-82 (E.D.Pa. 2000); In re Raymark Industries, Inc., 238 B.R. 295, 299 (Bankr.E.D.Pa. 1999) (collecting cases).

I begin by analyzing the extent to which the civil action is related to the pending bankruptcy cases. For the purposes of 28 U.S.C. § 1334(b), civil proceedings are related to bankruptcy proceedings if, "the outcome of that proceeding could conceivably hare any effect on the estate being administered in bankruptcy." Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3d Cir. 1984), impliedly overruled on other grounds by Things Remembered, Inc. v. Petrarca, 516 U.S. 124, 134-35, 116 S.Ct. 494, 133 L.Ed.2d 461 (1995) (emphasis in original) (citations omitted). See also CoreStates Bank, N.A. v. Huls America, Inc., 176 F.3d 187, 191 (3d Cir. 1999) (applying Pacor test). "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." Pacor, 743 F.2d at 994. However, "the mere fact that there may be common issues of fact between a civil proceeding and a controversy involving the bankruptcy estate does not bring the matter within the scope of section [1334(b)]. Judicial economy itself does not justify federal jurisdiction." Id.

Plaintiffs concede that if they are successful in the civil action there will be more money in the bankrupts' estate to pay creditors. (Pls.' Mot. at ¶ 19; Pls.' Mem. at 6.) The fact that the civil suit could conceivably impact the asset pool would appear to make the case "related to" the bankruptcy proceeding. See PharMor, Inc. v. Coopers & Lybrand, 22 F.3d 1228, 1235 n. 1 (3d Cir. 1994) (undisputed that civil lawsuit "will have a direct and substantial impact on the size of PharMor's asset pool available for distribution to creditors and therefore is `related to' the bankruptcy case"); In re Bobroff, 766 F.2d 797, 803 (3d Cir. 1985) (determining that tort claims brought by debtor which did not accrue until after a bankruptcy petition was filed was not property of the bankruptcy estate and therefore was not "related to" bankruptcy proceeding; thus premising test on whether cause of action became part of estate); In re Grace Community, Inc., 262 B.R. 625, 2001 WL 589462 (finding "related to" jurisdiction where "possible monetary recovery" could impact administration of bankruptcy estate); Thomas v. R.J. Reynolds Tobacco Company, 259 B.R. 571, 575 (S.D.Miss. 2001) ("This court finds that the removed action is `related to' the bankruptcy case because if a monetary judgment is rendered in favor of [debtor], this award would have the effect of increasing the property of the bankruptcy estate.").

While the civil case seems to meet the test established in Pacor the core legal issues raised by it have little or nothing in common with the bankruptcy proceedings.*fn4 The defendants in this case are also not at all connected to the bankruptcy proceedings and plaintiffs' liabilities in bankruptcy context will not be impacted by the outcome of this case. In these aspects, the civil preceding is more remote.

It is also worth mentioning that "related to" cases are referred to as noncore proceedings,*fn5 see Halper v. Halper, 164 F.3d 830, 837 (3d Cir. 1999), and "Congress has made it plain that, in respect to non-core proceedings such as this (i.e., cases which assert purely state law causes of action), the federal court should not rush to usurp the traditional precincts of the state court." Port Auth. of New York and New Jersey v. CCI-Bowers Co., Nos. 91-5682, 91-3013, 1992 WL 164441, at *5 (D.N.J. June 15, 1992) (citations omitted). The legislative history of § 1334 indicates that Congress was concerned with the "constitutionality of granting to the federal courts `related to' jurisdiction in cases where no independent basis for federal jurisdiction existed." Pacor; 743 F.2d at 996 n. 16 (emphasis in original). Thus, while the state claims meet the broad "related to" test, when a district court is faced with non-diverse claims which raise only state law questions, the flags of caution are raised.

With that, I move to the first factor and note that "`Congress intended to grant comprehensive jurisdiction to the bankruptcy courts so that they might deal efficiently and expeditiously with all matters connected with the bankruptcy estate.'" Celotex Corp. v. Edwards, 514 U.S. 300, 308, 115 S.Ct. 1493, 1499, 131 L.Ed.2d 403 (1995) (emphasis added) (quoting in Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (1984), impliedly overruled on other grounds by Things Remembered, Inc. v. Petrarca, 516 U.S. 124, 116 S.Ct. 494, 133 L.Ed.2d 461 (1995)) (citing H.Rep. No. 598, 95th Cong., 2d Sess., 43, 48, reprinted in 1978 U.S.Code Cong. & Ad. News 5963, 6004-08). The state law claims before me cannot be referred to the Bankruptcy court. Defendants do not consent to final orders or judgment by the bankruptcy judge (Notice of Removal at ¶ 7), thus this Court may not refer this case to a bankruptcy judge under 28 U.S.C. § 157(c)(2).*fn6 Cf. In re J & J Towne Pharmacy, Inc., No. 99-17560DWS, 2000 WL 568355, at *12 (Bankr.E.D.Pa. May 5, 2000) (determining that refusal by party to consent to final order or judgment by bankruptcy court is indicative of forum shopping). Likewise, the jury demand seems to prevent adjudication in a bankruptcy court and weighs in favor of remand. See In re Micro Design Inc., 120 B.R. 363, 368 (E.D.Pa. 1990) (observing apparent lack of authority ...


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