United States District Court, E.D. Pennsylvania
April 19, 2004.
SHARED NETWORK USERS GROUP, INC.
WORLDCOM TECHNOLOGIES, INC., et al.
The opinion of the court was delivered by: HARVEY BARTLE, III, District Judge
In March, 2000, plaintiff Shared Network Users Group, Inc. ("Shared
Network") instituted this action in the Court of Common Pleas of
Montgomery County, Pennsylvania for breach of contract and for violation
of the Communications Act of 1934, 47 U.S.C. § 201-02. Shared Network
sought to enjoin defendants WorldCom Technologies, Inc. and MCI WorldCom,
Inc. (collectively, "WorldCom") from carrying out their threat to
disconnect the telecommunication services they were providing to Shared
Network.Shared Network also requested damages. WorldCom counterclaimed
for amounts due under their contract, quantum meruit, and unjust
Almost four years later, on January 16, 2004, WorldCom removed the
action to this court pursuant to Rule 9027 of the Federal Rules of
Bankruptcy Procedure and 28 U.S.C. § 1334, 1441(b), and 1452(a).
WorldCom has moved to transfer venue to the United States District Court
for the Southern District of New York under 28 U.S.C. § 1412. Shared
Network has moved to remand to the state court on the ground that removal
was untimely or alternatively that the court should exercise its equitable
authority to remand and/or abstain under § 1452(b) or § 1334(c)
In 2002, WorldCom and certain of its subsidiaries commenced proceedings
under Chapter 11 of the Bankruptcy Code, 11 U.S.C. § 101 et
seq., in the Southern District of New York where they have been
consolidated and are being jointly administered. On January 22, 2003,
Shared Network filed a proof of claim in the amount of $507,671.20 in the
bankruptcy court in that district. This is essentially the same claim
that is the subject of the complaint originally filed in the state court.
On January 13, 2004, WorldCom filed an objection to the proof of claim
and asserted virtually the same counterclaim in the bankruptcy court
which it had filed against Shared Network in the Montgomery County
action. WorldCom seeks $884,512.08. Three days later, WorldCom removed
the state court action to this court.
We must first determine whether WorldCom's removal of Shared Network's
state court action was timely. Under § 1452(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." Section 1334(b) provides that "the district
courts shall have original but not exclusive jurisdiction of all civil
proceedings arising under Title 11, or arising in or related to cases under Title 11." § 1334(b). The federal court has
original jurisdiction over WorldCom's bankruptcy, which arises under
Title 11. In addition, Shared Network's state court claims and WorldCom's
counterclaim are "related to" the bankruptcy proceeding because the
outcome of the state court claims "could conceivably have [an] effect on
the estate being administered in bankruptcy." In re Marcus Hook
Development Park, Inc., 943 F.2d 261, 264 (3d Cir. 1991) (citations
omitted). Concededly, each is a core proceeding which may be heard and
determined by a bankruptcy judge. See 28 U.S.C. § 157.
Shared Network maintains that WorldCom waived its right to remove by
failing to do so within 30 days after the complaint was served
in the state court action as required under 28 U.S.C. § 1446(b).
Since the original complaint contained a claim under the Communications
Act of 1934, federal question jurisdiction clearly existed at the outset.
Nonetheless, we disagree that the 30 day deadline under § 1446(b) is
applicable when removal is predicated on § 1452.
As noted above, the time under § 1446 begins to run once the
complaint is served. In contrast, § 1452 cannot be triggered until
the "district court has jurisdiction of such claim or cause of action
under § 1334 of this title." This cannot occur until a bankruptcy
petition is filed. Such a filing, of course, often happens long after
the 30 day removal deadline of § 1446 has passed. After a
bankruptcy proceeding is instituted, the circumstances for the parties in
a state court action change significantly. An automatic stay of the state court
action or at least of certain claims is put into effect. See
11 U.S.C. § 362 (a). A separate federal proceeding now exists, and it is
often in the interest not only of judicial economy but of convenience to
the parties to have everything consolidated in one federal forum. The 30
day rule under § 1446 would undermine this salutary purpose of §
Unlike § 1446, any party including a plaintiff may remove an action
under § 1452. Section 1452(b) also has its own provision for
preventing dilatory or otherwise unfair conduct on the part of the
removing party. While § 1446 has the 30 day rule, § 1452 permits
the court to remand on "any equitable ground."*fn1 Thus, § 1452
takes care of the problem of abusive tactics by a removing party in a way
different from § 1446. To superimpose the bright line 30 day removal
deadline of § 1446(b) would undermine the specific statutory scheme
of § 1452.
Bankruptcy Rule 9027(a) is carefully Grafted to fit with the purpose of
§ 1452. It provides:
if the claim or cause of action in a civil action
is pending when a case under the [Bankruptcy] Code
is commenced, a notice of removal may be filed
within the longest of (A) 90 days after
the order for relief in thecase under the Code,
(B) 30 days after entry of an order
terminating a stay, if the claim or cause of
action in a civil action has been stayed under
§ 362 of the Code, or (C) 30 days after
a trustee qualifies in a chapter 11 reorganization case but not later than 180 days
after the order for relief.
F.R.Bankr.P. 9027(a)(2); see also In re Pacor, 72 B.R. 927
(Bankr. E.D. Pa. 1987). WorldCom specifically relies on Federal
Bankruptcy Rule 9027(a)(2)(B), which allows a party to remove a claim or
cause of action at any time within 30 days after the automatic
stay with respect to the claim or cause of action is terminated. It is
undisputed that the stay was still in effect when WorldCom removed the
state court action to this court. See In re Pacor, 72 B.R. at
Even assuming that WorldCom was timely in removing Shared Network's
claim, Shared Network maintains that WorldCom is out of time under
Rule 9027(a)(2)(B) with respect to its state law counterclaim because it was
not subject to the automatic stay provisions of § 362. That section
only allows for the stay of claims against a debtor, not claims brought
by the debtor. See 11 U.S.C. § 362(a); Maritime
Electric Co., Inc. v. United Jersey Bank, 959 F.2d 1194, 1204 (3d
While Shared Network correctly reads § 362, WorldCom counters that
since its counterclaim is related to Shared Network's claims, the entire
action was properly removed. WorldCom contends that the scope of what is
removed should be determined solely by the notice of removal, which
included WorldCom's counterclaim as well as Shared Network's causes of
action. See Princess Louise Corp. v. Pac. Lighting Leasing Co.,
77 B.R. 766, 771 (Bankr. C.D. Cal. 1987). We are unpersuaded by Shared Network's argument that WorldCom's state
court counterclaim should be remanded because the counterclaim was not
subject to the automatic stay. See F.R.Bankr.P.
9027(a)(2)(B). We recognize that "all proceedings in a single case are
not lumped together for the purposes of automatic stay analysis."
Maritime Elec. Co., 959 F.2d at 1204. However, in the instant
case, the issues before us concern removal and federal subject matter
jurisdiction. There is long-standing precedent allowing the federal
courts to decide not only claims within their original jurisdiction but
also other claims as long as they all "derive from a common nucleus of
operative fact." United Mine Workers of America v. Gibbs,
383 U.S. 715, 725 (1966). In this vein, § 1334(a) and (b) state that
federal courts "shall have original and exclusive jurisdiction of all
cases under title 11" and "original but not exclusive jurisdiction of all
civil proceedings arising under title 11, or arising in or related to
cases under title 11." Similarly, 28 U.S.C. § 1367(a) provides for
supplemental jurisdiction "over all other claims that are so related to
claims in the action within such original jurisdiction that they form
part of the same case or controversy under Article III of the United
We see no reason why these same principles of "judicial economy,
convenience and fairness to litigants" specifically acknowledged in
Gibbs, 383 U.S. at 726, and clearly recognized in § 1334
and § 1367 should not apply when the issue involves removal under § 1452 and Bankruptcy Rule 9027(a)(2)(B).
Compare In re Cuyhoga Equip. Corp., 980 F.2d 110, 115 (2d Cir.
1992) and In re Walker, 51 F.3d 562, 572-73 (5th Cir. 1995)
with Chapman v. Currie Motors, Inc., 65 F.3d 78, 81 (7th Cir.
1995). As noted by Justice Ginsburg in her concurring opinion in
Things Remembered, Inc. v. Petrarca, 516 U.S. 124, 132 (1995),
"Congress, when it added § 1452 to the Judicial Code chapter on
removal of cases from state courts . . . meant to enlarge, not to rein
in, federal trial court removal/remand authority for claims related to
Shared Network's claims against WorldCom were timely removed under
§ 1452 and Bankruptcy Rule 9027(a)(2)(B). Because the notice of
removal included the entire state court action, removal of the related
WorldCom counterclaim was also timely. Accordingly, we have jurisdiction
over both Shared Network's state court claims and WorldCom's
Having determined that removal of the entire action was timely, we must
now decide whether we should refuse to exercise subject matter
jurisdiction over this action. Shared Network appears to move for remand
under § 1452(b) and/or permissive abstention under § 1334(c)
(1). Section 1452(b) provides that "the court to which [a] claim or cause
of action is removed may remand such claim or cause of action on any
equitable ground." Similarly, § 1334(c)(1) reads:
Nothing in this section prevents a district court
in the interest of justice, or in the interest of comity with State courts or respect
for State law, from abstaining from hearing a
particular proceeding arising under title 11 or
arising in or related to a case under title 11.
See e.g., McCormick v. Kochar, 1999 WL 1051776, at *1
(E.D. Pa. Nov. 19, 1999). In assessing whether to abstain or to remand,
a court considers the following non-inclusive factors:
the effect on the efficient administration of the
bankruptcy estate; the extent to which issues of
state law predominate; the difficulty or unsettled
nature of applicable state law; comity; the degree
of relatedness or remoteness of the proceeding to
the main bankruptcy case; the existence of a right
to a jury trial; and, prejudice to the
involuntarily removed defendants.
In re U.S. Physicians, Inc., 2001 WL 793271, *2 (E.D. Pa.
July 12, 2001) (citing McCormick, 1999 WL 1051776, at *2).
See also In re RBGSC Investment Corp., 253 B.R. 369, 377-78
(E.D. Pa. 2000); In re Pacor, 72 B.R. at 931.
Shared Network argues that comity, the right to a jury trial, and the
predominance of state law issues all militate in favor of remand.
WorldCom contends that the effect on the efficient administration of the
estate, the degree of relatedness of the bankruptcy and state court
proceedings, and the waiver by Shared Network of its right to a jury
trial by subjecting itself to the equitable administration of the
bankruptcy court all support denying Shared Network's remand motion and
transferring the entire action to the Southern District of New York.
As stated above, the parties agree that the claims and originally filed
counterclaim in the state court action constitute "core proceedings." See 28 U.S.C. § 157.
"Thus, it is clear that [the claims and counterclaims are]. . . quite
related to the bankruptcy and also that remand would impede the efficient
administration of the bankrupt estate." In re RBGSC Investment
Corp., 253 B.R. at 382; see also In re Consol. Lewis Inv.
Corp., 78 B.R. 469, 477 (Bankr. M.D. La. 1987). Because the state
court action was voluntarily and temporarily stayed, Shared Network's
proof of claim and WorldCom's objection thereto in the bankruptcy court
are just as far along in the litigation process as the state court
action.*fn2 The remand and subsequent delay would negatively affect the
efficient administration of WorldCom's bankruptcy estate.
In addition, the lack of complexity of the applicable state law for
breach of contract, quantum meruit, and unjust enrichment, together with
"the absence of any special state interest . . . weigh strongly against
abstention." In re U.S. Physicians, 2001 WL 793271, at *2;
see also In re Sun West Distributors, 69 B.R. 861, 867 (Bankr.
S.D. Cal. 1987).
Shared Network argues that its right to a jury trial will be unfairly
lost if it is forced to litigate in bankruptcy court. We are not
convinced. Shared Network has voluntarily subjected itself to the
equitable jurisdiction of the bankruptcy court by filing its proof of claim there. See In re Asousa
Partnership, 276 B.R. 55, 66 (Bankr. E.D. Pa. 2002). It could have
moved to terminate the automatic stay on the state court action if it had
been interested in expeditiously resolving the dispute in state court
before a jury. It did not do so.
In light of the above analysis, we find that neither permissive
abstention nor equitable remand is appropriate. Accordingly, we will deny
Shared Network's motion to remand this action to the Court of Common
Pleas of Montgomery County.
Finally, we turn to WorldCom's motion to transfer venue to the Southern
District of New York. Under 28 U.S.C. § 1412, "a district court may
transfer a case or proceeding under Title 11 to a district court for
another district, in the interest of justice or for the convenience of
the parties." Our Court of Appeals has outlined the factors to consider
under 28 U.S.C. § 1404(a) in Jumara v. State Farm Ins. Co.,
55 F.3d 873 (3d Cir. 1995). Since much of the essential wording of §
1412 is similar to § 1404(a), we view the reasoning of
Jumara to be applicable here, taking into consideration the
particular circumstances arising out of a bankruptcy.
While there is no exclusive list of factors, there are a variety of
private and public interests to be considered in deciding a motion to
transfer venue. The private interests include not only the debtor's
choice of forum but also theconvenience of the parties as indicated by
the physical and financial condition and the location of books and records. The
public interests, on the other hand, include such matters as the
enforcement of any judgment, "practical considerations that could make
the trial easy, expeditious, or inexpensive," court congestion, and local
Here, we find the overwhelmingly significant factor, outweighing all
others, is the judicial economy to be achieved in having the entire
controversy decided in one forum, in this case the bankruptcy court which
is already administering the WorldCom bankruptcy. If we ruled otherwise,
it is inevitable that proceedings will be delayed and to some extent
duplicated for a tremendous waste of time and money for all concerned.
Having the Southern District of New York as the venue is particularly
compelling since Shared Network has filed a proof of claim against
WorldCom in the bankruptcy court in that district, WorldCom has filed a
counterclaim against Shared Network there, and all agree that the claims
and counterclaim are core proceedings so that they may be adjudicated
before the presiding bankruptcy judge.
We will grant the motion to transfer. IV.
In sum, we will deny the motion of Shared Network to remand to the
Court of Common Pleas of Montgomery County and grant the motion of
WorldCom to transfer venue to the Southern District of New York. ORDER
AND NOW, this day of April, 2004, for the reasons set forth in the
accompanying Memorandum, it is hereby ORDERED that:
(1) the motion of Shared Network Users Group, Inc. to remand to the
Court of Common Pleas of Montgomery County, Pennsylvania is DENIED;
(2) the motion of WorldCom Technologies, Inc., and MCI WorldCom, Inc.
to transfer venue to the Southern District of New York is GRANTED; and
(3) the Clerk is directed to transmit the file in this action to the
United States District Court for the Southern District of New York.