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Clark v. Chrysler Group

November 5, 2010

EDWARD F. CLARK, PLAINTIFF,
v.
CHRYSLER GROUP, LLC, DEFENDANT.



The opinion of the court was delivered by: Slomsky, J.

OPINION

I. INTRODUCTION

Before the Court are Defendant Chrysler Group L.L.C.'s Notice of Removal (Doc. No. 1), Plaintiff Edward F. Clark's Motion to Remand (Doc. No. 3), Defendant's Opposition to Plaintiff's Motion to Remand (Doc. No. 7), Defendant's Motion to Transfer (Doc. No. 8), Plaintiff's Memorandum of Law in Opposition to Defendant's Motion to Transfer (Doc. No. 9), and supplemental memorandums filed by the parties (Doc. Nos. 18 and 19).

On May 18, 2010, Plaintiff filed a Complaint against Defendant in the Court of Common Pleas of Philadelphia County. (Doc. No. 1, Ex. A.) In the Complaint, Plaintiff alleges Defendant failed to comply with contractual and statutory obligations in violation of the Magnuson-Moss Warranty Improvement Act, 15 U.S.C. § 2301, et seq. (the "MMWA"), which governs warranties on consumer products including automobiles when used primarily for "personal, family, or household purposes."*fn1 (Id. ¶¶ 11-23.) On June 23, 2010, Defendant filed a Notice of Removal with and to this Court. (Doc. No. 1.) On July 7, 2010, Plaintiff filed the Motion to Remand. (Doc. No. 3.) On August 4, 2010, Defendant filed the Motion to Transfer this case to the United States Bankruptcy Court for the Southern District of New York. (Doc. No. 8.) For the following reasons, the Court will deny Plaintiff's Motion to Remand (Doc. No. 3) and grant Defendant's Motion to Transfer. (Doc. No. 8.)

II. FACTUAL BACKGROUND

A. The State Court Action

On September 3, 2007, Plaintiff purchased a 2005 Chrysler Town & Country automobile from Defendant. (Doc. No. 1, Ex. A ¶ 3.) Plaintiff alleges that as part of the sale contract, Defendant made several warranties or guarantees.*fn2 (Id. ¶ 6.) Plaintiff further alleges that as a result of ineffective repairs made by Defendant's authorized dealers, the vehicle is "substantially impaired" and "worthless to Plaintiff." (Id. ¶ 9.) Plaintiff asserts that the failure of Defendant's authorized dealers to repair his vehicle constitutes a breach of Defendant's contractual and statutory obligations in violation of the MMWA. (Id. ¶¶ 11-23.) Defendant asserts that at the time Plaintiff purchased the vehicle, the written warranty had expired. (Doc. No. 1 at 2.)

B. The Chrysler Bankruptcy

On April 30, 2009, Chrysler L.L.C. (or Old Carco L.L.C.) and twenty-four of its affiliates (collectively "Debtors") filed a bankruptcy petition in the United States Bankruptcy Court for the Southern District of New York. In re Old Carco L.L.C., No. 09-50002 (Bankr. S.D.N.Y.). (Doc. No. 1 ¶ 2; Doc. No. 3 at 2.)*fn3 On June 1, 2009, the Bankruptcy Court entered an Order ("Sale Order") authorizing the sale of substantially all of Debtors' assets. (Doc. No. 1 ¶ 3; Doc. No. 3 at 2.)*fn4 Defendant is the purchaser of the assets and named as such in the Sale Order. In the case now before the Court, the main point of contention concerns the content of the Sale Order. Specifically, the parties dispute whether paragraph 19 of the Sale Order makes Defendant liable for the claim of Plaintiff.

C. The Positions of the Parties Before the Court

1. Defendant's Argument in Support of Removal

Defendant asserts that the Court has jurisdiction pursuant to 28 U.S.C. § 1334(b) because the state action arises under or in a bankruptcy proceeding, which is governed by Title 11 of the United States Code. (Doc. No. 1 ¶ 9.) Section 1334(b) provides: "[T]he 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." (Emphasis added.) Defendant argues that because the Bankruptcy Court expressly retained jurisdiction over interpretation, implementation and enforcement of the terms and provisions of the Sale Order and because the allegations in the Complaint necessarily involve the interpretation, implementation and enforcement of that Order, this case is "related to" the bankruptcy proceeding, giving this Court jurisdiction under § 1334(b). (Id. ¶¶ 10-11.)

Additionally, Defendant argues that the state action is a "core" proceeding pursuant to 28 U.S.C. § 157(b) because it involves an interpretation of the Bankruptcy Court's Sale Order. (Id. ¶ 12.) A core proceeding is either a proceeding specifically enumerated in § 157(b)(2) or a proceeding that "involve[s] a right created by federal bankruptcy law." Halper v. Halper, 164 F.3d 830, 836 n.7 (3d Cir. 1999) (citation omitted). If a case is a core proceeding, then a district court is not required to abstain from hearing the subject matter of the proceeding. 28 U.S.C. § 1334(c)(2).*fn5

2. Plaintiff's Argument in Support of Remand

Plaintiff asserts that the Court should remand the case pursuant to 28 U.S.C. § 1447(c) for lack of subject matter jurisdiction. Section 1447(c) requires a court to remand a case if it appears at any time before final judgment that the court lacks subject matter jurisdiction. Plaintiff argues that the Court lacks subject matter jurisdiction because "[t]his action is not a case under Title 11 because it is not based on any right expressly created by Title 11." (Doc. No. 3 at 6.) Plaintiff also argues that this case is not "related to" the underlying bankruptcy case because the outcome of the instant case will have no effect on the estate being administered in bankruptcy. Plaintiff asserts that, even if the Court has jurisdiction, this case is not a core proceeding because "the plain language of the statute makes it clear that a core proceeding under § 157(b)(2)(B) must be 'against the estate.'" (Id. at 8.) Finally, Plaintiff submits that even if the Court has jurisdiction, equity favors that the Court abstain from hearing this case because "judicial economy is promoted by remand of non-core proceedings that can be fully decided in state court."*fn6 (Id. at 8.)

3. Defendant's Argument in Support of Transfer

Defendant asserts that the Court, having accepted jurisdiction, should in turn transfer the case to the United States Bankruptcy Court for the Southern District of New York pursuant to 28 U.S.C. § 1412 for three reasons: (1) transfer will promote the interest of justice; (2) there is a presumption that the proper venue for a case "related to" a bankruptcy proceeding is the court in which the bankruptcy proceeding is pending; and (3) other district courts have "routinely transferred claims against [Defendant] to the United States District Court for the [S.D.N.Y.] when, like here, those claims are based on allegations that [Defendant] has liability due to events occurring in the bankruptcy proceedings." (Doc. No. 8-1 at 6.)*fn7

III. DISCUSSION

A. Removal Generally

Removal statutes are strictly construed because there is a strong presumption against removal. Meritcare, Inc. v. St. Paul Mercury Ins. Co., 166 F.3d 214, 217-218 (3d Cir. 1999).

Uncertainties are to be resolved in favor of remand. Franchise Tax Bd. v. Constr. Laborers Vacation Trust, 463 U.S. 1, 10-11 (1983). A defendant seeking removal has the burden of establishing a court's jurisdiction and compliance with removal procedures.

Removal is proper when a state action could have been filed originally in federal court.

28 U.S.C. § 1441(a). Stated differently, a state court action is properly removed to federal court when the federal court would have original, though not exclusive, jurisdiction over the matter. Id. A United States District Court has "original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States." 28 U.S.C. § 1331. When a pending state court action could have been filed in federal court in the first instance, a defendant may remove the action "to the district court of the United States for the district and division embracing the place where such action is pending." 28 U.S.C. § 1441(a). Where removal is improper because a federal court lacks subject matter jurisdiction, the court may remand the case pursuant to 28 U.S.C. § 1447(c), which states: "If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded."

B. Removal and Bankruptcy

In addition to the general removal statutes discussed above, Title 28 contains a removal statute that applies specifically to those cases "arising in" or "related to" bankruptcy proceedings. Under 28 U.S.C. § 1334(b), "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." (Emphasis added). If a district court has jurisdiction pursuant to § 1334(b), "a party may remove any claim or cause of action in [the] civil action . . . to the district court for the district where such civil action is pending." 28 U.S.C. § 1452. "A proceeding is considered to be 'related to' a bankruptcy case for purposes of establishing jurisdiction if the 'outcome of the proceeding could conceivably have any effect on the estate being administered in bankruptcy.'" Lichtenfels v. Electro-Motive Diesel, Inc., No. 09-1590, 2010 WL 653859, at *2 (W.D. Pa. Feb. 22, 2010) (quoting Pacor v. Higgins, 743 F.2d 984, 994 (3d Cir. 1984), overruled on other grounds, Things Remembered, Inc. v. Petrarca, 516 U.S. 124 (1995)).

When a district court has jurisdiction pursuant to § 1334(b), it is required to abstain from hearing a non-core proceeding based solely on a state law claim or a state law cause of action, where such claim can be timely adjudicated in state court.*fn8 28 U.S.C. ยง 1334(c)(2); Lichtenfels, 2010 WL 653859, at *3. A district court also is permitted to abstain from hearing a core proceeding "in the interest of ...


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