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Riverhounds Lender, LLC v. Pittsburgh Urban Initiatives Sub-Cde 3, LP

United States District Court, W.D. Pennsylvania

April 8, 2015



CATHY BISSOON, District Judge.

For the reasons that follow, Plaintiff's Emergency Motion for Remand to State Court or, In the Alternative, for Abstention ("Motion for Remand") (Doc. 2) will be granted. Defendant's Motion to Strike Plaintiff's Reply ("Motion to Strike") (Doc. 12) will be granted.



Pittsburgh Urban Initiatives Sub-CDE 3, LP ("Defendant CDE" or "Defendant") is a special purpose entity, established to finance the development of Highmark Stadium in Pittsburgh, Pennsylvania. Def.'s Br. in Opp'n (Doc. 9) at ¶ 1. Defendant CDE has one limited partner - Riverhounds Investment Fund, LLC ("RIF" or "Limited Partner") - a single member limited liability company. Id. at ¶ 4.

On or about October 5, 2012, Riverhounds Lender, LLC ("Plaintiff") entered into a Loan Agreement, promissory note and pledge, assignment and security agreement with RIF, Defendant CDE's sole limited partner. Pl.'s Mot. for Remand (Doc. 2) at ¶ 4. Pursuant to the loan agreement, [1] Plaintiff loaned RIF an investment "in excess of $5, 000, 000.00." Id. at ¶ 6. Plaintiff contends that, at least partially by virtue of the loan made by Plaintiff to RIF, RIF came to own a 99.99% membership interest in Defendant CDE. Id. at ¶ 7. RIF's membership interest was pledged as security to Plaintiff Lender for the loan. Id. at ¶ 8. RIF has only one asset: its membership interest in Defendant CDE. Id. at ¶ 9.

Highmark Stadium is owned and operated by Riverhounds Event Center, LP ("REC"). Def.'s Br. in Opp'n at ¶ 7. Riverhounds Acquisition Group, L.P. ("RAG") - an affiliate of REC - owns and operates the Riverhounds soccer team. Id . Also on or about October 5, 2012 - the day on which Plaintiff executed a loan agreement with RIF - Defendant CDE entered into a Loan and Security Agreement with REC for an aggregate principal amount of $7, 161, 000.00. Id. at Ex. A. RIF "contributed all of the funds necessary for [Defendant] CDE to make the Loan to REC, " a portion of which originated from Plaintiff. Id. at ¶ 9. As part of the loan agreement between Defendant CDE and REC, REC granted Defendant CDE a security interest in "substantially all of its assets, " and RAG executed a Guaranty of Payment, Performance and Completion. Id. at ¶¶ 10-11.[2]

Both REC and RAG (together, the "Debtors") commenced Chapter 11 bankruptcy proceedings in United States Bankruptcy Court for the Western District of Pennsylvania. Id. at ¶¶ 14-15. Defendant CDE is the largest creditor in these two bankruptcy cases. Id. at ¶ 16. First National Bank provided REC with additional financing, which is senior in priority to the loan by Defendant CDE pursuant to a Subordination and Intercreditor Agreement. Id. at ¶ 12. Defendant CDE contends that it has participated in extensive negotiations with the Debtors, Terrence C. Shallenberger (the Debtors' majority owner and sponsor), the unsecured creditors' committee in the bankruptcy cases, and First National Bank, in order to come to an agreement (the "Proposed Plan") regarding a Chapter 11 reorganization plan in connection with REC's bankruptcy proceedings. Id. at ¶ 16. At the time of the submission of Defendant CDE's Response to Plaintiff's Motion for Remand, the deadline for creditors to vote on the Proposed Plan was October 31, 2014. Id. at ¶ 17. A hearing to confirm the proposed plan was scheduled for November 7, 2014. Id . The Proposed Plan was adopted by the bankruptcy court on November 7, 2014. Bankruptcy Action No. 14-21180-JAD, Order Confirming Modified First Amended Joint Chapter 11 Plan of Reorganization of Riverhounds Event Center, LP and Shallenberger Investments, LLC Dated September 25, 2014 (Doc. 492).

On September 26, 2014, Plaintiff filed a Praecipe for Writ of Summons against Defendant CDE in the Court of Common Pleas of Allegheny County. Notice of Removal at Ex. 1. On October 7, 2014, Plaintiff filed a two count complaint (the "Complaint") against Defendant CDE in the same action. Id. at Ex. 2. Plaintiff alleges breach of fiduciary duty and requests the appointment of a receiver to represent Defendant CDE in REC's bankruptcy proceeding in order to "preserve [Defendant] CDE's position in the bankruptcy case and to avoid harm to CDE, Riverhounds Investment [RIF] and all creditors of those entities." Id . On October 14, 2014, Defendant CDE filed a Notice of Removal, removing the state court action to this Court. Id . On October 15, 2014, Plaintiff filed its Motion for Remand.


A. Motion for Remand

In its Motion for Remand, Plaintiff argues that: 1) the district court lacks jurisdiction over this matter, as it does not arise under title 11, or arise in or relate to a case under title 11; 2) in the alternative, the Court is required to abstain from its adjudication; 3) even if the Court is not required to abstain from hearing the instant matter, it should grant permissive abstention and equitable remand; and 4) the bankruptcy court lacks authority to enter a final order in this matter. Pl.'s Mot. to Remand.

Pursuant to 28 U.S.C. § 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." According to section 1334(b) of Title 28 of the United States Code, "the district courts... have original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11." Defendant contends that this action "arises in" and "relates to" a title 11 bankruptcy case - specifically REC's bankruptcy proceedings. Def.'s Br. in Opp'n at ¶¶ 23, 31.

"[C]laims that arise in' a bankruptcy case are claims that by their nature, not their particular factual circumstance, could only arise in the context of a bankruptcy case." In re Seven Fields Development Corp., 505 F.3d 237, 260 (3d Cir. 2007) (citing Stoe v. Flaherty, 436 F.3d 209, 218 (3d Cir. 2006)) (emphasis added); see also Halper v. Halper, 164 F.3d 830, 836 (3d Cir. 1999). Plaintiff filed a two count Complaint, alleging breach of fiduciary duty and requesting the appointment of a receiver. While the facts of this particular case happen to arise in the context of a bankruptcy case, these claims need not arise in the context of a bankruptcy case by their nature. As such, this case does not "arise in" a bankruptcy case, and is not a "core proceeding" for bankruptcy purposes. Seven Fields Development Corp., 505 F.3d at 260 (citing Stoe, 436 F.3d at 218); see also Halper, 164 F.3d at 836; U.S. Trustee v. Gryphon at Stone Mason, Inc., 166 F.3d 552, n. 6 (3d Cir. 1999) ("Claims that by nature can only arise ...

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