Belfor U.S. Grp. v. Salem Consumer Square Oh, LLC

• Decision Date: 22 April 2022
• Docket Number: 3:22-mp-00301
• Parties: Belfor U.S.A. Group Inc., Plaintiff, v. Salem Consumer Square OH LLC, et al., Defendants.
• Court: U.S. Bankruptcy Court — Southern District of Ohio

Belfor U.S.A. Group Inc., Plaintiff, v. Salem Consumer Square OH LLC, et al., Defendants.

No. 3:22-mp-00301

United States Bankruptcy Court, S.D. Ohio, Western Division

April 22, 2022

Thomas E. CardoneMichael Leo Pomeranz(Counsel for the Plaintiff)

Kerri Lynn SturmJeffrey C. Toole(Counsel for DefendantSalem Consumer Square OH LLC)

Michael W. Sandner(Counsel for DefendantsLeon W. Williams Jr. and Moonbeam Capital Investments)

James B. Lind(Counsel for Nations Roof of Ohio, LLC)

Michael F. Jacobson, 27777 Franklin Rd., Ste. 2500 Southfield, MI 48034 (Counsel for the Plaintiff)

John J. Richardson, 601 Grant St., 9th Floor, Pittsburgh, PA 15219 Kirk B. Burkley, 707 Grant St., Ste. 2200, Pittsburgh, PA 15219-1945 Harry W. Greenfield, 600 Superior Ave. E, Fifth Third Center, Ste. 1300, Cleveland, OH 44114 (Counsel for Salem Consumer Square OH LLC)

RECOMMENDATIONS FOR THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF OHIO TO REMAND CAUSE OF ACTION TO THE MONTGOMERY COUNTY, OHIO COURT OF COMMON PLEAS

Guy R. Humphrey United States Bankruptcy Judge

I.Introduction

For the reasons discussed below, the court recommends that the District Court grant Plaintiff's request to remand the causes of action against certain non-debtor parties to the Montgomery County(Ohio) Court of Common Pleas and permissively abstain from the litigation removed from the state court.The court also suggests that mandatory abstention is applicable if the District Court finds that it does not have diversity jurisdiction over the state court litigation.The court recommends that all other relief requested by the parties be denied.

II.Procedural Background

This matter is before this court pursuant to the Order Referring Case to the United States Bankruptcy Court for the Southern District of Ohio, Western Division at Dayton for Further Proceedings Pursuant to the United States District Court for the Southern District of Ohio (the "District Court"), Amended General OrderNo. 05-02(Amended Standing Order of Reference); Rulings on Motion (Docs. 15, 23, 28 and 30) Stayed Pending Report and Recommendation fromthe United States Bankruptcy Court(the "Referral Order")(doc. 44), which was entered in the United States District Court, Southern District of Ohio, Case No. 3:21-cv-78 on March 4, 2022.The District Court requests recommendations of this court regarding whether to transfer the causes of action to the United States Bankruptcy Court for the Western Division of Pennsylvania (the "Pennsylvania Bankruptcy Court") at Pittsburgh, Case No. 21-20020-CMB(the "Bankruptcy Case") or whether, in the alternative, it should be remanded, in whole or in part, to the Montgomery County, Ohio Court of Common Pleas(the "State Court").

In preparing its recommendations the court reviewed the pending motions:

.Motion to Transfer Venue(doc. 15) filed by DefendantSalem Consumer Square OH LLC

o Plaintiff's Objection to DefendantSalem Consumer Square OH LLC's Motion to Transfer Venue(doc. 24)

.Plaintiff's Motion to Remand or to Abstain from Hearing State Court Action(doc. 23)

o Response to Plaintiff's Motion to Remand or to Abstain from Hearing State Court Action(doc. 25) filed by DefendantSalem Consumer Square OH LLC

o Reply Memorandum in (I) Further Support of Plaintiff's Motion to Remand or to Abstain from Hearing State Court Action and (II) Opposition to the Response to Plaintiff's Motion(doc. 27) filed by PlaintiffBelfor U S.A.Group, Inc..Defendants, Moonbeam Capital Investments and Leon Williams, Jr's Motion to Stay Action Pending Bankruptcy Proceedings and Motion for Protective Order(doc. 28)

o Response in Opposition to Defendants, Moonbeam Capital Investments and Leon Williams, Jr's Motion to Stay Action Pending Bankruptcy Proceedings and Motion for Protective Order(doc. 32) filed by PlaintiffBelfor U.S.A. Group, Inc.

.Motion of DefendantSalem Consumer Square OH, LLC to Hold Further Proceedings in Abeyance Until the Bankruptcy Court Adjudicates Plaintiffs Claim(doc. 30)

o Belfor's Response in Opposition to DefendantSalem Consumer Square OH, LLC's Motion to Hold Further Proceedings in Abeyance Until the Bankruptcy Court Adjudicates Plaintiffs Claim(doc. 33)

o Reply Memorandum of DefendantSalem Consumer Square OH, LLC in Support of Its Motion to Hold Further Proceedings in Abeyance Until the Bankruptcy Court Adjudicates the Plaintiffs Claim(doc. 34)

This court held oral argument on all the pending motions on April 6, 2022.See doc. 1 (scheduling order).The court also reviewed the supplemental memoranda filed by Salem Consumer Square Ohio, LLC("Salem") and by Belfor U.S.A. Group Inc.("Belfor") in this miscellaneous proceeding.Docs. 6, 7.

III.Factual Background

On February 26, 2020, Belfor filed a complaint in the State Court against Salem, Moonbeam Capital Investments ("Moonbeam"), and Nation's Roof of Ohio, LLC.^[1]Case No. 3:21-cv-78(S.D. Ohio), Doc. 1, Exhibit A.^[2] It also filed a separate complaint in the State Court against Leon W. Williams, Jr.("Williams") containing similar allegations to the complaint against Salem and Moonbeam.Case No. 2020 CV 02130(State Court), Doc. 1.Belfor alleges through its complaints as follows.Belfor was authorized to perform "emergency-services and remediation work" for real property in Trotwood, Ohio that was damaged by a tornado.Doc. 1, Exhibit Aat ¶ 1.Moonbeam was (but is no longer) the parent company of Salem.Id.at ¶ 3.Williams was a joint agent of Salem and Moonbeam.Id.at ¶ 19.Salem's insurer, Travelers, issued checks in the total amount of $2, 800, 000.Id.at ¶ 23.Salem and/or Moonbeam fraudulently directed Travelers to issue the checks to Moonbeam, and not Belfor.Id.at ¶ 24.Belfor was never paid any compensation for the work completed.Id. at ¶ 25.Belfor sued on the following counts: breach of express or implied contract (against Salem and Moonbeam); Promissory Estoppel (against Moonbeam); Quantum Meruit (Against Moonbeam); Unjust Enrichment (against Moonbeam); Fraud (against Salem and Moonbeam); Conversion (against Salem and Moonbeam); Tortious Interference with Business Relationship & Contract (against Salem and Moonbeam); Foreclosure of Mechanic's Lien (All Parties); Declaratory Judgment (All Parties).Id. at 5-19.Belfor seeks compensatory and punitive damages against Salem and Moonbeam.Id. at 19-20.

The State Court complaint filed against Williams alleges claims for Fraud, Conversion, Civil Recovery for Theft Offense Under [Ohio]R.C. §§ 2307.60 and 2307.61, Tortious Interference with Business Relationship & Contract, and Civil Conspiracy.Belfor seeks compensatory and punitive damages and attorney fees against Williams.Case No. 2020 CV 02130(State Court), Doc. 1at 5-16.On November 19, 2020 the judge presiding over both the State Court complaints entered an order consolidating those two actions and ordered that all future filings be filed in the case number assigned to the action against Salem and Moonbeam (collectively the "State Court Case").Doc. 1, Exhibit I.

Salem filed a Chapter 11 petition on January 5, 2021 in the Pennsylvania Bankruptcy Court.Salem's Second Amended Chapter 11 Plan of Reorganization ("the "Plan") was confirmed on November 12, 2021.Bankruptcy Case, Docs. 309 (Plan), 342 (Confirmation Order).The Plan addresses issues relevant to the current dispute.First, the Plan is being funded by Moonbeam.Plan, Article VIII, ¶ 8.1.Under the Plan, Belfor was paid $1, 100, 000 toward the disputed Belfor proof of claim.Plan, ¶ 5.2A.If the Belfor claim is determined to be less than $1, 100, 00, Belfor must refund the difference.Conversely, if Belfor's claim is allowed at a greater amount than $1, 100, 000, the balance would be paid to Belfor.The Plan explicitly preserved the rights of Belfor against "any non-debtor individual or entity," which included, but was not limited to, Moonbeam and Williams.Plan, ¶ 14.2.

The amount of Belfor's claim (and its secured status) is being adjudicated in a related adversary proceeding that was filed on March5, 2021, 21-02019-CMB(the "AP") in the Pennsylvania Bankruptcy Court.The only two parties to the AP are the plaintiff, Salem, and the defendant, Belfor.The complaint seeks a determination under 11 U.S.C. § 506 as to the amount, priority, and extent of Belfor's claim.Belfor's proof of claim was filed in the amount of $4, 339, 773.18, plus accumulating interest.Bankruptcy Case, Proof of Claim 5-1.The AP parties, along with non-parties Williams and Moonbeam, are in a significant discovery dispute that is scheduled for mediation.The parties hope the AP can be tried later this year, but that is not certain.

On the same day the AP was filed, Salem removed the State Court Case to the United States District Court for the Southern District of Ohio.Doc. 1.

IV.Legal Standard and Analysis

Belfor seeks a remand to the State Court to adjudicate its claims against Moonbeam and Williams.Salem, Moonbeam, and Williams primarily argued to this court that the District Court should stay the litigation until the AP is adjudicated.The secondary argument, not emphasized to this court, is that the District Court should transfer the State Court Case to the United States District Court for the Western District of Pennsylvania, the District in which Salem's bankruptcy case has been pending.

Section 1452(b) of Title 28 of the U.S. Code provides for remand of a cause of action removed to a district court:

The court to which such claim or cause of action is removed may remand such claim or cause of action on any equitable ground.An order entered under this subsection remanding a claim or cause of action, or a decision to not remand, is not reviewable by appeal or otherwise by

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