Christo v. Padgett

• Citation: 223 F.3d 1324
• Decision Date: 25 August 2000
• Docket Number: No. 98-3577,N,98-3577
• Parties: (11th Cir. 2000) JOHN CHRISTO, JR., JOHN CHRISTO, III, JAMES PHILLIP CHRISTO, IRENE LAURETTE CHRISTO, Plaintiffs-Appellants, v. KENNETH EARL PADGETT, Defendant-Appellee. IN RE: JOHN CHRISTO, JR., Debtor. JOHN CHRISTO, JR., Plaintiff-Appellant, v. WILLIAM MILLER, Trustee, Defendant-Appellee. o. 98-3663.
• Court: United States Courts of Appeals. United States Court of Appeals (11th Circuit)

Page 1324

223 F.3d 1324 (11th Cir. 2000)

JOHN CHRISTO, JR., JOHN CHRISTO, III, JAMES PHILLIP CHRISTO, IRENE LAURETTE CHRISTO, Plaintiffs-Appellants, v. KENNETH EARL PADGETT, Defendant-Appellee.

IN RE: JOHN CHRISTO, JR., Debtor.

JOHN CHRISTO, JR., Plaintiff-Appellant, v. WILLIAM MILLER, Trustee, Defendant-Appellee.

No. 98-3577, No. 98-3663.

IN THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT.

Aug. 25, 2000.

[Copyrighted Material Omitted]

[Copyrighted Material Omitted] Appeal from the United States District Court for the Northern District of Florida

Before BLACK, CARNES and KRAVITCH, Circuit Judges.

KRAVITCH, Circuit Judge:

As we embark on this appeal, we must, in the apt words of the district court, "trudge down a long and winding road"¹ that has as much to do with the extensive history behind the original complaint as it does with the procedural complexities in its wake. The appeal requires us to consider, as a matter of first impression in this circuit, the interplay between the removal and remand statutes in relation to a pending bankruptcy case as well as the extent of our ability to review remand decisions in this context. We then evaluate the district court's denial of a recusal motion, its approval of a settlement agreement, and its grant of summary judgment on the ground of issue preclusion. We conclude that we are without jurisdiction to review the district court's decision not to remand to the state court; we affirm the district court on all other grounds.²

I. BACKGROUND AND PROCEDURAL HISTORY

This appeal comes after a decade of civil, criminal, and bankruptcy proceedings concerning the Christo family and their investments in Bay Bank & Trust ("Bay Bank"). In the early 1990s, all of the outstanding stock of Bay Bank was owned by Florida Bay Banks ("FBB"), a one-bank holding company. The majority of FBB's stock was owned by the J.C.J. Irrevocable Trust Agreement ("J.C.J. Trust") and the Bay Bank Company Employee Stock Ownership Plan ("ESOP"). John Christo, Jr. ("Christo, Jr.") established the J.C.J. Trust for the benefit of his three children, John Christo, III ("Christo, III"), James Phillip Christo ("Phillip Christo"), and Irene Christo. Christo, III was the Trustee of both the J.C.J. Trust and the ESOP. All three Christo children owned additional shares of common and preferred stock through the ESOP and individually. Christo, Jr. individually owned approximately 97% of the preferred stock of FBB.

FBB defaulted on a $4.5 million loan from SouthTrust Bank secured by all of FBB's stock in Bay Bank and guaranteed individually by Christo, Jr. Litigation between the Christos and SouthTrust ("the SouthTrust litigation") led to a settlement agreement providing for a court-ordered sale of the Bay Bank stock. The impending auction imperiled the Christos' ongoing negotiation with Union Planters Corporation ("Union Planters") for a stock purchase of Bay Bank because Union Planters could not complete its due diligence prior to the date of the auction, and Union Planters was unsuccessful in postponing the auction for additional time in which to consummate the deal.

The auction was scheduled for September 30, 1993. The night before the auction, Christo, Jr. contacted a lifetime friend and former officer of Bay Bank, Kenneth Earl Padgett, and asked him to attend the auction and purchase Bay Bank. Christo, Jr. provided Padgett a cashier's check for $250,000, cobbled from various sources, to secure Padgett's ability to bid. According to Christo, Jr., Padgett attended the auction with the understanding that, if Padgett were the successful bidder, he would assign his bid to Union Planters. Padgett refutes that such an agreement ever existed and contends that, although he considered the purchase out of respect for his friendship with Christo, Jr., his decision to bid on the auctioned bank was for his profit alone.

At the auction, Padgett and SouthTrust were the major bidders for the Bay Bank stock, and Padgett was the successful bidder with a final bid of $8.5 million. Shortly after the auction, SouthTrust filed pleadings with United States District Court Judge Lacey A. Collier, who had presided over the earlier SouthTrust litigation and settlement. SouthTrust sought to set aside Padgett's purchase on the basis that he was merely a "strawman" for Christo, Jr., which would foreclose regulatory approval, and also sought to re-auction the Bay Bank stock. The district court conducted a contempt hearing on November 16, 1993, at which it directed the Christo family, Padgett, and others to appear to show cause why they should not be held in contempt of the court's prior order directing the sale of the Bay Bank stock. At that hearing, Padgett testified that he acted on his own, and denied that there had ever been an agreement between he and the Christos concerning the purchase of Bay Bank. The Christos did not present any contrary evidence. The court denied SouthTrust's motion to set aside the sale, but reserved ruling on the motion for contempt.³

While Padgett awaited final regulatory approval for his purchase of Bay Bank, Christo, Jr. filed a bankruptcy petition under Chapter 7 on February 16, 1994. In the petition, Christo, Jr. did not list as property of his estate any interest in Bay Bank or any contractual rights with Padgett. In 1996, upon information received from one of the Christo children, the Trustee in Christo, Jr.'s bankruptcy case, William Miller, filed a four-count complaint against Padgett based on an alleged breach of an oral contract to turn over control of Bay Bank to the Christos ("the Miller litigation"). The Trustee voluntarily dismissed the two claims seeking to enforce the alleged oral agreement and unsuccessfully litigated the remaining claims. Miller initially filed a notice of intent to abandon the dismissed claims, but Padgett objected. Miller and Padgett then reached a settlement agreement on all claims relating to the sale of the Bay Bank stock; the settlement was contingent on the court finding that the Trustee had succeeded to any claim relating to Padgett's alleged agreement to buy Bay Bank on behalf of the Christos.

On November 14, 1997, the Christo family filed a complaint against Padgett in Florida state court in which they alleged that Padgett breached an oral contract with Christo, Jr. to purchase Bay Bank at auction on their behalf ("the Christo litigation").⁴ Padgett removed the case to federal court, after which it was transferred to Judge Collier. The Christo family moved to remand and for the judge's recusal. The district court deferred ruling on the motion to remand but denied the request for recusal.

After the Trustee and Padgett moved for the district court to approve the settlement in the Miller litigation, Christo, Jr. objected, and the court held an evidentiary hearing, applicable to both the Miller and Christo litigations, concerning any alleged agreement between Padgett and the Christo family. In a July 13, 1998 Order, the court found that there was no enforceable agreement, and that even if there were, it would only have been between Padgett and Christo, Jr., in which case Christo, Jr.'s interest in the agreement would have passed to his bankruptcy estate. The district court then referred the proposed settlement to the bankruptcy court for a Report and Recommendation on whether, in light of the district court's findings, the proposed settlement was in the best interest of Christo, Jr.'s estate.

On October 1, 1998, the district court denied the Christos' earlier motion to remand and dismissed their civil lawsuit on grounds of issue preclusion based on its findings in the July 13 order. The bankruptcy court recommended approving the proposed settlement and, on October 22, 1998, the district court adopted the recommendation and approved the settlement between Padgett and the Trustee. We hear this matter on a consolidated appeal.⁵

II. DISCUSSION

A. Removal and Remand

In response to the Christos' state court complaint, Padgett timely sought removal to the United States District Court for the Northern District of Florida,⁶ where Christo, Jr.'s bankruptcy case was pending; the Christos responded with a motion to remand.⁷ In their remand motion, the Christos requested both that the district court abstain as mandated by 28 U.S.C. § 1334(c)(2), and remand on prudential grounds as warranted by 28 U.S.C. § 1452. Section 1334 provides district courts with "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." 28 U.S.C §§ 1334(a) & (b) (2000). Section 1452 provides that "[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." Id. § 1452(a).

1. Does Mandatory Abstention Apply in Removed Cases?

As an initial matter, we address a controversy that has arisen among other courts: whether mandatory abstention under § 1334(c)(2) applies to cases removed under § 1452. Several courts, focusing on § 1334(c)(2)'s requirement that "an action is commenced, and can be timely adjudicated, in a State forum of appropriate jurisdiction," have concluded that a parallel state court proceeding is a prerequisite of mandatory abstention. Under this interpretation, once a state law action is removed, there no longer remains an action "commenced . . . in a State forum." See, e.g., Southern Marine & Indus. Servs., Inc. v. AK Eng'g, Inc. (In re AK Servs., Inc.), 159 B.R. 76, 83-84 (Bankr. D. Mass. 1993); Paul v. Chemical Bank (In re 666 Assocs.), 57 B.R. 8, 12 (Bankr. S.D.N.Y. 1985).

The vast majority of courts, however, have concluded to the contrary on the reasoning that the removed state law action has been "commenced" and,...