Conejo Enterprises, Inc., In re
| Decision Date | 23 August 1996 |
| Docket Number | Nos. 94-56702,95-56705,s. 94-56702 |
| Citation | 96 F.3d 346 |
| Parties | , 36 Collier Bankr.Cas.2d 822, 29 Bankr.Ct.Dec. 749, 96 Cal. Daily Op. Serv. 6285, 96 Daily Journal D.A.R. 10,333 In re CONEJO ENTERPRISES, INC., Debtor (Two Cases). BENEDOR CORPORATION, Plaintiff-Appellee, v. CONEJO ENTERPRISES, INC., Defendant-Appellant, and Ronald L. Durkin, Chapter 11 Trustee, on behalf of Conejo Enterprises, Inc., Appellant. BENEDOR CORPORATION, Plaintiff-Appellee, v. CONEJO ENTERPRISES, INC., Defendant, and Western Waste Industries, Appellant. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Sara Pfrommer, Sheppard, Mullin, Richter & Hampton, Los Angeles, California, for appellant Western Waste Industries.
Thomas C. Given, Murphy, Weir & Butler, Los Angeles, California, for appellant Ronald L. Durkin, Trustee.
Gerald M. Etchingham, Nordman, Cormany, Hair & Compton, Oxnard, California, for appellee.
Appeals from the United States District Court for the Central District of California William J. Rea, District Judge, Presiding. D.C. No. CV-94-05264-WJR.
Before FLETCHER, BRUNETTI, and T.G. NELSON, Circuit Judges.
OVERVIEW
Ronald L. Durkin, the trustee in bankruptcy, and Western Waste Industries, a creditor in bankruptcy (collectively "the appellants"), appeal the district court's order remanding a pre-petition state action brought by Benedor Corporation (Benedor) against the debtor in bankruptcy, Conejo Enterprises (Conejo), to state court and granting Benedor relief from the automatic stay.
Conejo collects and disposes of waste. In May 1993, it allegedly entered into a contract with Benedor, obligating it to deliver its "green waste" to Benedor and to pay Benedor for disposal. When Conejo refused to deliver its "green waste" pursuant to the contract, Benedor filed suit against Conejo in a California state court alleging, inter alia, a state law breach of contract claim (referred to as the ), and seeking $26,000,000 in damages. One year later, in May 1994, Conejo filed for Chapter 11 bankruptcy and removed the Benedor state action to the bankruptcy court.
Prior to filing a proof of claim, Benedor requested that the bankruptcy court abstain from hearing its state action and moved for relief from the automatic stay so it could pursue the action in state court. The bankruptcy court denied the motions.
Benedor appealed the bankruptcy court's decision to the district court and requested an extension of the bar date for filing its proof of claim. The district court extended the bar date until September 26, 1994. On that date, the district court heard Benedor's appeal, and Benedor also filed its proof of claim.
On November 16, 1994, the district court reversed the bankruptcy court's decision. 1 It held that Benedor's state action was a non-core proceeding subject to mandatory abstention under 28 U.S.C. § 1334(c)(2), and that, because mandatory abstention applied, there was cause for relief from the automatic stay. Thus, the district court held that the bankruptcy court abused its discretion in denying relief from the automatic stay. The district court remanded the case to the bankruptcy court with instructions to remand Benedor's state action to state court. The appellants timely appeal the district court's decision.
On December 6, 1995, we filed an opinion in this case in which we held the district court had erred in holding that the bankruptcy court was required to abstain from hearing Benedor's state law claim. The day before our opinion was filed, the Supreme Court issued its opinion in Things Remembered, Inc. v. Petrarca, --- U.S. ----, 116 S.Ct. 494, 133 L.Ed.2d 461 (1995). That opinion caused us to take another look at our analysis of this case.
Our review led to withdrawal of the opinion, but not before it was published at 71 F.3d 1460. It is appropriate to pause here to explain our error, not only because the opinion has now been published, but because we should be as free to discuss our own errors as we are to discuss perceived errors by the district court.
In our published opinion, we held that Benedor's filing of the claim in bankruptcy rendered the state law action a core proceeding. In doing so, we were in error.
While there can be no serious dispute that claims filed in bankruptcy are within the bankruptcy court's core jurisdiction, the filing of a claim does not consolidate it with the pending state law case (into the claim) even though they are based on the same transaction. Both continue to exist, and must be considered, separately. In this substitute opinion, we do just that, with appropriate apologies to the district court and the parties.
The district court held that the state action was not a core proceeding and that mandatory abstention applied. The district court therefore remanded the state action to the bankruptcy court with directions to remand the action to the state court from which it had been removed.
The district court also held that the bankruptcy court abused its discretion in denying relief from the automatic stay. The district court stated that "[s]ince abstention is appropriate, cause clearly exists for granting relief from the automatic stay." The district court therefore ordered that the automatic stay be lifted.
There are thus two orders by the district court which are before this court-the order remanding the state action to state court and the order that the automatic stay be lifted. We will address each order separately.
In Things Remembered, the Supreme Court held that an appellate court does not have jurisdiction to review a district court's order remanding a case to state court. The Court stated: "Congress has placed broad restrictions on the power of federal appellate courts to review district court orders remanding removed cases to state court." Id. at ----, 116 S.Ct. at 496.
As long as a district court's remand is based on a timely raised defect in removal procedure or on lack of subject-matter jurisdiction-the grounds for remand recognized by § 1447(c)-a court of appeals lacks jurisdiction to entertain an appeal of the remand order under § 1447(d). 2
Id. at ----, 116 S.Ct. at 497 (footnote added).
The Court noted that the district court's order remanded the case to the state court from which it came and the remand was based on grounds of untimely removal, Id. (footnote omitted).
The Court emphasized that it would reach the same conclusion Id. (quoting United States v. Rice, 327 U.S. 742, 752, 66 S.Ct. 835, 839, 90 L.Ed. 982 (1946)) (emphasis added in Things Remembered ). Thus, "[i]f an order remands a bankruptcy case to state court because of a timely raised defect in removal procedure or lack of subject-matter jurisdiction, then a court of appeals lacks jurisdiction to review that order under § 1447(d), regardless of whether the case was removed under § 1441(a) or § 1452(a)." Id.
In a concurrence, Justice Ginsburg, joined by Justice Stevens, stated: "Section 1334(c)(2) renders unreviewable district court decisions 'to abstain or not to abstain' from adjudicating state law claims merely 'related to' a bankruptcy case, i.e., claims that do not independently qualify for federal-court jurisdiction." Id. at ---- n. 1, 116 S.Ct. at 499 n. 1 (Ginsburg, J., concurring).
In the present case, the state action was removed from the state court pursuant to § 1452(a). The district court remanded the case to the bankruptcy court with directions to remand the case to the state court from which it was removed on the basis that the bankruptcy court lacked jurisdiction under § 1334(c)(2). 3 Under Things Remembered this remand order based on lack of jurisdiction is not reviewable on appeal. Id. at ----, 116 S.Ct. at 497. See also, Id. at ---- n. 1, 116 S.Ct. at 499 n. 1 (Ginsburg, J., concurring); Anusbigian v. Trugreen/Chemlawn, Inc., 72 F.3d 1253, 1256 (6th Cir.1996) () We therefore hold that we lack jurisdiction to review the district court's remand order.
The decision of a bankruptcy court granting or denying relief from an automatic stay under section 362(d) is a final decision reviewable by this court. In re American Mariner Industries, Inc., 734 F.2d 426, 429 (9th Cir.1984).
"We review the district court's decision on an appeal from a bankruptcy court de novo." In re Tucson Estates, Inc., 912 F.2d 1162, 1166 (9th Cir.1990). The decision to grant or deny relief from the automatic stay is committed to the sound discretion of the bankruptcy court, and we review such decision under the abuse of discretion standard. In re Arnold, 806 F.2d 937, 938 (9th Cir.1986); In re MacDonald, 755 F.2d 715, 716 (9th Cir.1985). Decisions committed to the bankruptcy court's discretion will be reversed only if "based on an erroneous conclusion of law or when the record contains no evidence on which [the bankruptcy court] rationally could have based that decision." In re Windmill Farms, Inc., 841 F.2d 1467, 1472 (9th Cir.1988) (quotations omitted).
Under 11 U.S.C. § 362(a), "[a] bankruptcy filing imposes an automatic stay of all litigation against the...
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