Frelin v. Oakwood Homes Corp.

• Decision Date: 30 April 2003
• Docket Number: No. 4:02-AP-1363E.,4:02-AP-1363E.
• Citation: 292 B.R. 369
• Parties: Chad and Bobbi FRELIN, Joseph and Sheila Woodall, Cecil, Kevin and Dixie Abbott, John and Joetta Tatum, Terry and Deborah Burkholder, and Joseph Combs, On Behalf of Themselves and as Representatives of A Class of All Others Similarly Situated, Plaintiffs v. OAKWOOD HOMES CORPORATION, Oakwood Mobile Homes, Inc., Oakwood Acceptance Corporation, Schult Mobile Homes, American Bankers Insurance Group, Assurant Group, and John Does 1-50, Defendants
• Court: U.S. Bankruptcy Court — Eastern District of Arkansas

292 B.R. 369

Chad and Bobbi FRELIN, Joseph and Sheila Woodall, Cecil, Kevin and Dixie Abbott, John and Joetta Tatum, Terry and Deborah Burkholder, and Joseph Combs, On Behalf of Themselves and as Representatives of A Class of All Others Similarly Situated, Plaintiffs v. OAKWOOD HOMES CORPORATION, Oakwood Mobile Homes, Inc., Oakwood Acceptance Corporation, Schult Mobile Homes, American Bankers Insurance Group, Assurant Group, and John Does 1-50, Defendants

No. 4:02-AP-1363E.

United States Bankruptcy Court, E.D. Arkansas, Little Rock Division.

April 30, 2003.

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Mr. Roger D. Rowe, Little Rock, AR, for Oakwood Homes Corp.

Mr. Byron Freeland, Little Rock, AR, for American Bankers Ins. Group.

Steven A. Owings, Gina M. Cothern, Ira M. Levee, Roseland, NJ, for Plaintiffs.

ORDER GRANTING PLAINTIFFS' MOTION FOR REMAND OF STATE COURT CIVIL ACTION AND FOR ABSTENTION AND DENYING DEFENDANTS' MOTION TO TRANSFER TO THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE

AUDREY R. EVANS, Bankruptcy Judge.

On February 18, 2003, the Court heard the Defendants' Motion to Transfer to the United States Bankruptcy Court for the District of Delaware and the Plaintiffs' Motion for Remand of State Court Civil Action and for Abstention. Roger D. Rowe appeared on behalf of Defendants Oakwood Homes Corporation, Oakwood Mobile Homes, Inc., Oakwood Acceptance Corporation, and Schult Mobile Homes (the "Oakwood Defendants" or "Oakwood Debtors"). Byron Freeland appeared on behalf of Defendants American Bankers Insurance Company of Florida, American Bankers Insurance Group, and Assurant Group (the "American Bankers Defendants"). Steven A. Owings and Gina M. Cothern appeared on behalf of the Plaintiffs. Ira M. Levee also appeared on behalf of the Plaintiffs via telephone. Following oral argument, the Court took the matter under advisement.

Upon consideration of the pleadings filed and oral argument at hearing as well as the briefs filed by counsel and applicable law, the Court makes the following findings of fact and conclusions of law in accordance with Rule 7052 (made applicable to contested matters by Rule 9014(c)).¹

PROCEDURAL BACKGROUND

Plaintiffs filed suit against the Oakwood Defendants and the American Bankers Defendants in the Circuit Court of Saline County, Arkansas on February 5, 2001 (the "State Court Action"). The Oakwood Defendants separately filed chapter 11 bankruptcies on November 15, 2002, in the United States Bankruptcy Court for the District of Delaware (the "Delaware Bankruptcy Court"). The separate chapter 11 cases have been consolidated for procedural purposes and are being jointly administered by the Delaware Bankruptcy Court as In re Oakwood Homes Corp., et al., Case No. 02-13396. On December 16, 2002, the Oakwood Defendants and American Bankers Defendants removed the State Court Action to the United States Bankruptcy Court for the Eastern and Western Districts of Arkansas. The Oakwood Defendants and American Bankers Defendants moved to transfer the case to the United States Bankruptcy Court for the District of Delaware on December 17, 2002. Plaintiffs subsequently filed a Motion for Remand of State Court Civil Action and for Abstention on January 17, 2003.

FACTUAL BACKGROUND

The following facts were alleged by Plaintiffs and/or Defendants in their pleadings and/or at oral argument, and as no objections were made contesting the validity of these facts, the Court accepts the facts as plead.

The State Court Action

The State Court Action is a deceptive trade practice action brought on behalf of Plaintiffs individually and a class of similarly situated individuals. The Plaintiffs purchased mobile homes from the Oakwood Defendants who financed the transactions; Plaintiffs also obtained insurance coverage in connection with those transactions. The Plaintiffs allege that the Oakwood and American Bankers Defendants willfully engaged in a nationwide scheme to defraud individuals by placing false charges on statements which represented no value to customers, and by selling sham insurance products (including home owners' insurance and term credit life insurance) which were added to the principal amount of the Plaintiffs' loans. The State Court Action pled violations of Arkansas North Carolina, and Florida's Unfair and Deceptive Trade Practices Acts and also alleged common law fraud under Arkansas, North Carolina and Florida law. Plaintiffs demanded a trial by jury. Similar lawsuits by other individuals have been filed against the Oakwood and American Bankers Defendants in Mississippi and North Carolina.

During the course of the State Court Action, the State Court decided certain class action issues. Specifically, class certification was granted as to those Plaintiffs who had one of the alleged false charges on a statement, but denied as to those Plaintiffs with only insurance-related claims. The State Court also decided that certain arbitration clauses were not binding. That decision is currently on appeal to the Arkansas Supreme Court; appellate briefs have been filed but no oral argument had been scheduled as of the date of hearing. Discovery in the State Court Action had commenced. The State Court granted a restraining order in favor of Plaintiffs preventing the Oakwood Defendants from destroying sales records and advertising materials maintained by sales locations in Arkansas that were being closed. Plaintiffs also filed a motion to compel discovery which was granted but before complying with that discovery order, the Oakwood Defendants filed bankruptcy in Delaware.

The Oakwood Defendants' Bankruptcies

The Oakwood Defendants separately filed chapter 11 bankruptcies on November 15, 2002, in the Delaware Bankruptcy Court. One of the three Oakwood Defendants is a Delaware Limited Liability Company with its principal place of business in North Carolina. The other Oakwood Defendants are incorporated in North Carolina and also have their principal places of business in North Carolina.

The American Bankers Defendants have filed a proof of claim in the Oakwood Defendants' bankruptcies for contractual and common law indemnification against the Oakwood Debtors for any liability resulting from the Plaintiffs' claims in state courts.

In the Oakwood Debtors' bankruptcy cases, the Oakwood Defendants have proposed certain alternative dispute resolution ("ADR") procedures to resolve claims against them, including the Plaintiffs' claims. On February 14, 2003, the Oakwood Debtors and American Bankers Defendants commenced an adversary proceeding in the Delaware Bankruptcy Court seeking an order extending the automatic stay to the American Bankers Defendants and enjoining the continued prosecution of the State Court Action. On March 27, 2003, the Delaware Bankruptcy Court held a hearing in this adversary proceeding and declined to extend the automatic stay to the American Bankers Defendants, but did extend the stay to any former or current employees of the Oakwood Defendants.² The Delaware Bankruptcy Court also indicated that the State Court Action could probably proceed once the Oakwood Debtors had a confirmed chapter 11 plan.³

JURISDICTION

The Court has jurisdiction over the removed State Court Action pursuant to 28 U.S.C. §§ 1452(a) and 1334(b). Section 1452(a) provides:

A party may remove any claim or cause of action in a civil action other than a proceeding before the United States Tax Court or a civil action by a governmental unit to enforce such governmental unit's police or regulatory power, 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 1334 of this title.

Because the State Court Action was originally filed in Saline County Circuit Court, and Saline County is within the Eastern District of Arkansas, the Bankruptcy Court for the Eastern District of Arkansas is the appropriate court to which this lawsuit should be removed provided this Court has jurisdiction under § 1334.⁴ Rule 9027 governs the procedures for removing a state court proceeding to federal court, and establishes the deadline for such removal. There is no question that the notice of removal filed by the Oakwood Defendants and American Bankers Defendants was timely filed under Rule 9027. Regardless of whether the removed State Court Action is a core or non-core proceeding in bankruptcy under 28 U.S.C. § 157⁵, the Court may enter final orders with respect to motions for abstention, remand and transfer. See Christensen v. St. Paul Bank for Cooperatives (In re Fulda Independent Co-op), 130 B.R. 967, 973 n. 5 (Bankr.D.Minn.1991) (explaining that the Judicial Improvements Act of 1990 amended §§ 1452(b) and 1334(c)(2) to remove prohibition on appeals to district court such that a bankruptcy judge may enter final orders with respect to remand and abstention, and that subsequent amendments to the Bankruptcy Rules provided for motions for remand and abstention to be governed by Rule 9014 as contested matters). See also Brizzolara v. Fisher Pen Co., 158 B.R. 761, 767-769 (Bankr.N.D.Ill.1993) (holding that motions for abstention, remand and transfer are core proceedings under 28 U.S.C. § 157(b)(2)(A)).

Bankruptcy Jurisdiction Under § 1334

For removal to this Bankruptcy Court to be proper, this Court must have jurisdiction over the State Court Action under § 1334. Pursuant to § 1334, federal district courts, which include bankruptcy courts, have exclusive jurisdiction over all civil proceedings under title 11 (i.e., the bankruptcy code), and original but not exclusive jurisdiction over all cases "arising under title 11, or arising in or related to cases under title 11." 28 U.S.C. § 1334(a)-(b). A case "arises under" title 11 if a claim asserted is created by or based on a provision of the bankruptcy code. See National City Bank v. Coopers and Lybrand, 802 F.2d 990, 994 ...