In re Biglari Import & Export, Inc.
| Decision Date | 17 June 1992 |
| Docket Number | Adv. No. 91-5185-C.,Bankruptcy No. 90-52552-C |
| Citation | 142 BR 777 |
| Parties | In re BIGLARI IMPORT & EXPORT, INC. d/b/a the Ritz Oriental Rug Gallery, Debtor. BIGLARI IMPORT & EXPORT, INC. d/b/a the Ritz Oriental Rug Gallery d/b/a the Orient Express and Khosrow Biglari, Plaintiffs, v. NATIONWIDE MUTUAL FIRE INS. CO. and Michelle Johnson, Defendants. |
| Court | U.S. Bankruptcy Court — Western District of Texas |
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DECISION ON DEFENDANTS' SECOND MOTION FOR REHEARING
CAME ON for consideration Defendants' second motion for rehearing. Upon consideration thereof, the court finds and concludes as follows:
BACKGROUND
This case suffers from a tortured procedural history. The debtor, as representative of the bankruptcy estate, initiated a lawsuit in state court against the above-named defendants. The defendants in turn attempted to remove the case to U.S. District Court pursuant to 28 U.S.C. § 1441, on grounds that the district court had diversity jurisdiction over the parties. The district clerk refused to accept the removal for filing, on grounds that, because the plaintiff was a debtor in bankruptcy, the only place the removal petition could be filed was in the bankruptcy clerk's office. This caused great consternation to the defendants, who knew that the bankruptcy clerk could only entertain a removal pursuant to 28 U.S.C. § 1452(a), a statute which they had no intention of invoking. Nonetheless, they complied, as the time was running on their right to file a removal.1
Once the matter was filed with the bankruptcy clerk, it was immediately set for status hearing before this court (per routine order of the bankruptcy courts of the Western District of Texas). In the meantime, the plaintiff filed a motion to remand to state court. After the parties explained the situation, this court initially ruled to remand the matter to state court. However, on motion for reconsideration by the defendants, this court vacated its remand order and instead "certified" a question to the district court regarding (1) whether there was subject matter jurisdiction to entertain removal under either § 1452 or § 1441 and (2) whether, notwithstanding jurisdiction to entertain removal under § 1452, the district court could independently entertain removal under § 1441.2 The district court ruled that there was indeed subject matter jurisdiction under § 1334(b)3 such that removal could be entertained under § 1452(a), but declined to visit the § 1441 question. It then referred the entire matter back to this court pursuant to § 157(a).
The defendants then again moved for reconsideration by this court, to be sure that they had clear marching orders on how to proceed. Among other things, they asked that the matter not be remanded to state court (as there is still a live motion for remand on the part of the plaintiffs). Instead, they want this court to transfer the case back to district court (evidently to effectuate what they had tried to accomplish with their original removal under § 1441), or if that is not possible, to retain and try the case.
The bankruptcy court declines the movant's invitation to "refer or transfer" this matter to the district court, as there is no rule or statute which permits such a referral or transfer. The reference statute is a "one-way street" from the district court to the bankruptcy court. See 28 U.S.C. § 157(a). The district court, upon motion to that court or on its own motion, may withdraw this reference over this adversary proceeding, as it sees fit, 28 U.S.C. § 157(d), but the bankruptcy court has no statutory authority to send the case back to the district court. Until such time as the district court elects to withdraw the reference (either on its own motion or on timely motion of a party), this court has no choice but to proceed with the case. Accordingly, the court now turns to the merits of the defendants' motion, which asks that this court not remand this case back to state court.
§ 1452(b) permits this court to consider all of the equities in framing its decision whether to remand a given case. 28 U.S.C. § 1452(b). In this case, if the defendants should have been permitted to effectuate their original removal under the general removal statute, and through no fault of their own were prevented from doing so, that is an equitable consideration which ought to affect the decision whether to remand pursuant to § 1452(b).4 Removal under the general removal statute would have assured the defendants that this matter would be heard in the district court rather than the bankruptcy court (unless, of course, the district court itself had decided to remand the case). By being forced into the bankruptcy court, the defendants have been deprived of their Article III forum and their jury trial rights may have been jeopardized as well.5 This court must therefore, in deciding whether this case should or should not be remanded to state court, consider whether removal under § 1441 was available as a matter of law to these defendants.
Entirely different considerations come into play when remand is sought under § 1452(b) than when it is sought under § 1447 (). See In re Fairchild Aircraft Corp., 4 Tex.Bankr.Ct.Rptr. 308, 312, 317, 1990 WL 119650 (Bankr.W.D.Tex.1990), recommendation adopted slip op. (W.D.Tex.1990) (Garza, D.J.). With regard to a request for remand under § 1452(b), the bankruptcy court may remand or not remand on any equitable grounds, bearing in mind the primacy of the trustee's entitlement to select the forum in which to pursue a given cause of action. Id. By contrast, had this matter been removed to the district court pursuant to § 1441, the district court, if it otherwise has subject matter jurisdiction, has a duty to hear the matter (absent independent compelling state law interests that might favor abstention, as distinguished from remand). Fairchild Aircraft, supra; Thermtron Products, Inc. v. Hermansdorfer, 423 U.S. 336, 96 S.Ct. 584, 46 L.Ed.2d 542 (1976); Abing v. Paine, Webber, Jackson & Curtis, 538 F.Supp. 1193 (D.Minn.1982); but see Sykes v. Texas Air Corp., 834 F.2d 488 (5th Cir. 1987) (). The test is so completely different that, if the defendants were entitled to removal under the general removal statute all along, then forcing them to submit to the standards for remand in bankruptcy cases subjects them to a substantial injustice.
At the same time, bankruptcy courts do not have the authority to entertain a general removal under § 1441 because bankruptcy courts are not empowered6 to consider matters solely on the basis of diversity of citizenship — only district courts can hear diversity cases. Nor does this court have the power to decide the issues raised in §§ 1446-1447 (). See Sykes v. Texas Air Corp., 834 F.2d at 492. More significantly, the provision in § 1447(d) that "an order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise . . ." runs counter to the requirement that the decisions of Article I judges be subject to some sort of review by an Article III court in order to avoid violating Article III of the Constitution. See generally Northern Pipe Line Construction Co. v. Marathon Pipeline Co., 458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982).7
The court at the outset concurs with the reasoning of the district court regarding the availability of § 1452 as one legitimate basis for removal to the federal court (a decision premised primarily on the availability of subject matter jurisdiction under § 1334(b)). Going further, however, this court also finds that § 1452 is not the exclusive basis for removal, even though one of the parties to the litigation is in bankruptcy. The wording of § 1452 is permissive and not exclusive ("a party may remove . . . to the district court . . . if such . . . court has jurisdiction . . . under section 1334 . . ."). 28 U.S.C. § 1452(a) (emphasis added). Meanwhile, the wording of § 1441 is broad (". . . any civil action . . . of which the district courts . . . have original jurisdiction, may be removed by the defendant or the defendants, to the district court . . ."). 28 U.S.C. § 1441(a) (emphasis added). Thus, a plain reading of the statute suggests that a defendant ought to have the right to remove an action to the district court under § 1441, as well as under § 1452, so long as the removal is otherwise qualified.8
There are compelling reasons for this conclusion beyond the language employed in the statutes themselves. One is that the basis (and so the justification) for removal of diversity jurisdiction cases is fundamentally different from the basis for removal of bankruptcy jurisdiction matters. The bankruptcy removal has to do primarily with centralizing the administration of a case before one forum. See In re Fairchild Aircraft Corp., 4 Tex.Bankr.Ct.Rptr. 308, 312, 317, 1990 WL 119650 (Bankr. W.D.Tex.1990), recommendation adopted slip op. (W.D.Tex.1990) (Garza, D.J.). General removal, however, is concerned primarily with affording a foreign party with an impartial forum. Bank of United States v. Deveaux, 9 U.S. (5 Cranch) 61, 87, 3 L.Ed. 38 (1809). If the plaintiff in a given case is the trustee in bankruptcy (or the debtor in possession), and that trustee chooses to commence a matter in state court, then that trustee has already decided that the benefits of the state forum outweigh the benefits of centralized administration. The plaintiff here does not need § 1452 to bring this case into bankruptcy court — the plaintiff wants to be in state court.
The non-trustee defendants meanwhile lack standing to insist on centralized...
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