In re Heinsohn
| Decision Date | 16 March 1999 |
| Docket Number | Adversary No. 97-3208.,Bankruptcy No. 90-31655 |
| Citation | 231 BR 48 |
| Parties | In re Douglas L. HEINSOHN, Debtor. Joseph B. Kirk, Plaintiff, v. William T. Hendon, Defendant. |
| Court | U.S. Bankruptcy Court — Eastern District of Tennessee |
COPYRIGHT MATERIAL OMITTED
J. Mikel Dixon, Knoxville, Tennessee.
John A. Lucas, Martin B. Bailey, Hunton & Williams, Knoxville, Tennessee.
This adversary proceeding involves state law tort claims of malicious prosecution and defamation asserted by the plaintiff, Joseph B. Kirk, and removed to this court by the defendant, William T. Hendon, who was the chapter 7 trustee in the underlying bankruptcy case of debtor Douglas L. Heinsohn. Before the court are the plaintiff's motion to remand or for abstention and motion to strike, and the defendant's motion to dismiss. For the following reasons, the plaintiff's motions will be denied and the defendant's motion to dismiss will be granted.
The complaint filed on September 24, 1997, in the Circuit Court for Knox County, Tennessee alleges that the plaintiff was indicted for bankruptcy fraud and conspiracy to commit bankruptcy fraud by the Federal Grand Jury for the U.S. District Court for the Eastern District of Tennessee on March 6, 1996, and upon trial was acquitted of all charges on November 25, 1996, at the close of the prosecution's proof. It is further averred that "at all times material to the criminal charges against Joseph B. Kirk, the defendant, William T. Hendon was the bankruptcy trustee for the relevant estate, and the principal witness against the plaintiff." For his malicious prosecution cause of action, the plaintiff alleges that the defendant "initiated or procured the criminal proceedings" against him "for an improper purpose, without probable cause," and "the proceedings were terminated favorably for the person thus prosecuted." As for the defamation of character count, the plaintiff "relies upon the factual and legal allegations contained in the first count for malicious prosecution" and additionally alleges that "defendant communicated to persons other than the plaintiff defamatory statements concerning the plaintiff that were defamatory, as that term is defined in law." Specifically, the plaintiff avers that "the defamatory statements alleged in this complaint were the allegations of criminal misconduct against the plaintiff made by the defendant." The plaintiff seeks $5 million in compensatory and punitive damages from the defendant.
On October 15, 1997, the defendant filed a notice of removal of the plaintiff's state court action, thereby commencing this adversary proceeding. In the notice, the defendant states that in accordance with his responsibilities as trustee under 18 U.S.C. § 3057, he referred the debtor "to the U.S. Trustee for consideration of any criminal activity by the debtor," and "the FBI and the U.S. Attorney's office subsequently instituted a criminal investigation, which led to indictments of Heinsohn and the plaintiff. . . ." The defendant alleges that the state court action "is a civil proceeding arising under title 11 of the Bankruptcy Code, or arising in or related to cases under title 11," the court "therefore has subject matter jurisdiction under 28 U.S.C. § 1334(b)," and "because the court has original subject matter jurisdiction under 28 U.S.C. § 1334, it has removal jurisdiction under 28 U.S.C. § 1452." Thereafter, the defendant filed an answer to the complaint on October 21, 1997, denying the material allegations in the complaint and asserting as a defense, inter alia, that the defendant "is immune from this lawsuit under both an absolute and qualified immunity and/or privilege because he acted at all times as an officer of the court during judicial proceedings."
In response to the removal, the plaintiff filed on November 13, 1997, a motion to remand and in the alternative for abstention contending that the court "does not have subject matter jurisdiction of the removed action" and the removal notice is defective because "removal of this action should be to the District Court as set out in Section 1452(a)" and "the notice does not include a statement indicating whether the removed matter is core or non-core, and if non-core, whether the parties consent to entry of final orders or judgments by the Bankruptcy Judge, as required by Bankruptcy Rule 9027 and 28 U.S.C. § 1452." Alternatively, the plaintiff asserts that "this case is appropriate for mandatory or discretionary abstention." On November 24, 1997, the defendant filed an amended notice of removal containing the allegation that "this proceeding is a core proceeding."
On November 28, 1997, the defendant filed a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6), as incorporated by Fed.R.Bankr.P. 7012(b), contending that both the malicious prosecution and defamation counts of the complaint must be dismissed on the ground of absolute immunity since the defendant acted in his capacity as trustee and as an officer of the court. The motion also asserts that the alleged defamatory statements were made in the course of judicial proceedings and therefore the defendant enjoys qualified immunity under state law.
On December 15, 1997, the plaintiff filed a motion to strike the defendant's amended notice of removal on the ground that neither leave of court nor consent of the adverse party was granted prior to its filing. The plaintiff stated that he does not consent to the amendment and that leave by the court to amend "cannot be granted because the amendment attempts to add an essential allegation to the notice of removal which cannot be added after the expiration of the statutory period of time for filing such notice."
Prior to ruling on the parties' various motions, the plaintiff filed a motion for withdrawal of reference on December 17, 1997. Pursuant to 28 U.S.C. § 157(d) and Fed. R.Bankr.P. 5011(a), this court entered an order on December 19, 1997, directing the bankruptcy clerk to transmit the plaintiff's motion for withdrawal of reference to the district court for disposition. Pending that decision, the court stayed all matters, including the plaintiff's motion to remand or for abstention, the defendant's motion to dismiss, and the plaintiff's motion to strike. By order entered September 29, 1998, the district court denied the motion to withdraw reference and directed this court to rule upon the pending motions. Oral arguments on the motions having been made, the issues raised by the parties are now ready for resolution.
The court will first consider the plaintiff's motion to strike. Fed.R.Bankr.P. 9027(a)(1)1 provides in pertinent part that a notice of removal shall "contain a statement that upon removal of the claim or cause of action the proceeding is core or non-core and, if non-core, that the party filing the notice does or does not consent to entry of final orders or judgment by the bankruptcy judge." Because no such statement was contained in the defendant's notice of removal filed on October 15, 1997, the plaintiff asserts that the notice of removal fails to "allege an essential jurisdictional element" and, as a result, is "fatally defective." The plaintiff notes that leave to amend the notice of removal was not sought prior to the defendant's filing of the amended notice of removal on November 24, 1997, and that, in any event, filing of the amended notice was outside the 30-day time period imposed by Fed. R.Bankr.P. 9027(a)(3) for removing civil actions initiated after commencement of a bankruptcy case. In support of these positions, the plaintiff cites a plethora of cases for the general propositions that removal statutes are to be strictly construed, see, e.g., Holder v. City of Atlanta, 925 F.Supp. 783, 784 (N.D.Ga.1996); and essential jurisdictional allegations may not be supplied after the statutory period for filing a removal notice or petition has run. See, e.g., Denton v. Wal-Mart Stores, Inc., 733 F.Supp. 340, 341 (M.D.Fla.1990) () and Crawford v. Fargo Mfg. Co., 341 F.Supp. 762, 763 (M.D.Fla.1972) ().
Characterizing the motion as "hypertechnical," the defendant responds by observing that the notice of removal contains all the facts necessary to support a legal conclusion that this is a core proceeding. As such, he argues that any failure to specifically state whether the proceeding is core or non-core is only a technical defect which can be corrected by amendment even after expiration of the 30-day removal time period, citing Northern Ill. Gas Co. v. Airco Indus. Gases, 676 F.2d 270 (7th Cir.1982) ().
The court has been unable to locate a reported decision which has considered the precise issue of whether the failure to designate a proceeding's core or non-core status in a notice of removal as required by Fed. R.Bankr.P. 9027(a)(1) is a fatal defect which deprives the court of jurisdiction to hear the matter. However, a similar question arises when parties fail to comply with an identical mandate contained in Fed.R.Bankr.P. 7008(a) which requires complaints, counterclaims, cross-claims, and third-party complaints in adversary proceedings to "contain a statement that the proceeding is core or non-core. . . ."2 When presented with this issue, the vast majority of...
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