In re Missouri Properties, Ltd., Bankruptcy No. 96-30376

• Citation: 211 BR 914
• Decision Date: 16 December 1996
• Docket Number: Adversary No. 96-03041.,Bankruptcy No. 96-30376,96-30461
• Court: United States Bankruptcy Courts. Eighth Circuit. U.S. Bankruptcy Court — Western District of Missouri
• Parties: In re MISSOURI PROPERTIES, LTD., and Billy W. Schell, Debtors. MILLER & MILLER AUCTIONEERS, INCORPORATED, Plaintiff, v. RITCHIE BROTHERS AUCTIONEERS INTERNATIONAL, L.P., Great Plains Equipment, Inc., Clark L. Besack, Billy W. Schell, Great Plains Equipment, Inc. Supplemental Retirement Plan, Missouri Properties Ltd., and West Texas Pipeline, Defendants.

211 B.R. 914 (1996)

In re MISSOURI PROPERTIES, LTD., and Billy W. Schell, Debtors MILLER & MILLER AUCTIONEERS, INCORPORATED, Plaintiff, v. RITCHIE BROTHERS AUCTIONEERS INTERNATIONAL, L.P., Great Plains Equipment, Inc., Clark L. Besack, Billy W. Schell, Great Plains Equipment, Inc. Supplemental Retirement Plan, Missouri Properties Ltd., and West Texas Pipeline, Defendants.

Bankruptcy Nos. 96-30376, 96-30461, Adversary No. 96-03041.

United States Bankruptcy Court, W.D. Missouri, Southwestern Division.

December 16, 1996.

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Murray Camp, Friedman, Yount & Suder, Fort Worth, TX, J. Kevin Checkett, Checkett & Pauly, Carthage, MO, for Plaintiff.

James B. Barlow, Barlow & Garsek, Fort Worth, TX, for Ritchie Brothers.

Mack Ed Swindle, Fort Worth, TX, for Great Plains Equipment, Clark L. Besak, Billy W. Schell, Great Plains Equipment Supplemental Retirement Plan, Missouri Properties and Western Pipeline.

MEMORANDUM OPINION

ARTHUR B. FEDERMAN, Bankruptcy Judge.

This adversary proceeding was referred to this Court on September 25, 1996, pursuant to the Order of Referral to the United States Bankruptcy Court for the Western District of Missouri. Said adversary proceeding was received by the United States District Court for the Western District of Missouri pursuant to an order transferring venue filed by the United States District Court for the Northern District of Texas, Fort Worth Division (the "Texas Federal District Court"). A brief explanation of the procedural posture of this proceeding is indicated.

FACTUAL BACKGROUND

Plaintiff Miller & Miller Auctioneers, Inc. ("plaintiff" or "Miller & Miller") brought a civil Complaint (the State Court Lawsuit') against defendants in the 236th District Court of Tarrant County, Texas (the "Texas State District Court") on June 7, 1993. One of the original defendants, Great Plains Pipeline Construction, Inc. (Case No. 593-50630) was placed in involuntary bankruptcy on October 22, 1993, in the United States Bankruptcy Court for the Northern District of Texas. Billy Schell and Clark Besack were the principal shareholders of Great Plains Pipeline Construction, Inc.¹ The State Court Lawsuit was removed to the Texas Federal District Court and referred to the bankruptcy court. After Great Plains Pipeline Construction, Inc. was dismissed with prejudice from the State Court Lawsuit, the action was remanded to the Texas State District Court. A jury verdict was rendered in favor of Miller & Miller on May 8, 1996, awarding plaintiffs judgment in the total amount of $1,822.676.

On June 12, 1996, Great Plains Equipment, Inc. (Case No. 596-50640) and West Texas Pipeline Construction, Inc. (Case No. 596-50644) filed Chapter 7 bankruptcy petitions in the United States Bankruptcy Court for the Northern District of Texas. Plaintiff attempted to execute on its judgment by noticing a deposition of defendant Billy Schell. Defendant Great Plains Equipment, Inc. Supplemental Retirement Plan ("GPSRP") filed a motion to quash the deposition notice with the Texas State District Court and such motion was denied. Defendants then filed an application for a Writ of Mandamus in the Second Court of Appeals for the State of Texas (the "Court of Appeals") alleging that the automatic stay in Great Plains Pipeline Construction, Inc.'s involuntary bankruptcy applied to Billy Schell individually. The Court of Appeals heard oral argument in this mandamus proceeding, but had not ruled on the application before removal. Defendants also filed a motion for a new trial in the Texas State District Court which had not been ruled prior to the Notice of Removal.

After judgment, while the motion for a new trial was pending, and after the oral argument on defendant's application for writ of mandamus to stop collection procedures, defendants Missouri Properties Limited (Case No. 96-30376) and Billy Schell (Case No. 96-30461) filed bankruptcy in the United States Bankruptcy Court for the Western District of Missouri on June 13, 1996, and July 23, 1996, respectively. As a consequence of the bankruptcy filings, defendants obtained a stay of collection proceedings against all of the defendants save Clark Besack and GPSRP without being required to post a bond, as they would have had to do in Texas State District Court.

On August 1, 1996, Defendant GPSRP removed the state court proceedings, consisting of a Motion for a New Trial and the mandamus proceeding in the Court of Appeals, to the Texas Federal District Court. Although GPSRP is not itself in bankruptcy, the basis for such removal was the bankruptcy cases filed by Great Plains Equipment, Inc., West Texas Pipeline Construction, Inc., Missouri Properties Ltd., and Billy W. Schell. 28 U.S.C. § 1452. Thereafter, on August 1, 1996, defendant GPSRP filed a Motion to Transfer Venue &/Or Request for Reference to the Bankruptcy Court. Plaintiffs filed a Motion to Abstain and Remand on August 12, 1996. Defendants then filed a Response to plaintiff's Motion to Abstain and Remand on August 15, 1996. The Texas Federal District Court granted defendant's Motion to transfer venue and denied plaintiffs' Motion to Abstain and Remand on August 16, 1996, the day after defendants' response was filed. No hearing was conducted and the ruling was based solely on the pleadings. The result of all this procedural maneuvering by the defendants is that this Bankruptcy Court in the Western District of Missouri has been placed in the untenable position of ruling on a Motion for a New Trial, based upon the alleged errors of a Texas trial court, interpreting Texas state law, as well as ruling on the writ of mandamus which was filed in the Texas Court of Appeals.

On September 18, 1996, plaintiff filed a Motion to Abstain and Remand in the United States District Court for the Western District of Missouri (the "Missouri Federal District Court"). Such motion, which was pending at the time of referral, is the subject of this Memorandum Opinion. Miller & Miller argue that either the doctrine of mandatory or permissive abstention requires this Court to abstain from exercising jurisdiction over the removed actions. Alternatively, plaintiff asked this Court to remand the removed action on equitable grounds.

Defendants filed an Amended Rule 50 And/Or Rule 59 Motion in the Missouri Federal District Court on September 19, 1996, seeking alteration or amendment of the judgment in the State Court Lawsuit. Defendant states that "this Amended Motion amends, and incorporates by reference, these Defendants Motion to Modify, Correct, or Reform the Judgment &/or for A New Trial . . . filed in this action on June 20, 1996, in Texas State Court." Doc. # 5, pg. # 1.

Defendants responded to the Motion to Abstain and Remand on October 11, 1996. After reviewing the pleadings, this Court, on November 7, 1996, issued an Order to Show Cause why this proceeding should not be remanded to the Texas State District Court for lack of subject matter jurisdiction. A hearing was held on the motion and the Order to Show Cause on December 10, 1996. This Memorandum Opinion follows the oral argument presented by the parties at that hearing.

DISCUSSION

I am going to abstain in this removed proceeding and remand it to the Texas State Court system where it belongs. I find that the Texas Federal District Court had no jurisdiction to do anything other than remand the case to the Texas State District Court. Indeed, this case takes the idea of forum shopping to dizzying new heights. Rather than trying to gain an advantage at the outset of a proceeding, defendants waited until after a verdict was rendered against them in state court, and then removed the action to Federal Court for ruling on post-trial motions and appeals.

The procedure for removing claims related to bankruptcy cases is set forth in a statute entitled "Removal of claims related to bankruptcy cases." 28 U.S.C. § 1452. Section 1452 provides:

(a) 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 government 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 section 1334 of this title.

(b) The court to which such claim or cause of action is removed may remand such claim or cause of action on any equitable ground. An order entered under this subsection remanding a claim or cause of action, or a decision to not remand, is not reviewable by appeal or otherwise by the court of appeals under section 158(d), 1291, or 1292 of this title or by the Supreme Court of the United States under section 1254 of this title.

28 U.S.C. § 1452. Thus, the statute permits removal only if the district court has jurisdiction of the claim or cause of action under section 1334 of title 28. 28 U.S.C. § 1452(a). Section 1334 gives District Courts original but not exclusive jurisdiction of all civil proceedings arising under or arising in specific provisions of the Bankruptcy Code. It also grants original but not exclusive jurisdiction to nonbankruptcy causes of action which are related to a pending bankruptcy case. 28 U.S.C. § 1334(b).² As indicated, the Federal Courts have original, but not exclusive, jurisdiction over lawsuits in which one or more parties happen to be in bankruptcy. Indeed, section 1334(c) of Title 28 of the United States Code sets out certain circumstances in which the District Court, or, by reference the Bankruptcy Court, may abstain in favor of the state courts, 28 U.S.C. § 1334(c)(1), and other circumstances in which it must so abstain. 28 U.S.C. § 1334(c)(2). Section 1334(c)(2), which deals with "mandatory abstention" provides as follows:

(2) Upon timely motion of a party in a proceeding based upon a State law claim or State law cause of action, related to a case und

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