In re Nat. Century Fin. Enterpr., Inc., Inv. Lit., No. 2:03md-1565.

• Decision Date: 10 June 2004
• Docket Number: No. 03-CV-1220.,No. 03-CV-541.,No. 03-CV-1618.,No. 03-CV-2084.,No. 2:03md-1565.
• Citation: 323 F.Supp.2d 861
• Parties: In re NATIONAL CENTURY FINANCIAL ENTERPRISES, INC., INVESTMENT LITIGATION. Rebecca S. Parrett, Plaintiff, v. Bank One, N.A., et al., Defendants. City of Chandler, et al., Plaintiffs, v. Bank One, N.A., et al., Defendants. State of Arizona, et al., Plaintiffs, v. Credit Suisse First Boston Corp., et al., Defendants. Crown Cork & Seal Company, Inc., et al., Plaintiffs, v. Credit Suisse First Boston Corp., et al., Defendants.
• Court: U.S. District Court — Southern District of Ohio

323 F.Supp.2d 861

In re NATIONAL CENTURY FINANCIAL ENTERPRISES, INC., INVESTMENT LITIGATION.

Rebecca S. Parrett, Plaintiff, v. Bank One, N.A., et al., Defendants.

City of Chandler, et al., Plaintiffs, v. Bank One, N.A., et al., Defendants.

State of Arizona, et al., Plaintiffs, v. Credit Suisse First Boston Corp., et al., Defendants.

Crown Cork & Seal Company, Inc., et al., Plaintiffs, v. Credit Suisse First Boston Corp., et al., Defendants.

No. 2:03md-1565.

No. 03-CV-541.

No. 03-CV-1220.

No. 03-CV-1618.

No. 03-CV-2084.

United States District Court, S.D. Ohio, Eastern Division.

June 10, 2004.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Acci/Allcare of Pennsylvanie, nia, Calabasas, CA, Pro se.

Joseph C Wasch, Ft. Lauderdale, FL, for Biosource Corporation.

Bobby R. Burchfield, Covington & Burling, Washington, DC, for Banc One Capital Markets Inc.

OPINION AND ORDER

GRAHAM, Chief Judge.

This matter is before the Court on the Arizona Plaintiffs' motions for remand or abstention. The motions concern four cases originally filed in the Superior Court of Maricopa County, Arizona. Rebecca S. Parrett v. Bank One, N. A., et al., Case No. 03-CV-541 (D.Ariz.); City of Chandler, et al. v. Bank One, N.A., et al., Case No. 03-CV-1220 (D.Ariz.); State of Arizona ex rel. David A. Peterson, et al. v. Credit Suisse First Boston, et al., Case No. 03-CV-1618 (D.Ariz.); and Crown Cork & Seal Co., Inc. Master Retirement Trust, et al. v. Credit Suisse First Boston Corp., et al., Case No. 03-CV-2084 (D.Ariz.). Certain defendants removed the cases to federal court under 28 U.S.C. § 1452(a), alleging that the cases are "related to" the bankruptcy of National Century Financial Enterprises, Inc. The Judicial Panel on Multidistrict Litigation then transferred the Arizona cases to this Court for consolidated pretrial proceedings with other cases "connected in one way or another to the financial collapse" of National Century.

The Arizona Plaintiffs argue for remand or abstention for the following reasons: (1) the Court lacks subject-matter jurisdiction because the Arizona actions are not "related to" the National Century bankruptcy case; (2) the removals were procedurally defective because defendants did not unanimously consent; (3) the Court must abstain under the mandatory abstention rule of 28 U.S.C. § 1334(c)(2); and (4) the Court should either permissively abstain under § 1334(c)(1) or grant equitable remand under § 1452(b).

For the reasons set forth below, the motions for remand or abstention are DENIED.

I. BACKGROUND

National Century Financial Enterprises, an Ohio company founded in 1991, financed healthcare providers nationwide and became the industry's largest financing company. To raise funds, National Century issued notes backed by the purchase of healthcare accounts receivable. National Century would take the proceeds from selling notes and purchase the accounts receivable of healthcare providers at a discount. Under the sales agreements, National Century was supposed to purchase "eligible receivables," i.e., those receivables meeting certain criteria that indicated they likely would be paid off. But National Century allegedly used the noteholders' money to purchase worthless or non-existent receivables from health care companies which National Century controlled or had some financial interest in. These companies became overfunded because they allegedly received substantial sums of money while exchanging nothing of value in return. And National Century insiders allegedly used these companies as "piggy banks" for their personal pleasure. Further, National Century allegedly wired funds back and forth between its financing programs — notably NPF VI, Inc. and NPF XII, Inc. — in order to hide serious shortfalls in the programs' reserve requirements.

In the midst of reports and allegations of wrongdoing, National Century filed for Chapter 11 bankruptcy on November 18, 2002 in the United States Bankruptcy Court for the Southern District of Ohio. National Century's demise prompted investors to file numerous civil actions against various players in National Century's alleged fraud. Four such actions were filed in Arizona state court in 2003. Three of the cases — City of Chandler, State of Arizona, and Crown Cork & Seal — are closely related. Plaintiffs in these three cases are investors, including numerous state and local governmental entities, who held $1.6 billion in notes issued by NPF VI and NPF XII. They refer to themselves as the "Arizona Noteholder Plaintiffs." The named defendants include: Lance Poulsen, Donald Ayers, and Rebecca Parrett (former National Century principals and directors); Thomas Mendell, Harold Pote, and Eric Wilkinson (former National Century directors); Bank One and J.P. Morgan Chase Bank (indenture trustees of NPF VI and NPF XII); PricewaterhouseCoopers and Deloitte & Touche (National Century's accounting firms); and Purcell & Scott (National Century's legal counsel). Defendants allegedly participated in one way or another in National Century's scheme to defraud investors by selling them worthless notes. The complaints assert state law claims for fraud, breach of contract, breach of fiduciary duty, negligence, misrepresentation, and securities fraud under state blue-sky laws. The complaints do not assert any federal causes of action.

The fourth Arizona case, Rebecca S. Parrett v. Bank One N.A., is brought by Rebecca Parrett, a defendant in the other three Arizona cases. Parrett disclaims any involvement in National Century's alleged wrongdoing and contends that she, as an owner of 18% of National Century's stock, suffered great loss when National Century collapsed. The complaint names substantially the same defendants as were named in the Arizona Noteholder cases. Parrett asserts state law claims for fraud, breach of fiduciary duty, professional negligence, tortious interference, and unfair business practices.

All four of the Arizona actions were removed to federal court on the grounds that they are "related to" the National Century bankruptcy proceedings. The Bank One Defendants¹ filed the removal papers in City of Chandler, State of Arizona, and Crown Cork & Seal and the J.P. Morgan Chase Defendants² filed the removal papers in Parrett. Each notice of removal contained a statement that certain other defendants were "consulted" and had no objections to removal. Not all of the defendants were listed as having been consulted.

Plaintiffs in each of the cases filed a motion for remand or abstention within one month after the removal of their case. The only such motion ruled on was in Crown Cork & Seal, where the Arizona federal court denied the motion to remand or abstain without prejudice to renewal. The court denied the motion "in light of" a pending motion for consolidation and transfer with the rest of the National Century litigation. See Nov. 20, 2003 Minute Order, attached as Ex. A to Consol. Response in Opp'n to Motions for Remand (doc. 110).

The MDL Panel transferred the Arizona actions to this Court for inclusion with the National Century multidistrict litigation. The Panel transferred City of Chandler and Parrett to this Court on November 13, 2003, State of Arizona on December 30, 2003, and Crown Cork & Seal on March 19, 2004.

Now that all four Arizona actions are a part of the MDL case, Plaintiffs have renewed their motions for remand or abstention. Two briefs have been filed, the first by the Arizona Noteholder Plaintiffs and the second by Rebecca Parrett. Both briefs offer the same arguments in support of remand or abstention.

Four groups of defendants have filed briefs in opposition to the motions for remand or abstention: (1) Donald and Elise Ayers, and E & D Investments; (2) Bank One, N.A., Bank One Corporation, Banc One Capital Markets, Inc., JP Morgan Chase Bank, J.P. Morgan Chase & Co., JPMorgan Partners, LLC, The Beacon Group, LLC, Deloitte & Touche LLP, Harold W. Pote, Eric R. Wilkinson, Thomas G. Mendell, PricewaterhouseCoopers LLP, and Credit Suisse First Boston, LLC; (3) Lance Poulsen, Barbara Poulsen, and Kuld Corporation; and (4) The Beacon Group III — Focus Value Fund, L.P. These defendants (the "Defendants Opposing Remand") offer the same or similar reasons why the motions for remand or abstention should be denied.

One defendant, Rebecca Parrett, supports the motions for remand. The remainder of the defendants have not weighed in on the matter; however, unresolved service of process issues surround at least some of those defendants.

II. SUBJECT-MATTER JURISDICTION

The first issue is whether the Court has subject-matter jurisdiction over the Arizona cases. The Defendants Opposing Remand assert that the cases are "related to" the National Century Chapter 11 bankruptcy proceedings. A party may remove any civil action that the federal courts have jurisdiction of under § 1334. 28 U.S.C. § 1452(a). Federal district courts have "original and exclusive jurisdiction of all cases under Title 11," and they have "original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11." 28 U.S.C. § 1334(a), (b).

Proceedings "related to" a bankruptcy case include "(1) causes of action owned by the debtor which become property of the estate pursuant to 11 U.S.C. § 541, and (2) suits between third parties which have an effect on the bankruptcy estate." Celotex Corp. v. Edwards, 514 U.S. 300, 308 n. 5, 115 S.Ct. 1493, 1499, 131 L.Ed.2d 403 (1995). The Defendants Opposing Remand believe the Arizona cases fit into this second category.

A. ASSERTED GROUNDS FOR "RELATED TO" JURISDICTION

"The defendant that removes a case from state court bears the burden of establishing federal subject-matter jurisdiction." Jerome-Duncan, Inc. v. Auto-By-Tel, L.L.C., 176 F.3d 904, 907 (6th Cir.1999) (citing Ahearn v. Charter Township of Bloomfield, 100 F.3d 451, 453 (6th Cir.1996)). The Defendants Opposing Remand offer...