In re Nationwide Roofing & Sheet Metal, Inc., Bankruptcy No. 3-90-01492

Decision Date13 August 1991
Docket NumberBankruptcy No. 3-90-01492,Adv. No. 3-90-0256.
Citation130 BR 768
PartiesIn re NATIONWIDE ROOFING & SHEET METAL, INC., Debtor. NATIONWIDE ROOFING & SHEET METAL, INC., Plaintiff, v. CINCINNATI INSURANCE COMPANY, James A. Lent Insurance Agency, Inc., the City of Dayton Division of Fire, Vicki Carr, Defendants.
CourtU.S. Bankruptcy Court — Southern District of Ohio

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Thomas R. Noland, Jeffrey E. Froelich, Dayton, Ohio, Sp. Counsel, for Nationwide Roofing & Sheet Metal, Inc.

Herbert Ernst, Jr., Dayton, Ohio, trustee.

Lawrence T. Burick, and Thomas A. Knoth, Dayton, Ohio, for the Cincinnati Ins. Co.

Patrick J. Bonfield, Dayton, Ohio for City of Dayton Div. of Fire and Vicki Carr.

Thomas L. Czechowski, Dayton, Ohio, for James A. Lent Ins. Agency, Inc.

John D. Squires, Dayton, Ohio, for Orbit Movers & Erectors, Inc.

Daryl R. Douple, Dayton, Ohio, for Cent. Trust Co., N.A.

DECISION ON ORDER GRANTING MOTION TO ABSTAIN AND DETERMINING OTHER PENDING MOTIONS TO BE MOOT

THOMAS F. WALDRON, Bankruptcy Judge.

This adversary proceeding involves alleged causes of action for breach of an insurance contract, bad faith in failure to pay an insurance claim, and defamation. Presently before the court for determination is the Motion Of Defendant, The Cincinnati Insurance Company, To Have This Court Abstain From Exercising Jurisdiction Over This Adversary Proceeding (Doc. 12-1). The plaintiff, Nationwide Roofing & Sheet Metal, Inc., filed a response and supplemental response to this motion (Docs. 21-1, 22-1). A Reply Memorandum Of Defendant, The Cincinnati Insurance Company, In Support Of Its Motion To Have This Court Abstain From Exercising Jurisdiction Over This Adversary Proceeding (Doc. 24-1) was also filed. Although other motions are pending before this court, including Motion Of Defendant, The Cincinnati Insurance Company, For A Protective Order (Doc. 11-1), Motion Of Defendant, The Cincinnati Insurance Company, To Stay Discovery (Doc. 13-1), Motion Of Defendant, The Cincinnati Insurance Company, To Dismiss Or For Summary Judgment (Doc. 14-1, 14-2), Motion For Protective Order And Memorandum filed by the City of Dayton Division of Fire and Vicki Carr (Doc. 15-1), and Motion Of Plaintiff To Strike material contained in reply memorandum of Cincinnati Insurance Company Pursuant To Rule 12(f) (Doc. 27-1), as a result of this court's determination to abstain, these motions are determined to be moot.

I. BACKGROUND

Gerald Jayne (Jayne) is the chairman of the board of directors and the sole shareholder of Nationwide Roofing and Sheet Metal, Inc. (Nationwide). Jayne owns the property (Property) which Nationwide occupies as a sole tenant. This Property was insured by Jayne through Cincinnati Insurance Company (CIC), a licensed insurance company. This insurance was obtained through James A. Lent Insurance Agency, Inc. (Lent), a licensed agent and representative of CIC. Nationwide avers that the Property was totally destroyed by fire on December 8, 1989 (Doc. 1-1).

On March 23, 1990, Jayne and Nationwide filed an action against CIC and Lent (Doc. 12-1, Ex. A) in the Common Pleas Court of Montgomery County, Ohio (Common Pleas Action). The complaint filed in the common pleas court alleges causes of action for breach of contract, bad faith for not paying an insurance claim, and defamation per se and per quod.1

On April 2, 1990, Nationwide filed for relief under chapter 11 of the Bankruptcy Code. Jayne filed for relief under chapter 7 of the Bankruptcy Code on May 9, 1990. On December 7, 1990, Nationwide initiated this adversary proceeding by filing a Complaint For Damages Jury Demand Affixed (Doc. 1). Nationwide named several defendants in this proceeding including, CIC, Lent, the City of Dayton Division of Fire (the DFD), and Vicki Carr (Carr), an employee of the DFD. Count I of Nationwide's complaint alleges that CIC and Lent breached their fiduciary duties of good faith and fair dealing by failing to pay the claim brought pursuant to the insurance contract. Count II of the complaint alleges that CIC and Lent breached the terms of the insurance contract. Under Counts III and IV, Nationwide alleges that CIC, the DFD, its employees and agents, including, but not limited to Carr, made statements which constitute defamation per se and per quod.

Under Counts I and II, Nationwide seeks to recover against CIC and Lent, jointly and severally, a judgment in the amount of one million sixty-four thousand seven hundred fifty dollars ($1,064,750.00) plus interest from the date of loss under the insurance policy, compensatory and punitive damages, interest, costs, and any other equitable relief deemed just by the court. Under Count III, Nationwide seeks to recover against CIC and Lent, jointly and severally, a judgment in an amount in excess of twenty-five thousand dollars ($25,000) to compensate Jayne and Nationwide for damages which have and will be sustained, plus punitive damages, interest, costs, and any other equitable relief deemed just by the court. In addition, Nationwide seeks special damages in the amount of fifty thousand dollars ($50,000.00). Under Count IV, Nationwide seeks, in addition to general damages, special damages in the amount of fifty thousand dollars ($50,000.00). Additionally, Nationwide has made a jury demand.

Lent is the only defendant who has filed a proof of claim in this bankruptcy.

II. DISCUSSION

This court must determine whether it possesses jurisdiction before it determines whether it should or should not abstain from hearing this proceeding. If jurisdiction exists, the court must then determine the manner in which this jurisdiction should be exercised. Commercial Heat Treating of Dayton, Inc. v. Atlas Indus., Inc. (Matter of Commercial Heat Treating of Dayton, Inc.), 80 B.R. 880, 884 (Bankr.S.D. Ohio 1987).

A. 28 U.S.C. § 1334 — Jurisdiction

28 U.S.C. § 1334 sets forth the provisions governing the existence of jurisdiction in bankruptcy courts providing, in pertinent part, as follows:

(a) Except as provided in subsection (b) of this section, the district courts shall have original and exclusive jurisdiction of all cases under title 11.
(b) Notwithstanding any Act of Congress that confers exclusive jurisdiction on a court or courts other than the district courts, the district courts shall have original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11.

Section 1334 establishes four categories of proceedings which are within the jurisdiction of the district court: (1) cases under title 11, (2) civil proceedings arising under title 11, (3) civil proceedings arising in a case under title 11, and (4) civil proceedings related to a case under title 11. The first category, cases under title 11, describes the underlying bankruptcy case upon which all subsequent proceedings rest. Michigan Employment Security Comm'n v. Wolverine Radio Co., Inc. (In re Wolverine Radio Co.), 930 F.2d 1132, 1141 (6th Cir.1991). With regard to the second category, civil proceedings arising under title 11, legislative history indicates that:

The phrase "arising under" has a well defined and broad meaning in the jurisdictional context. By a grant of jurisdiction over all proceedings arising under title 11, the bankruptcy courts will be able to hear any matter under which a claim is made under a provision of title 11. . . .

United Sec. & Communications, Inc. v. Rite Aid Corp. (In re United Sec. & Communications, Inc.), 93 B.R. 945, 950 (Bankr.S.D.Ohio 1988) (quoting H.R.Rep. No. 595, 95th Cong., 1st Sess., 445-46, reprinted in 1978 U.S.Code & Admin.News 5787, 6400-01). The third category of cases, proceedings arising in a case under title 11, although lacking in specificity, "seems to be a reference to those `administrative' matters that arise only in bankruptcy cases. In other words, `arising in' proceedings are those that are not based on any right expressly created by title 11, but nevertheless, would have no existence outside of the bankruptcy." Wood v. Wood (Matter of Wood), 825 F.2d 90, 97 (5th Cir.1987) (footnote omitted). The final category, proceedings related to a case under title 11, has been expansively defined. As the Sixth Circuit recently stated:

The circuit courts have uniformly adopted an expansive definition of a related proceeding under section 1334(b) and its substantially identical predecessor under the Bankruptcy Reform Act of 1978, 28 U.S.C. § 1471(b). As the Third Circuit held:
The usual articulation of the test for determining whether a civil proceeding is related to bankruptcy is whether the outcome of that proceeding could conceivably have any effect on the estate being administered in bankruptcy. Thus, the proceeding need not necessarily be against the debtor or against the debtor\'s property. An action is related to bankruptcy if the outcome could alter the debtor\'s rights, liabilities, options, or freedom of action (either positively or negatively) and which in any way impacts upon the handling and administration of the bankrupt estate.
Pacor, Inc. v. Higgins In re Pacor, Inc., 743 F.2d 984, 994 (3d Cir.1984) (emphasis in original; citations omitted). We "have accepted the Pacor articulation, albeit with the caveat that `situations may arise where an extremely tenuous connection to the estate would not satisfy the jurisdictional requirement.\'" Robinson v. Michigan Consol. Gas. Co., 918 F.2d 579 at 584 (6th Cir. 1990) (quoting In re Salem Mortgage Co., 783 F.2d 626, 634 (6th Cir.1986)); accord In re Turner, 724 F.2d 338, 341 (2d Cir.1983).

In re Wolverine Radio Co., 930 F.2d at 1141-42. See also Hughes-Bechtol, Inc. v. Ohio (In re Hughes-Bechtol, Inc.), 124 B.R. 1007, 1015 (Bankr.S.D.Ohio 1991). However, for purposes of determining this court's jurisdiction under 28 U.S.C. § 1334(b), it is not necessary to distinguish between these categories because "these...

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