In re Terry Mfg. Co. Inc.

• Citation: 324 B.R. 147
• Decision Date: 15 April 2005
• Docket Number: Bankruptcy No. 03-32063-WRS.,Adversary No. 04-3132-WRS.
• Parties: In re TERRY MANUFACTURING COMPANY INC., Debtor. J. Lester Alexander, III, Trustee, Plaintiff, v. Cintas Corporation, Defendant.
• Court: United States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Middle District of Alabama

324 B.R. 147

In re TERRY MANUFACTURING COMPANY INC., Debtor J. Lester Alexander, III, Trustee, Plaintiff, v. Cintas Corporation, Defendant.

Bankruptcy No. 03-32063-WRS.

Adversary No. 04-3132-WRS.

United States Bankruptcy Court, M.D. Alabama.

April 15, 2005.

COPYRIGHT MATERIAL OMITTED

Brent B. Barriere, for Plaintiff.

Michael L. Scheier, for Defendants.

W. Clark Watson, for Defendants.

Barry E. Teague, for Defendant Sidney Johnson.

MEMORANDUM DECISION

WILLIAM R. SAWYER, Bankruptcy Judge.

I. PROCEDURAL SETTING

On July 7, 2003, Terry Manufacturing Company, Inc, filed a petition in bankruptcy pursuant to Chapter 11 of the Bankruptcy Code, initiating Bankruptcy Case No. 03-32063. About two weeks later, Terry Uniform Company, LLC, an affiliated entity, filed another Chapter 11 case, initiating Bankruptcy Case No. 03-32213. Joint administration of these two cases was ordered by this Court's Order of October 3, 2003. On May 13, 2004, both cases were converted to cases under Chapter 7. Plaintiff J. Lester Alexander, III, is the Trustee in both cases. The Plaintiff will be referred to as Alexander.

On October 25, 2004, Alexander brought suit against ten named Defendants alleging that they had systematically looted Terry Manufacturing and Terry Uniform. Suit was brought in the Circuit Court for Randolph County, Alabama under Case No. CV-2004-162. Alexander alleges several theories generally sounding in fraud, breach of contract, breach of fiduciary duties and the like. It is not necessary to catalog the various causes of action alleged for purposes of this decision except to say that Alexander alleges massive wrongdoing on the part of the Defendants and seeks many millions of dollars in damages.

For purposes of analysis, the Court will divide the Defendants into two groups. The first group consists of Cintas Corporation, Cintas Corporation No. 2, Scott Farmer, David T. Jeanmougin, Paul Carmichael and Roger V. Reed. These six Defendants will be referred to as the Cintas Defendants. The second group consists of Roy Terry, Rudolph Terry, Sidney Johnson and Cotina Terry and will be referred to as the Terry Defendants. The Terry Defendants are former principals of Terry Manufacturing and Terry Uniform.

On November 29, 2004, the Cintas Defendants filed a Notice of Removal thereby removing this civil action from Randolph County to this Court pursuant to 28 U.S.C. § 1452(a). On December 22, 2004, Alexander moved to remand this civil action to the Circuit Court for Randolph County. (Doc. 18). The Cintas Defendants seek either dismissal of the civil action or transfer of this civil action to Delaware, citing provisions in several contracts which contain forum selection clauses. The Cintas Defendants contend that the forum selection clauses mandate that this civil action be tried in Delaware. The Court heard oral argument on the pending motions in Montgomery, Alabama on March 7, 2005. The motions have been fully briefed. (Alexander-Docs. 18, 21, 26; Cintas-Docs. 2, 5, 8, 20, 27). For the reasons set forth below, Alexander's Motion to Abstain is GRANTED.¹

II. SEQUENCE OF MATTERS CONSIDERED

Before delving into the various issues raised here, the undersigned will discuss the order in which the issues will be discussed. The Court will first discuss whether removal was proper in light of the fact that only the Cintas Defendants have sought to remove this civil action to Federal Court. Finding that unanimity is not required under § 1452(a), the undersigned will second consider whether the doctrine of mandatory abstention, pursuant to 28 U.S.C. § 1334(c)(2) applies. Having determined that mandatory abstention applies here, the matters at hand, in this Court, are at an end. Nevertheless, the Court will, in the alternative, discuss the doctrine of permissive abstention, pursuant to 28 U.S.C. § 1334(c)(1). Having determined that this Court should abstain from hearing this proceeding, it will not reach the issue as to whether venue is proper, leaving that for determination by the Circuit Court for Randolph County. It does not appear that there is any black-letter law which would guide the Court in a situation such as this where, as here, it is confronted with several motions filed by several parties, each of whom wants their motion decided first. The District Court has described rules purporting to govern these kinds of proceedings as "prudential." Retirement Systems of Alabama v. Merrill Lynch & Co., 209 F.Supp.2d 1257, 1261 (M.D.Ala.2002); see also, Gould v. National Life Insurance Company, 990 F.Supp. 1354, 1362-63 (M.D.Ala.1998)(order in which motions are decided turns on facts of each case). A District Court in New York, when faced with a similar problem, held that remand should be considered first. Renaissance Cosmetics, Inc. v. Development Specialists, Inc., 277 B.R. 5, 11 (S.D.N.Y.2002). As this is the "home" court, meaning that the Terry Manufacturing bankruptcy case is filed here, it would appear that this Court is in the best position to decide the abstention questions. In re Wedlo, 212 B.R. 678 (Bankr.M.D.Ala.1996). This is consistent with the briefing order entered by this Court on December 20, 2004. (Doc. 16).

III. UNANIMITY AND SECTION 1452 REMOVALS

Alexander argues that Cintas' attempted removal here is defective because not all of the Defendants have joined in the notice of removal. (Doc. 18, p. 4).² Whether all defendants must join in filing a Notice of Removal will be referred to, for sake of clarity, as unanimity. Section 1452 of Title 28, United States Code, provides as follows:

(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 governmental 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.

The first four words of this statute are "a party may remove." It would appear that this language is clear enough. A party, or as in this Adversary Proceeding, six of the ten-named Defendants, may remove the cause of action to the District Court. There is nothing in the plain language of this statute which would indicate that all defendants, or all plaintiffs if the case may be, must join in the removal.

The remainder of the requirements for removal have not been disputed. The cause of action is clearly not one before the United States Tax Court or a civil action by a governmental unit. At the March 7, 2005 hearing, counsel for Cintas conceded that § 1334 jurisdiction exists. "Related to" jurisdiction under § 1334 exists because Trustee Alexander's claim against Cintas is one of the most if not the most substantial asset in the Terry Manufacturing bankruptcy estate.

The District Court handed down two opinions in 2002 wherein it discussed but ultimately declined to decide the question of unanimity in § 1452 removals. Retirement Systems of Alabama v. J.P. Morgan Chase & Co., 285 B.R. 519, 524-25 (M.D.Ala.2002)(Albritton, C.J.)(RSA I); Retirement Systems of Alabama v. Merrill Lynch & Co., 209 F.Supp.2d 1257, 1261-64 (M.D.Ala.2002)(Albritton, C.J.)(RSA II). In both RSA I and RSA II, the District Court abstained under 28 U.S.C. § 1334(c)(1). It appears that the District Court in RSA I and RSA II was concerned by a decision recently handed down by the Southern District of Iowa in Ross v. Thousand Adventures of Iowa, Inc., 178 F.Supp.2d 996, 1001-2 (S.D.Iowa 2001), which looked to 28 U.S.C. § 1441, and held the unanimity is required for a removal under 28 U.S.C. § 1452. As it is well established that § 1441 removals require unanimity, it reasoned that § 1452 should likewise require unanimous consent of the defendants. In a decision handed down by the United States Supreme Court, it was stated that the general removal provisions of §§ 1441, 1446-48, supplement the bankruptcy removal provision of § 1452. See, Things Remembered, Inc. v. Petrarca, 516 U.S. 124, 116 S.Ct. 494, 133 L.Ed.2d 461 (1995).

The District Court in the Southern District of Ohio handed down a well-reasoned decision last year in National Century Financial Enterprises, Inc. Investment Litigation v. Bank One, N.A., 323 F.Supp.2d 861, 871-73 (S.D.Ohio 2004), where it compared the language in § 1441 with § 1452 and concluded that unanimity was not required. It noted that § 1441 permits removal by "the defendant or the defendants" while § 1452 permits removal by "a party." This strongly suggests that unanimity is not required. It now appears that the great weight of authority holds that unanimity is not required in a § 1452 removal. California Public Employees' Retirement System v. WorldCom, Inc., 368 F.3d 86, 103 (2nd Cir.2004); Creasy v. Coleman Furniture Corporation, 763 F.2d 656, 660 (4th Cir.1985); In re: National Century Financial Enterprises, Inc., Investment Litigation, 323 F.Supp.2d 861, 871-73 (S.D.Ohio 2004); In re WorldCom, Inc. Securities Litigation, 293 B.R. 308, 330 (S.D.N.Y.2003); Connecticut Resources Recovery Authority v. Lay, 292 B.R. 464, 471 (D.Conn.2003); Abner v. Mate Creek Loading, Inc., (In re: Mid-Atlantic Resources Corp.) 283 B.R. 176, 183 (S.D.W.Va.2002); Beasley v. Personal Finance Corporation, 279 B.R. 523, 532 (S.D.Miss.2002); In re: Asbestos Litigation, 271 B.R. 118, 120 n. 2 (S.D.W.Va.2001); Sommers v. Abshire, 186 B.R. 407, 408 (E.D.Tex.1995); See contra, Ross v. Thousand Adventures of...