LM Waste Serv. Corp. v. Diaz (In re LM Waste Serv. Corp.), CASE NO. 14–08851 EAG

CourtUnited States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — District of Puerto Rico
Writing for the CourtEdward A. Godoy, U.S. Bankruptcy Judge
Citation562 B.R. 845
Parties IN RE: LM WASTE SERVICE CORP., Debtor. LM Waste Service Corp., Plaintiff, v. Municipio De Juana Diaz ; Andres Reyes Burgos, Inc., Defendants.
Docket NumberCASE NO. 14–08851 EAG,ADV. PROCEEDING NO. 15–00126
Decision Date15 December 2016

562 B.R. 845

IN RE: LM WASTE SERVICE CORP., Debtor.

LM Waste Service Corp., Plaintiff,
v.
Municipio De Juana Diaz ; Andres Reyes Burgos, Inc., Defendants.

CASE NO. 14–08851 EAG
ADV. PROCEEDING NO. 15–00126

United States Bankruptcy Court, D. Puerto Rico.

Signed December 15, 2016


Manuel Borges, Borges Law Offices, San Juan, PR,

562 B.R. 847

Enrique J. Mendoza Mendez, Mendoza Law Offices, San Juan, PR, for Plaintiff.

Rafael A. Toro Ramirez, Toro & Arsuaga, PSC, San Juan, PR, Elizabeth Villagrasa, Gustavo A. Chico Barris, Camille N. Somoza, Ferraiuoli LLC, San Juan, PR, Sonia Colon Colon, San Juan, PR, for Defendants.

OPINION AND ORDER

Edward A. Godoy, U.S. Bankruptcy Judge

Plaintiff LM Waste Service Corp. ("LM Waste") commenced the adversary proceeding of caption against the Municipality of Juana Diaz (the "Municipality") for the turnover of property under section 542 of the Bankruptcy Code, collection of monies, and breach of contract and against Andres Reyes Burgos, Inc. ("ARB") for the tortious interference with a service contract LM Waste had with the Municipality.1 Both defendants move the court for dismissal based, among others, on the permissive abstention provisions of section 1334(c)(1) of title 28 of the United States Code.2 For the reasons stated below, the court grants the motion to abstain and dismisses the case.

I. Procedural Background.

LM Waste filed a voluntary petition under chapter 11 of the Bankruptcy Code, which was docketed as case 14–08851 on May 4, 2015. [Bankr. Dkt. No. 1.] On that same day, it also commenced this adversary proceeding. [Adv. Dkt. No. 1.] On June 25, 2015, the Municipality moved for dismissal of the complaint. [Adv. Dkt. No. 11.] On July 21, 2015, LM Waste filed its opposition to the motion to dismiss. [Adv. Dkt. No. 14.] The Municipality replied to the opposition on August 18, 2015. [Adv. Dkt. No. 18.]

A hearing was held on September 25, 2015, where LM Waste was granted seven days to supplement its opposition to the motion to dismiss and the Municipality was granted seven days thereafter to respond. [Adv. Dkt. Nos. 24 & 25.] On October 1, 2015, LM Waste filed its supplement to the opposition to dismissal [Adv. Dkt. No. 26.] On October 9, 2015, the Municipality filed its reply. [Adv. Dkt. No. 29.] LM Waste filed a sur-reply on February 18, 2016. [Adv. Dkt. No. 43.]

On February 17, 2016, ARB filed a motion requesting the court to abstain from hearing this case. [Adv. Dkt. No. 42.] On March 3, 2016, ARB moved the court for an order to grant the motion for abstention as unopposed. [Adv. Dkt. No. 47.] On March 4, 2016, LM Waste opposed ARB's motion requesting the entry of order as unopposed, and opposed the motion to abstain on March 7, 2016. [Adv. Dkt. Nos. 49 & 50.] On March 31, 2016, ARB replied to LM Waste's opposition to the abstention request. [Adv. Dkt. No. 56.] On April 4, 2016, LM Waste filed a motion to inform recent case law from the United State District Court for the District of Puerto Rico on a recently enacted state law on judgments against Puerto Rico municipalities. [Adv. Dkt. No. 57.]

562 B.R. 848

A hearing on the abstention and dismissal requests was held on April 8, 2016, where the defendants were granted 14 days to supplement their legal memoranda with respect to: (i) recent case law from the District of Puerto Rico on judgments against municipalities and (ii) whether LM Waste met the deadlines to remove this case from state court to bankruptcy court. [Adv. Dkt. Nos. 58 & 59.] The court also granted LM Waste 14 days thereafter to respond to the defendants' supplements. [Id.]

On April 18 and 22, 2016, ARB and the Municipality, respectively, filed their briefs in compliance with the order. [Adv. Dkt. Nos. 61 & 64.] On April 29, 2016, LM Waste filed its response. [Adv. Dkt. No. 65.] And on April 30, 2016, ARB replied to LM Waste's response. [Adv. Dkt. No. 66.]

After several continuance requests, a non-evidentiary hearing was held on June 17, 2016 on the abstention and dismissal requests filed by the defendants. [Adv. Dkt. Nos. 78 & 79.] At that hearing, the court granted both defendants 14 days to file a joint statement of uncontested facts with certified English translations of documents submitted as supporting exhibits. [Id.] The court granted LM Waste 28 days thereafter to respond and to file its own statement of uncontested facts. [Id.]

On June 30, 2016, ARB and the Municipality filed their statement of uncontested facts. [Adv. Dkt. No. 81.] On July 14, 2016, ARB and the Municipality filed a joint motion submitting certified translations. [Adv. Dkt. No. 82.] On August 10, 2016, LM Waste filed its statement of uncontested facts. [Adv. Dkt. No. 86.] On August 12, 2016, ARB filed a motion for leave to reply to LM Waste's statement of uncontested facts. [Adv. Dkt. No. 87.]

II. Uncontested facts

The following facts are undisputed as found in the record of this case and the statements of proposed uncontested facts filed by the parties at docket numbers 81 and 86:

On June 30, 2011, LM Waste and the Municipality executed an agreement for the collection and transportation of non-hazardous solid wastes in the Municipality to be disposed of in the municipal landfill. [Statement of Proposed Uncontested Facts filed by the ARB and the Municipality ("ARB/Municipality's SUF") at ¶ 1, Adv. Dkt. No. 81; LM Waste's Statement of Uncontested Facts and Reply ("LM Waste's Reply") at ¶ 8, Adv. Dkt. No. 86.]

On September 3, 2013, LM Waste filed a complaint against the defendants in the Puerto Rico Court of First Instance, Superior Court of Ponce (the "state court"). [ARB/Municipality's SUF at ¶ 2, Adv. Dkt. No. 81; LM Waste's Reply at ¶ 8, Adv. Dkt. No. 86.] LM Waste requested in its complaint damages against the Municipality for breach of contract and against ARB for tortious interference of the contract with the Municipality. [Id.] On December 13, 2013, LM Waste amended its complaint. [ARB/Municipality's SUF at ¶ 3, Adv. Dkt. No. 81; LM Waste's Reply at ¶ 8, Adv. Dkt. No. 86.]

On February 10, 2014, the parties filed a case management report disclosing their exhibits, witnesses, stipulated evidence, and discovery schedule. [ARB/Municipality's SUF at ¶ 4, Adv. Dkt. No. 81; LM Waste's Reply at ¶ 8, Adv. Dkt. No. 86.] On April 4, 2014, ARB filed a motion to dismiss the amended complaint. [ARB/Municipality's SUF at ¶ 5, Adv. Dkt. No. 81; LM Waste's Reply at ¶ 8, Adv. Dkt. No. 86.] And on May 1, 2014, the Municipality answered the amended complaint and counterclaimed. [ARB/Municipality's SUF at ¶ 6, Adv. Dkt. No. 81; LM Waste's Reply at ¶ 8, Adv. Dkt. No. 86.]

562 B.R. 849

On May 15, 2014, the state court granted ARB's motion to deem unopposed its motion to dismiss through an order notified on May 20, 2015. [ARB/Municipality's SUF at ¶ 7, Adv. Dkt. No. 81; LM Waste's Reply at ¶ 8, Adv. Dkt. No. 86.] On June 4, 2014, LM Waste filed a motion for reconsideration of the dismissal order in favor of ARB. [ARB/Municipality's SUF at ¶ 8, Adv. Dkt. No. 81; LM Waste's Reply at ¶ 8, Adv. Dkt. No. 86.]

On June 17, 2014, the Municipality moved for the entry of default on its counterclaim against LM Waste. [ARB/Municipality's SUF at ¶ 9, Adv. Dkt. No. 81; LM Waste's Reply at ¶ 8, Adv. Dkt. No. 86.] On July 8, 2014, the state court held a status conference in which it imposed deadlines to answer pending motions and scheduled a pretrial conference for October 29, 2014. [ARB/Municipality's SUF at ¶ 10, Adv. Dkt. No. 81; LM Waste's Reply at ¶ 8, Adv. Dkt. No. 86.]

On July 14, 2014, LM Waste filed its answer to the counterclaim. [ARB/Municipality's SUF at ¶ 11, Adv. Dkt. No. 81; LM Waste's Reply at ¶ 8, Adv. Dkt. No. 86.] On July 22, 2014, ARB served LM Waste with a set of interrogatories and request for production of documents. [ARB/Municipality's SUF at ¶ 12, Adv. Dkt. No. 81; LM Waste's Reply at ¶ 8, Adv. Dkt. No. 86.] And on October 17, 2014, ARB filed a motion to compel discovery because LM Waste had not complied with the requested discovery. [ARB/Municipality's SUF at ¶ 13, Adv. Dkt. No. 81; LM Waste's Reply at ¶ 8, Adv. Dkt. No. 86.]

On October 29, 2014, LM Waste filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code. [ARB/Municipality's SUF at ¶ 14, Adv. Dkt. No. 81; LM Waste's Reply at ¶ 8, Adv. Dkt. No. 86.] Also on October 29, 2014, LM Waste told the state court at a pretrial and settlement conference that it had filed for bankruptcy. [SUF at ¶ 15, Adv. Dkt. No. 81; LM Waste's Reply at ¶ 8, Adv. Dkt. No. 86.]

The state court then issued a judgment staying the proceedings and administratively closing the case without prejudice and without the imposition of costs or attorneys' fees. [SUF at ¶ 15, Adv. Dkt. No. 81; LM Waste's Reply at ¶ 11, Adv. Dkt. No. 86; State Court Judgment dated October 29, 2014; Adv. Dkt. No. 86–2.] The state court also reserved jurisdiction to reopen the case upon the request of a party if the order staying the proceedings were overruled, and stated that the judgment would be considered final if the claims were fully adjudicated in bankruptcy court. [Id.]

On May 4, 2015, LM Waste filed a complaint initiating this adversary proceeding....

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