LM Waste Serv. Corp. v. De Isabela (In re LM Waste Serv. Corp.), CASE NO. 14-08851 (EAG)

CourtU.S. Bankruptcy Court — District of Puerto Rico
Writing for the CourtEdward A. Godoy U.S. Bankruptcy Judge
PartiesIN RE: LM WASTE SERVICE CORP., DEBTOR. LM WASTE SERVICE CORP., PLAINTIFF, v. MUNICIPIO DE ISABELA, DEFENDANT.
Decision Date19 March 2018
Docket NumberCASE NO. 14-08851 (EAG),ADV. PROCEEDING NO. 15-00125

IN RE: LM WASTE SERVICE CORP., DEBTOR.

LM WASTE SERVICE CORP., PLAINTIFF,
v.
MUNICIPIO DE ISABELA, DEFENDANT.

CASE NO. 14-08851 (EAG)
ADV. PROCEEDING NO. 15-00125

UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF PUERTO RICO

March 19, 2018


CHAPTER 11

OPINION AND ORDER

Plaintiff LM Waste Service Corp. commenced three separate adversary proceedings against: the Municipality of San German [Adv. Proc. 15-00124]; the Municipality of Isabela [Adv. Proc. 15-00125]; and the Municipality of Juana Diaz and Andres Reyes Burgos, Inc. [Adv. Proc. 15-00126]. These three proceedings are all similar. All of them were filed for the turnover of property under section 542 of the Bankruptcy Code, collection of monies, and breach of contract.1 And, all of them also mirror law suits commenced by LM Waste in state

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court prior to its filing of the voluntary petition for relief under chapter 11 of the Bankruptcy Code.

After entering an opinion and order permissibly abstaining under section 1334(c)(1) of title 28 of the United States Code in adversary proceeding 15-00126, this court ordered in the adversary proceeding of caption the Municipality of Isabela to supplement its pending motion to dismiss with a statement of proposed uncontested facts. Given the similarities between the three cases and for comity reasons, the court forewarned the parties that it would consider permissively abstaining from also hearing this case.

For the reasons stated below, the court permissibly abstains from the case and dismisses the same.

I. Procedural Background.

LM Waste filed a voluntary petition under chapter 11 of the Bankruptcy Code, which was docketed as case 14-08851 on October 29, 2014. [Bankr. Dkt. No. 1.] On May 4, 2015 it commenced this adversary proceeding. [Adv. Dkt. No. 1.] On December 1, 2015, Isabela answered the complaint and counterclaimed against LM Waste. [Adv. Dkt. No. 22.] On December 22, 2016, LM Waste answered the counterclaim. [Adv. Dkt. No. 24.]

On May 12, 2016, Isabela moved to dismiss the case. [Adv. Dkt. No. 30.] On May 23, 2016, LM Waste opposed the dismissal. [Adv. Dkt. No. 31.]

A hearing was held on December 21, 2016, where Isabela was ordered to supplement its motion to dismiss with a statement of proposed material uncontested facts and certified English translations of documents submitted as supporting exhibits. [Adv. Dkt. No. 35.] LM Waste was also ordered at that hearing to respond to Isabela's proposed statement admitting

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or denying the facts submitted by Isabela. [Id.]

On January 2, 2017, Isabela filed its statement of uncontested material facts. [Adv. Dkt. No. 37.] On the same date, Isabela filed a motion for leave to file Spanish language documents pending translation. [Adv. Dkt. No. 38.]

On January 17, 2017, LM Waste requested an extension to respond to Isabela's statement of proposed material uncontested facts until Isabela filed the certified English translations of the documents submitted as supporting exhibits. [Adv. Dkt. No. 39.] The court granted the extension request made by Isabela to submit the certified English translations until February 1, 2017 and also granted LM Waste's request to reply to the statement once the translations were filed. [Adv. Dkt. Nos. 40 & 42.]

A hearing was held on February 17, 2017 where Isabela was granted thirty days to reach an agreement with LM Waste on stipulated facts as to minimize the cost of the certified English translations. [Adv. Dkt. No. 44.]

No further documents were filed and the court scheduled a status conference for June 9, 2017. [Adv. Dkt. No. 46.] Isabela did not appear at the status conference. [Adv. Dkt. No. 49.] As such, the court denied the pending motion to dismiss. [Id.] The court then scheduled an initial scheduling conference for August 18, 2017. [Adv. Dkt. No. 50.]

On June 20, 2017, Isabela filed a motion for reconsideration of the order denying its motion to dismiss, with a second proposed statement of uncontested facts and certified English translations as supporting exhibits. [Adv. Dkt. No. 53.] LM Waste did not respond to the motion for reconsideration.

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On August 9, 2017, LM Waste filed a motion to continue the initial scheduling conference, which was granted by the court to September 22, 2017. [Adv. Dkt. No. 54.] But, the initial scheduling conference was continued to October 27, 2017 and later to December 8, 2017 due to the emergency situation in Puerto Rico caused by the passage of Hurricane María. [Adv. Dkt. Nos. 57 & 62.] On November 6, 2017, LM Waste moved again for the continuance of the initial scheduling conference and the court continued it to January 12, 2018. [Adv. Dkt. Nos. 61 & 62.] At the initial scheduling conference held on January 12, 2018, the court informed the parties it would be entering a separate opinion and order permissively abstaining for this adversary proceedings. [Adv. Dkt. No. 65.]

II. Uncontested facts.

The following facts are undisputed as found in the record of this case and the statement of proposed uncontested facts filed by Isabela at docket number 37 as supplemented at docket number 53:

On June 6, 2011, LM Waste and Isabela executed an agreement for the collection and transportation of non-hazardous solid wastes in the municipality's communities to be disposed of in the municipal landfill. [Statement of Proposed Uncontested Facts filed by Isabela ("Isabela's SUF") at ¶ 1, Adv. Dkt. Nos. 37 & 53; LM Waste's complaint at ¶ 7; Adv. Dkt. No 1.] Under the contract, LM Waste would administer and operate the municipality's landfill. [Isabela's SUF at ¶ 1, Adv. Dkt. Nos. 37 & 53; LM Waste's complaint at ¶ 7; Adv. Dkt. No 1.]

On October 11, 2013, LM Waste filed a complaint for breach of contract against Isabela in the Puerto Rico Court of First Instance, Superior Part of Aguadilla. [Isabela's SUF at ¶ 2, Adv. Dkt. Nos. 37 & 53; Exhibit 1, Adv. Dkt. No. 53-1.] On October 31, 2013, Isabela answered the

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complaint. [Isabela's SUF at ¶ 3, Adv. Dkt. Nos. 37 & 53; Exhibit 2, Adv. Dkt. No. 53-2.]

On February 3, 2014, Isabela filed in the state court an informative motion stating that it had sent to LM Waste a first set of interrogatories, request for production of documents, and request for admissions. [Isabela's SUF at ¶ 6, Adv. Dkt. Nos. 37 & 53; Exhibit 3, Adv. Dkt. No. 53-3.] On September 14, 2014, Isabela filed a motion requesting that the request for admissions be deemed admitted since LM Waste had not answered the same. [Isabela's SUF at ¶ 7, Adv. Dkt. Nos. 37 & 53; Exhibit 4, Adv. Dkt. No. 53-4.] On the same date, Isabela also moved to dismiss the case because LM Waste had not answered any of the discovery requests. [Isabela's SUF at ¶ 7, Adv. Dkt. Nos. 37 & 53; Exhibit 5, Adv. Dkt. No. 53-5.]

On November 26, 2014, LM Waste filed a petition under chapter 11 of the Bankruptcy Code. [Bankr. Dkt. No. 1; Isabela's SUF at ¶ 9, Adv. Dkt. Nos. 37 & 53.] The state court then issued a judgment staying the proceedings and administratively closing, without prejudice, the case. [Isabela's SUF at ¶ 910, Adv. Dkt. Nos. 37 & 53; Exhibit 6, Adv. Dkt. No. 53-6.] The state court also reserved jurisdiction to reopen the case upon the request of a party if the order staying the proceedings were to be set aside. [Id.]

On May 4, 2015, LM Waste filed a complaint initiating this adversary proceeding. [Adv. Dkt. No. 1; Isabela's SUF at ¶ 11, Adv. Dkt. Nos. 37 & 53.]

III. Applicable Law and Discussion.

LM Waste avers in the complaint that Isabela has an outstanding debt to the estate of $1,231,223.40 for services rendered, plus damages in an amount not less than $20,000,000 due to breach of contract. [Adv. Dkt. No. 1.]

Isabela moves the court for dismissal arguing that the claim against it does not

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constitute a core proceeding as defined in section 157 of title 28, and that LM Waste did not properly transfer the case from the state court to the bankruptcy court under Bankruptcy Rule 9027. [Adv. Dkt. No. 30.]

LM Waste opposes dismissal arguing that this is a core proceeding because the alleged breach of contract is precisely what led to the filing of the chapter 11 petition, the uncollected funds owed to...

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