Marah Wood Prods., LLC v. Jones

• Decision Date: 22 July 2015
• Docket Number: No. 3:15–cv–100 SRU.,3:15–cv–100 SRU.
• Citation: 534 B.R. 465
• Court: U.S. District Court — District of Connecticut
• Parties: MARAH WOOD PRODUCTIONS, LLC, Plaintiff, v. Ruth M. JONES, et al., Defendants.

534 B.R. 465

MARAH WOOD PRODUCTIONS, LLC, Plaintiff

v.Ruth M. JONES, et al., Defendants.

No. 3:15–cv–100 SRU.

United States District Court, D. Connecticut.

Signed July 22, 2015.

Jonathan B. Nelson, Dorf & Nelson, LLP, Rye, N.Y., Heather Michelle Brown, Legal Consulting Group LLC, New Canaan, CT, for Plaintiff.

David M. Wallman, Wallman Law Firm, Stamford, Timothy D. Miltenberger, Coan, Lewendon, Gulliver & Miltenberger, New Haven, CT, for Defendant.

Ruth M. Jones, New Canaan, CT, pro se.

RULING AND ORDER DENYING MOTION FOR REMAND

STEFAN R. UNDERHILL, District Judge.

On January 9, 2015, plaintiff Marah Wood Productions, LLC (“MWP”) commenced an interpleader action pursuant to section 52–484 of the Connecticut General Statutes in the Connecticut Superior Court, Judicial District of New Haven at New Haven. Named as defendants were debtor-defendant Ruth M. Jones and defendants Imperial Real Estate Holdings, LLC (“Imperial”); Property Management & Real Estate Services, LLC (“PMRES”); David House; and Richard Coan (“the Trustee”), trustee for the Jones bankruptcyestate. The interpleader action seeks to adjudicate competing claims regarding a property interest in a fund (“Fund”) containing approximately $468,600. Notice of Removal, Ex. A, at 1–2 (doc. 1–1). On January 23, 2015, the Trustee removed the action to the United States District Court for the District of Connecticut,¹ alleging that the Fund is the property of the Jones bankruptcy estate and is thus related to Jones's bankruptcy case. Notice of Removal 2. Jones objected to the removal (doc. 11) and filed a motion to remand this case to state court (doc. 14), arguing that this court lacks jurisdiction, or in the alternative, that I should abstain from exercising jurisdiction over the interpleader action on equitable grounds, pursuant to 27 U.S.C. § 1452(b). Both the Trustee (doc. 18) and MWP (doc. 20) filed objections to Jones's motion for remand.

Based on the entire record before me and the reasons set forth in this ruling and order, Jones's motion for remand (doc. 14) is denied.

I. Standard of Review

A party seeking to remove an action from state to federal court bears the burden of proving federal jurisdiction. Montefiore Med. Ctr. v. Teamsters Local 272, 642 F.3d 321, 327 (2d Cir.2011) (citing Cal. Pub. Emps.' Ret. Sys. v. WorldCom, Inc., 368 F.3d 86, 100 (2d Cir.2004) ). A federal court evaluates whether subject matter jurisdiction exists based on the jurisdictional facts set forth in the pleadings at the time when the defendant files its notice of removal. Blockbuster, Inc. v. Galeno, 472 F.3d 53, 56–57 (2d Cir.2006). Further, removal statutes are strictly construed against removal. Syngenta Crop Protection, Inc. v. Henson, 537 U.S. 28, 32, 123 S.Ct. 366, 154 L.Ed.2d 368 (2002) (citing Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108–09, 61 S.Ct. 868, 85 L.Ed. 1214 (1941) ); In re Methyl Tertiary Butyl Ether (“MTBE”) Prods. Liab. Litig., 488 F.3d 112, 124 (2d Cir.2007).

II. Background

The Trustee asserts the following jurisdictional facts regarding removal of MWP's interpleader action from state to federal court. On August 14, 2009, Jones filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code, 11 U.S.C. § 1101 et seq. Trustee's Opp'n Br. 1.² Jones's reorganization efforts failed, and Coan was appointed trustee of the Ruth Jones Chapter 11 bankruptcy estate on February 25, 2011. Id. On April 23, 2013, Jones's bankruptcy was converted to a Chapter 7 (liquidation) bankruptcy, 11 U.S.C. § 701 et seq., and Coan remained the trustee for the Chapter 7 bankruptcy estate. Id. at 2; Notice of Removal ¶ 2.

On June 18, 2013, Jones endorsed a check for $438,350.00 to MWP, and she “directed or caused” an additional $30,000.00 to be wire transferred from PMRES to MWP. Notice of Removal, Ex. A (Complaint), at 1 (doc. 1–1). MWP continues to hold those funds, which total $468,500. Jones contends that she had entered into a joint venture with MWP's members, Robert Deak and Moshira Soliman, to develop certain real property located at 102 Locust Avenue, New Canaan, Connecticut. Notice of Removal, Ex. A (Complaint) ¶¶ 7–8, 10–13. The Trustee alleges that the Fund includes monies that Jones received for services performed during the pendency of her Chapter 11 bankruptcy, and consequently, asserts ownership over the Fund itself. Trustee's Opp'n Br. 2. Jones contends that she received the monies that comprise the Fund after her bankruptcy was converted to a Chapter 7 bankruptcy, and thus alleges that the Fund does not include assets that are part of the bankruptcy estate. Jones Mot. Remand 5.

Jones avers that the funds transferred to MWP were in fact a loan to Imperial for the purchase and development of the 102 Locust Avenue property, and on November 21, 2014, she commenced a lawsuit in the Connecticut Superior Court, Judicial District of Stamford/Norwalk at Stamford, seeking the return of the monies in MWP's Fund, as well as other alleged damages for breach of several contracts. See generally Compl., Ruth Jones v. Robert L. Deak, No. FST–CV14–6023913–S (Conn.Super. Nov.25, 2014) (http://civilinquiry.jud.ct.gov/CaseDetail/PublicCaseDetail.aspx?DocketNo=FSTCV146023913). Shortly after Jones filed her civil action, MWP commenced this interpleader action in state court on January 9, 2015, naming the Trustee as one of several defendants asserting ownership of or claims against the Fund. Notice of Removal, Ex. A (Complaint), at 1. On January 23, 2015, the Trustee appeared in the state case and removed MWP's interpleader action to federal court, noting that the case was “related to” the Jones bankruptcy estate. Notice of Removal 3; Trustee's Opp'n Br. 3. On February 23, 2015, Jones moved to remand the interpleader case to state court.

III. Discussion

A. The District Court's “Related To” Jurisdiction

Section 1452(a) provides that cases filed in state court may be removed to federal court if they are related to bankruptcy proceedings. 28 U.S.C. § 1452(a) (“A party may remove any claim or cause of action in a civil action ... 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.”). Section 1334(b) provides, “the district courts shall have original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to a case under title 11. ” 28 U.S.C. § 1334(b) (emphasis added). In his notice of removal, the Trustee invokes the “related to” provision of section 1334(b) to invoke this Court's jurisdiction and remove MWP's interpleader action to federal court.

The Supreme Court has noted that although Congress did not define the scope of “related to” jurisdiction, it departed from its prior construction of section 1334 and instead created a broader and more open-ended construction of the district court's “related to” jurisdiction. Celotex Corp. v. Edwards, 514 U.S. 300, 307–08, 115 S.Ct. 1493, 131 L.Ed.2d 403 (1995) (“Congress intended to grant comprehensive jurisdiction to the bankruptcy courts so they might deal efficiently and expeditiously with all matters connected with the bankruptcy estate.” (internal citation omitted)). That broader construction allows for the removal of otherwise non-removable claims to federal court on the basis of the district court's concurrent jurisdiction regarding bankruptcy claims. Cf. In re WorldCom, Inc. Secs. Litig.,

293 B.R. 308, 329–30 (S.D.N.Y.2003) (analyzing the framework for removal pursuant to section 1452(a) ). Nevertheless, “related to” jurisdiction is not limitless. Edwards, 514 U.S. at 308, 115 S.Ct. 1493.

The Second Circuit has noted that litigation may fall within the district court's “related to” jurisdiction if the outcome of that litigation “might have any ‘conceivable effect’ on the bankrupt estate.” In re Cuyahoga Equip. Corp., 980 F.2d 110, 114 (2d Cir.1992) (citing In re Turner, 724 F.2d 338, 340–41 (2d Cir.1983), and Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3d Cir.1984) ); see also In re Quigley Co., 676 F.3d 45, 57 (2d Cir.2012). Elaborating on that principle, the Second Circuit has held, in the context of a Chapter 11 bankruptcy, that a bankruptcy estate encompasses “all legal or equitable interests of the debtor as of the commencement of the case,” including “causes of action possessed by the debtor at the time of filing,” In re Jackson, 593 F.3d 171, 176 (2d Cir.2010), and any “interest in property that the trustee recovers.” In re Bernard L. Madoff Inv. Secs. LLC, 740 F.3d 81, 88 (2d Cir.2014) (citing in part 11 U.S.C. § 541(a)(3) ). Accordingly, “related to” jurisdiction may attach to “[e]very conceivable interest of the debtor, future, nonpossessory, contingent, speculative, and derivative.” Id. (citing Chartschlaa v. Nationwide Mut. Ins. Co., 538 F.3d 116, 122 (2d Cir.2008) ). Thus, any civil action that affects the kinds of interests described above may be sufficient to trigger section 1452(a)'s removal provisions.³

Based on the Supreme Court and Second Circuit's formulation of “related to” jurisdiction, a case in which the parties' “claims bring into question the very distribution of the estate's property” and its allocation “undoubtedly” vests the district court with the power to approve that allocation or distribution. In re Cuyahoga Equip. Corp., 980 F.2d at 114–15 ; see also Olick v. Parker & Parsley Petroleum Co., 145 F.3d 513, 515 (2d Cir.1998) (holding that fees accrued for services rendered after the commencement of Chapter 13 bankruptcy, and “any causes of action possessed by the debtor” with respect to those fees, were the property of the bankruptcy estate); In re Ionosphere Clubs, Inc., 156 B.R. 414 (S.D.N.Y.1993), aff'd, 17 F.3d 600 (2d Cir.1994) (causes of action may become assets of the estate once bankruptcy petition is filed).

Jones argues that (1) the Fund belongs to the joint venture, not to Jones as an individual; (2) that...