Meritage Homes Corp. v. JPMorgan Chase Bank, N.A.
Decision Date | 26 June 2012 |
Docket Number | Adversary No. 11–2388. |
Citation | 474 B.R. 526 |
Parties | MERITAGE HOMES CORPORATION and Meritage Homes of Nevada, Inc., Plaintiffs and Counter–Defendants, v. JPMORGAN CHASE BANK, N.A., Defendant and Counter–Claimant. |
Court | U.S. Bankruptcy Court — Southern District of Ohio |
OPINION TEXT STARTS HERE
Tiffany Strelow Cobb, Columbus, OH, Reginald W. Jackson, Vorys, Sater, Seymour and Pease, LLP, Columbus, OH, for Plaintiff.
Alexander M. Andrews, Ulmer & Berne LLP, Columbus, OH, Todd A. Atkinson, Ulmer & Berne LLP, Cleveland, OH, James E. Hough, New York, NY, for Defendant.
In this adversary proceeding, the Court is serving as a stopover on the road to litigation elsewhere because the parties agree that the merits of their dispute should be adjudicated by a court other than this one. They disagree, however, on which tribunal should decide those merits.
Meritage Homes Corporation and Meritage Homes of Nevada, Inc.1 filed a complaint (“State Court Complaint”) commencing a lawsuit (“State Court Action”) against JPMorgan Chase Bank, N.A. (“JPMorgan”) in the Common Pleas Court of Franklin County, Ohio (“Ohio State Court”). On September 2, 2011 (“Removal Date”), JPMorgan filed its notice of removal (“Notice of Removal”) (Doc. 1) pursuant to 28 U.S.C. § 1452(a)2 and Rule 9027(a) of the Federal Rules of Bankruptcy Procedure (“Bankruptcy Rule”),3 contending that removal was appropriate because the State Court Action was “related to” the bankruptcy case of a third entity, South Edge, LLC (“South Edge”), within the meaning of 28 U.S.C. § 1334(b).4 South Edge's bankruptcy case, captioned In re South Edge, LLC, Case No. 10–32968 (“South Edge Bankruptcy Case”), is pending in the United States Bankruptcy Court for the District of Nevada (“Nevada Bankruptcy Court”).
JPMorgan then filed a motion (“Transfer Motion”) (Doc. 2) requesting that the State Court Action be transferred to the United States District Court for the District of Nevada (“Nevada Federal District Court”) on several grounds: (1) the South Edge Bankruptcy Case is pending in the Nevada Bankruptcy Court; (2) Meritage's appeal of the order (“Confirmation Order”) 5 confirming South Edge's Chapter 11 plan (“Plan”) 6 is pending in the Nevada Federal District Court; and (3) the Nevada Federal District Court is already familiar with the facts and issues presented in the State Court Action because it has presided over other lawsuits arising out of the same real estate development in Nevada (described below) that gave rise to the State Court Action.
In response, Meritage filed a motion for remand (“Remand Motion”) (Doc. 12), arguing that no basis for removal exists because the State Court Action could not conceivably have had any effect on the bankruptcy estate of South Edge (“Estate”) on the Removal Date and, therefore, the State Court Action was not related to the South Edge Bankruptcy Case on that date. Meritage further argues that, even if the State Court Action was related to the South Edge Bankruptcy Case on the Removal Date, it must be remanded for lack of jurisdiction because it was not removed to the United States District Court for the Southern District of Ohio (“Ohio Federal District Court”). Finally, Meritage contends that, as a result of the confirmation of the Plan and other events that occurred subsequent to the Removal Date, the State Court Action is no longer related to the South Edge Bankruptcy Case. As a result, Meritage argues, no federal court has jurisdiction over the State Court Action, meaning that equitable remand of the State Court Action pursuant to 28 U.S.C. § 1452(b) and permissive abstention under 28 U.S.C. § 1334(c)(1) are both warranted.
For the reasons set forth below, the Court concludes that: (1) removal was appropriate because the State Court Action was related to the South Edge Bankruptcy Case on the Removal Date; (2) a transfer to the Nevada Federal District Court is warranted based on, among other reasons, the continued relatedness of the State Court Action to the South Edge Bankruptcy Case as of the present time; and (3) although neither equitable remand nor permissive abstention appears to be appropriate, the ultimate decision on the proprietyof remand and abstention should be made in the District of Nevada. The Court accordingly concludes that the Transfer Motion should be granted and the Remand Motion denied without prejudice to its renewal in the District of Nevada. But because the parties have not consented to the Court's entry of final orders, and because, as explained below, there is a question whether an order transferring an adversary proceeding to another federal court is a final order, the Court is submitting this opinion as a report and recommendation to the Ohio Federal District Court.
Meritage argues that the Court lacks jurisdiction to do anything other than remand the State Court Action because JPMorgan removed it here rather than to the Ohio Federal District Court. The parties have spent much time addressing the split of authority and debating the various arguments concerning the issue of whether state court actions should be removed to district courts rather than directly to bankruptcy courts. There are good arguments on both sides of the debate. Compare Indus. Clearinghouse, Inc. v. Mims (In re Coastal Plains, Inc.), 338 B.R. 703, 710 (N.D.Tex.2006) ( ) with Searcy v. Knostman, 155 B.R. 699, 704 (S.D.Miss.1993) ( ). But the Court need not choose a side in this debate. Because even if the State Court Action should have been removed to the Ohio Federal District Court, the Court clearly has the jurisdiction to at least hear the Transfer Motion and Remand Motion.
Although the United States Court of Appeals for the Sixth Circuit has not addressed the issue, decisions of several other federal courts of appeals support the proposition that the removal of a state court action directly to a bankruptcy court does not require remand and does not result in the bankruptcy court lacking jurisdiction to at least hear the matter. See Townsquare Media, Inc. v. Brill, 652 F.3d 767, 770 (7th Cir.2011) ( ); Geruschat v. Ernst Young LLP (In re Seven Fields Dev. Corp.), 505 F.3d 237, 246–47 & n. 8 (3d Cir.2007) () ; Specialty Mills, Inc. v. Citizens State Bank, 51 F.3d 770, 773 n. 4 (8th Cir.1995) (); Creasy v. Coleman Furniture Corp., 763 F.2d 656, 661 n. 5 (4th Cir.1985) (). See also Calvary Baptist Temple v. Church Mortg. Acceptance Co., LLC, 2011 WL 2457405, at *1 (S.D.Ga. June 16, 2011) () .
In light of the foregoing, the Court concludes that a remand based on the removal of the State Court Action to this Court rather than to the District Court would be unwarranted. And, given the relatedness of the State Court Action to the South Edge Bankruptcy (an issue discussed in detail below), the Court concludes that it has the jurisdiction to hear the Transfer Motion and the Remand Motion pursuant to 28 U.S.C. §§ 157 and 1334 and the general order of reference entered in the Ohio Federal District Court (“General Order”).7
The more difficult question is whether the Court has the authority to enter a final order remanding or transferring the State Court Action absent the consent of the parties, or whether the Court instead must, as the bankruptcy court did in the Calvary Baptist Temple case, submit a report and...
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