Resler v. Helton (In re Resler)
| Decision Date | 21 March 2019 |
| Docket Number | Adv. No. 18-06020-TLM,Case No. 15-00477-TLM |
| Parties | IN RE TIMOTHY RESLER and KIMBERLY RESLER, Debtors. TIMOTHY RESLER, an individual, Plaintiff, v. BEN HELTON, an individual; MINERAL KING, LLC d/b/a TOTAL MAINTENANCE SOLUTIONS, an Idaho limited liability company, Defendants. |
| Court | U.S. Bankruptcy Court — District of Idaho |
On April 16, 2015, Timothy Resler ("Resler") and Kimberly Resler (collectively, "Debtors") filed a petition under chapter 7.1 That case remains openand is being administered by the chapter 7 trustee, Janine Reynard ("Trustee").2
On May 30, 2018, Resler filed in the District Court of the Fourth Judicial District of the State of Idaho, Ada County, a complaint against Ben Helton ("Helton") and Mineral King, LLC d/b/a Total Maintenance Solutions ("Mineral King"), that was assigned Case No. CV01-18-10080 (the "State Court Action"). See Adv. Doc. No. 1-1 ("Complaint"). On July 5, 2018, Helton and Mineral King filed a notice of removal of the State Court Action to this Court. Adv. Doc. No. 1. ("Removal Notice"). On August 8, 2018, Resler filed a motion to remand the State Court Action. Adv. Doc. No. 3 ("Remand Motion"). Helton and Mineral King (together the "Defendants") objected to the Remand Motion, as did the Trustee. Adv. Doc. Nos. 4, 5 (the "Objections").
The Remand Motion and Objections were heard on September 10, 2018, and taken under advisement. The Court resolves the matter by this Decision.3
Rule 9027(a) requires a notice of removal under 28 U.S.C. § 1452 to "contain a short and plain statement of the facts which entitle the party filing the notice" to removal, and it also requires that party to state whether it "does or does not consent to entry of final orders or judgment by the bankruptcy court[.]" The Removal Notice here asserts that removal is made "[p]ursuant to 28 U.S.C. §§ 1452, 1478, and Bankruptcy Rule 9027[.]" It also alleges this Court has jurisdiction under 28 U.S.C. § 1334.4 The Removal Notice also asserts this litigation "is a 'core proceeding' under 28 U.S.C. § 157(b)(2)(O)" and that, under Rule 9027(a)(1) Defendants consent to entry of final orders and judgment by this Court.5
Removal under 28 U.S.C. § 1452(a) requires the district court to havejurisdiction under 28 U.S.C. § 1334.6 However, the guidance that has been provided in connection with removal of actions to the U.S. District Court under 28 U.S.C. § 1332 and 1441(a) is instructive. In Gaus v. Miles, Inc., 980 F.2d 564 (9th Cir. 1992), the Court of Appeals stated:
We strictly construe the removal statute against removal jurisdiction. Boggs v. Lewis, 863 F.2d 662, 663 (9th Cir. 1988); Takeda v. Northwestern Nat'l Life Ins. Co., 765 F.2d 815, 818 (9th Cir. 1985). Federal jurisdiction must be rejected if there is any doubt as to the right of removal in the first instance. Libhart v. Santa Monica Dairy Co., 592 F.2d 1062, 1064 (9th Cir. 1979).
980 F.2d at 566. Additionally:
The "strong presumption" against removal jurisdiction means that the defendant always has the burden of establishing that removal is proper. Nishimoto v. Federman-Bachrach & Assocs., 903 F.2d 709, 712 n.3 (9th Cir. 1990); Emrich v. Touche Ross & Co., 846 F.2d 1190, 1195 (9th Cir. 1988).
Id. Gaus further notes that "the defendant bears the burden of actually proving the facts to support jurisdiction[.]" Id. at 567 ().7 In regard to that burden:
The authority which the statute vests in the court to enforce the limitations of its jurisdiction precludes the idea that jurisdiction may bemaintained by mere averment or that the party asserting jurisdiction may be relieved of his burden by any formal procedure. If his allegations of jurisdictional facts are challenged by his adversary in any appropriate manner, he must support them by competent proof. And where they are not so challenged the court may still insist that the jurisdictional facts be established or the case be dismissed[.]
Id. (quoting McNutt v. Gen. Motors Acceptance Corp., 298 U.S. 178 (1936)).
Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 109 (1941), held that, in the context of removal, federal courts are required to "scrupulously confine their own jurisdiction to the precise limits which the statute has defined." Thus, even without a party raising the issue, the Court must independently evaluate its jurisdiction. See Henderson v. Shinseki, 562 U.S. 428, 434 (2011) ().8 Moreover, a federal court must "examine the 'well pleaded' allegations of the complaint and ignore potential defenses" in determining its jurisdiction to hear an action removed from state court. Beneficial Nat'l Bank v. Anderson, 539 U.S. 1, 6 (2003).
The state court Complaint, for obvious reasons, makes no allegations regarding federal jurisdiction. This requires the Court to evaluate whetherDefendants have, by reference to the "well-pleaded" allegations of the Complaint, carried the burden of establishing the causes alleged fall within this Court's jurisdiction.
Under 28 U.S.C. § 1334(b), the district court (and this Court by reference) has "original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11." A proceeding "arises under" Title 11 when the cause of action is created or decided by a provision of Title 11. In re Harris Pine Mills, 44 F.3d 1431, 1435 (9th Cir. 1995). The term "arising in" refers to those matters that arise only in a bankruptcy case, i.e., matters that are not based on any right created by Title 11 but which, nevertheless, would have no existence outside bankruptcy. Id. (citing In re Wood, 825 F.2d 90, 96-97 (5th Cir. 1987).
A civil proceeding is "related to" a case under Title 11 if "the outcome of the proceeding could conceivably have any effect on the estate being administered in bankruptcy," including those proceedings where "the outcome could alter the debtor's rights, liabilities, options, or freedom of action (either positively or negatively) and which in any way impacts upon the handling and administration of the bankruptcy estate." Fietz v. Great W. Savings (In re Fietz), 852 F.2d 455, 457 (9th Cir. 1988) ().
Assuming the removal is shown to be proper, a removed action may be remanded "on any equitable ground." 28 U.S.C. § 1452(b). The "any equitable ground" standard Lake Country Invs., LLC v. Stewart (In re Lake Country Invs., LLC), 2000 WL 33712216, *3 (Bankr. D. Idaho July 10, 2000) (quoting McCarthy v. Prince (In re McCarthy), 230 B.R. 414, 417 (9th Cir. BAP 1999) (citation omitted)).
As noted above, the burden is on Defendants, as removing parties, to establish that the Court has jurisdiction over the removed action. The Removal Notice's contentions regarding jurisdictional facts, Adv. Doc. No. 1 at 2-4, were challenged by Resler. Adv. Doc. Nos. 3, 3-1. At hearing, Defendants presented no evidence, nor did they request judicial notice under Fed. R. Evid. 201. Defendants rely instead on Resler's assertions in the Complaint, and on their interpretations and characterizations of the factual and legal effect of those assertions in the Removal Notice and their Objection to remand.
Consistent with the above authorities, and given Defendants' approach totheir burden, the Court will focus on the allegations made by Resler in the Complaint.
Resler contends that he, along with Helton, was an "owner" of an Idaho limited liability company called Total Maintenance Solutions, LLC ("TMS"), that performed landscaping services. Though there are unclear statements about TMS being "dissolved" at some unidentified point, Resler asserts that in 2014 he "sold" his TMS member interest to Helton. Helton, in turn, and as part of the negotiation regarding the purchase price for such interest, agreed to employ Resler as a full-time consultant to TMS. Resler and TMS entered into a July 2, 2014 consulting agreement that provided for an annual $175,000 fee to Resler, payable monthly. See Complaint at Ex. A, pp. 12-13 (the "Consulting Agreement").9 The Consulting Agreement is between TMS and Resler alone; Helton is a signatory only for TMS, and Mineral King is not involved.
Resler alleges Helton later wanted Mineral King to "formally purchase" Resler's member interest in TMS, and that this required a second purchase and sale agreement and another consulting agreement. Helton purportedly discussed dissolving TMS but ultimately determined Mineral King would take over use of the TMS name and assume TMS's liabilities. Resler asserts that he agreed, andentered into and signed a second consulting agreement with Mineral King. This subsequent agreement, unlike the Consulting Agreement, is not of record, and its date is not clear. It allegedly required full-time services from Resler and again provided a $175,000/year fee for those services.10
The Complaint then alleges Helton "convinced Resler" to cancel this second consulting agreement on the basis that Resler, Helton and Bob Wheeler would form a new company in which Resler would be an owner. Resler contends he agreed and the second consulting agreement (i.e., with Mineral King) was "cancelled" in November 2014, but that he was still being paid under the earlier and "original" TMS...
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