Townsquare Media Inc. v. Brill

• Decision Date: 21 July 2011
• Docket Number: Nos. 10–3017,10–3018.,s. 10–3017
• Citation: 652 F.3d 767,55 Bankr.Ct.Dec. 47
• Parties: TOWNSQUARE MEDIA, INC., formerly known as Regent Communications, Inc., Defendant–Appellant,v.Alan R. BRILL, et al., Plaintiffs–Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

652 F.3d 767

55 Bankr.Ct.Dec. 47

TOWNSQUARE MEDIA, INC., formerly known as Regent Communications, Inc., Defendant–Appellant,

v.Alan R. BRILL, et al., Plaintiffs–Appellees.

Nos. 10–3017

10–3018.

United States Court of Appeals, Seventh Circuit.

Argued Jan. 19, 2011.Decided July 21, 2011.

David C. Campbell, Attorney, Bingham McHale LLP, Indianapolis, IN, for Debtors–Appellees in No. 10–3017.David C. Campbell, Phillip J. Fowler (argued), Attorneys, Bingham McHale LLP, Indianapolis, IN, for Debtors–Appellees in No. 10–3018.J. Michael Debbeler, Attorney, Graydon, Head & Ritchey, Cincinnati, OH, Cindy C. Kelly (argued), Attorney, Kasowitz, Benson, Torres & Friedman, New York, NY, for Appellant.Before POSNER, KANNE, and ROVNER, Circuit Judges.POSNER, Circuit Judge.

This appeal requires us to plumb the mysteries of removal and remand in the context of bankruptcy.

Section 1446(a) of the Judicial Code (Title 28) specifies procedures for removing a case from a state court to a federal district court. Section 1447 specifies procedures after removal, and in subsection (c) provides that “a motion to remand [a case removed from a state court to a federal district court] on the basis of any defect other than lack of subject matter jurisdiction must be made within 30 days after the filing of the notice of removal under section 1446(a). If at any time before final judgment [in the removed case] it appears that the district court lacks subject matter jurisdiction, the case shall be remanded [to the state court].”

The next subsection, however, provides that “an order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise.” 28 U.S.C. § 1447(d). As an original matter, this broad rule of nonappealability (with the exception, also in (d), inapplicable to this case, of remands in civil rights cases governed by 28 U.S.C. § 1443) would, one would have thought, make subsection (c) irrelevant to the appealability of a remand. But in Thermtron Products, Inc. v. Hermansdorfer, 423 U.S. 336, 345–46, 96 S.Ct. 584, 46 L.Ed.2d 542 (1976), overruled on other grounds in Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 116 S.Ct. 1712, 135 L.Ed.2d 1 (1996), the Supreme Court held that (c) limits (d): only cases remanded under (c) are nonappealable. The only cases remanded under (c) are ones in which either it appears that the district court lacks subject-matter jurisdiction or there was some other “defect” in the removal, though in the latter case a motion to remand the case has to have been made within 30 days after the notice of removal was filed. Only the first ground for remand is relevant in this case because there was no timely motion to remand; so to simplify exposition we'll pretend that only if absence of subject-matter jurisdiction is the ground for remand is the remand order nonappealable.

The Supreme Court has adhered to the limiting interpretation of subsection (d), most recently in Carlsbad Technology, Inc. v. HIF Bio, Inc., 556 U.S. 635, 129 S.Ct. 1862, 173 L.Ed.2d 843 (2009), despite the evident misgivings of the Justices themselves, which we'll discuss later.

A further complication is the existence of a separate statute governing removal of bankruptcy cases, 28 U.S.C. § 1452(b), under which this case was removed. But we'll see that this court has held that the limitations in section 1452(b) on appeal are identical to the limitations in section 1447. So if but only if absence of subject-matter jurisdiction was the ground for the remand in this case, the remand is not appealable and we must therefore dismiss the appeal.

Enough, for the moment, about statutes; we need to tell the reader about the case. Alan Brill owned a number of media companies. In 2002 creditors forced several of them into a Chapter 11 bankruptcy. Neither Brill nor Brill's other companies were debtors in the bankruptcy proceeding.

The bankruptcy judge ordered that the radio stations owned by the debtors be auctioned off. See 11 U.S.C. § 363. Brill bid at the auction, but the successful bidder was Regent, as we will refer to the principal appellant despite its change of name (we can ignore the other appellants). The bankruptcy plan was confirmed in 2003. Essentially it was a liquidation, although the bankrupt companies were not dissolved.

Years later Brill (we can ignore his co-plaintiffs—other firms that he owns) sued Regent, along with pre-judgment creditors of the debtors and some of the debtors' lawyers and other professional advisors (“bankruptcy professionals,” they are called), in an Indiana state court. The 111–page complaint contained a multiplicity of tort and contract claims. The creditors were alleged to have violated the terms of the bond covenants and by these and other means to have forced the debtors to default on their bonds. The main allegations against the bankruptcy professionals were that they had misused confidential information and encouraged Regent to violate two confidentiality agreements that it had made with Brill. The complaint charged Regent mainly with those violations plus fraud. All claims were based on Indiana law.

The background of the claim against Regent (which is all that remains of Brill's case) was as follows. Before the bankruptcy, Brill had discussed with Regent the possibility of selling his companies' radio stations to it, and as part of the negotiations (never completed) the parties had made an agreement prohibiting Regent from using any information it obtained from Brill in those negotiations in a manner that would harm him or his companies. The sale never went through. But during the bankruptcy Brill discussed with Regent a plan to bid jointly for the debtors' radio stations, and they signed another confidentiality agreement. Brill claims that Regent used information subject to the agreements to outbid him at the auction ordered by the bankruptcy court.

In the order confirming the bankruptcy plan, the bankruptcy judge, consistent with a recommendation in the plan, had forbidden suits against the bankruptcy professionals. (Third-party releases for the protection of bankruptcy professionals are common and, when consensual, unexceptionable. See, e.g., In re Specialty Equipment Cos., 3 F.3d 1043, 1046–47 (7th Cir.1993).) Those bankruptcy professionals who had been debtors' counsel and whom Brill had sued asked the bankruptcy judge to compel him to comply with the judge's order confirming the plan; he had violated the order by suing them.

The order had also barred anyone but the debtors from pursuing certain litigation against pre-bankruptcy creditors of Brill's companies. Those creditors, upset that he'd included them as defendants in his suit, removed the suit to the bankruptcy court rather than just asking the bankruptcy judge to enforce compliance with his order as the bankruptcy professionals had done. The creditors based removal on 28 U.S.C. § 1452(a), which authorizes removal to a district court of any claim of which that court would have jurisdiction under 28 U.S.C. § 1334, which confers on the district courts original jurisdiction “of all civil proceedings arising under title 11 [the Bankruptcy Code], or arising in or related to cases under title 11.” §§ 1334(a), (b). Although section 1452(a) provides for removal to the district court rather than to the bankruptcy court, Bankruptcy Rule 9027, buttressed by standing orders in the district courts (including the district court for the Southern District of Indiana), transfers removed suits from district court to bankruptcy court. In re Seven Fields Development Corp., 505 F.3d 237, 246–47 and 247 n. 8 (3d Cir.2007); see also William L. Norton, Jr., Norton Bankruptcy Law and Practice § 7:1 (3d ed.2011).

Regent didn't sign the petition for removal. For cases governed by 28 U.S.C. § 1441(a)—the general statute authorizing removal from state courts to federal district courts of cases presenting claims arising under state law—all defendants must consent for removal to be effective. Hanrick v. Hanrick, 153 U.S. 192, 196, 14 S.Ct. 835, 38 L.Ed. 685 (1894); Pettitt v. Boeing Co., 606 F.3d 340, 343 (7th Cir.2010). That would not be a problem in this case; Regent indicated its consent shortly after removal, and no objection to its failure to have signed the petition to remove was made—and without a timely objection to the lack of unanimity the defect would not be fatal. 28 U.S.C. § 1447(c); Doe v. GTE Corp., 347 F.3d 655, 657 (7th Cir.2003); Payne ex rel. Estate of Calzada v. Brake, 439 F.3d 198, 203–04 (4th Cir.2006); cf. Lively v. Wild Oats Markets, Inc., 456 F.3d 933, 942 (9th Cir.2006). But in any event section 1452(a) authorizes removal by “a party” (in contrast to section 1441(a), which authorizes removal by “the defendant or the defendants”—the plural being the basis for the requirement of unanimity), and so has been interpreted to reject the requirement of unanimity. California Public Employees' Retirement System v. WorldCom, Inc., 368 F.3d 86, 103 (2d Cir.2004); Creasy v. Coleman Furniture Corp., 763 F.2d 656, 660 (4th Cir.1985). By making it easier to remove a bankruptcy case, this interpretation promotes judicial economy by concentrating bankruptcy litigation in the bankruptcy courts.

So the case was properly removed. The bankruptcy judge quickly determined that the suit against the bankruptcy professionals was barred. But by then Brill had already dismissed them from his suit, so the judge merely ordered him not to reinstate them.

The judge stayed the remainder of the suit while reserving decision on the issues raised by the other defendants. Brill then filed an amended complaint (actually a second amended complaint, but we'll suppress that detail and pretend there were only two complaints), eliminating all defendants except Regent and making clear that his only claims arose from Regent's alleged violations of the confidentiality agreements. The bankruptcy judge ruled that, as thus amended,...