Virginia ex rel. Integra Rec LLC v. Countrywide Sec. Corp.
| Decision Date | 03 June 2015 |
| Docket Number | Civil Action No. 3:14cv706 |
| Court | U.S. District Court — Eastern District of Virginia |
| Parties | COMMONWEALTH OF VIRGINIA ex rel. INTEGRA REC LLC, Plaintiff, v. COUNTRYWIDE SECURITIES CORPORATION, et al., Defendants. |
This matter comes before the Court on the Commonwealth of Virginia's Motion to Amend and Certify Order for Interlocutory Review Pursuant to 28 U.S.C. § 1292(b)1 (the "Motion to Amend and Certify") and Motion to Stay. (ECF No. 99.) Countrywide Securities Corporation ("CSC") filed a response to the Motion, and the remaining four defendants in this removed action joined CSC's opposition. (ECF Nos. 101, 103-06.) The Commonwealth filed its reply. (ECF No. 107.) The matter is ripe for disposition. The Court dispenses with oral argument because the materials before the Court adequately present the facts and legal contentions, and argument would not aid the decisional process.
The Court exercises jurisdiction pursuant to 28 U.S.C. § 1334(b)2 and 1367.3 For the reasons that follow, the Court will deny the Commonwealth's Motion to Amend and Certify and the Commonwealth's Motion to Stay. (ECF No. 99.)
In its Complaint originally filed in the Richmond Circuit Court, the Commonwealth of Virginia, on behalf of the Virginia Retirement System ("VRS"), alleges that defendants made fraudulent misrepresentations in offerings of mortgage-backed securities ("MBS"), also called certificates, or residential mortgage-backed securities ("RMBS"), also called certificates (collectively, "certificates"). CSC and four of its affiliates ("the Removing Defendants") removed the portion of the Richmond Circuit Court action they say involves every MBS certificate issued by Countrywide Financial Corporation ("CFC") and its affiliates. On October 24, 2014, CSC filed a Motion to Transfer this action to the United States District Courtfor the Central District of California. (ECF No. 15.) On October 31, 2014, the Commonwealth moved this Court to remand the action to the Richmond Circuit Court. (ECF No. 42.)
On March 17, 2015, following a stay ordered by the Court (ECF Nos. 75-76), the Court entered the March Opinion and Order. (ECF Nos. 85-86.) The Court denied CSC's Motion to Transfer this action to the Central District of California and the Commonwealth's Motion to Remand as to mandatory abstention, permissive abstention, and equitable remand. (March Mem. Op. 7-12.) The Court also referred the parties to settlement proceedings with the Honorable David J. Novak, United States Magistrate Judge. (March Mem. Op. 12-13.) The parties scheduled a settlement conference to take place on June 9 and 10, 2015. (See Am. O. Regarding Proced. Settlement Conf. ("Am. Settlement Conf. O.") 1, ECF No. 118.)
The Commonwealth's present motion seeks interlocutory appeal only of the Court's denial of mandatory abstention pursuant to 28 U.S.C § 1334(c)(2).5 (Commw. Mot. Amend 1, ECF No. 99.) In its March Opinion, the Court noted that of the five factors required for mandatory abstention, the parties contested only the final factor: whether "an action is commenced and can be timely adjudicated in state court." (March Mem. Op. 10.) The language of the fifth factor involves two considerations, meaning the failure to meet either the"commencement" or "timely adjudication" prong blocks a party's ability to satisfy the mandatory abstention test.
While in the March Opinion this Court noted discussion among several courts regarding the application of both the "commencement" and the "timely adjudication" requirements, this Court ultimately found that the Commonwealth failed to meet any test articulated as to timely adjudication, and denied the motion for mandatory abstention without making what would have been an advisory analysis of the commencement prong of the mandatory abstention test. For instance, in its discussion of the judicial development of this factor's analysis, the Court simply noted that the United States Court of Appeals for the Fourth Circuit "has not spoken to the split of lower court authority as to when an action must have been 'commenced' under this test." (March Mem. Op. 10 (citing cases).) Because the Court made a finding as to timely adjudication, it did not further address the commencement prong of the test.
Instead, the Court observed that while the Fourth Circuit "has not resolved a split of lower court authority as to which party bears the burden of demonstrating whether a case can be timely adjudicated in state court, and what evidence is needed to meet the burden[,]" (id. (citing cases)), the Court had a record before it in which none of the evidence produced by either side "sufficiently educate[d]" the Court regarding the timely adjudication issue. (Id. at 11.) This finding necessarily placed the burden on the Commonwealth as the party moving for mandatory abstention, and found the evidence wanting. Because the Court could not make a finding that the evidence supported a timely adjudication in the Richmond Circuit Court based on the general caseload and judicial statistics before it, the Court could not find that the evidence supported mandatory abstention.
The rinding as to timely adjudication rested primarily on the factual record before the Court notwithstanding the legal issue the Court had to address. In short, as to timely adjudication, the Court discussed the various evidentiary exhibits placed before it by both the Commonwealth and CSC that purportedly addressed the Richmond Circuit Court's ability to timely adjudicate the action. (Id. at 11-12). Largely because neither party addressed the progress of any proceeding in the Richmond Circuit Court,6 the Court found the record "bereft" of adequate helpful evidence to allow it to make a finding that the Richmond Circuit Court could timely adjudicate this matter. (Id. at 12; see also id. at 9 ().)
The Commonwealth seeks certification of two questions for interlocutory review related to 28 U.S.C. § 1334(c)(2) (the "First Question" and the "Second Question"):
1. "[W]hether the provision stating 'if an action is commenced . . . in a State forum of appropriate jurisdiction' imposes an additional requirement that the state court action must have been filed prior to the related-to bankruptcy case." (Commw. Mot. Amend 1 (alteration in original).)
2. "[W]hich party bears the burden of demonstrating whether the 'action . . . can be timely adjudicated in a State forum of appropriate jurisdiction,' and what evidence is sufficient to satisfy the burden." (Commw. Mot. Amend 1 (alteration in original).)
The Commonwealth seeks an immediate appeal from the March Order. At the same time, the Commonwealth seeks a stay in this action - to commence after the "already referred . . . settlement conference" in the district court.7 (Mot. Amend at 1-2.)
As to the requirements for an appeal, "[f]ederal appellate jurisdiction generally depends on the existence of a decision by the [d]istrict [c]ourt that 'ends the litigation on the merits and leaves nothing for the court to do but execute the judgment.'" Coopers & Lybrand v. Livesay,437 U.S. 463, 467 (1978) (citing Catlin v. United States, 324 U.S. 229, 233 (1945)). However, Congress has established narrow avenues by which litigants may pursue appeals of non-final orders. See Katz v. Carte Blanche Corp., 496 F.2d 747, 753-54 (3d Cir. 1974) (). Section 1292(b) provides litigants one such path to an interlocutory appeal "upon the consent of both the district court and the court of appeals." In re Cement Antitrust Litig., 673 F.2d 1020, 1025-26 (9th Cir. 1982). Pursuant to Section 1292(b), a district court may certify a non-final order for interlocutory appeal when the court finds that the order sought for appeal involves (1) a controlling question of law (2) about which there is substantial ground for difference of opinion and (3) an immediate appeal therefrom may materially advance the termination of the litigation.8 28 U.S.C. § 1292(b).
The Court must begin a Section 1292(b) analysis "by emphasizing the gravity of the relief sought in such a request. Cooke-Bates v. Bayer Corp., No. 3:10cv261-JRS, 2010 WL 4789838, at *2 (E.D. Va. Nov. 16, 2010). Interlocutory appeals are an "extraordinary remedy," Fannin v. CSX Transp., Inc., No. 88-8120, 1989 WL 42583, at *2 (4th Cir. Apr. 26, 1989) (unpublished) (per curiam), that sit contrary to "the well-established policy limiting appeals to final judgments." Long v. CPI Sec. Sys., Inc., No. 3:12cv396-RJC-DSC, 2013 WL3761078, at *1 (W.D.N.C. July 16, 2013) (citation omitted) (internal quotation marks omitted); see Difelice v. U.S. Airways, Inc., 404 F. Supp. 2d 907, 908 (E.D. Va. 2005). Further, courts are "bound 'to protect the integrity of the congressional policy against piecemeal appeals.'" Fannin, 1989 WL 42583, at *2 ; see Xoom, Inc. v. Imageline, Inc., No. 3:98cv00542-JRS, 1999 WL 1611444, at *1 (E.D. Va. Sept. 3, 1999) (citing James v. Jacobson, 6 F.3d 233, 237 (4th Cir. 1993)); Riley v. DowCorning Corp., 876 F. Supp. 728, 731 (M.D.N.C. 1992). Section 1292(b) is not intended to allow interlocutory appeals in ordinary suits, Xoom, 1999 WL 1611444, at *1, but instead should be utilized for "'orders deemed pivotal and debatable.'" Difelice, 404 F. Supp. 2d at 908 (quoting Swint v. Chambers Cnty. Comm'n, 514 U.S. 35, 46 (1995)). Thus, certification is "not to be granted lightly." Fannin, 1989 WL 42583, at *2.
Section 1292(b) ensures such an extraordinary remedy will not be granted lightly by requiring "dual judicial discretion" in the certification and acceptance of the appeal. Cross v. Suffolk...
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