United States District Court, D. Nebraska
In re ROBERT A. SEARS, Debtor.
RHETT R. SEARS; RHETT SEARS REVOCABLE TRUST; RONALD H. SEARS; RON H. SEARS TRUST; and DANE SEARS, Defendants/Appellants. ROBERT A. SEARS; ROBERT A. SEARS, TESTAMENTARY TRUSTEE; AND KORLEY B. SEARS, Plaintiffs/Appellees. Bankruptcy Case No. 10-40275 Adversary Proceeding No. 14-04062
MEMORANDUM AND ORDER
Richard G. Kopf Senior United States District Judge
This is an appeal from an order entered by the United States Bankruptcy Court for the District of Nebraska on December 9, 2014, remanding an adversary proceeding to the District Court of Madison County, Nebraska. For the reasons discussed below, the bankruptcy court’s order will be reversed and the case will be remanded for further proceedings.
On October 20, 2014, Robert A. Sears, individually and as testamentary trustee under the will of Redmond Sears, deceased, and Korley B. Sears (“Appellees), filed a complaint in state court alleging that Rhett R. Sears, Rhett Sears Revocable Trust, Ronald H. Sears, Ron H. Sears Trust, and Dane Sears (“Appellants”), breached an agreement for the sale of their shares of AFY, Inc. stock to Korley B. Sears and the corporation, and that Ronald H. Sears and Dane Sears breached their fiduciary duties as employees of the corporation. Appellees also sought restitution of distributions Appellants received from the bankruptcy estate of AFY, Inc. (Case No. 10-40875), and claimed that Appellants tortiously interfered with the Chapter 11 reorganization of AFY, Inc., and filed “bogus” claims as creditors.
On November 24, 2014, Appellants filed a notice of removal in the Chapter 11 bankruptcy of Robert A. Sears (Case No. 10-40275),  thereby initiating Adversary Proceeding No. 14-04062. The bankruptcy court has subject matter jurisdiction over the adversary proceeding pursuant to 28 U.S.C. § 1334(b) (for claims “arising in or related to cases under” the Bankruptcy Code).
However, on December 11, 2014, the bankruptcy court ordered sua sponte that the adversary proceeding be remanded to the state court under the permissive abstention doctrine of 28 U.S.C. § 1334(c)(1) and the equitable remand doctrine of 28 U.S.C. § 1452(b). Appellants timely appealed the order to this court on December 24, 2014. See Fed.R.Bankr.P. 8002(a)(1).
This court has jurisdiction to hear this appeal pursuant to 28 U.S.C. § 158(a). Although 28 U.S.C. §§ 1334(d) and 1452(b) provide that decisions to, or not to, abstain or remand are not subject to review by appeal or otherwise by a “court of appeals” or by “the Supreme Court of the United States, ” appellate review by a district court (or bankruptcy appellate panel) is permitted. In re Schmidt, 453 B.R. 346, 349 (8th Cir. B.A.P. 2011); Cargill, Inc. v. Man Fin., Inc. (In re Refco, Inc.), 354 B.R. 515, 518 (8th Cir. B.A.P. 2006). In addition, 28 U.S.C. § 1447(d) only prohibits appellate review of cases in which remand was based on a timely raised defect in the removal procedure or on the lack of subject matter jurisdiction, neither of which is present here. See Things Remembered, Inc. v. Petrarca, 516 U.S. 124, 127 (1995).
Permissive abstention decisions under § 1334(c)(1) and equitable remand decisions under § 1452(b) are reviewed for an abuse of discretion. In re Williams, 256 B.R. 885, 891 (8th Cir. B.A.P. 2001) (citing In re DeLorean Motor Co., 155 B.R. 521, 524 (9th Cir. B.A.P. 1993)). “A bankruptcy court abuses its discretion if it bases its decision on an erroneous view of the law or clearly erroneous factual findings.” Id. (citations omitted).
The bankruptcy court’s remand order (Doc. 15) reads in its entirety:
This matter is before the court on the defendants’ notice of removal (Fil. No. 1). Brian J. Koenig, Kristin M.V. Krueger, and Donald L. Swanson represent the defendants. Jerrold L. Strasheim represents the plaintiffs.
This is a lawsuit brought by current shareholders of AFY, Inc., against former shareholders of the corporation concerning the terms of the sale of the former shareholders’ stock to the current shareholders. The buyers and sellers are all members of the same extended family. The individual plaintiffs filed bankruptcy petitions in early 2010 and the matters at bar have been in litigation in one form or another ever since. This court has ruled that AFY and Korley Sears owe the defendants in this case more than $5 million; one of those orders is final (the claim against AFY), and one is currently on appeal in the United States District Court (the claim against Korley Sears). Notwithstanding those rulings, the plaintiffs filed this lawsuit in Madison County District Court on October 20, 2014, alleging breach of contract as to the stock sale agreement, breach of fiduciary duty, unjust enrichment, conspiracy and tortious interference with business expectancies, and abuse of process.
The defendants removed the case to this court pursuant to 28 U.S.C. § 1452(a), which provides that 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 when the federal court has jurisdiction of such claim or cause of action under 28 U.S.C. § 1334. Section 1334(a) gives the federal district courts “original and exclusive jurisdiction over cases under title 11, ” which are bankruptcy cases themselves. Section 1334(b) gives federal courts non-exclusive jurisdiction over “all civil proceedings arising under title 11, or arising in or related to cases under title 11.” Those civil proceedings are further divided into two categories: core proceedings and non-core, related proceedings. Core proceedings are those cases arising under title 11, or arising in a case under title 11, while non-core, related-to proceedings are those which could conceivably have an effect on the estate being administered in bankruptcy.
Certainly, the validity of the proofs of claim of the defendants against the bankruptcy estates of AFY, Inc., and Korley Sears are core proceedings within the jurisdiction of the Bankruptcy Court to enter final judgment. 28 U.S.C. § 157(b)(2)(B). However, those issues have already been decided by this court and the plaintiffs’ causes of action are matters of common law; they are not sufficiently inherent to the bankruptcy case that they could be considered core proceedings. In that regard, § 1334(c)(1) permits a court to abstain from hearing a particular proceeding in favor of the state courts: “[N]othing in this section prevents a district court in the interest of justice, or in the interest of comity with State courts or respect for State law, from abstaining from hearing a particular proceeding arising under title 11 or arising in or related to a case under title 11.” In deciding whether permissive abstention under § 1334(c)(1) is appropriate under the broad statutory guidelines of the interests of justice or comity, and keeping in mind “the premise that federal courts should exercise their jurisdiction if it is properly conferred and that abstention is the exception rather than the rule, ” [Williams v. Citifinancial Mortg. Co. (In re Williams), 256 B.R. 885, 894 (B.A.P. 8th Cir. 2001), ] courts consider the following factors:
(1) the effect or lack thereof on the efficient administration of the estate if a court ...