MAUREEN A. TIGHE, Bankruptcy Judge.
On February 8, 2010, Mohammad Sahranavard ("Debtor") filed a voluntary chapter 7 petition with the assistance of his attorney Mandana (aka Donna) Vasseghi
At the time the bankruptcy was filed, La Corte alleged that Vasseghi was in a confidential or fiduciary relationship with him and that Vasseghi remained in a confidential or fiduciary with him from the date of the filing of this Chapter 7 Case to and/or through well beyond the deadlines for filing actions under 11 U.S.C. §523 and 11 U.S.C. §727.
Prior to the filing of Debtor's bankruptcy case, La Corte alleges that Debtor tendered regular payments on the promissory notes held by La Corte and BWI, for several months after the filing of Debtor's bankruptcy case. La Corte alleges that Debtor directed a group of individuals, holding pre-petition assets, or proceeds of prepetition assets, in his name or on his account, consisting of, but not limited to, Vasseghi, Hamid Sahranavard (Debtor's brother, "Hamid"), American Regional Gallery, and Monica Contreras, to continue making the payments on Debtor's account in connection with the promissory notes held by La Corte and BWI.
On June 8, 2016, Vasseghi filed a breach of contract action in Los Angeles Superior Court (the "State Court") against BWI, Italian Historical Society of America ("IHSA"), LaCorte, and others (collectively, the "Movants"). On December 2, 2015, Vasseghi filed an amended complaint (the "Vasseghi Complaint"). On January 13, 2016, Movants filed an answer to the Vasseghi Complaint. On March 24, 2016, BWI and LaCorte removed the Vasseghi Complaint to this Court (1:16-ap-01041-MT).
On October 29, 2014, Hamid filed a breach of contract action in the State Court against Movants. On May 11, 2015, 2015, Hamid filed a second amended complaint (the "Hamid Complaint"). On June 12, 2015, Movants filed an answer to the Hamid Complaint. On March 23, 2016, BWI and LaCorte removed the Hamid Complaint to this Court (1:16-ap-01040-MT, together with 1:16-ap-01041 as the "Removed Actions").
Vasseghi and Hamid (collectively, the "State Plaintiffs") allege that, over the last nine months, there have been lengthy depositions taken, several motions heard by the State Court, and that the parties had engaged in extensive written discovery. Vasseghi also contends that a trial setting conference was scheduled to take place in the State Court on April 15, 2016, which was continued because of this removal. Hamid states that depositions of LaCorte and BWI were scheduled for March 30, 2016, and a trial was set for May 31, 2016, none of which occurred because of the removal. The State Defendants separately moved for remand of the Removed Actions (the "Remand Motions").
On May 25, 2016, the Court held a hearing on the Remand Motions. Appearances are as noted on the record. After extensive oral argument in response to the Court's tentative ruling, the Court granted the Motions for Remand. Movants now move for reconsideration of the Orders Granting Motion for Remand, entered on the docket for each of the Removed Actions. As the Motions for Reconsideration that were filed in each of the Removed Actions are nearly identical (the "Reconsideration Motions"), both are analyzed below.
Under Rule 9023 of the Federal Rules of Bankruptcy Procedure, "Rule 59 F.R.Civ.P. applies" in bankruptcy cases. Under Rule 59 of the Federal Rules of Civil Procedure, the court may alter or amend a judgment pursuant to a motion that is timely filed. FED. R. CIV. P. 59(e). "A motion to alter or amend a judgment must be filed no later than 28 days after the entry of judgment."
Reconsideration of an entered judgment is an extraordinary remedy that should be used sparingly.
Procedurally, if the ground for the motion for reconsideration is an error of law, "the error or errors relied upon must be stated specifically." LBR 9013-4(b)(1). A manifest error of fact or law must be one "that is plain and indisputable, and that amounts to a complete disregard of the controlling law or the credible evidence in the record."
Here, Movants argues that this Court has a "fundamental misunderstanding" of their position. Movants contend that the Removed Actions, which seek to recover "a stream of payments from Debtor's attorney wife Donna Vasseghi and Debtor's brother Hamid Saharanavard to [Movants] on the ground that said payments were tendered as `loans,' whereas [Movants] steadfastly maintain that this stream of payments was tendered . . . as `loan payments'"
Movants, in support of their motions, make the same arguments that were made at the hearing on the Remand Motions. Movants again explain in great detail their theory as to why this Court is the proper venue for the Removed Matters. Movants believe that Debtor, Vassseghi, and Hamid colluded to procure Debtor's "discharge through fraud by engaging in a conspiracy that, among other things, prevented LaCorte from engaging independent counsel to assert their rights in the bankruptcy."
A motion under [Civil Rule 59(e)] does not allow a party to "ask the Court to rethink matters already decided, to reargue matters already submitted, or to attempt to cure deficiencies in earlier submissions that were found to be inadequate."
The Court has already previously considered Movants' arguments for why this forum is proper for these disputes.
As is often the case in this Court of limited jurisdiction, litigation between non-debtor parties asserting state law claims are resolved in state court, or another court of proper jurisdiction. Later in the bankruptcy, any findings that are germane to the resolution of an adversary to revoke Debtor's discharge can be given preclusive effect here, if required. While the Court realizes that litigating piecemeal is generally unfavored, it is unfortunately required in circumstances where non-debtor parties are asserting state law claims against each other that have only a tangential relationship to this bankruptcy.
Movant takes issue with the Court's characterization as dicta of its use of the term "preferential transfer" in its tentative ruling on the Adversary Extension Motion
As stated in the Notice of Tentative Ruling re Motion for Remand, any finding that LaCorte received post-petition payments was based on statements he had made in his allegations in a dismissed complaint.
The Court has previously explained that the factual finding that LaCorte received money post-petition was based on his own words. "The trustee did not bring an action for avoiding a preferential transfer and for turnover, thus there was no `finding' or `ruling' that the payments received by LaCorte were preferential transfers."
If the use of the term "dicta" to characterize this ancillary fact is an error of fact (which the Court does not believe it is), it is not sufficiently material to raise grounds for reconsideration of an otherwise sound ruling.
The causes of action asserted Vasseghi Complaint and the Hamid Complaint are identical: (1) Breach of Contract; (2) Common Counts; (3) Fraud; (4) Aiding and Abetting; and (5) Unjust Enrichment. Movants urge the Court to look to the substance of the proceeding to determine that the Removed Matters are central to the purpose of underlying Title 11. The Court is well aware of Movants' "big picture" arguments, and the cases cited in support of Movants' argument for reconsideration are all pre-
As stated previously, the Removed Matters do not present issues of bankruptcy law, and any findings relevant to the forthcoming 727 revocation of discharge complaint be given preclusive effect, in the interest of comity and as required under bankruptcy law.
Movants argue that the Removed Matters "now involve or present what [may] prove to be complex issues of federal law." The Removed Matters do not present any issues of difficult or unsettled California law for the State Court. The State Court cannot rule on actions under 11 U.S.C. § 727. As stated in the above section, any findings by the State Court can be given proper preclusive effect, and then characterization of payments received by LaCorte has not been ruled on by this Court. The State Court can determine the Removed Actions, and this Court will apply any germane findings to any future adversary proceedings.
Both the Hamid Complaint and the Vasseghi Complaint are related proceedings commenced in the State Court, albeit before two different state court judges. Movant complains that the Removed Matters being before two different state court judges risks inconsistent rulings. This complication for these non-debtor parties cannot be solved by keeping the Removed Matters here, where jurisdiction is not proper.
There does not appear to be any jurisdictional basis other than 28 U.S.C. §1334. The State Court Proceedings are based on contract and equitable claims arising under state law, so there is no federal question jurisdiction. Vasseghi, Hamid, and LaCorte are California residents, and BWI and IHSA are New York not-for-profit corporations. The amounts in controversy, however, are $14,000 and $53,000 respectively, amounts which do not reach the $75,000 minimum amount required for diversity jurisdiction. Movants contend that with their claims for special and punitive damages, the Removed Matters will (likely) reach the minimum monetary requirement for diversity jurisdiction. Here, there is no request to withdraw the reference to the District Court. Even if the damages are over the diversity minimum, this is not sufficient to confer jurisdiction in this Article I court.
The Court acknowledges that there is a tangential relationship between the Removed Matters and Debtor's six-year old bankruptcy. As stated previously, if State Court Plaintiffs are successful and Movants are required to tender money in satisfaction of a judgment, the chapter 7 trustee may seek a determination from this Court that the payments on which the award was based are preferential transfers under § 547. If the chapter 7 trustee is successful in proving that the funds paid to LaCorte were preferential transfers, then the trustee may sustain an action for turnover of property of the estate under § 542. All of these matters are speculative at this time. None of these bankruptcy law matters require this Court to determine the Removed Actions. The State Court judgments on the Removed Actions will be preclusive as to any factual findings made therein.
This remote connection to the bankruptcy is not sufficient for this Court to hear and determine the State Court Actions involving nondebtors on both sides, let alone enter an order thereon. As described in more detail above, these same arguments were considered and rejected in connection with the Motions to Remand.
A proceeding is core when it invokes a substantive right created by bankruptcy law and could not exist outside the bankruptcy proceeding.
Movant argues that the Removed Matters should be treated as core, because the "substance" of the claims asserted in State Court will be determinative of the forthcoming revocation of discharge action. Specifically, Movants present the issue as simply, "all [the] Court needs to do is adjudicate the question of `whether the payment stream from [Vasseghi] and [Hamid] to LaCorte and BWI were loans or post-petition payments on the Better World Note.'" Movants then envision the State Court resolving the balance of the issues.
Movants' theory, however, misses the jurisdictional issue. There are no bankruptcy claims to sever. All claims arise under state law, and involve only nondebtor parties. Movants would have this Article I Court determine substantive state law claims between two non-debtor parties. As explained above, the Court considered these arguments before its ruling on the Remand Motions. Despite the Movants' arguments to the contrary, the State Court Actions are based on a contract dispute and arises under state law, not Title 11. The State Court Actions present noncore claims between nondebtor parties.
Movants take issue with the Court's statement that "it is not necessary for the Court to decide the issues presented in the State Court [Actions] in order to administer the estate" as "categorically false."
Any findings by the State Court will be applied as required under bankruptcy law to a revocation of discharge action, and it is within the sound discretion of the chapter 7 trustee how to marshal and administer assets of the estate.
Motions for Reconsideration are DENIED.