JANICE MILLER KARLIN, Bankruptcy Judge.
This matter is before the Court on Plaintiff's Motion for Abstention, filed pursuant to 28 U.S.C. § 1334(c).
According to the Plaintiff, Andrea Peterson ("Peterson"), her then-husband, Gary Mattson ("Mattson"), the Debtor in the underlying Kansas bankruptcy case, borrowed $40,054 from Defendant, Commerce Bank, N.A. ("Commerce") to purchase a 2006 Hummer H3 automobile in November 2005. Peterson claims she was unaware that Mattson intended to purchase this vehicle until he arrived at their home with it, that she never agreed to the purchase, and she never signed any loan documents relating to its purchase. Although Commerce is headquartered in Missouri, the loan was processed at its Pittsburgh, Kansas branch. Peterson and Mattson were living in Olathe, Kansas when the loan was made.
Peterson and Mattson divorced in 2007, and the Johnson County, Kansas District Court awarded the automobile, and the debt associated with it, to Mattson in their divorce proceedings. The Court further ordered that Mattson hold harmless and indemnify Peterson for any debt on the automobile.
On May 20, 2010, Commerce Bank debited $719.15 from Peterson's bank account for a missed payment on Mattson's Hummer.
Peterson's state court action asserted five counts against Commerce, including (1) conversion for wrongfully taking the funds out of her checking account, (2) conversion for failing to return the money taken from her checking account, (3) breach of contract based upon Kansas law and the Uniform Commercial Credit Code, (4) breach of contract based upon Missouri law and Chapter 408 of the Missouri Revised Statutes, and (5) breach of fiduciary duty. Peterson did not name Mattson as a party to the lawsuit, although Peterson alleged her signature had been forged on the loan documents, possibly by Mattson.
On January 5, 2011, the case was removed by Commerce from Jackson County, Missouri to the United States Bankruptcy Court for the Western District of Missouri. Commerce claimed that the case was related to the Mattson bankruptcy case, because it might at some point raise a third party claim for common law contribution or indemnity against Mattson. Therefore, according to Commerce, the United States Bankruptcy Court for the Western District of Missouri had jurisdiction over the matter pursuant to 28 U.S.C. § 1334.
On January 12, 2011, Commerce filed a motion to dismiss pursuant to Fed. R. Bankr.P. 7012(b) for failure to state a claim upon which relief could be granted. Simultaneously with filing the motion to dismiss, Commerce also filed a Motion to Transfer Venue, seeking to have the case transferred to the United States Bankruptcy Court for the District of Kansas. Commerce claimed that because Mattson's bankruptcy case was pending in Kansas rather than Missouri, the case should be transferred to Kansas so it could be tried in conjunction with the pending bankruptcy case. Commerce also claimed that the interests of justice, as well as the convenience of the parties and witnesses, favored transferring the case to Kansas since the actions leading up to the filing of the lawsuit all occurred in Kansas.
On January 13, 2011, just one day after the filing of the motion to transfer venue, Bankruptcy Judge Venters granted the motion and transferred the case to this Court. In the order, Judge Venters noted "[t]he state court action that has been removed to this Court is not related to any underlying bankruptcy case in this District. If the matter relates to any bankruptcy case at all, an issue this Court does not decide, it is related to the case of In re Gary Clayton Mattson, Case No. 10-23636 pending in the District of Kansas."
On January 18, 2011, Peterson filed a Motion for Abstention, claiming that this Court should abstain from hearing this case under the principles of mandatory abstention set forth in 28 U.S.C. § 1334(c)(2) or discretionary abstention under 28 U.S.C. § 1334(c)(1). Peterson also filed a motion for remand, arguing this Court lacks jurisdiction to hear this case because it is not actually related to Mattson's bankruptcy proceeding. Commerce opposes both the motion for remand and the motion to abstain, arguing this Court is the proper venue for resolution of this dispute.
The issue before the Court is whether it should abstain from hearing this case. Abstention in bankruptcy cases is generally governed by 28 U.S.C. § 1334(c). Abstention under § 1334(c) is divided into two distinct areas: mandatory abstention under § 1334(c)(2) and permissive abstention under § 1334(c)(1). Abstention is applicable not only to cases that are initiated in bankruptcy court, but also to those cases that are originally filed in
The requirements for mandatory abstention are set forth in § 1334(c)(2). It provides:
Thus, pursuant to this section, mandatory abstention is required when all of the following elements are present: (1) the motion to abstain was timely filed; (2) the underlying action is based on state law; (3) an action has been commenced in state court; (4) the action can be timely adjudicated in state court; (5) there is no independent basis for federal jurisdiction other than bankruptcy; and (6) the matter is non-core.
Of the six factors the Court must consider, the only serious issues raised by Commerce are whether (1) the Jackson County court is an "appropriate jurisdiction" to hear this case and (2) whether the action can be timely adjudicated in that court. Thus, there is no question on the other four elements. The motion to abstain was filed timely, as it was filed only 13 days after the case was removed to federal court and before any substantial work on the case had commenced, there is no question the action is based on state law, as there are no federal claims raised in that case, there is no independent basis for federal jurisdiction other than the remote Mattson bankruptcy connection because the issues involve purely state law claims, and there is no basis to remove the case to federal court on diversity grounds.
Finally, Commerce admits this is not a core-proceeding, but alleges it is "related to" the Mattson bankruptcy filing.
Although a stretch, because the test for "related to" jurisdiction is so broad, the Court agrees that this proceeding "could conceivably" have an effect on the Mattson bankruptcy, and therefore fits within the Court's related to jurisdiction.
Therefore, the Court will turn to the questions of whether the claim can be timely adjudicated in state court, and whether Jackson County Circuit Court is a court of appropriate jurisdiction. The burden of proving that an action can be timely adjudicated in state court rests on Peterson as the party seeking abstention.
The Court has been presented no evidence concerning the backlog of the Jackson County Circuit Court and cannot make any findings as to the speed with which the case may be adjudicated in that forum. However, the Court can attest to the time frame in which the case can be resolved in federal court. This bankruptcy court's docket is not presently burdened with a backlog of evidentiary matters, and this Court would likely be able to conduct a trial and issue a final order in this case in a relatively short time frame. However, that would not end the resolution of this
In addition, Peterson has made a demand for a jury trial, and has reiterated that she does not consent to such a trial taking place in the bankruptcy court. Commerce does not dispute that she is entitled to a trial by jury. Therefore, to accommodate this right to a jury trial, it would be necessary for the district court to withdraw the reference to this Court under 28 U.S.C. § 157(d), which would again weigh in favor of the case proceeding in state court.
Based on these factors, and specifically the factors concerning the requirement that the United States District Court would be required to enter any final orders or judgments in this case either through a report and recommendation by this Court or a jury trial following the withdrawal of the reference under 28 U.S.C. § 157(d), the Court finds that this case could likely be more timely adjudicated in state court. The Court predicts no unduly prejudicial effect on the administration of the bankruptcy estate by allowing this case to proceed in state court, and in fact, believes such remand will likely result in a speedier resolution to these matters.
The second argument Commerce makes against mandatory abstention is that the Jackson County Circuit Court is not a court of "appropriate jurisdiction."
The Court finds that Commerce's arguments are more appropriate in the context of its Motion to Dismiss
In fact, in its Motion to Dismiss, which Commerce specifically incorporates into its response to Peterson's abstention motion, Commerce does not allege that the Missouri state courts do not have jurisdiction to hear the case, but rather only that it makes more sense to try the case in the "alternative forum" of a Kansas state court.
The Court finds that this case was commenced in a state forum of appropriate jurisdiction. Commerce does not argue that the Jackson County Circuit Court could not hear the case or that it lacked jurisdiction over either the subject matter or the parties. Because Commerce has its headquarters in Missouri, it is clearly subject to the jurisdiction of that state's court system. Further, the subject matter of this case is clearly within the reach of the Jackson County Circuit Court. The allegations are all state law claims, they are not subject to the exclusive jurisdiction of the federal court system, or any specialty court or tribunal. Although Commerce may be able to argue that the Jackson County Circuit Court is not the most convenient forum to hear this action, or even that the Jackson County Circuit Court is not the most appropriate court where Peterson could have filed this case, it cannot seriously argue that the Jackson County Circuit Court is not "a state forum of appropriate jurisdiction."
Based on these findings, the Court holds that it is required to abstain from hearing this case pursuant to 28 U.S.C. § 1334(c)(2). The Court finds that the motion for abstention was timely filed, that the claims asserted in this case arise exclusively under state law, that this case is not a core proceeding but instead a related to proceeding, that there is no independent federal jurisdiction absent jurisdiction under 28 U.S.C. § 1334, that the action was
Although the Court finds that it is required to abstain from hearing this case pursuant to the mandatory abstention provisions of 28 U.S.C. § 1334(c)(2), the Court also holds that even if mandatory abstention were not required, the Court would still abstain pursuant to the permissive abstention provisions of 28 U.S.C. § 1334(c)(1). Permissive abstention in bankruptcy cases is derived from 28 U.S.C. § 1334(c)(1), which states:
In examining whether to abstain under that provision, courts typically examine twelve non-exclusive factors to determine whether abstention is appropriate:
The Court finds that most of these factors favor abstention. The Court has already analyzed the effect abstention would have on the efficient administration of the bankruptcy estate in the preceding section, and again finds that abstaining from this case and having it heard in state court would be at least as efficient as retaining jurisdiction over the case—especially in light of the added hurdles created by Peterson's decision not to consent to this Court entering a final judgment or conduct a jury trial. There is no question the state law issues predominate this case as there are no federal claims asserted.
With regard to the degree to which this case is related to the underlying bankruptcy case, the Court finds it difficult to imagine
Furthermore, at this point, neither of the parties involved in this lawsuit have asserted any claims against Mattson, and no property of the bankruptcy estate is at issue. The Court agrees that this case is related to the Mattson bankruptcy proceeding (otherwise jurisdiction would be completely lacking), but finds that the degree of relatedness is extremely remote. There are no core matters involved at all in this case, nor are there any federal claims that may need to be severed.
The Court also finds that the likelihood that this case was removed to this court as a result of forum shopping by one of the parties to be a significant factor. Commerce goes to great lengths in its briefs to show how Peterson engaged in forum shopping by attempting to have the case heard in Jackson County, Missouri—a forum Commerce claims has very few ties to the underlying case. To remedy this alleged forum shopping, Commerce has itself engaged in forum shopping by removing this case to the federal bankruptcy court—a forum in which there are absolutely no ties to the underlying case except for the fact that Commerce may potentially bring a claim against a debtor in this Court. Although Kansas may have more ties to this case than Missouri, there are virtually no ties to the federal bankruptcy courts. It appears the only reason this case is currently pending in this Court is that Commerce does not want it heard in the forum that Peterson chose. Forum shopping done to prevent successful forum shopping by one's opponent is still forum shopping.
The final two factors also weigh heavily in favor of abstention. Peterson has demanded a jury trial, and has indicated that she will not consent to that trial taking place in the bankruptcy court. Therefore, for this case to proceed to a jury trial, the referral to the bankruptcy court will have to be withdrawn and the case tried before the United States District Court for the District of Kansas. Finally, the Court notes that the only parties to this case are non-debtors. Although Commerce has stated that it may bring a third-party claim against Mattson for contribution or indemnification, that has not taken place and likely would not prevent abstention even if it had.
Of the twelve factors the Court is to consider, only two factors appear neutral or to weigh against abstention. First, the claims raised by Peterson do not appear to be overly complex or involve an unsettled area of state law. Second, this case would not unduly burden the bankruptcy court's docket, as it appears to be a fairly straight forward dispute that should not require an abundance of court supervision.
Based upon the consideration of these factors, the Court finds that permissive abstention under 28 U.S.C. § 1334(c)(1) is appropriate, even if mandatory abstention were not. This is a state law case, involving state law matters, with very little tie to the Mattson bankruptcy proceeding. Therefore, the Court will abstain. It remands
The Court finds that abstention is proper in this case under both the mandatory abstention provisions of 28 U.S.C. § 1334(c)(2) and the permissive abstention provisions of 28 U.S.C. § 1334(c)(1). Therefore, the Court will abstain and remands it to the Circuit Court in Jackson County, Missouri for further proceedings.
The Motion for Remand filed by Peterson is now moot, as the Court is remanding the case on other grounds and does not need to address that motion. The Court makes no findings with regard to whether Peterson has failed to state a claim upon which relief can be granted or whether the case should be dismissed under the doctrine of forum non conveniens. Those issues raised in Commerce's Motion to Dismiss can, and should be, address by the Jackson County Circuit Court, as they are ripe for decision having been fully briefed.
