DAVID C. NORTON, District Judge.
This matter comes before the court on plaintiffs BGC Partners, Inc. ("BGC"), G&E Acquisition Company, LLC ("G&E Acquisition"), and Newmark Southern Region, LLC's ("Newmark") (collectively "plaintiffs") motion to remand or to abstain.
Grubb & Ellis Company ("Grubb & Ellis"), one of the largest real estate brokerages in the United States, filed for bankruptcy on February 20, 2012 in the United States Bankruptcy Court for the Southern District of New York. Compl. ¶ 1. BGC, through its indirect subsidiary G&E Acquisition, purchased substantially all of the assets of Grubb & Ellis after it filed its bankruptcy petition.
On August 2, 2012, BGC commenced an action against the defendants in the Supreme Court of New York, New York County, bringing seven state-law claims against various Avison Young defendants, including defendants Avison Young (Canada), Inc., Avison Young (USA) Inc., and Avison Young — Atlanta LLC.
Plaintiffs filed the present action on April 10, 2015 in the Court of Common Pleas for Charleston County, bringing the following state law causes of action: (1) tortious interference with contractual relationships; (2) civil conspiracy; (3) misappropriation of trade secrets in violation of the South Carolina Trade Secrets Act, §§ 39-8-10,
On May 18, 2015, Defendants Avison Young (Canada) Inc., Avison Young (USA) Inc., Avison Young — Atlanta, LLC, and Rose (collectively "Avison Young"), with the consent of defendants Christopher Fraser ("Fraser") and WRS Real Estate LLC ("WRS"), (collectively with Avison Young "defendants") filed a notice of removal in this court pursuant to 28 U.S.C. § 1446. Defendants assert that the court has subject matter jurisdiction because the case is "related to" a pending bankruptcy proceeding and/or it arises under Title 11. Notice of Removal 3-5. Defendants further assert that the court has jurisdiction pursuant to 28 U.S.C. §§ 1332(a) and 1441(a) because there is complete diversity of citizenship between the parties and the matter in controversy exceeds $75,000.00.
Plaintiffs filed the present motion to remand or abstain on June 17, 2015. Defendants filed a response in opposition to the motion to remand on July 2, 2015, and plaintiffs replied on July 13, 2015. Plaintiffs filed additional attachments to their motion on July 23, 2015 to notify the court of an order from the United States District Court for the District of Columbia in which the court remanded a case with identical, or almost identical, parties.
The court held a hearing on the motion to remand on October 30, 2015. After the hearing, plaintiffs filed a November 17, 2015 order from the Northern District of Illinois as an additional attachment to the reply in which the court remanded the action to state court.
The right to remove a case from state court to federal court is derived from 28 U.S.C. § 1441, which provides that "any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant . . . to the district court of the United States for the district and division embracing the place where such action is pending." 28 U.S.C. § 1441(a). The party seeking to remove a case from state court to federal court bears the burden of demonstrating that jurisdiction is proper at the time the petition for removal is filed.
District courts have original diversity jurisdiction over a case "where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between . . . citizens of different states." 28 U.S.C. § 1332(a)(1). When removal is based solely on diversity jurisdiction, however, an otherwise-removable case "may not be removed if any of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought." 28 U.S.C. § 1441(b)(2). Federal law also requires that "[a] motion to remand the case on the basis of any defect other than lack of subject matter jurisdiction
Plaintiffs argue that removal was improper because there is an absence of complete diversity, the forum defendant rule bars removal, and there is no bankruptcyrelated jurisdiction. Plaintiffs further argue that even if there is jurisdiction under 28 U.S.C. § 1334(b), the court must abstain from exercising jurisdiction pursuant to 28 U.S.C. § 1334(c)(2), or alternatively, should exercise its discretion and abstain pursuant to 28 U.S.C. § 1452(b).
Although defendants originally argued that removal was proper on the basis of diversity jurisdiction, Defs.' Resp. 8, during the October 30, 2015 hearing defendants conceded that there was no diversity of citizenship. Hr'g Tr. 19:12-18 (The Court: But you agree that on a pure—forget about the bankruptcy alright—on a pure diversity of citizenship if that was the only thing at issue, you do not have diversity of citizenship in this case? Answer: If there were no allegations of subject matter jurisdiction, federal subject matter jurisdiction, yes, we concede that."). However, in an effort to differentiate the court's holding in the Illinois action, defendants again contend that diversity jurisdiction exists in the instant action.
District courts have original diversity jurisdiction over a case "where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between . . . citizens of different states." 28 U.S.C. § 1332(a)(1). In order for a district court to exercise jurisdiction, the parties must be completely diverse.
In its notice of removal, Avison Young represents that defendants are citizens of Canada, Georgia, Illinois, Maryland, North Carolina, South Carolina, and Tennessee. Notice of Removal 6. Specifically, Avison Young represents that: (1) Avison Young (Canada) Inc. is a Canadian corporation with its principal place of business in Ontario, Canada,
BGC submitted numerous declarations to establish the citizenship of plaintiffs. In the first declaration, Treasa Chennikara ("Chennikara")—a paralegal and contracts manager at Cantor Fitzgerald Securities tasked with the responsibility of maintaining and overseeing records related to Cantor Fitzgerald Securities and its parents, subsidiaries, and affiliates, including the plaintiffs—stated the following: G&E Acquisition (a plaintiff) has one member, BGC Partners, L.P., a limited partnership with two partners, BGC Partners, Inc. (a plaintiff) and BGC Holdings, L.P. Pls.' Mot. Ex. 2. BGC Partners, L.P. is a Delaware Corporation with its principal place of business in New York.
BGC submitted the second declaration of Mark Prasad ("Prasad") who is tasked with the responsibility of overseeing the partnership department that administers the partnership program for BGC Holdings, L.P. at Cantor Fitzgerald Securities. Pls.' Mot. Ex. 4, Prasad Depo. ¶ 2. Prasad declared that at all times relevant to the issue of diversity of citizenship in this case, specifically between April 1, 2015 and June 1, 2015, BGC Holdings, L.P. had a number of partners who are citizens of Georgia, Illinois, North Carolina, and South Carolina. Prasad Depo. ¶ 3.
Avison Young argues that the declarations are insufficient because they include conclusory allegations. Avison Young further argues that plaintiffs' refusal to submit underlying business records to support the lack of complete diversity arguments is fatal to their arguments. Avison Young requests an opportunity to "conduct limited jurisdictional discovery to determine the veracity of the factual assertions contained in Plaintiffs' conclusory declarations." Defs.' Resp. 27. The court does not find limited discovery necessary under these circumstances. The allegations are not conclusory because they are supported by multiple declarations from people tasked with the responsibility of knowing the partners and/or members of the various entities. Notably, Judge Cooper from the United States District Court for the District of Columbia found Prasad's declaration sufficient to establish the citizenship of the plaintiffs.
BGC Holdings L.P., a partner of plaintiff G&E Acquisition, is a limited partnership with partners between April 1, 2015 and June 1, 2015 who are citizens of Georgia, Illinois, North Carolina, and South Carolina. Chennikara Depo. ¶¶ 4-5; Prasad Depo. ¶ 3. Defendant Avison Young — Atlanta, LLC has members who are citizens of Georgia, Illinois, North Carolina, and Tennessee. Notice of Removal ¶ 20. Further, defendant WRS is a limited liability company whose members are citizens of South Carolina.
Section 1334(b) provides that "district courts shall have original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11." 28 U.S.C. § 1334(b).
Defendants argue that "one need only skim the Complaint to see that it is `related to' and `aris[ing] under' a bankruptcy proceeding" because is alleges that: (1) defendants stole and/or received a benefit from the bankruptcy estate; (2) defendants improperly violated the automatic stay; and (3) if recovery in this and other similar actions exceeds $20 million, there will be additional funds made available to the debtor's estate. Defs.' Mot. 7-9. Therefore, defendants contend that this court has subject matter jurisdiction under 28 U.S.C. § 1334(b). Defs.' Resp. 7.
In the notice of removal, defendants first argue that because the complaint asserts a claim based on purported violations of the automatic stay in the bankruptcy of Grubb & Ellis, the claims "arise under" title 11. Notice of Removal 5.
"To determine whether a proceeding `arises under' title 11, [courts] apply the same test used for deciding whether a civil action presents a federal question under 28 U.S.C. § 1331."
Defendants argue that plaintiffs "explicitly assert a claim based on purported violations of the automatic stay imposed by Grubb & Ellis's bankruptcy." Defs.' Resp. 9. Therefore, defendants argue that plaintiffs' claims arise under the Bankruptcy Code.
In response, plaintiffs argue that although the factual allegations of the complaint do contend that certain of defendants' actions violated the automatic stay, plaintiffs do not assert a
Plaintiffs' complaint only asserts state law claims. Further, plaintiffs' right to relief does not depend on an interpretation of a substantive question of federal bankruptcy law. While the Bankruptcy Code does provide a cause of action for a debtor to recover damages for violation of an automatic stay pursuant to 11 U.S.C. § 362(k),
Therefore, plaintiffs' claims do not arise under the Bankruptcy Code, nor do they require the court to interpret a substantive question of federal bankruptcy law.
Defendants further assert that plaintiffs' claims "relate to" the bankruptcy case because: (1) plaintiffs allege that defendants unlawfully acquired the assets of the Grubb & Ellis estate; and (2) under the Asset Purchase Agreement between BGC and Grubb & Ellis, the bankruptcy estate can recover a portion of plaintiffs' recovery should they obtain more than $20 million. Defs.' Resp. 22 ("[T]here is virtually no aspect of this case that does not rely on and relate to the proceedings in the underlying bankruptcy. Each of Plaintiffs' twelve causes of action is premised on the rights, contracts, and assets that Plaintiffs allegedly purchased.").
The Supreme Court has explained that:
An action is
In
As the Court stated in
If plaintiffs recover over $20 million—which is quite possible considering the allegations in the complaint and the related actions pending in various other states—the estate will also recover. However, even if the present action "could conceivably have an[] effect on the estate being administered in bankruptcy,"
Plaintiffs contend that even if plaintiffs' claims relate to the bankruptcy case, the court must abstain. Pls.' Mot. 18-21. Alternatively, plaintiffs argue that the court should exercise its discretion to abstain.
For purposes of mandatory abstention, the court may assume, without deciding, that plaintiffs' claims "relate to" the bankruptcy action.
28 U.S.C. § 1334(c)(2) (emphasis added).
If the following six factors are met, the court
First, it is undisputed that plaintiffs filed the motion to remand within 30 days of removal. Defendants filed the notice of removal on May 18, 2015, and plaintiffs filed the motion to remand or abstain on June 17, 2015; therefore, it is timely under the first factor. Second, all of plaintiffs' claims are state law claims. Third, as more fully set forth above, plaintiffs' claims do not "arise under" the bankruptcy code. Fourth, as outlined above, section 1334 provides the sole basis for jurisdiction because there is an absence of complete diversity. Fifth, it is undisputed that plaintiffs commenced the present action in the Court of Common Pleas for Charleston County.
Lastly, the action can be timely adjudicated in state court. Defendants argue that plaintiffs have not met their burden to demonstrate that the matter can be timely adjudicated in state court. Defs.' Resp. 22 (citing
Further, "[i]n general, courts focus on whether allowing the state court to hear the matter will have any unfavorable effect on the administration of the bankruptcy case."
Therefore, because all of the six factors above are met, the court must abstain from adjudicating the present action under 28 U.S.C. § 1334(c)(2).
Even if the court were to find that mandatory abstention does not apply, under these circumstances, the court would exercise its discretion to abstain under 28 U.S.C. § 1452(b) and § 1334(c)(1). The Bankruptcy Court for the District of South Carolina has adopted the following twelve factors to consider when deciding whether to exercise discretionary abstention: (1) the effect or lack thereof on the efficient administration of the estate if a court recommends abstention; (2) the extent to which state law issues predominate over bankruptcy issues; (3) the difficulty or unsettled nature of the applicable state law; (4) the presence of a related proceeding commenced in state court or other non-bankruptcy court; (5) the jurisdictional basis, if any, other than 28 U.S.C. § 1334; (6) the degree of relatedness or remoteness of the proceeding to the main bankruptcy case; (7) the substance rather than form of an asserted "core" proceeding; (8) the feasibility of severing state law claims from core bankruptcy matters to allow judgments to be entered in state court with enforcement left to the bankruptcy court; (9) the burden of the bankruptcy court's docket; (10) the likelihood that the commencement of the proceeding in bankruptcy court involves forum shopping by one of the parties; (11) the existence of a right to a jury trial; and (12) the presence in the proceeding of nondebtor parties.
First, because the bankruptcy case is closed, there will be no effect on the efficient administration of the estate if the court abstains. Second, state law entirely predominates over bankruptcy issues because plaintiffs assert only state law causes of action and any facts relating to the bankruptcy case are incidental to adjudication of the state law claims. Third, at this time, there does not appear to be any difficulty or unsettled nature of the applicable state law. Fourth, although there are four other actions pending in various states, there do not appear to be any related proceedings commenced in this South Carolina state courts or other non-bankruptcy court. Fifth, as fully set forth above, there is no jurisdictional basis other than 28 U.S.C. § 1334. Sixth, the present matter is only tangentially related to the bankruptcy case. Seventh, as discussed above, there are no "core" proceedings. Eighth, because the bankruptcy case is closed, the feasibility issue is inapplicable. Ninth, because the bankruptcy case is closed, the burden on the bankruptcy court's docket is irrelevant. The tenth factor is similarly inapplicable because the plaintiffs did not file the present action in bankruptcy court, and issues of forum-shopping have not been raised. Eleventh, plaintiffs do have a right to a jury trial because they bring state-law tort claims. Lastly, there are non-debtor parties involved in the proceedings.
Because almost all of the aforementioned factors heavily favor exercising the court's discretion to abstain, the court alternatively finds that discretionary abstention under §§ 1334(c)(1) and 1454(b) would be appropriate, even if mandatory abstention pursuant to § 1334(c)(2) were inapplicable.
For the reasons set forth above, plaintiffs' motion is
