Bates & Rogers Construction Corp. v. Continental Bank, N.A.

97 B.R. 905, 1989 WL 27721
CourtDistrict Court, N.D. Illinois
DecidedMarch 10, 1989
Docket89 C 565
StatusPublished
Cited by20 cases

This text of 97 B.R. 905 (Bates & Rogers Construction Corp. v. Continental Bank, N.A.) is published on Counsel Stack Legal Research, covering District Court, N.D. Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Bates & Rogers Construction Corp. v. Continental Bank, N.A., 97 B.R. 905, 1989 WL 27721 (N.D. Ill. 1989).

Opinion

*906 MEMORANDUM OPINION

KOCORAS, District Judge:

This case comes before the Court on plaintiff Bates & Rogers Construction Corp.’s (“Bates & Rogers”) Motion to Abstain and Remand. For the following reasons, the motion is granted.

DISCUSSION

On February 17, 1987, Bates & Rogers filed a voluntary petition for reorganization under Chapter 11 of the Bankruptcy Code. On December 20, 1988, plaintiff filed a Complaint in the Circuit Court of Cook County, Illinois against defendant, Continental Bank (“Continental”), for breach of contract, breach of the duty of good faith and fair dealing, and tortious interference with contractual relations. Shortly thereafter, Continental filed its Notice of Removal with the Clerk of the Circuit Court of Cook County and the United States District Court for the Northern District of Illinois, seeking removal of the state court complaint to this Court.

The defendant claims that removal is proper under 28 U.S.C. § 1452(a) and 28 U.S.C. § 1334(b). Section 1452 states:

(a) A party may remove any claim or cause of action other than a proceeding before the United States Tax Court or a civil action by a governmental unit to enforce such government unit’s police or regulatory power, to the district court for the district where such civil action is pending, if such district court has jurisdiction of such claim or cause of action under section 1334 of this title.
(b) The court to which such claim or cause of action is removed may remand such claim or cause of action on any equitable ground. An order entered under this subsection remanding a claim or cause of action, or a decision to not remand, is not reviewable by appeal or otherwise.

Section 1334(b) provides:

Notwithstanding any Act of Congress that confers exclusive jurisdiction on a court or courts other than the district courts, the district courts shall have orig *907 inal but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11.

We agree that this Court has jurisdiction over the state court claims because they are related to Bates & Rogers Title 11 case within the meaining of § 1334(b). See Cooper v. Coronet Insurance Co. (In re Boughton) 49 B.R. 312, 314 (Bankr.N.D.Ill. 1985). However, our inquiry does not end here. This Court must now determine whether the plaintiffs state court claims can properly remain here under § 1334(c)(2) which provides:

Upon timely motion of a party in a proceeding based upon a State law claim or State law cause of action, related to a case under title 11 but not arising under title 11 or arising in a case'under title 11, with respect to which an action could not have been commenced in a court of the United States absent jurisdiction under this section, the district court shall abstain from hearing such proceeding if an action is commenced, and can be timely adjudicated, in a State forum of appropriate jurisdiction. Any decision to abstain made under this subsection is not reviewable by appeal or otherwise. This subsection shall be construed to limit the applicability of the stay provided for by section 362 of title 11, United States Code, as such section applies to an action affecting the property of the estate in bankruptcy.

The defendant argues that § 1334(c)(2) does not apply to removed actions under 28 U.S.C. § 1452 but only to cases originally filed in bankruptcy court because § 1452(b) does not contain a cross reference to § 1334 as does § 1452(a). We do not agree. As the court, in the matter of In Re Chiodo, 88 B.R. 780 (W.D.Tex., 1988), aptly stated:

This reasoning reads subsection (c)(2) out of section 1334. The plain meaning of the jurisdictional reference in section 1452(a) is that section 1334 applies in its entirety. The cross-reference does not state that actions may be removed if the district court has jurisdiction under section 1334(b) but that is the effect of [such] reasoning. Under section 1334, Congress grants jurisdiction over bankruptcy matters to the district courts, but Congress had also specifically directed district courts to abstain in certain instances provided for in section 1334(c)(2). Mandatory abstention is an integral limitation to the grant of jurisdiction; courts are not allowed to pick and choose which subsections of a statute they wish to apply when Congress has directed that an entire section shall apply in a given situation. The lack of a cross-reference in section 1452(b) is not important because section 1334(c)(2) is incorporated by section 1452(a) along with the rest of section 1334. (citations omitted)

Id. at 784. Accordingly, we reject defendant’s argument on this point.

In concluding that § 1334(c)(2) does apply to removed actions, we must now determine whether the section mandates abstention under the facts before us. Abstention is mandatory when the following requirements have been met: 1) the case is based upon a state law claims or cause of action which although related to a Title 11 case, did not arise under Title 11 or out of a Title 11 case; 2) the case could not have been commenced in federal court absent the fact of a bankruptcy petition; 3) an action is commenced in a State forum; and 4) the case could be timely adjudicated in state court.

Here, Bates & Rogers’ Complaint is based upon a state law claim that is related to the bankruptcy case but does not arise under the bankruptcy code or out of a bankruptcy case. Moreover, the case could not have been commenced in federal court absent the fact of a pending bankruptcy. Therefore, the first two requirements of § 1334(c)(2) are met.

The defendant argues, however, that the third requirement is not fulfilled because the state court proceeding was commenced after Bates & Rogers filed their Chapter 11 petition in bankruptcy court. The defendant maintains that Section 1334(c)(2) makes sense only when the phrase “is commenced” is interpreted to *908 mean that the state court proceeding was commenced prior to a Chapter 11 filing in bankruptcy. In support of this proposition, Continental relies on the reasoning of the bankruptcy court in In re Jackson Consolidated Industries, Inc., 18 C.B.C.2d 431, 435 (Bankr.N.D.Ill.1988), which held:

In the normal instance, if a state court proceeding has not been commenced pri- or to bankruptcy, a creditor would- be prevented from beginning one because of the automatic stay. In that situation, Section 1334(c)(2) makes sense in that if a state court proceeding was commenced prior to filing, it would be an inefficient use of the judicial system to start the case all over again in the bankruptcy court.

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Cite This Page — Counsel Stack

Bluebook (online)
97 B.R. 905, 1989 WL 27721, Counsel Stack Legal Research, https://law.counselstack.com/opinion/bates-rogers-construction-corp-v-continental-bank-na-ilnd-1989.