Doan v. Loomis (In re Fort Dodge Creamery Co.)

117 B.R. 438, 1990 U.S. Dist. LEXIS 5872, 1990 WL 112449
CourtDistrict Court, N.D. Iowa
DecidedMay 11, 1990
DocketBankruptcy No. X88-1550F; Adv. No. X89-0154F; Misc. No. 90-3002
StatusPublished
Cited by2 cases

This text of 117 B.R. 438 (Doan v. Loomis (In re Fort Dodge Creamery Co.)) is published on Counsel Stack Legal Research, covering District Court, N.D. Iowa primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Doan v. Loomis (In re Fort Dodge Creamery Co.), 117 B.R. 438, 1990 U.S. Dist. LEXIS 5872, 1990 WL 112449 (N.D. Iowa 1990).

Opinion

ORDER

HANSEN, District Judge.

This matter is before the court on the report and recommendation of the bankruptcy court, filed February 5, 1990. The bankruptcy court recommends that the motion to remand, filed with the bankruptcy court by defendant Maurice Stark on August 24, 1989, and joined in by defendant McGladrey, Hendrickson & Pullen on August 29, 1989, be denied. Defendant Stark filed objections to the report and recommendation with the bankruptcy court on February 15, 1990. The trustee for the debtor filed a response to defendant’s objections on February 27, 1990.

Removal and remand of state actions related to bankruptcy cases are governed by 28 U.S.C. § 1452 and Bankruptcy Rule 9027. Bankruptcy Rule 9027(e) provides that, “[ujnless the district court orders otherwise, a motion for remand shall be heard by the bankruptcy judge, who shall file a report and recommendation for disposition of the motion.” A party may object within 10 days. Bankr.R. 9027(e). This court’s review of the report and recommendation is pursuant to Bankruptcy Rule 9033. Bankr.R. 9027(e). Bankruptcy Rule 9033(d) provides that:

The district judge shall make a de novo review upon the record or, after additional evidence, of any portion of the bankruptcy judge’s findings of fact or conclusions of law to which specific written objection has been made in accordance with this rule. The district judge may accept, reject, or modify the proposed findings of fact or conclusions of law, receive further evidence, or recommit the matter to the bankruptcy judge with instructions.

Stark objects only to the bankruptcy court’s conclusion that the trustee’s removal of this action was timely within the [440]*440meaning of Bankruptcy Rule 9027(a)(2). Stark does not object to the bankruptcy court’s findings of fact or the bankruptcy court’s conclusion that remand upon equitable grounds pursuant to 28 U.S.C. § 1452(b) is not warranted in this case. The court has reviewed the unobjected to portions of the report and finds that the bankruptcy court’s findings of fact and conclusions regarding 28 U.S.C. § 1452(b) should be adopted.

Bankruptcy Rule 9027(a)(2) provides that: If the claim or cause of action in a civil action is pending when a case under the Code is commenced, an application for removal may be filed only within the longest of
(A) 90 days after the order for relief in the case under the Code,
(B) 30 days after entry of an order terminating a stay, if the claim or cause of action in a civil action has been stayed under § 362 of the Code, ...

The bankruptcy court described the adversary action as a shareholder derivative suit essentially alleging that defendants breached their fiduciary duties to the debt- or corporation. Report and recommendation at 2. The order for relief in debtor’s Chapter 7 case was entered on February 8, 1989. On Aügust 9, 1989, the trustee removed the state court action to the bankruptcy court. It does not appear that any order terminating any 11 U.S.C. § 362 stay, assuming that a stay was or is in effect, has been entered in this case by the bankruptcy court.

The bankruptcy court reasoned as follows:

It is the nature of a derivative action which makes the determination of the timeliness of the removal so difficult.... [A] debtor’s status as a plaintiff or defendant in a pending state court suit may affect the timeliness of removal by a trustee under Bankr.R. 9027(a)(2)_
When there is normal alignment of parties, the effect of the Rule is this — if the debtor is a defendant in a pending state court action, the trustee has thirty days after the entry of an order terminating the stay to file his removal application. If the debtor is the plaintiff in a pending state court action, no stay exists to inhibit the trustee’s pursuit of estate claims; therefore he would have 90 days after the order for relief to remove the pending state court action to federal court.
[[Image here]]
There appears to this court to be two alternatives ... First, it is arguable that because the corporation is a nominal defendant and the stay had not been lifted permitting the litigation of the corporation’s rights against the other state court defendants, there is no time limit presently confronting the trustee ...
Second, it is arguable that as a “real” plaintiff, if the trustee desires to pursue the corporation’s rights in the pending litigation, he must obtain the removal within the 90 days from the entry of the order for relief....
[[Image here]]
This court, however, can find no case law to support or detract from either alternative. The Rule itself does not explicitly deal with this situation and although the court believes it is the second alternative which may be the more appropriate, in the absence of a clear rule applicable to this situation, and because the trustee’s situation fits literally within the 30-day rule (Rule 9027(a)(2)(B)), the application for removal should not be found to be untimely.

Report and recommendation at 6-9. Like the bankruptcy court, this court has been unable to locate any case law on point.

Stark argues that the debtor is the real plaintiff, that the state litigation was not stayed, and thus the removal application is untimely as it was not filed within 90 days of the entry of the order of relief. The trustee argues that the debtor is both a real and a nominal defendant, and as a real defendant, the § 362 stay was in force and the 30 day time period of Bankruptcy Rule 9027(a)(2)(B) applied. The trustee appears to argue that, at a minimum, the status of the debtor as a real or nominal defendant was unclear, and that the trustee had a good faith belief that Bankruptcy [441]*441Rule 9027(a)(2)(B) applied which should excuse any late filing. The trustee also supports his position with excerpts from briefs filed in the bankruptcy court by defendants Allen R. Loomis and A. Robert Loomis, and by First American State Bank, who appears to be a creditor in debtor’s bankruptcy. These briefs suggest that plaintiffs Doan and Ambrose’s claims include claims directly against the debtor.

Paragraph 8 of plaintiffs’ petition states that “[p]laintiffs bring this action on behalf of themselves and other shareholders similarly [situated]. This is a shareholder derivative suit brought by and on behalf of the nominal corporate defendant, Fort Dodge Creamery Company.” Petition, filed April 7, 1988, in the Iowa District Court for Webster County. The bankruptcy court stated that the action is a shareholder derivative action. Report and recommendation at 2. On March 9, 1989, plaintiffs Doan and Ambrose filed a motion to terminate the automatic stay. On March 29, 1989, the bankruptcy court denied this motion

for the reason that 11 U.S.C. § 362

Free access — add to your briefcase to read the full text and ask questions with AI

Related

In Re Lawrence
233 B.R. 248 (N.D. New York, 1999)

Cite This Page — Counsel Stack

Bluebook (online)
117 B.R. 438, 1990 U.S. Dist. LEXIS 5872, 1990 WL 112449, Counsel Stack Legal Research, https://law.counselstack.com/opinion/doan-v-loomis-in-re-fort-dodge-creamery-co-iand-1990.