In re Cashco, Inc.

598 B.R. 9
CourtUnited States Bankruptcy Court, D. New Mexico
DecidedFebruary 19, 2019
DocketNo. 18-11968-j7
StatusPublished
Cited by1 cases

This text of 598 B.R. 9 (In re Cashco, Inc.) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, D. New Mexico primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Cashco, Inc., 598 B.R. 9 (N.M. 2019).

Opinion

ROBERT H. JACOBVITZ, United States Bankruptcy Judge *11At a status conference held December 12, 2018, an issue arose concerning the applicability of the automatic stay to the removal of a state court class action lawsuit to this Court initiating Adversary Proceeding No. 18-1055-J, and whether, if the stay did not apply to removal, the automatic stay applies to the continuation of the litigation in the removed case before this Court. See Order Resulting from Status Conference - Docket No. 46. The Court directed the parties to brief these issues. Id.1 The Chapter 7 Trustee ("Trustee") contends that the automatic stay applies to removal of the state court class action lawsuit to this Court and to the continuation of the litigation in the removed case before this Court. See Chapter 7 Trustee's Brief on Applicability of the Automatic Stay ("Trustee's Brief" - Docket No. 62). The Trustee requests the Court to strike the Notice of Removal and all subsequent documents filed in Adversary Proceeding No. 18-1055-J and remand the Adversary Proceeding to state court. Debtor disagrees. See Debtor's Brief in Response to Chapter 7 Trustee's Brief on Applicability of the Automatic Stay ("Debtor's Response Brief" - Docket No. 70). The Chapter 7 Trustee also filed a reply. See Chapter 7 Trustee's Reply Brief on Applicability of the Automatic Stay ("Reply" - Docket No. 79).

The Court has considered the Trustee's Brief, the Debtor's Response Brief, the Reply, and relevant case law. Courts disagree whether the automatic stay applies to the removal and to continued litigation of a removed state court action in the bankruptcy court. Compare In re Hoskins , 266 B.R. 872, 877 (Bankr. W.D. Mo. 2001) (the automatic stay applies to "remov[al] of a pending state court lawsuit to the bankruptcy court if the claim or cause of action is subject to the stay") and F & M Bank & Trust Co. v. Owens , No. 2:13CV00063 ERW, 2013 WL 3941382, at *1 (E.D. Mo. July 31, 2013) (the automatic stay bars further prosecution of a state court lawsuit, "including removing the state court action to federal court") with In re Babekov , No. 1-07-43574-DEM, 2009 WL 1373597, at *3 (Bankr. E.D.N.Y. May 5, 2009) ("[T]he automatic stay would not apply to a case removed to the forum of the debtor's bankruptcy case") (citation omitted). The Court is convinced that the automatic stay does not apply to the Debtor's removal of the state court class action lawsuit to this Court and does not apply to the continuation of the litigation in the removed class action lawsuit before this Court. However, to the extent the automatic stay applies to removal or to the continuation of the litigation of the removed action in this Court, the Court sua sponte annuls the automatic stay to validate the removal of the state court class action suit to this Court and modifies the automatic stay to permit litigation of Adversary Proceeding No. 18-1055-J before this Court. The Court is not modifying the stay to permit continued litigation before the state court in the event of remand.

*12BACKGROUND AND PROCEDURAL HISTORY

Debtor commenced this bankruptcy case by filing a voluntary petition under Chapter 7 of the Bankruptcy Code on August 6, 2018. See Docket No. 1. Pre-petition, Matthew Kitts commenced an action against the Debtor in the Second Judicial District Court as Cause No. D-202-CV-2016-01851 (the "State Court Action"). The State Court Action is a class action lawsuit filed against the Debtor; Budget Payday Loans, Limited Partnership ("Budget Payday"); and Hitex, Inc. ("Hitex"). See Adversary Proceeding No. 18-1055-J - Docket Nos. 18 and 19. The state court certified the class as to the Debtor. The class has not yet been certified as to Budget Payday or Hitex. Budget Payday is a Chapter 7 debtor in Case No. 18-11967-t7 pending before Judge David T. Thuma. Hitex is not in bankruptcy.

On August 23, 2018, Debtor filed a notice of removal of the State Court Action to this Court, initiating Adversary Proceeding No. 18-1055-J (the "Class Action Adversary Proceeding"). Mr. Kitts, as Plaintiff in the Class Action Adversary Proceeding, filed a motion for remand and abstention, which the Court stayed pending the Court's ruling on the applicability of the automatic stay. See Class Action Adversary Proceeding - Docket Nos. 10 and 27.

DISCUSSION

A. The Removal Process

Removal of claims related to bankruptcy cases is governed by 28 U.S.C. § 1452, which provides, in relevant part:

A party may remove any claim or cause of action in a civil action ... 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.

28 U.S.C. § 1452(a).2 The removal statute thus has three applicable requirements: 1) the removing party must be a party to the state court action; 2) the state court action must be removed to the district court where the state court action is pending; and 3) the district court must have jurisdiction over the claim. 28 U.S.C. § 1452(a). Bankruptcy Rule 9027 sets forth the procedure for removal, including time restrictions for timely filing a notice of removal. Fed. R. Bankr. P. 9027.

The Debtor satisfied the statutory removal requirements and timely filed the notice of removal per Bankruptcy Rule 9027. The Debtor was a party to the State Court Action and removed the case to the bankruptcy court in the district where the State Court Action was pending. Although the removal statute provides for removal to the federal district court, all matters related to a bankruptcy case pending in the District of New Mexico are automatically referred to this Court. See Administrative Order - Misc. No. 84-0324 ("Pursuant to the authority of Section 157, Title 28, United States Code, and Rule 9029 of the Federal Rules of Bankruptcy Procedure...

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Cite This Page — Counsel Stack

Bluebook (online)
598 B.R. 9, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-cashco-inc-nmb-2019.