MIEIVIORANDUM OF DECISION ON DEFENDANT MOUNTAIN VALLEY INDEMNITY CO.’S REQUEST FOR ENTRY OF FINDINGS OF FACT AND CONCLUSIONS OF LAW PURSUANT TO FED. R. BANKR. P. 9033 IN RELATION TO THE BANKRUPTCY COURT ORDER DENYING DEFENDANTS’ JOINT MOTION FOR THE BANKRUPTCY COURT TO ABSTAIN FROM HEARING AND DISMISS OR REMAND THE ABOVE-ENTITLED PROCEEDING PURSUANT TO 28 U.S.C. § 1334(c)(2), 28 U.S.C. § 1334(c)(1), AND/OR 28 U.S.C. § 1452(b)
JOEL B. ROSENTHAL, Bankruptcy Judge.
This matter is presently before the Court on Defendant Mountain Valley Indemnity Co.’s Request for Entry of Findings of Fact and Conclusions of Law Pursuant to Fed. R. Bankr.P. 9033 in Relation to the Bankruptcy Court Order Denying Defendants’ Joint Motion for the Bankruptcy Court to Abstain from Hearing and Dismiss or Remand the Above-Entitled Proceeding Pursuant to 28 U.S.C. § 1334(c)(2), 28 U.S.C. § 1334(c)(1), and/or 28 U.S.C. § 1452(b) [# 33] (“Request for Proposed Ruling”) and the Trustee’s Opposition thereto [# 31] (“Opposition to Request for Proposed Rulings”).
After reviewing all of the relevant pleadings, the Court hereby DENIES the Request for Proposed Rulings.
BACKGROUND
The instant adversary proceeding began as a state court action which the Chapter 7 Trustee removed to this Court.
The adversary proceeding involves only the non-core “related to” jurisdiction of this Court.
The Defendants demand a jury trial
and do not consent to this Court conducting said trial or entering final orders.
Following the removal of the state court action, the Defendants filed a Joint Motion
for the Bankruptcy Court to Abstain from Hearing and Dismiss or Remand the Above-Entitled Proceeding Pursuant to 28 U.S.C. § 1334(c)(2), 28 U.S.C. § 1334(c)(1), and/or 28 U.S.C. § 1452(b) [# 4] (“Motion to Abstain”) to which the Trustee’s objected (“Objection to Motion to Abstain”). At the conclusion of the hearing, the Court denied the Motion to Abstain, primarily on the grounds that the Defendants failed to demonstrate that this matter could be timely adjudicated in state court.
On November 25, 2003 an order denying the Motion to Abstain (“November 25, 2003 Order”) entered on the docket.
On December 5, 2003, the last day to file an appeal of the November 25, 2003 Order, the Defendants filed a motion seeking an extension of time to file an appeal of that Order and a stay of this adversary proceeding (“Extension Motion”) on the grounds that “there is a conflict among the controlling rules and statutes as to appropriate method of seeking district court review.” Because the Defendants failed to demonstrate any basis for the requested relief, the Court denied the Extension Motion.
On December 5, 2003 Defendant Creare, Inc. filed a pleading entitled “Objections of Defendant Creare, Inc. Pursuant to Fed. R. Bank. P. 9033” [# 14] (“Rule 9033 Objection”). Although the pleading was styled as an objection pursuant to Fed. R. Bank. P. 9033 and bore a caption indicating it was addressed to the district court,
in reality the Rule 9033 Objection was a motion for reconsideration. Thus placing substance over form, the Court denied the Rule 9033 Motion.
On the same day Defendant Mountain Valley Indemnity Co. filed a pleading entitled “Request for District Court Review Pursuant to Fed. R. Bank. P. § [sic] 9033 of the Bankruptcy Court Order Denying the Defendants’ Joint Motion for the Bankruptcy Court to Abstain from Hearing and Dismiss or Remand the Above-Entitled Proceeding Pursuant to 28 U.S.C. § 1334(c)(2), 28 U.S.C. § 1334(c)(1), and/or 28 U.S.C. § 1452(b)” [# 16] (“Request for District Court Review”). Defendant Mountain Valley requested that the district court review the November 25, 2003 Order
de novo
on the grounds that this Court lacked jurisdiction to enter the Order. This pleading was transmitted to the district court which, on April 8, 2004, issued its Memorandum & Order in which it denied the Request for District Court Re
view without prejudice. Specifically the district court stated:
Fed. R. Bankr.P. 9033 is entitled “Review of Proposed Findings of Fact and Conclusions of Law in Non-Core Proceedings.” That rule provides that in non-core bankruptcy proceedings, such as the one at issue here, the bankruptcy judge shall file proposed findings of fact and conclusions of law. Fed. R. Bankr.P. 9033. Within ten days of being served with a copy of those findings the parties may file objections.
Id.
A district judge will then exercise
de novo
review, based upon the record and any other evidence of any portion of the bankruptcy judge’s findings of fact or conclusions of law to which specific objection has been made.
Id.
In the instant case, the Bankruptcy Court has not yet issued findings of fact or conclusions of law in this non-core proceeding and, pursuant to Fed. R. Bankr.P. 9033, any review by the District Court at this stage would be premature. As such, defendant’s motion is improperly filed. Defendant has a right to object to the Bankruptcy Court’s ruling but not until it has issued findings of fact and conclusions of law. Defendant’s motion will be denied.
POSITION OF THE PARTIES
Defendant Mountain Valley Indemnity Co., reading the district court’s Memorandum & Order as a directive that this Court enter proposed finding and rulings in connection with its decision not to abstain, filed its Request for Proposed Rulings.
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MIEIVIORANDUM OF DECISION ON DEFENDANT MOUNTAIN VALLEY INDEMNITY CO.’S REQUEST FOR ENTRY OF FINDINGS OF FACT AND CONCLUSIONS OF LAW PURSUANT TO FED. R. BANKR. P. 9033 IN RELATION TO THE BANKRUPTCY COURT ORDER DENYING DEFENDANTS’ JOINT MOTION FOR THE BANKRUPTCY COURT TO ABSTAIN FROM HEARING AND DISMISS OR REMAND THE ABOVE-ENTITLED PROCEEDING PURSUANT TO 28 U.S.C. § 1334(c)(2), 28 U.S.C. § 1334(c)(1), AND/OR 28 U.S.C. § 1452(b)
JOEL B. ROSENTHAL, Bankruptcy Judge.
This matter is presently before the Court on Defendant Mountain Valley Indemnity Co.’s Request for Entry of Findings of Fact and Conclusions of Law Pursuant to Fed. R. Bankr.P. 9033 in Relation to the Bankruptcy Court Order Denying Defendants’ Joint Motion for the Bankruptcy Court to Abstain from Hearing and Dismiss or Remand the Above-Entitled Proceeding Pursuant to 28 U.S.C. § 1334(c)(2), 28 U.S.C. § 1334(c)(1), and/or 28 U.S.C. § 1452(b) [# 33] (“Request for Proposed Ruling”) and the Trustee’s Opposition thereto [# 31] (“Opposition to Request for Proposed Rulings”).
After reviewing all of the relevant pleadings, the Court hereby DENIES the Request for Proposed Rulings.
BACKGROUND
The instant adversary proceeding began as a state court action which the Chapter 7 Trustee removed to this Court.
The adversary proceeding involves only the non-core “related to” jurisdiction of this Court.
The Defendants demand a jury trial
and do not consent to this Court conducting said trial or entering final orders.
Following the removal of the state court action, the Defendants filed a Joint Motion
for the Bankruptcy Court to Abstain from Hearing and Dismiss or Remand the Above-Entitled Proceeding Pursuant to 28 U.S.C. § 1334(c)(2), 28 U.S.C. § 1334(c)(1), and/or 28 U.S.C. § 1452(b) [# 4] (“Motion to Abstain”) to which the Trustee’s objected (“Objection to Motion to Abstain”). At the conclusion of the hearing, the Court denied the Motion to Abstain, primarily on the grounds that the Defendants failed to demonstrate that this matter could be timely adjudicated in state court.
On November 25, 2003 an order denying the Motion to Abstain (“November 25, 2003 Order”) entered on the docket.
On December 5, 2003, the last day to file an appeal of the November 25, 2003 Order, the Defendants filed a motion seeking an extension of time to file an appeal of that Order and a stay of this adversary proceeding (“Extension Motion”) on the grounds that “there is a conflict among the controlling rules and statutes as to appropriate method of seeking district court review.” Because the Defendants failed to demonstrate any basis for the requested relief, the Court denied the Extension Motion.
On December 5, 2003 Defendant Creare, Inc. filed a pleading entitled “Objections of Defendant Creare, Inc. Pursuant to Fed. R. Bank. P. 9033” [# 14] (“Rule 9033 Objection”). Although the pleading was styled as an objection pursuant to Fed. R. Bank. P. 9033 and bore a caption indicating it was addressed to the district court,
in reality the Rule 9033 Objection was a motion for reconsideration. Thus placing substance over form, the Court denied the Rule 9033 Motion.
On the same day Defendant Mountain Valley Indemnity Co. filed a pleading entitled “Request for District Court Review Pursuant to Fed. R. Bank. P. § [sic] 9033 of the Bankruptcy Court Order Denying the Defendants’ Joint Motion for the Bankruptcy Court to Abstain from Hearing and Dismiss or Remand the Above-Entitled Proceeding Pursuant to 28 U.S.C. § 1334(c)(2), 28 U.S.C. § 1334(c)(1), and/or 28 U.S.C. § 1452(b)” [# 16] (“Request for District Court Review”). Defendant Mountain Valley requested that the district court review the November 25, 2003 Order
de novo
on the grounds that this Court lacked jurisdiction to enter the Order. This pleading was transmitted to the district court which, on April 8, 2004, issued its Memorandum & Order in which it denied the Request for District Court Re
view without prejudice. Specifically the district court stated:
Fed. R. Bankr.P. 9033 is entitled “Review of Proposed Findings of Fact and Conclusions of Law in Non-Core Proceedings.” That rule provides that in non-core bankruptcy proceedings, such as the one at issue here, the bankruptcy judge shall file proposed findings of fact and conclusions of law. Fed. R. Bankr.P. 9033. Within ten days of being served with a copy of those findings the parties may file objections.
Id.
A district judge will then exercise
de novo
review, based upon the record and any other evidence of any portion of the bankruptcy judge’s findings of fact or conclusions of law to which specific objection has been made.
Id.
In the instant case, the Bankruptcy Court has not yet issued findings of fact or conclusions of law in this non-core proceeding and, pursuant to Fed. R. Bankr.P. 9033, any review by the District Court at this stage would be premature. As such, defendant’s motion is improperly filed. Defendant has a right to object to the Bankruptcy Court’s ruling but not until it has issued findings of fact and conclusions of law. Defendant’s motion will be denied.
POSITION OF THE PARTIES
Defendant Mountain Valley Indemnity Co., reading the district court’s Memorandum & Order as a directive that this Court enter proposed finding and rulings in connection with its decision not to abstain, filed its Request for Proposed Rulings. The Chapter 7 Trustee interprets the Memorandum & Order differently; he argues that this Court has not yet
heard
this matter and thus there are no final orders ready for review by the district court. He reads the Memorandum & Order to mean that the district court will review this Court’s proposed final orders at the conclusion of this case.
DISCUSSION
Bankruptcy Court Jurisdiction Under Section 133i
Section 1334(a) of title 28 vests federal district courts with exclusive jurisdiction over all cases
“under
title 11,” while 28 U.S.C. § 1334(b) grants the district courts “original but not exclusive jurisdiction of all civil proceedings
arising under
title 11, or
arising in
or
related to
cases under title 11.” (Emphasis added). In turn, 28 U.S.C. § 157(a) permits the district court of each district to refer these cases to the bankruptcy judges for that district. The United States District Court for the District of Massachusetts has made such a referral. LR, D. Mass. 201. Although the district court may, and in this district has, referred all matters for which it has jurisdiction under § 1334(a) and (b), the power of the bankruptcy court to enter final orders in a referred proceeding is not coextensive with the referral. Instead the bankruptcy court’s jurisdiction is limited as is constitutionally required.
See Northern Pipeline Const. Co. v. Marathon Pipe Line Co.,
458 U.S. 50, 87, 102 S.Ct. 2858, 2880, 73 L.Ed.2d 598 (1982) (“We conclude that 28 U.S.C. § 1471 (1976 ed., Supp. IV), as added by § 241(a) of the Bankruptcy Act of 1978, has impermissibly removed most, if not all, of ‘the essential attributes of the judicial power’ from the Art. Ill district court, and has vested those attributes in a non-Art. Ill adjunct. Such a grant of jurisdiction cannot be sustained as an exercise of Congress’ power to create adjuncts to Art. III”).
See also
28 U.S.C. § 157.
Core proceedings
At it essence, bankruptcy court jurisdiction exists in cases “under” the United States Bankruptcy Code, 11 U.S.C. §§ 101
et seq.,
and those cases “arising under,” “arising in,” and “related to” title 11. 28 U.S.C. § 1334(b); 28 U.S.C. § 157(a). The foregoing types of proceedings are further delineated as “core” or “non-core.” Because of the constitutional limits imposed upon bankruptcy court jurisdiction, distinguishing between core and non-core proceedings is vital to the exercise of jurisdiction by a bankruptcy court. A bankruptcy court may hear and finally determine all core bankruptcy proceedings; the parties’ agreement is not needed. 28 U.S.C. § 157(b). In non-core “related to” proceedings, however, only the district court may enter final orders absent consent of the parties. 28 U.S.C. § 157(c). In non-core proceedings, a bankruptcy court proposes final orders to the district court. Fed. R. Bankr.P. 9033. Section 157(c), however, by its very language “applies only to the entry of final orders and judgments.”
In re Ben Franklin Retail Stores, Inc.,
231 B.R. 717, 720 (Bankr.N.D.Ill.1999). It does not apply to non-final orders.
“Generally speaking, a proceeding which ‘arises under’ the bankruptcy laws is considered core.
See
28 U.S.C. § 157(b)(1);
Boroff v. Tully (In re Tully),
818 F.2d 106, 108 (1st Cir.1987).”
In re Sheridan,
362 F.3d 96, 106 (1st Cir.2004). “Related to” actions are non-core. “Determination of what is core and what is non-core has not always been easy.... -‘[A] procedure is core ... if it invokes a'substantive right provided by title 11 or if it is a procedure that, by its nature, could arise only in the context of a bankruptcy case.’ ”
In re Palmer Trucking Co.,
201 B.R. 9, 17 (Bankr.D.Mass.1996) quoting
Ralls v. Docktor Pet Ctrs., Inc.,
177 B.R. 420, 424 (D.Mass.1995). A core proceeding, unlike its non-core counterpart, “relates to a function essential to the administration of the bankruptcy case.”
Sheridan,
362 F.3d at 106. “If the proceeding, by its nature, arises only within the bankruptcy context because it involves a right created by federal bankruptcy law, then it is a core proceeding.”
In re Scotland Guard Services, Inc.,
179 B.R. 764, 766-67 (Bankr.D.P.R.1993) citing
In re Wood,
825 F.2d 90, 97 (5th Cir.1987). That a matter raises issues of state rather than federal law does not by itself determine that the matter is non-core.
In re Arnold Print Works,
815 F.2d 165, 169 (1st Cir.1987). “It is the nature of the proceeding — its relation to the basic function of the bankruptcy court — not the state or federal basis for the claim, that makes the difference....”
Id.
A non-exhaustive exemplar list of proceedings considered “core” is set forth in 28 U.S.C. § 157(b)(2)(A)-(0) but “even this list in several instances is not a model of specificity.”
Palmer Trucking,
201 B.R. at 17. Section 157(b)(2)(A)(“matters concerning the administration of the estate”) and section 157(b)(2)(0)(“other proceedings affecting the liquidation of the assets of the estate or the adjustment of the debtor-creditor or the equity security holder relationship, except personal injury tort or wrongful death claims”) must be read with the constitutional parameters articulated in
Marathon
in mind lest these sections form the basis for overstepping the boundaries. “It is important to note that the matters adumbrated in Bankruptcy Code § 157(b)(2)(A) and (O) likewise typically arise within the context of a particular bankruptcy case, and are essential to the efficient administration of the bankruptcy case.”
Sheridan,
362 F.3d at 107.
Applying these general principles, the Court must determine whether the Motion
to Abstain falls within the core jurisdiction of the bankruptcy court.
Is a motion to abstain and remand a core matter?
An examination of the core or non-core nature of a motion to abstain must begin with a recognition that the statute and rules governing abstention and remand were amended by Congress as part of the Judicial Improvements Act of 1990 (the “1990 Amendments”)- Pub.L. 101-650. Prior to the 1990 Amendments, § 1334(c)(2), the mandatory abstention provision,
provided that “[a]ny decision to abstain made under this section is not reviewable by appeal or otherwise.” Many courts, including the First Circuit interpreted this provision to mean that only a district court could enter mandatory abstention orders;
to hold otherwise would be unconstitutional.
In re Corporacion de Servicios Medicos Hospitalarios de Fajardo v. Mora (In re Corporacion de Servicios Medicos Hospitalarios de Fajardo),
805 F.2d 440, 443 (1st Cir.1986).
Moreover Fed. R. Bankr.P. 5011(b), as it existed prior to August 1, 1991, acknowledged the constitutional dilemma of permitting a bankruptcy court to enter abstention and remand orders. It required a bankruptcy court to submit proposed finding and recommendation to the district court which would then decide the motion
de novo
after considering the bankruptcy court’s report.
The landscape of abstention and remand was dramatically altered by section 309 of
the 1990 Amendments and the subsequent companion amendment to Fed. R. Bankr.P. 5011. Specifically, 28 U.S.C. § 1334(c)(2) added the following highlighted language: “Any decision to abstain
or not to abstain
made under this subsection is not reviewable by appeal or otherwise
by the court of appeals under section 158(d), 1291, or 1292 of this title or by the Supreme Court of the United States under section 1251 of this title.”
The amendment prohibits review of any mandatory abstention order entered by a bankruptcy court only by courts of appeal and the Supreme Court. It does not prohibit such review by a district court. If there were any doubt as to this interpretation, the legislative history of section 305 confirms it.
“Section 309 would amend 11 U.S.C. § 305(c) and 38[sie] U.S.C. § 1334(c)(2) and 1452(b) to clarify that, with respect to certain determinations in bankruptcy cases, they forbid only appeals from the district courts to the courts of appeal, not from the bankruptcy courts to the district courts.” 136 Con. Ree. S17580 (October 27, 1990).
See Nationwide Roofing & Sheet Metal, Inc. v. Cincinnati Insurance Company (In re Nationwide Roofing & Sheet Metal, Inc.),
130 B.R. 768, 777 (Bankr.S.D.Ohio 1991) (citing legislative history and collecting cases addressing the 1990 Amendments).
With judicial review of mandatory abstention orders by an Article III court in place, the constitutional problem, recognized and addressed by Fed. R. Bankr.P. 5011(b) (now repealed) was resolved; the 1990 Amendments eliminated the need for a bankruptcy court to submit proposed findings and rulings.
Brizzolara v. Fisher Pen Co.,
158 B.R. 761, 768 (Bankr.N.D.Ill.1993). Subsequently Fed. R. Bankr.P. 5011(b) was amended; the subsection as it previously existed was replaced by the following: “A motion for abstention pursuant to 28 U.S.C. § 1334(c) shall be governed by Rule 9014 [making it a contested matter] and shall be served on parties to the proceeding.”
The 1990 Amendments also effected a significant change to 28 U.S.C. § 1452(b). Prior to the 1990 Amendments, this section, like the prior version of section 1334(c)(2), prohibited appeals. The 1990 Amendments, using language virtually identical to amend both sections, changed section 1452(b) as follows: “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 by the
court of appeals ... or by the Supreme Court of the United States.”
Subsequently Fed. R. Bankr.P. 9027(e) which had required a bankruptcy court to submit recommendations was amended (and designated as Rule 9027(d)) to make motions for remand contested matters. Fed. R. Bankr.P. 9027(d).
See In re Roper,
203 B.R. 326, 336 (Bankr.N.D.Ala.1996).
Following the 1990 Amendments many courts have held that a motion to abstain, whether mandatory or discretionary abstention, is itself a core matter.
In re Best Reception Systems, Inc.,
220 B.R. 932, 941 (Bankr.E.D.Tenn.1998) (“The determination of whether to abstain is a core proceeding, pursuant to 28 U.S.C.A. § 157(b)(2)(A) (West 1993), in which this court may enter a final order.”);
In re Finkley,
203 B.R. 95, 97 (Bankr.N.D.Ill.1996) (“[A] motion seeking abstention pursuant to 28 U.S.C. § 1334(c)(1) can arise only in the context of a bankruptcy case, and hence is a ‘core proceeding’ arising in
a case under Title 11. 28 U.S.C. § 157(b)(2)(A)”);
Branham v. Davis (In re Branham),
149 B.R. 406, 408 (Bankr.W.D.Va.1992) (“The authority to abstain is vested in this Court by virtue of 11 U.S.C. § 305, 28 U.S.C. § 1334, and Rule 5011. Although the statutes refer to abstention by the ‘District Court,’ most cases have held that the Bankruptcy Court, after the order of reference, has jurisdiction to abstain in appropriate cases. This Court therefore assumes that under the general order of reference issued by the District Court, it has jurisdiction to determine whether or not abstention is appropriate.”). Motions to remand also are now core proceedings.
Roper,
203 B.R. at 334 (“After analyzing relevant case law, Code sections, and Federal Rules of Bankruptcy Procedure, this Court is satisfied that a Motion to Remand, in and of itself, is ‘core’ within the meaning of 28 U.S.C. § 157; and also that it has the authority to enter an order on the matter pursuant to 28 U.S.C. §§ 157 and 1452.”).
This Court agrees. In instances such as the case at bar where the underlying adversary proceeding is a non-core matter for which no independent grounds for the district court to exercise federal jurisdiction exists, removal is nevertheless still permissible because the case is “related to” a bankruptcy case. The district court has original, albeit non-exclusive jurisdiction pursuant to 28 U.S.C. § 1334(b), and thus removal is appropriate. 28 U.S.C. § 1452(b). But for the bankruptcy, however, no right to remove the action from state court would exist. Thus, a motion to abstain, at least in a non-core “related to” proceeding, falls within the quintessential definition of a core proceeding. It is a procedure that, by its very nature, can only exist in connection with a bankruptcy case. It is the type of core proceeding contemplated by the expansive language of 28 U.S.C. § 157(a)(2)(0).
Final orders
Courts are not in agreement as to whether an order denying a motion to abstain is a final order.
Compare Ascher,
128 B.R. at 645 (bankruptcy judge’s order with regard to mandatory or discretionary abstention is a final order) with
BancBoston Real Estate Capital Corporation v. JBI Associates Limited Partnership (In re Jackson Brook Institute, Inc.),
227 B.R. 569, 575 (D.Me.1998) (order denying abstention is not a final order). Given that the Motion to Abstain is a core matter in which this Court can and should enter final orders, it is not necessary for this Court to determine whether the November 25, 2003 Order denying the Motion to Abstain is final.
CONCLUSION
For the foregoing reasons, the Court denies the Request for proposed Rulings.
A separate order shall issue.