2 FILED & ENTERED
4 NOV 09 2020
5 CLERK U.S. BANKRUPTCY COURT 6 C Be Yn t t ar ta u l m D i s t r i c Dt E o Pf UC Ta Yli f Cor Ln Eia RK 7 UNITED STATES BANKRUPTCY COURT 8 CENTRAL DISTRICT OF CALIFORNIA 9 LOS ANGELES DIVISION 10
12 In re: Case No. 2:18-bk-12224-RK
13 RAEISI GROUP, INC., Chapter 11
14 ORDER GRANTING DEBTOR’S MOTION TO Debtor. STAY PENDING APPEAL, ECF 213, AND 15 ABSTAINING FROM DETERMINING 16 DEBTOR’S OBJECTION TO CLAIM NO. 4 BY U.S. BANK NATIONAL ASSOCIATION 17 AS TRUSTEE FOR VELOCITY COMMERCIAL CAPITAL LOAN TRUST 18 2014-1, ECF 115 19 Vacated Hearing Date 20 Date: November 10, 2020 Time: 11:00 a.m. 21
23 24 TO DEBTOR RAEISI GROUP, INC., CREDITOR U.S. BANK NATIONAL 25 ASSOCIATION AS TRUSTEE FOR VELOCITY COMMERCIAL CAPITAL LOAN 26 TRUST 2014-1, AND THEIR COUNSEL OF RECORD: 27 Pending before the court is the motion of Debtor Raeisi Group., Inc., to stay 28 bankruptcy court proceedings pending resolution of its appeal in Raeisi Group, Inc. v. 1 Velocity Commercial Capital, LLC, et al. (California Second District Court of Appeal, No. 2 B293744) (the “Stay Motion”). The Stay Motion was filed on October 7, 2020 as Docket 3 Number 213 and was directed at the trial on Debtor’s Objection to Claim No. 4 by U.S. 4 Bank National Association as Trustee for Velocity Commercial Capital Loan Trust 2014- 5 1, Docket Number 115 (the “Claim Objection”), then scheduled for October 29, 2020 at 6 9:00 a.m. 7 Having considered the Stay Motion and the written opposition filed by Creditor 8 U.S. Bank National Association as Trustee for Velocity Commercial Capital Loan Trust 9 2014-1, Docket Number 216, filed on October 14, 2020, the court filed and entered an 10 order on October 22, 2020, Docket Number 218, setting forth its tentative ruling on 11 Debtor’s Stay Motion. The court’s tentative ruling on the Stay Motion stated that in 12 addition to a request for a stay, the court construed Debtor’s motion as requesting the 13 court to abstain on ruling on the Claim Objection so the state appellate court could 14 decide Debtor’s pending appeal. The court’s order and tentative ruling on the Stay 15 Motion requested further briefing from the parties and continued the hearing on the 16 motion to November 10, 2020. 17 Having considered Debtor’s briefing on abstention in support of the court’s 18 tentative ruling, Docket Number 220, and the written statement of non-opposition to the 19 court’s tentative ruling of creditor U.S. Bank National Association as Trustee for Velocity 20 Commercial Capital Loan Trust 2014-1, Docket Number 221, the court rules and adopts 21 its tentative ruling set forth in its prior order, Docket Number 218, which is 22 reincorporated as follows: 23 The court will grant Debtor’s motion for stay, which the court interprets as a 24 request for the bankruptcy court to abstain from determining the reasonableness of 25 Creditor’s attorneys’ fees and validity of the claim for attorneys’ fees under state law in 26 Debtor’s objection to the claim of the Creditor, Docket Number 115, pursuant to 27 statutory permissive abstention under 28 U.S.C. § 1334(c)(1) and nonstatutory 28 abstention under Colorado River Water Conservation District v. United States, 424 U.S. 1 800 (1976). The factors that the court has considered for permissive abstention are set 2 forth in In re Tucson Estates, Inc., 912 F.2d 1162, 1167 (9th Cir. 1990): 1) the effect or 3 lack thereof on the efficient administration of the estate if a Court recommends 4 abstention (favoring abstention for lack of effect on efficient administration of the 5 estate), (2) the extent to which state law issues predominate over bankruptcy issues 6 (favoring abstention because, although determining Creditor’s claim is a bankruptcy 7 issue, the validity of Creditor’s claim for fees and the reasonableness of the fees is 8 governed by state law), (3) the difficulty or unsettled nature of the applicable law 9 (neutral since the applicable law is not difficult or unsettled), (4) the presence of a 10 related proceeding commenced in state court or other nonbankruptcy court (favoring 11 abstention because there is a pending state court appeal and the request for attorney 12 fees was initially brought before the state court), (5) the jurisdictional basis, if any, other 13 than 28 U.S.C. § 1334 (not favoring abstention since the allowance or disallowance of 14 claims against the estate is a core proceeding, 28 U.S.C. § 157(b)(2)(B)), (6) the degree 15 of relatedness or remoteness of the proceeding to the main bankruptcy case (favoring 16 abstention since a plan has been confirmed, Debtor has received its discharge, and the 17 main bankruptcy case is effectively completed as all plan payments have been made 18 and all terms of the plan have been complied with, and the remaining dispute in this 19 case is whether the creditor was overpaid on its claim), (7) the substance rather than 20 form of an asserted "core" proceeding (favoring abstention because the underlying 21 issue of Creditor’s right to reasonable attorneys’ fees is a noncore proceeding involving 22 California law, Butner v. United States, 440 U.S. 48, 55 (1979)), (8) the feasibility of 23 severing state law claims from core bankruptcy matters to allow judgments to be 24 entered in state court with enforcement left to the bankruptcy court (favoring abstention 25 because the attorneys’ fees issue can be determined by the state court in conjunction 26 with Debtor’s state court appeal and no bankruptcy issues are left to be resolved), (9) 27 the burden of [the bankruptcy court's] docket (favoring abstention because there are no 28 issues left to be resolved on the bankruptcy court’s docket in this case, so it would be 1 more efficient to resolve the attorneys’ fees dispute in the state court proceedings), (10) 2 the likelihood that the commencement of the proceeding in bankruptcy court involves 3 forum shopping by one of the parties (this factor is neutral as the court makes no 4 determination of forum shopping), (11) the existence of a right to a jury trial (not favoring 5 abstention since attorneys’ fee determinations are equitable proceedings and the right 6 to trial by jury does not apply, United States Fid. & Guar. Co. v. Superior Court, 204 7 Cal.App.3d 1513, 1530 (1988)), and (12) the presence in the proceeding of nondebtor 8 parties (not favoring abstention since the only parties to the dispute are before the 9 court). Based on the significant presence of factors favoring abstention, the court 10 exercises permissive abstention as to Debtor’s objection to Creditor’s request for 11 attorney fees in its claim before this bankruptcy court. 12 The court also exercises nonstatutory Colorado River abstention as the factors 13 for such abstention favor abstention because: (1) state law provides the rule of decision 14 on the merits; (2) the state court proceeding is adequate to protect the parties’ rights; 15 and (3) the state court obtained and exercised jurisdiction first as the state court ruled 16 on Creditor’s demurrers and deferred ruling on the attorneys’ fees issue before the 17 dispute came before the bankruptcy court. In re Bellucci, 119 B.R. 763, 775-776 18 (Bankr. E.D. Cal. 1990) (citations omitted).
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2 FILED & ENTERED
4 NOV 09 2020
5 CLERK U.S. BANKRUPTCY COURT 6 C Be Yn t t ar ta u l m D i s t r i c Dt E o Pf UC Ta Yli f Cor Ln Eia RK 7 UNITED STATES BANKRUPTCY COURT 8 CENTRAL DISTRICT OF CALIFORNIA 9 LOS ANGELES DIVISION 10
12 In re: Case No. 2:18-bk-12224-RK
13 RAEISI GROUP, INC., Chapter 11
14 ORDER GRANTING DEBTOR’S MOTION TO Debtor. STAY PENDING APPEAL, ECF 213, AND 15 ABSTAINING FROM DETERMINING 16 DEBTOR’S OBJECTION TO CLAIM NO. 4 BY U.S. BANK NATIONAL ASSOCIATION 17 AS TRUSTEE FOR VELOCITY COMMERCIAL CAPITAL LOAN TRUST 18 2014-1, ECF 115 19 Vacated Hearing Date 20 Date: November 10, 2020 Time: 11:00 a.m. 21
23 24 TO DEBTOR RAEISI GROUP, INC., CREDITOR U.S. BANK NATIONAL 25 ASSOCIATION AS TRUSTEE FOR VELOCITY COMMERCIAL CAPITAL LOAN 26 TRUST 2014-1, AND THEIR COUNSEL OF RECORD: 27 Pending before the court is the motion of Debtor Raeisi Group., Inc., to stay 28 bankruptcy court proceedings pending resolution of its appeal in Raeisi Group, Inc. v. 1 Velocity Commercial Capital, LLC, et al. (California Second District Court of Appeal, No. 2 B293744) (the “Stay Motion”). The Stay Motion was filed on October 7, 2020 as Docket 3 Number 213 and was directed at the trial on Debtor’s Objection to Claim No. 4 by U.S. 4 Bank National Association as Trustee for Velocity Commercial Capital Loan Trust 2014- 5 1, Docket Number 115 (the “Claim Objection”), then scheduled for October 29, 2020 at 6 9:00 a.m. 7 Having considered the Stay Motion and the written opposition filed by Creditor 8 U.S. Bank National Association as Trustee for Velocity Commercial Capital Loan Trust 9 2014-1, Docket Number 216, filed on October 14, 2020, the court filed and entered an 10 order on October 22, 2020, Docket Number 218, setting forth its tentative ruling on 11 Debtor’s Stay Motion. The court’s tentative ruling on the Stay Motion stated that in 12 addition to a request for a stay, the court construed Debtor’s motion as requesting the 13 court to abstain on ruling on the Claim Objection so the state appellate court could 14 decide Debtor’s pending appeal. The court’s order and tentative ruling on the Stay 15 Motion requested further briefing from the parties and continued the hearing on the 16 motion to November 10, 2020. 17 Having considered Debtor’s briefing on abstention in support of the court’s 18 tentative ruling, Docket Number 220, and the written statement of non-opposition to the 19 court’s tentative ruling of creditor U.S. Bank National Association as Trustee for Velocity 20 Commercial Capital Loan Trust 2014-1, Docket Number 221, the court rules and adopts 21 its tentative ruling set forth in its prior order, Docket Number 218, which is 22 reincorporated as follows: 23 The court will grant Debtor’s motion for stay, which the court interprets as a 24 request for the bankruptcy court to abstain from determining the reasonableness of 25 Creditor’s attorneys’ fees and validity of the claim for attorneys’ fees under state law in 26 Debtor’s objection to the claim of the Creditor, Docket Number 115, pursuant to 27 statutory permissive abstention under 28 U.S.C. § 1334(c)(1) and nonstatutory 28 abstention under Colorado River Water Conservation District v. United States, 424 U.S. 1 800 (1976). The factors that the court has considered for permissive abstention are set 2 forth in In re Tucson Estates, Inc., 912 F.2d 1162, 1167 (9th Cir. 1990): 1) the effect or 3 lack thereof on the efficient administration of the estate if a Court recommends 4 abstention (favoring abstention for lack of effect on efficient administration of the 5 estate), (2) the extent to which state law issues predominate over bankruptcy issues 6 (favoring abstention because, although determining Creditor’s claim is a bankruptcy 7 issue, the validity of Creditor’s claim for fees and the reasonableness of the fees is 8 governed by state law), (3) the difficulty or unsettled nature of the applicable law 9 (neutral since the applicable law is not difficult or unsettled), (4) the presence of a 10 related proceeding commenced in state court or other nonbankruptcy court (favoring 11 abstention because there is a pending state court appeal and the request for attorney 12 fees was initially brought before the state court), (5) the jurisdictional basis, if any, other 13 than 28 U.S.C. § 1334 (not favoring abstention since the allowance or disallowance of 14 claims against the estate is a core proceeding, 28 U.S.C. § 157(b)(2)(B)), (6) the degree 15 of relatedness or remoteness of the proceeding to the main bankruptcy case (favoring 16 abstention since a plan has been confirmed, Debtor has received its discharge, and the 17 main bankruptcy case is effectively completed as all plan payments have been made 18 and all terms of the plan have been complied with, and the remaining dispute in this 19 case is whether the creditor was overpaid on its claim), (7) the substance rather than 20 form of an asserted "core" proceeding (favoring abstention because the underlying 21 issue of Creditor’s right to reasonable attorneys’ fees is a noncore proceeding involving 22 California law, Butner v. United States, 440 U.S. 48, 55 (1979)), (8) the feasibility of 23 severing state law claims from core bankruptcy matters to allow judgments to be 24 entered in state court with enforcement left to the bankruptcy court (favoring abstention 25 because the attorneys’ fees issue can be determined by the state court in conjunction 26 with Debtor’s state court appeal and no bankruptcy issues are left to be resolved), (9) 27 the burden of [the bankruptcy court's] docket (favoring abstention because there are no 28 issues left to be resolved on the bankruptcy court’s docket in this case, so it would be 1 more efficient to resolve the attorneys’ fees dispute in the state court proceedings), (10) 2 the likelihood that the commencement of the proceeding in bankruptcy court involves 3 forum shopping by one of the parties (this factor is neutral as the court makes no 4 determination of forum shopping), (11) the existence of a right to a jury trial (not favoring 5 abstention since attorneys’ fee determinations are equitable proceedings and the right 6 to trial by jury does not apply, United States Fid. & Guar. Co. v. Superior Court, 204 7 Cal.App.3d 1513, 1530 (1988)), and (12) the presence in the proceeding of nondebtor 8 parties (not favoring abstention since the only parties to the dispute are before the 9 court). Based on the significant presence of factors favoring abstention, the court 10 exercises permissive abstention as to Debtor’s objection to Creditor’s request for 11 attorney fees in its claim before this bankruptcy court. 12 The court also exercises nonstatutory Colorado River abstention as the factors 13 for such abstention favor abstention because: (1) state law provides the rule of decision 14 on the merits; (2) the state court proceeding is adequate to protect the parties’ rights; 15 and (3) the state court obtained and exercised jurisdiction first as the state court ruled 16 on Creditor’s demurrers and deferred ruling on the attorneys’ fees issue before the 17 dispute came before the bankruptcy court. In re Bellucci, 119 B.R. 763, 775-776 18 (Bankr. E.D. Cal. 1990) (citations omitted). “Under the Colorado River doctrine, a 19 federal trial court has discretion in ‘exceptional circumstances’ and despite the general 20 obligation to exercise jurisdiction, to stay or dismiss an action for reasons of wise 21 judicial administration solely because of parallel litigation in state court." Id. at 775 22 (citations omitted). 23 Thus, the court abstains from hearing Debtor’s objection to Creditor’s request for 24 attorney fees in its claim filed with this court, and Debtor may move to close this 25 bankruptcy case as Debtor has paid all creditors pursuant to the Plan and received its 26 discharge. This bankruptcy court retains jurisdiction over Debtor’s Claim Objection 27 pursuant to the provisions of the confirmed plan of reorganization, and either party may 28 move to reopen the bankruptcy case once it has been closed to resolve the present 1 || dispute, should the parties be unable to resolve the attorneys’ fees dispute before the 2 || state courts. 3 In light of this ruling, the court determines that oral argument on Debtor's Stay 4 || Motion is unnecessary at the further hearing scheduled for November 10, 2020, and the 5 || court exercises its discretion to dispense with it pursuant to Local Bankruptcy Rule 6 || 9013-1(j)(3) and vacates the further hearing on the motion scheduled for November 10, 7 ||}2020. No appearances are required on November 10, 2020. 8 IT |S SO ORDERED. 9 10 # # # 11 12 13 14 15 16 17 18 19 20 21 22 23 2 25 Date: November 9, 2020 26 United States Bankruptcy Judge 27 28