Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_09-cv-01312/USCOURTS-azd-2_09-cv-01312-0/pdf.json

Nature of Suit Code: 422
Nature of Suit: Bankruptcy Appeals Rule 28 USC 158
Cause of Action: 28:0158 Notice of Appeal re Bankruptcy Matter (BAP)

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

In re:

Mortgages Ltd.,

Debtor. __________________________________

PDG Los Arcos, LLC, et al.,

Appellants,

vs.

Robert M . Adams, et al.,

Appellees.

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

No. CV 09-1312-PHX-MHM

(Consolidated)

BK. No. 2:08-bk-7465-RJH

Consolidated cases:

ADV. No. 2:08-ap-00781-RJH

ADV. No. 2:08-ap-00831-RJH

ORDER

Appellants National Retail Development Partners I, LLC (“NRDP”) and PDG Los

Arcos, LLC (“PDG”) appeal from the Bankruptcy Court’s (Judge Randolph J. Haines) May

19, 2009 Orders concluding that “under Arizona law, a bare assignment of a contract . . . in

the circumstances where the assignment is for purposes of financing,” does not imply an

assumption of duties and granting Appellees’ Motion to Dismiss. Following oral argument

held on March 24, 2010, the Court took the matter under advisement. Having considered the

written and oral arguments of the parties, the applicable law, and the record before it, the

Court now rules. 

/ / /

Case 2:09-cv-01312-MHM Document 35 Filed 03/31/10 Page 1 of 13
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1

 Citations to Appellants’ Excerpts of Record are delineated as “R,” citations to Appellee

ML Manager LLC’s Excerpts of Record are delineated as “ML R,” and citations to Appellee

Investors’ Excerpts of Record are delineated as “I R.”

- 2 -

I. BACKGROUND

This case arises from the complex and well-publicized bankruptcy of Mortgages Ltd.

Mortgages Ltd. was in the business of lending money to commercial real estate developers.

In this case, Mortgages Ltd. entered a $26 million construction loan agreement with PDG

and a $10 million construction loan agreement with NRDP. (R 2,3)1

 The loans were

documented with loan agreements, promissory notes, deeds of trust, guarantees and other

documents. 

In turn, Mortgages Ltd. sold “participations” in the loans to pass-through investors,

who are the Appellees in these proceedings (collectively “Investors”). (R 1) For their

investment, the Investors received undivided fractional interests in the promissory notes and

deeds of trust. In addition, in each case there was also an Assignment stating that “Assignor

[Mortgages Ltd.] hereby assigns to Assignee the above-referenced interest in the following

documents,” which included the Construction Loan Agreement. (R 6) The loans were not

fully funded by the time of the Mortgages Ltd. bankruptcy. NRDP and PDG asked the

Investors for additional funding, but they refused. Thereafter, NRDP and PDG each filed

suit in state court against the Investors, alleging that they were liable under the assignment

of the construction loan agreements to fully fund the loans. 

The investors subsequently removed the cases to Bankruptcy Court. NRDP and PDG

then filed motions to remand, which the Bankruptcy Court denied. Thereafter, NRDP and

PDG filed nearly identical Motions for Leave to Appeal the denial of the remand in this

Court (CV 09-13-PHX-MHM and CV 09-91-PHX-MHM), and, in the alternative, Motions

to Withdraw the Reference (CV 09-276-PHX-MHM and CV 09-277-PHX-MHM). 

During the pendency of these interlocutory appeals, the Investors filed Motions to

Dismiss in the Bankruptcy Court, which the Bankruptcy Court granted in identical orders

issued on May 19, 2009. NRDP and PDG appealed from the Bankruptcy Court’s dismissal

Case 2:09-cv-01312-MHM Document 35 Filed 03/31/10 Page 2 of 13
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 3 -

orders. In light of the Bankruptcy Court’s rulings, this Court dismissed the interlocutory

appeals without prejudice and consolidated the instant appeals for consideration. (CV 09-

1312-PHX-MHM and CV 09-1328-PHX-MHM). 

II. STANDARD OF REVIEW

To avoid dismissal under Rule 12(b)(6), which is incorporated by reference into

the Bankruptcy Rules by 7012(b)(6), a complaint must contain sufficient factual matter,

accepted as true, to "state a claim to relief that is plausible on its face." Bell Atl. Corp. v.

Twombly, 550 U.S. 544, 570, 127 S. Ct. 1955 (2007). A claim has facial plausibility

when the plaintiff pleads factual content that allows the court to glean the reasonable

inference that the defendant is liable for the misconduct alleged. Id. at 556, 127 S. Ct.

1955. In Ashcroft v. Iqbal, 129 S. Ct. 1937,1953 (2009), the Supreme Court clarified that

its decision in Twombly “expounded the pleading standard for ‘all civil actions,’”

rejecting the plaintiff’s argument that the standard should be limited to the anti-trust

context. See also, Moss v. U.S. Secret Service, 572 F.3d 962, 969 n.7 (9th Cir. 2009)

(noting Twombly’s broad application). 

A dismissal for failure to state a claim is reviewed de novo. Carpenter v. FDIC,

205 B.R. 600, 604 (9th Cir. B.A.P. 1997). In determining whether a plaintiff has stated a

claim, the court must generally treat the allegations of the complaint as true. Id.

However, the Court "may consider evidence on which the complaint 'necessarily relies'

if: (1) the complaint refers to the document; (2) the document is central to the plaintiff’s

claim; and (3) no party questions the authenticity of the copy." Marder v. Lopez, 450

F.3d 445,448 (9th Cir. 2006). The allegations of the complaint need not be treated as true

if they are refuted by the referenced documents. Carpenter, 205 B.R. at 604. Similarly,

the court may consider facts subject to judicial notice, including the record of related

proceedings. Mullis v. U.S. Bankruptcy Ct., 828 F .2d 1385, 1388 (9th Cir. 1987).

/ / /

/ / /

Case 2:09-cv-01312-MHM Document 35 Filed 03/31/10 Page 3 of 13
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

2

 In its opening brief, Appellants chose to address only the Bankruptcy Court’s first basis

for its holding. Accordingly, Appellants have waived any argument with respect to the Bankruptcy

Court’s second and third bases. Amoco Oil Co. v. U.S., 234 F.3d 1374, 1377 (Fed. Cir. 2000). The

Court, in its discretion, will address all three. 

- 4 -

III. DISCUSSION

A. MOTION TO DISMISS

The Bankruptcy Court identified three independent bases for dismissal of

Appellants' complaints: (1) that Grant v. Harner, 29 Ariz. 41, 239 P.296 (1925), requiring

an express delegation of contract liabilities, is dispositive; (2) that third-party beneficiary

law precludes an action against the Investors on the assignment; and (3) that even if the

court were to conclude that Arizona would follow the Restatement of Contracts § 328,

there would be no presumptive delegation of duties to the Investors.2

 (R 15)

1. Arizona Precedent

Relying on Norton v. First Fed. Sav., 624 P.2d 854 (Ariz. 1981), Appellants argue

that “the assignment/delegation issue is unresolved in Arizona” and urge the Court to

predict how the Arizona Supreme Court would decide the issue. They argue that the

Arizona court “would likely follow the Restatement’s presumptive approach” and find a

delegation of duties. Appellants also argue that the Arizona Supreme Court “may also

adopt the approach that implies an assumption of duties from the surrounding

circumstances,” and that the circumstances here imply such a delegation. The

Bankruptcy Court rejected these arguments, finding that the Arizona Supreme Court’s

holding in Grant was controlling. This Court agrees.

 In Grant, the Arizona Supreme Court considered whether the assignment of a

contract carried with it an implied delegation of the duties owed by the assignor to the

other original contracting party, the obligee. Grant at 43, 239 P. at 296. Finding that the

defendant-assignee did not become indebted to the obligee, the court cited the “wellestablished rule” that assignment of a contract does not relieve the assignor of his duties

to the obligee, nor “does it have the effect of creating a new liability on the part of the

Case 2:09-cv-01312-MHM Document 35 Filed 03/31/10 Page 4 of 13
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 5 -

assignee to the other party to the contract assigned, because the assignment does not bring

them together, and consequently there cannot be the meeting of the minds essential to the

formation of a contract.” Id. at 43-44, 239 P. at 296-97.

In Norton, the Arizona Supreme Court cited Grant’s “general principal[] that an

assignment of a contract does not operate to cast on the assignee liabilities imposed by the

contract on the assignor.” 128 Ariz. at 181, 624 P.2d at 859. The Norton court noted

that “a review of cases from other jurisdiction discloses that many courts agree with this

basic rule.” Id. While suggesting, in dicta, that because Arizona recognizes implied

contracts, “it would be logical for us to recognize an implied assumption of duties by an

assignee,” the court concluded that the circumstances of the case, which involved an

interest in real property, did not require it to reach that question. Id. Furthermore, the

court concluded that even if the Restatement rule’s presumptive approach were adopted in

Arizona, under the circumstances presented, it would not operate to impose duties upon

the assignee. Id. 

Accordingly, because Norton did not overrule Grant, Grant remains controlling

precedent in Arizona. In the present case, as in Grant, there was no express assumption

of duties, therefore the Investors cannot be held liable for Mortgages Ltd.’s funding

obligations, and the Bankruptcy Court properly dismissed the Complaints. 

In their reply brief, Appellants argue that Grant “follows the implied delegation

approach” and that the Bankruptcy Court should have applied it. While the Grant court

considered whether the assignment of a contract carried with it an implied delegation of

the duties, it held to the contrary. Grant’s analysis in this regard does not negate its

holding nor does it change the effect of that holding on the facts presented here. 

2. Third-Party Beneficiaries

The Bankruptcy Court found, as its second basis for dismissal, that Appellants are

not third-party beneficiaries of the assignments and therefore cannot enforce any

obligations the Investors may have had to provide funds to Mortgages Ltd. Citing the

“Arizona rule” that “for a person to recover as a third-party beneficiary of a contract, an

Case 2:09-cv-01312-MHM Document 35 Filed 03/31/10 Page 5 of 13
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 6 -

intention to benefit that person must be indicated in the contract itself,” the Bankruptcy

Court concluded that nothing in the assignments between Mortgages Ltd. and its

Investors indicated an intent to directly benefit the Appellants. 

Appellants assert, in their opening brief and at oral argument, that they never

contended that they were third-party beneficiaries. Nonetheless, the Court agrees with the

conclusion of the Bankruptcy Court.

3. Implied Delegation of Duties

As its third basis for dismissal, the Bankruptcy Court found that even if it were to

conclude that Arizona would follow the Restatement of Contracts § 328, there were no

facts alleged in the Complaints from which a delegation of duties could be implied. This

Court agrees. 

Under the presumptive approach, duties are not implicitly delegated to an assignee

where “the circumstances indicate the contrary, as in an assignment for security . . . .” 

Restatement of Contracts § 328. The Bankruptcy Court noted that the purpose of the

assignments to the Investors was to raise funds with which to fund the loans. While the

Bankruptcy Court acknowledged that these assignments may not technically constitute

securities because the Investors were intended to become the owners of the fractional

interests in the notes rather than lenders secured by security interests in the notes, it 

nevertheless held that the Restatement’s term “assignment for security” must be read

broadly to include situations, such as the present one, where the assignment is “intended

to make the assignee’s investment a secure one.” 

The Bankruptcy Court also found that the transaction documents demonstrated that

“this was a financing transaction akin to the resale of collateralized debt obligations in the

securities markets.” Indeed, a review of these documents shows that the Investors had no

control over the loans; at most, the Investors could have their interests diluted or

liquidated. (R 1, 35-26, 50-51) Thus, as the Bankruptcy Court explained, it was “not . . .

a purchase of the business of Mortgages Ltd. where the buyer intended to take over the

lending business and with it the obligation to fund the outstanding loan agreements.” 

Case 2:09-cv-01312-MHM Document 35 Filed 03/31/10 Page 6 of 13
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 7 -

Accordingly, the Court agrees with the Bankruptcy Court’s conclusion that even if the

presumptive approach were adopted in Arizona, the assignments would not imply a

delegation of duties. 

Important policy considerations support the Bankruptcy Court’s conclusion. To

extend the law by presuming a delegation of duties in the financing transaction at issue

would negatively impact broader financial markets by making every investor potentially

liable to the obligee. As the Bankruptcy Court noted, “[b]y making the [assignee] a

surety, not only will accounts receivable financing be discouraged, but transaction costs

will undoubtedly increase for everyone . . . without any discernable benefit.” Michelin

Tires (Can.) Ltd. v. First Nat’l Bank of Boston, 666 F.2d 673, 679-80 (1st Cir. 1981).

In sum, the Court finds that each of the bases relied upon by the Bankruptcy Court 

supports its dismissal of Appellants’ Complaints for failure to state a claim. 

4. A.R.S. § 44-101(9)

A fourth basis for dismissal of the Complaints was raised in the briefing but not

relied upon by the Bankruptcy Court. Arizona’s statute of frauds, A.R.S. § 44-101(9),

prohibits an action based “[u]pon a contract, promise, undertaking or commitment to loan

money” in excess of $250,000 for commercial purposes, unless accompanied by a writing

signed by the party to be charged. Here, Appellants do not cite any writing, signed by the

Investors, charging the Investors with the obligation to fund the loans. Accordingly,

without such a writing, under Arizona law, an action cannot be maintained against the

Investors and dismissal was required for this reason as well. 

In light of the Court’s ruling above, Appellants’ argument that this Court should

have withdrawn the reference is moot.

/ / /

/ / /

Case 2:09-cv-01312-MHM Document 35 Filed 03/31/10 Page 7 of 13
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

3

 Appellants also contend that the Investors do not have an indemnity claim because the

Agency Agreement explicitly releases Mortgages Ltd. Appellants raise this argument for the first

time in their reply brief, therefore depriving Appellees of an opportunity to respond. Because

Appellants failed to include this argument in their opening brief, this issue is waived. Amoco Oil

Co. v. U.S., 234 F.3d 1374, 1377 (Fed. Cir. 2000).

- 8 -

B. BANKRUPTCY COURT’S “RELATED TO” JURISDICTION

Bankruptcy courts have jurisdiction over cases “related to” Title 11. 28 U.S.C. §

1334(b). The test for whether a case is related to bankruptcy was set forth in Pacor Inc. v.

Higgins, 743 F.2d 984 (3rd Cir. 1984). Under Pacor, “[a]n action is related to bankruptcy

if the outcome could alter the debtor’s rights, liabilities, options or freedom of action . . .

and which in any way impacts upon the handling and administration of the bankrupt

estate.” Id. at 994; see also Fietz v. Great W. Sav., 852 F.2d 455, 457 (9th Cir. 1988). 

In denying Appellants’ motions to remand, the Bankruptcy Court found that

NRDP’s and PDG’s suits affected the estate because if NRDP and PDG prevail, the

Investors may make claims for indemnity against Mortgages Ltd., increasing the claims

against the estate; that the suits could impair Mortgages Ltd.’s ability to collect the funds

it loaned, which are assets of the estate; and that the Investors could assert counterclaims,

which would reduce the amount that Mortgages Ltd. can recover from NRDP and PDG.

Appellants argue that NRDP’s and PDG’s suits are not related to the Mortgages

Ltd. bankruptcy because their outcome will have no effect on the bankruptcy estate. 

Appellants contend that there is no effect on the bankruptcy estate because Mortgages

Ltd. is not a party and because Mortgages Ltd. never lent any of its own money and

assigned all of its interest in the loans to the Investors. 

The Bankruptcy Court found that NRDP’s and PDG’s lawsuits could impose

additional liability on the estate. If Appellants establish the Investors’ liability for the

failure to fund the loan, the Investors would have a claim for indemnification against

Mortgages Ltd. Appellants respond that under Pacor, 743 F.2d at 995, theoretical

indemnity claims do not control related-to jurisdiction.3

 

Case 2:09-cv-01312-MHM Document 35 Filed 03/31/10 Page 8 of 13
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 9 -

Contrary to Appellants’ assertion, courts in the Ninth Circuit have held that

potential indemnification satisfied the Pacor test even in the absence of an "unconditional

indemnification agreement." See, e.g., In re Sizzler Restaurants International, lnc., 262

B.R. 811, 818-19 (C.D.Cal. 2000) ("This court declines to accept a reading of Pacor

which requires an unconditional indemnification agreement or otherwise automatic

liability on the part of the debtor in order to find the existence of related to jurisdiction.");

In re Master Mortgage, Inc., 168 B.R. 930, 934-935 (W.D. Mo. 1994) (citing cases

finding jurisdiction where "there is an identity of interest between the debtor and the third

party, usually an indemnity relationship, such that a suit against the non-debtor is, in

essence, a suit against the debtor or will deplete assets of the estate").

The potential chance that NRDP’s and PDG’s action against the Investors could

affect the administration of Mortgages, Ltd.’s estate is enough to confer jurisdiction. See,

e.g., Edge Petroleum Operating Co. v. GPR Holdings, L.L.C., 483 F.3d 292, 298 (5th Cir.

2007); Randall & Blake, Inc. v. Evans (In re Canion), 196 F.3d 579, 585-87 (5th Cir.

1999) (holding that even a claim between two non-debtors that will potentially reduce the

bankruptcy estate’s liabilities produces an effect on the estate sufficient to confer “related

to” jurisdiction); Kaonohi Ohana, Ltd. v. Sutherland, 873 F.2d 1302, 1307 (9th Cir. 1989)

(upholding “related to” jurisdiction over third-party action as specific performance

remedy in third-party action would reduce damages in breach of contract claim against

bankruptcy estate). 

The Bankruptcy Court also found that any liability would impair the ability of

Mortgages Ltd. to collect on the amounts that were lent, which “is definitely an asset of

the estate.” Appellants counter that Mortgages Ltd. never loaned its own money and

assigned away its interest in the loans, thus there was no asset of the estate to collect. 

Contrary to Appellants’ assertion that Mortgages Ltd. “assigned all of its interests

in the loans to investors,” the record reveals that Mortgages Ltd. retained, by Appellants’

own estimation, at least a 4.806% to .816% interest in the loans. (R 7; I R 2). In addition,

Mortgages Ltd. held interests in the deeds of trust, and the promissory notes, in addition

Case 2:09-cv-01312-MHM Document 35 Filed 03/31/10 Page 9 of 13
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 10 -

to its valuable servicing rights. (I R 11) All of these were assets of the estate. 

The Bankruptcy Court further found that the Investors “will probably file

compulsory counterclaims” against Appellants for the amounts of their funds that were

advanced and have not been paid and that the recovery on those counterclaims will reduce

the amount Mortgages Ltd. can recover from Appellants. Appellants again respond that

Mortgages Ltd. never loaned its own money and assigned its interest in the construction

loans to the Investors. As discussed above, Mortgages Ltd. held interests in the loans,

deeds of trust, and the promissory notes, as well as valuable servicing rights. Appellants

also dismiss the Bankruptcy Court’s finding as “speculative.” To the contrary, the record

reveals that certain Investors have filed proofs of claim against Mortgages Ltd. in the

Bankruptcy Court. (R I 12, Exh. E)

Based on its findings, the Bankruptcy Court concluded that “[a] closer relationship

to both the assets of the estate and the claims against the estate can hardly be imagined,”

and that “these close relationships satisfy the Pacor/Fietz test.”

The Bankruptcy Court also noted that the term “related to” “has been defined by

the Supreme Court to include matters that would logically be litigated as a single

litigation unit because they involve claims that “derive from a common nucleus of

operative fact.’” Pierce v. Conseco Fin. Servicing Corp. (In re Lockridge), 303 B.R. 449,

454 (Bankr. D. Ariz. 2003). The Bankruptcy Court found that there “can be no debate

that a claim of investors’ liability for failure to fully fund the construction loans made by

Mortgages Ltd. is a single litigation unit, involving the common nucleus of operative

facts, as the claim of Mortgages Ltd. to recover the funds it actually lent, a claim that [is]

indisputably property of the estate.” 

Accordingly, the Bankruptcy Court concluded that “the claims asserted in this

litigation, as well as the counterclaims and third party claims that may be asserted, are

highly related if not integral to the Mortgages Ltd. bankruptcy case.”

Based on the foregoing, this Court agrees with the Bankruptcy Court that NRDP’s

and PDG’S lawsuits are related to the bankruptcy proceeding, and concludes that the

Case 2:09-cv-01312-MHM Document 35 Filed 03/31/10 Page 10 of 13
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

4

 28 U.S.C. § 1452 provides in pertinent part:

Removal of claims related to bankruptcy cases

(a) 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 . . . .”

- 11 -

Bankruptcy Court has “related to jurisdiction” under 28 U.S.C. § 1334(b) over NRDP’s

and PDG’s actions. 

In light of the Court’s conclusion, the issue whether these cases are noncore is

moot.

C. The Removal

 In the order denying Appellants’ Motion to Remand, the Bankruptcy Court found

that the removal was procedurally proper under the bankruptcy removal statute, 28 U.S.C.

§ 1452.4

 The Bankruptcy Court reasoned that the “bankruptcy removal statute, § 1452, is

conspicuously different from the general removal statute, because it permits ‘a party’ to

remove an action, rather than ‘a defendant or defendants.’” The Bankruptcy Court

concluded that because any party may remove based on bankruptcy jurisdiction, the

unanimity requirement of the general removal statute does not apply to bankruptcy

removals and therefore NRDP’s and PDG’s actions were properly removed. 

Appellants argue that “[b]y its language, § 1452 only allows a party to remove a

claim,” not an entire civil action. Appellants contend that if “a defendant removes an

entire action, then the general removal statute, 28 U.S.C. § 1441, applies, and . . . the

consent of all the other defendants” is required. Because all defendants did not join in the

removal, Appellants maintain that the removal was procedurally defective and the

Bankruptcy Court “should have remanded on these grounds alone.” 

Although this issue has not been explicitly decided by the Ninth Circuit, numerous

other jurisdictions have agreed with the Bankruptcy Court and held that the rule of

unanimity does not apply to removal pursuant to § 1452(a). See, e.g., Creasy v. Coleman

Furniture Corp., 763 F2d 656, 660 (4th Cir. 1985); Conn. Res. Recovery Auth. v. Lay,

292 BR 464, 471 (D. Conn. 2003); N.Y. City Employees’ Retirement Sys. v. Ebbers (In

Case 2:09-cv-01312-MHM Document 35 Filed 03/31/10 Page 11 of 13
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 12 -

re WorldCom Sec. Litig.), 293 B.R. 308, 330 (S.D.N.Y. 2003); Abner v. Mate Creek

Loading, Inc. (In re Mid-Atl. Res. Corp.), 283 B.R. 176, 183 (S.D. W. Va. 2002);

Sommers v. Abshire, 186 B.R. 407, 409 (E.D. Tex. 1995). 

Further, citing 28 U.S.C. § 1452(a), the Ninth Circuit explained in dicta that

“[t]hose matters falling under the heading of concurrent jurisdiction (i.e., civil actions

involving claims that arise under or in or are related to Title 11 proceedings) may be filed

originally in state court, then subsequently removed by one of the parties to federal

district court.” Maitland v. Mitchell (In re Harris Pine Mills), 44 F.3d 1432, 1435 (9th

Cir. 1995). Subsequently, in Schulman v. California (In re Lazar), 237 F.3d 967, 973 n.2

(9th Cir. 2001), the Ninth Circuit, citing Maitland, reiterated this proposition. 

Appellants reliance on Abrego v. Dow Chemical Co., 443 F.3d 676, 680 (9th Cir.

2006), Hewett v. City of Stanton, 798 F.2d 1230, 1232-33 (9th Cir. 1986), and Hills v.

Hernandez, 1998 WL 241518 at *2 (E.D. La.) is misplaced. Abrego, Hewett and Hills

relied on § 1446(b), not § 1452(a), in holding that unanimity applied to removal

proceedings. Although Hills also addressed § 1452(b), it did so in the context of

permissive abstention and equitable remand. Id. at *2-3. 

In light of the weight of authority and consistent with Congress’ intent “to grant

comprehensive jurisdiction to bankruptcy courts so that they might better deal efficiently

and expeditiously with all matters connected with the bankruptcy estate,” Celotex Corp.

v. Edwards, 514 U.S. 300, 308 (1995), the Court concludes that the removal was

procedurally proper under 28 U.S.C. § 1452(a), and that the Bankruptcy Court properly

denied Appellants’ motions to remand on this ground.

In their response briefs, Appellees argue that even if unanimity is required, any

alleged “defect” was cured when the Investors joined in the Notices of Removal upon

being served. The Court need not address this issue in light of its ruling above.

IV. CONCLUSION

In sum, the Court concludes that the Bankruptcy Court properly dismissed

Appellants’ Motions to Dismiss for failure to state a claim and that it had jurisdiction to 

Case 2:09-cv-01312-MHM Document 35 Filed 03/31/10 Page 12 of 13
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 13 -

do so. Further, the Court concludes that the removal was procedurally proper. 

Accordingly,

IT IS ORDERED affirming the Bankruptcy Court’s judgments.

DATED this 31st day of March, 2010.

Case 2:09-cv-01312-MHM Document 35 Filed 03/31/10 Page 13 of 13