Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_07-cv-01075/USCOURTS-cand-3_07-cv-01075-0/pdf.json

Nature of Suit Code: 360
Nature of Suit: Other Personal Injury
Cause of Action: 28:1452 R&amp;R re motions to remand (non-core)

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United States District Court

For the Northern District of California

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UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

SENORX, INC.,

Plaintiff,

v.

COUDERT BROTHERS, LLP, and DOES 

1-500,

Defendants. 

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No. C-07-1075 SC

ORDER DENYING

PLAINTIFF'S MOTION TO

REMAND

I. INTRODUCTION

Presently before the Court is a motion by Plaintiff SenoRx,

Inc. ("Plaintiff" or "SenoRx") to remand the action to state

court. See Mot. to Remand, Docket No. 13. Defendants Coudert

Brothers, LLP et al. ("Defendants" or "Coudert") filed an

opposition to Plaintiff's motion. See Opp'n, Docket No. 15.

For the reasons discussed herein, the Court DENIES

Plaintiff's Motion to Remand. 

II. BACKGROUND

In 2001, SenoRx retained the law firm Coudert Brothers LLP to

represent it in the filing of several patent applications. See

Weiss Decl., Ex. 1. In 2004, Plaintiff sued Defendants in

California Superior Court for professional negligence stemming

from Defendants' legal advice and actions on behalf of Plaintiff. 

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See Not. of Removal, ¶ 1. From late 2004 through late 2006, the

state court litigation continued as Plaintiff filed several

amendments to substitute named limited liability partners of

Coudert Brothers LLP for the DOE defendants and Defendants filed

demurrers. See id. at ¶¶ 2-3. 

On September 22, 2006, Coudert filed a Chapter 11 Bankruptcy

Petition in the United States Bankruptcy Court for the Southern

District of New York: In re Coudert Brothers LLP, Case No. 06-

12226 (the "Bankruptcy Case"). See id. at ¶ 4. On November 8,

2006, Plaintiff filed its Fourth Amended Complaint and the state

court subsequently overruled Defendants' demurrer to that

complaint. See id. at 5. On January 31, 2007, Plaintiff filed a

proof of claim in the Bankruptcy Case seeking the same recovery as

the claims set forth in its Fourth Amended Complaint. See id. at

6. Defendants removed the action to this Court on February 21,

2007. See id.

III. DISCUSSION

A. Jurisdiction

This matter was removed to federal court pursuant to 28

U.S.C. § 1452 and Rule 9027 of the Federal Rules of Bankruptcy

Procedure. Under 28 U.S.C. § 1334(b), which governs federal

jurisdiction over bankruptcy matters, "Congress intended to grant

comprehensive jurisdiction to the bankruptcy courts so that they

might deal efficiently and expeditiously with all matters

connected with the bankruptcy estate." Celotex Corp. v. Edwards,

514 U.S. 300, 308 (1995). Furthermore, "the 'related to' language

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of § 1334(b) must be read to give district courts (and bankruptcy

courts under § 157(a)) jurisdiction over more than simple

proceedings involving the property of the debtor or the estate." 

Id. 

On January 31, 2007, Plaintiff filed a proof of claim in the

Bankruptcy Case seeking the same recovery as its claims in this

case. See Not. of Removal, ¶ 6. As a result, Plaintiff's claims

against Coudert Brothers LLP are core bankruptcy matters which are

subject to the jurisdiction of the bankruptcy court. See In re

G.I. Industries, 204 F.3d 1276, 1279-80 (9th Cir. 2000) ("The

filing of a proof of claim is the prototypical situation involving

the 'allowance or disallowance of claims against the estate,' a

core proceeding under 28 U.S.C. § 157(b)(2).").

In this action, Plaintiff has also filed suit against

numerous individuals who were partners of the Coudert law firm

(the "Individual Partner Defendants"). The Individual Partner

Defendants are not debtors in the Bankruptcy Case. See Pl.'s

Reply, 2. In its Reply Brief, Plaintiff concedes that the Court

cannot remand the claims against Coudert Brothers LLP, but

requests that the Court remand the claims against the Individual

Partner Defendants. See id., 1-2. 

28 U.S.C. § 1452 also allows "removal of claims related to

bankruptcy cases." Though not core bankruptcy proceedings, the

claims against the Individual Partner Defendants are related to

the Bankruptcy Case. The Ninth Circuit has stated:

The usual articulation of the test for determining whether a

civil proceeding is related to bankruptcy is whether the

outcome of the proceeding could conceivably have any effect

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on the estate being administered in bankruptcy. [citations

omitted]. Thus, the proceeding need not necessarily be

against the debtor or against the debtor's property. An

action is related to bankruptcy if the outcome could alter

the debtor's rights, liabilities, options, or freedom of

action (either positively or negatively) and which in any way

impacts upon the handling and administration of the bankrupt

estate.

In re Feitz, 852 F.2d 455, 457 (9th Cir. 1988) (emphasis in

original). In this case, Plaintiff's success or failure to

recover from the Individual Partner Defendants will either

positively or negatively affect the bankruptcy estate. On the one

hand, if the Individual Partner Defendants are liable for

malpractice and guarantors for damages against Coudert Brothers

LLP, claims against the estate will be reduced. On the other

hand, a holding of liability will likely give rise to indemnity

claims by the partners against the bankruptcy estate, negatively

affecting the estate. See In re Sizzler Rests. Int'l, Inc., 262

B.R. 811, 818-819 (Bankr. C.D. Cal. 2001) (discussing how

indemnity claims give rise to "related to" bankruptcy

jurisdiction). 

B. Abstention

Plaintiff asserts that the Court should abstain from hearing

this case under 28 U.S.C. § 1334(c). See Mot. to Remand, 14. 

Plaintiff's argument fails. In the Ninth Circuit, abstention is

unavailable if there is no pending state court proceeding. See In

re Lazar, 237 F.3d 967, 981-82 (9th Cir. 2001) ("Accordingly,

because there is no pending state proceeding, §§ 1334(c)(1) and

1334(c)(2) are simply inapplicable to this case."). As a result

of Defendant's removal, no pending state proceeding remains and

abstention does not apply.

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C. Equitable Remand

Plaintiff also requests equitable remand of the action

pursuant to 28 U.S.C. § 1452(b). See Mot. to Remand, 10. In

analyzing whether to remand, the Court should consider a variety

of equitable factors, including:

(1) the effect of the action on the administration of the

bankruptcy estate; (2) the extent to which the issues of

state law predominate; (3) the difficulty of applicable state

law; (4) comity; (5) the relatedness or remoteness of the

action to the bankruptcy case; (6) the existence of a right

to jury trial; and (7) prejudice to the party involuntarily

removed from state court.

Williams v. Shell Oil Co., 169 B.R. 684, 692-693 (S.D. Cal. 1994). 

A thorough evaluation of the relevant factors weighs in favor of

denying equitable remand.

 1. Effect of the action on the bankruptcy estate

As previously discussed, the resolution of this case will

have a significant effect on the bankruptcy estate. The large

amount of money at stake in this litigation has the potential to

greatly reduce the bankruptcy estate and constitutes a significant

potential liability for the debtor. The estimation of such

liabilities is "a mandatory obligation of the bankruptcy court" 

A.H. Robbins Co. v. Piccinin, 788 F.2d 994, 1012 (4th Cir. 1986).

2. Relatedness of the action to the Bankruptcy Case

As noted by Defendants, this action is related to the

Bankruptcy Case. First, Coudert Brothers LLP is the debtor in the

Bankruptcy Case and Plaintiff filed a proof of claim in that case

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concerning the same transactions as this case. Second, the

Individual Partner Defendants were allegedly members of the firm

at the time it did legal work for Plaintiff and have been named as

guarantors of the firm's liabilities. As such, any action against

the Individual Partner Defendants will necessarily inquire into

the liability of Coudert, the debtor, and whether its insurance is

sufficient to cover Plaintiff's claims. Plaintiff's claims

against the non-debtor partners are thus inextricably linked to

its claims against the debtor.

3. Issues of state law

Plaintiff's case involves relatively straightforward state

law claims of legal malpractice. In support of its motion to

remand, Plaintiff argues that the trial court will need to

interpret California Corporations Code § 16956, which regulates

the amount of insurance a limited liability partnership must hold. 

See Mot. to Remand, 11. Despite the presence of state law claims

and the need to interpret a state statute, bankruptcy courts are

capable of resolving issues of state law, as the court will be

able to do in this case. See In the Matter of Chicago, Milwaukee,

St. Paul & Pacific R.R. Co., 6 F.3d 1184 (7th Cir. 1993) (stating

that bankruptcy courts are qualified to resolve issues of state

law). 

4. Comity

 Comity does not favor remand in this case. Though the case

was before the state court for some time, the court had not made

significant progress. Indeed, it was not until January 2007 that

the demurrer to Plaintiff's Fourth Amended Complaint was

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overruled. See Not. of Removal, ¶ 5; see e.g., In re Talon

Holdings, Inc., 221 B.R. 214, 221 (Bankr. N.D. Ill. 1998) ("[A]t

the time this action was removed, the proceedings in the State

Court were not sufficiently advanced such that concerns for comity

and waste of judicial resources are implicated.")

5. Other factors 

Consideration of the remaining factors weighs against remand.

IV. CONCLUSION

For the reasons described herein, Plaintiff's Motion to

Remand is DENIED.

IT IS SO ORDERED.

Dated: May 24, 2007

 

UNITED STATES DISTRICT JUDGE 

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