United States Bankruptcy Appellate Panel

FOR THE EIGHTH CIRCUIT

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Nos. 09-6084, 09-6085

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The National Benevolent Association *

of the Christian Church (Disciples *

of Christ), *

*

Plaintiff – Appellant *

*

State of Missouri, ex rel Chris Koster, *

Attorney General of Missouri, *

*

Plaintiff-Appellant *

*

v. *

*

Weil, Gotshal & Manges, LLP, *

 *

Defendant – Appellee *

*

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Submitted: September 15, 2010

Filed: October 8, 2010

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Before KRESSEL, Chief Judge, VENTERS and SALADINO, Bankruptcy Judges.

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VENTERS, Bankruptcy Judge.

These appeals seek review of the bankruptcy court’s order dismissing the statecourt petition brought by the Plaintiffs, the National Benevolent Association of the
1 Carton v. General Motor Acceptance Corp., 611 F.3d 451, 454 (8th Cir.

2010).

2

Christian Church (Disciples of Christ) (“NBA”) and the State of Missouri, and

removed to the bankruptcy court by the Defendant, Weil, Gotshal & Manges, LLP.

NBA’s and the State’s primary contention is that the bankruptcy court should have

remanded the matter to state court rather than dismissing their claims. 

For the reasons stated below, we reverse and remand the matter to the

bankruptcy court for remand to the state court.

I. STANDARD OF REVIEW

The bankruptcy court’s dismissal of the complaint for failure to state a claim

is subject to de novo review.1

 

II. BACKGROUND

The bankruptcy court’s factual findings are not in controversy; therefore, the

Court adopts them here with editorial revisions only.

NBA is a Missouri nonprofit corporation with its principal place of business in

Missouri. On February 16, 2004, NBA filed a petition for relief under Chapter 11 of

Bankruptcy Code in the United States Bankruptcy Court for the Western District of

Texas, San Antonio Division. The Texas bankruptcy court confirmed NBA’s First

Amended Joint Plan of Reorganization on March 2, 2005 and it became effective

shortly thereafter. All of NBA’s creditors were paid 100% of their claims pursuant

to the confirmed plan.

After confirmation of NBA’s plan, NBA filed an adversary proceeding against

the Defendant, Weil, Gotshal & Manges, LLC, (“Weil”) in the Texas bankruptcy

court. Weil had assisted NBA in its pre-petition attempts to restructure its bond
2

 In its opinion, the Court of Appeals stated that “NBA, as the reorganized

debtor, has no standing to pursue these claims in federal court.” In re National

Benevolent Association of the Christian Church (Disciples of Christ), 333

Fed.App’x. 822, 829 (5th Cir. 2009). We share the bankruptcy court’s suspicion

that the Fifth Circuit’s reference only to “federal” court was unintentional, and that

NBA lacks standing to pursue its claims in state court as well. But we do not need

to make that determination to support our decision here. 

3

indebtedness and continued to represent the NBA (along with other counsel) in the

bankruptcy case. The adversary sought damages for Weil’s alleged legal malpractice,

negligence, and breach of fiduciary duty in connection with its pre-petition and postpetition services. The portion of the Texas bankruptcy court action relating to Weil’s

pre-petition conduct was, for all relevant purposes, identical to the action subsequently

filed in the Missouri state court and removed to the bankruptcy court.

Weil moved the Texas bankruptcy court for summary judgment on res judicata

and estoppel grounds. The Texas bankruptcy court granted Weil’s motion and the

District Court for the Western District of Texas affirmed. NBA then appealed the

portion of the judgment pertaining to pre-petition malpractice claims to the Fifth

Circuit Court of Appeals.

On Weil’s motion, the Court of Appeals dismissed the case for lack of subject

matter jurisdiction on June 11, 2009. The Court of Appeals held that because NBA

had not unequivocally provided in its confirmed Chapter 11 plan for the retention of

ownership of the asserted pre-petition causes of action, NBA lacked standing to

pursue its claims in federal court.2

 Accordingly, the Court of Appeals vacated the

District Court order and dismissed the case without prejudice for lack of subject

matter jurisdiction.

On August 10, 2009, NBA, joined by the State of Missouri, filed a petition in

the Circuit Court of St. Louis County, Missouri alleging, in substance, the same cause
3

 The Attorney General for the State of Missouri joined the action in his

capacity as the common law guardian of charitable trusts of which the public is or

may be the beneficiary. 

4

of action that NBA had brought against Weil in the Texas bankruptcy court in

connection with Weil’s pre-petition representation of NBA.3

Weil removed the Plaintiffs’ action from the Circuit Court of St. Louis County

to the Bankruptcy Court for the Eastern District of Missouri on October 2, 2009, and

filed a motion to dismiss and a motion to transfer venue on October 21, 2009. Shortly

thereafter, NBA and the State moved to remand the case to the state court or for the

bankruptcy court to abstain from hearing the case.

On December 18, 2009, the bankruptcy court entered an order dismissing the

case. The bankruptcy court found, inter alia, that the State’s claims against Weil were

wholly derivative of NBA’s claims against Weil, and that the Fifth Circuit had already

decided that NBA’s failure to preserve in its Plan of Reorganization its claims against

Weil precluded a federal court from exercising jurisdiction over those claims. The

bankruptcy court further concluded that the Fifth Circuit’s decision precluded NBA

and the State from pursuing their claims in any court, not just federal court.

Accordingly, it dismissed their claims instead of remanding them to state court.

III. DISCUSSION

A. NBA is bound by the Fifth Circuit Court of Appeals’s ruling that NBA

lacks standing to pursue its claims against Weil in federal court.

The bankruptcy court’s determination that NBA lacks standing to bring its

claims against Weil in federal court is supported by an application of the doctrines of

res judicata and collateral estoppel to the Fifth Circuit Court of Appeals’s decision

dismissing NBA’s claims based on a lack of subject matter jurisdiction. 
4 See Frank C. Minvielle LLC v. Atlantic Refining Co., 337 Fed.App’x. 429

(5th Cir. 2009).

5 See Ballenger v. Mobil Oil Corp., 138 Fed.App’x. 615, 619 (5th Cir. 2005).

6

 28 U.S.C. § 1447(c) (emphasis added).

7 See 20 Am.Jur.2d Courts § 65 (1995) (“A court devoid of jurisdiction over

the case cannot make a decision in favor of either party, cannot dismiss the

5

In the Fifth Circuit, res judicata bars the re-litigation of a claim where: (1) the

parties are identical or in privity; (2) the judgment in the prior action was rendered by

a court of competent jurisdiction; (3) the prior action was concluded by a final

judgment on the merits; and (4) the same claim or cause of action was involved in

both actions.4

 Collateral estoppel bars the re-litigation of an issue where: (1) the issue

at stake is identical to the one involved in the prior action; (2) the issue was actually

litigated in the prior action; and (3) the determination of the issue in the prior action

must have been a necessary part of the judgment in that earlier action.5

 

None of NBA’s or Weil’s arguments undermines any of these elements, and we

find that all of the elements necessary for the application of both of these doctrines to

NBA’s claims against Weil are indeed present here. Therefore, we find that the

bankruptcy court properly concluded that it lacked subject matter jurisdiction over

NBA’s claims against Weil.

B. In the absence of subject matter jurisdiction over NBA’s claims, the

bankruptcy court was required to remand the entire case to state court. 

 28 U.S.C. § 1447(c) provides in pertinent part: “If at any time before final

judgment it appears that the district court lacks subject matter jurisdiction, the case

shall be remanded.”6

 As emphasized, this language is mandatory and leaves no

discretion for a court to dismiss or otherwise exercise jurisdiction over the case.7

 
complaint for failure to state a claim, and cannot render a summary judgment, as

such a decision would be on the merits of the action.”). 

8

 See RMP Consulting Group, Inc. v. Datronic Rental Corp., 189 F.3d 478,

*4 (10th Cir. 1999) (unpublished). See also, Wilson v. New York Terminal

Warehouse Co., Inc., 398 F.Supp. 1379, 1383 (M.D. Ala. 1975) (“Unlike 

§ 1441(c), § 1447(c) does not leave a court with discretion to remand only part of

an action.”).

9

 28 U.S.C. § 1441(c) (emphasis added).

10 28 U.S.C. § 1447(c) (emphasis added).

11 See RMP Consulting Group, Inc., 189 F.3d at *4. 

6

Weil contends that there is a “futility” exception to § 1447(c), but we find no

room to depart from the statute’s unambiguous, mandatory directive to remand the

case, especially in the absence of Eighth Circuit precedent recognizing such an

exception. 

Moreover, the plain language of § 1447(c) required remand of the entire case,

not just the claims over which federal jurisdiction was lacking, i.e., NBA’s claims

against Weil.8

 On this point, a comparison to 28 U.S.C. § 1441(c) is instructive.

Section 1441(c) provides that when “a separate and independent claim within the

jurisdiction conferred by section 1331” is joined with “otherwise non-removable 

claims or causes of action, the entire case may be removed and the district court may

determine all issues therein, or, in its discretion, may remand all matters in which state

law predominates.”9

 In contrast, § 1447(c) specifies that “the case shall be remanded”

when the court lacks subject matter jurisdiction.10 From this juxtaposition, we find §

1447(c)’s reference to remand of the “case” indicative of Congress’s intent to provide

for partial remands in § 1441(c), but only total remands in § 1447(c).11
7

CONCLUSION

Despite the potential judicial economy to be served by dismissing the case, once

the bankruptcy court determined that NBA lacked standing to pursue its claims against

Weil in federal court, i.e., that federal subject matter jurisdiction was lacking over

NBA’s claims, it was required by 28 U.S.C. § 1447(c) to remand the entire case to

state court.

Therefore, for the reasons stated above, we reverse the bankruptcy court’s

dismissal of NBA’s and the State’s petition and remand the case to the bankruptcy

court with directions to remand the entire case to the Circuit Court of St. Louis

County.