$500,000 amount of Fleet’s secured claim against the Debtor should not be altered in the bankruptcy.

In the absence of plaintiff's class action, the Bankruptcy Court will administer the remainder of the
Debtor’s estimated $51.6 million in assets among creditors with allowed claims which would
presumably include Fleet’s current undisputed $500,000 secured claim, Thus, once Fleet receives
the $500,000 it is owed, the remaining assets of the estate would be allocated among the Debtor’s
other creditors in accordance with their priorities...

If, on the other hand, plaintiff is correct that the Debtor had no rights whatsoever in 85 % of
the ATM fees, then Fleet’s lien arguably did not attach to such proceeds and Fleet may have to pay
roughly $10 million to plaintiff's putative class. If plaintiff were to prevail, the Debtor would still
owe to Fleet the $10 million in disgorged loan obligations and the amount of Fleet’s secured claim
against the Debtor would increase to approximately $10.5 million.

Thus, the net economic impact on the Debtor’s estate is clear—Fleet could have a $10.5
million secured claim against the very same pool.of assets that now secure its $500,000 secured
claim. This would reduce the amount potentially available to other creditors in the bankruptcy. Fleet
could then receive $10.5 million (rather than merely $500,000) out of the remaining amount of the
Debtor’s estimated $57 million in assets before_other secured creditors, administrative priority
claimants and unsecured creditors could receive distributions from the estate. Such an outcome

would not only “have an effect on the [Debtor’s] bankruptcy estate” under Celotex, but would also

substantially affect both “the amount of property for distribution” and “the allocation of property

among creditors” in the Bankruptcy Case. Celotex, 514 U.S. at 307 n.5; In re Memorial Estates

Inc., 950 F.2d at 1368. As such, this case is clearly “related to” the Debtor’s Bankruptcy Case under


an extremely expedited basis itself illustrates that.a speedy resolution is critical to the timely
administration of the bankruptcy estate.

In sum, each of the relevant factors illustrates that this case cannot be timely adjudicated in
state court. Thus, we reject plaintiff's request for mandatory abstention pursuant to 28 U.S.C. §
1334(c)(2).

CONCLUSION
For the foregoing reasons, we deny plaintiff's motion to remand and for mandatory

abstention. This case is set for status on January 24, 2002 at 10:00 a.m.

ah, (2
ao Wayne R. Ande?sSen——_

United States District Judge

Dated: rauauyG, £04


Plaintiff next argues that because the Debtor.remitted the funds at issue to Fleet prior to the
commencement of the Bankruptcy Case, the dispute somehow does not “affect the amount of
property available for distribution.” The timing of Fleet’s receipt of the funds at issue, however, in
no way affects this Court’s ability to exercise “related to” jurisdiction. That Fleet received the funds
at issue prior to the commencement of the Bankruptcy Case simply has no bearing on this Court’s
“related to” jurisdiction. Instead, it is the effect on.the estate that matters. Here, as discussed above,
if plaintiff prevails in this case, the effect on the bankruptcy estate will be substantial.

Faced with the fact that his own allegations.establish “related to” jurisdiction, plaintiff next
argues that this Court’s jurisdiction is defeated because “Fleet has not filed a claim with the
Bankruptcy Court, nor quantified the amount of any potential claim.” Although the actual filing of
a proof of claim by a secured creditor is simply not.a.requirement for “related to” jurisdiction, this
argument is now moot because Fleet filed a Proof of Claim in the Bankruptcy Case on October 10,
2001.

Plaintiff's related arguments that the Debtor potentially may not have any assets to distribute
and that Fleet must prove the “precise dollar amounts from the [D]ebtor’s schedules or other
creditors’ claims” also are not persuasive. It is tore than enough to show the direct and material
impact on the Bankruptcy Case that will likely occur by increasing Fleet’s $500,000 secured claim
to $10.5 million. In order to determine that this.action is “related to” the Bankruptcy Case, this
Court need not engage in a mini-bankruptcy evidentiary hearing, as implied by plaintiff, ruling on
the difficult issues of the valuation of the assets of the Debtor’s estate, whether the other secured
creditors have valid and enforceable liens, and the allowance of administrative priority claims and

the claims of other unsecured creditors. All of these issues are for the Bankruptcy Court to decide.


Section 1334(b). See In re Cardinal Indus., Inc., 126 B.R. 754 (Bankr. S.D. Ohio 1991); Apex

Moreover, the adjudication of the plaintiff's class action necessarily involves a determination
of the scope and extent of property of the Debtor, the allowance, amount, validity and priority of
Fleet’s secured claim against the Debtor and the allocation of assets among creditors. These issues
are traditionally the province of the Bankruptcy Court and such matters constitute “core proceedings”
of the Bankruptcy Court under 28 U.S.C. § 157(b).. Indeed, the determination of whether property
of the Debtor is subject to a constructive trust or not-the crux of plaintiff's complaint-has widely
been held to be a “core proceeding” within the jurisdiction of the federal bankruptcy courts. See,
e.g., Inre Robert D. Johnson, 960 F.2d 396, 401 (4 Cir. 1992) (“clearly, the only proper forum for
determining whether assets held by a debtor are held in constructive trust is the bankruptcy court,
and such proceedings must be considered core proceedings”). Accordingly, since the predicate legal
issues implicated by plaintiff's class action are themselves core proceedings, the Bankruptcy Court
has jurisdiction not only to hear them, but to enter,a final order disposing of them. Thus, plaintiff’s
claim is clearly “related to” the Bankruptcy Case,»

In an attempt to avoid this result, plaintiff proffers a number of arguments. First, plaintiff
argues that his claim “is not asserted against the debtor, CCC, but solely against Fleet.” Plaintiff
cannot avoid “related to” jurisdiction merely by. craftily refusing to name the Debtor. To the
contrary, the Supreme Court has explicitly stated that “related to” jurisdiction applies not only to
causes of action directly by or against the Debtor, but also to “suits between third parties which have

an effect on the bankruptcy estate.” Celotex, 514.U.S. at 307 n.5; Cardinal Indus., 126 B.R. at 757-

58. Because this is precisely such a case, this Court has jurisdiction.


of the bankruptcy proceeding; 3) complexity of issues; and 4) whether the state court proceeding

would prolong the administration or liquidation of the estate. J.D, Marshall Int’l, 74 B.R. at 654-55;

Georgou, 157 B.R. at 851. In this case, each of these factors illustrates that this case could not be
timely adjudicated in state court.

First, the most recent Annual Report of the Ulinois Courts shows that for jury cases of more
than $50,000 pending in the Circuit Court of Cook County, it takes an average of 43.5 months from
the date a case is filed until a verdict is rendered... The extraordinary length of time it would likely
take this case to wind its way through the Cook County Court system illustrates that this case cannot
be timely adjudicated in the state court.

Second, the status of the bankruptcy proceeding does not favor mandatory abstention. The
schedule set by the Bankruptcy Court provides for.a fast-track resolution of this dispute, with a
discovery cut-off of December 26, 2001 and the_final pre-trial conference to be held on March 7,
2002.

Third, the nature of the issues involved fayors adjudication in federal court. Whether the
ATM fees are property of the bankruptcy estate or su)ject to a constructive trust are traditional
subjects within the expertise of bankruptcy courts.

Finally, a lengthy jury trial in state court would unnecessarily prolong the distribution of
assets to creditors in the Debtor’s Bankruptcy Case. This is particularly true here because the
Debtor’s Bankruptcy Case is a case under chapter 1 1 of the Bankruptcy Code, in which federal courts
have shown sensitivity to the goal of expediting the consummation of the case as promptly as
practicable. See, e.g., All American Laundry Serv. , 128 B.R. at 646 n.8; J.D. Marshall, 74 B.R. at

655. Indeed, the fact that the Bankruptcy Court has deemed it appropriate to resolve this dispute on


‘Minute Order Form (06/97)

United States District Court, Northern District of Illinois

ees

Name of Assigned Judg Sitting Judge if Oth
sor Magistrate Judge Wayne R. Andersen “than Assigned Judge
CASE NUMBER 1C 6939 DATE 1/9/2002
CASE Joe Janazzo, Sr. vs. FleetBoston Financial Corporation
TITLE emmeene
[in the following box (a) indicate the party filing the motion, .g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
MOTION: of the motion being presented.)
DOCKET ENTRY:
qd) gq Filed motion of [ use listing in “Motion” box above.]
(2) a Brief in support of motion due
(3) oOo Answer brief to motion due. . Reply to answer brief due
(4) Q Ruling/Hearing on set for at
(8) a Status hearing[held/continued to] [set for/re-set for] on _ set for _ at
(6) o Pretrial conference[held/continued to] [set for/re-set for] on set for at
(7) a Trial[set for/re-set for] on at
(8) o [Bench/Jury trial] [Hearing] held/continued to .__... at
(9) o This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to}
OOFRCP4(m) OGeneralRule21 OFRCP4i(a)\(1) O FRCP4i(a)(2).

ao) [Other docket entry] Enter MEMORANDUM, OPINION AND ORDER: For the foregoing

reasons, we deny plaintiffs motion to remand [5-1] and for mandatory abstention[5-2]. This case

is set for status on 1/24/2002 @ 10:00 a.m.
(i) ff [For further detail see order attached to the original minute order.]

No notices required, advised in open court.

nc ied.
No notices required. number af notices

Notices mailed by judge's staff.

VAN 1-5 2002

Notified counsel by telephone, date docketed

Docketing to mail notices.
Mail AO 450 form. ddocketing deputy ints
Copy to judge/magistrate judge.

courtroom oO pd date mailed notice
deputy’s

initials

TSA

Ad

Dateltime:xétéived in .
central Clerk’s Office

ailing deputy initials



In sum, resolution of this case will have a Very real and substantial effect on the Bankruptcy
Case. Therefore, we find that federal “related to” jurisdiction does exist. Since we find that federal
jurisdiction exists pursuant to 28 U.S.C. § 1334(b) because the claims are related to the bankruptcy
proceedings, we need not reach the issue of whether diversity jurisdiction exits.

Il. Mandatory Abstention

Plaintiff next argues that this Court is required to abstain pursuant to 28 U.S.C. § 1334(c)(2).
Plaintiff, however, has failed to meet the requirements established by that statute. In order to prevail
on a motion for mandatory abstention pursuant to 28 U.S.C. §1334(c)(2), the moving party must
demonstrate that: 1) there is no separate basis for jurisdiction apart from bankruptcy; and 2) the case
can be timely adjudicated in the state court. Plaintiff, in this case, cannot satisfy the statutory
requirements.

Without reaching the issue of whether. this Court has any other basis for jurisdiction,
plaintiff's request for mandatory abstention must be denied because plaintiff has failed to present
any evidence that this matter could be timely adjudicated in the state court. It is well established
that, under 28 U.S.C. §1334(c)(2), plaintiff has the. burden of proving that this action can be timely

adjudicated in state court. J.D Marshall Int’l, Inc. v. Redstart, Ine., 74 B.R. 651, 654-55 (N.D. Ill.

1987). Plaintiff may not meet his burden merely by arguing that a proceeding can be timely
adjudicated in state court. In re Georgou, 157 B.R. 847, 851 (Bankr. N.D. Ill. 1993). Instead,
plaintiff must present evidence.

The relevant evidence illustrates that this case could not be timely adjudicated in state court.
Courts discussing the timely adjudication element of mandatory abstention pursuant to 28 U.S.C.

§ 1334(c)(2) have looked to the following factors: 1) backlog of the state court’s calendar; 2) status


transactions as revenue on the ATM terminal. .The. balance of the surcharge, 15%, would be
allocated to CCC. The complaint alleges that pursuant, to these Agreements, the class is owed
approximately $10 million in ATM surcharge transaction fees charged by CCC to ATM customers.

IL. The Bankruptcy Proceeding

On June 6, 2001, CCC filed a Chapter 11 bankruptcy petition in the Bankruptcy Court for
the Eastern District of Pennsylvania. As of its petition date, CCC estimated that the total value of
its personal property assets was $51,646,970.07.

Prior to CCC’s bankruptcy, Fleet had loaned approximately $12.5 million to CCC pursuant
to the parties’ loan and security documentation....Fleet’s loan was secured by a senior lien on
substantially all of CCC’s personal property assets and accounts. Prior to its bankruptcy filing, CCC
was in default of its obligations to Fleet under the parties’ loan and security documentation. By the
time of CCC’s bankruptcy filing, the principal amount of Fleet’s secured claim against CCC was
approximately $500,000. Fleet has filed a proof.of secured claim in the Bankruptcy Court in the
principal amount of $500,000 plus other indebtedness under the loan documents.

On September 4, 2001, Fleet filed with the Bankruptcy Court a complaint to determine the
validity, priority, and extent of liens and other interests and for declaratory relief. This complaint,
which names as defendants creditors of CCC including the plaintiff class, seeks, among other things,
a determination by the Bankruptcy Court that the class does not have any property interest in, or
other valid claim to, the ATM surcharges charged by CCC and that Fleet’s claim is secured and
superior to that of any defendant, including the plaintiff class herein.

Fleet then filed its Notice of Removal in this Court seeking removal on two bases-- plaintiff's

claims are related to CCC’s bankruptcy proceedings, and diversity jurisdiction.


DISCUSSION

I. Motion To Remand For Lack Of Subject Matter Jurisdiction

Pursuant to 28 U.S.C. § 1334(b), federal district courts have “original but not exclusive
jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title
11.” The Supreme Court has acknowledged that the “related to” language of § 1334(b) constitutes
a jurisdictional grant “of some breadth.” Celotex Corp. v. Edwards, 514 U.S. 300, 307-08 (1995).
“Related to” jurisdiction applies not only to causes. of action directly involving the debtor, but also
to “suits between third parties which have an effect on the bankruptcy estate.” Id. at 307 n.5. “A
case is ‘related’ toa bankruptcy when the dispute affects the amount of property for distribution [i.e.,
the debtor’s estate] or the allocation of property among creditors.” Inre Memorial Estates, Inc., 950
F.2d 1364, 1368 (7" Cir. 1992). See also Diamond Mortgage Corp. v. Sugar, 913 F.2d 1233, 1239
(7" Cir. 1990).

This case is plainly related to the Bankruptcy Case because its outcome will have a direct and
substantial effect on the Bankruptcy Case. Plaintiff’s only claim is based solely on the contractual
obligations of the debtor CCC to the plaintiff class. By necessity, plaintiff's claim will require a
determination of whether the approximately $10.million in ATM fees constitutes the Debtor’s
property. Plaintiff asserts that his putative class has an unrecorded superior interest in the bulk of
the ATM transaction fees—proceeds that have already been remitted by the Debtor in partial reduction
of the Debtor’s secured indebtedness to Fleet-that now trumps the prior public, perfected liens and
security interests of Fleet and all other lien holders.

If, as Fleet contends, the Debtor had a property interest in the ATM surcharges it received

and administered, then such amounts were properly subject to Fleet’s senior lien, and the current


ic

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION DOCKETED
JOE JANAZZO, SR. d/b/a The Track Shack, ) JAN 1 5 2002
Individually and on behalf of a class of )
similarly situated persons, )
)
Plaintiff, )
) Case No. 01 C 6939
v. )
) Judge Wayne R. Andersen
FLEETBOSTON FINANCIAL )
CORPORATION, )
)
Defendant.

MEMORANDUM, OPINION AND ORDER

This case is before the Court on the motion of plaintiff, Joe Janazzo, to remand this action
to the Circuit Court of Cook County or, in the. alternative, for mandatory abstention. For the
following reasons, we deny plaintiffs motion.

BACKGROUND

I. Plaintiff's Complaint

Plaintiff filed his complaint for damages in tort and for equitable relief against defendant
Fleet Boston Financial Corporation (“Fleet”) in the Circuit Court of Cook County. Plaintiff, the
owner of a small retail beverage business, had entered into a “Merchant Processing Agreement”
(“MPA”) with JRA222, Inc. d/b/a/ Credit Card Center (“CCC” or “Debtor”) allowing installation
MPA’s with plaintiff and a proposed class consisting of approximately 17,000 other retail merchants
throughout the United States. Pursuant to the MPA, ATM customers would be charged a transaction

fee for the use of the ATM, and the merchant plaintiffs would receive 85% of all surcharged

Taw i