Source: https://law.justia.com/cases/federal/appellate-courts/F3/292/61/642468/
Timestamp: 2020-07-05 21:22:15
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Matched Legal Cases: ['§ 1334', '§ 1334', '§ 1334', '§ 1334', '§ 1334', '§ 1334', '§ 1334', '§ 1334', '§ 1334', '§ 1334', '§ 1334', '§ 1334', '§ 1334', '§ 1331', '§ 1334', '§ 1334', '§ 1334', '§ 157', '§ 1334', '§ 1334', '§ 1334', '§ 104', '§ 702', '§ 1334', '§ 1334', '§ 1334', '§ 1334', '§ 1334', '§ 1334']

In Re Middlesex Power Equipment & Marine, Inc., Debtor.new England Power & Marine, Inc., Appellant, v. Town of Tyngsborough, Massachusetts, Appellee, 292 F.3d 61 (1st Cir. 2002) :: Justia
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In Re Middlesex Power Equipment & Marine, Inc., Debtor.new England Power & Marine, Inc., Appellant, v. Town of Tyngsborough, Massachusetts, Appellee, 292 F.3d 61 (1st Cir. 2002)
US Court of Appeals for the First Circuit - 292 F.3d 61 (1st Cir. 2002) Heard March 4, 2002
the issues raised by the contempt motion can adequately be adjudicated in the pending Land Court proceeding between the parties, a tax taking action by the Town against NEPM. The Bankruptcy Court's jurisdiction over the scope and effectiveness of the 1993 sale order is not exclusive, so the Land Court has jurisdiction to decide the matter. Issues relating to the 1993 sale order should have been raised (and, I understand, were raised) by NEPM as a defense in the tax taking action. Moreover, the Land Court action has already been fully litigated and taken under advisement. Comity, and the courts' shared interest in the avoidance of forum shopping, favor leaving the matter to the Land Court ... the [bankruptcy] Court would, in the interest of comity, abstain from adjudicating the matter. 28 U.S.C. § 1334(c) (1).
In re Middlesex Power Equip. & Marine, Inc., No. 92-20482-CJK, slip op. at 1-2 (Bankr.D. Mass. Jan. 4, 2001) (footnote omitted).
On April 13, 2001, NEPM filed motions to reopen the case with the bankruptcy court, for the court to rule on a motion for contempt and to stay the Land Court's judgment. On April 27, the bankruptcy court once again denied the motion stating that "[i]n denying the [first] motion to reopen, [it] effectively abstained from determining the significance of the sale order" and "[t]he fact that the state court has ruled in favor of the Town is not cause for the bankruptcy court to revisit its decision to abstain." In re Middlesex Power Equip. & Marine, Inc., No. 92-20482-CJK, slip op. at 2 (Bankr.D. Mass. Apr. 27, 2001). In addition, the bankruptcy court stated that under the Rooker-Feldman doctrine, it, as a lower federal court, could not review the final judgment of a state court, and that even had it not abstained, "the Land Court's ruling on the scope and effect of the Bankruptcy Court's sale order... would be entitled to preclusive effect." Id. at 3.
NEPM appealed the bankruptcy court's decision to the federal district court. In response, the Town moved to dismiss the appeal. In a written opinion issued on August 14, 2001, the district court granted the Town's motion to dismiss the appeal. New England Power & Marine, Inc. v. Town of Tyngsborough (In re Middlesex Power Equip. & Marine, Inc.), No. 01-10886-DPW, slip op. (D. Mass. Aug. 14, 2001). The district court reasoned that because the bankruptcy court's jurisdiction over the matter was not exclusive, its decision to abstain "fell squarely within the discretion afforded to the federal courts under [28 U.S.C.] § 1334(c) (1)." Id. at 9. The district court also agreed with the bankruptcy court's reliance on the Rooker-Feldman doctrine and issue preclusion as additional reasons for denying the motion to reopen. Id. at 9-14.
We affirm the district court's order because we conclude that the bankruptcy court had concurrent jurisdiction over this proceeding and was acting well within its discretion under 28 U.S.C. § 1334(c) (1) to abstain.1
The federal courts' jurisdiction over bankruptcy cases is governed by 28 U.S.C. § 1334 (2000). Celotex Corp. v. Edwards, 514 U.S. 300, 307, 115 S. Ct. 1493, 131 L. Ed. 2d 403 (1995). Section 1334 sets up two main categories of bankruptcy cases over which the district court has jurisdiction: "cases under title 11," over which the district court has original and exclusive jurisdiction, 28 U.S.C. § 1334(a), and "proceedings arising under title 11, or arising in or related to cases under title 11," over which the district court has original, but not exclusive jurisdiction, 28 U.S.C. § 1334(b). See also Donaldson v. Bernstein, 104 F.3d 547, 552 (3d Cir. 1997).2 Section 1334(a) states that the only cases over which the district court has exclusive jurisdiction are "cases under title 11." A case under title 11 is the bankruptcy petition itself, such as a Chapter 11 reorganization. 1 Collier on Bankruptcy ¶ 3.01[3], at 3-12 to 3-13 (L. King et al. eds., 15th rev. ed. 2001) ("The `case' referred to in section 1334(a) is the umbrella under which all of the proceedings that follow the filing of a bankruptcy petition take place."); see also Donaldson, 104 F.3d at 552. The claims here, between a purchaser of estate property and a town, both third parties to the bankruptcy, are not the sort of case outlined in § 1334(a), and the bankruptcy court's jurisdiction was therefore not exclusive. The responsibility of a purchaser of real property from the estate to pay property taxes is not part of the original debtor's bankruptcy petition. Instead, this is a dispute which is connected to the bankruptcy case.
Section 1334(c) provides for both permissive abstention under § 1334(c) (1), and mandatory abstention under § 1334(c) (2). Whether the bankruptcy court's abstention was mandatory or permissive matters because, under the language of § 1334 applicable in this case,4 there is a difference in this court's jurisdiction to review the abstention decision. In relevant part, section 1334(c) (2), the provision for mandatory abstention, states that "[a]ny decision to abstain or not to abstain made under this subsection is not reviewable by appeal or otherwise by the court of appeals ... or by the Supreme Court...." The court of appeals' jurisdiction to review a decision of mandatory abstention is thus, at best, limited.5
28 U.S.C. § 1334(c) (1). The abstention exercised by the bankruptcy court in this case was necessarily permissive because the case fits into a category of proceedings described in § 1334(c) (1), as the bankruptcy court itself stated.
The dividing line is unclear between proceedings that "arise under" as opposed to "arise in" and as opposed to "relate to" title 11. The statute itself provides no definitions. We assume each term was meant to have separate content in order to avoid redundancy. Wood v. Wood (In re Wood), 825 F.2d 90, 96 (5th Cir. 1987); see also Tamko Roofing Prods., Inc. v. Ideal Roofing Co., 282 F.3d 23, 32 (1st Cir. 2002) (when Congress creates a list of categories, courts "are loath to strip [any of them] of meaning").
The "arising under" language of § 1334(b) is analogous to the "arising under" language in 28 U.S.C. § 1331. 1 Collier on Bankruptcy, supra, ¶ 3.01[4][c][i], at 3-21. In shorthand, it is commonly said that "arising under" proceedings are (at least) those cases in which the cause of action is created by title 11. Id.; see also Cont'l Nat'l Bank of Miami v. Sanchez (In re Toledo), 170 F.3d 1340, 1345 (11th Cir. 1999); In re Wood, 825 F.2d at 96.
"Arising in" proceedings generally "are those that are not based on any right expressly created by title 11, but nevertheless, would have no existence outside of the bankruptcy." In re Wood, 825 F.2d at 97; see also In re Toledo, 170 F.3d at 1345; United States Tr. v. Gryphon at Stone Mansion, Inc., 166 F.3d 552, 556 (3d Cir. 1999); Eastport Assocs. v. City of Los Angeles (In re Eastport Assocs.), 935 F.2d 1071, 1076 (9th Cir. 1991).
By contrast, this court has defined "related to" proceedings as proceedings which "`potentially have some effect on the bankruptcy estate, such as altering debtor's rights, liabilities, options, or freedom of action, or otherwise have an impact upon the handling and administration of the bankrupt estate.'" In re G.S.F. Corp., 938 F.2d 1467, 1475 (1st Cir. 1991) (quoting Smith v. Commercial Banking Corp. (In re Smith), 866 F.2d 576, 580 (3d Cir. 1989)). We need not decide whether this proceeding is "related to" a case under title 11.
Our review of the bankruptcy court's decision to abstain under § 1334(c) (1) is for abuse of discretion. Gober v. Terra + Corp., 100 F.3d 1195, 1207 (5th Cir. 1996); Coker v. Pan Am. World Airways, Inc. (In re Pan Am. Corp.), 950 F.2d 839, 844 (2d Cir. 1991); In re Eastport Assocs., 935 F.2d at 1075. In a case that falls into the categories outlined in § 1334(c) (1), "courts have broad discretion to abstain from hearing state law claims whenever appropriate `in the interest of justice, or in the interest of comity with State courts or respect for State law.'" Gober, 100 F.3d at 1206 (citing 28 U.S.C. § 1334(c) (1)). We find no abuse here.
The statute itself delineates "three ... criteria to determine whether abstention is appropriate": the interests of justice, comity, and respect for state law. In re Pan Am. Corp., 950 F.2d at 845. Other circuits have considered several factors in the determination of whether permissive abstention is appropriate, including: "the extent to which state law issues predominate over bankruptcy issues"; "the presence of a related proceeding commenced in state court or other nonbankruptcy court"; and "the likelihood that the commencement of the proceeding in bankruptcy court involves forum shopping by one of the parties." See Christensen v. Tucson Estates, Inc. (In re Tucson Estates, Inc.), 912 F.2d 1162, 1166-67 (9th Cir. 1990) (quoting Republic Reader's Serv., Inc. v. Magazine Serv. Bureau, Inc. (In re Republic Reader's Serv., Inc.), 81 B.R. 422, 429 (Bankr.S.D. Tex. 1987)) (internal quotations omitted) (adopting a twelve-factor test to ascertain whether permissive abstention is appropriate in any given case); see also In re Chicago, Milwaukee, St. Paul & Pac. R.R. Co., 6 F.3d 1184, 1189 (7th Cir. 1993) (same). In our view, the bankruptcy court took these criteria into account in its decision and arrived at a sound and supportable decision to abstain.
One of the bankruptcy court's and district court's grounds of decision was the Rooker-Feldman doctrine. The Rooker-Feldman doctrine is jurisdictional in nature; if a case is dismissed because the Rooker-Feldman doctrine applies, it means the court has no subject matter jurisdiction to hear the case. See Hill v. Town of Conway, 193 F.3d 33, 41 (1st Cir. 1999); Long v. Shorebank Dev. Corp., 182 F.3d 548, 554-55 (7th Cir. 1999); Goetzman v. Agribank, FCB (In re Goetzman), 91 F.3d 1173, 1177 (8th Cir. 1996); Dubinka v. Judges of the Superior Court, 23 F.3d 218, 221 (9th Cir. 1994). "Article III generally requires a federal court to satisfy itself of its jurisdiction over the subject matter before it considers the merits of a case." Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 583, 119 S. Ct. 1563, 143 L. Ed. 2d 760 (1999) (citing Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 101-02, 118 S. Ct. 1003, 140 L. Ed. 2d 210 (1998)). However, while "subject-matter jurisdiction necessarily precedes a ruling on the merits, the same principle does not dictate a sequencing of jurisdictional issues," and a court may "choose among threshold grounds for denying audience to a case on the merits." Ruhrgas AG, 526 U.S. at 584-85, 119 S. Ct. 1563. For example "district courts do not overstep Article III limits when they decline jurisdiction of state-law claims on discretionary grounds ... or abstain under Younger v. Harris." Id. at 585, 119 S. Ct. 1563; see also Parella v. Ret. Bd. of the R.I. Employees' Ret. Sys., 173 F.3d 46, 53-57 (1st Cir. 1999) (declining to apply the rule of Steel Co. to cases involving the Eleventh Amendment). Thus, we choose to decide this case on discretionary abstention grounds before we reach the issue of subject matter jurisdiction and the Rooker-Feldman doctrine.
The bankruptcy court has jurisdiction over these cases through delegation by the district court pursuant to 28 U.S.C. § 157(a) (2000)LeBlanc v. Salem (In re Mailman Steam Carpet Cleaning Corp.), 196 F.3d 1, 5 (1st Cir. 1999).
NEPM attempts to rely on several Ninth Circuit cases to bolster its argument that the bankruptcy court had no discretion to abstain McGhan v. Rutz (In re McGhan), 288 F.3d 1172 (9th Cir. 2002); Contractors' State License Bd. v. Dunbar (In re Dunbar), 245 F.3d 1058 (9th Cir. 2001); Gruntz v. County of Los Angeles (In re Gruntz), 202 F.3d 1074 (9th Cir. 2000). These cases fell within the exclusive jurisdiction of the federal courts under 28 U.S.C. § 1334(a). McGhan, 288 F.3d 1172, 1178-79; Gruntz, 202 F.3d at 1080-83. As we have held that jurisdiction here was concurrent, those cases are irrelevant. Although Gruntz contains a dictum that may suggest that its rule could extend to cases of concurrent jurisdiction, 202 F.3d at 1083, we find that suggestion inconsistent with § 1334(c) and therefore unpersuasive.
Congress revised 28 U.S.C. § 1334 as part of the Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, § 104(b), 108 Stat. 4106, 4109 (1994). These revisions only apply in title 11 cases commenced after the effective date of the revisions, October 22, 1994 Id. § 702, 108 Stat. at 4150; see also Christo v. Padgett, 223 F.3d 1324, 1331-32 (11th Cir. 2000), cert. denied, 531 U.S. 1191, 121 S. Ct. 1190, 149 L. Ed. 2d 106 (2001). Because this case began on October 15, 1992, the revisions do not apply here. We therefore use the version of § 1334 that was in place before the revisions.
Because we decide that the bankruptcy court in this case properly abstained under § 1334(c) (1), the permissive abstention provision, we do not decide the extent of appellate jurisdiction to review a court's decision about mandatory abstention under the old version of § 1334(c) which applies in this case. While some courts have stated that appellate courts "have no power to review the district court's decision" to abstain under § 1334(c) (2),Gober v. Terra + Corp., 100 F.3d 1195, 1206 n. 9 (5th Cir. 1996), others have said that appellate courts have jurisdiction to review whether "the statutory requirements prerequisite to mandatory abstention are met." S.G. Phillips Constructors, Inc. v. City of Burlington (In re S.G. Phillips Constructors, Inc.), 45 F.3d 702, 708 (2d Cir. 1995).
Alternatively, if the proceeding were "related to" but not "arising under" title 11 or "arising in" a case under title 11, and thus subject to mandatory abstention, then the outcome from a practical point of view would be the same. The bankruptcy court would have been required to abstain and this court would have, at best, limited appellate jurisdiction to review that order See supra n. 4. The requirements for mandatory abstention, laid out in 28 U.S.C. § 1334(c) (2), in relevant part, read:
28 U.S.C. § 1334(c) (2) (emphasis added).