Opinion ID: 26094
Heading Depth: 1
Heading Rank: 2

Heading: Jurisdiction, Stays, Transfer of Claims, and Effect of Remand.

Text: 22 We will examine the basis for federal bankruptcy jurisdiction and the framework of Garlock's contentions therein. 23
24 Authority to remove a case relating to a case under title 11 resides in 28 U.S.C. § 1452(a): A party may remove any claim or cause of action in a civil action other than a proceeding before the United States Tax Court or a civil action by a governmental unit to enforce such governmental unit's police or regulatory power, to the district court for the district where such civil action is pending, if such district court has jurisdiction of such claim under section 1334 of this title. 25 Title 28 U.S.C. § 1334(a) provides that the district courts shall have original and exclusive jurisdiction of all cases under title 11. 26 Certain matters related to the debtor's bankruptcy may be included within the ambit of federal bankruptcy jurisdiction under 28 U.S.C. § 1334, et seq. Specifically, [n]otwithstanding any Act of Congress that confers exclusive jurisdiction on a court or courts other than the district courts, the district courts shall have original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11. See id. § 1334(b). 27 As the United States Supreme Court has noted, related to bankruptcy proceedings include (1) causes of action owned by the debtor which become property of the estate pursuant to 11 U.S.C. § 541, and (2) suits between third parties which have an effect on the bankruptcy estate. Celotex Corp. v. Edwards, 514 U.S. 300, 308 n. 5, 115 S.Ct. 1493, 131 L.Ed.2d 403 (1995). Garlock's asserted claim for contribution against the debtor falls into the second category. 28 Most of the federal circuits, including the Fifth Circuit, derive their related to jurisprudence from Pacor, Inc. v. Higgins, 743 F.2d 984 (3rd Cir.1984). See Celotex, 514 U.S. at 308 n. 6, 115 S.Ct. 1493. In Pacor, the Third Circuit determined that a third-party controversy not directly involving a debtor in bankruptcy was not related to the bankruptcy, but was, at best, a precursor to a claim against the debtor. See Pacor, 743 F.2d at 995. The Third Circuit so ruled on the basis that any judgment between the two third parties could not have any preclusive effect by either res judicata or collateral estoppel against the debtor, who would be free to relitigate any claim brought against it. Id. Thus, related to jurisdiction would not come into play until a litigant brought a direct claim under bankruptcy jurisdiction based on the result of the prior judgment. 29 Within the Fifth Circuit, the test for whether a proceeding properly invokes federal bankruptcy jurisdiction is the same as the Third Circuit's Pacor test, namely, whether the outcome of that proceeding could conceivably have any effect on the estate being administered in bankruptcy. In re Canion, 196 F.3d 579, 585 (5th Cir. 1999). Certainty, or even likelihood of such an effect is not a requirement. Id. at 587 n. 30 (citing Copelin v. Spirco, Inc., 182 F.3d 174 (3rd Cir.1999)). 30 In In re Canion, a judgment creditor of the debtor, Canion, brought a direct action against several family members, employees, friends and associates of the debtor, asserting claims of fraud and tortious interference with the judgment creditor's recovery of the judgment. In re Canion, 196 F.3d at 582. Our determination was that this circumstance fell within the related to bankruptcy jurisdiction at the time the case was referred to the bankruptcy court (which is the time at which jurisdiction is tested) because the outcome of the proceedings against the defendants conceivably could have increased the debtor's estate. Id. at 587. Appellees argue that Garlock presents no such direct claim and that its claim for contribution, not based on a contractual relationship, is too tenuous to connect the underlying asbestos PITWD claims to the debtor. 31 1. Contribution as a basis for related to jurisdiction and the automatic stay provision in bankruptcy. 32 The Sixth Circuit has held that a claim for contribution is a sufficient basis for finding related to jurisdiction in bankruptcy and, in fact, is a sufficient ground upon which to direct a transfer of venue for related tort claims under 28 U.S.C. § 157(b)(5), the same relief sought by Garlock here. In In re Dow Corning, 86 F.3d 482 (6th Cir.1996), where a relatively small number of non-debtor co-defendants were closely related to the pending breast implant litigation against debtor Dow Corning, a claim of contribution by the co-defendants against Dow Corning, even if only intended and not yet asserted, was sufficient to invoke related to bankruptcy jurisdiction. 33 In In re Walker, 51 F.3d 562 (5th Cir. 1995), a party held liable to a debtor for a violation of the automatic stay provided in 11 U.S.C. § 362 sought to invoke related to jurisdiction against a third party by asserting a claim of contribution under § 362. Id. at 565-66. We found no federal contribution right to be invoked in § 362 and denied the appellant's claim. Id. at 567-68. Here, Garlock has asserted its contribution rights entirely under Texas state law. As we discuss in Part III, Garlock's contribution claim is invalid and therefore no related to jurisdiction could exist in this case. 34 B. Transfer of Personal Injury Tort and Wrongful Death Claims under 28 U.S.C. § 157(B)(5). 35 Garlock seeks to transfer all of the PITWD claims in each of the lawsuits against it in accordance with 28 U.S.C. § 157, which empowers the district court where a bankruptcy is proceeding to determine the venue for certain PITWD claims related to the bankruptcy. Specifically, 36 The district court shall order that personal injury tort and wrongful death claims shall be tried in the district court in which the bankruptcy case is pending, or in the district court in the district in which the claims arose, as determined by the district court in which the bankruptcy case is pending. 37 See 28 U.S.C. § 157(b)(5). Use of this transfer provision in the mass tort context is not strictly novel, but is to date uncommon. 7 In the cases before us, the various district courts either explicitly or implicitly denied Garlock's motions to transfer all underlying PITWD claims from the districts in Texas to the District of Delaware. 38 The Sixth Circuit has held that the denial of a motion to transfer under § 157(b)(5) is immediately appealable on different grounds including a less rigid view of the finality requirement for bankruptcy judgments and under the collateral order doctrine of Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949). See In re Dow Corning, 86 F.3d 482, 488 (6th Cir.1996). Because of our ultimate holding herein, we need not determine the same issue for this circuit. Regardless, Garlock claims it should benefit from a stay of the district courts' orders to present an appeal. 39 C. Stays Applicable to Bankruptcy Proceedings. 40
41 Once a party files in bankruptcy, under Chapter 11, for example, 11 U.S.C. § 362, et seq., stays further actions against the debtor. Virtually any act attempting to enforce a judgment against or obtain property from the estate of the debtor is stayed once the title 11 proceedings are commenced. See id. § 362(a)(1)-(8). In the instant cases, Garlock contends that § 362 should stay any further actions against the non-debtor co-defendants and should stay the various district courts from dismissing debtor Federal-Mogul companies or remanding the related cases to state court. 8 42 Section 362 is rarely, however, a valid basis on which to stay actions against non-debtors. See Wedgeworth v. Fibreboard Corp., 706 F.2d 541, 544 (5th Cir. 1983)([w]e join [the cited courts] in concluding that the protections of § 362 neither apply to co-defendants nor preclude severance). 43 By exception, a bankruptcy court may invoke § 362 to stay proceedings against nonbankrupt co-defendants where such identity between the debtor and the third-party defendant exists that the debtor may be said to be the real party defendant and that a judgment against the third-party defendant will in effect be a judgment or finding against the debtor. A.H. Robins Co., 788 F.2d 994, 999 (4th Cir.1986). In that case, however, the non-debtor co-defendants were indemnified associates, employees or insureds of the debtor sole manufacturer of the Dalkon Shield intrauterine device. Here, Garlock is one of scores of different asbestos makers, users, importers, etc., with no interest to establish such an identity with debtor Federal-Mogul/Gasket Holdings. There is no claim of a formal tie or contractual indemnification to create such an identity of interests. 44
45 Garlock has also asserted that FED. R.CIV.P. 62(a) should have operated to effect a ten-day stay of the various district courts' orders before they were executed. In pertinent part, Rule 62(a) establishes that no execution shall issue upon a judgment nor shall proceedings be taken for its enforcement until the expiration of 10 days after its entry. Garlock's concern is that, lacking the protection of the ten-day stay, the district clerks' offices were free to certify the various remand orders at any time and by doing so, potentially destroy federal jurisdiction without possibility of appellate review. 9 Garlock contends that it is not seeking appellate review of an order to remand, but seeks a stay of the remand order in the district court under FED.R.CIV.P. 62(d) upon appeal of the § 157(b)(5) issue. 46 Rule 62(d) relates to Rule 62(a) in that Rule 62(a) provides a respite from the immediate execution of a judgment, except for an interlocutory or final judgment in an action for an injunction or in a receivership action, or for an accounting in an action for infringement of letters patent. Rule 62(d) then provides for a stay pending appeal, subject to the exceptions in Rule 62(a). 47 The stay provisions of Rule 62 pertain to judgments for money. Hebert v. Exxon Corp., 953 F.2d 936, 938 (5th Cir.1992). That does not preclude diverse forms of judgment pertaining to monetary responsibility from a stay under Rule 62(d) pending appeal nor Rule 62(a) for ten-day automatic stay of judgment. See id. at 938-39 (overturning a district court's denial of a stay of declaratory judgment where the declaratory judgment was, in effect, a money judgment suitable for a Rule 62(d) stay subject to the requirements of Rule 62(a)). 48 In the instant cases, however, the subject matter of Garlock's motion is not for a stay of judgment, declaratory or otherwise. It is for a stay of remand under Rule 62. A remand of an ongoing case is not a final judgment following a full adjudication of a claim, the result of which may be appealed. Even if the subject matter of the underlying litigation is solely money damages, there is no money judgment inherent in its remand. Accordingly, there is no basis in Rule 62 for such a stay. See City of New Orleans v. Nat'l Serv. Cleaning Corp., No. CIV. A. 96-1601, 1997 WL 5915, at  (E.D.La. Jan. 6, 1997). 49 Further, Rule 62 itself provides no authority to revoke a remand once it has become effective. See, e.g., Rivera Perez v. Mass. Gen. Hosp., 193 F.R.D. 43, 45 (D.P.R.2000). 50 On that basis, Garlock is not entitled to the Rule 62 automatic stay. 51 D. Effect of Remand. 52 We have consolidated many of these cases according to date or by court, but as indicated in Part I, the orders are not entirely uniform. All of them include a remand for lack of subject matter jurisdiction, citing 28 U.S.C. § 1447(c). However, two of the courts did not make such a finding until after the debtor had been dismissed with prejudice from the plaintiffs' cases and the remaining cross-claims for contribution severed and transferred to the District of Delaware. Two others remanded for lack of subject matter jurisdiction without dismissing the debtor, without detailed explanation. One court did not dismiss the debtor but found Garlock's claims for contribution to be scanty and, if real, too tenuous and remanded. Some courts remanded on equitable grounds. 53 1. Remand for lack of subject matter jurisdiction. 54 A remand for lack of subject matter jurisdiction under 28 U.S.C. § 1447(c) is ordinarily barred from appellate review by 28 U.S.C. § 1447(d). See State of Rio de Janeiro v. Philip Morris, Inc., 239 F.3d 714, 716 (5th Cir.2001)(noting that as long as a district court's remand order is based on lack of subject matter jurisdiction, a court of appeals lacks authority to review a remand under § 1447(d); also referring to the black hole force of a remand for want of jurisdiction). There are few exceptions. Notably, remand under a district court's citation of § 1447(c) for a reason not embraced within that statute is subject to appellate review. Id. at 715 (citing Thermtron Products, Inc. v. Hermansdorfer, 423 U.S. 336, 343, 96 S.Ct. 584, 46 L.Ed.2d 542 (1976)). That exception is inapplicable here. 55 Rather than fruitlessly attempting an appellate review of a district court's remand order, we instead examine the steps leading from a district judge's decision to remand to execution of the remand order. 56 A § 1447(c) order of remand is not self-executing. Section 1447(c) provides, in pertinent part, that upon determination that a case should be remanded, [a] certified copy of the order of remand shall be mailed by the clerk to the clerk of the State court. The State court may thereupon proceed with such case. See McClelland v. Gronwaldt, 155 F.3d 507, 514 n. 5 (5th Cir.1998). This provision creates legal significance in the mailing of a certified copy of the remand order in terms of determining the time at which the district court is divested of jurisdiction. Id. (citing the discussion and references in Browning v. Navarro, 743 F.2d 1069, 1078-79 (5th Cir.1984)). On that basis, the federal court is not divested of jurisdiction until the remand order, citing the proper basis under § 1447(c), is certified and mailed by the clerk of the district court. 57 Once the remand order is certified and mailed, however, the matter remanded is removed from federal jurisdiction. Of all the cases brought before us under Garlock's motions, most have already been certified and mailed by the respective district clerks. 58 2. Equitable remand. 59 Of greater import in this particular case is the effect of an equitable remand. 60 The court to which [claim or cause of action related to bankruptcy cases] is removed may remand such claim or cause of action on any equitable ground. An order entered under this subsection remanding a claim or cause of action, or a decision to not remand, is not reviewable by appeal or otherwise by the court of appeals under section 158(d), 1291, or 1292 of this title or by the Supreme Court of the United States under section 1254 of this title. 61 See 28 U.S.C. § 1452(b). This remand statute, unlike § 1447(c), carries no certification and mailing requirement, nor have we found authority to require such, as much as that would promote procedural consistency with § 1447(c). Whether such an equitable remand is self-executing is less important than the stricture that, once a matter related to a bankruptcy case is equitably remanded, it is not subject to federal appellate review on any basis. See Hawking v. Ford Motor Credit Co., 210 F.3d 540, 550 (5th Cir.2000); Sykes v. Texas Air Corp., 834 F.2d 488, 490 (5th Cir. 1987)(even an equitable remand based on a substantive law issue such as lack of subject matter jurisdiction is unreviewable, in part because of the likelihood of throwing matters into confusion months or years later after other proceedings, e.g., in state courts). 62 Garlock's emergency petition seeks to halt the progress of a remand before it leaves the district court for an immediate appeal of a collateral order. The determination of venue for PITWD cases such as these under 28 U.S.C. § 157(b)(5) would seem to be the type of matter which could be readily decided without creating the type of confusion following an order of remand with which we were concerned in Sykes. The equitable remand of bankruptcy-related matters harbors no such opportunity. 63 Because some of the various subject-matter jurisdiction remands have not yet been certified and mailed, and because some have not been remanded equitably, we will proceed with an analysis of whether Garlock should otherwise be granted a stay pending appeal under our authority in FED. R.APP. P. 8 in those matters not barred from further review. 64