Court Opinion

ID: 2656241
Source: CourtListenerOpinion
Date Created: 2014-03-11 17:08:57.127549+00
Date Added: 2024-06-11T12:59:48.269830
License: Public Domain

FILED
                                                 United States Court of Appeals
                    UNITED STATES COURT OF APPEALS       Tenth Circuit

                           FOR THE TENTH CIRCUIT                        March 11, 2014

                                                                     Elisabeth A. Shumaker
                                                                         Clerk of Court
PATRICK J. MALLOY, III, Bankruptcy
Trustee for the Bankruptcy Estate of
George David Gordon, Jr.,

             Plaintiff - Appellee,

v.                                                        No. 13-5065
                                              (D.C. No. 4:13-CV-00059-JHP-FHM)
COMMERCE BANK, N.A.;                                      (N.D. Okla.)
BRUCE C. HUMPHREY,

             Defendants - Appellants.

                            ORDER AND JUDGMENT*

Before HARTZ, McKAY, and BACHARACH, Circuit Judges.

       “Congress has placed broad restrictions on the power of federal appellate

courts to review district court orders remanding removed cases to state court.”

Things Remembered, Inc. v. Petrarca, 516 U.S. 124, 127 (1995). This is a case

in point.

*
      After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination of this
appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument. This order and judgment is not binding
precedent, except under the doctrines of law of the case, res judicata, and collateral
estoppel. It may be cited, however, for its persuasive value consistent with
Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
      Patrick J. Malloy, III, trustee for the bankruptcy estate of George David

Gordon, Jr., filed suit in Oklahoma state court against Commerce Bank, N.A. and

Bruce C. Humphrey, one of the bank’s officers. The suit alleged that Defendants

were liable for facilitating Mr. Gordon’s stock schemes, for which he was criminally

convicted, and for sharing in his profits. It asserted claims for (1) aiding and abetting

violations of Oklahoma securities laws, (2) civil conspiracy to commit fraud,

(3) aiding and abetting breach of fiduciary duty, (4) negligent supervision of

Mr. Humphrey by Commerce Bank, and (5) fraudulent-transfer violations under

federal and Oklahoma law.

      Defendants removed the suit to federal court, claiming federal jurisdiction

under (1) the Securities Litigation Uniform Standards Act (SLUSA), 15 U.S.C.

§ 78bb(f); (2) the Class Action Fairness Act (CAFA), 28 U.S.C. §§ 1332 and 1453;

(3) federal-question jurisdiction, 28 U.S.C. §§ 1441 and 1331, because the claims

concerned bankruptcy and banking law; and (4) 28 U.S.C. §§ 1452(a) and 1334(b),

because the fraudulent-transfer claim arose in a bankruptcy case.

      Mr. Malloy moved to remand, asserting that (1) the district court lacked

subject-matter jurisdiction over the SLUSA and CAFA claims; (2) his first four

claims did not arise under federal law or in a bankruptcy case and therefore were

subject to mandatory abstention under 28 U.S.C. § 1334(c)(2); (3) his fifth claim for

fraudulent transfer arose in part under bankruptcy law, but 28 U.S.C. § 1334(c)(1)

gave the district court discretion to abstain from hearing the claim and the court

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should exercise that discretion since the other four claims were subject to mandatory

abstention; and (4) equitable considerations favored remand of all claims under

28 U.S.C. § 1452(b).

      In response, Defendants argued that the case was properly removed

(1) because the federal court had jurisdiction under the SLUSA, the CAFA, and

federal-question jurisdiction; (2) because mandatory, discretionary, and equitable

abstention were not required or appropriate in light of the three independent grounds

for federal jurisdiction and because the case was intertwined with Mr. Gordon’s

bankruptcy and federal criminal-forfeiture proceedings; and (3) because the

fraudulent-transfer claim arose in bankruptcy and was intertwined with the other

claims.

      Mr. Malloy filed a reply, reiterating his previous contentions. In a minute

order the district court granted Mr. Malloy’s motion to remand “for the reasons set

forth in Plaintiff’s Memorandum in Support of Plaintiff’s Motion to Remand and in

Plaintiff’s Reply Memorandum in Support of Plaintiff’s Motion to Remand.” Aplt.

App. at 284 (citations to docket numbers omitted).

      Because the reviewability of a remand order may depend on the ground for the

remand, we consider in turn the grounds relied on by Mr. Malloy (which were

adopted by the district court). First, the district court remanded under § 1447(c) for

lack of subject-matter jurisdiction. Section 1447(d) precludes our review of a

remand on that ground as long as “the basis for the district court’s decision can be

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colorably characterized as subject-matter jurisdiction.” Moody v. Great W. Ry.,

536 F.3d 1158, 1163 (10th Cir. 2008) (internal quotation marks omitted); see Things

Remembered, 516 U.S. at 129 (recognizing applicability of § 1447(d) when

bankruptcy case is remanded to state court for lack of subject-matter jurisdiction).

Second, to the extent that the court abstained under §§ 1334(c)(1) or (2) from

considering claims related to a bankruptcy case, our review of the abstention is

precluded by § 1334(d); and to the extent that the court remanded bankruptcy-related

claims on equitable grounds under § 1452(b), that section also prohibits appellate

review of the remand. See Allied Signal Recovery Trust v. Allied Signal Inc.,

298 F.3d 263, 269 (3d Cir. 2002) (discussing §§ 1334(c) and (d) and 1452(b) and

noting congressional intent that remand in bankruptcy cases be barred from review).

Thus, in light of the grounds for remand relied on by the district court, we have no

jurisdiction to review the remand.

      Defendants argue, however, that Grable & Sons Metal Products, Inc. v. Darue

Engineering & Manufacturing, 545 U.S. 308, 313 (2005), supports their position that

remand was reviewable. Grable sets forth a framework for determining when

“federal-question jurisdiction will lie over state-law claims that implicate significant

federal interests.” Id. at 312. In that context a court needs to ask: “[D]oes a

state-law claim necessarily raise a stated federal issue, actually disputed and

substantial, which a federal forum may entertain without disturbing any

congressionally approved balance of federal and state judicial responsibilities[?]” Id.

                                          -4-
at 314. Defendants assert that the final consideration, balancing federal and state

responsibilities, sets forth an abstention doctrine, and that remand based on such

abstention is reviewable under Quackenbush v. Allstate Insurance Co., 517 U.S. 706,

711-12 (1996). The flaw in this argument is that no issue of a Grable balancing

between federal and state responsibilities was implicated in the remand order. The

district court expressly based remand on Mr. Malloy’s initial and reply memoranda in

support of his motion for remand; but his initial memorandum did not even cite

Grable, and his reply addressed Grable only to say that his claims did not

“necessarily raise” an issue of federal law and never presented an argument

concerning a federal/state balance.

      We therefore conclude that we lack jurisdiction to review Defendants’ appeal

from the district court’s remand order. We dismiss this appeal.

                                               Entered for the Court

                                               Harris L Hartz
                                               Circuit Judge

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