United States District Court, Northern District of California
January 17, 2003
BRADEN PARTNERS, L.P., PLAINTIFF,
HOMETECH MEDICAL SERVICES, INC., ET AL., DEFENDANTS.
The opinion of the court was delivered by: Edward M. Chen, United States Magistrate Judge
ORDER OF REFERENCE TO THE SANTA ROSA DIVISION OF THE BANKRUPTCY COURT FOR
THE NORTHERN DISTRICT OF CALIFORNIA REGARDING 1) DEFENDANT'S NOTICE OF
REMOVAL; 2) PLAINTIFF'S MOTION TO ABSTAIN AND REMAND; AND 3)
DEFENDANT'S EX PARTE MOTION TO HAVE ITS PETITION FOR TRANSFER HEARD AT
THE SAME (Docket No. 1, No. 6, No. 12) FACTUAL BACKGROUND
Defendant Hometech Medical Services, Inc. (hereinafter referred to as "Hometech") filed for Chapter 11 in the Eastern District of California on February 21, 2001. Plaintiff Braden Partners, L.P. (hereinafter referred to as "Braden") filed a complaint in Mann County Superior Court alleging breach of contract and other claims on September 24, 2002, against Defendants Hometech, as well as Best, Patterson, Crothers & Yeoham LTD, and several individual members of Hometech's board of directors. Verified Complaint ¶¶ 2-6. Plaintiff served Defendant Hometech on October 10, 2002. Hometech then filed its notice of removal with the clerk of the Northern District of California on October 25, 2002. Removal jurisdiction was based upon 28 U.S.C. § 1452. On November 26, 2002, Plaintiff filed a motion to abstain and remand to state court. On December 17, 2002, Defendant Hometech filed an ex parte motion to have its petition for transfer to the Eastern District, which was filed with the notice of removal, heard at the same time as the hearing on Plaintiff's motion.
While Plaintiff moves for this matter to be remanded to state court, Plaintiff also points out that Defendant's removal notice should have been referred to the Bankruptcy Judges of this District pursuant to the Northern District of California's Bankruptcy Local Rule 5011-1(a). Plaintiff's Memorandum of Points and Authorities in Support of Motion to Abstain and Remand, at 4. For the reasons stated below, this Court agrees that the notice of removal should have been filed with the Santa Rosa Division of the Northern District of California's Bankruptcy Court. Because the matter should properly be before the Bankruptcy Court, this Court declines to reach the merits of Plaintiff's motion to abstain and remand.
Section 1452 of the Bankruptcy Code covers the removal of claims related to bankruptcy cases, and states:
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 or cause
of action under section 1334 of this title.
28 U.S.C. § 1452(a). F.R.B.P. Rule 9027(a) addresses the notice of removal in such cases, and states in pertinent part, "A notice of removal shall be filed with the clerk for the district and division within which is located the state or federal court where the civil action is pending." Rule 9027(a)(1). The Court acknowledges that a party might interpret Rule 9027(a)(1) and § 1452(a) to mean that the removal notice should be filed in district court. Confusion about whether to file the notice of removal in district court or bankruptcy court is also understandable given that there is some case authority indicating that the former is appropriate. See In re Schuler, 45 B.R. 684, 686 (Bankr. D. N.D. 1985) (finding that 28 U.S.C. § 1452 "clearly provides that removal of claims related to bankruptcy cases shall be to the district court. No mention is made of the bankruptcy court."); Centrust Savings Bank v. Love, 131 BR. 64, 65-66 (S.D. Tex 1991) ("The general removal statute and the bankruptcy removal statute allow a defendant to remove a case from state to federal district court when the federal district court has original jurisdiction, but no statute allows removal directly from a state court to bankruptcy court.").
However, the majority view is stated in In re Aztec Industries, Inc., 84 B.R. 464 (N.D. Ohio 1987), which involved a Ohio state court case and a bankruptcy proceeding in Oklahoma, where the petition for removal was filed with the bankruptcy court in Ohio. Id. at 465. The court in Aztec Industries held that it was proper to remove to the bankruptcy court rather than the district court, noting, "Notwithstanding the use of the term `District Court' in § 1452(a), the majority of Courts have allowed parties to file Petitions for Removal of state court cases with the Bankruptcy Court." Id. at 468 (citing In re Princess Louise Corp., 77 B.R. 766, 768 (Bankr. C.D. Cal. 1987); In re Convent Guardian Corp., 75 B.R. 346, 347 (Bankr. E.D. Pa. 1987); Matter of Centro de Transmisiones Automaticas, 73 B.R. 297, 298 (Bankr. D. Puerto Rico 1987); In re North American Funding Corp., 64 B.R. 795, 796 (Bankr. S.D. Tex. 1986); In re Finley, 62 B.R. 361, 365 (Bankr. N.D. Ga. 1986); Matter of Cassidy Land & Cattle Co., 62 B.R. 93, 96 (Bankr. D. Neb. 1986); In re Commercial Oil Service, Inc., 58 B.R. 311, 314 (Bankr. N.D. Ohio 1986), aff'd sub nom. State of Ohio v. Commercial Oil Service, Inc., 88 B.R. 126 (N.D. Ohio 1987); In re Gianakas, 56 B.R. 747, 750-753 (N.D. Ill. 1985); In re Philadelphia Gold Corp., 56 B.R. 87, 89-90 (Bankr. E.D. Pa. 1985).
More importantly, in the Northern District of California, any ambiguity is resolved by Bankruptcy Local Rule 5011-1(a), which states, "Pursuant to 28 U.S.C. § 157(a), all cases under title 11 and all civil proceedings arising under Title 11 or arising in or related to a case under Title 11 are referred to the bankruptcy judges of this district except as provided in B.L.R. 5011-1(b)." Local Rule 5011-1(a).*fn1 This matter clearly "is related to a case under Title 11" as the Ninth Circuit defines that term. In re Fietz, 852 F.2d 455, 457 (9th Cir. 1989) ("An action is related to bankruptcy if the outcome could alter the debtor's rights, liabilities, options, or freedom of action (either positively or negatively) and which in any way impacts upon the handling and administration of the bankrupt estate.") (citing Pacor Inc., v. Higgins, 743 F.2d 984, 994 (3rd Cir. 1984); see also Kaonohi Ohana, Ltd. v. Sutherland, 873 F.2d 1302, 1306 (9th Cir. 1989) (same).
Where local rules provide that all bankruptcy proceedings (including those under 28 U.S.C. § 157(a)) are referred to the Bankruptcy Court, removal applications must be directed to the Bankruptcy Court. Lone Star Industries, Inc. v. Liberty Mutual Ins. Co., 131 B.R. 269, 272 (Bankr. D. Del. 1991) ("[I]n this jurisdiction all Title 11 proceedings are automatically referred to the United States Bankruptcy Court . . . and removal applications are properly filed in the bankruptcy court."); Lawrence R. Ahern III & Nancy Fraas MacLean, West's Bankruptcy Procedure Manual § 9027.2 p. 1317 (2002) ("In districts where all bankruptcy proceedings are automatically referred to the bankruptcy court, the notice of removal should be filed with the clerk of the bankruptcy court."). Thus, under Local Rule 5011-1(a), this case should have been filed with the Bankruptcy Court.
Where an application for removal in a bankruptcy-related case is incorrectly filed with the clerk of the district court rather than the bankruptcy court, the district court is authorized under the Bankruptcy Code to refer the case to the bankruptcy judges of the same district. Hendersonville Condominium Homes, Inc. 84 B.R. 510 (M.D. Tenn. 1988). Bankruptcy Local Rule 50.11-1(a) also affords the Court the authority to make that referral.
This Court hereby orders that the Clerk of the District Court refer this matter to the Santa Rosa Division of the Bankruptcy Court for the Northern District of California. This order of reference includes Defendant's notice of removal, Plaintiff's motion to abstain and remand, as well as Defendant's ex parte motion to its petition for transfer to the Eastern District heard concurrently with Plaintiff's motion.
IT IS SO ORDERED.