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Title In Re: U.S. Dry Cleaning Services Corporation v. U.S. Dry Cleaning Services

April 30, 2012

TITLE IN RE: U.S. DRY CLEANING SERVICES CORPORATION TEAM EQUIPMENT, INC., ET AL.
v.
U.S. DRY CLEANING SERVICES CORPORATION, ET AL.



Bankruptcy Case No. 8:10-bk-12735-RK Adversary Proceeding No. 8:10-ap-01469-RK

The opinion of the court was delivered by: The Honorable Dolly M. Gee, United States District Judge

JS-6

CIVIL MINUTES-GENERAL

Present: The Honorable DOLLY M. GEE, UNITED STATES DISTRICT JUDGE

VALENCIA VALLERY NOT REPORTED

Deputy Clerk Court Reporter

Attorneys Present for Plaintiff(s) Attorneys Present for Defendant(s)

None Present None Present

Proceedings: IN CHAMBERS-ORDER REMANDING PROCEEDING TO FRESNO COUNTY SUPERIOR COURT

Plaintiffs lodged their proposed third amended complaint on February 6, 2012 [Doc. # 10]. On February 13, 2012, the Court granted Plaintiffs' unopposed motion to withdraw the reference of this adversary proceeding to the Bankruptcy Court and issued an Order to Show Cause why this action should not be dismissed for lack of subject matter jurisdiction [Doc. # 16]. The parties filed their respective responses on February 23, 2012 [Doc. ## 18, 19].

Plaintiffs do not oppose remand to Fresno County Superior Court. Debtor and the other defendants maintain that the Court should not remand this action because the Court retains original bankruptcy jurisdiction, 28 U.S.C. § 1334(b), over the claims against Debtor and supplemental jurisdiction, 28 U.S.C. § 1367, over the claims against the other defendants. For the reasons discussed below, the Court finds that remand is appropriate.

The parties stipulated to withdraw the reference to the bankruptcy court and proceed before this Court. Although transfer of a matter from the bankruptcy court to the district court does not itself implicate questions of subject matter jurisdiction," Stern v. Marshall, 131 S.Ct. 2594, 2607, 180 L.Ed.2d 475 (2011), the question remains whether bankruptcy jurisdiction still exists now that Debtor's reorganization plan has been confirmed. It is well-established that parties cannot stipulate to subject matter jurisdiction. See, e.g., United States v. Juvenile Male, 595 F.3d 885, 894 (9th Cir. 2010) (per curiam).

Defendants assert that the Court has original jurisdiction over Plaintiffs' claims against Debtor because the dispute in this adversary proceeding is "related to" the bankruptcy case. 28 U.S.C. § 1334(b). Proceedings are "related to" a bankruptcy case if the outcome of the proceeding could conceivably have any effect on the estate being administered in bankruptcy. Thus, the proceeding need not necessarily be against the debtor or against the debtor's property. 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.

Montana v. Goldin (In re Pegasus Gold Corp.), 394 F.3d 1189, 1193 (9th Cir. 2005) (citing In re Fietz, 852 F.2d 455, 457 (9th ...


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