The Eldersburg Building Supply Company v. Tuscarora Condominium Company, LLC

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF MARYLAND
at Greenbelt
IN RE: 	:
:
JACK HALL, INC. 	: 	Case No. 05-21508PM
Debtor 	: 	Chapter 11
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - :
THE ELDERSBURG BUILDING 	:
SUPPLY COMPANY 	:
Plaintiff 	:
vs. 	: 	Adversary No. 05-1979PM
TUSCARORA CONDOMINIUM 	:
COMPANY, LLC 	:
Defendant 	:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - :
MEMORANDUM OF DECISION
This case comes before the court on the Motion of The Eldersburg Building Supply
Company (“EBS”) to remand this adversary proceeding to the Circuit Court for Frederick
County, Maryland. This removed action was filed in the Circuit Court for Frederick County,
Maryland, by EBS against the Tuscarora Condominium Company, LLC (“TCC”), to establish
and enforce a Mechanic’s Lien on account of materials and work said to be supplied by EBS to
the Park Place Luxury Condominiums in Frederick County. The Motion for Remand is opposed
by TCC. Debtor takes no position on this Motion.
The Defendant, TCC, and a related entity, Tuscarora Condominium Construction, LLC,
filed claims against the estate in the sum of $818,354.00. EBS filed an unsecured claim in the
sum of $699,396.64.
This action is a non-core proceeding. It involves a claim by a supplier against the owner
of property based on the Maryland Mechanics’ Lien Law that arose before the filing of this
Date signed December 05, 2005
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bankruptcy case under Chapter 11 on May 16, 2005. The Debtor scheduled EBS as the holder of
an unsecured claim without priority in the sum of $688,017.51. Debtor scheduled Tuscarora
Condominium Construction, LLC, as a party to an executory contract, and scheduled an entity
identified only as “Tuscarora” under its list of accounts receivable reflecting a total account
receivable of $131,034.11, consisting of “retainage” of $119,458.00 and accounts receivable of
$11,576.11.
Under 28 U.S.C. § 157(c), this court may hear a proceeding that is not a core proceeding
but that is otherwise related to a case under Chapter 11. Because EBS does not consent to the
entry of a final order by this court in this dispute, after taking testimony, this court would then
submit its proposed Findings of Fact and Conclusions of Law to the District Court, together with
a proposed Order that the District Court may review de novo.
The seminal case in determining whether the Bankruptcy Court has related to jurisdiction
over a controversy is Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (CA3 1984). A civil case is
related to a case in bankruptcy if the outcome in the civil case “could conceivably have any
effect on the estate being administered in bankruptcy . . . if the out-come could alter the debtor’s
rights, liabilities, options or freedom of action (positively or negatively) and which in any way
impacts upon the handling and administration of the bankruptcy case.” See Celotex Corp. v.
Edwards, 514 U.S. 300, 307-08, n.6 (1995), quoting Pacor, 743 F.2d at 994. As noted in the
case of New Horizon of NY LLC v. Jacobs, 231 F.3d 143, 151 (CA4 2000),
This court has adopted the Pacor related to test and has held that a district
court, “and derivatively the Bankruptcy court” has jurisdiction over an action
related to a bankruptcy case “if the outcome [of the proceeding] could alter the
debtor’s rights, liabilities, options, or freedom of action (either positively or
negatively) and [the proceeding] in any way impacts upon the handling and
administration of the bankrupt estate.” Spartan Mills v. Bank of Am. Ill., 112 F.3d
1251, 1255-56 (4th Cir.), cert. denied, 522 U.S. 969, 118 S.Ct. 417, 139 L.Ed. 2d
319 (1997) (quoting Pacor, 743 F.2d at 994 (Internal quotations marks omitted)).
The Supreme Court gave the following as an example of a civil case related to a
bankruptcy case: “suits between third parties which have an effect on the
bankruptcy estate.” Celotex, 514 U.S. at 307 n.5, 115 S.Ct. 1493 (citing 1 Collier
on Bankruptcy ¶3.01[1][c][iv] at 3-28 (15th ed. 1994)). Notably, as is the case
here, a related to case need not necessarily be against the debtor or his property.
Nevertheless, the “mere fact that there may be common issues of fact between a
civil proceeding and a controversy involving a bankruptcy estate does not bring
the matter within the scope of [1334(b)].” Pacor, 743 F.2d at 994. In this circuit,
a civil case is related to bankruptcy if “the outcome of [the civil] proceeding
could conceivably have any effect on the estate being administered in
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bankruptcy.” In re Celotex Corp., 124 F.3d 619, 625 (4th Cir. 1997) (citing
Pacor, 743 F.2d at 994). [FN19] see also A.H. Robins Co. v. Piccinin, 788 F.2d
994, 1002 n.11 (4th Cir. 1986).
The relationship of this third-party dispute to this estate is a distant one at best. The issue for
this court to determine is which of these two parties will have a claim against this bankruptcy
estate for the work and materials supplied by EBS. 	This is a classic state court dispute between
non-debtors. The law of decision is confined entirely to the real estate article of the Maryland
Code.
Under 28 U.S.C. § 1452(b), the court to which a cause of action is removed may remand
such claim or cause of action on any equitable ground. As noted in the case of In re Enron
Corp., 296 B.R. 505-08 (C.D. Cal. 2003), bankruptcy courts have broad discretion to remand
cases over which they have jurisdiction on any equitable ground. In Enron the court relied upon
the list of 14 factors that the court should consider in deciding requests for discretionary
abstention and equitable remand set out in the case of Davis v. Life Investors Ins. Co. of
America, 282 B.R. 186, 194 (S.D. Miss.2002). These factors are as follows:
(1) the effect or lack thereof on the efficient administration of the estate if the
Court recommends [remand or] abstention;
(2) extent to which state law issues predominate over bankruptcy issues;
(3) difficult or unsettled nature of applicable law;
(4) presence of related proceeding commenced in state court or other
nonbankruptcy proceeding;
(5) jurisdictional basis, if any, other than § 1334;
(6) degree of relatedness or remoteness of proceeding to main bankruptcy case;
(7) the substance rather than the form of an asserted core proceeding;
(8) the feasibility of severing state law claims from core bankruptcy matters to
allow judgments to be entered in state court with enforcement left to the
bankruptcy court;
(9) the burden of the bankruptcy court’s docket;
(10) the likelihood that the commencement of the proceeding in bankruptcy court
involves forum shopping by one of the parties.
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(11) the existence of a right to a jury trial;
(12) the presence in the proceeding of nondebtor parties;
(13) comity; and
(14) the possibility of prejudice to other parties in the action.
Almost without exception, these 14 factors all militate against retention of this dispute in this
Bankruptcy Court. Factor (3) has no application in that the Maryland Mechanic’s Lien Law is
straightforward and anything but unsettled. The court will not consider Factor (9), and Factor
(11) has no application to this case. One other factor militates in favor of deferring to the state
court action. Resolution of this dispute requires the preparation of Findings of Fact and
Conclusions of Law and a proposed Order to be forwarded to the United States District Court for
the District of Maryland. That court would then have to consider those findings and review de
novo the matters to which any party has objected.
In the circumstances described, the court finds it appropriate to abstain from the exercise
of jurisdiction over this case and to grant the Motion to Remand this case to the Circuit Court for
Frederick County, Maryland. An appropriate order will be entered.
cc:
Bradford F. Englander, Esq., 7200 Wisconsin Avenue, Suite 800, Bethesda, MD 20814
Standord G. Gann, Jr., Esq., 502 Washington Avenue, Towson, MD 21204
Kevin M. O’Donnell, Esq., 4103 Chain Bridge Road, Suite 100, Fairfax, VA 22030
United States Trustee, 6305 Ivy Lane, #600, Greenbelt MD 20770
Clerk, Circuit Court for Frederick County, Court House 100 West Patrick Street, Frederick,
Maryland 21701
End of Memorandum
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