Bisno v. Miske

OCR transcription for search; preserved printed pages are authoritative

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AUTHENTI
U.S. GOVER
INFORMA}

ENTERED
JUN -2 2010

CLERK US BANKRUPTCY COURT
CENTRAL CHSTRIC YT OF CALIFEG:
- Taba Gh

In re:

ROBERT HENRY BISNO,

Debtor(s).

Case 2:09-ap-02072-PC Doc4 _ Filed 05/28/10 Entere
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ORIGINAL

ARTHUR D. ROBERTS et al.

Vv.

ROBERT H. BISNO et al.

1. INTRODUCTION

Debtor Robert H. Bisno (“Bisno”)
purports to have removed this adversary
proceeding from the Alameda County
Superior Court directly to this court.
The issues before the court are (1) whether
this court has jurisdiction over the removed
proceeding in light of Bisno’s failure to follow
the proper removal procedures, and, if so,
(2) whether this court may sua sponte
remand the adversary proceeding to the
Alameda County Superior Court.

The court holds that it has jurisdiction
over the removed case, notwithstanding the
direct removal to this court rather than to the

CATED
ENT
ON
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£10.16:23:39 , Des¢

Page lof] gx: FILED

MAY 2 8 2010

CLE 1S BANKRUPTCY CGUHT
CERCHAL OOSTRICT OF CAUFGRMIA
g¥ Dey oe

UNITED STATES BANKRUPTCY COURT
CENTRAL DISTRICT OF CALIFORNIA

Case No.: 2:09-bk-33386SB
Adv. No.: 2:09-ap-02072SB

Chapter 7
OPINION ON REMAND
TO STATE COURT

Date: September 2, 2009

Time: 11:00 a.m.
Ctrm: 1575
Floor: 15th

Northern District of California, in) which
Alameda County is located. The court further
holds that it has the power to remand the
state court case sua sponte and that such
remand is appropriate in this case.

Il. RELEVANT FACTS

Plaintiff George Miske (“Miske”)
filed a case against Bisno for fraud and deceit
in the Alameda County Superior Court, which
is located in the Northern § District of
California. The case went to trial before
a jury on July 20, 2009.

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Case 2:09-ap-02072-PC Doc4_ Filed 05/28/10 Entered 06/02/10 16:23:39 Desd
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On August 31, 2009, Miske
completed his case in chief and rested,
On the same day, Bisno filed this chapter 41"
case in this court. Upon learning of the filing
of the bankruptcy case, the superior court
suspended its trial pending further order of
this court.

On September 1, 2009, Bisno filed a
notice of removal that purported to remove
the state court action to this court and
asserted that this court has jurisdiction over
the removed action pursuant to 28 USC.
§ 1334 (b)’ and {e).” On the same day,
Miske filed an emergency motion for relief
from the automatic stay alleging that this
bankruptcy case was filed in bad faith in that
it was specifically designed to delay, hinder,

' Unless otherwise indicated, all chapter,

section and rule references are to the
Bankruptcy Code, 11 U.S.C.A. §§ 101-1532
(West 2009) and to the Federal Rules of
Bankruptcy Procedure, Rules 1001-9036.

2 98 U.S.C. 1334(b) provides:

Except as provided in subsection
{e)(2), and notwithstanding 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
tile 11....

328 U.S.C. § 1334(e) provides:

The district court in which a case
under title 11 is commenced or is
pending shall have — exclusive
jurisdiction--

(1) of all the property, wherever
jocated, of the debtor as of the
commencement of such case, and of
property of the estate; and

(2) over all claims or causes of
action that involve construction of
section 327 of titie 11, United States
Code, or rules relating to disclosure
requirements under section 327.

Page 2 of 7

or interfere with prosecution of the state court
proceeding.

On September 2, 2009, the parties
appeared before this court for a hearing on
Miske’s emergency motion for relief fram the
automatic stay. Miske cited the time and
effort that the parties had already expended
during the course of the state court
proceeding. Miske also argued that the
removal had already caused substantial
prejudice to the parties, the jurors, and the
state court.

However, at the time of the hearing
on Miske’s emergency motion no party had
made a motion to remand the case to state
court. Because the removal of the state court
case to this court left no proceeding in state
court, granting relief from the automatic stay
could not permit the state court trial to
proceed absent remand.

lf the proper response to the removal!
of a state court case in the middle of a jury
trial is to remand it to state court for
completion of the trial, this decision must be
made very quickly. The state court can only
hold a jury for a few days defore releasing it.
Once a jury is released, it cannot be
reconstituted and the case must be retried
before a new jury. Thus, absent an
immediate decision, the benefits of seven
weeks of jury trial in the state court could not
be saved.

It appears to this court that a decision
to remand should not await a motion by a
party to that action, even if made on
shortened time or on an emergency basis.
Thus the court must address whether it can
remand the adversary proceeding sua sponte
to the Alameda County Superior Court to
allow that court to complete its jury trial.

For the reasons stated below, this
court holds that it does have jurisdiction over
the adversary proceeding and that it should
remand the proceeding sua sponte to the
Alameda County Superior Court.

lll. DISCUSSION
A. Statutory Provisions
Removal of a state court action to

a bankruptcy court is governed by 28 U.S.C
§ 1452, which provides in relevant part:

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Case 2:09-ap-02072-PC Doc4_ Filed 05/28/10 Entered 06/02/10 16:23:39 Desc
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A party may remove any claim or
cause of action in a civil action. . .
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.

Section 1334 is the jurisdictional statute
for bankruptcy cases and related
proceedings. Subsection (b} provides:

[T]he district courts shall have original but
not exclusive jurisdiction of all civil
proceedings arising under [the Bankruptcy
Code], or arising in or related to cases
under [the Bankruptcy Code].

See 28 U.S.C. § 1334(b) (Supp. 2009).

B. Removal Procedure

Rule 9027 governs the procedure
for removing a case to bankruptcy court,
which is very similar to the procedure
specified in 28 U.S.C. § 1446 for the removal
of a state court case to federal district court.
Removal is accomplished by the filing in the
bankruptcy court of a verified application
containing a short and plain statement of the
facts that entitle the applicant to remove. The
application must be accompanied by a copy
of all process and pleadings filed in the state
court. Promptly after filing the application
{and a bond if required}, the applicant is
required to serve a copy of the application on
all parties to the removed claim or cause of
action.

The removal is effective upon the
filing of a copy of the removal application
(without the accompanying copy of ail
process and pleadings) in the court from
which the action is removed. The parties are
then enjoined from proceeding any further in
that court unless and until a remand is
ordered by the bankruptcy court. See, eg.,
in re Princess Loutse Corp., 77 B.R. 766, 768

Page 3 of 7

a notice of removal in the state court where
the case was previously pending.

Cc. Jurisdiction When Removal is Made
to an Improper District

Rule 9027(a}{(1} specifies the place
where a notice of removal is to be filed:

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.

Pursuant to this provision, the proper place
for Bisno to file his notice of removal of the
Alameda County Superior Court action was
with the clerk* of the Oakland Division of the
Bankruptcy Court for the Northern District of
California. Nonetheless, Bisno filed his
notice of removal in the Los Angeles
courthouse in the Central District of California
where his bankruptcy case is pending.

Removal of a state court case to a
bankruptcy court located in a federal district
other than the district in which the state court
is Jocated is normally a two-step process.
First, the removing party removes the state
court case to the lecal bankruptcy court
whose district encompasses the state court
where the case is pending. Second, the
removing party (or any other party in interest)
files a motion in that bankruptcy court to
transfer the removed case to the district
where the relevant bankruptcy case is
pending.

A recurring problem arises when
a party (such as Bisno) tries to circumvent
this general two-step process by removing
astate court case directly to the district
(different from the district where the state
court is located} where the bankruptcy case
is pending.

The courts are divided as to whether
removal to an improper district constitutes a

{Bankr. C.D, Cal. 1987).

Where removal is from a state court
to the bankruptcy court in the federal district
where the state court is located, the removal
petition is filed directly with the bankruptcy
court. Removal is complete upon the filing of

* Rule 9001(3) provides that the term “clerk”
where used in the rules, means “bankruptcy
clerk.” Thus, the proper place to file a notice off
removal to a bankruptcy court is the bankrupicy
clerk for the division of the federal judicial district
in which the state court is located.

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jurisdictional problem or a _ procedural
problem, If the issue is jurisdictional, the
federal court must dismiss the case entirely.
However, if the issue is procedural, the
federal court may either hear the case or
remand it.” There is no controlling Ninth
Circuit decision on this issue.

The majority view is that removal to
the wrong federal court is a venue problem,
not a jurisdictional problem. For example,
in Peterson v. BMI Refractories, 124 F.3d
1386, 1388 (11th Cir. 1997), the court held
that, “failure to comply with the geographic
requirements of 28 U.S.C. § 1441{a) [the
general federal removal statute] is a
procedural defect that does not deprive a
district court of subject matter jurisdiction in a
removed case.”

Similarly, in Cambridge Co. v. Cotton
(in re Trafficwatch), 138 B.R. 841 (Bankr.
E.D. Tex. 1992), the bankruptcy court found
that removal from a state court located in the
Northern District of Texas to a bankruptcy
court in the Eastern District was a defect of
venue, not jurisdiction.

In contrast, in Furr v. Barnett Bank,
(in re S & K Air Power, Inc.), 166 B.R. 193,
195 (Bankr. S.D. Fla. 1994), the bankruptcy
court held that removal to the Southern
District of Florida from a state court located in
the Middle District of Florida was improper,
and that it had no jurisdiction over the case.
In deciding this case, the court followed the
prior Eleventh Circuit case, National
Developers, inc. v. CIBA-Geigy (in re
National Developers, Inc.), 803 F.2d 616
(11th Cir. 1986), where court held that
removal from a state court in New York to the
Middle District of Alabama was improper
because it violated the removal procedure of
28 U.S.C. 1478(a), the predecessor to

° Remand is the proper procedure for a case
that is improperly removed to federal court.
See, e.g., Moore-Thomas v. Alaska Airlines,
Inc., 553 F.3d 1241, 1244 (9th Cir. 2009)
(construing 28 U.S.C. § 1447 (the statute
governing removal to a federal district court)).
° Peterson involved a civil rights case
removed from the Middle District of Alabama
to the district court in the Northern District.

Page 4 of 7

§ 1452.’ id. at 620. Although the court noted
that direct removal to the court where the
bankruptcy case was pending would be a
more efficient procedure, this procedure was
not permitted by the statute. fd. However, in
Peterson the Eleventh Circuit held that
National Developers was confined tc_ its
particular facts, which presumably included
that tt was based on a subsequently repealed
statute. Thus it appears that S & K Air Power
is no longer good law.

This court finds Traffic Watch and
Peterson persuasive. Removal of a state
court proceeding to a bankruptcy court in a
district other than the district in which the
state court is located is a defect of venue and
not jurisdiction. Accordingly, this court has
jurisdiction to decide whether to hear the
removed case or to remand it to state court.

D. Court’s Authority to
Remand Sua Sponte

A bankruptcy court's power to
remand is governed by 28 U.S.C. § 1452{b),
which provides in relevant part:

The court to which [a] claim or cause
of action is removed may remand
such claim or cause of action on any
equitable ground.

Given this broad grant of discretion,
“a federal bankruptcy court [generally] does
net have to rely upon a motion by any party
to remand a case. instead the court can
consider, upon its own motion, its jurisdiction
over the subject matter and whether to
remand the matter to state court.” Texas Guif
Trawling Co. v. RCA Trawlers & Supply, inc.
{in re Ciclon Negro, inc.), 260 B.R. 832, 837
(Bankr. S.D. Tex. 2001). In Ciclon Negro,
both parties argued that the bankruptcy court
lacked authority to remand sua sponte on
procedural grounds after the mandatory

* 28 U.S.C.A. § 1478, the governing removal
Statute prior to 1984 when § 1452 was
adopted, provided “[a] party may remove any
claim or cause of action in a civil action... to
the bankruptcy court for the district where
such civil action is pending, if the bankruptcy
courts have jurisdiction over such claim or
cause of action.” Jd.

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thirty-day expiration period. fd. The court
noted, however, that the “decision whether to
remand is not based on a procedural defect,
so the thirty-day restriction against the court's
ability to raise the issue sua sponte does not
apply.” fd. = Instead, the court’s inquiry
focused on whether the court should, upon its
own motion, remand the adversary
proceeding to state court on equitable
grounds under § 1452(b).

To evaluate whether to remand, the
court in Ciclon Negro considered the
following factors: (1) the convenience of the
forum; (2) the presence of non-debtor parties;
(3) whether the case should be tried as a
whole in state court; (4) the duplicative and
uneconomic effect of judicial resources in two
forums; (5) the lessened possibility of
inconsistent results, (6) whether the state
court would be better able to handle issues of
State law; (7) the expertise of the Bankruptcy
Court; (8) the degree of relatedness or
remoteness to the main bankruptcy case; (9)
prejudice to involuntarily removed parties;
(10) whether the case involves forum
shopping; (11) the burden on the Bankruptcy
Court's docket; and (12) considerations of
comity. fd at 837.2 After reviewing the
evidence and the arguments of counsel as
well as the pleadings on file, the court
concluded that “the equities of the lawsuit
supported remand under § 1452(b).” id.

Here, the facts of the instant case
clearly warrant sua sponte remand under
§ 1452(b}. Bisno filed his bankruptcy case in
this court on the last day of plaintiff's case in
chief after the completion of seven weeks of
an eight-week jury trial. Thus, it can be
inferred that the filing was made in bad faith
and was intended to disrupt the ongoing civil
trial. In addition, there are parties in the
state court proceeding who would not
otherwise need to come before this court and
who could face substantial hardship if
required to appear. Finally, the relief sought
by the plaintiffs in the state court proceeding
is simply to obtain a judgment liquidating
Bisno’s debt. Enforcement of that judgment
must be accomplished in this court.

* The factors that the court cited in Cicfon are
net mandatory, but illustrate what the court
may consider in deciding to remand an
adversary proceeding to state court.

Page 5 of 7

Given these circumstances and the
court’s concern for judicial economy, there is
compelling evidence to remand _ this
adversary proceeding to the Alameda County
Superior Court so that the state court
proceeding may be completed.

Dated: May 28, 2010

MAY 28 2010

UA
as

. Bufford
es ve kruptcy Judge

Ww

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NOTE TO USERS OF THIS FORM:

1} Attach this form to the last page of a proposed Order or Judgment. Do not file as a separate document.

2) The title of the judgment or order and all service information must be filled in by the party lodging the order.
3) Category I. below: The United States trustee and case trustee (if any) will always be in this category.

4) Category Il. below: List ONLY addresses for debtor (and attorney}, movant (or attorney) and person/entity
(or attorney) who filed an opposition to the requested relief. DO NOT list an address if person/entity is listed in
category |.

NOTICE OF ENTERED ORDER AND SERVICE LIST

Notice is given by the court that a judgment or order entitled (specify) OPINION ON REMAND TO
STATE COURT was entered on the date indicated as “Entered” on the first page of this judgment or
order and will be served in the manner indicated below:

| SERVED BY THE COURT VIA NOTICE OF ELECTRONIC FILING (“NEF”) - Pursuant to
controlling General Order(s} and Local Bankruptcy Rule(s), the foregoing document was served on
the following person(s) by the court via NEF and hyperlink to the judgment or order. As of May 28,
2010, the following person(s) are currently on the Electronic Mail Notice List for this bankruptcy case
or adversary proceeding to receive NEF transmission at the email address(es) indicated below.

David L. Hahn, Esq. trustee@hahntite.com, dhahn@ecf.epiqsystems.com
Autumn D. Spaeth, Esq. aspaeth@wagllp.com
United States Trustee ustpregion16.la.ecf@usdoj.gov
Dare Law, Esq. dare.law@usdoj.gov
Russell Clementson, Esq. Russell.clementson@usdoj.gov
Mette H. Kurth, Esq. kurth.mette@arentfox.com
oO Service information continued on attached page

ll. SERVED BY THE COURT VIA U.S. MAIL: A copy of this notice and a true copy of this judgment
or order was sent by United States Mail, first class, postage prepaid, to the following person(s) and/or
entity(ies} at the address(es) indicated below:

Robert Henry Bisno
66 Beverly Park
Beverly Hills, California 90210

Robert Henry Bisno

9255 Sunset Boulevard

Suite 920

Los Angeles, California 90067

Robert J. Kahn, Esq.

Law Offices of Robert J. Kahn

2033 North Main Street, Suite 363
Walnut Creek, California 94596-3726

William S. Berland, Esq.
Ferguson & Berland

1816 Fifth Street
Berkeley, California 94716

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Charles Evans Patterson, Il, Esq.
1640 School Street

Suite 100

Moraga, California 945506

Gregory P. Regier, Esq.

Larry Resnick, Esq.

Jackson, DeMarco, Tidus & Peckenpaugh
2815 Townsgate Road, Suite 200
Westlake Village, California $1361

i Service information continued on attached page

lil. TO BE SERVED BY THE LODGING PARTY: Within 72 hours after receipt of a copy of this
judgment or order which bears an “Entered” stamp, the party lodging the judgment or order will serve
a complete copy bearing an “Entered” stamp by U.S. Mail, overnight mail, facsimile transmission or
email and file a proof of service of the entered order on the following person(s) and/or entity(ies} at
the address(es}, facsimile transmission number(s), and/or email address(es) indicated below:

im Service information continued on attached page

ADDITIONAL SERVICE INFORMATION (if needed):