In re: Parmalat Securities Litigation 1

09-4302-cv (L)
In re: Parmalat Securities Litigation
1
UNITED STATES COURT OF APPEALS 2
3
F OR THE S ECOND C IRCUIT 4
____________________________________ 5
6
August Term, 2011 7
8
Argued: December 7, 2011 Decided: February 21, 2012 9
10
Docket Nos. 09-4302-cv (L); 09-4306-cv (con); 11
09-4373-cv (con) 12
____________________________________ 13
14
P ARMALAT C APITAL F INANCE L IMITED , 15
16
Plaintiff-Appellant, 17
18
D R . E NRICO B ONDI , E XTRAORDINARY C OMMISSIONER OF P ARMALAT F INANZIARIA 19
S. P .A., P ARMALAT S. P .A., AND OTHER AFFILIATED ENTITIES , IN 20
E XTRAORDINARY A DMINISTRATION UNDER THE LAWS OF I TALY , 21
22
Plaintiff-Counter-Defendant-Third-Party-Defendant-Appellant, 23
24
C APITAL & F INANCE A SSET M ANAGEMENT S.A., C ATTOLICA P ARTECIPAZIONI 25
S. P .A., H ERMES F OCUS A SSET M ANAGEMENT E UROPE L IMITED , E RSTE 26
S PARINVEST K APITALANLAGEGESELLSCHAFT M . B .H., S OLOTRAT , S OCIETE 27
M ODERNE DES T ERRASSEMENTS P ARISIENS , R ENATO E SPOSITO , F ONDAZIONE 28
I TALO M ONZINO , S OUTHERN A LASKA C ARPENTERS P ENSION F UND , ON BEHALF OF 29
ITSELF AND ALL OTHERS SIMILARLY SITUATED , C RISTINA P ONCIBO , M ARGERY 30
L OUISE K RONENGOLD , R OBERT M C Q UEEN , C USTODIAN , INDIVIDUALLY AND ON 31
BEHALF OF ALL OTHERS SIMILARLY SITUATED , F ERRI G IAMPOLO , F OOD 32
H OLDINGS L IMITED , D AIRY H OLDINGS L IMITED , G. J AMES C LEAVER , G ORDON 33
I. M AC R AE , G ERALD K. S MITH , L AURA J. S TURAITIS , M ONUMENTAL L IFE 34
I NSURANCE C OMPANY , T RANS A MERICA O CCIDENTAL L IFE I NSURANCE C OMPANY , 35
T RANS A MERICA L IFE I NSURANCE C OMPANY , A VIVA L IFE I NSURANCE C OMPANY , 36
P RINCIPAL G LOBAL I NVESTORS , LLC, P RINCIPAL L IFE I NSURANCE C OMPANY , 37
S COTTISH R E (US) I NC ., H ARTFORD L IFE I NSURANCE C OMPANY , P LAN 38
A DMINISTRATOR G. P ETER P APPAS , 39
40
Plaintiffs, 41
42

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—v.— 1
2
B ANK OF A MERICA C ORPORATION , B ANC OF A MERICA S ECURITIES L IMITED , 3
B ANK OF A MERICA , N.A., B ANK OF A MERICA N ATIONAL T RUST & S AVINGS 4
A SSOCIATION , B ANC OF A MERICA S ECURITIES LLC, B ANK OF A MERICA 5
I NTERNATIONAL , L TD ., G RANT T HORNTON I NTERNATIONAL , L TD ., 6
7
Defendants-Appellees, 8
9
G RANT T HORNTON I NTERNATIONAL , G RANT T HORNTON LLP, 10
11
Defendants—Third-Party-Plaintiffs-Counter-Claimants-Appellees, 12
13
D EUTSCHE B ANK AG, M ORGAN S TANLEY & C O ., I NCORPORATED , B ONLAT 14
F INANCING C ORPORATION , C ALISTO T ANZI , F AUSTO T ONNA , C OLONIALE 15
S. P .A., C ITIGROUP I NC ., B UCONERO , LLC, Z INNI & A SSOCIATES , P.C., 16
D ELOITTE T OUCHE T OHMATSU , D ELOITTE & T OUCHE S. P .A., A S OCIETA PER 17
A ZIONI UNDER THE LAWS OF I TALY , J AMES E. C OPELAND J R ., P ARMALAT 18
F INANZIARIA S. P .A., S TEFANO T ANZI , L UCIANO D EL S OLDATO , D OMENICO 19
B ARILI , F RANCESCO G IUFFREDI , G IOVANNI T ANZI , D ELOITTE & T OUCHE 20
USA, LLP, D ELOITTE & T OUCHE L.L.P., C REDIT S UISSE F IRST B OSTON , 21
C ITIBANK , E UREKA S ECURITISATION PLC , V IALATTEA LLC, P AVIA E 22
A NSALDO , B ANCA N AZIONALE D EL L AVORO S. P .A., C ITIBANK , N.A., 23
P ROFESSOR M ARIA M ARTELLINI , B ANCA I NTESA S. P .A., D ELOITTE & T OUCHE 24
T OHMATSU A UDITORES I NDEPENDENTES , C REDIT S UISSE I NTERNATIONAL , 25
C REDIT S UISSE S ECURITIES (E UROPE ) L IMITED , C REDIT S UISSE , C REDIT 26
S UISSE G ROUP , G RANT T HORNTON S. P .A., A S OCIETA PER A ZIONI UNDER THE 27
LAWS OF I TALY , NOW KNOWN AS I TALAUDIT , S. P .A., 28
29
Defendants, 30
31
P ARMATOUR S. P .A., 32
33
Defendant-Third-Party-Defendant. 34
___________________________________ 35
36
37
38
39
40
41
42

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1
Before: C ABRANES and W ESLEY , Circuit Judges, and K OELTL , District 2
Judge. *
3
4
5
This is an appeal from the judgments of the United States 6
District Court for the Southern District of New York (Kaplan, 7
J.) dismissing the claims of plaintiffs-appellants Parmalat 8
Capital Finance Limited and Dr. Enrico Bondi against the Grant 9
Thornton defendants after determining, pursuant to the mandate 10
of this Court, that mandatory abstention under 28 U.S.C. 11
§ 1334(c)(2) was not required in these bankruptcy-related cases. 12
Because we find that mandatory abstention was required in these 13
cases under the test we laid out in our prior Opinion, we vacate 14
the judgments of the District Court, and remand these cases to 15
the District Court with instructions to transfer them to the 16
United States District Court for the Northern District of 17
Illinois so that they can be remanded to Illinois state court. 18
19
* The Honorable John G. Koeltl, of the United States District
Court for the Southern District of New York, sitting by
designation.

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______________ 1
2
J. GREGORY TAYLOR , Allan B. Diamond, J. 3
Benjamin King, Diamond McCarthy 4
LLP, for Appellant Parmalat 5
Capital Finance Limited. 6
7
KATHLEEN M. S ULLIVAN , Peter E. Calamari, 8
Terry L. Wit, Sanford I. 9
Weisburst, Quinn Emanuel Urquhart 10
& Sullivan, LLP, New York, NY, for 11
Appellant Dr. Enrico Bondi. 12
13
JAMES L. BERNARD , David M. Cheifetz, 14
Stroock & Stroock & Lavan LLP, New 15
York, NY, for Appellees Grant 16
Thornton International, Inc. and 17
Grant Thornton International Ltd. 18
19
LINDA T. COBERLY , Bruce R. Braun, William 20
P. Ferranti, Winston & Strawn LLP, 21
Chicago, IL, for Appellee Grant 22
Thornton LLP. 23
24
______________ 25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41

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P ER C URIAM : 1
Plaintiffs-appellants Parmalat Capital Finance Limited 2
(“PCFL”) and Dr. Enrico Bondi (“Bondi,” and collectively, 3
“Appellants”) appeal from the judgments of the United States 4
District Court for the Southern District of New York (Kaplan, 5
J.) dismissing their claims against Grant Thornton 6
International, Inc., Grant Thornton International Ltd, and Grant 7
Thornton LLP (collectively, “Grant Thornton” or “Appellees”). 8
In our prior Opinion in this case, Parmalat Capital Fin. Ltd. v. 9
Bank of America Corp. (“Parmalat”), 639 F.3d 572, 582-83 (2d 10
Cir. 2011), we vacated the decisions not to abstain from 11
deciding these cases pursuant to the mandatory abstention 12
provision in 28 U.S.C. § 1334(c)(2) that applied to these 13
bankruptcy-related proceedings. 14
We remanded the cases to the District Court for a 15
determination of whether the cases could be “timely adjudicated” 16
in Illinois state court in accordance with the factors we set 17
forth in that Opinion. On remand, the District Court again 18
concluded that mandatory abstention did not apply, In re 19
Parmalat Sec. Litig., Nos. 04 Civ. 9771, 06 Civ. 2991, 2011 WL 20
3874824, at *1 (S.D.N.Y. Aug. 31, 2011), and the Appellants 21
renewed their appeals to this Court arguing for mandatory 22
abstention. Because we find that these cases can be “timely 23
adjudicated” within the meaning of the statute and pursuant to 24

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the test we laid out in our prior Opinion, we conclude that 1
abstention was mandatory in these cases. Accordingly, we vacate 2
the judgments of the District Court and remand these cases with 3
instructions that the cases be transferred to the Northern 4
District of Illinois and remanded to Illinois state court. 5
6
BACKGROUND 7
The facts in these long-running cases were fully set forth 8
in our prior Opinion, Parmalat, 639 F.3d at 576-78, and we 9
provide only a summary here. 10
These cases arise out of the collapse of Parmalat 11
Finanziaria, S.p.A. (“Old Parmalat”) in 2003. Plaintiff- 12
appellant Bondi represents Old Parmalat’s Italian bankruptcy 13
estate as its Extraordinary Commissioner under Italian law. 14
Parmalat’s plan of reorganization, the Concordato, was approved 15
after the commencement of these lawsuits, and is proceeding in 16
Italy. Plaintiff-appellant PCFL is a Grand Caymans-based 17
corporate subsidiary of Parmalat. PCFL is in liquidation in the 18
Cayman Islands. 19
In 2004, PCFL and Bondi commenced separate proceedings 20
pursuant to former 11 U.S.C. § 304 in the Bankruptcy Court for 21
the Southern District of New York. These proceedings permitted 22
PCFL and Bondi, as representatives of the foreign bankruptcy 23
estates, to commence bankruptcy cases in the United States in 24

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order to enjoin litigation against PCFL and Parmalat in the 1
United States courts. The bankruptcy court entered a 2
preliminary injunction shielding Old Parmalat from American 3
lawsuits. Purchasers of Old Parmalat’s debt and equity 4
securities had filed securities fraud class action lawsuits in 5
the United States against Old Parmalat and against various banks 6
and auditing firms that had allegedly participated in the fraud, 7
including Appellees Grant Thornton, who had been auditors for 8
Old Parmalat and PCFL. After the issuance of the preliminary 9
injunction, the securities fraud plaintiffs dropped Old Parmalat 10
as a defendant. 11
In August 2004, Bondi filed suit in Illinois state court 12
against Grant Thornton, alleging claims arising under Illinois 13
law including professional malpractice, fraud, negligent 14
misrepresentation, and unlawful civil conspiracy. Bondi filed a 15
similar suit in New Jersey state court against Citigroup. In 16
September 2004, Grant Thornton removed the Illinois case to the 17
United States District Court for the Northern District of 18
Illinois on the basis of 28 U.S.C. §§ 1334(b) and 1452, arguing 19
that removal was proper because the case was “related to” 20
Bondi’s § 304 proceeding in the Southern District of New York. 21
Bondi filed a motion to remand, arguing that the court was 22
required to abstain from hearing the case pursuant to 28 U.S.C. 23
§ 1334(c)(2). The Judicial Panel on Multidistrict Litigation 24

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transferred Bondi's action against Grant Thornton to Judge 1
Kaplan in the Southern District of New York. On February 25, 2
2005, Judge Kaplan denied Bondi's motion to remand to state 3
court. The District Court found that it had jurisdiction 4
pursuant to § 1334(b) and that abstention was not mandatory. 5
The District Court denied Bondi’s motion for an interlocutory 6
appeal pursuant to 28 U.S.C. § 1252(b). 7
In December 2005, PCFL filed suit against Grant Thornton in 8
the same Illinois state court, alleging similar claims to those 9
asserted by Bondi. PCFL also filed a complaint in North 10
Carolina state court against Bank of America alleging some 11
similar claims. Grant Thornton removed the Illinois case to the 12
United States District Court for the Northern District of 13
Illinois, again arguing that removal was proper because the 14
state law claims were related to PCFL’s § 304 proceeding. PCFL, 15
like Bondi, filed a motion to abstain and remand, arguing that 16
abstention was mandatory pursuant to 28 U.S.C. § 1334(c)(2). 17
The Northern District of Illinois denied PCFL's motion. That 18
court then transferred the case to Judge Kaplan in the Southern 19
District of New York for consolidation with Bondi’s case. In a 20
separate proceeding, the North Carolina case against Bank of 21

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America was also transferred to the Southern District of New 1
York. 1
2
In October, 2005, the Italian bankruptcy court approved the 3
Concordato. Under the Concordato, a newly formed entity, 4
Parmalat, S.p.A. (“New Parmalat”), assumed all of the legal 5
liabilities, as well as the assets, of its predecessor 6
companies. New Parmalat acts as a claims administrator for 7
creditors of Old Parmalat under the Concordato. See Bondi v. 8
Capital & Fin. Asset Mgmt. S.A., 535 F.3d 87, 89 (2d Cir. 2008). 9
In June 2007, the District Court denied Bondi’s motion to bar 10
the securities fraud plaintiffs from bringing direct claims 11
against New Parmalat. See In re Parmalat Sec. Litig., 493 F. 12
Supp. 2d 723 (S.D.N.Y. 2007), aff’d, Bondi, 535 F.3d at 94. The 13
District Court also granted a motion to permit Grant Thornton to 14
file third party contribution claims against Parmalat in the 15
securities class action. See In re Parmalat Sec. Litig., 472 F. 16
Supp. 2d 582 (S.D.N.Y.), aff’d, 240 F. App’x 916 (2d Cir. 2007). 17
The securities class actions eventually settled. 18
Meanwhile, the Illinois and North Carolina actions 19
continued in the Southern District of New York. Following 20
discovery, the District Court issued a detailed and thoughtful 21
1 Bondi’s New Jersey case against Citigroup remained in New
Jersey state court. See, e.g., Bondi v. Citigroup, Inc., 32
A.3d 1158 (N.J. Super. Ct. App. Div. 2011).

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opinion granting summary judgment to the defendants. See In re 1
Parmalat Sec. Litig., 659 F. Supp. 2d 504 (S.D.N.Y. 2009). With 2
regard to the North Carolina action, we affirmed the District 3
Court’s grant of summary judgment to Bank of America. See 4
Parmalat Capital Fin. Ltd. v. Bank of Am. Corp., 412 F. App’x 5
325 (2d Cir. 2011) (summary order). 6
In a separate Opinion regarding the Illinois actions 7
against Grant Thornton, we vacated the decisions not to abstain 8
from deciding these cases pursuant to the mandatory abstention 9
provision in 28 U.S.C. § 1334(c)(2). Parmalat Capital Fin. Ltd. 10
v. Bank of Am. Corp., 639 F.3d 572, 582-83 (2d Cir. 2011). We 11
remanded the Illinois cases to the District Court for a 12
determination of whether the cases could be “timely adjudicated” 13
in Illinois state court within the meaning of § 1334(c)(2), in 14
accordance with the factors we set forth in that Opinion. On 15
remand, the District Court again concluded that mandatory 16
abstention did not apply. In re Parmalat Sec. Litig., Nos. 04 17
Civ. 9771, 06 Civ. 2991, 2011 WL 3874824, at *1 (S.D.N.Y. Aug. 18
31, 2011). The Appellants renewed their appeals to this Court 19
arguing for mandatory abstention. 20
21
22
23
24

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DISCUSSION 1
Section 1334(c)(2) provides that, in certain circumstances, 2
a district court must abstain from hearing state law claims that 3
are related to a bankruptcy case when those proceedings can be 4
“timely adjudicated” in state court. 28 U.S.C. § 1334(c)(2). 5
In our previous Opinion, we explained that “[f]our factors come 6
into play in evaluating § 1334(c)(2) timeliness: (1) the backlog 7
of the state court's calendar relative to the federal court's 8
calendar; (2) the complexity of the issues presented and the 9
respective expertise of each forum; (3) the status of the title 10
11 bankruptcy proceeding to which the state law claims are 11
related; and (4) whether the state court proceeding would 12
prolong the administration or liquidation of the estate.” 13
Parmalat, 639 F.3d at 580 (citing In re Georgou, 157 B.R. 847, 14
851 (N.D. Ill. 1993)). The issue on this renewed appeal is 15
whether that four factor test was met in these cases. We review 16
the decision whether to abstain de novo. Id. 17
18
I. 19
With regard to the first factor, “the backlog of the state 20
court’s calendar relative to the federal court’s calendar,” we 21
explained that “[t]he inquiry does not turn exclusively on 22
whether an action could be adjudicated most quickly in state 23
court[, but] is, however, informed by the comparative speeds of 24

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adjudication in the federal and state forums.” Id. The 1
District Court found that this factor ultimately weighs in favor 2
of denying abstention. In re Parmalat, 2011 WL 3874824, at *1- 3
*3. We agree that this factor weighs in favor of denying 4
abstention, but this factor is not dispositive. It is plainly 5
the case that, were this claim to remain in federal court, we 6
would reach the merits of the already-decided motions for 7
summary judgment. There would be a decision on the merits 8
sooner if abstention were denied. But that difference in timing 9
appears to be a matter of months, rather than years. 10
The Appellants have conceded that, if this case were 11
remanded to the Illinois state courts, the Appellants will not 12
seek to relitigate the discovery issues already decided by the 13
District Court. If they received an adverse judgment, it could 14
then be appealed directly through the Illinois appellate courts. 15
There is no allegation in the record that the Illinois courts 16
are “backlogged,” and no dispute over the assertion that the 17
difference in the time it takes to resolve a case between 18
federal and Illinois state courts, when both start at the same 19
time, is no more than a few months. The conclusion that there 20
would be years of delay from a remand overestimates, based 21
solely on the complexity of the record, the amount of time an 22
Illinois court might take to decide or review a summary judgment 23
motion. 24

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On balance, this factor does tip in favor of denying 1
abstention. At the very least, there will be delay added for 2
the review of the summary judgment motion by an Illinois trial 3
court. But the entire inquiry cannot “turn exclusively on 4
whether an action could be adjudicated most quickly in state 5
court.” Parmalat, 639 F.3d at 580; see also In re Exide Techs., 6
544 F.3d 196, 218 n.14 (3d Cir. 2008) (“The question is not 7
whether the action would be more quickly adjudicated in [the 8
bankruptcy court] than in state court, but rather, whether the 9
action can be timely adjudicated in the state court.” 10
(alterations in original) (internal quotation marks omitted)). 11
The District Court did not specifically address each of the 12
other three factors. 2 We now address them in turn. 13
The second factor, “the complexity of the issues presented 14
and the respective expertise of each forum” cuts in favor of 15
remand. We explained in our prior Opinion that “[t]he district 16
court may find that this factor particularly favors abstention 17
here because one of the key issues in this case—the defense of 18
in pari delicto—is a matter of Illinois state law and there is 19
some doubt as to the nature and reach of the defense.” 20
Parmalat, 639 F.3d at 580 n.8. The District Court did not 21
address these legal issues, despite the fact that, as the 22
2 The remaining factors solely involve issues of law that are not
premised on findings of fact.

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Appellees conceded at oral argument, basic questions regarding 1
in pari delicto under Illinois law are unsettled. See, e.g., 2
Peterson v. McGladrey & Pullen, LLP, --- F. Supp. 2d ----, 2010 3
WL 4435543, at *2-*3 (N.D. Ill. 2010) (“[T]here is no 4
controlling authority in the Seventh Circuit or Illinois on 5
whether the defense of in pari delicto is available against a 6
bankruptcy trustee.”), on appeal, No. 10-3770 (7th Cir.) (argued 7
Sept. 8, 2011). 3
8
Instead, the District Court appeared to find that this 9
factor supported denying abstention, because the facts in the 10
case are complex, and the District Court is already familiar 11
with them. In re Parmalat, 2011 WL 3874824, at *2-*3. But the 12
District Court did not address the complexity of the legal 13
issues, even though we specifically highlighted that the 14
complexity of state law issues here “particularly favors 15
abstention,” and despite the fact that the District Court=s 16
disposition of these cases rested on its prediction and 17
interpretation of Illinois law. See In re Parmalat Sec. Litig., 18
3 Although Amici Curiae have argued that in pari delicto should
not apply to Bondi because he is an appointed public official
charged with overseeing Parmalat’s bankruptcy affairs, Bondi has
analogized his position to that of a bankruptcy trustee
throughout this litigation. Indeed, Bondi conceded to the
District Court that he “stands in the shoes” of Parmalat, and on
appeal, he likewise did not assert that in pari delicto did not
apply to him on the basis of his position as Extraordinary
Commissioner of Old Parmalat.

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659 F. Supp. 2d 504, 519-20 & nn. 101, 103 (S.D.N.Y. 2009); id. 1
at 530-32 & nn. 162, 166-168, 170. This Court, in another 2
case, found that the application of in pari delicto to auditor 3
malpractice under New York law was sufficiently important and 4
unsettled to warrant certifying questions to the New York Court 5
of Appeals. See Kirschner v. KPMG LLP, 590 F.3d 186 (2d Cir. 6
2009); 938 N.E.2d 941 (N.Y. 2010) (responding to certified 7
questions). The high courts of Pennsylvania and New Jersey have 8
each issued recent decisions limiting the in pari delicto 9
doctrine in auditor malpractice cases. See Official Comm. of 10
Unsecured Creditors of Allegheny Health Educ. & Research Found. 11
v. PricewaterhouseCoopers, LLP, 989 A.2d 313 (Pa. 2010); NCP 12
Litig. Trust v. KPMG LLP, 901 A.2d 871 (N.J. 2006). In our 13
prior Opinion we specifically noted that, “Illinois does not 14
permit our Court to certify questions of Illinois state law to 15
the Illinois Supreme Court.” Parmalat, 639 F.3d at 580 n.8. 16
Remand will allow the state courts of Illinois to speak directly 17
on these issues of state law. Moreover, the complexity of the 18
factual issues in these cases is tempered by the fact that there 19
is a thorough summary judgment record that will accompany this 20
case back to the Illinois state court. 21
The third factor, “the status of the title 11 bankruptcy 22
proceeding to which the state law claims are related,” also 23
favors remand. We specifically explained in our prior Opinion 24

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that “[b]ecause a [bankruptcy] court overseeing a ' 304 case is 1
not tasked with overseeing reorganization or liquidation of the 2
estate, we see no reason why, as a result of the ' 304 3
proceeding, the litigants in a state law proceeding would 4
require swift resolution of the state law claims.” Parmalat, 5
639 F.3d at 581 n.9. The District Court did not explain why 6
such swift resolution of the ' 304 proceeding was required here, 7
or even whether a quicker resolution of the Illinois claims 8
would have any effect on the ' 304 proceeding. It is difficult 9
to see how these actions will affect the § 304 proceeding, and 10
the Appellees do not claim that they would. They argue that the 11
factor is “neutral,” but it is not, in our view, neutral. It 12
supports the proposition that these cases can be timely 13
adjudicated in state court without affecting the federal 14
interest in “related-to” jurisdiction. 15
The fourth factor, “whether the state court proceeding 16
would prolong the administration or liquidation of the estate,” 17
also favors remand. The Appellees do not challenge the 18
assertion that the ability of New Parmalat to pay creditors 19
according to the Concordato does not depend on the resolution of 20
the Illinois claims. It appears undisputed that the Italian 21
reorganization of Parmalat will be completed when the current 22
appeal in Italy is concluded, so that the pendency of the 23
Illinois cases will not affect the reorganization of Parmalat. 24

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Nor is there any dispute that PCFL is in liquidation in the 1
Cayman Islands. See In re Leco Enters., Inc., 144 B.R. 244, 2
251 (S.D.N.Y. 1992) (“In deciding whether a matter may be timely 3
adjudicated, perhaps the single most important factor is the 4
nature of the underlying chapter proceeding. In a Chapter 7 5
proceeding there is no administrative urgency or plan of 6
reorganization to facilitate and timely adjudication can be 7
weighed relatively lightly.” (alterations and internal quotation 8
marks omitted)); accord Bates & Rogers Constr. Corp. v. Cont’l 9
Bank, N.A., 97 B.R. 905, 908 (N.D. Ill. 1989) (“Bates & Rogers 10
is involved in a liquidating Chapter 11 which involves no 11
reorganization. Consequently, no administrative urgency or plan 12
of reorganization exists to facilitate. In light of this fact, 13
we do not believe that a potential delay in state court will 14
significantly affect the administration or liquidation of the 15
estate.” (citation omitted)); see also Parmalat, 639 F.3d at 16
581-82 (“Unlike WorldCom, the district court here is not charged 17
with administration of a bankruptcy estate. As a result, the 18
possibility that remand of the state court claims will slow down 19
the ' 304 proceeding is insufficient to show that state court 20
adjudication would be untimely. The inquiry=s proper focus is on 21
the timely administration of the estate, not the ' 304 22
proceeding.”). 23

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The District Court did not address this factor with 1
specific reference to the types of proceedings at issue, but the 2
Appellees argue that remand would harm the creditors by 3
increasing the cost of litigation. The issue, though, is 4
plainly not whether abstention increases the ultimate payout to 5
the creditors, but whether it “unduly prolong[s] the 6
administration of the estate” at issue. Parmalat, 639 F.3d at 7
581. As we noted, the Appellants are the administrators of the 8
estates at issue, and were presumably “well versed in the 9
timeliness concerns of their respective foreign bankruptcy 10
proceedings when they selected the state forum.” Id. at 581 11
n.10. That presumption is only buttressed by the nature of the 12
foreign bankruptcy proceedings and the extent to which they do 13
not depend on the Illinois claims for resolution. 14
These are unusual cases. They have existed in parallel 15
with a securities fraud class action that was also before the 16
District Court, in which Grant Thornton had asserted third-party 17
contribution claims against Parmalat. At least Bondi likely 18
could have asserted Parmalat’s state law claims against Grant 19
Thornton in that securities fraud action, but he chose not to do 20
so. Instead, Bondi chose to assert these claims as a separate 21
action in a state forum, and the unusual procedural posture of 22
these cases reflects that decision. However, mandatory 23
abstention affords that choice. By contrast, when PCFL 24

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attempted to sue Bank of America in North Carolina state court, 1
there was an independent basis for federal jurisdiction, 2
unrelated to bankruptcy jurisdiction. Mandatory abstention did 3
not apply in that case, and we summarily affirmed the District 4
Court’s grant of summary judgment to Bank of America. 5
In sum, the four factors weigh in favor of abstention. 6
While some additional time will be expended by remanding these 7
cases, that delay does not outweigh the substantial factors that 8
militate in favor of abstention, namely the complexity of the 9
state law issues, the deference owed to state courts in deciding 10
state law issues where possible, and the minimal effect of the 11
state cases on the federal bankruptcy action and on the 12
administration of the underlying estates. 13
The four factors are meant to guide courts= analyses with 14
respect to the ultimate balance, struck by Congress, between, on 15
the one hand, creating a federal forum for purely state law 16
cases which, due to delay, might impinge upon the federal 17
interest in the administration of a bankruptcy estate, and, on 18
the other, ensuring that purely state law cases remain in state 19
courts when they would not significantly affect that federal 20
interest. See Leco, 144 B.R. at 252 (' 1334 mandatory abstention 21
“comports with principles of federalism”); cf. Stern v. 22
Marshall, 131 S. Ct. 2594, 2619-20 (2011) (“The dissent asserts 23
. . . that, ‘to be effective, a single tribunal must have broad 24

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authority to restructure debtor-creditor relations.’ But the 1
framework Congress adopted in the 1984 Act already contemplates 2
that certain state law matters in bankruptcy cases will be 3
resolved by judges other than those of the bankruptcy courts. 4
Section 1334(c)(2), for example, requires that bankruptcy courts 5
abstain from hearing specified non-core, state law claims that 6
‘can be timely adjudicated in a State forum of appropriate 7
jurisdiction’” (citation and alterations omitted)). The factors 8
are ultimately interrelated: an action might be “timely 9
adjudicated” in state court, despite some substantial delay, 10
where the delay has little or no effect on the bankruptcy estate 11
which creates the federal interest. See Stoe v. Flaherty, 436 12
F.3d 209, 219 (3d Cir. 2006) (“[T]imeliness in this context must 13
be determined with respect to needs of the title 11 case and not 14
solely by reference to the relative alacrity with which the 15
state and federal court can be expected to proceed.”). 16
Conversely, even a relatively brief delay might make state court 17
adjudication untimely where the state action substantially 18
affects the bankruptcy estate, or where the estate=s resolution 19
is contingent upon the state action. Based on the particular 20
facts of these cases, the four-factor test indicates that these 21

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cases can be “timely adjudicated” in Illinois state court. 4
1
Abstention is therefore mandatory. 2
3
II. 4
The District Court also concluded that, even if this case 5
could be “timely adjudicated” in the Illinois state courts, 6
mandatory abstention did not apply because these cases “could . 7
. . have been commenced” in federal court. See In re Parmalat, 8
2011 WL 3874824, at *3 (citing 28 U.S.C. § 9
1334(c)(2)). It was error to consider this argument, because it 10
had been waived, and because it was outside the scope of the 11
mandate set forth in our previous Opinion. 12
It is plain that this argument was waived in the initial 13
appeal, because it had not been raised with the District Court 14
as a basis to avoid mandatory abstention. See, e.g., Singleton 15
v. Wulff, 428 U.S. 106, 120 (1976) (“It is the general rule, of 16
course, that a federal appellate court does not consider an 17
issue not passed upon below.”); see also Stoe, 436 F.3d at 219. 18
4 The District Court did not resolve the issue of which party
bears the burden of showing timely adjudication. Our previous
Opinion, while noting that other courts have held to the
contrary, explained that there were reasons for imposing the
burden on the party opposing abstention. Parmalat, 639 F.3d at
582 (citing Younger v. Harris, 401 U.S. 37, 44 (1971)).
However, because the balance of the four factors weighs in favor
of abstention, we do not need to resolve this issue.

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The argument was not raised on the initial appeal, and we 1
issued a mandate that focused specifically and exclusively on 2
the question of “timely adjudication.” Parmalat, 639 F.3d at 3
582. The Appellees argue that the mandate reasonably can be 4
read as allowing consideration of an alternative basis for 5
denying mandatory abstention. We have explained that, “[t]o 6
determine whether an issue remains open for reconsideration on 7
remand, the trial court should look to both the specific 8
dictates of the remand order as well as the broader ‘spirit of 9
the mandate.’” United States v. Ben Zvi, 242 F.3d 89, 95 (2d 10
Cir. 2001). Here, both the “specific dictates of the mandate” 11
and the “spirit of the mandate” focus entirely on the question 12
of timely adjudication, with no mention of an alternative basis 13
for denying mandatory abstention. It is not reasonable to 14
construe the mandate as allowing alternative, dispositive bases 15
for denying abstention to be raised for the first time on 16
remand, particularly when the cases had been pending for years 17
and had already been the subject of an appeal. The more 18
reasonable reading of the mandate is that it directed the 19
District Court to examine the issue of timely adjudication as a 20
bar to abstention, and that alternative grounds for denying 21
abstention that had not been raised either before the District 22
Court or on the initial appeal were “impliedly decided” to have 23

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been waived in the first instance. Id. The District Court 1
therefore should not have entertained this argument. 2
3
CONCLUSION 4
We have considered all of the arguments of the parties. To 5
the extent not specifically addressed above, they are either 6
moot or without merit. For the reasons explained above, we 7
VACATE the judgments of the District Court and REMAND these 8
cases to the District Court with instructions to transfer them 9
to the Northern District of Illinois so that they can be 10
remanded to Illinois state court. 5 The mandate shall issue 11
forthwith. 12
13
14
15
5 The proper procedure to remand a case subject to mandatory
abstention under 28 U.S.C. § 1334(c)(2) is found in 28 U.S.C. §
1452(b). See Covanta Onondaga Ltd. v. Onondaga Cnty. Res.
Recovery Agency, 318 F.3d 392, 398-99 (2d Cir. 2003). However,
under § 1452(b), the appropriate court to remand a case to state
court is the “court to which [the] claim or cause of action
[was] removed.” 28 U.S.C. § 1452(b). Because the Illinois
state court actions were originally removed to the United States
District Court for the Northern District of Illinois, from which
they were transferred to the District Court for the Southern
District of New York, only the District Court for the Northern
District of Illinois has the authority to remand the actions
back to the Illinois state court. Thus, on remand, the District
Court for the Southern District of New York should transfer the
actions to the District Court for the Northern District of
Illinois, which can then remand the actions to Illinois state
court.

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