United States District Court, D. Arizona
Cheryl Sam, individually and on behalf of the respective bankruptcy estate, et al., Plaintiffs,
Ledbetter Law Firm, PLC, an Arizona professional limited liability company, et al., Defendants.
G. Campbell United States District Judge
Warfield filed a motion for mandatory remand under 28 U.S.C.
§ 1334(c)(2) and for discretionary remand under 28
U.S.C. §§ 1334(c)(1) and 1452(b).Doc. 8. After
Defendants filed their response (Doc. 20), Plaintiff dropped
his request for mandatory remand and argued in favor of
discretionary remand under 28 U.S.C. § 1452(b) (Doc.
23). The Court discussed remand issues with the parties at
the case management conference on October 11, 2017. The Court
set a litigation schedule at the conference and took the
motion to remand under advisement. After considering the
motion, the discussion at the conference, and other documents
in this case, the Court concludes that remand is appropriate.
The Nature of this Case.
case asserts four claims under Arizona state law: breach of
contract against State Farm, bad faith against State Farm,
malpractice against Ledbetter, and aiding and abetting bad
faith against Ledbetter. Doc. 1. This case includes several
challenging questions of state law: whether a cause of action
for breach of an insuring clause can accrue before entry of a
judgment against the insured (Doc. 7 at 4); whether
Plaintiff's bad faith claim is barred by the final
judgment rule (id. at 5); whether the state law
claims accrued before the insureds filed for bankruptcy
(id. at 7; Doc. 18 at 5-7); and whether Plaintiff
has pled a viable claim for aiding and abetting bad faith
(Doc. 17 at 3-4). Because these issues are raised in
Defendants' motions to dismiss, they will need to be
addressed early in the litigation.
also true that this case appears to contain a challenging
issue related to bankruptcy law: if Plaintiff can assert the
claims in the complaint, what is their value? Is it zero
because the insureds have received a discharge in bankruptcy,
or is it the value of the exposure to which the insureds were
subjected by Defendants' alleged wrongdoing? If the case
remains in this Court, the parties seem to suggest that this
issue should be referred to bankruptcy court for decision.
For several reasons, the Court is not inclined to make such a
referral: the case came from state court, not bankruptcy
court; this issue appears to be novel, and even if the Court
could refer it to bankruptcy court, the parties likely would
seek to re-litigate it in this Court; the issue is closely
tied to the state law claims in this case, when the claims
accrued, and how their damages are to be measured - issues
better resolved by Arizona state courts; and, for case
management purposes, the Court would not be inclined to split
this case and send a portion of this case to bankruptcy court
while retaining related state law issues.
removed this case under 28 U.S.C. § 1334. Doc. 1.
Congress has provided that “[t]he court to which such
claim or cause of action is removed may remand such claim or
cause of action on any equitable ground.” 28 U.S.C.
§ 1452(b). The Ninth Circuit Bankruptcy Appellate Panel
notes that “any equitable ground” is unusually
broad and “subsumes and reaches beyond all of the
reasons for remand under non-bankruptcy removal
statutes.” In re McCarthy, 230 B.R. 414, 417
(9th Cir. B.A.P. 1999).
in this district consider the following factors in analyzing
equitable remand under § 1452(b): judicial economy, the
presence of substantial questions of state law, comity, and
the possibility of inconsistent factual findings. In re
Davis Chevrolet, Inc., 282 B.R. 674, 684 (Bankr. D.
Ariz. 2002) (citing In re Med. Lab. Mgmt.
Consultants, 931 F.Supp. 1487, 1493 (D. Ariz. 1996)).
Applying these factors, the Court concludes that remand is
warranted. This case contains substantial questions of state
law, and comity would be furthered by remand because at least
one of those questions appears to be a novel issue under
Arizona law - whether a cause of action for breach of an
insuring clause can accrue before entry of a judgment against
the insured. See State Farm's Motion to Dismiss,
Doc. 7 at 4 (citing Minnesota law). Such a question is best
addressed by state trial and appellate courts rather than
this Court. In addition, because both this Court and the
state court would need to resolve the bankruptcy-related
issue identified above, judicial economy would not be
furthered by keeping the case here. The final factor -
possible inconsistent findings of fact - is not relevant
because there is only one proceeding that raises these
parties address several additional factors that may be
considered in the remand analysis:
(1) the effect or lack thereof on the efficient
administration of the estate if the Court recommends [remand
or] abstention; (2) the extent to which state law issues
predominate over bankruptcy issues; (3) difficult or
unsettled nature of applicable law; (4) presence of related
proceedings commenced in state court or other non-bankruptcy
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 on
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; (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.
In re Cedar Funding, 419 B.R. 807, 820 n.18 (9th
Cir. B.A.P. 2009).
of these factors favor remand: important state law issues
predominate over bankruptcy issues (factor 2); at least one
of the state law issues appears to be unsettled (factor 3);
there is no jurisdictional basis in this Court other than
§ 1334 (factor 5); it is not feasible to sever state law
claims from the bankruptcy issues (factor 8); this case
includes several non-debtor parties (factor 12); and comity
(factor 13), for reasons mentioned above. Other factors in
the list do not weigh in favor of retaining jurisdiction.
Although Defendants argue that a number of issues must be
resolved by the bankruptcy court presiding over the
insureds' bankruptcy (administration of the estate's
assets, determination of what creditors receive what amounts,
approval of any contingent fee received by Plaintiffs
counsel), this is true whether the case is pending before
this Court or the state court.
all of the relevant factors, the Court concludes that remand
IS ORDERED that Plaintiffs motion to remand (Doc. 8)
is granted. The Clerk shall remand this case