671 B.R. 280
Bankr. D.N.M.2025Background
- Bright Green Corporation (Debtor) filed a state court action against John Fikany in 2020, seeking a declaratory judgment regarding Fikany’s entitlement to company shares and employment compensation.
- Fikany counterclaimed, alleging wrongful termination, unpaid wages, breach of contract, and other state law theories, also bringing claims against Lynn and John Stockwell (the "Stockwells").
- The state court held extensive proceedings over four years, including discovery, motions, and a five-day bench trial, after which it found Fikany was entitled to 5,000,000 shares and set a jury trial for damages.
- Just before the jury trial, Bright Green filed for bankruptcy, automatically staying state proceedings; Fikany moved to lift the stay and later filed a proof of claim in the bankruptcy case parallel to his state claims.
- Bright Green removed the state court action to bankruptcy court; Fikany moved to abstain and remand the matter back to state court.
- The bankruptcy court considered whether it was required or should, as a matter of discretion, abstain from exercising jurisdiction and remand to state court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Mandatory Abstention (28 U.S.C. § 1334(c)(2)) | Claims are core due to proof of claim; abstention not required | Claims are non-core, purely based on state law; abstention mandatory | Not required; claims against Debtor are core due to proof of claim filed |
| Permissive Abstention & Remand (28 U.S.C. § 1334(c)(1), § 1452(b)) | State law issues predominate, and judicial economy favors state court | Case should remain in bankruptcy for consistency and administration | Court abstains and remands based on comity, judicial economy, and state law predominance |
| Severance of Claims | State/federal issues inseparable, so all claims should proceed together | Claims could be severed for efficiency | Severance inappropriate; claims are intertwined and best adjudicated together in state court |
| Jury Trial Rights | Entitled to jury trial on damages in state court | Filing proof of claim waives right to jury in bankruptcy court | Bankruptcy court constrained; remand to state court to protect jury trial rights and judicial economy |
Key Cases Cited
- Langenkamp v. Culp, 498 U.S. 42 (1990) (filing a proof of claim converts legal to equitable claim, affecting right to jury trial)
- Katchen v. Landy, 382 U.S. 323 (1966) (bankruptcy court has equitable jurisdiction over claims process, impacting jury right)
- Gardner v. United States (In re Gardner), 913 F.2d 1515 (10th Cir. 1990) (core versus non-core proceeding analysis for bankruptcy jurisdiction)