Grant, Konvalinka & Harrison, P.C. v. Still (In re McKenzie)
471 B.R. 884
Bankr. E.D. Tenn.2012Background
- GKH sued in state court alleging malicious prosecution and abuse of process related to the Malpractice Lawsuit.
- Trustee removed the Hamilton County M/P Lawsuit to federal court; GKH seeks remand and/or abstention and consolidation with a parallel adversary.
- Bankruptcy court previously ruled the Trustee’s actions in pursuing the Malpractice Lawsuit were within his duties and that the Banks Defendants acted as Trustee’s counsel.
- GKH filed related actions against the Debtor and Banks Defendants in this court; contempt and related motions were involved.
- Court held mandatory abstention as to the Debtor and permissive abstention as to the Banks Defendants; Trustee and Banks Defendants’ claims remained core or related as to estate administration.
- Court ordered consolidation of Hamilton County M/P Lawsuit with the Bankruptcy M/P Lawsuit and remanded the consolidated matter to state court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the court has jurisdiction over the Hamilton County Defendants | GKH contends the action is core/related to estate; removal proper. | Trustee/Banks Defendants argue core/immune; state court issues belong in state court. | Court has non-core but related jurisdiction; Trustee/Banks defenses are core in part; Debtor claims are non-core but related. |
| Whether mandatory abstention applies to the Debtor | Debtor’s involvement should be adjudicated in state court; avoid federal overlap. | Debtor’s actions arise in a core context; abstention inappropriate. | Mandatory abstention applies to the Debtor; claims against Debtor remanded to state court. |
| Whether permissive abstention applies to Banks Defendants | State-law claims against Banks Defendants should be heard in state court to avoid federal proceedings. | Banks Defendants’ dual roles create intertwined issues; federal resolution preferred for consistency. | Court grants permissive abstention as to Banks Defendants; retain some core/related aspects but abstain from remaining proceedings. |
| Whether consolidation is appropriate | Two identical actions should be consolidated to avoid duplicative efforts. | Remand/abstention governs; consolidation may streamline proceedings. | Hamilton County M/P Lawsuit consolidated with Bankruptcy M/P Lawsuit. |
Key Cases Cited
- In re Dow Corning Corp., 86 F.3d 482 (6th Cir. 1996) (defines 'related to' jurisdiction test)
- Sanders Confectionery Products, Inc. v. Heller Financial, Inc., 973 F.2d 474 (6th Cir. 1992) (core vs non-core; related-to standard)
- In re Best Reception Sys., Inc., 220 B.R. 932 (Bankr. E.D. Tenn. 1998) (each claim must satisfy §157(b); core vs non-core analysis)
- In re Heinsohn, 231 B.R. 55 (E.D. Tenn. 1999) (trustee actions as core proceedings; immunity analysis for counsel)
- Delphi Automotive Sys., LLC v. Segway, Inc., 519 F. Supp. 2d 662 (E.D. Mich. 2007) (state law claims can be indirectly related; timeliness factors)
- Family Medical Associates, LLC v. Alongi, 272 B.R. 156 (Bankr. D. Md. 2001) (state-law action not related to estate; remand considerations)