Laddusire v. Auto-Owners Insurance (In re Laddusire)
541 B.R. 697
Bankr. W.D. Wis.2015Background
- Debtor Paula Laddusire sued defendants for alleged failure to remediate mold and related personal injury/property damage; suit filed in 2011 and later transferred to Oneida County.
- Debtor filed Chapter 13 bankruptcy on September 13, 2015, and removed the state-court action to bankruptcy court on October 14, 2015, one day before a state-court dismissal hearing for alleged discovery abuses.
- Notice of Removal invoked bankruptcy jurisdiction (28 U.S.C. §§ 157, 1334, 1452) and cited various federal statutes; removal asserted the claim could become property of the estate.
- Defendants moved to remand under 28 U.S.C. § 1452(b); the bankruptcy court evaluated jurisdiction, mandatory and permissive abstention, and whether remand was equitable.
- Court found the state-law tort/insurance claims are non-core, that federal jurisdiction did not independently exist on the face of the complaint, and that the § 1334(c)(2) mandatory-abstention factors were satisfied.
- Court also found permissive abstention appropriate and remanded the action to Oneida County Circuit Court under 28 U.S.C. § 1452(b).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether federal jurisdiction exists over the removed state action | Removal proper because claim could become property of the bankruptcy estate and Debtor invoked federal statutes | Complaint asserts only state-law tort/insurance claims; no federal question on face and no complete diversity | No federal jurisdiction on complaint face; removal relied solely on bankruptcy filing and § 1334 relation jurisdiction was insufficient |
| Whether the proceeding is core or non-core | Laddusire: recovery is for administration of estate, so proceeding is core under § 157(b) | Defendants: claims predate bankruptcy and arise under state law, so non-core | Non-core: claims could and did exist outside bankruptcy and are state-law causes of action |
| Whether mandatory abstention under 28 U.S.C. § 1334(c)(2) applies | Debtor: motion to remand untimely or state court failed to accommodate disability, so cannot be timely adjudicated in state court; also invoked some federal statutes | Defendants: motion timely; case is state-law, non-core, could not have been brought originally in federal court; state forum appropriate and capable | Mandatory abstention satisfied: motion timely; state-law, non-core; no original federal jurisdiction; state court can timely adjudicate |
| Whether permissive abstention and equitable remand under § 1334(c)(1)/§ 1452(b) are appropriate | Debtor: removing to federal court justified to protect estate and secure accommodations | Defendants: comity, judicial economy, state-court progress, jury right, presence of non-debtors, and potential forum-shopping favor remand | Permissive abstention and equitable remand granted based on comity, predominance of state law, docket efficiency, jury-trial practicality, and potential prejudice/delay |
Key Cases Cited
- Stoe v. Flaherty, 436 F.3d 209 (3d Cir. 2006) (elements of mandatory abstention under § 1334(c)(2))
- Taub v. Taub (In re Taub), 413 B.R. 69 (Bankr. E.D.N.Y. 2009) (application of abstention factors)
- United States Brass Corp. v. Nat'l Union Fire Ins. Co. (In re United States Brass Corp.), 110 F.3d 1261 (7th Cir. 1997) (state-law questions should generally be decided by state courts when related to bankruptcy)
- Barnett v. Stern, 909 F.2d 973 (7th Cir. 1990) (definition of core vs non-core proceedings)
- Wood v. Wood (In re Wood), 825 F.2d 90 (5th Cir. 1987) (core proceeding test)
- Caterpillar Inc. v. Williams, 482 U.S. 386 (1987) (federal-question jurisdiction determined by complaint's well-pleaded allegations)
- Things Remembered, Inc. v. Petrarca, 516 U.S. 124 (1995) (equitable remand and scope of appropriate bankruptcy-related removals)
- Chicago, Milwaukee, St. Paul & Pac. R.R. Co. v. Schendel, 6 F.3d 1184 (7th Cir. 1993) (flexible application of abstention considerations)
- Official Unsecured Creditors’ Comm. of Hearthside Baking Co. v. Cohen (In re Hearthside Baking Co., Inc.), 391 B.R. 807 (Bankr. N.D. Ill. 2008) (timeliness of state-court adjudication not defeated by speed arguments)
- Cargill, Inc. v. Man Fin., Inc. (In re Refco, Inc.), 354 B.R. 515 (8th Cir. BAP 2006) (liberal approach to remands where removal is based solely on bankruptcy filing)