458 B.R. 725
Bankr. D. Md.2011Background
- Masterbuilt filed Chapter 11 in the Eastern District of Virginia; two Maryland lawsuits seek liens and damages by subcontractors against Masterbuilt and related parties.
- Martz Painting Contractors asserts four Maryland-law claims, including a mechanic's lien and damages against L'Academie de Cuisine and others for unpaid labor/materials on the Bethesda project.
- AirOn, Inc. seeks a Maryland mechanic's lien against a project building for unpaid services; defendants remove to federal court and move to transfer to Virginia bankruptcy court.
- Bankruptcy court finds it has related-to jurisdiction but not arising under/in; the actions would not be resolved by the bankruptcy proceeding but could affect the estate.
- Court considers mandatory abstention and ultimately remands both actions to Maryland Circuit Court under 28 U.S.C. § 1452, denying transfer as moot.
- Court reasons comity and Maryland state-law nature of the claims, and notes related-to but remote connection to Masterbuilt’s bankruptcy.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Subject matter jurisdiction | Martz and AirOn argue no bankruptcy-subject-matter jurisdiction. | Defendants contend related-to jurisdiction exists and transfer is proper. | Court holds related-to jurisdiction exists but remands; no arising-under/in jurisdiction. |
| Abstention | Mandatory abstention should apply to state-law disputes. | Abstention not mandatory; transfer sought to Virginia. | Court declines mandatory abstention and remands to state court. |
| Remand vs transfer | Proceedings should remain in state court; remand warranted. | Venue should be Virginia bankruptcy court for centralized resolution. | Remand to state court; transfer denied as moot. |
| Relation to bankruptcy estate | Actions are related to estate; should be heard in bankruptcy court. | Impact on estate is limited and does not justify removal. | Actions are related-to but remote; remand appropriate. |
| Comity and jurisdictional balance | State court already handling cases; comity favors remand. | Virginia court expertise preferable for contract/venue terms. | Comity favors remand; state court better suited for Maryland law issues. |
Key Cases Cited
- Global Express Money Orders, Inc. v. Farmers & Merchants Bank (In re Colleen, Inc.), 406 B.R. 674 (Bankr. D. Md. 2009) (defines 'arising under' and related concepts for § 1334)
- Bergstrom v. Dalkon Shield Claimants Trust (In re A.H. Robins Co.), 86 F.3d 364 (4th Cir. 1996) (distinguishes 'arising in' from 'arising under')
- Owens-Ill., Inc. v. Rapid Am. Corp. (In re Celotex Corp.), 124 F.3d 619 (4th Cir. 1997) ("related to" standard for bankruptcy jurisdiction)
- Pacor Inc. v. Higgins, 743 F.2d 984 (3d Cir. 1984) (establishes the related-to standard for bankruptcy jurisdiction)
- Valley Historic L.P. v. Bank of New York, 486 F.3d 831 (4th Cir. 2007) (reaffirmed standards for bankruptcy jurisdiction and remand)
- Merry-Go-Round Enterprises, Inc., 222 B.R. 254 (D. Md. 1998) (factors for remand under § 1452)