560 B.R. 111
Bankr. D. Del.2016Background
- NJ Environmental Litigation: State of New Jersey and Spill Fund sued multiple defendants (including Maxus debtors, Tierra, YPF, Repsol, and OCC) over Passaic River contamination tied to the Lister Site; long-running state litigation (≈11 years) with numerous settlements resolving State claims.
- OCC (a cross-claimant and former purchaser of DSCC) brought alter-ego and indemnity cross-claims against Repsol and related entities; Repsol asserted a counterclaim under the New Jersey Spill Act to recover $65 million paid in a prior settlement.
- After multiple rounds of motions and settlements with the State (including the RYM Settlement and OCC Consent Judgment), only OCC’s alter-ego-based cross-claims against Repsol (the “OCC Claims”) and Repsol’s counterclaim (the “Repsol Counter-Claim”) remained.
- Maxus and affiliates (the Debtors) filed chapter 11 on June 17, 2016; OCC removed the remaining NJ litigation to the bankruptcy court and sought transfer to the Delaware bankruptcy court; Repsol moved to remand the OCC Claims and its counterclaim back to New Jersey state court.
- Central legal disputes: (1) whether the OCC Claims are property of the bankruptcy estate and thus subject to estate standing; (2) whether the bankruptcy court must or should abstain and remand under 28 U.S.C. §§ 1334(c)(1), (c)(2) and 1452(b); and (3) whether any non-1334 federal jurisdiction (e.g., diversity) exists.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are the OCC Claims property of the bankruptcy estate? | OCC (and Debtors) — yes; claims existed at petition and Debtors could have asserted them, so they are estate property. | Repsol — OCC (a creditor) is the party asserting the Claims, so remand is appropriate regardless of estate ownership. | Held: OCC Claims are property of the estate; Debtors are the proper owners, but that fact alone does not preclude remand. |
| Mandatory abstention under 28 U.S.C. § 1334(c)(2) | Repsol — §1334(c)(2) applies because Claims are state-law, non-core, pending in state court and can be timely adjudicated there. | OCC — argues federal jurisdiction exists (estate property, or diversity) so abstention/remand improper. | Held: All six §1334(c)(2) elements satisfied; mandatory abstention required and remand ordered. |
| Diversity or other independent federal jurisdiction outside §1334 | OCC — contends complete diversity exists (measuring parties currently before the court); thus removal could be supported by §1332. | Repsol — there was no complete diversity at filing/removal because Debtors/OCC/other related parties share citizenships (e.g., Texas/Delaware). | Held: No complete diversity; no independent basis for federal jurisdiction other than §1334. |
| Permissive abstention / equitable remand under §1334(c)(1) and §1452(b) | Repsol — discretionary factors favor abstention and remand (state-law predominance, docket burden, related state proceedings, forum shopping risk). | OCC — retaining jurisdiction aids efficient estate administration and avoids fragmentation of alter-ego issues. | Held: Permissive abstention/equitable remand also supported — multiple key factors (effect on estate administration, state-law predominance, non-core status, docket burden, forum shopping risk, presence of nondebtors) favor remand. |
Key Cases Cited
- In re Emoral, 740 F.3d 875 (3d Cir.) (definition of estate property and causes of action as estate assets)
- In re Exide Techs., 544 F.3d 196 (3d Cir.) (core v. non-core and related-to jurisdiction analysis)
- Pacor v. Higgins, 743 F.2d 984 (3d Cir.) (test for related-to bankruptcy jurisdiction)
- Halper v. Halper, 164 F.3d 830 (3d Cir.) (factors and guidance on abstention/remand and economic impact on estate)
- Stern v. Marshall, 564 U.S. 462 (U.S.) (constitutional limits on bankruptcy court adjudication of certain claims)
- Wellness Int’l Network, Ltd. v. Sharif, 135 S. Ct. 1932 (U.S.) (further guidance on bankruptcy court constitutional authority)