563 B.R. 191
E.D. La.2016Background
- Margaret and Milhado Shaffer own Louisiana real property subject to a 1944 oil-and-gas lease originally assigned to Union Oil Company of California (UNOCAL); various Chevron entities and Forest/Sabine later operated portions of the lease.
- Shaffers sued UNOCAL, Chevron entities, Sabine, and others in Louisiana state court (Aug. 2012) for property damage from oil-and-gas operations; UNOCAL later filed a contractual indemnity cross-claim against Sabine.
- After the Shaffers dismissed claims against Sabine, Sabine filed Chapter 11 in the Southern District of New York (July 2015); UNOCAL and Chevrons removed the Louisiana action to federal court based on Sabine’s bankruptcy.
- The Bankruptcy Court (E.D. La.) ruled it lacked § 1334 “related to” jurisdiction over the Shaffers’ main demand, remanded that portion to state court, but retained UNOCAL’s indemnity cross-claim against Sabine and stayed that claim.
- Appellants (UNOCAL/Chevron) appealed the remand and the Bankruptcy Court’s denial of a motion to transfer UNOCAL’s cross-claim to the SDNY; the district court affirmed in all respects.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Bankruptcy Court should decide venue transfer before subject-matter jurisdiction | Shaffers argued jurisdiction should be decided first; case was state-centered and trial-ready in Louisiana | Appellants argued transfer to SDNY should be considered first per Marquette and for judicial economy | Court: jurisdiction may be considered first here given facts; affirmed Bankruptcy Court’s approach |
| Whether the Bankruptcy Court had § 1334 “related to” jurisdiction over Shaffers’ main demand | Shaffers: main demand is purely state-law and not related to Sabine’s bankruptcy | Defendants: main demand could trigger UNOCAL’s indemnity rights against Sabine and thus affect the estate | Held: main demand not “related to” Sabine’s bankruptcy; remand to state court affirmed |
| Whether equitable remand under 28 U.S.C. § 1452(b) or permissive abstention was proper even if jurisdiction existed | Shaffers: equitable factors favor remand (state-law predominance, jury demand, local interest, forum shopping) | Defendants: asserted estate’s interest and coordination with bankruptcy justify retention/transfer | Held: even if jurisdiction existed, Bankruptcy Court properly exercised discretion to remand under §1452(b) |
| Whether UNOCAL’s cross-claim against Sabine should have been severed and transferred to SDNY | Shaffers: Sabine is not indispensable; severance and remand of main demand acceptable | Defendants: cross-claim is related to bankruptcy and should be transferred to SDNY (home-court presumption) | Held: severance was proper; cross-claim is non-core "related to" matter and denial of transfer was not an abuse of discretion; SDNY transfer not required |
Key Cases Cited
- MacArthur Co. v. Johns-Manville Corp., 837 F.2d 89 (2d Cir. 1988) ("related to" jurisdiction over suits against debtor’s insurer to protect estate distribution; limited jurisdiction over third-party claims)
- Pacor, Inc. v. Higgins, 743 F.2d 984 (3d Cir. 1984) (limitation on "related to" jurisdiction where primary action between non-debtor parties does not affect debtor estate)
- Northern Pipeline Const. Co. v. Marathon Pipe Line Co., 458 U.S. 50 (U.S. 1982) (constitutional limits on bankruptcy adjudicatory power informing core/non-core analysis)
- Celotex Corp. v. Edwards, 514 U.S. 300 (U.S. 1995) (bankruptcy jurisdiction principles and limits)
- Stern v. Marshall, 564 U.S. 462 (U.S. 2011) (distinguishing core bankruptcy matters and Article III concerns)
- Matter of Wood, 825 F.2d 90 (5th Cir. 1987) (definition and test for core vs. non-core proceedings in bankruptcy jurisdiction)