Federal Court Remands Action Based on Equity Even Though Removal Was Proper on Bankruptcy Issue

In this federal court case, the plaintiffs commenced an action against various defendants for the alleged asbestos exposure and development of mesothelioma for decedent, George Fenicle.  Following decedent’s death, plaintiffs amended their complaint to name Boise Cascade Company and OfficeMax (“Defendants”). The defendants subsequently removed the matter to federal court under 28 U.S.C. 1441, for putative federal question jurisdiction, and 28 U.S.C. 1452, as a bankruptcy-related action. The plaintiffs moved to remand, arguing removal was improper since the defendants did not seek approval from all defendants prior to the removal, the matter was not a bankruptcy matter under 28 U.S.C. 1452 and for equitable grounds pursuant to 1452(b).

The court granted the remand. On the issue of a federal question, the court applied “the Grable factors: that a federal question is (1) necessarily raised; (2) actually disputed; (3) a substantial federal issue; and (4) capable of resolution without disrupting the Congressionally.” The court found that all four factors were missing and that the removal under 28 U.S.C 1441 was improper and remand was required “unless some independent basis for federal jurisdiction exists.”

The court then turned to the bankruptcy and consent by all the defendants’ issues. The court did agree with the defendants that the action was bankruptcy related under 28 U.S.C. 1452, and held: “the rule of unanimity does not apply to cases removed under §1452. As such, Defendants’ removal was not procedurally flawed in this respect.”

However, the court remanded the case based on equity. In making its decision, the court weighed the following factors: 1) Effect of the action on the administration of the bankruptcy estate; 2) Extent to which issues of state law predominate; 3) Difficulty of applicable state law; 4) Comity; 5) Relatedness of the action to the bankruptcy case; 6) Any jury trial right; 7) Prejudice to the plaintiffs from removal; 8) Jurisdictional basis in federal court other than §1334; and 9) Extent of non-debtor party presence in the bankruptcy. In holding for the remand, the court stated “the factors which speak to the notion of federalism and respect for state sovereignty (numbers 2, 3, 4, 7, and 8) weigh in favor of remand, while the factors relating to the administration of the bankruptcy estate (numbers 1, 5, and 9) and to jury trial rights (number 6) weigh in favor of removal. The Court therefore finds that the factors favoring remand outweigh the factors favoring removal in both number and substance. Because even a single ‘factor may provide a sufficient basis for equitable remand,’ the Court therefore determines, in its discretion, that remand on equitable grounds is appropriate in this matter.” (internal citation omitted).

Read the full decision here.