Tomassi v. MDS, Inc.

Filing 16

MEMORANDUM OPINION & ORDER by Senior Judge Thomas B. Russell on 4/16/2013 referring case to bankruptcy court for further proceedings.cc:counsel, US Bankruptcy Court (KJA)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
PADUCAH DIVISION
CASE NO. 5:12-CV-00201-TBR
RAY A. TOMASSI

PLAINTIFF

v.
MDS, INC.

DEFENDANT

This matter is before the Court on the Plaintiff’s motion to remand or, alternatively,
abstain. (DN 6). Defendant has responded (DN 12), and Plaintiff has replied. (DN 13.) Also
before the Court is Defendant’s motion to refer this action to the United States Bankruptcy Court
for the Western District of Kentucky, Paducah Division. (DN 7.) Plaintiff has responded. (DN
11.) These matters are now ripe for adjudication. For the following reasons, Defendant’s motion
for reference to the bankruptcy court is GRANTED, and Plaintiff’s motion to remand is
REFERRED to the bankruptcy court for further proceedings.
BACKGROUND
Plaintiff, Ray A. Tomassi (“Plaintiff”), alleges that on or about April 30, 2010, he injured
his lumbar spine in a work-related injury while working as a service technician for Defendant,
MDS, Inc. d/b/a Mike Smith Kia (“Defendant” or “MDS”). Sometime thereafter, Plaintiff filed a
claim for worker’s compensation benefits. On October 1, 2010, MDS terminated his
employment. Then, on July 7, 2011, Plaintiff and his wife, Angela L. Tomassi, filed a Voluntary
Petition in Bankruptcy in the United States Bankruptcy Court for the Western District of
Kentucky, Paducah Division, styled In re Tomassi, Case No. 11-BK-50656. (See Notice of
Removal, Ex. 1, DN 1-1.) Among the assets of his estate, Plaintiff listed his worker’s

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compensation administrative claim against MDS, but he did not list any claim or potential claim
against MDS arising from the termination of his employment. The Tomassis’ plan, a 70% plan,
was confirmed on September 2, 2011.
On September 28, 2011, Plaintiff then filed a Complaint in the McCracken Circuit Court
alleging that MDS wrongfully terminated him “in retaliation for filing a lawful worker’s
compensation claim, in violation of KRS 342.197.” Plaintiff seeks compensatory damages,
including emotional distress damages, attorney’s fees, costs, and expenses under Kentucky law.
After beginning litigation in the McCracken Circuit Court, MDS thereafter removed the action to
this Court on December 18, 2012, pursuant to 28 U.S.C. §§ 1334(b) and 1452(a). Following
removal to federal court, on January 4, 2013, Plaintiff amended his bankruptcy petition, listing
the “legal claim against MDS . . . for damages due to wrongful employment termination” on the
appropriate schedules. Plaintiff thereafter filed the instant motion to remand on January 30, 2013,
arguing that this Court lacks jurisdiction over his claim. In the event the Court finds that
bankruptcy jurisdiction exists, Plaintiff alternatively requests the Court abstain from exercising
such jurisdiction. Defendant opposes remand and moves the Court to refer this matter to the
bankruptcy court.
DISCUSSION
I.
MDS contends removal was proper because the Court has bankruptcy jurisdiction
pursuant to 28 U.S.C. § 1334(b). In both his motion to remand and his reply in support of
remand, Plaintiff seems to improperly conflate this Court’s subject matter jurisdiction with
mandatory abstention under 28 U.S.C. § 1334(c)(2). (See, e.g., Pl.’s Mot. for Remand, 1, DN 6
(citing Section 1334(c)(2) in support of contention that “[t]his Court no longer has even arguably
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a basis to exercise jurisdiction over this case”).) However, “[m]andatory abstention under section
1334(c)(2) is not jurisdictional” and, thus, the Court first must address whether it has jurisdiction
over this matter before addressing whether abstention is proper. Robinson v. Michigan Consol.
Gas Co., 918 F.2d 579, 584 (6th Cir. 1990); see also McKinstry v. Sergent, 442 B.R. 567, 570
(E.D. Ky. 2011) (noting the same).
Under Section 1334(b), “the district courts shall have original but not exclusive
jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under
title 11.” 28 U.S.C. § 1334(b). Since these categories operate conjunctively to define the scope of
jurisdiction, the Sixth Circuit has stated that “it is necessary only to determine whether a matter
is at least ‘related to’ the bankruptcy.” Mich. Emp’t Sec. Comm’n v. Wolverine Radio Co. (In re
Wolverine Radio Co.), 930 F.2d 1132, 1141 (6th Cir. 1991). The Sixth Circuit has adopted the
expansive definition of a “related to” proceeding first articulated by the Third Circuit in Pacor,
Inc. v. Higgins (In re Pacor). See id. at 1142 (adopting In re Pacor, 743 F.2d 984 (3d Cir. 1984),
overruled on other grounds by Things Remembered, Inc. v. Petrarca, 516 U.S. 124, 124-25
(1995)). Under this definition, a proceeding is “related to” a bankruptcy action if “the outcome of
that proceeding could conceivably have any effect on the estate being administered in
bankruptcy.” In re Pacor, 743 F.2d at 994 (emphasis omitted). “An action is related to
bankruptcy if the outcome could alter the debtor's rights, liabilities, options, or freedom of action
(either positively or negatively) and which in any way impacts upon the handling and
administration of the bankrupt estate.” Robinson, 918 F.2d 583 (quoting In re Pacor, 743 F.2d at
994). This is a “broad” basis for jurisdiction that “empowers courts to deal efficiently and
effectively with the entire universe of matters connected with bankruptcy estates.” McKinstry,
442 B.R. at 573 (quoting Kelley v. Nodine (In re Salem Mortg. Co.), 783 F.2d 626, 633-34 (6th

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Cir. 1986) and Boston Reg’l Med. Ctr., Inc. v. Reynolds (In re Boston Reg’l Med. Ctr., Inc.), 410
F.3d 100, 105 (1st Cir. 2005)) (internal quotations omitted).
The Court finds the instant case is “related to” Plaintiff’s bankruptcy because, first, it
could conceivably impact the handling and administration of the bankrupt estate. As Plaintiff
admits, in the event the action against MDS is successful, “Ray and Angela Tomassi’s creditors
may receive a larger distribution.” (Pl’s. Reply, 2, DN 13.) There is a sufficient conceivable
effect to confer the Court with “related to” jurisdiction.
Plaintiff cites to the Third Circuit’s opinion Binder v. Price Waterhouse & Co., LLP (In
re Resorts Int’l, Inc.), 372 F.3d 154 (3d Cir. 2004), which reflects some courts’ view that
“related-to” jurisdiction narrows after plan confirmation. See Equipment Finders, Inc. of Tenn. v.
Fireman’s Fund Ins. Co. (In re Equipment Finders, Inc. of Tenn.), 473 B.R. 720, 732 (Bankr.
M.D. Tenn. 2012) (collecting cases). Because the estate essentially ceases to exist postconfirmation, these courts reason that it is “technically impossible for post-confirmation claims
to meet the ordinary test for pre-confirmation-related-to jurisdiction—whether the claims could
have any conceivable effect on the estate.” McKinstry, 442 B.R. at 574. Under these courts’
formulation, post-confirmation jurisdiction exists only when there is a “close nexus” between the
plaintiff’s claim and bankruptcy—in other words, matters “that affect the interpretation,
implementation, consummation, execution, or administration of the confirmed plan.” In re
Resorts Int’l, Inc., 372 F.3d at 167.
Even applying this narrower test, the Court would still have jurisdiction. Plaintiff was
terminated from his employment with MDS on October 1, 2010. Plaintiff and his wife filed for
bankruptcy more than nine months later, on July 7, 2011. Thus, any potential claim Plaintiff had
arising from his termination would properly be included in the bankruptcy estate, unless exempt.

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See 11 U.S.C. § 541(a)(1) (bankruptcy estate is comprised of “all legal or equitable interests of
the debtor in property as of the commencement of the case”) (emphasis added). Plaintiff’s claims
in this suit are “not merely ancillary matters that arose after confirmation of the bankruptcy
plan”; rather, his claim concerns Defendant’s pre-petition conduct. See McKinstry, 442 B.R. at
573. Finally, although Plaintiff contends that his claim in the instant action is exempt from
inclusion in the bankruptcy estate, the Bankruptcy Trustee has filed a motion contesting
Plaintiff’s claimed exemption. See Ch. 13 Trustee’s Limited Objection to Debtor’s Claimed
Exemption at 1, In re Tomassi, 11-BK-50656, DN 49. Should this motion be granted, the Trustee
has requested that “[a]ny proceeds [from the instant suit] above $9,150 should be turned over to
the Chapter 13 Trustee in an amount that will allow this case to be paid off at 100%.” Id. Thus,
the implementation and execution of the bankruptcy plan is directly at issue, and this matter is at
least “related to” a case arising under Title 11.
II.
Having determined it has jurisdiction over this case, the Court concludes that Plaintiff’s
abstention argument is best decided by the bankruptcy court. Specifically, Plaintiff argues that
under 28 U.S.C. § 1334(c)(2) the Court has no choice but to mandatorily abstain from hearing
this case. Section 1334(c)(2) states that:
Upon timely motion of a party in a proceeding based upon a State law claim or
State law cause of action, related to a case under title 11 but not arising under title
11 or arising in a case under title 11, with respect to which an action could not
have been commenced in a court of the United States absent jurisdiction under
this section, the district court shall abstain from hearing such proceeding if an
action is commenced, and can be timely adjudicated, in a State forum of
appropriate jurisdiction.
For mandatory abstention to apply under § 1334, then, a proceeding must: (1) be based on a state
law claim or cause of action; (2) lack federal jurisdiction absent the bankruptcy; (3) be
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commenced in a state forum of appropriate jurisdiction; (4) be capable of timely adjudication;
and (5) be a non-core proceeding. Johnson v. Fifth Third Bank, Inc., 476 B.R. 493, 500 (W.D.
Ky. 2012) (McKinley, C.J.) (citing Lindsey v. O’Brien, Tanski, Tanzer, & Young Health Care
Providers of Conn. (In re Dow Corning Corp.), 86 F.3d 482, 497 (6th Cir. 1996)).
To decide whether it must abstain, the Court must determine whether this action involves
“core” bankruptcy claims: “claims over which the bankruptcy court is at the height of its power.”
McKinstry, 442 B.R. at 570 (referring motion to remand or abstain to bankruptcy court). See also
Fed. R. Bankr. P. 5011, cmt. (b) (“The bankruptcy judge ordinarily will be in the best position to
evaluate the grounds asserted for abstention”); Chrysler LLC v. Getrag Transmission Mfg., LLC,
2009 WL 799038, at *2 (E.D. Mich. Mar. 23, 2009) (holding that bankruptcy court has authority
to determine questions of abstention or remand to state courts); Navon v. Mariculture Prods.
Ltd., 395 B.R. 818, 822-23 (D. Conn. 2008) (“[I]t should be within the bankruptcy court’s
province to rule on whether abstention is appropriate”). This factor, combined with Local Rule
83.12’s authorization to refer the instant matter to the bankruptcy court, leaves the Court inclined
to refer Plaintiff’s motion to remand or abstain for the bankruptcy court. See L.R. 83.12(a)(4)
(“All actions for removal of claims under 28 U.S.C. § 1452(a) and (b) that relate to bankruptcy
cases, except proceedings involving tort claims for personal injury or wrongful death” are
referred to Bankruptcy Court judges).
CONCLUSION
The Court having concluded that it has jurisdiction over this case, the Clerk of Court is
directed to REFER this matter to the bankruptcy court for further proceedings.

CC:

Counsel
April 16, 2013

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