Pinkozie v. Ricks et al

Filing 34

ORDER: IT IS HEREBY ORDERED that Pinkozie's 16 Motion to Remand is GRANTED.IT IS FURTHER ORDERED that the case is remanded to the 24th Judicial District Court for Jefferson Parish, State of Louisiana. IT IS FURTHER ORDERED that Pinkozie's request for attorney's fees is DENIED.Signed by Judge Nannette Jolivette Brown on 3/20/2017. (mmv) (Additional attachment(s) added on 3/21/2017: # 1 Remand Letter) (mmv).

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
DENNIS PINKOZIE

CIVIL ACTION

VERSUS

CASE NO. 16-11621

GREGORY RICKS, et al.

SECTION: “G”(4)
ORDER

Pending before the Court is Plaintiff Dennis Pinkozie’s (“Pinkozie”) “Motion to Remand
or, in the Alternative, Motion for Abstention under 28 U.S.C. § 1334(c).”1 Having considered the
motion, the memoranda in support and in opposition, the record, and the applicable law, the Court
will grant the motion and remand this case to the 24th Judicial District Court for the Parish of
Jefferson, State of Louisiana.
I. Background
A.

Factual Background
In this litigation, Pinkozie alleges that Defendants Gregory Ricks, Gregory Ricks &

Associates, Inc., and Gregory Ricks, L.L.C. (“Defendants”) breached fiduciary, contractual, and
other state law duties owed to Pinkozie by misrepresenting and omitting material facts concerning
certain investments. 2 Pinkozie states that Defendants sold him $350,000 worth of investment
securities involving fractional interests in the proceeds of third parties’ life insurance policies

1

Rec. Doc. 16.

2

Rec. Doc. 1-3 at 1.

1

(“Investments”) in or around 2010.3 Pinkozie states that these Investments were developed by Life
Partners Holdings, Inc. and/or LPI Financial Services, Inc. (“the Debtors”). 4 According to
Pinkozie, Defendants falsely marketed these Investments and misrepresented the true
characteristics of the Investments, the likely returns of the Investments, and the fees and/or
commission that the Defendants would earn by selling the Investments.5
Pinkozie avers that in or around January 2015, the Debtors entered into chapter 11
bankruptcy in the Northern District of Texas.6 On March 11, 2016, a chapter 11 Trustee named
Defendant Gregory Ricks as a defendant in an adversary proceeding for allegedly perpetrating a
fraud on investors and misrepresenting key characteristics of the Investments.7 Pinkozie learned
of Defendant Gregory Ricks’ alleged misdeeds from the adversary proceeding.8
B.

Procedural Background
Pinkozie filed his Petition in Louisiana state court on May 25, 2016, and did not name the

Debtors as defendants.9 On June 24, 2016, Defendants filed their Notice of Removal in this Court,
alleging that the Court has jurisdiction over this case pursuant to 28 U.S.C. § 1334 because it is
“related to” the Debtors’ bankruptcy proceedings pending in federal court.10 On June 30, 2016,

3

Id. at 2.

4

Id.

5

Id. at 3.

6

Id.

7

Id.

8

Id. at 4.

9

Rec. Doc. 1-3 at 2.

10

Rec. Doc. 1 at 2.

2

Defendants filed a motion to dismiss for failure to join the Debtors as defendants or, in the
alternative, to transfer Pinkozie’s case to the Northern District of Texas to be referred to the
bankruptcy court handling the Debtors’ bankruptcy proceedings.11
On July 11, 2016, Pinkozie filed the instant motion to remand.12 On July 20, 2016, the
Court granted the parties’ joint motion to continue the submission date of Pinkozie’s motion to
remand to August 17, 2016.13 On August 9, 2016, Defendants filed an opposition.14 With leave
of court, Pinkozie filed a reply on August 19, 2016.15
II. Parties= Arguments
A.

Defendants’ Notice of Removal
In their Notice of Removal, Defendants assert that on May 27, 2016, they received notice

that this matter had been filed in state court, and timely removed it to this Court on June 24, 2016.16
Defendants contend that this Court has original jurisdiction over this case under 28 U.S.C. § 1134
and §1452 because this matter is “related to” the bankruptcy proceedings of the Debtors pending
in the United States Bankruptcy Court for the Norther District of Texas.17 Defendants aver that
they will seek to transfer this case to the Northern District of Texas, and then have the case referred

11

Rec. Doc. 9.

12

Rec. Doc. 16.

13

Rec. Doc. 20.

14

Rec. Doc. 24.

15

Rec. Doc. 29.

16

Rec. Doc. 1 at 1.

17

Id. at 2.

3

to the bankruptcy court. 18 Thereafter, Defendants allege that they can file a third-party action
under Federal Rule of Civil Procedure 14 against the Debtors, but are prevented from doing so in
this Court because of the automatic stay in place.19 Defendants also point out that Pinkozie’s own
complaint incorporates by reference all the allegations made in an adversary proceeding against
Defendant Gregory Ricks that is pending in the bankruptcy court.20 Thus, Defendants argue that
the outcome of this case, “especially after [the] Debtors are made parties hereto, will ‘conceivably
have an effect on the estate being administered in bankruptcy . . . .’” 21 Accordingly, Defendants
assert that this Court has subject-matter jurisdiction, and removal is proper.22
B.

Pinkozie’s Arguments in Support of Remand
In his motion, Pinkozie argues that this Court should remand this case back to Louisiana

state court for lack of subject matter jurisdiction, or pursuant to the mandatory or permissive
abstention provisions under 28 U.S.C. § 1334. 23 In particular, Pinkozie asserts that the Court
should grant Pinkozie’s motion on any of three independent grounds: (1) the Court lacks subjectmatter jurisdiction, as Pinkozie’s claims are allegedly not “related to” the bankruptcy proceeding
because they will have no effect on the Debtors’ estate; (2) even if the case was “related to” the
bankruptcy proceeding, the Court must abstain from hearing this matter under the mandatory

18

Id. at 3.

19

Id.

20

Id. at 4.

21

Id. at 3 (citing Wood v. Wood (In re Wood), 825 F.2d 90, 93 (5th Cir. 1987)).

22

Id.

23

Rec. Doc. 16-1 at 1.

4

abstention provision of 28 U.S.C. § 1334; or (3) even if the Court does not adopt either of the first
two reasons, it should decline jurisdiction based on the Court’s equitable abstention and permissive
remand authority. 24 Pinkozie also seeks an award of attorneys’ fees and costs, as he alleges
Defendants cannot set forth a good-faith basis for removal in this case.25
1.

Lack of Subject Matter Jurisdiction

First, Pinkozie asserts that he is a Louisiana domiciliary bringing only state law claims
against Defendants, who are also Louisiana domiciliaries, and that this case was removed on the
sole basis that Pinkozie’s claims were “related to” the Debtors’ bankruptcy proceedings. 26
According to Pinkozie, a federal bankruptcy court has jurisdiction over “all civil proceedings . . .
arising in or related to cases under title 11,” and such cases originally filed in state court may be
removed “to the district court for the district where such civil action is pending.”27 Pinkozie argues
that, in the Fifth Circuit, a proceeding is “related to” a bankruptcy proceeding if “the outcome of
that proceeding could conceivably have any effect on the estate being administered in
bankruptcy.”28 Pinkozie asserts that the Fifth Circuit has cautioned that the “related to” language
is not limitless or as broad as “having some connection with;” rather, “the proceeding must be
capable of affecting the bankruptcy estate.”29 According to Pinkozie, the Fifth Circuit has further

24

Rec. Doc. 16 at 2.

25

Id.

26

Rec. Doc. 16-1 at 1–2.

27

Id. at 5 (citing 28 U.S.C. § 1334(b), 1452(a)).

28

Id. (citing Matter of Wood, 825 F.2d 90, 93 (5th Cir. 1987)).

29

Id. at 6 (citing Matter of Zale Corp., 62 F.3d 746, 752 (5th Cir. 1995) (quoting Celotex Corp. v. Edwards,
514 U.S. 300, 308 (1995)); In re Bass, 171 F.3d 1016, 1022–23 (5th Cir. 1999)).

5

clarified that “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 in any way impacts
upon the handling and administration of the bankrupt estate.”30 Pinkozie argues that “conversely
the bankruptcy court has no jurisdiction over a matter that does not affect the debtor.”31 Pinkozie
further asserts that “bankruptcy jurisdiction does not extend to state law actions between nondebtors over non-estate property.”32
Here, Pinkozie argues that this Court lacks jurisdiction over this matter, and thus removal
was improper, because he only alleged state law claims against the non-debtor Defendants and
made no claim to the Debtors’ estate.33 Pinkozie further avers that the Debtors were not named as
defendants in his case, and the outcome of this action would in no way bind the Debtors.34 Thus,
Pinkozie alleges, it is not “related to” the Debtors’ bankruptcy estate.35 Pinkozie cites to the Third
Circuit’s decision in Pacor Inc., v. Higgins, where the court held an action that is only “a mere
precursor to a potential third party claim for indemnification” by the defendant against the
bankrupt party is not “related to” the bankruptcy proceeding, as the action could not bind the
bankrupt party or determine any of its rights, liability, or courses of action. 36 According to

30

Id. (citing Zale Corp., 62 F.3d at 752; Celotex Corp., 514 U.S. at 308 n.6) (emphasis in original).

31

Id. (emphasis in original).

32

Id. (citing In re TMT Procurement Corp., 764 F.3d 512, 526 (5th Cir. 2014)).

33

Id.

34

Id. at 4, 8.

35

Id. at 8.

36

Id. at 7–8 (citing 743 F.2d 984, 985–86 (3d Cir. 1984)).

6

Pinkozie, the Fifth Circuit has expressly adopted the Pacor test.37 Like in Pacor, Pinkozie asserts
that it is irrelevant whether Defendants may eventually join the Debtors through a third-party
action or seek indemnification. 38 Moreover, Pinkozie argues that merely incorporating by
reference the allegations made in the adversary proceeding pending in the bankruptcy court is not
enough, as “shared facts . . . do not in and of themselves suffice to make the third-party action
‘related to’ the bankruptcy.”39
2.

Mandatory Abstention

Second, Pinkozie avers that even if his action is “related to” the bankruptcy proceedings,
this Court must abstain and remand the case back to state court pursuant to 28 U.S.C.
§ 1334(c)(2).40 According to Pinkozie, the Bankruptcy Code’s mandatory abstention provision
provides that federal courts must abstain from actions asserting state law claims that are “related
to” a case under title 11 “but not arising under title 11.” 41 Pinkozie contends that mandatory
abstention is required when: (1) “[a] motion has been timely filed requesting abstention;” (2) “[t]he
cause of action is essentially one that is premised on state law;” (3) “[t]he proceeding is non-core
or related to the bankruptcy case;” (4) “[t]he proceeding could not otherwise have been
commenced in federal court absent the existence of the bankruptcy case;” and (5) “[t]he proceeding

37

Id. at 7–8 n.2 (citing Matter of Wood, 825 F.2d at 93 & n.15 (5th Cir. 1987)).

38

Id. at 8–9.

39

Id. at 9 (citing Zale Corp., 62 F.3d at 753).

40

Id.

41

Id. at 9–10 (quoting 28 U.S.C. § 1334(c)(2); Broyles v. U.S. Gypsum Co., 266 B.R. 778, 782 (E.D. Tex.

2001)).

7

has already been commenced and can be timely adjudicated in a state court forum.” 42 Here,
Pinkozie argues that all requirements are met: (1) Pinkozie filed his motion for abstention within
30 days of Defendants’ Notice of Removal; (2) Pinkozie only alleges state law claims; (3) the
proceeding is “non-core” because it does not invoke any rights or claims under title 11; (4) there
is no other independent basis for subject matter jurisdiction here; and (5) the proceeding was timely
commenced in Louisiana state court. 43 Accordingly, Pinkozie alleges that even if this Court
determines that it has jurisdiction, it is required to abstain and remand this matter to state court.44
3.

Equitable Abstention and Permissive Remand

Even if the Court determines it has jurisdiction and that mandatory abstention does not
apply here, Pinkozie asserts, the Court should decline jurisdiction under the Bankruptcy Code’s
equitable abstention and permissive remand provisions.45 Pinkozie avers that there are thirteen
factors for the Court to consider while determining if equitable remand and permissive abstention
are appropriate:
(1) forum non conveniens; (2) a preference for a bifurcated action to be tried in the
same court; (3) whether the state court is better able to respond to questions
involving state law; (4) expertise of the court; (5) duplicative and uneconomic effort
of judicial resources; (6) prejudice to the involuntarily removed parties; (7) comity;
(8) a lessened possibility of an inconsistent result; (9) the presence in the proceeding
of nondebtor parties; (10) the absence of any basis for jurisdiction other than section
1334; (11) the predominance of state law issues; (12) the degree of relatedness of
the proceeding to the bankruptcy case; and (13) the likelihood of forum shopping.46

42

Id. at 10 (citing Broyles v. U.S. Gypsum Co., 266 B.R. 778, 782–83 (E.D. Tex. 2001)).

43

Id. at 10–11 (citations omitted).

44

Id. at 11.

45

Id. at 12 (citing 28 U.S.C. §§ 1334(c)(1) & 1452(b)).

46

Id. (citing Nase v. TECO Energy, Inc., No. 09-7659, 2010 WL 924290, at *4 (E.D. La. Mar. 9, 2010)

8

Here, Pinkozie asserts that the balance of factors favor remand.47 For example, Pinkozie
alleges that this is a localized controversy, all the parties and evidence are in Louisiana, Louisiana
state court is more accustomed to deciding Louisiana state law claims, the relationship between
Pinkozie’s claims and the Debtors’ bankruptcy estate is highly attenuated, and Pinkozie would be
prejudiced by having to pursue his Louisiana action in a Texas venue.48
Attorneys’ Fees

4.

Finally, Pinkozie alleges that the Court has the discretion to award attorneys’ fees if it finds
that removal to federal court was improper.49 Here, Pinkozie alleges removal was done to delay
these proceedings and caused Pinkozie to spend more time and money on this action than was
necessary.50
C.

Defendant’s Arguments in Opposition to Remand
In opposition, Defendants argue that this Court should deny Pinkozie’s motion to remand.51
1.

Subject Matter Jurisdiction

Defendants assert that, prior to filing his Petition in state court, Pinkozie first sent a letter
and draft complaint to Defendants where Pinkozie named the Debtors as a defendant in the case,
alleged that Defendants and the Debtors engaged in various wrongdoing, and requested damages

(Vance, J.)).
47

Id.

48

Id. at 12–13.

49

Id. at 14.

50

Id.

51

Rec. Doc. 24.

9

against Defendants and the Debtors.52 Defendants aver that while Pinkozie omitted the Debtors
as parties in this litigation in an attempt to avoid the bankruptcy court’s jurisdiction, his Petition
still incorporates by reference “all allegations” made in the adversary proceeding against
Defendant Gregory Ricks in the bankruptcy court, to which the Debtors were also a party.53
According to Defendants, the Fifth Circuit has stated that a state court action is “related to”
a bankruptcy proceeding when “the outcome of that [action] could conceivably have any effect on
the estate being administered in bankruptcy.”54 Defendants contend that it “strains credulity” for
Pinkozie to assert that it is inconceivable that a Petition that incorporates by reference an entire
bankruptcy adversary complaint alleging wrongdoing by the Debtors will not affect the Debtors’
estate.55 For example, Defendants argue that the adversary complaint alleges that the Debtors
“devised and executed a wide-ranging scheme to defraud its Investors,” including Defendants, and
by incorporating the entire complaint in Pinkozie’s Petition, Pinkozie also makes the same
allegation.56 Moreover, Defendants assert that the adversary complaint alleges that Defendant
Gregory Ricks “aided and abetted [the Debtors] and were joint tortfeasors with [the Debtors] in
defrauding the Investors;” thus, Defendants aver that Ricks faces liability from the Debtors for the
exact same allegations that Pinkozie seeks in this case.57

52

Id. at 2.

53

Id.

54

Id. (citing Wood v. Wood (In re Wood), 825 F.2d 90, 93 (5th Cir. 1987) (emphasis added)).

55

Id. at 3.

56

Id.

57

Id. at 3–4.

10

Additionally, Defendants contend that upon transfer of this case to the Northern District of
Texas, Defendants will add the Debtors as parties to this suit, whereby the proceeding would be
deemed “arising in” the bankruptcy court proceeding and thus clearly within the bankruptcy
court’s jurisdiction.58 Prior to that, Defendants argue that Pinkozie’s omission of the Debtors as
parties “in an attempt to escape the bankruptcy court’s jurisdiction does not eliminate ‘related to’
jurisdiction.” 59 Defendants argue that Pacor is non-binding case law, and is distinguishable
because the plaintiff in that case did not incorporate by reference an entire adversary complaint,
serve a draft petition with the debtor as a named party, or indicate that the debtor and defendant
were accused of engaging in a fraudulent scheme to defraud the plaintiff.60
Furthermore, Defendants assert that in In re Canion, the Fifth Circuit found that an action
by a judgment creditor of a bankrupt debtor filed against non-debtors, seeking to recover his claim
against the debtor from the non-debtors, had a “conceivable” effect on the bankruptcy estate.61
According to Defendants, the Fifth Circuit held that if the non-debtor prevailed, the “total amounts
due on claims against [the] bankruptcy estate would be decreased,”62 and that claims between
non-debtors that may potentially reduce the bankruptcy estate’s liabilities is sufficient to confer
“related to” jurisdiction.63 Here, Defendants argue that if Pinkozie succeeds in his action against

58

Id. at 4.

59

Id.

60

Id.

61

Id. at 5 (citing In re Canion, 196 F.3d 579, 581–82 (5th Cir. 1999)).

62

Id. (citing In re Canion, 196 F.3d at 586).

63

Id.

11

Defendants, it will conceivably reduce the Debtor’s liabilities from investors like Defendants, as
the Debtors have alleged a claim for contribution for Defendants role as joint tortfeasors. 64
Defendants contend that if Pinkozie prevails here, “he will be foreclosed from bringing the exact
same claims against Debtors, thus negating the contribution claim asserted by Debtors against
Ricks.”65
2.

Mandatory Abstention

Second, Defendants contend that Pinkozie’s action does not meet the requirements for
mandatory abstention.66 Defendants argue that because the Debtors are necessary parties to this
action under Federal Rule of Civil Procedure 19, and this is therefore not a “non-core proceeding,”
mandatory abstention does not apply.67 Defendants further assert that because Pinkozie alleges all
of the adversary complaint’s bankruptcy allegations, Pinkozie’s claims are not only premised on
state law.68 Moreover, Defendants aver that Pinkozie’s state court Petition was filed well after the
Debtors’ bankruptcy proceedings commenced, while mandatory abstention requires the state court
action to be pending when the bankruptcy case was filed.69 Defendants also argue that remanding
this case would not ensure the claims can be “timely adjudicated in an alternate forum,” but rather
would prolong the proceedings.70

64

Id.

65

Id.

66

Id. at 6.

67

Id. (citing In re Gober, 100 F.3d 1195, 1206 (5th Cir. 1996)).

68

Id.

69

Id. at 7.

70

Id. at 7–8.

12

3.

Equitable Abstention and Permissive Remand

Third, Defendants assert that the Fifth Circuit views permissive abstention as “an
extraordinary measure—the exception, not the rule.” 71 Defendants point out that, because
Pinkozie incorporated by reference the entire adversary complaint, Pinkozie was incorrect that all
the parties and proof required for this litigation are in Louisiana.72 Defendants further argue that
the Debtors should be a party to this case, and they are located in Texas.73
Defendants aver that the other factors to consider for permissive abstention also weigh
against abstention.74 For example, Defendants point out that the bankruptcy court in the Northern
District of Texas has a high level of expertise regarding the underlying scheme in Pinkozie’s
claims, and it would be duplicative for a Louisiana state court to consider the same allegations
made in the adversary complaint in state court and raise the possibility of inconsistent results.75
Moreover, Defendants argue that Pinkozie is forum shopping by attempting to avoid the
bankruptcy court’s jurisdiction.76
Attorneys’ Fees

4.

Finally, Defendants allege that an award of attorneys’ fees for improper removal is only
available if the defendant “lacked objectively reasonable grounds to believe removal was legally

71

Id. at 9 (quoting Matter of Al Copeland Enter., 153 F.3d 268, 271 (5th Cir. 1998) (internal quotations

omitted)).
72

Id.

73

Id.

74

Id.

75

Id. at 9–10.

76

Id. at 10.

13

proper.”77 Here, Defendants argue that they had objectively reasonable grounds to remove this
case, as shown by the arguments in their memorandum in opposition to this motion and other
filings.78
D.

Pinkozie’s Reply in Further Support of Remand
1.

Subject Matter Jurisdiction

In reply, Pinkozie asserts that this case is not related to the bankruptcy proceeding because
Pinkozie has filed a “stand-alone Louisiana state law cause of action against Louisiana defendants
in Louisiana state court.”79 Pinkozie states that while he considered filing his own claims against
the Debtors before, he ultimately opted to not do so.80 Pinkozie argues that prior “draft” petitions
have no effect on what was ultimately filed, and are irrelevant because jurisdiction is determined
at the time a suit is filed.81 Moreover, Pinkozie contends that his state court Petition expressly
incorporated all “allegations” contained in the Trustee’s adversary complaint against Defendant
Ricks, and not all “allegations and legal claims.” 82 Additionally, the chapter 11 Trustee’s
adversary complaint seeks to recover “for harm caused to the estate” by Defendant Ricks’ actions,
while here Pinkozie seeks to recover for the harm he suffered as a result of Defendants’ actions
towards him.83 Pinkozie further argues that the case cannot be “related to” the Debtors’ bankruptcy

77

Id. at 11 (citing Hornbuckle v. State Farm Lloyds, 385 F.3d 538, 541 (5th Cir. 2004)).

78

Id.

79

Rec. Doc. 29 at 2.

80

Id.

81

Id.

82

Id. at 3 (emphasis in original).

83

Id.

14

proceeding because, given Louisiana’s rules of comparative fault and contribution, the outcome of
Pinkozie’s action will not bind or impact the Debtors.84
Moreover, Pinkozie alleges that the Fifth Circuit has adopted Pacor’s holding that a “mere
precursor to the potential third party claim for indemnification by the non-debtor defendant against
the debtor” is not sufficient for a claim to be related to the bankruptcy proceeding. 85 By contrast,
Pinkozie asserts that the cases cited by Defendants that Pinkozie’s claims will reduce the liabilities
of Debtors’ bankruptcy estate are distinguishable, as each involved a form of mandatory indemnity
or reimbursement agreement between the non-debtor defendant and debtor. 86 Here, however,
Pinkozie argues that Defendants have not shown there is any contractual agreement or legal
principle that would require the reimbursement from the Debtors.87
Additionally, Pinkozie avers that Defendants’ argument that this case “aris[es] in” the
bankruptcy court proceeding also fails.88 Pinkozie argues that Defendants did not invoke “arising
in” jurisdiction in their Notice of Removal, and that “arising in” jurisdiction only applies to “core”
bankruptcy proceedings that arise under title 11 or in a case under title 11.89 Here, Pinkozie asserts
that he only alleges state law causes of action against non-debtor Defendants, which do not arise
under title 11, or arise in a case under title 11.90 Moreover, Pinkozie contends that the Debtors are

84

Id. at 6.

85

Id. at 5–6.

86

Id. at 6–7 (citations omitted).

87

Id. at 7.

88

Id. at 4.

89

Id.

90

Id.

15

not defendants in this case and were not defendants at the time of removal; thus, Pinkozie asserts
that Defendants’ argument that the Debtors will be made parties to the case in the future is
irrelevant and “pure speculation.”91 Pinkozie also points to his arguments in his opposition to
Defendants’ motion to dismiss, where he asserted that the Debtors are neither a “required” nor
“indispensable” party to this case under Rule 19 because the Court can fairly and expeditiously
provide complete relief between Pinkozie and Defendants without the Debtors’ involvement.92
According to Pinkozie, Louisiana Civil Code follows a comparative fault system, and thus
Defendants would only be responsible for their own liability regardless of whether the Debtors are
defendants in Pinkozie’s case.93
2.

Mandatory Abstention

Pinkozie contends that none of Defendants’ reasons for why mandatory abstention should
not apply here have merit.94 Pinkozie states that Defendants are wrong that Pinkozie’s claims are
not premised on state law, as he has clearly only asserted six claims based purely on Louisiana
state law.95 Pinkozie avers that merely incorporating the allegations of the Trustee’s complaint
does not mean that Pinkozie is asserting those same legal claims as the bankruptcy estate did.96
Moreover, Pinkozie asserts that recent cases demonstrate that mandatory abstention applies to

91

Id.

92

Id. at 4–5 (citing Rec. Doc. 17 at 4, 7).

93

Id. at 5.

94

Id. at 7–8.

95

Id. at 8.

96

Id.

16

cases filed after a bankruptcy proceeding has been initiated.97
3.

Permissive Abstention

Pinkozie further argues that all evidence that he is aware of that support his state law claims
against the Louisiana Defendants are in Louisiana.98 Thus, Pinkozie alleges that Defendants have
not identified any reason why the Northern District of Texas is a more appropriate forum for this
dispute.99
Attorneys’ Fees

4.

Pinkozie argues that an award of attorneys’ fees is appropriate here, as Defendants knew
that the Debtors were not a party to the case in state court when they removed this case and knew
that Defendants could not claim contribution from the Debtors yet.100
III. Law and Analysis
A.

Legal Standard
Under 28 U.S.C. § 1452, a party may remove any claim or cause of action to the appropriate

district court if the court has jurisdiction over the matter under 28 U.S.C. § 1334. 28 U.S.C. § 1334
provides for four types of cases over which federal courts have bankruptcy jurisdiction: (1) “all
cases under title 11”; (2) “proceedings arising under title 11”; (3) proceedings “arising in” a case
under title 11; and (4) proceedings “related to” a case under title 11.101 The first category refers to

97

Id.

98

Id. at 10.

99

Id. at 11.

100

Id.

101

See 28 U.S.C. § 1334(a), (b); Matter of Wood, 825 F.2d 90, 92 (5th Cir. 1987); Union Oil Co. of California
v. Shaffer, No. 15-5475, 2016 WL 4161299, at *2 (E.D. La. Aug. 5, 2016) (Morgan, J.).

17

the bankruptcy petition itself, while the remaining three categories “identify collectively a broad
range of matters subject to the bankruptcy jurisdiction of federal courts.” 102 “Therefore, it is
necessary only to determine whether a matter is at least ‘related to’ the bankruptcy.” 103 A district
court may refer any proceedings related to a case under title 11 to the bankruptcy judges for the
district.104
The Fifth Circuit has noted that Congress did not define “related” matters, and has thus
adopted the definition used by the Third Circuit Court of Appeals: “whether the outcome of that
proceeding could conceivably have any effect on the estate being administered in bankruptcy.”105
“Related to” jurisdiction does not require an effect to be certain; rather, “jurisdiction will exist
based on a finding of any conceivable effect.” 106 Conversely, “bankruptcy courts have no
jurisdiction over proceedings that have no effect on the estate of the debtor.”107 Additionally, the
Fifth Circuit held that “[a]n 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.”108 Thus, for jurisdiction

102

Matter of Wood, 825 F.2d at 92.

103

Id. at 93.

104

Matter of Zale Corp., 62 F.3d 746, 751 (5th Cir. 1995) (citing Celotex Corp. v. Edwards, 514 U.S. 300,
307 (1995)).
105

Matter of Wood, 825 F.2d at 93. Matter of Zale Corp., 62 F.3d at 751 (citing Celotex Corp., 514 U.S. at

307).
106

In re Canion, 196 F.3d 579, 587 (5th Cir. 1999); Firefighters' Ret. Sys. v. Consulting Grp. Servs., LLC,
541 B.R. 337, 351 (M.D. La. 2015).
107

Celotex Corp., 514 U.S. at 308.

108

Matter of Walker, 51 F.3d 562, 569 (5th Cir. 1995) (quotation marks and citations omitted).

18

to attach, “the anticipated outcome of the action must both (1) alter the rights, obligations, and
choices of action of the debtor, and (2) have an effect on the administration of the estate.” 109 The
Supreme Court has cautioned that a court’s “related to” jurisdiction is not “limitless.”110
In assessing whether removal was appropriate, the Court is guided by the principle,
grounded in notions of comity and the recognition that federal courts are courts of limited
jurisdiction, that “removal statute[s] should be strictly construed in favor of remand.” 111 Remand
is appropriate if the Court lacks subject matter jurisdiction, and “doubts regarding whether removal
jurisdiction is proper should be resolved against federal jurisdiction.”112 A district court’s order
remanding an action removed from state court is not reviewable on appeal, as a remand order
completely divests federal courts of jurisdiction.113
B.

Analysis
In his motion, Pinkozie first argues that this matter should be remanded back to state court

because his claims are not “related to” the Debtors’ bankruptcy proceedings, and thus this Court
lacks subject matter jurisdiction.114 Pinkozie contends that his action is between two Louisiana

109

In re Bass, 171 F.3d 1016, 1022 (5th Cir. 1999); Firefighters' Ret. Sys., 541 B.R. at 351.

110

Celotex Corp., 514 U.S. at 308.

111

Manguno v. Prudential Prop. & Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002).

112

Acuna v. Brown & Root, Inc., 200 F.3d 335, 339 (5th Cir. 2000) (citing Willy v. Coastal Corp., 855 F.2d
1160, 1164 (5th Cir. 1988)).
113
See 28 U.S.C. § 1452 (providing that an order remanding a claim or cause of action related to bankruptcy
cases “is not reviewable by appeal”); 28 U.S.C. § 1447 (“An order remanding a case to the State court from which it
was removed is not reviewable on appeal or otherwise”). See also Browning v. Navarro, 743 F.2d 1069, 1078 (5th
Cir. 1984) (holding that it is “axiomatic that remanding a case to state court terminates the jurisdiction of a federal
bankruptcy or district court over that case”).
114

Rec. Doc. 16-1 at 1–2.

19

non-debtors and only asserts Louisiana state law claims.115 Pinkozie points out that the Debtors
were never made defendants in this case, and it is irrelevant that Pinkozie considered naming the
Debtors as defendants prior to filing his Petition for Damages.116 Pinkozie further avers that the
outcome of this litigation would not bind the Debtors, and that under Pacor Inc. v. Higgins, it is
irrelevant if Defendants may eventually seek to join the Debtors through a third-party action or
seek indemnification.117 Moreover, Pinkozie argues that he only incorporated the allegations from
the adversary proceeding pending in bankruptcy court, not the legal claims, and that incorporating
facts from a bankruptcy court adversary proceeding is not sufficient to make an action “related to”
the bankruptcy.118
In response, Defendants argue that a state court action is “related to” a bankruptcy
proceeding when “the outcome of that [action] could conceivably have any effect on the estate
being administered in bankruptcy.” 119 Defendants contend that Pinkozie’s first draft petition
named the Debtors as defendants in this case and alleged that Defendants and Debtors both
engaged in various wrongdoing.120 Defendants aver that Pinkozie also incorporated by reference
“all allegations” that were made in an adversary proceeding against Defendant Gregory Ricks in
the bankruptcy court.121 Additionally, Defendants assert that they will add the Debtors as parties

115

Rec. Doc. 29 at 2.

116

Rec. Doc. 16-1 at 4, 8.

117

Id. at 8–9 (citing 743 F.2d 984, 985–86 (3d Cir. 1984)).

118

Id. at 9.

119

Rec. Doc. 24 at 2 (citing Wood v. Wood (In re Wood), 825 F.2d 90, 93 (5th Cir. 1987) (emphasis added)).

120

Id.

121

Id.

20

to this suit upon transfer to the Northern District of Texas.122 Defendants argue that Pinkozie’s
omission of the Debtors as parties “in an attempt to escape the bankruptcy court’s jurisdiction does
not eliminate ‘related to’ jurisdiction.”123 Here, Defendants argue that if Pinkozie succeeds in his
action against Defendants, it will conceivably reduce the Debtor’s liabilities from investors like
Pinkozie, as the Debtors have alleged a claim for contribution for Defendants role as joint
tortfeasors.124
As a preliminary matter, Defendants aver that because Pinkozie incorporated all
“allegations” of the chapter 11 Trustee’s adversary proceeding complaint against Defendant
Gregory Ricks and several hundred other defendants filed in the United States Bankruptcy Court
for the Northern District of Texas (“Adversary Complaint”), he also incorporated the causes of
action from the Adversary Complaint as well. 125 The Court finds this argument unpersuasive.
Pinkozie’s Petition clearly asserts only six state law causes of action against Defendants in this
matter.126 Pinkozie has made clear that his Petition only incorporates the factual “allegations”
made in the Adversary Complaint, and not the causes of action asserted by the chapter 11
Trustee. 127 Moreover, the Court notes that Pinkozie could not bring most, if not all, of the
Adversary Complaint’s causes of action, as they are largely Texas state law claims specific to the

122

Id. at 4.

123

Id.

124

Id.

125

See Rec. Doc. 24 at 2–3.

126

Rec. Doc. 1-3 at 8-14.

127

Rec. Doc. 29 at 3.

21

Debtors’ estate.128
Accordingly, it is clear that this is an action between non-diverse parties asserting purely
state law claims.129 Therefore, the Court does not have subject matter jurisdiction pursuant to 28
U.S.C. § 1331 or 28 U.S.C. § 1332. Thus, the Court will consider whether jurisdiction exists
pursuant to 28 U.S.C. § 1334, which defines jurisdiction for bankruptcy cases.130 Section 1334(b)
provides that “district courts . . . have original but not exclusive jurisdiction of all civil proceedings
arising under title 11, or arising in or related to cases under title 11.”131 Here, because this litigation
is between only non-debtor parties asserting state law claims, 28 U.S.C. § 1334(b) requires, at
minimum, that this civil matter be “related to” the bankruptcy proceeding.132
In the Fifth Circuit, a matter is “related to” a bankruptcy proceeding if “the outcome of that
proceeding could conceivably have any effect on the estate being administered in bankruptcy.”133
More specifically, the Court must consider if the outcome in this case “could alter the debtor’s
rights, liabilities, options, or freedom of action (either positively or negatively) and . . . in any way
impacts upon the handling and administration of the bankruptcy estate.”134 “To fall within the

See, e.g., Rec. Doc. 9-5 at 67–70 (asserting an “actual fraudulent transfer” cause of action for the allegedly
excessive commissions the Debtors paid to several hundred defendants).
128

129

See Rec. Doc. 1-3.

130

In re TMT Procurement Corp., 764 F.3d 512, 523 (5th Cir. 2014).

131

28 U.S.C. § 1334(b).

132

See Matter of Wood, 825 F.2d at 92–93. See Matter of Zale Corp., 62 F.3d at 751 (noting that a thirdparty action between noncreditors and nondebtors must be “related to” the bankruptcy case in order for the court to
have jurisdiction).
133

Matter of Walker, 51 F.3d at 569 (citing Matter of Wood, 825 F.2d at 93); see also In re Bass, 171 F.3d
1016, 1022 (5th Cir. 1999) (noting that the Supreme Court and multiple circuits have adopted this test).
In re Bass, 171 F.3d at 1022 (quotation marks and citations omitted) (“This test is obviously conjunctive:
For jurisdiction to attach, the anticipated outcome of the action must both (1) alter the rights, obligations, and choices
134

22

court's jurisdiction, the plaintiff’s claims must affect the estate, not just the debtor.”135 Thus, the
Fifth Circuit requires that “the anticipated outcome of the action must both (1) alter the rights,
obligations, and choices of action of the debtor and (2) have an effect on the administration of the
estate” for jurisdiction to exist.136
The Supreme Court has made clear that “Congress intended to grant comprehensive
jurisdiction to the bankruptcy courts so that they might deal efficiently and expeditiously with all
matters connected with the bankruptcy estate.” 137 However, the Supreme Court has further
cautioned that a court’s “related to” bankruptcy jurisdiction is not “limitless.”138 The Fifth Circuit
has also clarified that “related to” is a “term of art in bankruptcy jurisdiction, where its meaning is
not as broad as it is in ordinary parlance where it means ‘having some connection with.’” 139
According to the Fifth Circuit, the “related to” provision includes a causal component, whereby
the instant proceeding “must be capable of affecting the bankruptcy estate for it to be ‘related to’
the bankruptcy.”140
Overall, Defendants argue that this Court has “related to” jurisdiction here because: (1) a
pre-filing draft of Pinkozie’s Petition named the Debtors as defendants; (2) Defendants plan on

of action of the debtor, and (2) have an effect on the administration of the estate.”).
135

Matter of Wood, 825 F.2d at 94.

136

In re Bass, 171 F.3d at 1022; Firefighters' Ret. Sys. v. Consulting Grp. Servs., LLC, 541 B.R. 337, 351
(M.D. La. 2015).
137

Celotex Corp., 514 U.S. at 308 (quoting Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3d Cir. 1984)).

138

Id.

139

In re Bass, 171 F.3d at 1022.

140

Id. at 1022–23.

23

adding the Debtors as parties to this matter if the case is transferred to the Northern District of
Texas; (3) Pinkozie incorporated all “allegations” made in the Adversary Complaint, and the
Debtors are a necessary party to this litigation; (4) the chapter 11 Trustee asserts a claim for
contribution under Texas law against Defendant Ricks, which Defendants contends shows that
Defendant Ricks “faces liability from Debtors for the exact same alleged damages which Pinkozie
seeks in this case;” and, ultimately, (5) that if Pinkozie prevails on his action against Defendant
Ricks, it will conceivably reduce the Debtor’s liabilities to investors such as Pinkozie. 141 The
Court will address each of Defendants’ arguments in turn.
The parties’ pre- and post- removal actions

1.

First, Defendants argue that this matter is “related to” the Debtors’ bankruptcy proceeding
because a pre-filing draft of Pinkozie’s Petition named the Debtors as defendants and because
Defendants plan on adding the Debtors as parties to this matter if the case is transferred to the
Northern District of Texas.142 The Court finds Defendants’ arguments unpersuasive, as they do
not demonstrate that the outcome of Pinkozie’s case could have a conceivable effect on the
Debtors’ bankruptcy estate. First, it is well established that subject matter jurisdiction for a case
removed from state court is determined when the federal court’s jurisdiction is invoked, i.e. at the
time of removal.143 At the time of removal from state court to this Court, Pinkozie’s petition only

141

See Rec. Doc. 24 at 4–6.

142

Id.

See In re Enron Corp. Sec., 535 F.3d 325, 336 (5th Cir. 2008) (noting that when “related to” jurisdiction
under Section 1334 “actually existed at the time of . . . removal,” then subsequent events cannot divest a district court
of its jurisdiction) (quoting Celotex, 124 F.3d at 626)); In re Canion, 196 F.3d 579, 587 n.29 (5th Cir. 1999) (“Federal
subject matter jurisdiction is tested when the jurisdiction of the federal court is invoked.”). See also Nuveen Mun.
Trust ex rel. Nuveen High Yield Mun. Bond Fund v. WithumSmith Brown, P.C., 692 F.3d 283, 294 (3d Cir. 2012)
(holding that whether an action would have a conceivable effect on the bankrupt estate “is determined at the time a
lawsuit is filed”) (citing Grupo Dataflux v. Atlas Global Grp., L.P., 541 U.S. 567, 570–71 (2004)); In re Celotex
143

24

alleged state law claims against the non-debtor Defendants. 144 The fact that the Debtors were
named as defendants in an unfiled draft of Pinkozie’s Petition is insufficient to establish that this
Court has jurisdiction under Section 1334. Defendants have only shown that Pinkozie
contemplated naming the Debtors as defendants in his state court Petition, but Defendants have
pointed to no authority to suggest that “related to” jurisdiction exists when a plaintiff only
considered naming a debtor party as a defendant in a future action.
Similarly, neither the fact that Defendants will seek to add the Debtors as parties if the
Court transfers the case nor the fact that Defendants may seek contribution or indemnification from
the Debtors in a future action demonstrate that this Court has subject matter jurisdiction. As stated
above, Defendants’ post-removal conduct is insufficient to establish that jurisdiction existed at the
time of removal. Moreover, courts have held that future potential litigation or claims by a
defendant against a debtor do not establish that a court has “related to” jurisdiction over an action
by a non-debtor plaintiff solely against the non-debtor defendant. For example, in Pacor, Inc. v.
Higgins, the Third Circuit case that established the “related to” test adopted by the Fifth Circuit,
the Third Circuit held that future potential actions by a defendant against a debtor cannot establish
“related to” jurisdiction.145 In Pacor, the Third Circuit determined that a case that is “[a]t best . . . a
mere precursor to the potential third party claim for indemnification” by the defendants against the
debtors would have no effect on the bankruptcy estate, and thus there was no “related to”

Corp., 124 F.3d 619, 626 (4th Cir. 1997) (considering whether “related to” jurisdiction under Section 1334 existed at
the time of removal to the district court).
144

See Rec. Doc. 1-3.

145

Pacor, Inc. v. Higgins, 743 F.2d 984, 995 (3d Cir. 1984).

25

jurisdiction.146
Factual and legal overlap between Pinkozie’s Petition and the Adversary
Complaint

2.

Second, Defendants argue that “related to” jurisdiction exists because of the significant
factual and legal overlap between Pinkozie’s allegations in his petition and the allegations in the
Adversary Complaint. 147 Defendants assert that this proceeding may conceivably affect the
Debtors’ estate because Pinkozie incorporated all “allegations” made in the Adversary Complaint;
the chapter 11 Trustee asserts a claim for contribution under Texas law against Defendant Ricks;
and Pinkozie’s success on this action could reduce the Debtor’s liabilities from him on a future
action.148
The Court first notes that Pinkozie and the chapter 11 Trustee allege separate and
independent causes of action such that the outcome of Pinkozie’s case would not have a
conceivable effect on the bankrupt estate. In this litigation, Pinkozie alleges that Defendants held
themselves out as investment and financial planning experts and that Defendants breached their
fiduciary, contractual, and other duties to Pinkozie when they sold him fractional interests in the
proceeds of certain life insurance policies.149 In particular, Pinkozie alleges six Louisiana state
law causes of action for conduct specific to Defendants in this case: (1) Defendants allegedly
breached their fiduciary duty to Pinkozie in their capacity as investment advisers;

146

Id.

147

See Rec. Doc. 24 at 4–6.

148

Id.

149

Rec. Doc. 1-3 at 3.

150

Id. at 8–9.

26

150

(2) Defendants allegedly breached their investment services contract with Pinkozie;

151

(3) Defendants allegedly fraudulently induced Pinkozie into entering an investment services
contract with Defendants;152 (4) Pinkozie allegedly relied to his detriment on the representations
and information of Defendants regarding the strength and viability of the Investments; 153
(5) Defendants allegedly violated Louisiana securities law by making misrepresentations and
omissions about the Investments;154 and (6) Defendants were unjustly enriched as a result of their
relationship with Pinkozie.155 In other words, Pinkozie seeks to recover only against Defendants
and only for Defendants’ specific conduct committed while acting as Pinkozie’s financial advisors,
and Pinkozie does not assert any cause of action against both Defendants and the Debtors.
By contrast, the Adversary Complaint filed by the Debtors’ chapter 11 Trustee in
bankruptcy court brings causes of action specific to Defendant Ricks’ conduct in relation to the
Debtors. 156 In particular, the chapter 11 Trustee requests that the defendant licensees in the
adversary proceeding “be ordered to return the funds they received from Life Partners to the
Debtor’s Estate,” a cause of action specific to the Debtors.157 Thus, it is clear that the chapter 11
Trustee asserts causes of action independent and distinct from Pinkozie’s causes of action for
Defendant Ricks’ alleged misconduct towards each respective party. Defendants point to no

151

Id. at 9–11.

152

Id. at 11.

153

Id. at 12.

154

Id. at 13.

155

Id. at 14.

156

Rec. Doc. 24-1.

157

Id. at 82.

27

authority for the proposition that Pinkozie’s action would affect the Debtors’ adversary
proceedings.
In support of their position, Defendants generally point out that the Debtors are factually
intertwined with this case, particularly since Pinkozie incorporated all allegations made by the
chapter 11 Trustee in the Adversary Complaint. 158 However, the Fifth Circuit has determined that
“[s]hared facts” between the two proceedings “do not in and of themselves suffice to make the
third-party action ‘related to’ the bankruptcy.”159 For example, in Matter of Paso Del Norte Oil
Company, the Fifth Circuit concluded that the district court lacked jurisdiction to resolve a dispute
regarding whether the defendants had fraudulently induced the plaintiff to sell the non-party
debtors’ stocks.160 Despite the fact that ownership of the debtor corporations’ stocks were the sole
issue in dispute, the Fifth Circuit reasoned that, because the litigation involved neither the debtor
nor its property, the matter was not “related to” the bankruptcy proceeding.161 Similarly, in Pacor,
the Third Circuit determined that “the mere fact that there may be common issues of fact between
a civil proceeding and a controversy involving the bankruptcy estate does not bring the matter
within the scope of section 1471(b),” as judicial economy does not justify federal jurisdiction. 162
This is further made clear from the fact that “related to” jurisdiction may be invoked only when

158

Rec. Doc. 24 at 2–4.

159
Matter of Zale Corp., 62 F.3d 746, 753 (5th Cir. 1995); In re TMT Procurement Corp., 764 F.3d 512, 526
(5th Cir. 2014) (concluding that a common owner between a party to the litigation and the debtors is not sufficient to
establish “related to” jurisdiction).
160

755 F.2d 421, 424 (5th Cir. 1985).

161

Id.

162

Pacor, 743 F.2d at 994.

28

the plaintiff’s claims affect the bankrupt estate, not just the debtor.163
Defendants also point out that the chapter 11 Trustee brings a claim for contribution under
Texas law and alleges that several hundred defendant licensees “aided and abetted Life Partners
and were joint tortfeasors with Life Partners in defrauding the Investors.”164 However, Pinkozie
does not assert any claims against the Debtors for which the Debtors’ claim for contribution
against Defendant Ricks would be implicated. As the Fifth Circuit has recognized, the “essential
prerequisites for a contribution claim” under Texas law “are a judgment finding the party seeking
contribution to be a joint tortfeasor and the payment by such party of a disproportionate share of
the common liability.”165 Thus, because Pinkozie is not seeking a judgment against the Debtors,
the Debtors’ action for contribution from Defendant Ricks is not implicated, and the outcome of
this case would not affect the Debtors’ estate.
Accordingly, Defendants’ reliance on the Fifth Circuit decision in In re Canion is
misplaced. In that case, the Fifth Circuit determined that “related to” jurisdiction existed because
the plaintiff’s action seeking to collect a judgment held against the debtor from the defendants
could directly lower the total amounts due from the bankruptcy estate. 166 Here, however,
Defendants have not shown that the outcome in this case would directly have any effect on the
Debtors or directly reduce the total amounts due to or from the bankruptcy estate. Likewise,

See Matter of Zale Corp., 62 F.3d 753 (determining that it is “the relation of dispute to estate, and not of
party to estate, that establishes jurisdiction” (citations and quotation marks omitted)); In re Boone, 52 F.3d 958, 961
(11th Cir. 1995).
163

164

See Rec. Doc. 24-1 at 75.

165

Arnold v. Garlock Inc., 288 F.3d 234, 237 (5th Cir. 2002) (citing Beech Aircraft Corp. v. Jinkins, 739
S.W.2d 19 (Tex. 1987); FDIC v. Niblo, 821 F.Supp. 441, 457 (N.D. Tex. 1993)).
166

In re Canion, 196 F.3d 579, 585 (5th Cir. 1999).

29

Defendants’ citation to In re Brooks Mays Music Co. is unpersuasive, because, in that case, the
bankruptcy court for the Northern District of Texas determined that “related to” jurisdiction existed
due to the pre-existing indemnification agreements between the defendants and the debtor. 167
Here, Defendants have not pointed to any pre-existing indemnification agreements between the
Defendants and the Debtors that would be implicated by Pinkozie’s action.
By the same token, the Court notes that Defendants’ assertion that, “if Pinkozie prevails in
this case, he will be foreclosed from bringing the exact same claims against Debtors” is of no
moment. Here, Pinkozie is alleging that Defendants breached their fiduciary duty to Pinkozie, and
any claims that Pinkozie may have against the Debtors are not before this Court. The Court can
only consider the claims that existed at the time of removal when determining whether subject
matter jurisdiction exists. Moreover, Defendants have not pointed to any authority to show that
Pinkozie’s litigation has foreclosed any claim he may have against the Debtors or why Pinkozie
would be foreclosed from making the choice to assert claims against Defendants and not the
Debtors for Defendants’ particular conduct.
Defendants further assert that the action is at least “related to” the bankruptcy proceedings
because, according to Defendants, the Debtors are necessary parties to this litigation, as Pinkozie
incorporated the allegations from the Adversary Complaint and Pinkozie’s case is also premised
on the Debtors’ alleged wrongdoing.168 The Court finds this argument unavailing, as Pinkozie has
alleged distinct claims against Defendants. Moreover, the Fifth Circuit has determined that joint

167

363 B.R. 801, 813 (Bankr. N.D. Tex. 2007).

168

Rec. Doc. 24 at 4.

30

tortfeasors are not necessary parties under Federal Rule of Civil Procedure 19.169 Under Rule 19,
Defendants must show that (1) the Court cannot grant complete relief among the existing parties
without the Debtors or that (2) the Debtors’ absence from this litigation would impair its ability to
protect its interests or expose an existing party to a “substantial risk of incurring double, multiple,
or otherwise inconsistent obligations.”170 Defendants have not done so here. Defendants have not
demonstrated that the Court cannot grant complete relief to Pinkozie with the current parties for
Pinkozie’s state law claims premised on the Defendants’ alleged misconduct. Moreover, even
assuming that Defendants could face multiple liability from Pinkozie’s and the chapter 11
Trustee’s respective actions, Defendants have not articulated how that would affect the Debtors’
estate. In other words, Defendants have not asserted any reason that, if both the Debtors and
Pinkozie were successful in their actions against Defendant Ricks, the Debtor’s estate would not
be able to fully recover on its independent causes of action such that this Court would have
jurisdiction. Additionally, the Court notes that, even if the Debtors were a necessary party, joinder
is not feasible while the bankruptcy court’s automatic stay is in place. Thus, Rule 19 requires the
Court to only consider whether, “in equity and good conscience,” the action should proceed
without the Debtors or be dismissed, and not if the matter should be transferred to another venue.171
The Court further notes that this action would not have an effect on the Debtors’ estate
because it does not appear that the outcome of this litigation against Defendants would bind the

See Aug. v. Boyd Gaming Corp., 135 F. App’x 731, 734 (5th Cir. 2005) (determining that joint tortfeasors
are not necessary parties); see also La. Code of Civ. P. art. 641 (“Joinder of parties needed for just adjudication,”
providing for a similar necessary party analysis).
169

170

Fed. R. Civ. P. 19(a).

171

Fed. R. Civ. P. 19(b).

31

Debtors or determine their rights, liabilities, options, or freedom of action.172 In Pacor, the Third
Circuit noted that since the debtor was not a party to the action between two non-debtors, it could
not be bound by res judicata or collateral estoppel, and thus there would be no conceivable effect
on the bankrupt estate.173
Here, the Debtors similarly would not be bound by res judicata or collateral estoppel arising
from Pinkozie’s Louisiana state court action. As the Supreme Court has made clear, federal courts
must “refer to the preclusion law of the State in which judgment was rendered” to determine the
preclusive effect of a state court judgment. 174 Thus, because Pinkozie filed his Petition in
Louisiana state court, Louisiana law would determine what preclusive effects, if any, would arise
from his Louisiana state court action if remand is ordered.175 In Louisiana, pursuant to Louisiana
Revised Statute § 13:4231, five elements must be satisfied to preclude a second action under the
theory of res judicata:176
(1) the judgment is valid; (2) the judgment is final; (3) the parties are the same; (4)
the cause or causes of action asserted in the second suit existed at the time of final
judgment in the first litigation; and (5) the cause or causes of action asserted in the
second suit arose out of the transaction or occurrence that was the subject matter

172

See In re Bass, 171 F.3d 1016, 1022 (5th Cir. 1999).

173

Pacor, Inc. v. Higgins, 743 F.2d 984, 995 (3d Cir. 1984).

174
Marrese v. Am. Acad. of Orthopaedic Surgeons, 470 U.S. 373, 380 (1985) (quoting 28 U.S.C. § 1738);
see also Matter of Gober, 100 F.3d 1195, 1201 (5th Cir. 1996) (holding that courts “must look to the state that rendered
the judgment to determine whether the courts of that state would afford the judgment preclusive effect”).
175

See In re Keaty, 397 F.3d 264, 270 (5th Cir. 2005) (determining that, because the underlying judgment
was from a Louisiana state court, Louisiana issue preclusion rules would apply).
176

The Court notes that the Louisiana doctrine of res judicata was amended in 1990 to embrace both issue
preclusion and collateral estoppel. See Contogouris v. Ocean Therapy Sols., LLC, 2015-0472 (La. App. 4 Cir. 1/27/16),
187 So. 3d 18, 22 (citing La. Rev. Stat. § 13:4231). Thus, “Louisiana Revised Statute § 13:4231 embraces the broad
usage of the phrase ‘res judicata’ to include both claim preclusion (res judicata) and issue preclusion (collateral
estoppel).” Maschek v. Cartemps USA, 2004-1031 (La. App. 4 Cir. 2/16/05), 896 So. 2d 1189, 1193.

32

of the first litigation.177
In particular, the Court notes that Louisiana state courts have made clear that “[w]ithout
identity between the parties in the first and subsequent actions, an exception of res judicata will
not be maintained.”178 Relatedly, Louisiana Code of Civil Procedure article 425(A) provides that
“[a] party shall assert all causes of action arising out of the transaction or occurrence that is the
subject matter of the litigation.” Louisiana courts have further held that Article 425(A) “operates
in tandem with the res judicata statutes and they must be read in para materia,” meaning that “[a]ll
of the elements of res judicata, such as identity of parties, must be met for an exception to enforce
La. C.C.P. art. 425 to be maintained.” 179 Courts and commentators have noted that, while
Louisiana amended its res judicata law in 1991 to include both issue preclusion and claim
preclusion, Louisiana law differs from many states and federal law in that it “still require[s]
mutuality; that is, it is only applicable if the parties to the first and second actions are the same or
there is identity of parties.”180 Thus, as one Louisiana court of appeals has held, “a judgment or
decree among parties to a lawsuit resolves issues as among them, but it does not conclude the
rights of strangers to those proceedings.” 181 Likewise, as another Louisiana court of appeals

177

Burguieres v. Pollingue, 2002-1385 (La. 2/25/03), 843 So. 2d 1049, 1053; Bd. of Sup'rs of Louisiana
State Univ. v. Dixie Brewing Co., 2014-0641 (La. App. 4 Cir. 11/19/14), 154 So. 3d 683, 689.
178

See Ward v. State Dep't of Transp. & Dev. (Office of Highways), 43,948 (La. App. 2 Cir. 1/28/09), 2 So.
3d 1231, 1234 (citing Hudson v. City of Bossier, 33,620 (La. App. 2d Cir. 8/25/00), 766 So.2d 738).
179

Id. at 1235.

180

Williams v. City of Marksville, 2002-1130 (La. App. 3 Cir. 3/5/03), 839 So. 2d 1129, 1132; see also M.
David Kurtz & Mark W. Frilot, Res Judicata in Louisiana: A Synthesis of Competing Interests, 53 La. B.J. 445, 446–
48 (2006) (noting that Louisiana’s requirement that the parties must be identical in both suits for either claim
preclusion or issue prelusion to apply “differs from many states and federal law, which allow non-mutual issue
preclusion where the party to the first action had the same incentive to advance a position as the party against whom
issue preclusion is being asserted”).
181

Hudson v. City of Bossier, 33,620 (La. App. 2 Cir. 8/25/00), 766 So. 2d 738, 743, writ denied, 2000-2687

33

concluded, “[u]nder issue preclusion or collateral estoppel, once a court decides an issue of fact or
law necessary to its judgment, that decision precludes relitigation of the same issue in a different
cause of action between the same parties.”182
Here, the burden to show that removal was proper lies with Defendants, and they have not
demonstrated that Pinkozie’s state law action against Defendants for their specific conduct would
have an effect on the Debtors’ estate or the chapter 11 Trustee’s causes of action under Louisiana
preclusion law. First, as stated supra, Louisiana’s res judicata law provides that final judgments
are “conclusive between the same parties,” and any issue litigated and determined is conclusive
“in any subsequent action between [the same parties.]”183 However, Defendants have not shown
that identity of the parties would exist in an action involving the Debtors, as any current or
subsequent action between Defendants and the Debtors or between Pinkozie and the Debtors
would necessarily involve different parties than the instant litigation.
The Court finds the Fifth Circuit’s analysis in Sosebee v. Steadfast Ins. Co. to be persuasive
here.184 In Sosebee, a plaintiff filed a claim against a debtor in bankruptcy court and a separate
action against the debtor’s insurer in district court.185 The Fifth Circuit considered the question of
what possible res judicata or collateral estoppel effect a judgment in the civil action against the

(La. 11/27/00), 775 So. 2d 450.
182

Id. (emphasis added); See also Williams, 839 So. 2d at 1131.

183

La. Rev. Stat. § 4231.

184

701 F.3d 1012, 1017 (5th Cir. 2012).

185

Id. at 1017–18, 1023–24.

34

insurer would have on the plaintiff’s claim in the bankruptcy case under Louisiana law. 186 The
Fifth Circuit noted that if claim preclusion applied, then the judgement in the civil action would
be dispositive in the bankruptcy case as to the amount of the debtor’s obligation to the plaintiff.187
However, the Fifth Circuit determined that, because the debtor was not a party to the civil action,
claim preclusion did not apply, and issue preclusion would likewise not bar re-litigating the issues
decided in the civil case in the bankruptcy case. 188 “Unlike the federal issue preclusion rules,
Louisiana still requires mutuality for issue preclusion.” 189 Here, as was the case in Sosebee,
Defendants have not shown that complete identity of the parties would exist in an action with the
Debtors such that claim preclusion or issue preclusion would exist.
Moreover, it is clear that in this litigation Pinkozie asserts only Louisiana state law claims
arising from the non-debtor Defendants’ own alleged misconduct as Pinkozie’s financial advisors,
such as Defendants’ alleged breach of their fiduciary duties and contractual obligations to Pinkozie
and Defendants’ alleged misrepresentations. 190 By contrast, Defendants have not sufficiently
articulated how these specific claims for Defendants’ alleged actions would result in any preclusive
effect against the Debtors or otherwise affect the Debtors’ estate.
In conclusion, the Court notes that the burden to establish subject matter jurisdiction is on
the removing party, and that “doubts regarding whether removal jurisdiction is proper should be

186

Id. at 1025–26.

187

Id. at 1026.

188

Id.

189

Id.

190

Rec. Doc. 1-3 at 8–14.

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resolved against federal jurisdiction.”191 Here, Defendants have not demonstrated that Pinkozie’s
state law claims against the non-debtor Defendants would have any conceivable effect on the
Debtors’ estate or shown how this action’s outcome could alter the Debtors’ rights, liabilities,
options, or freedom of action and impact the handling and administration of the bankrupt estate.
Thus, the Court finds that there is no claim asserted by Pinkozie upon which Defendants can
establish “related-to” jurisdiction under 28 U.S.C. § 1334.192 Therefore, the Court finds that it
lacks subject matter jurisdiction over the case and will remand this matter back to state court.
3.

Attorneys’ Fees

Finally, Pinkozie asserts that the Court should exercise its discretion to award attorneys’
fees to Pinkozie as Defendants’ removal of this case to federal court was legally improper and
done to delay these proceedings.193 28 U.S.C. § 1447(c) provides that“[a]n order remanding the
case may require payment of just costs and any actual expenses, including attorney fees, incurred
as a result of the removal.” However, “[t]here is no automatic entitlement to an award of attorney's
fees.”194 Rather, a court “may award attorney's fees when the removing party lacks an objectively
reasonable basis for removal.”195 Here, based on the foregoing analysis, the Court cannot conclude
that Defendants lacked an objectively reasonable grounds to believe that removal was proper.

191

Acuna v. Brown & Root Inc., 200 F.3d 335, 339 (5th Cir. 2000) (citing Willy v. Coastal Corp., 855 F.2d
1160, 1164 (5th Cir. 1988)).
192

See Arnold v. Garlock Inc., 288 F.3d 234, 238 (5th Cir. 2002).

193

Id. at 14.

194
Am. Airlines, Inc. v. Sabre, Inc., 694 F.3d 539, 541–42 (5th Cir. 2012) (quoting Valdes v. Wal–Mart
Stores, Inc., 199 F.3d 290, 292 (5th Cir. 2000) (holding that the “mere determination that removal was improper” does
not require a district court to award attorney's fees)).
195

Id. (quoting Howard v. St. Germain, 599 F.3d 455, 457 (5th Cir.2010) (per curiam) (citations omitted)).

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Accordingly, the Court will deny Pinkozie’s request for attorneys’ fees.
IV. Conclusion
Based on the foregoing, the Court finds that this case is not “related to” the Debtors’
bankruptcy action as defined in 28 U.S.C. § 1334, because the outcome of Pinkozie’s state law
claims against non-debtor Defendants for Defendants’ specific alleged misconduct would not
conceivably have any effect on the estate being administered in bankruptcy. 196 Moreover,
Defendants have not demonstrated that this action’s outcome could alter the Debtors’ rights,
liabilities, options, or freedom of action and impact the handling and administration of the bankrupt
estate.197 Thus, this Court finds that it lacks subject matter jurisdiction in this case, and that remand
to state court is appropriate.198 Additionally, because the Court cannot conclude that Defendants
lacked an objectively reasonable grounds to believe that removal was proper, Pinkozie’s request
for attorney’s fees pursuant to 28 U.S.C. § 1447 is denied. Accordingly,

196

Matter of Zale Corp., 62 F.3d 746, 751 (5th Cir. 1995) (citing Celotex Corp. v. Edwards, 514 U.S. 300,
307 (1995)).
197

Matter of Walker, 51 F.3d 562, 569 (5th Cir. 1995) (quotation marks and citations omitted).

See 28 U.S.C. § 1452(b) (“The court to which such claim or cause of action is removed may remand such
claim or cause of action on any equitable ground.”); 28 U.S.C. § 1447 (“If at any time before final judgment it appears
that the district court lacks subject matter jurisdiction, the case shall be remanded.”).
198

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IT IS HEREBY ORDERED that Pinkozie’s “Motion to Remand”199 is GRANTED.
IT IS FURTHER ORDERED that the case is remanded to the 24th Judicial District Court
for Jefferson Parish, State of Louisiana.
IT IS FURTHER ORDERED that Pinkozie’s request for attorney’s fees is DENIED.
NEW ORLEANS, LOUISIANA, this ______ day of March, 2017.
20th
________________________________
NANNETTE JOLIVETTE BROWN
UNITED STATES DISTRICT JUDGE

199

Rec. Doc. 16.

38