Pho An, LLC et al v. Capital One, N.A.

Filing 106

ORDER AND REASONS: ORDERED that 92 Motion to Remand to Bankruptcy Court is GRANTED. Case No. 16-14733 is REFERRED to the bankruptcy court. Signed by Judge Susie Morgan on 9/25/2017.(Reference: 16-14733)(Attachment(s) added on 9/25/2017: # 1 Bankruptcy Letter) (clc).

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
PHO AN, LLC, ET AL.,
Plaintiffs

CIVIL ACTION

VERSUS

NO. 16-14400
c/w 16-14733,
16-15802

CAPITAL ONE, N.A.,
Defendant

SECTION “E” (1)

Applies to: 16-14733
ORDER AND REASONS
Before the Court is Plaintiff Kanetha Arun Chau’s (“Chau”) motion to refer Case
No. 16-14733 to the bankruptcy court. 1 For the reasons that follow, the Court grants
Plaintiff’s motion and refers the case to the bankruptcy court.
BACKGROUND
Chau has an ownership interest in several restaurants, namely Sake 21, LLC; Pho
Ann, LLC; Pad-Thai, LLC; and Chili Thai, Inc. d/b/a Thia Chile (collectively the “company
Plaintiffs”). On January 13, 2014, Chau filed an individual voluntary petition for Chapter
11 bankruptcy in the United States Bankruptcy Court for the Eastern District of
Louisiana. 2 On January 22, 2014, Chau opened a Chapter 11 Debtor-in-Possession
account with Capital One (the “Debtor Account”). On August 7, 2015, suspecting
fraudulent activity, Capital One placed an All Funds Hold on each of the bank accounts
for which Chau had signatory authority, including the Debtor Account and the accounts

1
2

No. 16-14400, R. Doc. 92.
In re Kanetha Arun Chau, No. 14-10059, R. Doc. 1 (Bankr. E.D. La.).

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owned by Chau’s restaurants (the “Non-debtor Accounts”). 3 Twelve days later, after
conducting an investigation into the suspicious activity, Capital One lifted the All Funds
Hold, issued checks for the account balances, and closed the accounts. 4 On February 4,
2016, claiming the All Funds Hold violated section 362(a)(7) of the Bankruptcy Code,
Chau filed an Adversary Complaint and Request for Sanctions against Capital One. 5
Thereafter, on May 16, 2016, Chau amended her bankruptcy petition to include Pho Ann,
Pad-Thai, and Chili Thai. 6 In the amended complaint, Chau and the three restaurants
contend Capital One is liable to them for violations of the automatic stay provisions of the
Bankruptcy Code, breach of contract, and negligence under Louisiana Civil Code articles
2315 and 2317. 7
On August 4, 2016, the Bankruptcy Court granted Chau’s motion to withdraw Pho
Ann, LLC; Pad-Thai, LLC; and Chili Thai, Inc. from the bankruptcy, leaving only Chau
individually as the debtor in the bankruptcy court. 8 The three restaurants filed suit
against Capital One in state court on August 2, 2016, alleging breach of contract and
negligence under Louisiana Civil Code articles 2315 and 2317. 9 Capital One subsequently
removed the suit to this Court on September 1, 2016. 10 On August 17, 2016, the three
restaurants, with the addition of Sake 21, LLC, filed suit in state court, alleging the same
causes of action and seeking the same damages as the August 2, 2016 state court

Pho Ann, LLC, et al. v. Capital One, N.A., No. 16-14400, R. Docs. 58-2 at 7, 68 at 8 (E.D. La.) (“No. 1614400”).
4 No. 16-14400, R. Doc. 58-2.
5 No. 16-14400, R. Doc. 1-2 at 5; In re Kanetha Arun Chau, No. 16-14733, R. Doc. 1-4 (E.D. La.) (“No. 1614733”).
6 Id.
7 Chau v. Capital One, N.A., No. 16-1006, R. Doc. 16 (Bankr. E.D. La.) (“No. 16-1006”).
8 No. 16-1006, R. Doc. 26.
9 Pho An, LLC, et al. v. Capital One, N.A., No. 2016-13199, 22nd Judicial District Court for the Parish of St.
Tammany, State of Louisiana.
10 Pho Ann, LLC, et al. v. Capital One, N.A., No. 16-14400 (E.D. La.).
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petition. 11 Capital One removed the matter to this Court on October 24, 2016. 12
On September 15, 2016, Capital One filed a motion to withdraw the reference to
the bankruptcy court of Chau’s adversary action, 13 alleging the state court petition in case
number 16-14733 and the complaint in the bankruptcy action set forth the same operative
facts and causes of action, except for the automatic stay violation claim. 14 Capital One also
requested that the withdrawn proceeding be consolidated with case number 16-14400.
On November 1, 2016, this Court granted Capital One’s motion, noting that “[a]lthough
the adversary proceeding contains a core bankruptcy claim, it is appropriate in this matter
to withdraw the reference because of the substantial overlap of the facts and issues in the
three cases.” 15
Capital One did not seek mandatory withdrawal of the reference. The Court,
instead, determined whether withdrawal was permissive in this case. In its assessment,
the Court considered whether the proceedings involve a jury demand and whether
withdrawal would further the goals of promoting uniformity in bankruptcy
administration, reducing forum shopping and confusion, fostering the economical use of
the debtor’s and creditors’ resources, and expediting the bankruptcy process. 16 At that
time, Capital One argued that the non-core claims for breach of contract and negligence
predominated. In the interest of judicial economy and because a jury demand was
available to Capital One on the non-core claims, the Court withdrew the reference, noting
that “[t]he claims pending in the adversary proceeding and the pending civil actions have

Sake 21, LLC, et al. v. Capital One, N.A., No. 2016-13305, 22nd Judicial District Court for the Parish of
St. Tammany, State of Louisiana.
12 Sake 21, LLC, et al. v. Capital One, N.A., No. 16-15802, R. Doc. 1 (E.D. La.) (“No. 16-15802”).
13 No. 16-14733, R. Doc. 1.
14 In re Kanetha Arun Chau, No. 16-14733, R. Doc. 1 (E.D. La.).
15 No. 16-14733, R. Doc. 12.
16 See In re OCA, No. 06-3811, 2006 WL 4029578, at *5 (E.D. La. 2006).
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overlapping facts, and will require the use of the same witnesses and evidence.” 17
Following a status conference on November 3, 2016, 18 the Court consolidated all three
cases. 19
On September 15, 2017, the Court was informed that Sake 21 LLC had settled its
claims against Capital One. 20 Thereafter, on September 25, 2017, the Court remanded
Chili Thai, Inc., Pad Thai, LLC, and Pho An, LLC’s claims against Capital One, 21 to the
22nd Judicial District Court for the Parish of St. Tammany for lack of subject matter
jurisdiction, leaving Chau’s adversary complaint as the only matter before this Court.
ANALYSIS
In her motion to refer this case back to the bankruptcy court, Chau argues that,
given the case’s procedural background, “the removal of this action from the United States
Bankruptcy Court for the Eastern District of Louisiana to the United States District Court
for the Eastern District of Louisiana is no longer necessary or required.” 22 Because the
only claim left in this case is her “core” bankruptcy claim, Plaintiff contends, “remand
would promote uniform Bankruptcy administration, reduce confusion, be an economical
use of the parties’ resources, and expedite the Bankruptcy process.” 23 In opposition,
Capital One avers that, contrary to Chau’s assertion, more than her bankruptcy claim
remains in this case—specifically, the contract and Louisiana tort claims she alleged in
her amended bankruptcy petition. 24 According to Capital One, those claims still
No. 16-14733, R. Doc. 12 at 5.
No. 16-14733, R. Doc. 14.
19 Id.
20 No. 16-14400, R. Doc. 88. The Court retained jurisdiction to enforce the settlement agreement if
settlement is not consummated within sixty days. Id.
21 The Court remanded Case Nos. 16-15802 and 16-14400, the cases in which Chili Thai, Inc., Pad Thai, LLC,
and Pho An, LLC are plaintiffs. R. Docs. 104, 105.
2222 No. 16-14400, R. Doc. 92 at 5.
23 R. Doc. 92-1.
24 No. 16-14400, R. Doc. 100 at 3–5.
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predominate in this matter, and therefore, the case should continue in district court. 25
The Court agrees that referral is in order. Although the Seventh Amendment
provides Capital One a right to a jury trial with respect to Chau’s state law claims, 26 it has
made no such demand. 27 “The case law is clear that a District Court is not compelled to
withdraw a reference simply because a party is entitled to a jury trial.” 28 More
importantly, it has become clear to the Court that the bankruptcy issues predominate in
this action. 29 This Court’s involvement in the two state cases having ended, there is no
longer a significant overlap of facts, witnesses, and evidence. Because the reasons to
withdraw the reference no longer exist, the Court refers the case to bankruptcy court
pursuant to 28 U.S.C. § 157. 30
CONCLUSION
IT IS ORDERED that Case No. 16-14733 be REFERRED to the bankruptcy
court.
New Orleans, Louisiana, this 25th day of September, 2017.
______________________ _________
SUSIE MORGAN
UNITED STATES DISTRICT JUDGE
Id. at 8.
See In re Gulf States Long Term Acute Care of Covington, L.L.C., 455 B.R. 869, 876 (E.D. La. 2011).
27 “[E]ven if a party does have a right to a jury trial, a motion to withdraw is premature until such time as it
is determined that a jury trial must be conducted.” In re OCA, 2006 WL 4029578, at *5.
28 Official Comm. of Unsecured Creditors of Enron Corp. v. Lay (In re Enron Corp.), 295 B.R. 21, 27
(S.D.N.Y. 2003).
29 In fact, in her motion, Plaintiff states, “The settlement and remand of the Company Partners State Court
Cases has had effect of removing the non-core issues in the Chau vs. Capital One, NA Case,” R. Doc. 92-1
and that “the removal of this action from the United States Bankruptcy Court for the Eastern District of
Louisiana to the United States District Court for the Eastern District of Louisiana is no longer necessary or
required inasmuch as here are no longer non-core items present.” R. Doc. 92. The Plaintiff apparently has
abandoned her state law claims.
30 See In re Nat’l Gypsum Co., 139 B.R. 397, 415 (N.D. Tex. 1992) (citing In re White Motor Corp., 42 B.R.
693, 705 (N.D. Ohio 1984)) (“Bankruptcy courts provide the expertise and efficiency intended by Congress
in adjudication of core bankruptcy matters.”); In re Johns-Manville Corp. 63 B.R. 600, 602 (S.D.N.Y. 1986)
(“[W]ithdrawal is mandatory only when consideration of non-Code federal statutes is necessary for the
resolution of a case or proceeding and . . . substantial and material consideration of those non-bankruptcy
statutes must be involved before withdrawal will be mandatory.” (internal quotations omitted)).
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