Credit Suisse AG, Cayman Islands Branch v. Appaloosa Investment Limited Partnership I, BOKF, N.A. et al

Filing 40

OPINION AND ORDER re: 32 MOTION to Transfer Case to the Northern District of Illinois. filed by Palomino Fund, Ltd., Wilmington Savings Fund Society, FSB, Special Value Expansion Fund, LLC, Appaloosa Investment Limited Partners hip I, Oaktreee FF Investment Fund LP, Centerbridge Credit Partners Master LP, Delaware Trust Company, OCM Opportunities Fund VI, L.P., Tennembaum Opportunities Partners V, LP, BOKF, N.A., Opportunities Fund VI, L.P., 29 MOTION to Remand to State Court or Abstain. filed by Credit Suisse AG, Cayman Islands Branch. For the foregoing reasons, defendants' motion to transfer is GRANTED and plaintiff's cross-motion is DENIED. The Clerk of Court is directed to cl ose these motions [Docket Nos. 29 and 32] and transfer this case to the United States District Court for the Northern District of Illinois. SO ORDERED. (As further set forth within this Opinion.) (Signed by Judge Shira A. Scheindlin on 9/9/2015) (ajs)

Lien Secured Parties”), and defendants, as described more fully herein, are either
indenture trustees for second priority creditors or second priority creditors
themselves. On January 15, 2015, CEOC and certain of its affiliates (the
“Debtors”), filed petitions for relief under chapter 11 of the Bankruptcy Code in
the Bankruptcy Court for the Northern District of Illinois (the “Bankruptcy Case”
or the “Voluntary Case”). Three months later, on April 7, plaintiff filed this action
in New York State Supreme Court. The Debtors are not parties to this action.
Defendants removed this action to this Court pursuant to the
bankruptcy removal statute.2 They now seek an order transferring the action to the
Northern District of Illinois pursuant to either the bankruptcy venue statute3 or the
general venue statute.4 Plaintiff cross-moves, asserting that this Court is required
to abstain from hearing this case under section 1334(c)(2) of Title 28 of the United

2

See 28 U.S.C. § 1452(a) (“A party may remove any claim or cause of
action in a civil action . . . to the district court for the district where such civil
action is pending, if such district court has jurisdiction of such claim or cause of
action under section 1334 of this title.”).
3

See id. § 1412 (“A district court may transfer a case or proceeding
under title 11 to a district court for another district, in the interest of justice or for
the convenience of the parties.”).
4

See id. § 1404(a) (“For the convenience of parties and witnesses, in
the interest of justice, a district court may transfer any civil action to any other
district or division where it might have been brought or to any district or division
to which all parties have consented.”).
2

States Code or, in the alternative, that the case should be equitably remanded to the
New York State Supreme Court under section 1452(b). For the following reasons
plaintiff’s motion is DENIED and defendants’ motion is GRANTED.
II.

BACKGROUND
A.

The Parties
1.

Credit Suisse and the Debtors’ Debt Structure

The Complaint states that Credit Suisse has the authority to enforce
the terms of the ICA for the benefit of holders of: (i) CEOC’s first lien bank debt
(the “First Lien Bank Debt”), which was issued by CEOC pursuant to a Third
Amended and Restated Credit Agreement dated as of July 25, 2014 (the “Credit
Agreement”) and (ii) first lien notes issued by CEOC (the “First Lien Notes”) and
governed by Indentures dated June 10, 2009, February 14, 2012, August 22, 2012,
and February 15, 2013, respectively (the “First Lien Indentures”).5 Thus, the First
Lien Secured Parties represented by Credit Suisse include the holders of the First
Lien Bank Debt and the First Lien Notes, as well as UMB Bank, NA (“UMB”), the

5

See Complaint ¶ 8. There are two additional Intercreditor Agreements.
The first, dated January 28, 2008, governs the relationship between first lien
creditors and certain of CEOC’s unsecured noteholders. The third, dated June 10,
2009, governs the relationship among holders of CEOC’s First Lien Bank Debt and
First Lien Notes. See id. ¶ 4.
3

Indenture Trustee for the First Lien Notes.6 The Complaint explains that as of the
filing of the Bankruptcy Case, CEOC’s debt structure included the following: (i)
the First Lien Bank Debt governed by the Credit Agreement; (ii) the First Lien
Notes governed by the First Lien Notes Indentures; (iii) three series of Second Lien
Notes governed by Second Lien Indentures dated December 24, 2008 (the “2008
Indenture”), April 15, 2009 (the “2009 Indenture”), and April 16, 2010 (the “2010
Indenture”); and (iv) four series of Unsecured Notes, some of which were issued as
early as May 27, 2005.7
Although the ICA was executed in 2008, it governs the priority of
subsequent debt issuances as well. This includes CEOC’s spring 2014 transaction
which raised a new tranche of First Lien Bank Debt in the amount of $1.75 billion
(the “B-7 Transaction”). “Proceeds of the B-7 Transaction were used to pay down
a portion of existing debt issued by CEOC, including debt issued under other
tranches of the Credit Agreement.”8
As security for all obligations owing to the First Lien Secured Parties,
CEOC “granted first priority liens and mortgages on, security interests in, and

6

See id. ¶ 4.

7

See id. ¶ 22.

8

Id. ¶ 5.
4

collateral assignments, charges, or pledges of [Common] Collateral” (the “First
Priority Liens”).9 According to Credit Suisse, the First Lien Secured Parties made
applicable UCC filings and mortgage recordings to perfect the First Priority Liens.
In addition, as is relevant here, on October 15 and 16, 2014, the First Lien Secured
Parties entered into certain deposit account control agreements (“DACAs”) with
U.S. Bank National Association and Wells Fargo Bank, National Association, to
perfect certain of the First Priority Liens.10
2.

Defendants, the Wilmington Action, and the Bankruptcy
Cases

Each defendant is either an indenture trustee for second priority
creditors or a second priority creditor itself. As such, each defendant is subject to
the ICA.
a.

WSFS and the Wilmington Action

Defendant Wilmington Savings Fund Society, FSB (“WSFS”), is a
successor Trustee under the 2009 Indenture.11 On August 4, 2014, WSFS, acting
in its capacity as Indenture Trustee, filed a lawsuit in Delaware Chancery Court
against CEOC and other parties (the “Wilmington Action”). The suit alleges

9

Id. ¶ 23.

10

See id. ¶ 24.

11

See id. ¶ 18.
5

fraudulent transfers, breaches of fiduciary duty, and claims arising from a payment
guarantee of CEOC’s parent, Caesars Entertainment Corporation (“CEC”).12 The
alleged fraudulent conveyances include the transfer of eight lucrative casino, hotel,
and entertainment properties in Las Vegas, New Orleans, and Baltimore, as well as
valuable intellectual rights and CEOC’s internet gaming business (the “Property
Transfers”). The Complaint alleges that the Property Transfers involve the transfer
of “Common Collateral” within the meaning of the ICA.13
b.

The Petitioning Creditors and the Involuntary Case

Defendants Appaloosa Investment Limited Partnership I
(“Appaloosa”), OCM Opportunities Funds VI, L.P. (“OCM”), and Special Value
Expansion Fund, LLC (the “Petitioning Creditors”), are all holders of Second Lien
Notes.14 On January 12, 2015, the Petitioning Creditors filed an involuntary
petition under chapter 11 of the Bankruptcy Code against CEOC in the United
States Bankruptcy Court for the District of Delaware (the “Involuntary Case”).15
The timing of the Involuntary Case was no accident. On December

12

See id. ¶ 35.

13

See id.

14

See id. ¶¶ 9, 14, 16.

15

See id. ¶ 37.
6

19, 2014, CEC and CEOC publicly disclosed in Form 8-K filings with the
Securities and Exchange Commission that they had entered into a restructuring
support agreement (the “RSA”) with certain holders of First Lien Notes that would
require CEOC to file a chapter 11 case on or after January 15, 2015, but no later
than January 20, 2015.16 “It thus was widely known that CEOC hoped to file for
Chapter 11 protection to implement the restructuring in the window between
Jan[uary] 15 and Jan[uary] 20.”17 According to the Complaint, the Petitioning
Creditors deliberately timed the filing of the Involuntary Case so that it would
occur fewer than ninety days after CEOC executed the DACAs, so that the
Petitioning Creditors could seek to avoid the perfection of such liens as a
preference under section 547 of the Bankruptcy Code.18
The Petitioning Creditors also filed a motion requesting the
appointment of an examiner pursuant to section 1104(c) of the Bankruptcy Code.19
The filing of the Involuntary Case resulted in an automatic stay, pursuant to section
362(a) of the Bankruptcy Code, of all but two of the claims asserted in

16

See id. ¶ 36.

17

Id. (internal quotation marks and alterations omitted).

18

See id. ¶ 38.

19

See id. ¶ 44.
7

the Wilmington Action.20 On January 28, 2015, the Delaware Bankruptcy Court
transferred the Involuntary Case to the Northern District of Illinois, where the
Voluntary Case had been pending since January 15. However, the Petitioning
Creditors have made a motion in the Illinois Bankruptcy Court to consolidate the
Involuntary Case with the Voluntary Case. According to the Complaint, “[t]he
only reason to make such a request is . . . to preserve the ability of the Petitioning
[Creditors, WSFS,] or others to attack as a preference the DACAs . . . .”21
c.

The Committee Defendants

Defendant BOKF, N.A. (“BOKF”) is the successor Trustee and
Collateral Agent under the 2010 Indenture.22 Defendant Delaware Trust Company
(“DTC”) is successor Trustee and Collateral Agent under the 2008 Indenture.23
Defendants Centerbridge Credit Partners Master LP, Oaktree FF Investment Fund
LP (“Oaktree”), Palomino Fund, Ltd. (“Palomino”), Tennenbaum Opportunities
Partner V, LP (“Tennenbaum”), are the holders of Second Lien Notes.24
20

Those are the claims against CEC to enforce the payment guarantee.

21

Id. ¶ 42.

22

See id. ¶ 10.

23

See id. ¶ 12.

24

See id. ¶¶ 11, 13, 15, 17. Defendant Oaktree is an affiliate of
Petitioning Creditor OCM; Tennenbaum is an affiliate of Petitioning Creditor
Special Value Expansion Fund; and Palomino is an affiliate of Petitioning Creditor
8

On February 5, 2015, the United States Trustee appointed these
Second Lien Note holders, together with BOKF, DTC, and WSFS (together, the
“Committee Defendants”), to the Official Committee of Second Priority
Noteholders (the “Committee”) pursuant to section 1102 of the Bankruptcy Code.25
Thereafter, the Committee filed a motion for appointment of an examiner.26
B.

The ICA
The purpose of the ICA is to preserve the priority of first lien debt. It

gives the First Lien Secured Parties the exclusive right to “enforce rights [and]
exercise remedies . . . with respect to . . . Common Collateral,” which includes
substantially all of the present and future property of CEOC and the other
Debtors.27 “[U]ntil the First Lien Secured Parties are paid in full in cash, the
Intercreditor Agreement entitles the First Lien Secured Parties priority of recovery
from collateral vis-à-vis holders of Second Lien Notes, such as the Defendants.”28
Under section 4.1 of the ICA, this priority includes the right to

Defendant Appaloosa. See 6/11/15 Declaration of Joshua M. Mester, counsel to
defendants, in Support of Motion to Transfer, ¶ 6.
25

See Complaint ¶ 47.

26

See id. ¶ 49.

27

ICA §§ 1.1, 3.1(a)(ii).

28

Complaint ¶ 28.
9

payment from “the sale or other disposition of, or collection on, such Common
Collateral . . . upon the exercise of remedies as a secured party.”29 Section
3.1(a)(ii) provides that the First Lien Secured Parties have the exclusive right to
enforce rights and exercise remedies with respect to Common Collateral, until such
time as they are paid in full.30 According to the Complaint, “[t]his right includes
instituting court actions to enforce such rights or remedies — including actions
asserting fraudulent transfer or avoidance claims.”31 Section 2.2 prohibits Second
Lien Holders or their Indenture Trustees from taking “any action to challenge . . .,
directly or indirectly, in any proceeding (including any Insolvency or Liquidation
Proceeding), the validity, perfection, priority or enforceability of . . . a Lien
securing any” debt owed to the First Lien Creditors.32
Notably, section 8.7 is a forum selection clause. It states that the
parties
consent to the nonexclusive jurisdiction of any state or federal
court located in New York County, New York, [and that] . . . [t]he
parties hereto waive any objection to any action instituted
hereunder in any such court based on forum non conveniens, and

29

Id. (internal quotation marks omitted).

30

See id. ¶ 29.

31

Id.

32

Id. ¶ 30 (internal quotation marks omitted).
10

any objection to the venue of any action instituted hereunder in
any such court.
C.

The Removed Claims
The Complaint alleges that defendants, as “holders of CEOC Second

Lien Notes,” breached the ICA by “tak[ing] actions that are deliberately intended
to result (and have resulted in) challenges to or the invalidation of First Lien
Secured Parties’ liens on certain CEOC assets or to impermissibly receive and/or
collect Common Collateral . . . that is due first to holders of First Lien Bank
Debt.”33 The First Cause of Action seeks declaratory and injunctive relief against
WSFS, alleging that WSFS breached the ICA by, among other things, seeking to
enforce rights and remedies with respect to Common Collateral; to recover money
damages before the debts owed to the First Lien Secured Parties are discharged;
and to challenge the B-7 Transaction. This conduct “directly attacks the validity,
perfection, priority or enforceability of certain of the First Priority Liens, in
violation of section 2.2 of the Intercreditor Agreement.”34
The Second Cause of Action seeks declaratory and injunctive relief
against the Petitioning Creditors and WSFS in connection with the involuntary

33

Id. ¶ 6.

34

Id. ¶¶ 53-57.
11

petition and other actions contesting the First Priority Liens.35 Among other
things, Credit Suisse alleges that seeking to avoid the DACAs is precluded by the
ICA.36 The Complaint states that WSFS “participated in this breach of the
Intercreditor Agreement when, acting as Trustee for the Second Priority Secured
Parties, it appeared in the Involuntary Case and took actions to support the
[Petitioning Creditors.]”37 Furthermore, the Petitioning Creditors and WSFS
“contested or supported others in contesting the First Priority Liens by requesting
an examiner to . . . investigate the Property Transfers, the B-7 Transactions, and
the perfection of certain of the First Priority Liens through the DACAs, in both
Delaware and Illinois.”38
The Third Cause of Action is against the Committee Defendants.39
The Complaint notes that on February 13, 2015, “the Debtor took the almost
unprecedented action of requesting an examiner to investigate certain of its own
actions while solvent — namely, the pre-petition transfer of a number of its hotels

35

See id. ¶¶ 59-64.

36

See id. ¶ 60.

37

Id. ¶ 61.

38

Id. ¶ 63.

39

See id. ¶¶ 47-51, 66-73.
12

and casinos.”40 On February 17, 2015, the Committee Defendants filed a motion
seeking the appointment of an examiner (the “Second Examiner Motion”). Credit
Suisse alleges that the “primary purpose of the Second Examiner Motion was to
cause any examiner . . . to investigate . . . the Property Transfers, the B-7
Transaction, and the DACAs” in violation of the ICA.41
By bringing this action, Credit Suisse seeks to:
a.

b.

c.

d.

Enjoin Defendants, including every member of the
Committee, “from taking any action to challenge, contest or
support any other person in contesting or challenging,
directly or indirectly, in any proceeding (including in
CEOC’s bankruptcy proceedings), the validity, perfection,
priority or enforceability of any of the Bank Debt Liens”;42
Enjoin Defendants, including every member of the
Committee, “from taking any action to enforce rights or
exercise remedies with respect to the Property Transfers or
the B-7 Transaction”;43
Enjoin Defendants “from seeking to recover or causing the
[Committee] to seek to recover for any professional fees
incurred in connection with any action that violates the
Intercreditor Agreement”;44 and
Require the Defendants “to segregate and pay over for the
benefit of holders of First Lien Debt any Common
Collateral or proceeds thereof received by the holders of

40

Id. ¶ 48 (emphasis in original).

41

Id. ¶ 49.

42

Id. at ¶ 75.

43

Id. at ¶ 76.

44

Id. at ¶ 77.
13

Second Lien Notes, including but not limited to any
professional fees paid out of the Common Collateral or
proceeds thereof,” including amounts paid to members of
or professionals appointed to represent the Committee.45
D.

Earlier Related Proceedings
1.

Motion to Disband the Committee

On February 19, 2015, a motion was filed by the Debtors in the
Voluntary Case seeking to disband the Committee. The Debtors asserted three
grounds for relief, the first of which was that “an intercreditor agreement to which
each Committee member is a party would prevent the Committee from performing
many of its statutory functions” under section 1103(c) of the Bankruptcy Code.46
“UMB Bank, the first lien notes indenture trustee . . ., the Ad Hoc Committee of
First Lien Noteholders and the Ad Hoc Committee of First Lien Bank Lenders,” all
first lien holders represented by Credit Suisse under the ICA, joined the Debtors’
motion.47 These first lien holders represent $11.6 billion of CEOC’s first lien
debt.48

45

Id. at ¶ 78.

46

3/9/15 Memorandum Opinion by Judge A. Benjamin Goldgar, Bankr.
N.D. Ill. 15-01145, ECF No. 633 (“Committee Order”), at 3.
47

Id.

48

See Defendants’ Memorandum in Support of Motion to Transfer
Venue (“Transfer Mem.”), at 9.
14

On March 9, 2015, the Bankruptcy Court denied the motion. The
Bankruptcy Court explained that under section 1102 of the Bankruptcy Code, the
United States Trustee was entrusted with the authority to appoint creditors
committees, and that a bankruptcy court’s power with respect to such committees
was circumscribed.49 The court explained that “nothing in section 1102(a) confers
on the court the power to disband a committee a U.S. Trustee has appointed under
section 1102(a)(1).”50 The court further held that section 105(a) did not provide a
basis to disband the Committee.51
2.

Objections to the Committee’s Retention of Professionals

The Ad Hoc First Lien Noteholder Committee and UMB objected to
the Committee’s applications to retain professionals, and requested that the
Bankruptcy Court impose a cap on payment of those professionals. On March 25,
2015, the Bankruptcy Court rejected these objections and approved the
Committee’s retention of professionals.52
3.

49

Objections to the Consolidation of the Involuntary and

See Committee Order at 4.

50

Id. (citing In re Dewey & LeBoeuf LLP, No. 12-12321, 2012 WL
5985325, at *3 (Bankr. S.D.N.Y. Nov. 29, 2012)).
51

See id. at 6-8.

52

See Transfer Mem. at 10.
15

Voluntary Cases
After the Involuntary Case was transferred to Illinois, the Petitioning
Creditors moved to consolidate the two proceedings so that CEOC’s official filing
date would be deemed January 12 (which would leave open the possibility of
challenging the DACAs as preferences). The First Lien Parties opposed the
motion, arguing in part that the Involuntary Case was filed in bad faith “to gain
leverage in the restructuring process and to preserve the opportunity to avoid a
preference, notwithstanding that the Petitioning Creditors are contractually
prohibited through an intercreditor agreement from challenging senior lender
liens.”53 The Ad Hoc First Lien Noteholders Committee and UMB asserted that
the involuntary petition, if filed to “capture a preference,” would “constitute a
violation of the intercreditor agreement,” and attached the ICA as “Exhibit A” to
their objection.54

53

3/9/15 Objection of the Ad Hoc Committee of First Lien Bank
Lenders to the Petitioning Creditors’ Motion to Consolidate, Ex. A to the 6/11/15
Declaration of Lanora C. Pettit, counsel to plaintiff (“Pettit Decl.”), ¶¶ 2, 12
(“Moreover, the filing of the involuntary petition exposes the Petitioning Creditors’
other motivation — to attempt to use this Court for their own agenda and
circumvent the restrictions imposed by their intercreditor agreement with the first
lien lenders.”) (internal footnotes, including one which cites to section 2.2 of the
Intercreditor Agreement, omitted).
54

3/9/15 First Lien Notes’ Joint Objection to Consolidation Motion
(Bankr. N.D. Ill. 15-03193 ECF No. 34), ¶ 7.
16

The Debtors moved to suspend the proceedings related to the
Involuntary Case. The Debtors argued that the DACAs were so crucial to the RSA
negotiated with holders of first lien notes that their avoidance jeopardized the
Debtors’ ability to reorganize.55 On March 25, 2015, the Bankruptcy Court denied
the Debtors’ motion, and deferred ruling on the motion to consolidate until after
trial,56 which is now scheduled for October 2015.57
III.

APPLICABLE LAW
A.

The Bankruptcy Removal Statute
Section 1452 governs the removal and remand of claims related to

55

See 3/18/15 Alleged Debtors’ Omnibus Reply in Support of Motion to
Suspend Proceedings Related to Involuntary Petition Pursuant to Section 305 of
the Bankruptcy Code (“Reply in Support of Motion to Suspend”) (Bankr. N.D. Ill.
15-03193 ECF No. 55), ¶ 25 (“Debtor entered into control agreements that
perfected liens on certain cash [i.e., the DACAs] as part of a six-month negotiation
with senior creditors that eventually achieved the RSA. Debtor concluded that the
RSA provides Debtor and its 172 subsidiaries with substantial benefits, including
(a) support from the holders of almost $5 billion of the first lien notes for a
comprehensive plan of reorganization, (b) a blueprint for negotiations with other
stakeholders around a value maximizing reorganization strategy, and (c)
contributions valued at a minimum of $1.5 billion from CEC to settle potential
claims against CEC. If the Debtor consents to the involuntary petition date or it is
otherwise forced upon Debtor prematurely, the RSA is likely to terminate and
these benefits would be lost.”).
56

See 3/25/15 Hearing Transcript, Ex. C to Pettit Decl., at 120:3-124:23.
See also Plaintiff’s Brief in Opposition to Defendants’ Motion to Transfer Venue
(“Transfer Opp.”), at 19.
57

See Transfer Opp. at 20 n.10.
17

bankruptcy actions. Subsection (a) permits removal of “any claim . . . in a civil
action . . . to the district court for the district where such civil action is pending,” if
the district court has bankruptcy jurisdiction over the claim. “Federal district
courts have original, though not exclusive, jurisdiction over cases “arising under
title 11 or arising in or related to a case under title 11.”58 “Arising under” and
“arising in” cases are core matters, while “related to” proceedings are non-core.
“‘Arising under’ jurisdiction exists where one invokes a substantive
right created by federal bankruptcy law.”59 “‘[A]rising in’ proceedings are those
that are not based on any right expressly created by title 11, but nevertheless,
would have no existence outside of the bankruptcy.”60 A proceeding is “related to”
a case under title 11, “if the outcome of the litigation might have any conceivable
effect on the bankruptcy estate, or has any significant connection with the bankrupt
estate.”61

58

28 U.S.C. § 1334(a).

59

Glinka v. Murad (In re Housecraft Indus. USA, Inc.), 310 F.3d 64, 70
(2d Cir. 2002).
60

Wood v. Wood (In re Wood), 825 F.2d 90, 97 (5th Cir. 1987). Accord
Baker v. Simpson, 613 F.3d 346, 351 (2d Cir. 2010) (same).
61

Lead I JV, LP v. North Fork Bank, 401 B.R. 571, 581 (E.D.N.Y.
2009) (quotation marks omitted). Accord Publicker Indus., Inc. v. United States
(In re Cuyahoga Equip. Corp.), 980 F.2d 110, 114 (2d Cir. 1992) (“The test for
determining whether litigation has a significant connection with a pending
18

Subsection (b) provides that “[t]he court to which [a] claim or cause
of action is removed may remand such claim or cause of action on any equitable
ground.” As one court explains, “[a]n “equitable” ground is one that is “fair and
reasonable.”62 Other factors to be considered in remanding a case include: (1)
whether issues of state law predominate; (2) whether judicial economy would be
served by equitable remand; (3) whether § 1334(b) is the sole basis for exercising
federal jurisdiction; (4) whether the proceeding involves non-debtors; (5) the
degree of relatedness or remoteness of the proceeding to the main bankruptcy case;
and (6) the likelihood that the proceeding was commenced in a particular forum
because of forum shopping on the part of one of the parties.63
B.

Transfer of a Case or a Proceeding
Section 1412 provides that “[a] district court may transfer a case or

proceeding under title 11 to a district court for another district, in the interest of
justice or for the convenience of the parties.” By its terms, this provision applies to
bankruptcy cases as well as core proceedings. Non-core proceedings are governed
by section 1404(a), which provides that “[f]or the convenience of parties and

bankruptcy proceeding is whether its outcome might have any conceivable effect
on the bankrupt estate.”) (quotation marks omitted).
62

Shiboleth v. Yerushalmi, 412 B.R. 113, 117 (S.D.N.Y. 2009).

63

See id. (citing Rahl v. Bande, 316 B.R. 127, 135 (S.D.N.Y. 2004)).
19

witnesses, in the interest of justice, a district court may transfer any civil action to
any other district or division where it might have been brought or to any district or
division to which all parties have consented.”
The standards used to determine transfer under section 1412 and
1404(a) are substantially similar.64 Courts typically consider such factors as: (1)
the plaintiff’s choice of forum; (2) the locus of operative facts; (3) convenience
factors, such as the location of parties, witnesses, and evidence; (4) familiarity of
the court with the applicable law; and (5) interests of justice, including trial
efficiency.65 “Although a plaintiff’s choice of forum is normally given substantial
weight, it is well-established ‘that the existence of a related action pending in the
transferee court weighs heavily towards transfer.’”66
In applying the “interest of justice” standard, the Second Circuit has
recognized that “the district in which the underlying bankruptcy case is pending is
presumed to be the appropriate district for hearing and determination of a

64

See Delaware Trust Co. v. Wilmington Trust, N.A., 534 B.R. 500, 519
(S.D.N.Y. 2015); Alliance Comm’cns Grp., Inc. v. Northern Telecom, Inc., 65 B.R.
581, 585 (S.D.N.Y. 1986).
65

See CCM Pathfinder Pompano Bay, LLC v. Compass Fin. Partners
LLC, 396 B.R. 602, 608 (S.D.N.Y. 2008) (citing In re Northwest Airlines Corp.,
384 B.R. 51, 60 (S.D.N.Y. 2008)).
66

Id. (quoting APA Excelsior III L.P. v. Premiere Techs., Inc., 49 F.
Supp. 2d 664, 668 (S.D.N.Y. 1999)).
20

proceeding in bankruptcy.”67 The Second Circuit also stated that the standard is
“broad and flexible . . . [and] must be applied on a case-by-case basis [because i]t
contemplates [ ] consideration of whether transferring venue would promote the
efficient administration of the bankruptcy estate, judicial economy, timeliness, and
fairness-factors . . . .”68
C.

Mandatory Abstention
The jurisdictional statute addressing bankruptcy cases and

proceedings requires that district courts and bankruptcy judges abstain from
hearing proceedings based on state law claims in certain circumstances.
Abstention is mandatory under section 1334(c)(2) of Title 28 of the United States
Code when the party seeking such abstention demonstrates that (1) it timely moved
for abstention; (2) the proceeding is based on state law; (3) the proceeding
concerns “non-core,” as opposed to “core,” bankruptcy claims; (4) there is no
independent basis for federal jurisdiction other than bankruptcy jurisdiction; (5) the
action was commenced in state court; and (6) the action can be “timely

67

Gulf States Exploration Co. v. Manville Forest Prods. Corp. (In re
Manville Forest Prods. Corp.), 896 F.2d 1384, 1391 (2d Cir. 1990).
68

Id. Accord D.H. Blair & Co. v. Gottdiener, 462 F.3d 95, 106 (2d Cir.
2006) (“District courts have broad discretion . . . and notions of convenience and
fairness are considered on a case-by-case basis.”) (citing Cuyahoga Equip. Corp.,
980 F.2d at 117).
21

adjudicated” in state court.
The Second Circuit explains that
“Four factors come into play in evaluating § 1334(c)(2)
timeliness: (1) the backlog of the state court’s calendar relative
to the federal court’s calendar; (2) the complexity of the issues
presented and the respective expertise of each forum; (3) the
status of the title 11 bankruptcy proceeding to which the state
law claims are related; and (4) whether the state court
proceeding would prolong the administration or liquidation of
the estate.”69
These four factors assist courts in weighing the “balance, struck by Congress,
between, on the one hand, creating a federal forum for purely state law cases
which, due to delay, might impinge upon the federal interest in the administration
of a bankruptcy estate, and, on the other, ensuring that purely state law cases
remain in state courts when they would not significantly affect that federal
interest.”70
IV.

DISCUSSION
I have jurisdiction over this action pursuant to section 1334(b) of title

28 of the United States Code, which provides that “the district courts shall have
69

Parmalat Capital Fin. Ltd. v. Bank of Am. Corp., 671 F.3d 261, 266
(2d Cir. 2012) (per curiam) (quoting Parmalat Capital Fin. Ltd. v. Bank of Am.
Corp., 639 F.3d 572, 580 (2d Cir. 2011)).
70

Id. at 269 (citing Silverman v. General Railway Signal Co. (In re Leco
Enters., Inc.), 144 B.R. 244, 252 (S.D.N.Y. 1992) (stating that section 1334
mandatory abstention “comports with principles of federalism”)).
22

original but not exclusive jurisdiction of all civil proceedings arising under title 11,
or arising in or related to cases under title 11.”71 At the very least this action is
“related to” a case under title 11 in that it will have a conceivable effect on the
pending bankruptcy.72

71

“‘Proceedings’ is interpreted broadly to include any civil matter or
dispute that occurs during the administration of a bankruptcy case.” In re New
York Skyline, Inc., 512 B.R. 159, 172 (S.D.N.Y. 2014), aff’d, 601 Fed. App’x 52
(2d Cir. 2015). Pursuant to Federal Rule of Bankruptcy Procedure 7001(10), “a
proceeding to determine a claim or cause of action removed under 28 U.S.C.
§1452” is an “adversary proceeding.”
72

Plaintiff argues that “there is no basis for claiming that . . . [the First
Cause of Action in the Complaint] even is ‘related to’ CEOC’s bankruptcy . . .
[because it] states a claim for breach of contract against [WSFS] for impermissibly
exercising a right with respect to Common Collateral when it brought a fraudulent
transfer action in August 2014, five months prior to CEOC’s bankruptcy.”
Memorandum of Law in Support of Plaintiff’s Motion for Abstention or Remand
(“Abstention Mem.”), at 6 (emphasis in original). However, the fact that the
Wilmington Action was brought prior to the Bankruptcy Case is not relevant to
whether the First Cause of Action is “related to” the Bankruptcy Case. Whether an
action is core or non-core is determined at the time an action is filed. This action
was filed after the filing of the Bankruptcy Case. See In re WorldCom, Inc. Sec.
Litig., 294 B.R. 553, 556 (S.D.N.Y. 2003) (explaining that “the existence of federal
jurisdiction ordinarily depends on the facts as they exist when the complaint is
filed”) (internal quotation marks omitted). The First Cause of Action is “related
to” the Bankruptcy Case because it seeks to enjoin conduct relating to property of
the estate (or property that was allegedly fraudulently transferred by the Debtors to
non-debtor entities), and to prevent WSFS from challenging the B-7 Transaction.
Thus, this cause of action — which relates to both property of the estate and rights
and prioritization among creditors — has a conceivable effect on the Bankruptcy
Case.
23

A.

Transfer73
While the parties dispute whether the claims are core or non-core, I

need not resolve this issue. This is because the considerations under section 1412
— which applies to core matters — and 1404(a) — which applies to non-core
matters — are substantially the same.74 In this case, the fifth transfer factor — the
interests of justice, including trial efficiency — outweighs all other factors, by far,
and compels transfer to the Northern District of Illinois.75

73

Plaintiff argues that the “statutory [abstention] mandate controls here
— and it does so regardless of whether transfer would otherwise be appropriate,”
and therefore I must discuss abstention before transfer in this Opinion and Order.
Abstention Mem. at 6. This argument is rejected. First, I disagree that abstention
is mandated here. Second, because I am not ruling on the merits, the order in
which I decide these issues is not legally significant. See Sinochem Int’l Co. v.
Malaysia Int’l Shipping Corp., 549 U.S. 422, 431 (2007) (explaining that a
“federal court has leeway ‘to choose among threshold grounds for denying
audience to a case on the merits’”) (quoting Ruhrgas AG v. Marathon Oil Co., 526
U.S. 574, 585 (1999)). While I recognize that courts often discuss abstention
before transfer, addressing transfer first makes more sense here because the
arguments in favor of transfer are unequivocal and inform the discussion of why
abstention is neither mandated nor appropriate in this case.
74

See Alliance Comm’cns Grp., Inc., 65 B.R. at 585.

75

As a threshold matter, this action could have been brought in the
Northern District of Illinois, because the Bankruptcy Case is pending there and the
parties have been active participants in that case. See 28 U.S.C. § 1409(a) (“[A]
proceeding arising under title 11 or arising in or related to a case under title 11 may
be commenced in the district in which such case is pending.”). Following transfer
of this matter to the Northern District of Illinois, it will be referred to the
Bankruptcy Court pursuant to section 157(a) and the local order of reference.
24

1.

Existence of a Related Action

Plaintiff’s choice of forum is heavily outweighed by “the existence of
a related action pending in the transferee court . . . .”76 At its core, the Complaint
seeks declaratory and injunctive relief,77 the majority of which concern matters that
are closely related to the Bankruptcy Case. Credit Suisse seeks to enjoin
defendants, including the Committee Defendants, “from taking any action to
challenge, contest or support any other person in contesting or challenging, directly
or indirectly, in any proceeding (including in CEOC’s bankruptcy proceedings),
the validity, perfection, priority or enforceability of any of the Bank Debt Liens”78
and “from taking any action to enforce rights or exercise remedies with respect to
the Property Transfers or the B-7 Transaction.”79 This relief directly relates to the
pending motion by the Petitioning Creditors to consolidate the bankruptcy cases, as
well as the work the Committee Defendants are permitted, or expected to
undertake, as statutory committee members.80
Credit Suisse also seeks to enjoin defendants “from seeking to recover
76

CCM Pathfinder, 396 B.R. at 608 (internal quotation marks omitted).

77

Damages are sought when specific performance is no longer possible.

78

Complaint ¶ 75.

79

Id. ¶ 76.

80

See 11 U.S.C. § 1103(c).
25

or causing the [Committee] to seek to recover for any professional fees incurred in
connection with any action that violates the Intercreditor Agreement”; as well as to
require defendants “to segregate and pay over for the benefit of holders of First
Lien Debt any Common Collateral or proceeds thereof received by the holders of
Second Lien Notes, including but not limited to any professional fees paid out of
the Common Collateral or proceeds thereof,” including amounts paid to members
of or professionals appointed to represent the Committee.81 That relief also relates
directly to the ability of the Committee Defendants to carry out their core duties
under the Code. After receiving the required approval from the Bankruptcy Court,
the Committee Defendants have already retained various professionals.
2.

Plaintiff’s Motive in Filing This Lawsuit in New York

Deference is ordinarily given to a plaintiff’s choice of forum.
However, where, as here, plaintiff does not bring suit in its home residence, “the
degree of deference given to plaintiff’s choice of forum depends on the
motivations behind that choice.”82 “A court must give greater deference to a
plaintiff’s choice of a non-home forum where that choice was ‘motivated by
legitimate reasons, including plaintiff’s convenience and the ability of plaintiff to
81

Complaint ¶¶ 77, 78.

82

Renaissance Cosmetics, Inc. v. Development Specialists Inc., 277 B.R.
5, 18 (S.D.N.Y. 2002).
26

obtain jurisdiction over the defendant.’”83 Plaintiff argues that its choice to bring
this action in New York State court was for “the plainly legitimate reason that all
ten Defendants indisputably submitted to personal jurisdiction in New York.”84
Just because plaintiff had the contractual right to bring suit in New
York State court, does not mean that doing so served a legitimate purpose. Courts
generally do not reward forum shopping. It is true that Credit Suisse is acting in
this suit in its capacity as agent under various agreements, including the Credit
Agreement, and not every plaintiff represented by Credit Suisse has necessarily
participated in the Bankruptcy Case. But it cannot seriously be disputed that the
First Priority Creditors are not only crucial to the success of the reorganization —
whether because of the RSA85 or their concessions with respect to the use of cash
collateral86 — but have been heavily involved in the Bankruptcy Case, asserting

83

Id. (quoting Iragorri v. United Techs. Corp., 274 F.3d 65, 73 (2d Cir.

2001)).
84

Transfer Opp. at 24.

85

As noted, the Debtors sought to stay the Petitioning Creditors’ efforts
to consolidate the Involuntary and Voluntary Cases, arguing that the DACAs were
so crucial to the RSA negotiated with holders of first lien debt that their avoidance
jeopardized the Debtors’ ability to reorganize. See Reply in Support of Motion to
Suspend ¶ 25.
86

The Final Cash Collateral Order (the “Cash Collateral Order”) was
entered in the Bankruptcy Case on March 25, 2015. See Bankr. N.D. Ill. ECF No.
988.
27

and specifically preserving their rights under the ICA throughout the bankruptcy
proceedings.
In the Bankruptcy Case, UMB and other First Lien Secured Creditors
argued that the Committee Defendants were prohibited under the terms of the ICA
from performing many of the actions that committee members are permitted or
even expected to undertake under the statute addressing the power and duties of
committees. The Bankruptcy Court determined that it did not have the power to
disband the Committee and that
Limiting the Committee’s activities is not an option either.
Section 1103 of the Code addresses the powers and duties of
committees appointed under section 1102. See 11 U.S.C. § 1103.
Nothing in section 1103 authorizes a bankruptcy court to define
those powers and duties in such a way as to place limits on a
committee’s activities beyond the limits in section 1103 itself.
Neither [the Debtors] nor any of [their] allies has cited any
authority supporting the existence of such a power.87
Based on this ruling, what legitimate purpose could Credit Suisse have in seeking
an injunction from a New York state court prohibiting the Committee Defendants
from carrying out their duties and responsibilities under section 1103? I cannot
think of any. To the extent that plaintiff’s interests were not adequately
represented by UMB and the participating First Lien Priority Creditors, Credit

87

Committee Order at 8.
28

Suisse, a participant in the Bankruptcy Case,88 could have joined in the motion as a
party in interest.
Likewise, the Bankruptcy Court has approved the Committee
Defendants’ retention of professionals. The retention of professionals by a
committee is governed by the Bankruptcy Code, and requires the approval of the
bankruptcy court.89 Multiple provisions of the Code govern compensation of such
professionals, and professionals can only be compensated if the bankruptcy court
enters an order approving such compensation.90 As the Bankruptcy Court has
already approved the retention of professionals by the Committee, what legitimate
purpose is there in asking a New York state court to enjoin the defendants from
paying those professionals? It would violate the compensation provisions to deny
relief to these professionals on the grounds asserted in the Complaint.

88

Indeed, while the Cash Collateral Order expressly states that the First
Lien Secured Parties are not required to file proofs of claim, Credit Suisse has
nonetheless filed a proof of claim of over $5.3 billion on behalf of the First Lien
Lenders.
89

See 11 U.S.C. § 1103(a) (“At a scheduled meeting of a committee
appointed under section 1102 of this title, at which a majority of the members of
such committee are present, and with the court’s approval, such committee may
select and authorize the employment by such committee of one or more attorneys,
accountants, or other agents, to represent or perform services for such committee.”)
(emphasis added).
90

See id. §§ 328, 330, 331, 503.
29

In this context, filing this action in New York state court is transparent
forum shopping. The action was filed on April 7, two weeks after the Bankruptcy
Court overruled the objections to the compensation of the professionals retained by
the Committee and scheduled a trial on consolidation of the Involuntary and
Voluntary Cases. Even so, it is difficult to imagine that Credit Suisse actually
believes that a New York state court or this Court would issue an injunction
purporting to bar defendants from participating in the Committee or from pursuing
relief with respect to the Involuntary Case. Rather, the tactical advantage Credit
Suisse likely seeks is a ruling that can be used preclusively in the Bankruptcy Case.
The effort to achieve that tactical advantage is not a legitimate purpose.
3.

The Forum Selection Clause Does Not Control

Plaintiff argues that defendants waived their right to seek transfer
from New York in the ICA’s forum selection clause.91 To support this, plaintiffs
cite to the Supreme Court’s decision in Atlantic Marine Construction Co., Inc. v.
United States District Court for the Western District of Texas, which held, in a
different context, that “a valid forum-selection clause should be given controlling
weight in all but the most exceptional cases.”92
91

See Transfer Opp. at 3.

92

134 S. Ct. 568, 582 (2013) (internal quotation marks and alterations

omitted).
30

Plaintiff’s argument is not persuasive.93 Assuming the forum
selection clause here is mandatory, “[t]he existence of a mandatory forum-selection
clause does not by itself dispose of a motion to transfer under § 1404(a).”94
Accordingly, it is still appropriate to consider the fifth factor (interests of justice,
including trial efficiency), which, in this case, is dispostive. It also addresses the
concerns raised in Atlantic Marine, which was greatly informed by the notion that
“enforcement of valid forum-selection clauses, bargained for by
the parties, protects their legitimate expectations and furthers vital
interests of the justice system.” For that reason, and because the
overarching consideration under § 1404(a) is whether a transfer
would promote “the interest of justice,” “a valid forum-selection
clause [should be] given controlling weight in all but the most
exceptional cases.”95
It is not difficult to conclude that enforcing the forum selection clause here would
not serve the interests of justice. The palpable conflict between this action and the
Bankruptcy Case evokes a public interest sufficient to outweigh the forum

93

Atlantic Marine did not involve interference with a bankruptcy case,
and the Supreme Court remanded for a determination of whether any publicinterest factors might support denial of the motion to transfer.
94

Beatie & Osborn LLP v. Patriot Scientific Corp., 431 F. Supp. 2d 367,
394 (S.D.N.Y. 2006) (citing Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 29
(1988)).
95

Atlantic Marine, 134 S. Ct. at 581 (internal citations omitted)
(alterations in original) (quoting Stewart Org., Inc., 487 U.S. at 33 (Kennedy, J.,
concurring)).
31

selection clause. The claims are “closely intertwined” with the proceedings in the
Northern District of Illinois.96 The rights that plaintiff seeks to enforce under the
contract are in direct conflict with defendants’ status and rights under the
Bankruptcy Code. Moreover, they undercut the power of the Bankruptcy Court
and jeopardize the legitimacy of the Debtors’ reorganization.
Apart from impeding the functioning of a standing committee,
compelling defendants to take no action that runs contrary to plaintiff’s interests
interferes with the bankruptcy in other respects, including by undercutting the plan
confirmation process.97 Indeed, plaintiff’s attempt to cabin defendants’ conduct, or
ramping up their leverage by instituting this suit, is antithetical to the workout
process. A subordination agreement may be modified under a confirmed plan, and
as explained in a leading treatise,
[o]ften, in reorganization cases, senior creditors may negotiate
away rights to junior creditors in order to gain confirmation of a
plan that will maximize the likelihood of the debtor's
rehabilitation. . . . The legislative history to section 510 makes it
clear that the section was not designed to thwart this process. If
a class that is a beneficiary of a subordination agreement later
96

ResCap Liquidating Trust v. PHH Mortg. Corp., 518 B.R. 259, 268
(S.D.N.Y. 2014).
97

One result is that it may effectively disenfranchise defendants when
the Code specifically allows for voting on whether to accept or reject a plan. See
In re Adelphia Comm’cns Corp., 359 B.R. 54, 61 (Bankr. S.D.N.Y. 2006) (“A right
to vote on a plan is a fundamental right of creditors under chapter 11.”).
32

accepts a plan that modifies or eliminates the subordination, then
the agreement as modified, or eliminated, will be enforced in lieu
of the original agreement. If subordination agreements were not
waivable under a plan of reorganization acceptable to the senior
creditor, the section would prevent just what Congress envisioned:
that senior creditors may compromise with junior creditors in
order to confirm a plan.98
Finally, the parties Credit Suisse represents have effectively consented
to having the Bankruptcy Court interpret and enforce the ICA. In the introductory
paragraph to the Complaint, Credit Suisse states that it is acting pursuant to “the
written direction of the Required Lenders as defined in the Credit Agreement . . . .”
However, the “Required Lenders” under the Credit Agreement, as well as the First
Lien Noteholders and UMB, are parties to several stipulations entered into with
WSFS in the Bankruptcy Case.99 These stipulations — specifically contemplated
by section 12(b) of the Cash Collateral Order — extend the time of WSFS, or any
other interested party, to bring an action or proceeding to challenge, among other
things, the validity of the security interests of the First Lien Secured Parties,
including the DACAs.
4.
98

Transferring This Action Promotes Federal Policy and

4-510 Collier on Bankr. ¶ 510.03.

99

See, e.g., 7/11/15 Notice of Filing of the Stipulation Pursuant to Final
Chase Collateral Order Extending Challenge Period Regarding Leveraged Buyout
(Bankr. N.D. Ill. 15-01145, ECF No. 1874 (citing the prior stipulations filed at
ECF Nos. 1420, 1577, 1735, 1862).
33

Efficiency
As a general rule, when “substantially similar parties and claims are
present in both courts,” federal policy “favor[s] consolidation.”100 Because this
action involves issues that either have already been adjudicated by the Bankruptcy
Court or will be adjudicated by the Bankruptcy Court, allowing multiple
proceedings would “‘simply complicate and slow down the resolution of the’”
Bankruptcy Case.101 It would complicate the resolution of the Bankruptcy Case
because it could raise difficult collateral estoppel issues. It would slow down
resolution of the Bankruptcy Case not only because of these collateral estoppel
issues, but because it may also require coordination between the courts, and

100

Cuyahoga Equip. Corp., 980 F.2d at 116-17 (stating that as a general
rule, “two competing but related disputes brought in different fora should be
consolidated in the court in which the first action was brought”) (citing Fort
Howard Paper Co. v. William D. Witter, Inc., 787 F.2d 784, 790 (2d Cir. 1986);
William Gluckin & Co. v. International Playtex Corp., 407 F.2d 177, 178 (2d Cir.
1969)).
101

CCM Pathfinder, 396 B.R. at 607 (quoting In re Global Crossing, Ltd.
Sec. Litig., 311 B.R. 345, 349 (S.D.N.Y. 2003)). Accord Delaware Trust Co., 534
B.R. at 520 (“Litigating related actions in the same tribunal fosters efficient case
administration, avoids needless expense, and avoids the risk of conflicting
rulings.”) (citing Wyndham Assocs. v. Bintliff, 398 F.2d 614, 619 (2d Cir. 1968));
SPV OSUS Ltd. v. UBS AG, No. 15-cv-619, 2015 WL 4503521, at *5 (S.D.N.Y.
July 1, 2015) (“[R]emand would require the issues presented in this case and the
Hill Action to be adjudicated in parallel state and federal proceedings, creating the
potential for duplicative discovery and motion practice and the risk of inconsistent
rulings.”).
34

because the case has been pending before the Bankruptcy Court since January
2015.
Plaintiff argues that the relief sought in this action would not prevent
defendants from participating in the bankruptcy but rather it would simply prevent
them from acting in such a way that violates the ICA.102 Plaintiff’s argument
proves too much. By commencing an action in New York — rather than bringing
an adversary proceeding or litigating the issues in contested matters in the
Bankruptcy Case — plaintiff is asking another court to rule on whether the
defendants’ conduct in the Bankruptcy Case violates the ICA. That situation is
simply untenable. Congress eliminated the need to have parallel proceedings of
this kind when it empowered bankruptcy courts to interpret and enforce
subordination agreements.103
That is not to say that, “‘to be effective, a single tribunal must have
broad authority to restructure debtor-creditor relations.’ [Because] the framework
Congress adopted in the 1984 Act already contemplates that certain state law
matters in bankruptcy cases will be resolved by judges other than those of the

102

Transfer Opp. at 7-8.

103

See 11 U.S.C. § 510(a) (“A subordination agreement is enforceable in
a case under this title to the same extent that such agreement is enforceable under
applicable nonbankruptcy law.”).
35

bankruptcy courts.”104 There are countless situations in which actions that relate to
the bankruptcy case will proceed in other jurisdictions. For example, it is common
for unliquidated claims against the debtor to be resolved in alternate fora. Doing
so will typically not impact the bankruptcy case because of provisions such as
section 502(c), which permits the court to estimate contingent or unliquidated
claims without having to actually resolve them.105 The difference between those
actions and the present action is that — whether or not the claims are deemed core
or non-core — the proposed action is blatant forum shopping, interferes with the
bankruptcy process, and raises complicated issues of judicial comity, issue
preclusion, and res judicata.106
B.

Mandatory Abstention and Equitable Remand Are Unwarranted
Just as plaintiff did not bat an eye when arguing that this Court should

simply enforce the forum selection clause and be done with it, plaintiff contends

104

Stern v. Marshall, 131 S. Ct. 2594, 2619 (2011) (internal quotation
marks omitted).
105

See also 28 U.S.C. § 157(b)(2)(B) (referring to estimation of claims
for limited purpose of confirming a plan); Fed. R. Bankr. P. 3018(a) (referring to
the power of the bankruptcy court to “temporarily allow” a claim “in an amount
which the court deems proper for the purpose of accepting or rejecting a plan”).
106

In addition, insofar as the interpretation of the ICA “could affect the
rights and prioritization among creditors, the interests of justice overwhelmingly
dictate transfer to the court overseeing the bankruptcy proceedings.” Delaware
Trust Co., 534 B.R. at 521 (internal quotation marks and alterations omitted).
36

with a straight face that abstention is required here by mechanical application of
the statutory factors set forth in section 1334(c)(2). However, section 1334(c)(2)
only requires federal courts to cede jurisdiction over purely state-law matters when
not doing so runs contrary to principles of federalism. It does not divest federal
courts of jurisdiction when a party seeks to undermine a bankruptcy case by
attempting to litigate intercreditor disputes in multiple fora.
Abstention is not required where “the state court proceeding would
prolong the administration or liquidation of the estate.”107 I have previously noted
that “[t]he Second Circuit has left open the issue of who bears the burden on the
question of whether a case may be timely adjudicated in state court.”108 In so
doing, the Second Circuit stated that “[p]lacing the burden on the party seeking
remand may nevertheless be inconsistent with the mandatory nature of abstention
under § 1334(c)(2) as well as the principles of comity, which presume that a state
court will operate efficiently and effectively.”109 Based on this, I concluded,
“particularly in the context of removal, where any doubts are to be resolved against

107

Parmalat Capital Fin. Ltd., 671 F.3d at 266 (quotation marks

omitted).
108

BGC Partners, Inc. v. Avison Young (Canada), Inc., 919 F. Supp. 2d
310, 319 n.66 (S.D.N.Y. 2013).
109

Id. (internal quotation marks omitted).
37

- Appearances For Plaintiff:

For Defendants:

Lawrence S. Robbins, Esq.
Ariel Lavinbuk, Esq.
Lanora C. Pettit, Esq.
Robbins, Russell, Englert, Orseck,
Untereiner & Sauber LLP
1801 K Street NW
Washington, DC 20006
[phone]

Andrew I. Silfen, Esq.
Mark B. Joachim, Esq.
Michael S. Cryan, Esq.
Arent Fox LLP(New York)
1675 Broadway
New York, NY 10019
[phone]
Bruce Bennett, Esq.
Sidney Paul Levinson, Esq.
Joshua Mester, Esq.
Jones Day
555 S. Flowers St. 50th Floor
Los Angeles, CA 90071
[phone]

39