Patricio Agapito et al v. AHDS Bagel LLC et al
Filing
104
OPINION AND ORDER: re: (97 in 1:16-cv-08170-JPO) MOTION to Remand to Bankruptcy Court filed by 1101 Bagel Corp., AHDS Bagel LLC, (38 in 1:17-cv-04127-JPO) MOTION to Remand to Bankruptcy Court filed by 1101 Bagel Corp., AHDS Bagel LLC. According ly, the parties are directed to file supplemental briefing, not to exceed ten pages, by 5:00 p.m. on November 7, 2018. Briefing shall be confined to the following three questions: 1) Whether Plaintiffs' labor-law suits are "case[s] or proce eding[s] under [the Bankruptcy Code]" within the meaning of 28 U.S.C. § 1412; 2) Whether those suits "might have been brought" in the Eastern District of New York within the meaning of 28 U.S.C. § 1404(a); and 3) Whether any other legal basis exists for this Court to transfer Plaintiffs' suits to the Eastern District of New York. Thereafter, each party shall be permitted to file a responsive brief of no more than five pages by 5:00 p.m. on November 14, 2018. And as set forth herein. SO ORDERED. (Signed by Judge J. Paul Oetken on 10/29/2018) (ama)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
ADOLFO PATRICIO AGAPITO and
JOSE FRANCISCO REQUELME
PLIEGO, individually and on behalf of
others similarly situated,
Plaintiffs,
16-CV-8170 (JPO)
-vAHDS BAGEL LLC d/b/a PICK A
BAGEL, et al.,
Defendants.
MAXIMO PATRICIO, individually and
on behalf of others similarly situated,
Plaintiff,
17-CV-4127 (JPO)
OPINION AND ORDER
-vAHDS BAGEL LLC d/b/a PICK A
BAGEL, et al.,
Defendants.
J. PAUL OETKEN, District Judge:
In these two related cases, former employees of a bagel restaurant on Manhattan’s Upper
East Side (“Plaintiffs”) seek to hold their erstwhile employers liable for alleged violations of
federal and state labor laws. (SDNY No. 16 Civ. 8170 (“Agapito”), Dkt. No. 45 ¶¶ 1–2, 107–36;
SDNY No. 17 Civ. 4127 (“Patricio”), Dkt. No. 1 ¶¶ 1–2, 78–103.) Defendants in each suit are
three individuals—Ariey Nussbaum, Islam Abbas, and Haim Wysoki (collectively, the
“Individual Defendants”)—who allegedly own, control, and operate the restaurant, as well as the
two corporate entities—AHDS Bagel LLC and 1101 Bagel Corp. (collectively, the “Corporate
Defendants”)—through which they allegedly do so. (Agapito, Dkt. No. 45 ¶¶ 21–25; Patricio,
Dkt. No. 1 ¶¶ 19–23.)
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These cases proceeded to discovery and were set to be tried together before a jury
beginning on June 4, 2018. (Agapito, Dkt. No. 59; Patricio, Dkt. No. 29.) Just days before trial
was due to commence, however, the Corporate Defendants filed for Chapter 11 bankruptcy in the
United States Bankruptcy Court for the Eastern District of New York (the “EDNY Bankruptcy
Court”) (Agapito, Dkt. No. 82; Patricio, Dkt. No. 31), and all legal proceedings against them,
including the instant cases, were automatically stayed by operation of law, see 11 U.S.C.
§ 362(a)(1). Though the automatic stay applied to the Corporate Defendants alone, this Court,
on Defendants’ request, temporarily stayed the instant cases as to all Defendants. (Agapito, Dkt.
No. 89; Patricio, Dkt. No. 36.)
On August 23, 2018, the EDNY Bankruptcy Court modified the automatic bankruptcy
stay to allow the instant cases to proceed against the Corporate Defendants. (Agapito, Dkt. Nos.
101-1, -2; Patricio, Dkt. Nos. 43-1, -2.) Consequently, Plaintiffs now request that this Court lift
the stays it has imposed in these proceedings and reschedule the cases for trial. (Agapito, Dkt.
No. 101; Patricio, Dkt. No. 43.) Defendants, however, have a different view about how these
cases should proceed. Although they agree that the time has come to determine the amount, if
any, of their liability to Plaintiffs, they believe it should fall to the EDNY Bankruptcy Court—
and not this Court—to make that determination. Accordingly, they have moved for this Court to
refer these cases to the EDNY Bankruptcy Court. (Agapito, Dkt. No. 97; Patricio, Dkt. No. 38.)
Defendants’ chief contention is that referral here should be “automatic.” (Agapito, Dkt.
No. 98 at 1; Patricio, Dkt. No. 39 at 1.) The Bankruptcy Code provides that “[e]ach district
court may provide that any or all cases under [the Bankruptcy Code] and any or all proceedings
arising under [the Bankruptcy Code] or arising in or related to a case under [the Bankruptcy
Code] shall be referred to the bankruptcy judges for the district,” 28 U.S.C. § 157(a), and this
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Court has by standing order directed that all such cases and proceedings “are referred to the
bankruptcy judges for this district,” In re Standing Order of Reference, No. 12 Misc. 32
(S.D.N.Y. Jan. 31, 2012). Plaintiffs have not disputed—nor could they dispute—that these cases
are at least “related to” the Corporate Defendants’ ongoing bankruptcy proceedings. See
Parmalat Capital Fin. Ltd. v. Bank of Am. Corp., 639 F.3d 572, 579 (2d Cir. 2011) (“[A] civil
proceeding is ‘related to’ a [bankruptcy] case if the action’s ‘outcome might have any
“conceivable effect” on the bankrupt estate.’” (quoting In re Cuyahoga Equip. Corp., 980 F.2d
110, 114 (2d Cir. 1992))).
Ordinarily, then, this Court would grant Defendants’ referral motions as a matter of
course. Here, though, there is a wrinkle. This Court’s standing order contemplates referral to
“the bankruptcy judges for this district,” i.e., the Southern District of New York, but the
Corporate Defendants’ bankruptcy cases are proceeding in the Eastern District of New York.
For good reason, no party here argues in support of a remand to this district’s bankruptcy court,
which is a stranger not only to the labor-law claims that have already proceeded almost to the
point of trial in this Court but also to the Chapter 11 proceedings that could justify moving these
cases into bankruptcy court. Accordingly, to the extent that reference to this district’s
bankruptcy court is “automatic,” this Court exercises its authority to withdraw the reference on
its own motion. See 28 U.S.C. § 157(d); In re Formica Corp., 305 B.R. 147, 149 (S.D.N.Y.
2004) (noting that “considerations of judicial economy” weigh on whether to withdraw a
reference to bankruptcy court).
That said, this Court agrees with Defendants that adjudication of the instant cases ought
to proceed in bankruptcy court. Although the previously referenced standing order does not
control the outcome here, the order is instructive insofar as it reflects this Court’s considered
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view that suits relating to a bankruptcy should typically be consolidated in bankruptcy court. Cf.
In re Manville Forest Prods. Corp., 896 F.2d 1384, 1391 (2d Cir. 1990) (“[T]he district in which
[an] underlying bankruptcy case is pending is presumed to be the appropriate district for hearing
and determination of a proceeding in bankruptcy.”). This view honors the fact that “[a] principal
purpose served by the Bankruptcy Code is the centralization of all disputes concerning the
property of a debtor’s estate so that reorganization can proceed efficiently, unimpeded by
uncoordinated proceedings in other arenas.” Reifler v. Glaser, Weil, Fink, Jacobs, Howard &
Shapiro, LLP, 435 B.R. 118, 120–21 (S.D.N.Y. 2010). Here, moreover, Plaintiffs have filed
claims in the EDNY Bankruptcy Court against the Corporate Defendants’ estates (Agapito, Dkt.
No. 87-2; Patricio, Dkt. No. 35-2) and have thereby affirmatively “subject[ed] themselves to
th[at] court’s equitable power” to allow or disallow those claims, Granfinanciera, S.A. v.
Nordberg, 492 U.S. 33, 59 n.14 (1989). Not only does this additional fact mitigate any prejudice
Plaintiffs might suffer as a result of having the underlying merits of their labor-law suits resolved
in the Eastern District of New York rather than a stone’s throw away in their chosen venue of the
Southern District, but it also further entwines the instant suits with the bankruptcy proceedings.
Nor is it dispositive that the instant cases include claims against Individual Defendants
who have not filed for bankruptcy alongside claims against the Corporate Defendants that have.
In authorizing all matters broadly “related to” a bankruptcy to proceed in bankruptcy court,
Congress was sensitive to the fact that “bifurcation of jurisdiction over matters obviously
pertinent to [a] bankruptcy case . . . serve[s] [no] identifiable policy objective; indeed, it seem[s]
to promote nothing but delay, inconvenience, and the litigation of abstruse jurisdictional issues,
all of which tend[] to work to the prejudice of the estate.” In re Turner, 724 F.2d 338, 341 (2d
Cir. 1983). What is more, relying on the presence of the Individual Defendants in these cases as
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a basis for segregating all or part of the cases from the comprehensive Chapter 11 proceedings
ongoing in the EDNY Bankruptcy Court would be particularly nonsensical in light of the fact
that Plaintiffs themselves contend that the Individual Defendants “operate [the Corporate
Defendants] as . . . alter egos of themselves and/or fail to operate [the Corporate Defendants] as
entities legally separate and apart from themselves.” (Agapito, Dkt. No. 45 ¶ 32; Patricio, Dkt.
No. 1 ¶ 30.)
While this Court concludes that transferring these cases to the EDNY Bankruptcy Court
would best serve the efficient administration of justice, this Court can effect such a transfer only
if it has the legal authority to do so. As an initial matter, the parties have not identified any
source of law authorizing a district court to transfer a case to another district’s bankruptcy court.
Nonetheless, because the Eastern District of New York, like the Southern District, has in place a
standing order that refers all bankruptcy-related cases to the district’s bankruptcy court, see
Pergament ex rel. Estate of Barkany v. Marina Dist. Dev. Co., No. 14 Civ. 2602, 2018 WL
5018654, at *2 n.5 (E.D.N.Y. Oct. 15, 2018), transfer to the United States District Court for the
Eastern District of New York would serve the same prudential ends—provided, again, that this
Court has legal authority to pursue such a course.
Two potential sources of transfer authority suggest themselves here. First, under the
bankruptcy-specific transfer statute, “[a] district court may transfer a case or proceeding under
[the Bankruptcy Code] to a district court for another district, in the interest of justice or for the
convenience of the parties.” 28 U.S.C. § 1412. Second, under the generally applicable transfer
statute, “[f]or 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.”
Id. § 1404(a). “[C]ourts consider the same factors” under both statutes in assessing whether the
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interest of justice militates in favor of transfer. Del. Trust Co. v. Wilmington Trust, N.A., 534
B.R. 500, 519 (S.D.N.Y. 2015). Chief among these factors is “whether transferring venue would
promote the efficient administration of the bankruptcy estate, judicial economy, timeliness, and
fairness.” In re Manville Forest Prods. Corp., 896 F.2d 1384, 1391 (2d Cir. 1990). As the Court
has explained, these factors support transfer here.
That is not the end of the analysis, however. The bankruptcy-specific transfer statute can
apply only if the Court determines that the instant labor-law suits—which predate the bankruptcy
proceedings in the EDNY Bankruptcy Court and which do not themselves invoke the
Bankruptcy Code—constitute “case[s] or proceeding[s] under [the Bankruptcy Code].” 28
U.S.C. § 1412. And the generally applicable transfer statute can apply only if the Court
determines that these suits “might have been brought” in the Eastern District of New York from
the outset. Id. § 1404(a); see Hoffman v. Blaski, 363 U.S. 335, 344 (1960) (holding that transfer
under the general transfer statute is available only where “plaintiff ha[d] a right to sue in [the
transferee] district, independently of the wishes of defendant” at the time the suit was
commenced, irrespective of later developments (quoting Blaski v. Hoffman, 260 F.2d 317, 321
(7th Cir. 1958))).
The existing briefing does not address these issues, and the Court hesitates to proceed
without giving the parties an opportunity to state their positions. Accordingly, the parties are
directed to file supplemental briefing, not to exceed ten pages, by 5:00 p.m. on November 7,
2018. Briefing shall be confined to the following three questions:
1) Whether Plaintiffs’ labor-law suits are “case[s] or proceeding[s] under [the
Bankruptcy Code]” within the meaning of 28 U.S.C. § 1412;
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2) Whether those suits “might have been brought” in the Eastern District of New
York within the meaning of 28 U.S.C. § 1404(a); and
3) Whether any other legal basis exists for this Court to transfer Plaintiffs’ suits to
the Eastern District of New York.
Thereafter, each party shall be permitted to file a responsive brief of no more than five pages by
5:00 p.m. on November 14, 2018.
SO ORDERED.
Dated: October 29, 2018
New York, New York
____________________________________
J. PAUL OETKEN
United States District Judge
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