Slinde & Nelson, LLC v. Luneke et al

Filing 36

OPINION & ORDER . Plaintiffs Motion to Remand 18 this Case to Multnomah County Circuit Court is GRANTED. Defendants Motion to Transfer 22 is moot and therefore DENIED. Signed on 2/22/2017 by Judge Marco A. Hernandez. (joha)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON

SLINDE & NELSON, LLC, dba SLINDE
NELSON STANFORD, an Oregon limited
liability company,
Plaintiff,
v.
DAVID K. LUNEKE, an individual and
RANBIR SANHI, an individual,
Defendants.

Philip J. Nelson
Keith A. Pitt
Colin G. Andries
Slinde Nelson Stanford
111 SW Fifth Avenue, Suite 1940

OPINION & ORDER - 1

No. 3:16-cv-1914-HZ
OPINION & ORDER

Portland, OR 97204
Attorneys for Plaintiff
Clifford S. Davidson
Sussman Shank LLP
1000 SW Broadway, Suite 1400
Portland, OR 97205
Attorney for Defendants
HERNÁNDEZ, District Judge:
Defendants David Luneke and Ranbir Sanhi removed this action from Multnomah
County Circuit Court1 (“State Action”) to the District of Oregon pursuant to 28 U.S.C. § 1452.
Before the Court are Plaintiff’s motion to remand this matter back to Oregon state court and
Defendants’ motion to transfer to the Bankruptcy Court for the Central District of California. See
Mot. to Remand, ECF 18; Mot. to Transfer, ECF 22. Plaintiff’s Motion to Remand is
GRANTED and Defendants’ Motion to Transfer is DENIED.
BACKGROUND
This matter arises out of Defendants’ failure to pay Plaintiff for representing them in an
underlying litigation.2 Plaintiff, a law firm located in Portland, Oregon, defended Luneke, Sanhi,
and Lite Solar, LLC in Multnomah County Circuit Court in a suit brought by another solar
company. Mot. to Remand at 3. Plaintiff entered into an Engagement Agreement with Luneke,
Sanhi, and Lite Solar, LLC. Id.; Pitt. Decl. Ex. 2, ECF 19. The Engagement Agreement obligated
Defendants and Lite Solar, LLC to pay Plaintiff for fees incurred during the underlying litigation.
Compl. ¶ 9, ECF 1. Defendants refused to pay for Plaintiff’s services and are indebted to
Plaintiff for $79,096.64. Id. at ¶ 12.
1

Slinde & Nelson, LLC, dba Slinde Nelson Stanford v. David K. Luneke and Ranbir Sanhi, Multnomah County
Circuit Court Case No. 16CV27593.
2
Kamana O’Kala, LLC v. Lite Solar, LLC, Ranbir Sanhi and David Luneke, Multnomah County Circuit Court Case
No. 14CV14976.

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On July 18, 2016, Sanhi merged Lite Solar, LLC into Lite Solar Corp., another company
that he owned. Notice of Removal ¶ 1, ECF 1. Nine days later, on July 27, 2016, Lite Solar Corp.
filed for bankruptcy under Chapter 11 in the Bankruptcy Court for the Central District of
California (“Bankruptcy Proceeding”).3 Id. at ¶ 4; Nov. 8, 2016, Davidson Decl. Ex. 5, ECF 24.
In that petition, Lite Solar Corp. stated that it owed approximately $7.9 million to its twenty
largest creditors, including $69,433.81 to Plaintiff for “Professional Services.” Nov 8, 2016,
Davidson Decl. Ex. 5 at 9. Additionally, the plaintiff from the underlying litigation has since
filed a Proof of Claim for $12 million in the Bankruptcy Proceeding. Nov. 28, 2016, Davidson
Decl. Ex. 1 at 2, ECF 30. On August 12, 2016, Plaintiff filed a Proof of Claim in the Bankruptcy
Proceeding, claiming that Lite Solar Corp. owed it $79,096.64 for legal services. On August 24,
2016, Plaintiff also brought the State Action against Sanhi and Luneke in Multnomah County
Circuit Court seeking the same amount. Id. at ¶¶6–26. Neither Lite Solar, LLC nor Lite Solar
Corp. are named defendants in the State Action. Defendants filed their notice to remove the State
Action to this Court on September 29, 2016.
Plaintiff now requests that the Court remand this matter back to Multnomah County
Circuit Court. Conversely, Defendants seek to transfer this matter to the Bankruptcy Court for
the Central District of California.
STANDARDS
Section 1452(a) of Title 28 of the United States Code provides that a party may remove a
civil action to the district court where the civil action is pending, if the district court has
jurisdiction over the matter under 28 U.S.C. § 1334. “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

3

In re Lite Solar Corp., No. 2:16-bk-19896-BB (C.D. Cal. July 27, 2016).

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U.S.C. § 1452(b). The Ninth Circuit applies a fourteen factor test, the “Cedar Funding Factors,”
for determining whether equitable grounds support remand:
(1) the effect or lack thereof on the efficient administration of the
estate if the Court recommends [remand or] abstention;
(2) extent to which state law issues predominate over bankruptcy
issues;
(3) difficult or unsettled nature of applicable law;
(4) presence of related proceeding commenced in state court or
other nonbankruptcy proceeding;
(5) jurisdictional basis, if any, other than § 1334;
(6) degree of relatedness or remoteness of proceeding to main
bankruptcy case;
(7) the substance rather than the form of an asserted core
proceeding;
(8) the feasibility of severing state law claims from core
bankruptcy matters to allow judgments to be entered in state court
with enforcement left to the bankruptcy court;
(9) the burden on the bankruptcy court's docket;
(10) the likelihood that the commencement of the proceeding in
bankruptcy court involves forum shopping by one of the parties;
(11) the existence of a right to a jury trial;
(12) the presence in the proceeding of nondebtor parties;
(13) comity; and
(14) the possibility of prejudice to other parties in the action.
In re Cedar Funding, Inc., 419 B.R. 807, 821 (B.A.P. 9th Cir. 2009). The court also considers
“judicial economy and ‘the effect of bifurcating the claims and parties’ and ‘the possibilities of
inconsistent results.’” Cox v. Holcomb Family Ltd. P’ship, No. ADV. 14-3260, 2015 WL
128001, at *1 (Bankr. D. Or. Jan. 8, 2015) (quoting In re Sequoia Village, LLC, No. ADV 1106220-FRA, 2012 WL 478926, at *1 (Bankr. D. Or. Feb. 14, 2012)). Because the statute
provides that the court may remand on “any equitable grounds,” any single factor may be
sufficient to support equitable remand. Stichting Pensioenfonds ABP v. Countrywide Financial
Corp., 447 B.R. 302, 211 (C.D. Cal. 2010).
//
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DISCUSSION
As a preliminary matter, the parties dispute whether the Court should entertain the
Motion to Remand or Motion to Transfer first. “Most courts, when faced with concurrent
motions to remand and transfer, resolve the motion to remand prior to, and/or to the exclusion of,
the motion to transfer.” Pac. Inv. Mgmt. Co. LLC v. Am. Int’l Grp., Inc., No. SA CV 15-0687DOC, 2015 WL 3631833, at *4 (C.D. Cal. June 10, 2015); see also Burse v. Purdue Pharma Co.,
No. C-04-594 SC, 2004 WL 1125055, at *1 (N.D. Cal. May 3, 2004) (acknowledging the
practice within the Ninth Circuit to rule on remand motions before deciding motions to transfer).
Before Defendants’ Motion to Transfer can be considered, the Court must first determine
whether it has subject matter jurisdiction. See In re Asbestos Litig., No. CV 01-1790-PA, 2002
WL 649400, at *2 (D. Or. Feb. 1, 2002). Accordingly, the Court will consider the Motion to
Remand first.
Next, the Court must determine whether it has jurisdiction over this case under 28 U.S.C.
§ 1334 as a “core” bankruptcy matter or as a proceeding “related to” a bankruptcy matter. The
Ninth Circuit applies the Pacor Test for determining whether a proceeding is “related to” a
bankruptcy matter. “Under this formulation, the test is whether: the outcome of the proceeding
could conceivably have any effect on the estate being administered in bankruptcy.” In re Pegasus
Gold Corp., 394 F.3d 1189, 1193 (9th Cir. 2005) (quoting Pacor, Inc. v. Higgins, 743 F.2d 984,
994 (3d Cir.1984)); see also In re Conejo Enterprises, Inc., 96 F.3d 346, 349 (9th Cir. 1996)
(holding that while claims filed in bankruptcy court are core proceedings, “the filing of a claim
does not consolidate it with the pending state law case (into the claim) even though they are
based on the same transaction. Both continue to exist, and must be considered, separately”).

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Here, Plaintiff has filed two separate actions relating to the same subject matter. First,
Plaintiff filed a Proof of Claim in the Bankruptcy Proceeding seeking to recover unpaid legal
fees from Lite Solar Corp. Second, Plaintiff filed the State Action seeking to recover the same
fees from Defendants Sanhi and Luneke. Luneke, Sanhi, and Lite Solar, LLC each entered into
the Engagement Agreement and may be individually liable to Plaintiff. While Plaintiff’s Proof of
Claim in the Bankruptcy Proceeding pertains to the same claim for relief asserted in the
Complaint, the two exist separately and are not consolidated. Id. Therefore, the Court has
jurisdiction over this case as a proceeding “related to” a bankruptcy matter under 28 U.S.C.
§ 1334.
Next, the Court turns to the Cedar Funding Factors to determine whether equity requires
remand. On balance, the Court concludes that factors supporting remand outweigh those against
remand.
1.

The Effect or Lack Thereof on the Efficient Administration of the Estate if the
Court Recommends Remand

Remand will have a minimal effect on the administration of the estate. Neither defendant
in this case is the debtor in the Bankruptcy Proceeding. As stated above, Sanhi, Luneke, and Lite
Solar, LLC are separate parties to the Engagement Agreement. Sanhi claims that he may be
indemnified by Lite Solar, Corp., however, in this case, Defendants have yet to make such an
indemnity claim or join Lite Solar, Corp. as a party. Remand will have at least some effect on the
administration of the estate due to the fact that Plaintiff has filed a Proof of Claim against Lite
Solar Corp. regarding the same subject matter in the Bankruptcy Proceeding. At this juncture,
assuming that Plaintiff obtains a favorable judgment in state court, the preclusive effect that
judgment may have on the Bankruptcy Proceeding against Lite Solar Corp. as a third party is
unclear. See Kremer v. Chem. Const. Corp., 456 U.S. 461, 466 (1982) (“Section 1738 [of the

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Full Faith and Credit Act] requires federal courts to give the same preclusive effect to state court
judgments that those judgments would be given in the courts of the State from which the
judgments emerged.”). Therefore, the Court can only speculate about the possibilities of
duplicative litigation and inconsistent results remand may have on the Bankruptcy Proceeding.
Accordingly, the Court finds that this factor is neutral.
2.

The Extent to Which State Law Issues Predominate Over Bankruptcy Issues

This Case is a dispute over unpaid legal fees that was originally brought in Oregon state
court under state law. The Engagement Agreement provides that Oregon law governs the
contract. Mot. to Remand Ex. A at 3. There are no bankruptcy issues raised in the Complaint.
The Proof of Claim filed in the Bankruptcy Proceeding is independent from Plaintiff’s
Complaint and as previously stated, the two do not merge. This factor weighs in favor of remand.
3.

The Difficult or Unsettled Nature of Applicable Law

Plaintiff’s breach of contract claim and related claims are based on well-settled state law.
Because the complaint does not raise unsettled legal issues, this factor weighs against remand.
4.

The Presence of Related Proceedings Commenced in State Court or Other NonBankruptcy Proceedings

There are no related proceedings. This factor is neutral.
5.

The Jurisdictional Basis, If Any, Other Than § 1334

The only basis of jurisdiction in this case is 28 U.S.C. § 1334. This case does not present
diversity nor federal question jurisdiction. 28 U.S.C. §§ 1331, 1332. Because the Court only has
jurisdiction over this proceeding as “related to” a bankruptcy matter, the federal basis for
jurisdiction is not strong and this factor weighs in favor of remand.
6.

The Degree of Relatedness or Remoteness of Proceeding to Main Bankruptcy
Case

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As previously stated, this Case is “related to” the Bankruptcy Proceeding for § 1334
purposes and neither Defendant in this case is the debtor in the Bankruptcy Proceeding. Plaintiff
is listed in Solar Lite Corp.’s bankruptcy petition as only one of the twenty creditors that holds
the largest unsecured claims against the company. Nov 8, 2016, Davidson Decl. Ex. 5 at 9.
Plaintiff’s claim is a fraction of the $7.9 million listed in the petition, which is not a complete list
of Solar Lite Corp.’s unsecured claims. Davidson Decl. Ex. 5 at 9–10. Since the filing of the
petition, the plaintiff from the underlying litigation has also filed a Proof of Claim in the
Bankruptcy Proceeding for $12 million. Nov. 28, 2016, Davidson Decl. Ex. 1 at 2.
Moreover, neither named Defendant in this case is a party to the Bankruptcy Proceeding.
Defendants’ argument that it and Lite Solar, Corp. intends on bringing negligence counterclaims
against Plaintiff in the State Action and Bankruptcy Proceeding is irrelevant. Plaintiff’s Proof of
Claim in the Bankruptcy Proceeding and Complaint in this case are separate. This factor weighs
in favor of remand.
7.

The Substance Rather Than the Form of an Asserted Core Proceeding

The Court has assumed jurisdiction over this case because it is “related to” the
Bankruptcy Proceeding and it is not a “core” matter. The Proof of Claim in the Bankruptcy
Proceeding is a “core” bankruptcy matter; once more, however, that action is distinct from the
claims alleged in the Complaint here. The Court finds that there is no “core” bankruptcy matter
in the State Action and this factor weighs in favor of remand.
8.

The Feasibility of Severing State Law Claims from Core Bankruptcy Matters

This case is brought solely under state law and there is no bankruptcy matter to sever.
This factor favors remand because the claims alleged in the Complaint are not intertwined with
“core” bankruptcy matters.

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9.

The Burden on the Bankruptcy Court’s Docket

Plaintiff has submitted its Proof of Claim in the Bankruptcy Proceeding and denying
remand would not impose any additional burden on the Bankruptcy Court. This factor weighs
against remand.
10.

Forum Shopping

The parties have not alleged that the Bankruptcy Court for the Central District of
California is any more or less likely to render judgment in one party’s favor than the Multnomah
County Circuit Court. Luneke is an Oregon resident while Sanhi is a California resident
domiciled in Longbeach which is within the district where the Bankruptcy Proceeding is taking
place. The Court finds that this factor is neutral.
11.

The Existence of a Right to a Jury Trial

The parties do not dispute Plaintiff’s Seventh Amendment right to a jury trial in this case.
Because this matter is not a “core” proceeding, Plaintiff’s entitlement to a jury trial heavily
weighs in favor of remand. See Fed. Home Loan Bank of Seattle v. Barclays Capital, Inc., No.
C10-0139 RSM, 2010 WL 3662345, at *7 (W.D. Wash. Sept. 1, 2010) (“Courts have granted
equitable remand solely on the basis of a party’s entitlement to a jury trial when that party’s
action was not a “core proceeding.’”) (citation omitted).
12.

The Presence of Non-Debtor Parties

As previously discussed, the named Defendants in this Case are non-debtor parties. This
factor also favors remand.
13.

Comity

The Court agrees with Plaintiff that this matter arose out of activities occurring within
Oregon and involves state law. The Oregon state court is undoubtedly better suited to adjudicate

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disputes arising under its own law and remand is favorable especially where the matter does not
implicate a “core” bankruptcy proceeding. In re Bay Area Material Handling, Inc., No. 91-46488
JR, 1995 WL 747954, at *9 (N.D. Cal. Dec. 6, 1995) (holding that comity favors remand where
the suit is “not based in federal law and is only tangentially related to a bankruptcy”).
Defendants’ reliance on a previous opinion from this Court to argue that comity does not favor
remand is misplaced. Sussman Shank, LLP v. Citizens of Humanity, LLC, No. 3:15-cv-02148HZ, 2016 U.S. Dist. LEXIS 53255, at *25 (D. Or. Apr. 18, 2016). That case is distinguishable on
the grounds that it did not involve a motion to remand and the underlying transaction here was
more substantially based in Oregon. Id. Comity weighs in favor of remand.
14.

Prejudice to Other Parties

Defendants argue that Lite Solar, Corp. will be prejudiced if this Case is remanded
because there will be a significant risk of inconsistent results and inefficient administration of the
estate. As previously stated in the discussion of the first factor, the preclusive effect that a
judgment in state court may have on the Bankruptcy Proceeding against Lite Solar Corp. as a
third party is unclear. This factor is neutral.
In sum, this Case implicates only state law, the transaction giving rise to this case
occurred in Oregon, and the matter is not a “core” proceeding. Given that 28 U.S.C. § 1452(b)
provides broad authority to remand “on any equitable ground,” any one of the factors discussed
above may be sufficient to support remand. Accordingly, the Court finds that equity favors
remand to state court and it dismisses Defendants’ Motion to transfer as moot.
//
//
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CONCLUSION
Plaintiff’s Motion to Remand [18] this Case to Multnomah County Circuit Court is
GRANTED. Defendants’ Motion to Transfer [22] is moot and therefore DENIED.

Dated this

day of ______________________, 2017.

MARCO A. HERNÁNDEZ
United States District Judge

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