3rd Time Trucking, LLC, et al v. Massachusetts Mutual Life Insurance Company, et al

Filing 36

ORDER Remanding Case: granting 19 Motion to Remand to State Court; denying without prejudice 31 Motion to Bifurcate; granting 34 Motion for Leave to File, this Court having reviewed and considered the same; denying 5 Motion to Change Venue. Copy of Order, docket sheet and letter to Circuit Clerk of Jefferson County, WV. Signed by Chief Judge John Preston Bailey on 9/26/2011. (cmd)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
Martinsburg
3RD TIME TRUCKING, LLC and
ERIC W. CUSTER,
Plaintiffs,
v.

Civil Action No. 3:11-cv-68-JPB
Judge Bailey

MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY, L. JAMES
NICHOLS, CPA/PFS, CLTC, JULIE
K. DEHAVEN, CPA, NICHOLS DEHAVEN
AND ASSOCIATES CPAs, PLLC,
GEORGE F. FISHER, KELLY MARGARET
PARSONS, H. LAWRENCE LOGAN, CLU,
ChFC, STEVEN W. DORMAN, CLU, ChFC,
ALEXANDRA P. WEST, MARIE
ANN CHIO, CPA & LUTCF, WEST FINANCIAL
GROUP, LLC, WEST FINANCIAL
GROUP PENSION SOLUTIONS, LLC, and
CAMICO MUTUAL INSURANCE COMPANY,
Defendants.

ORDER REMANDING CASE
Pending before this Court are Defendant Massachusetts Mutual Life Insurance
Company’s Motion to Transfer Venue (Doc. 5), plaintiffs’ Motion to Abstain from Hearing
Case and to Remand Case to Circuit Court for Jefferson County (Doc. 19), Camico Mutual
Insurance Company’s Motion to Bifurcate or, in the Alternative, to Sever (Doc. 31), and
Defendant Massachusetts Mutual Life Insurance Company’s Motion for Leave to File SurReply Brief in further Opposition to Plaintiffs’ Motion to Abstain and Remand (Doc. 34). The
Motions have been fully briefed and are ripe for decision.
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This action, filed February 24, 2011, in the Circuit Court of Jefferson County, West
Virginia, seeks damages arising out of the marketing and sale of a pension plan to the
plaintiffs. Count I of the Complaint alleges fraud in the inducement against Massachusetts
Mutual Life Insurance Company (“MassMutual”), H. Lawrence Logan (“Logan”), George F.
Fisher (“Fisher”), and L. James Nichols (“Nichols”). Count II alleges a violation of the West
Virginia Unfair Trade Practices Act and constructive fraud, fraud and negligence against
MassMutual, WFG, Alexandra P. West (“West”), Logan, Fisher, Kelly Margaret Parsons
(“Parsons”), Nichols, Julie K. DeHaven (“DeHaven”), and Nichols DeHaven and Associates,
CPAs, PLLC (“NDA”). Count III alleges negligence against NDA, Nichols, DeHaven, and
Camico Mutual Insurance Company (“Camico”). Count IV alleges breach of fiduciary duty
and constructive fraud against NDA, Nichols and DeHaven. Count V alleges negligent
supervision against DeHaven. Count VI alleges unauthorized practice of law, constructive
fraud and violations of the West Virginia Unfair Trade Practices Act against DeHaven, NDA,
and Camico. Count VII alleges negligence, negligent supervision, fraud and constructive
fraud against MassMutual, WFG, West and Chio. Count VIII alleges negligent retention
against MassMutual, WFG, and West. Count IX alleges a violation of the West Virginia
Unauthorized Insurers Act against MassMutual, WFG, NDA, West, Logan, Steven W.
Dorman (“Dorman”), Fisher, Parsons, and Nichols. Count X seeks declaratory judgment.
On or about July 29, 2011, defendant West filed Chapter 7 bankruptcy in the United
States Bankruptcy Court for the Eastern District of Virginia. On August 16, 2011, defendant
MassMutual removed the case to this Court under 28 U.S.C. §§ 1452(a) and 1334(b). On
August 17, the plaintiffs, MassMutual and West, agreed to a consent order lifting the
automatic stay and permitting the plaintiffs to proceed with this action, “provided that no
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execution shall proceed with respect to any judgment against assets of the Debtor or
Debtor’s estate (other than insurance) without further order” of the Bankruptcy Court or
termination of the stay by operation of law. The plaintiffs filed their motion to abstain and
remand on August 25, 2011.
This Court finds it appropriate to address the issue of mandatory abstention prior to
addressing the remaining motions.
“The United States Supreme Court has established that removal and remand
principles apply in both bankruptcy and non-bankruptcy proceedings.

Things

Remembered, Inc. v. Petrarca, 516 U.S. 124, 128 (1995). 28 U.S.C. § 1441(a) provides
that a party may remove any matter over which the district courts have original jurisdiction.
However, the Fourth Circuit has clearly stated that removal statutes must be construed
strictly against removal. Mulcahey v. Columbia Organic Chemicals Co., Inc., 29 F.3d
148, 151 (4th Cir. 1994). The strict construction against removal is required because
removal jurisdiction raises significant federalism concerns. The party seeking removal to
federal court and opposing remand has the burden of establishing federal jurisdiction. This
has been a long established principle. Wilson v. Republic Iron and Steel Co., 257 U.S.
92 (1921). If federal jurisdiction is doubtful, remand is necessary. Mulcahey, 29 F.3d at
151, citing, In re Business Men's Assur. Co. of America, 992 F.2d 181, 183 (8th Cir.
1993). In Business Men's Assurance Company, a case cited by the Fourth Circuit's
Mulcahey decision, the Eighth Circuit held that the district court was required to resolve
all doubts in favor of remand. In re Business Men's Assur. Co. of America, 992 F.2d at
182 (8th Cir. 1993), citing, Steel Valley Auth. v. Union Switch and Signal Div., 809 F.2d

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1006, 1010 (3rd Cir. 1987), cert dismissed 484 U.S. 1021 (1988).” Wise v. Travelers
Indem. Co., 192 F.Supp.2d 506, 510 (N.D. W.Va. 2002) (Broadwater, J.)
28 U.S.C. § 1334(c)(2) provides the basis for mandatory abstention and provides:
Upon timely motion of a party in a proceeding based upon a state law claim
or state law cause of action, related to a case under Title 11 but not arising
under Title 11 or arising in a case under Title 11, with respect to which an
action cannot have commenced in a court of the United States absent
jurisdiction under this section, the district court shall abstain from hearing
such proceeding if an action is commenced, and can be timely adjudicated,
in a state forum of appropriate jurisdiction.
28 U.S.C. § 1334(c)(2).
“‘In other words, a district court must abstain from hearing a non-core, related matter
if the action can be timely adjudicated in state court.’ Howe v. Vaughan, 913 F.2d 1138,
1142 (5th Cir. 1990). Courts and commentators have derived five basic factors from the
mandatory abstention statute to be employed by district courts in deciding whether or not
to abstain from hearing the claims of a particular case, including whether: (1) a timely
motion to abstain has been made; (2) the proceeding is based upon a state law cause of
action; (3) the proceeding is related to a Title 11 case but is not a core proceeding; (4) the
action could not have been commenced in federal court absent jurisdiction under § 1334;
and (5) an action is commenced, and can be timely adjudicated, in state court with proper
jurisdiction. See In re Midgard Corp. v. Kennedy, 204 B.R. 764, 776–79 (10th Cir. BAP
1997); see also Business and Commercial Litigation in Federal Courts, § 45.5 (Robert

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L. Haig Ed., 1998).” Wheeling-Pittsburgh Corp. v. Am. Ins. Co., 267 B.R. 535, 538 (N.D.
W.Va. 2001) (Stamp, J.); Cline v. Quicken Loans, Inc., 2011 WL 2633085, *2 (N.D. W.Va.
July 5, 2011) (Stamp, J.).
The defendants concede that this case satisfies the first, second, and fourth factors,
but deny that the third and fifth factors are met. This Court will address each factor in turn.
“The first factor contained in § 1334(c)(2) requires that the movant party make a
timely motion requesting the court to abstain. See 28 U.S.C. § 1334(c)(2); see also
Midgard, 204 B.R. at 776. ‘Courts have generally adopted a flexible, case-specific
approach in determining whether a motion for mandatory abstention is “timely.”’ Channel
Bell Assocs. v. W.R. Grace & Co., 1992 WL 232085 (S.D. N.Y. August 31,1992).”
Wheeling-Pittsburgh, at 538; Quicken Loans, at *4. In this case, the action was removed
to this Court on August 16, 2011. On August 25, 2011, plaintiffs filed their motion asking
this Court abstain from hearing the claim and remand the case to the Circuit Court of
Jefferson County. The Court finds that such motion was timely, thus satisfying the first
factor of the mandatory abstention statute.
Title 28, United States Code, Section 1334(c)(2) next provides that, in order for
mandatory abstention to apply, the proceeding must be one based upon a state law claim
or state law cause of action. The parties do not dispute that plaintiffs' claims are based
solely upon state law. None of the claims are based on federal law. Furthermore,
defendants do not argue that federal law is implicated in the underlying suit. Accordingly,
the second factor of the mandatory abstention statute is met.
“Application of § 1334(c)(2) next requires that the proceeding be related to a Title

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11 case but not arising under Title 11 or arising in a case under Title 11. In Northern
Pipeline Construction Co. v. Marathon Pipeline Co., 458 U.S. 50 (1982), the United
States Supreme Court struck down portions of the Bankruptcy Act of 1978 as violative of
Article III of the Constitution. Following Northern Pipeline, Congress amended the
Bankruptcy Act of 1978 and made the bankruptcy courts adjuncts of Article III courts when
adjudicating state law matters. See Bankruptcy Amendments and Federal Judgeship
Act of 1984, Pub.L. No. 98–353, 98 Stat. 333, 28 U.S.C. § 152. The 1984 Act drew a
distinction between core and non-core bankruptcy proceedings. ‘Core matters are those
that would fit within the Bankruptcy Court's summary jurisdiction prior to 1978; that is, core
matters are those involving the bankrupt's property or assets within the jurisdiction of the
Bankruptcy Court. Bankruptcy Courts may “hear and decide” these core proceedings.’
Erwin Chemerinsky Federal Jurisdiction § 4.5.3 (5th ed. 2007).” Quicken Loans, at *4.
“It is first noted that civil proceedings arising under Title 11 include those created by
Title 11 such as a claim for exemptions under § 522 or the exercise by the trustee of an
avoiding power under § 544(b). 1 Collier on Bankruptcy ¶ 3.01(4)(b)(i) (15th ed. 2003).
Those arising in a case under Title 11 include administrative matters, allowance or
disallowance of claims, determination of liens and other matters that take place as part of
the administration of the bankruptcy estate. Id. at ¶ 3.01(4)(b)(iv).” Barge v. Western
Southern Life Ins. Co., 307 B.R. 541, 544 (S.D. W.Va. 2004).
“Proceedings arising under Title 11 or arising in a case under Title 11 fall generally
into the category known as core proceedings under 28 U.S.C. § 157(b)(2). As stated by
Judge Wisdom in Wood v. Wood, 825 F.2d 90, 97 (5th Cir. 1987), ‘a proceeding is core

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under section 157 if it invokes a substantive right provided by title 11 or if it is a proceeding
that, by its nature, could arise only in the context of a bankruptcy case.’ On the other hand,
proceedings that are merely related to a bankruptcy case are generally considered to be
non-core.

The distinction between core and non-core is found in the Bankruptcy

Amendments and Federal Judgeship Act of 1984, Pub.L. No. 98–353 (1984). Its purpose
is to direct nearly all, though not all, core proceedings to an Article I bankruptcy judge, while
related proceedings in the federal system are committed to an Article III judge. The 1984
amendments were enacted by Congress in the wake of Northern Pipeline Constr. Co. v.
Marathon Pipe Line Co., 458 U.S. 50 (1982). Marathon involved a state law breach of
contract action filed in bankruptcy court by a debtor in possession on a pre-bankruptcy
petition claim. The Court held that the provision of the Bankruptcy Act of 1978 vesting that
matter in an Article I bankruptcy judge was an unconstitutional effort by Congress to create
an adjunct to an Article III court. Id.” Id.
In Barge, the claims asserted were pre-bankruptcy petition, state law claims for,
inter alia, fraud, negligent misrepresentation, negligent failure to train, violations of the West
Virginia Unfair Trade Practices Act, W. Va. Code §§ 33–11–1, et seq., and breach of the
duty of good faith and fair dealing, arising out of the sale of “vanishing premium” life
insurance policies. Judge Copenhaver, an expert in bankruptcy law, found that “[t]he
defendants' effort to sweep the Barge cases into the core catch-all subcategories of 28
U.S.C. § 157(b)(2)(A) (‘matters concerning the administration of the estate’) and (O) (‘other
proceedings affecting the liquidation of the assets of the estate’) is unavailing. Such a
broad interpretation would expand the core category beyond the limits contemplated by the

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1984 Act and ignore the teaching of Marathon.” Id. at 544-45.
The claims pending in this case are remarkably similar to the claims in Barge. The
defendants in this case, however, contend that Barge is distinguishable because this case
involves issues of non-dischargeability. This Court cannot agree. The Barge case similarly
involved allegations of actual fraud. While it is true that the fraudulent conduct may lead
to a finding of dischargeability by the bankruptcy case, the issue of dischargeability is not
present in this case. A contrary finding would make any case in which there was a fraud
allegation a core proceeding - an expansion of core proceedings to a degree which would
clearly run afoul of Marathon.
The next factor under § 1334(c)(2) is that the action could not have been
commenced in federal court absent jurisdiction under § 1334. As discussed above, the
plaintiffs have asserted no claims arising under federal law. The only other avenue for
jurisdiction is found in diversity of citizenship pursuant to § 1332. The plaintiffs and
defendants Nichols, Fisher, Parsons, and DeHaven are West Virginia residents and
defendant NDA is a West Virginia professional limited liability company. Therefore, this
Court finds that this action could not have been commenced in federal court absent
jurisdiction under § 1334, and thus the fourth factor under § 1334(c)(2) has been met.
Finally, § 1334(c)(2) directs a court to determine whether the proceedings can be
resolved in a timely fashion before the state court. The defendants argue that the plaintiffs
have not met their burden on this requirement. While the defendants have offered
statistical evidence as to how quickly cases may be resolved in the Eastern District of
Virginia, no evidence has been presented showing the state court's docket is

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unmanageable or that the state court will not determine matters in a timely fashion. In fact,
the state court had entered an order prior to removal setting the trial of this case for March
6, 2012. This Court finds that the fifth and final condition for mandatory remand under §
1334(c)(2) has been met, and this Court finds it must abstain from exercising its jurisdiction
under § 1334.
For the reasons stated above:
1.

Defendant Massachusetts Mutual Life Insurance Company’s Motion to

Transfer Venue (Doc. 5) is DENIED;
2.

Plaintiffs’ Motion to Abstain from Hearing Case and to Remand Case to

Circuit Court for Jefferson County (Doc. 19) is GRANTED, and this case is hereby
REMANDED to the Circuit Court of Jefferson County, West Virginia;
3.

Camico Mutual Insurance Company’s Motion to Bifurcate or, in the

Alternative, to Sever (Doc. 31) is DENIED WITHOUT PREJUDICE; and
4.

Defendant Massachusetts Mutual Life Insurance Company’s Motion for Leave

to File Sur-Reply Brief in further Opposition to Plaintiffs’ Motion to Abstain and Remand
(Doc. 34) is GRANTED, this Court having reviewed and considered the same.
It is so ORDERED.
The Clerk is directed to transmit copies of this Order to any counsel of record and
to the Circuit Clerk of Jefferson County, West Virginia.

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DATED: September 26, 2011.

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