Diversified Fabricators, Inc. v. Caldwell (In re Caldwell)

SUPERIOR COURT OF SPALDING COUNTY, STATE OF GEORGIA, CASE NO. 20V-763.

ORDER GRANTING PLAINTIFF'S MOTION TO ABSTAIN AND REMANDING CASE TO THE SUPERIOR COURT OF SPALDING COUNTY

Paul Baisier, U.S. Bankruptcy Court Judge.

The above-captioned matter (the "Adversary Proceeding") comes before the Court on a Motion to Abstain From Hearing and Remand Above-Styled Case to the Superior Court of Spalding County (Docket No. 6)(the "Motion") filed by Diversified Fabricators, Inc. (the "Plaintiff") on September 15, 2021.

The Adversary Proceeding arises from case number 20V-763, originally commenced in the Superior Court of Spalding County (the "Superior Court") on August 24, 2020, in which the Plaintiff filed a Complaint For Relief (as amended, the "Complaint")^[1] against Brandy H. Caldwell (the "Debtor"), The At the Olde House Trust, and Brandy H. Caldwell and Antwan Caldwell, as the Trustees for The At the Olde House Trust (collectively, the "Defendants")(Docket No. 1, Exhibit A, C)(the "State Court Proceeding"). In the Complaint, the Plaintiff asserts that the Defendants conspired to convert money while the Debtor was working in the Plaintiff's accounting department. In connection with the conspiracy and conversion allegations, the Plaintiff contends that the Defendants used the allegedly converted funds to purchase or pay off real property as well as to acquire other assets.^[2]

On September 16, 2020, the Debtor and Antwan Caldwell filed an Answer, Defenses, and Counterclaim for Computer Theft and Computer Invasion of Privacy in the State Court Proceeding, alleging in the included counterclaim (the "Counterclaim") that the Plaintiff took the Debtor's computer and invaded her privacy by hacking into her personal social media accounts (Docket No. 1, Exhibit D). The pretrial conference for the State Court Proceeding was set for

August 26, 2021, at 9:00 a.m. (Docket No. 1, Exhibit J), two (2) days after the first anniversary of the commencement of the State Court Proceeding.

On August 25, 2021, the day before the scheduled pretrial conference, the Debtor filed a voluntary petition for relief under Chapter 11 of Title 11 of the United States Bankruptcy Code (Case No. 21-10784-PMB, Docket No. 1), and filed a Notice of Removal of the State Court Proceeding in this Court (Docket No. 1). The Plaintiff then filed the present Motion, arguing that the Court must abstain from hearing the removed case under 28 U.S.C. § 1334(c)(2) and that even if the Court is not required to abstain, it should remand the case back to the Superior Court based on equitable grounds pursuant to 28 U.S.C. § 1452(b). The Debtor filed a Response in Opposition to Diversified Fabricators, Inc.'s Motion to Abstain from Hearing and Remand Above-Styled Case to the Superior Court of Spalding County on September 29, 2021, arguing that the case is a core proceeding better heard in Bankruptcy Court (Docket No. 9)(the "Response").

Under the mandatory abstention provision of 28 U.S.C. § 1334(c)(2), the Court must abstain from hearing a state law claim if all of the following requirements are met:

(1) a motion has been timely filed requesting abstention; (2) the cause of action is essentially one that is premised on state law; (3) the claim is a non-core proceeding; (4) the proceeding could not otherwise have been commenced in federal court absent federal jurisdiction under § 1334(b); (5) an action has been commenced in state court; and (6) the action could be adjudicated timely in state court

In re Manton, 585 B.R. 630, 640 (Bankr. N.D.Ga. 2018). All of these requirements, with the exception of the third element, are clearly met. The first and last requirements are met because the Plaintiff filed this Motion only twenty (20) days after the Debtor removed the case, and the matter is ready for a pretrial conference in the Superior Court. The case is premised entirely on state law, was filed in state court, and could not have been commenced in federal court outside the bankruptcy filing. Thus, requirements 2, 4 and 5 are

satisfied.^[3] The alleged causes of action are clearly state law claims, which suggests they are at best only "related to" the bankruptcy case.^[4] Conversely, the outcome of this litigation is critical to the Debtor's bankruptcy estate, which suggests that these could be a matter "arising in" a case under Title 11. Further, the litigation involves the allowance or disallowance of claims, a counterclaim by the estate, and allegations of fraudulent transfer, all of which the United States Code defines as "core." 28 U.S.C. §157(b)(2)(B), (C) and (H). Resolving these complex issues is, however, unnecessary in this case because of the finding below that this Court should permissively abstain under 28 U.S.C. § 1334(c)(1)^[5] and remand the proceeding to state court under 28 U.S.C. § 1452(b).

"Discretionary abstention and equitable remand are 'kindred statutes.' Both favor 'comity and the resolution of state law questions by state courts.'" In re TitleMax Holdings, LLC, 447 B.R. 896, 900 (Bankr. S.D. Ga. 2010)(quoting In re Norrell, 198 B.R. 987, 997-98 (Bankr. N.D. Ala. 1996)). Therefore, courts contemplating relief under both sections consider similar factors, which include:

(1) the effect of abstention on the administration of the bankruptcy estate; (2) the extent to which state law issues predominate over bankruptcy issues; (3) the difficulty or unsettled nature of the applicable law; (4) the presence of a related

proceeding commenced in state court or other non-bankruptcy court; (5) the basis of bankruptcy jurisdiction, if any, other than 28 U.S.C. § 1334; (6) the degree of relatedness or remoteness of the proceeding to the 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