Hoffmann v. Ondrajka (In re Ondrajka)

657 B.R. 217

IN RE: Adam J. ONDRAJKA, Debtor.

John M. Hoffmann, Plaintiff, v. Adam J. Ondrajka, and Flyboyz Aviation, LLC, Defendants.

Case No. 24-40035

Adv. No. 24-4004

United States Bankruptcy Court, E.D. Michigan, Southern Division

Signed March 1, 2024

Kenneth R. Beams, Bingham Farms, Michigan, Attorney for Plaintiff.

Jay S. Kalish, Law Offices of Jay S. Kalish, PC, Farmington Hills, Michigan, Attorney for Defendants.

OPINION REGARDING PLAINTIFF'S MOTION FOR ABSTENTION

Thomas J. Tucker, United States Bankruptcy Judge

I. Introduction

This adversary proceeding began after one of the two Defendants, Adam J. Ondrajka, filed a Chapter 13 bankruptcy case in this Court on January 3, 2024, and then immediately removed a pending state court lawsuit to this Court. That lawsuit had been pending in the state court for almost two and one half years, and was scheduled for a jury trial to be held on February 29, 2024. The Plaintiff has moved for this Court to abstain, based on the mandatory and permissive abstention provisions of 28 U.S.C. § 1334(c). For the reasons stated in this Opinion, the Court will abstain, and will remand the case back to the state court.

Before the Court is the motion filed by Plaintiff John M. Hoffman (the "Plaintiff" or "Hoffman") on February 2, 2024, entitled "Plaintiff's Motion for Abstention from Further Proceedings" (Docket # 26, the "Motion"). On February 14, 2024, the Defendants filed a response objecting to the Motion.¹ The Court concludes that a hearing on the Motion is not necessary, and that the Motion should be granted.

II. Background

A. The state court lawsuit

On August 16, 2021, the Plaintiff Hoffman filed a complaint against the Defendants Adam J. Ondrajka ("Ondrajka" or the "Debtor") and Flyboyz Aviation LLC ("Flyboyz") (collectively, the "Defendants") in the state circuit court for Sanilac County, Michigan, commencing Case No. 21-39262-CZ (the "State Court Lawsuit").²

The complaint in the State Court Lawsuit alleged the following facts.

Hoffman is the owner of an airplane that "was disassembled when [he] obtained [it] in 2016[,]" and is also the owner of "parts, manuals, [a] logbook, [and] yellow tags from [his air]plane."³ The "[D]efendant Ondrajka is an owner, employee, agent and/or representative of [the D]efendant Flyboyz."⁴ The "[D]efendant Flyboyz is an airplane repair shop and [the D]efendant Ondrajka is a licensed airplane repair mechanic."⁵ Sometime in 2017, Hoffman and Ondrajka agreed that Ondrajka would repair the engine of the airplane, paint various parts of the airplane, and otherwise reassemble and restore the airplane. From 2017 through 2019, Ondrajka ordered parts for the airplane and performed various services on the airplane, and invoiced Hoffman for those services and for parts. Hoffman promptly paid such invoices, and on November 18, 2017, "paid an advancement on [Ondrajka's] labor of 20 hours at $65.00 per hour."⁶ On October 23, 2018, Hoffman provided the Defendants with his credit card information so that Ondrajka could purchase additional parts to be used in reassembling and restoring the airplane.⁷ The Defendants would also "contact [Hoffman] as to parts that were need[ed] for the airplane which [Hoffman] would purchase . . . and have . . . delivered to [the D]efendants."⁸

On October 16, 2019, Hoffman paid Flyboyz $25,000.00 for "a complete new instrument panel."⁹ On August 7, 2020, Hoffman's son "emailed [the D]efendants inquiring as to the status of the restoration of [Hoffman's air]plane and if [the D]efendants had a proposed panel layout for the instrument panel."¹⁰ On August 8, 2020, the Defendants responded to Hoffman's son's email by stating that they did not have any money remaining "to order parts for the instrument panel" and "that some of the restoration work on the airplane [was] partially done."¹¹ After this response, both Hoffman and his son repeatedly asked for an accounting "as to the money that was spent on the airplane and what amount of money remained from the $25,000 [Hoffman] sent to [the D]efendants for the instruments for the instrument panel" and for "the money and labor spent on the airplane."¹² Hoffman also requested that Ondrajka "return all the parts that came with the airplane as well as all of the parts that either [Hoffman] purchased or [the D]efendants allegedly purchased for the airplane as well as the 'yellow tags[.]' . . . the aircraft logbook[, and . . . all of the maintenance records for the airplane."¹³ Despite Hoffman's repeated demands for an accounting and for the return of his personal property, the Defendants have failed to provide an accounting or to return his property.¹⁴

The complaint in the State Court Lawsuit stated that the state court had jurisdiction over the case because Hoffman sought "in part, an equitable order seeking the return of parts, manuals, logbook, [and] yellow tags" from Hoffman's airplane.¹⁵

The complaint did not explicitly allege any particular legal theories for relief. Rather, the complaint contained only a section entitled "General Allegations" in which Hoffman laid out in 33 numbered paragraphs the facts he alleged entitled him to relief, and then a prayer for relief which stated:

WHEREFORE, [P]laintiff JOHN M. HOFFMAN, prays that this Court enter an[ ] order that [the D]efendant return all parts for the airplane, the aircraft and flight logbooks, manuals, yellow tags, all documentation to the airplane included previously yellow tags [the D]efendants took, and $25,000 that [the P]laintiff had paid to [the D]efendants, including costs and attorney fees so wrongfully incurred, and any other remedy this Court deems fair and just.¹⁶

The docket in the State Court Lawsuit¹⁷ indicates that the Defendants filed an answer to the complaint on September 24, 2021,¹⁸ and that, after almost two and one half years of litigation, the case was scheduled for a final settlement conference on February 26, 2024, and a jury trial on February 29, 2024.

B. Ondrajka's bankruptcy filing and removal of the State Court Lawsuit

On January 3, 2024, Ondrajka filed a voluntary petition for relief under Chapter 13, commencing Case No. 24-40035, and then immediately filed a "Notice of Removal" of the State Court Lawsuit to this Court, thereby commencing this adversary proceeding.¹⁹

C. Plaintiff's abstention motion

On February 2, 2023, Hoffman filed the Motion, arguing that this Court should abstain from hearing this proceeding under both the mandatory and permissive abstention provisions of 28 U.S.C. § 1334(c), and remand the case back to the state court.²⁰ In support of mandatory abstention, Hoffman argues that this adversary proceeding "is related to a case under title 11 and could not be commenced in a court of the United States absent this bankruptcy" and that this action "can be timely adjudicated in the state court, because it was scheduled "to go to trial on February 29, 2024."²¹ In support of permissive abstention, Hoffman argues that his "claims are contractual and arise under state law;" "[t]here is no jurisdictional basis for this adversary proceeding in the federal courts, other than 28 U.S.C. § 1334;" and "[a]llowing the state court to hear this matter will discourage forum shopping."²²

On February 14, 2024, the Defendants filed a brief objecting to the Motion.²³ The Defendants argue that the Court should not abstain, because:

• the Debtor has a lien on at least some of the personal property that Hoffman demands that the Defendants return to him, which lien "is scheduled by the Debtor in his Schedule B at question 25, as a 'Garage keeper lien on Hoffmann aircraft records pursuant to MCL 259.205a'."²⁴

• "the bankruptcy court is the only court with subject matter jurisdiction to decide whether an asset is property of a debtor's bankruptcy estate."²⁵

• "the bankruptcy court has exclusive jurisdiction of all of the debtor's property, wherever located[,]" and "the asset listed in the Debtor's Schedule B, question 25" is property of the Debtor's bankruptcy estate."²⁶

• this adversary proceeding concerns "the allowance or disallowance of claims against the bankruptcy estate" and is thus a core proceeding under 28 U.S.C. § 157(b)(2)(B).

• the action cannot be timely adjudicated in state court for the reason that the Bankruptcy Court is the only court with subject matter jurisdiction to decide whether an asset is property of a debtor's bankruptcy estate."²⁷

The Defendants argue further that permissive abstention is not appropriate because the factors courts consider in deciding whether to abstain weigh against abstention.²⁸ The Defendants list these factors in their brief, but they do not discuss how any of these factors apply to this case.

III. Discussion

The Court concludes that both mandatory and permissive abstention apply, and that this Court should abstain and remand this case to the state court.

"28 U.S.C. § 1334(c) applies to abstention. It has two parts: permissive abstention under § 1334(c)(1) and mandatory abstention under § 1334(c)(2)." Palltronics, Inc. v. PALIoT Solutions, Inc. (In re Lightning Technologies, Inc.), 647 B.R. 76, 99 (Bankr. E.D. Mich. 2022).

Section 1334(c)(2) governs mandatory abstention, and states:

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 could not have been 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). Section 1334(c)(1) governs permissive abstention, and states:

Except with respect to a case under chapter 15 of title 11, nothing in this section prevents a district court in the interest of justice, or in the interest of comity with State courts or respect for State law, from

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