Pinkozie v. Ricks

243 F.Supp.3d 768

Dennis PINKOZIE

v.Gregory RICKS, et al.

CIVIL ACTION CASE NO. 16-11621

United States District Court, E.D. Louisiana.

Signed March 20, 2017

Lawrence J. Centola, III, Christopher Hicks Carbine, Neil Franz Nazareth, Martzell & Bickford, Jason W. Burge, Jesse Cobb Stewart, Lance C. McCardle, Fishman Haygood, New Orleans, LA, for Dennis Pinkozie.

Philip S. Brooks, Jr., Stephen Lynn Williamson, Gordon, Arata, McCollam, Duplantis & Eagan, Michael Edward Landis, Montgomery Barnett, New Orleans, LA, Brian P. Shaw, Richard Rogge Dunn, Clouse Dunn LLP, Dallas, TX, for Gregory Ricks, et al.

SECTION: "G"(4)

ORDER

NANNETTE JOLIVETTE BROWN, UNITED STATES DISTRICT JUDGE

Pending before the Court is Plaintiff Dennis Pinkozie's ("Pinkozie") "Motion to Remand or, in the Alternative, Motion for Abstention under 28 U.S.C. § 1334(c)."¹ Having considered the motion, the memoranda in support and in opposition, the record, and the applicable law, the Court will grant the motion and remand this case to the 24th Judicial District Court for the Parish of Jefferson, State of Louisiana.

I. Background

A. Factual Background

In this litigation, Pinkozie alleges that Defendants Gregory Ricks, Gregory Ricks & Associates, Inc., and Gregory Ricks, L.L.C. ("Defendants") breached fiduciary, contractual, and other state law duties owed to Pinkozie by misrepresenting and omitting material facts concerning certain investments.² Pinkozie states that Defendants sold him $350,000 worth of investment securities involving fractional interests in the proceeds of third parties' life insurance policies ("Investments") in or around 2010.³ Pinkozie states that these Investments were developed by Life Partners Holdings, Inc. and/or LPI Financial Services, Inc. ("the Debtors").⁴ According to Pinkozie, Defendants falsely marketed these Investments and misrepresented the true characteristics of the Investments, the likely returns of the Investments, and the fees and/or commission that the Defendants would earn by selling the Investments.⁵

Pinkozie avers that in or around January 2015, the Debtors entered into chapter 11 bankruptcy in the Northern District of Texas.⁶ On March 11, 2016, a chapter 11 Trustee named Defendant Gregory Ricks as a defendant in an adversary proceeding for allegedly perpetrating a fraud on investors and misrepresenting key characteristics of the Investments.⁷ Pinkozie learned of Defendant Gregory Ricks' alleged misdeeds from the adversary proceeding.⁸

B. Procedural Background

Pinkozie filed his Petition in Louisiana state court on May 25, 2016, and did not name the Debtors as defendants.⁹ On June 24, 2016, Defendants filed their Notice of Removal in this Court, alleging that the Court has jurisdiction over this case pursuant to 28 U.S.C. § 1334 because it is "related to" the Debtors' bankruptcy proceedings pending in federal court.¹⁰ On June 30, 2016, Defendants filed a motion to dismiss for failure to join the Debtors as defendants or, in the alternative, to transfer Pinkozie's case to the Northern District of Texas to be referred to the bankruptcy court handling the Debtors' bankruptcy proceedings.¹¹

On July 11, 2016, Pinkozie filed the instant motion to remand.¹² On July 20, 2016, the Court granted the parties' joint motion to continue the submission date of Pinkozie's motion to remand to August 17, 2016.¹³ On August 9, 2016, Defendants filed an opposition.¹⁴ With leave of court, Pinkozie filed a reply on August 19, 2016.¹⁵

II. Parties' Arguments

A. Defendants' Notice of Removal

In their Notice of Removal, Defendants assert that on May 27, 2016, they received notice that this matter had been filed in state court, and timely removed it to this Court on June 24, 2016.¹⁶ Defendants contend that this Court has original jurisdiction over this case under 28 U.S.C. § 1134 and § 1452 because this matter is "related to" the bankruptcy proceedings of the Debtors pending in the United States Bankruptcy Court for the Northern District of Texas.¹⁷ Defendants aver that they will seek to transfer this case to the Northern District of Texas, and then have the case referred to the bankruptcy court.¹⁸ Thereafter, Defendants allege that they can file a third-party action under Federal Rule of Civil Procedure 14 against the Debtors, but are prevented from doing so in this Court because of the automatic stay in place.¹⁹ Defendants also point out that Pinkozie's own complaint incorporates by reference all the allegations made in an adversary proceeding against Defendant Gregory Ricks that is pending in the bankruptcy court.²⁰ Thus, Defendants argue that the outcome of this case, "especially after [the] Debtors are made parties hereto, will ‘conceivably have an effect on the estate being administered in bankruptcy....’ "²¹ Accordingly, Defendants assert that this Court has subject-matter jurisdiction, and removal is proper.²²

B. Pinkozie's Arguments in Support of Remand

In his motion, Pinkozie argues that this Court should remand this case back to Louisiana state court for lack of subject matter jurisdiction, or pursuant to the mandatory or permissive abstention provisions under 28 U.S.C. § 1334.²³ In particular, Pinkozie asserts that the Court should grant Pinkozie's motion on any of three independent grounds: (1) the Court lacks subject-matter jurisdiction, as Pinkozie's claims are allegedly not "related to" the bankruptcy proceeding because they will have no effect on the Debtors' estate; (2) even if the case was "related to" the bankruptcy proceeding, the Court must abstain from hearing this matter under the mandatory abstention provision of 28 U.S.C. § 1334 ; or (3) even if the Court does not adopt either of the first two reasons, it should decline jurisdiction based on the Court's equitable abstention and permissive remand authority.²⁴ Pinkozie also seeks an award of attorneys' fees and costs, as he alleges Defendants cannot set forth a good-faith basis for removal in this case.²⁵

1. Lack of Subject Matter Jurisdiction

First, Pinkozie asserts that he is a Louisiana domiciliary bringing only state law claims against Defendants, who are also Louisiana domiciliaries, and that this case was removed on the sole basis that Pinkozie's claims were "related to" the Debtors' bankruptcy proceedings.²⁶ According to Pinkozie, a federal bankruptcy court has jurisdiction over "all civil proceedings ... arising in or related to cases under title 11," and such cases originally filed in state court may be removed "to the district court for the district where such civil action is pending."²⁷ Pinkozie argues that, in the Fifth Circuit, a proceeding is "related to" a bankruptcy proceeding if "the outcome of that proceeding could conceivably have any effect on the estate being administered in bankruptcy."²⁸ Pinkozie asserts that the Fifth Circuit has cautioned that the "related to" language is not limitless or as broad as "having some connection with;" rather, "the proceeding must be capable of affecting the bankruptcy estate."²⁹ According to Pinkozie, the Fifth Circuit has further clarified that "an action is related to bankruptcy if the outcome could alter the debtor's rights, liabilities, options, or freedom of action (either positively or negatively) and in any way impacts upon the handling and administration of the bankrupt estate. "³⁰ Pinkozie argues that "conversely the bankruptcy court has no jurisdiction over a matter that does not affect the debtor. "³¹ Pinkozie further asserts that "bankruptcy jurisdiction does not extend to state law actions between non-debtors over non-estate property."³²

Here, Pinkozie argues that this Court lacks jurisdiction over this matter, and thus removal was improper, because he only alleged state law claims against the non-debtor Defendants and made no claim to the Debtors' estate.³³ Pinkozie further avers that the Debtors were not named as defendants in his case, and the outcome of this action would in no way bind the Debtors.³⁴ Thus, Pinkozie alleges, it is not "related to" the Debtors' bankruptcy estate.³⁵ Pinkozie cites to the Third Circuit's decision in Pacor , Inc. v. Higgins , where the court held an action that is only "a mere precursor to a potential third party claim for indemnification" by the defendant against the bankrupt party is not "related to" the bankruptcy proceeding, as the action could not bind the bankrupt party or determine any of its rights, liability, or courses of action.³⁶ According to Pinkozie, the Fifth Circuit has expressly adopted the Pacor test.³⁷ Like in Pacor , Pinkozie asserts that it is irrelevant whether Defendants may eventually join the Debtors through a third-party action or seek indemnification.³⁸ Moreover, Pinkozie argues that merely incorporating by reference the allegations made in the adversary proceeding pending in the bankruptcy court is not enough, as "shared facts ... do not in and of themselves suffice to make the third-party action ‘related to’ the bankruptcy."³⁹

2. Mandatory Abstention

Second, Pinkozie avers that even if his action is "related to" the bankruptcy proceedings, this Court must abstain and remand the case back to state court pursuant to 28 U.S.C. § 1334(c)(2).⁴⁰ According to Pinkozie, the Bankruptcy Code's mandatory abstention provision provides that federal courts must abstain from actions asserting state law claims that are "related to" a case under title 11 "but not arising under title 11."⁴¹ Pinkozie contends that mandatory abstention is required when: (1) "[a] motion has been timely filed requesting abstention;" (2) "[t]he cause of action is essentially one that is premised on state law;" (3) "[t]he proceeding is non-core or related to the bankruptcy case;" (4) "[t]he proceeding could not otherwise have been commenced in federal court absent the existence of the bankruptcy case;" and (5) "[t]he proceeding has already been commenced and can be timely adjudicated in a state court forum."⁴² Here, Pinkozie argues that all requirements are met: (1) Pinkozie filed his ...