United States District Court, D. New Mexico
MEMORANDUM OPINION AND ORDER
MATTER comes before the Court upon the removing parties
Westmoreland Coal Company (Westmoreland), BHP Billiton New
Mexico Coal, Inc. (BHP), and Public Service Company of New
Mexico's (PNM) Joint Motion to Transfer Case to the
United States Bankruptcy Court for the Southern District of
Texas Houston Division, filed on November 30, 2018 (Doc. 8).
The New Mexican, Inc.'s (The New Mexican) and New Mexico
Public Regulation Commission's (NMPRC) responses were
filed December 14, 2018, and BHP and PNM's reply was
filed on December 28, 2018. (Docs. 14, 15, 18). Also before
the Court are NMPRC's and The New Mexican's Motions
to Remand to State Court (Docs. 10, 13). BHP and PNM's
responses were filed on December 21, 2018, and December 28,
2018. (Docs. 16, 17). The New Mexican's and PNM's
replies were filed January 7, 2019, and February 4, 2019.
(Docs. 20, 23). For the following reasons the Court denies
the motion to transfer venue to the Texas Bankruptcy Court
(Doc. 8) and grants the motions to remand (Docs. 10, 13).
underlying litigation began on August 6, 2015, when the NMPRC
filed an emergency TRO petition in New Mexico's First
Judicial District Court. (Doc. 5) at 1. NMPRC asked the state
court to enjoin The New Mexican from using or publishing
certain confidential documents from PNM. Id. at 11.
NMPRC had inadvertently disclosed the PNM documents following
The New Mexican's request for public records.
Id. at 4-5. PNM, Westmoreland, and BHP intervened.
They also wished to keep the documents confidential. (Doc. 1)
26, 2016, The New Mexican filed various counterclaims against
NMPRC, PNM, Westmoreland, and BHP. (Doc. 1-1). The New
Mexican alleged those defendants engaged in malicious abuse
of process; violated the First Amendment; and participated in
a conspiracy. Id. at 17-21. The New Mexican sought
declaratory relief and unspecified money damages.
Id. at 22. The parties litigated in state court for
over two years.
October 9, 2018, Westmoreland filed a Chapter 11 petition in
the Texas Bankruptcy Court, No. 18-35672. (Doc. 1) at 2. On
November 27, 2018, Westmoreland, PNM, and BHP removed the
state court lawsuit to this Court. (Doc. 1). Westmoreland,
PNM, and BHP then filed a joint motion to transfer this case
to the Texas Bankruptcy Court. (Doc. 8). NMPRC and The New
Mexican oppose the transfer. They also filed motions to
remand the case to state court. (Docs. 14-15). NMPRC and The
New Mexican did not file claims in the bankruptcy case and do
not seek payment from the bankruptcy estate. See
Claims Registrar, No. 18-35672. PNM and BHP filed unsecured
claims against Westmoreland's bankruptcy estate. They
filed the claims in the event the state court suit gives rise
to a claim for contribution or indemnity against
Westmoreland. (Docs. 16-1 and 16-2).
Order entered March 2, 2019, the Bankruptcy Court confirmed
Westmoreland's Chapter 11 plan of reorganization. (Doc.
1561 in No. 18-35672). The reorganization plan provides that
all general unsecured claimants (which includes PNM and BHP)
will receive a pro rata share of the General Unsecured Claims
fund. (Doc. 1561 in No. 18-35672) at 71. The reorganization
plan does not impact The New Mexican and NMPRC because
neither party seeks payment from the estate.
Notice of Removal cites the bankruptcy removal statute (28
U.S.C. § 1452) and the district court removal statutes
(28 U.S.C. §§ 1441, 1446). The case is not
removable under the district court statutes because the
removing parties received notice of The New Mexican's
counterclaim in 2016 (i.e. more than 30 days after
receipt of service of the pleading). The Court will therefore
analyze the removal under 28 U.S.C. § 1452.
1452 statute allows a party to remove a cause of action
related to a bankruptcy case, provided the Federal Court can
exercise bankruptcy jurisdiction under 28 U.S.C. § 1334.
Section 1452 further provides the cause of action may be
remanded on “any equitable ground.” The Court
will therefore determine: (1) whether the Texas Bankruptcy
Court could exercise jurisdiction if the case were
transferred; and (2) whether the equities favor a remand. The
Court denies the removing parties' request to allow the
Texas Bankruptcy Court to rule on remand in the first
instance. (Doc. 18) at 2. The Court will not transfer venue
without being satisfied that the transferee court has at
least a colorable claim to jurisdiction.
1334 grants bankruptcy jurisdiction over three kinds of
proceedings: (1) those “arising under” Title 11
of the United States Code; (2) those “arising in”
a case under Title 11, and (3) those “related to”
a case under Title 11. See 28 U.S.C. § 1334(b).
The claims here were filed in state court three years before
the bankruptcy proceeding. They do not arise under the
Bankruptcy Code, nor did they arise in the bankruptcy case.
reviewing the record, it also does not appear that the claims
are sufficiently “related to” Westmoreland's
bankruptcy case to give rise to federal jurisdiction under
Section 1334. An action is “related to” the
bankruptcy case if the outcome of the underlying proceeding
could impact the debtor's rights, liabilities, or the
administration of the estate. See In re Gardner, 913
F.2d 1515, 1518 (10th Cir. 1990). Here, Westmoreland's
rights, liabilities, and repayment obligations are governed
by its reorganization plan. The bankruptcy docket reflects
that the plan has already been confirmed. If Westmoreland
becomes liable to PNM and BHP for contribution at some point,
it will not impact Westmoreland. At most, the underlying
litigation could impact the distribution to one class of
creditors, but any delay would likely be immaterial in a case
this size. Hence, the resolution of the bankruptcy case does
not - as the removing parties argue - turn on the outcome of
the underlying litigation. (Doc. 18) at 2.
even if the matter were “related to” the
bankruptcy case for purposes of Section 1334, it does not
appear the Texas Bankruptcy Court can enter a final judgment
in the underlying action. Stern v. Marshall, 131
S.Ct. 2594 (2011), held that absent consent by the non-debtor
parties, bankruptcy courts “lack the constitutional
authority to enter a final judgment on a state law
counterclaim that is not resolved in the process of ruling on
a creditor's proof of claim.” The New Mexican does
not consent to bankruptcy jurisdiction. The New Mexican
raised a state law counterclaim against Westmoreland, PNM,
and BHP. Those claims will not be resolved in the
claims-allowance process because The New Mexican did not file
a proof of claim in Westmoreland's bankruptcy case.
these reasons, it does not appear the Texas Bankruptcy Court
has jurisdiction over, or authority to enter final judgments
in, the underlying action. Therefore, the action should be
remanded to state court, rather than transferred to the Texas
result would not change based on the removing parties'
equitable arguments. (Docs. 16, 17). PNM and BHP cite In
re Drexel Burnham Lambert Group, Inc.,130 B.R. 405, 407
(S.D.N.Y. 1991), which sets forth the ...