Opinion
02 Civ. 910 (GEL), 03 Civ. 4521 (GEL)
November 13, 2003
Arnold G. Regardie, Los Angeles, CA, for plaintiff Abe Nachom.
Sean Riley, Christensen, Miller, Fink, Jacobs, Glaser, Weil and Shapiro, LLP, Los Angeles, CA, for defendants Gary Winnick, Thomas J. Casey, Dan J. Cohrs, Joseph P. Clayton, and David A. Walsh.
William F. Alderman, Orrick, Herrington Sutcliffe LLP, San Francisco, CA, for defendants Citigroup, Inc., Salomon Smith Barney Inc., and Jack Grubman.
OPINION AND ORDER
Plaintiff Abe Nachom filed this suit in California Superior Court making various state law claims against Solomon Smith Barney, Inc., its parent Citigroup, Inc., and its former lead analyst Jack Grubman for their role in promoting the securities of now-bankrupt Global Crossing, Ltd. ("GC). He also makes state-law claims against certain former officers and directors of GC (the "GC defendants") and against GC's accounting firm, Arthur Andersen, alleging that they provided "false, misleading and incomplete information" in various public filings. (Compl. ¶ 74.)
On January 22, 2003, the GC defendants removed the case to the U.S. District Court, Central District of California, claiming federal jurisdiction pursuant to 28 U.S.C. § 1334(b), in that the case is purportedly "related to" GC's bankruptcy proceedings. The other defendants consented to removal. Plaintiff moved to remand, arguing lack of subject matter jurisdiction. The motion was fully briefed, but consideration of the motion was stayed pending the determination by Judicial Panel on Multidistrict Litigation whether to transfer the case to this District as part of In re Global Crossing, Ltd., Securities and ERISA Litigation, 02 MD 1472. The case having now been transferred here, and the parties having provided this Court with supplementary briefing, the motion to remand will be denied.
In several other Global Crossing-related cases in which plaintiffs have similarly argued lack of federal subject matter jurisdiction, this Court has held that lawsuits against GC's officers and directors are "related" to the GC bankruptcy proceedings, and therefore were properly removed, because the outcome of such lawsuits could have a "conceivable effect" upon the bankruptcy estate (notwithstanding that GC was not itself a defendant) in the form of a contribution claim by the officer/director defendants against GC. In re Global Crossing. Ltd., Securities Litigation (Beightol v. UBS Paine Webber), Dkt. No. 02 Civ. 910 (GEL), 2003 WL 21507466, at *1 (S.D.N.Y. June 23, 2003) ("Beightol"): In re Global Crossing, Ltd., Securities Litigation (Olofson v. Winnick), Dkt. No. 02 Civ. 910 (GEL), slip op. at 2 (S.D.N.Y. July 3, 2003) ("Olofson"); In re Global Crossing Ltd., Securities Litigation (Hesselman v. Arthur Andersen, LLP), Dkt. No. 02 Civ. 910 (GEL), 2003 WL 21659360, at *1 (S.D.N.Y. July 15, 2003) ("Hesselman"). To the extent that plaintiff raises the same issues raised by the plaintiffs in those cases, the Court will not address them again here.
Plaintiff does, however, have one arrow in his quiver unavailable, the plaintiffs in Beightol, Olofson, and Hesselman. He argues that because Global Crossing's reorganization plan had already been confirmed by the bankruptcy court on December 26, 2002, nearly a month before this case was removed to federal court, there was, in effect, no bankruptcy proceeding to which this case could be "related." (P. Mem. 8.) The Court disagrees. Contrary to plaintiffs suggestion, bankruptcy jurisdiction is not cut off the moment a plan of reorganization is confirmed, nor is the analysis under § 1334 of whether a case is "related to" the bankruptcy proceedings otherwise modified. In re U.S. Brass Corp., 301 F.3d 296, 304 (5th Cir. 2002) ("Section 1334 does not expressly limit bankruptcy jurisdiction upon plan confirmation."); 8 Lawrence P. King et al., Collier on Bankruptcy, ¶ 1142.04 [1] ("Bankruptcy jurisdiction is governed by 28 U.S.C. § 1334; this is so whether the matter at issue arises before or after confirmation of a plan.")
Thus, cases holding that the jurisdiction of the bankruptcy court largely ceases at confirmation are irrelevant, for those cases interpret 11 U.S.C. § 1142(b), governing certain powers granted to the bankruptcy court post-confirmation, not federal bankruptcy jurisdiction in general. See, e.g., In re Johns-Manvilie Corp., 7 F.3d 32, 34 (2d Cir. 1993) (stating that "A bankruptcy court retains post-confirmation jurisdiction in a chapter 11 proceeding only to the extent provided in the plan of reorganization," but citing district court cases that relied upon section 1142(b)); see also U.S. Trustee v. Gryphon at Stone Mansion, Inc., 166 F.3d 552, 556 (3d Cir. 1999) ("[S]ection 1142(b) is a grant of authority to the bankruptcy court that channels, but does not abrogate, the bankruptcy court's jurisdiction post-confirmation.") (quoting United States Trustee v. Gryphon at the Stone Mansion, Inc., 216 B.R. 764, 768 (W.D.Pa. 1997)).
Notwithstanding confirmation of GC's plan of reorganization, GC has not "emerged from the bankruptcy" (P. Mem. 4), and this action retains the same potential to affect the estate that it had when Beightol Olofson, and Hesselman were removed. Though confirmed, the plan has not become effective, since government approval is needed for the sale of the new GC entity to certain foreign companies. (D. Mem. 14.) As a result, the distribution of GC's assets to creditors has not yet begun to take place in accordance with the plan. (See Regardie Decl. Ex. B, at 29 (establishing that distributions to be made on effective date).) Thus any depletion of or claim on GC's remaining assets resulting from a putative indemnification claim made in the course of this litigation could, from the vantage point of the date of removal and perhaps even today, conceivably affect the estate.
Accordingly, federal jurisdiction existed on January 22, 2003, and the case was properly removed. Plaintiff's motion is DENIED.
SO ORDERED.