Opinion
SA-03-CA-304-RF
October 20, 2003
ORDER GRANTING MOTION TO REMAND
Before the Court are three Motions to Remand to State Court, those of Defendant Sheerin (Docket No. 7), Plaintiff Northern Natural Gas Corp. ("Northern Natural" or "NNG") (Docket No. 19), and of Third Party Defendant Tidelands Oil and Gas ("Tidelands") (Docket No. 20). Also pending are the various responses, replies and supplemental briefings filed in relation to the above. A hearing was held on the related matters on October 15, 2003. A hearing was held on the matter on October 15, 2003. After careful consideration of the filed briefs as well as the oral arguments, the Court is of the opinion that the Motions to Remand should be GRANTED.
FACTUAL AND PROCEDURAL BACKGROUND
Plaintiff Northern Natural originally filed this suit in Bexar County District Court, 45th Judicial District of Texas against Defendant Sheerin, alleging failure to make payments on a promissory note and seeking damages in the amount of $1,871,756.70. Sheerin answered, counterclaimed against NNG, and cross-claimed against Tidelands, ZG Gathering, Ltd. ("ZG Gathering") and Lay, alleging statutory and common law fraud, violations of state and federal securities regulations, conspiracy, and breach of contract. Sheerin alleges that NNG, while a subsidiary of Enron Corporation ("Enron"), and Lay, as an officer and agent of Enron, engaged in fraudulent activities in connection with the sale of unregistered securities. Tidelands is joined because it allegedly purchased the gathering system from ZG Gathering and promised to pay on the Northern Natural note on behalf of Sheerin, thereby relieving any of her duties to NNG. Sheerin requested a jury trial and initiated discovery in the form of interrogatories and request for production of documents.
Plaintiffs NNG's Original Petition, at 2-3.
Lay subsequently filed a Notice of Removal on April 17, 2003 without the joinder or consent of the other defendants. Lay argues that, pursuant to 28 U.S.C. § 1452, an individual defendant in a multi-defendant suit related to a bankruptcy case may so remove. Upon removal, Lay also filed a Rule 7.5(e) Notice of Potential Tag-Along Action with the Federal Judicial Panel on Multi-District Litigation ("the MDL Panel") seeking to transfer and consolidate this action into the MDL pretrial proceedings, the Honorable Melinda Harmon, presiding, in the Southern District of Texas. Lay then filed a Motion to Stay Proceedings pending the outcome of his request for transfer.
28 U.S.C. § 1452. See also In re Worldcom, Inc. Sec. Litig. New York City Employees' Retirement Sys., et al. v. Ebbers, et al, 2003 WL 716243, *18 (S.D.N.Y. Mar. 3, 2003); Sommers v. Abshire, 186 B.R. 407, 408 (E.D. Tex. 1995).
In the Notice of Removal, Lay asserts that the instant action is "related to a bankruptcy case" and is therefore removable because this claim has a conceivable potential effect on the bankruptcy estate of Enron. In support of this argument for relatedness, Lay avers that he may have a claim for indemnity and defense costs against Enron and a claim arising from Directors and Officers insurance policies procured for him by Enron. These potential claims, he argues, are sufficient to have a possible effect on the Enron bankruptcy litigation and are therefore related for the purposes of removal jurisdiction. In sum, Lay requests the Court to await the determination of the MDL panel regarding the potential transfer of this case to the Southern District of Texas.
On the other hand, Sheerin, NNG, and Tidelands argue the removal is improper and that a remand to state court is appropriate "in the interest of justice" as defined in 28 U.S.C. § 1334(c)(1). Thus, the questions before the Court are (1) whether the procedure of removal was proper; (2) whether the instant claims are "related to" the bankruptcy estate of Enron such that federal jurisdiction is properly invoked under 28 U.S.C. § 1334(b); and (3) whether the interests of justice favors this Court's abstention and remand of the case to Texas state court.
28 U.S.C. § 1334(c)(1) ("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 abstaining from hearing a particular proceeding arising under title 11 or arising in or related to a case under title 11.").
DISCUSSION
At the outset, the Court notes that Lay bears significant burden with respect to the Motion to Remand, even though filed by opposing parties. A removing party — here, Lay — bears the burden of demonstrating that federal jurisdictional requirements have been satisfied and that removal was procedurally proper. Moreover, any ambiguity or doubt will be construed against removal because the removal statute should be strictly construed in favor of remand. This burden in mind, the Court finds that Lay has demonstrated that the procedure of removal and this Court's jurisdiction over the instant cause are both proper. Even in light of this finding, though, the Court finds that the interests of justice require remand of the case.
Manguno v. Prudential Property Casualty Co., 276 F.3d 720, 723 (5th Cir. 2002),
Id. See also Acuna v. Brown Root, Inc., 200 F.3d 335, 339 (5th Cir. 2000); Willy v. Coastal Corp., 855 F.2d 1160, 1164 (5th Cir. 1988).
28 U.S.C. § 1334(b) grants subject matter jurisdiction to federal district courts in civil cases arising under title 11 or in civil cases related to title 11, in other words, cases arising from or related to bankruptcy. Assuming that a given case is sufficiently related to bankruptcy for purposes of § 1334(b), then 28 U.S.C. § 1452 provides for the removal of that hypothetical action to federal court. This statutory coupling creates the awkwardly-termed "related to bankruptcy" jurisdiction for federal district courts.
28 U.S.C. § 1334(b) ("the district courts shall have original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11").
28 U.S.C. § 1452(a) ("A party may remove any claim or cause of action in a civil action . . . to the district court for the district where such civil action is pending, if such district court has jurisdiction of such claim or cause of action under § 1334 of this title.").
Lay argues that this case is "related to" the Enron bankruptcy, now proceeding before Judge Gonzalez in the Southern District of New York, and therefore is removable pursuant to 28 U.S.C. § 1452(a). The parties dispute three central issues. Sheerin, Northern Natural, and Tidelands argue that Lay's initial removal of the case was procedurally defective, that this Court lacks subject matter jurisdiction of the claim, and finally, that the Court should abstain from exercising jurisdiction and remand the case to state court. Thus, the questions before the Court are (1) whether removal was procedurally proper; (2) whether this Court enjoys subject matter jurisdiction over the controversy; and (3) whether abstention is appropriate in this case such that a remand to state court is in order.
I. The Procedure of Removal
Sheerin argues that Lay erred in filing for removal in the District Court, rather than Bankruptcy Court. Sheerin points the Court to Local Rule 9027 of the Bankruptcy Court for the Western District of Texas that requires the filing of removal notice with the Bankruptcy Court. Tidelands supplements this argument by suggesting that Lay failed to timely file a notice of removal with the Bankruptcy Court.Lay responds that the filing was proper pursuant to 28 U.S.C. § 1446(a) which provides that "[a] defendant . . . desiring to remove any civil action . . . from a State court shall file in the district court of the United States for the district and division within which such action is pending a notice of removal. . . . " The Court agrees with Lay and finds that the procedure of removal was not defective for failure to comply with Federal Rule of Bankruptcy Procedure 9027 or Local Bankruptcy Rule 9027. Lay need only comply with the rules relating to bankruptcy procedure to the extent the case or motion was filed in Bankruptcy Court. Here, however, the case was properly removed to the district court, pursuant to 28 U.S.C. § 1452, and therefore, Lay need only comply with the rules relating to filings therein. Neither this Court, nor a party adjudged herein, is bound to follow the local rules of the Bankruptcy Court for the Western District of Texas, despite the sororal relationship of the two Courts.
28 U.S.C. § 1446(a) (emphasis added).
See In re Simmons, 205 B.R. 834, 837, n. 5 (W.D. Tex. 1997) ("There is, in actuality, no such thing as `bankruptcy court jurisdiction,' per se. Subject matter jurisdiction is delineated by Congress in title 28 and conferred on the district court. The bankruptcy court, by operation of the referral order, exercises that jurisdiction, but the subject matter being exercised is precisely the same as it would be had the matter not been referred by the district court.").
In so far as Sheerin, NNG, and Tidelands assert that the action must have been removed, if at all, to the Bankruptcy Court directly, the Court disagrees. As cited above, the clear language of 28 U.S.C. § 1334(b) and § 1452(a) states that the district courts may enjoy jurisdiction of claims that are related to bankruptcy. This rule leads to the next disputed issue, whether the instant claim is sufficiently related to bankruptcy to confer federal subject matter jurisdiction.
II. "Related to" District Court Jurisdiction
Sheerin, NNG, and Tidelands (the "moving parties") argue this Court lacks subject matter jurisdiction over the cause, requiring a remand to state court. In short, the three parties allege that this controversy is not related to the bankruptcy of Enron or is not sufficiently related, while Lay argues to the contrary.
The Fifth Circuit, like most of the federal circuits, adopted the test for "related to jurisdiction" from Pacor, Inc. v. Higgins. A proceeding is "related to" bankruptcy if "the outcome of that proceeding could conceivably have any effect on the estate being administered in bankruptcy." In Pacor, the Third Circuit held that third party common law claims for indemnity that did not directly involve the bankrupt debtor were not related to the bankruptcy. The Fifth Circuit has consistently reasserted its commitment to the adoption of the Pacor test for relatedness.
743 F.2d 984 (3d Cir. 1984).
In re Wood, 825 F.2d 90, 93 (5th Cir. 1987) citing Pacor, 743 F.2d at 994. See also In re Canion, 196 F.3d 579, 585 (5th Cir. 1999).
Pacor, 743 F.2d at 995.
In re Wood, 825 F.2d at 93; Arnold v. Garlock, Inc., 278 F.3d 426, 434 (5th Cir. 2001); In re Canion, 196 F.3d at 585; Bass v. Denney (In re Bass), 171 F.3d 1016, 1022 (5th Cir. 1999). FeId v. ZaIe Corp. (In re ZaIe), 62 F.3d 746, 752 (5th Cir. 1995).
The language of the test is potentially expansive. Reminiscent of Commerce Power jurisprudence, the extent to which an action could conceivably have any effect on the estate of a debtor seems limitless. Common sense and, more importantly, binding case law require that this not be the case. "[A] bankruptcy court's' `related to' jurisdiction cannot be limitless." A district court's ability to hear matters related to bankruptcy ebbs as the nexus between the subject of the action and the bankruptcy dissipates. With this history and applicable law in mind, the Court must determine whether Lay's potential, but as yet not asserted, claims for contribution, indemnity or Director and Officer ("DO") insurance coverage — based upon common law theories, statutory rights and contractual rights — are sufficiently related to the Enron bankruptcy to provide federal subject matter jurisdiction in the instant controversy.
Celotex Corp. v. Edwards, 514 U.S. 300, 308 (1995).
In re ZaIe, 62 F.3d at 752, citing In re Lemco Gypsum, Inc., 910 F.2d 784, 787 (11th Cir. 1990).
Although the parties dispute a connection between the Enron bankruptcy and the instant controversy, it is clear that if any such nexus exists, it does so as a result of Third Party Defendant Ken Lay alone. As an officer and agent of the now-collapsed entity, Lay asserts that DO insurance coverage included in the Enron estate is implicated in this action. Lay also maintains that pending the outcome of this litigation, he may have claims against the Enron estate for indemnity, contribution, or coverage based upon the DO insurance. These potential claims might be based upon common law theories of recovery or might be grounded in Lay's contractual rights. NNG, too, shares a past relationship with Enron as its subsidiary, but no party alleges this relationship has an effect on whether the current action is related to the Enron bankruptcy. Thus, in determining relatedness to the Enron bankruptcy, the Court examines only the third party claims against Lay.
Two classes of cases are subject to federal "related to jurisdiction": causes of action belonging to the debtor that become the property of the estate and suits between or among third parties that have an effect on the bankruptcy estate. Lay's possible, but as yet not asserted, claims for indemnity, contribution or DO insurance fall within the second category.
Celotex Corp. v. Edwards, 514 U.S. 300, 308, n. 5 (1995).
See Arnold, 278 F.3d at 434; American National Ins. Co. v. J.P. Morgan Chase Co., Civ. A. No. G-02-0299 (S.D. Tex. Aug. 9, 2002) (J. Harmon).
The Fifth Circuit understands the relatedness test as conjunctive. In order to exercise "related to jurisdiction" pursuant to § 1334(b), this Court must find that (1) the instant action could conceivably alter the rights, obligations, and choices of action of the debtor, in this case, Enron, and (2) that the action could have an effect on the administration of the debtor's estate. The Court finds that both prongs are satisfied and therefore denies the motion to remand.
In re Bass, 171 F.3d 1016, 1022(5th Cir. 1999); Walker v. Cadle Co. (In re Walker), 51 F.3d 562, 569 (5th Cir. 1995).
With respect to the first prong of the conjunctive test for relatedness, the Court finds that Lay's potential claims for indemnification, contribution or coverage under DO insurance do conceivably alter the rights, obligations, and choices of action of the collapsed Enron's estate. Claims for indemnification or contribution may affect the scope of the debtor's estate, the debtor's ability to reorganize and the bankruptcy proceeding. Indeed, the evidence reveals that claims for coverage under Enron's DO policies has already affected the Bankruptcy proceedings. Lay's claim under these policies could affect the debtor's obligations as well as the administration of the debtor's estate.
In re Canion, 196 F.3d at 586. See also Belcufine v. Aloe, 112 F.3d 633, 636, 37 (3d Cir. 1997).
See Lay's Resp. App., at ex. D (Motion of Associated Electric Gas Insurance Services Ltd. for Relief From Stay requesting advance of insurance policies' monies in order to defend former Enron officers and directors in pending and future lawsuits).
See Federal Deposit Ins. Corp. v. Majestic Energy Corp. (In re Majestic), 835 F.2d 87, 90 (5th Cir. 1988).
Lay points the Court to the Enron-related decision of Judge Harmon in American National Ins. Co. v. J.P. Morgan Chase Co., ("American National") and argues that a third party's potential claim for contribution or indemnity falls within "related to jurisdiction." In American National, Judge Harmon addressed similar issues with respect to defendant J.P. Morgan, who only possessed potential claims for contribution or indemnification, and found that such potential claims both altered the rights, obligations and choices of action of the debtor Enron and effected the administration of the debtor Enron's estate. Factually, American National is distinguishable from the instant question because J.P. Morgan was the original defendant in that action, whereas Lay is a third party defendant here. The Court finds this difference alone insufficient to deem this action unrelated to Enron's bankruptcy.
Civ. A. No. G-02-0299 (S.D. Tex. Aug. 9, 2002).
Id. at 15.
In Arnold, the Fifth Circuit held that a right to contribution was related to the bankruptcy sufficiently to create jurisdiction. Unlike the co-defendant in that case, Lay here has not yet asserted his potential claims against Enron and, of course, he may never do so. The moving parties suggest that this relationship is too tenuous upon which to hang federal subject matter jurisdiction. The Court agrees that the nexus between Lay's potential claims and the estate of the debtor Enron is ethereal. But in light of substantial Fifth Circuit and other case law discussing the breadth of the "related to jurisdiction," the Court declines under these circumstances to sever the ties between Lay's possible cause and the Enron estate as a matter of law.
Arnold, 278 F.3d at 434.
In re El Paso Refinery, LP, 302 F.3d 343, 348-49 (5th Cir. 2002); In re Zane, 62 F.3d at 753 (upholding related to jurisdiciton over third parties when subject of third-party dispute is property of the estate); In re Worldcom, Inc. Sec. Litig., 2003 WL 716243, (S.D.N.Y. Mar. 3, 2003).
The Court notes the compelling reasoning provided by the Bankruptcy Court for the District of Delaware in In re Federal-Mogul Global, Inc. in support of a denial of subject matter jurisdiction, but declines to follow the lead offered by that court to limit "related to jurisdiction" in light of Fifth Circuit case law to the contrary. In the context of asbestos-related personal injury litigation, the Delaware court questioned the expanding construction of "related to" and reminded of the limited nature of the original Pacor holding. "The possibility that the loser of an unrelated dispute might seek to recover its losses from the debtor does not make the dispute between non-debtors subject to the jurisdiction of the bankruptcy court." Federal-Mogul Global, 282 B.R. at 308. In that same analysis though, the court said that" . . . it seems settled that suits against principal or key-personnel indemnities of the debtor may be within the bankruptcy court's related-to jurisdiction."
282 B.R. 301 (Bankr. D. Del. 2002).
Federal-Mogul Global, 282 B.R. at 310.
Neither Arnold nor Federal-Mogul Global dealt with a potential but unfiled claim for indemnification against the debtor, such as exists in this case, but American National did and found that federal subject matter jurisdiction existed. The Court finds the instant claims against Lay are related to the Enron bankruptcy under existing Fifth Circuit precedent, both by conceivably altering the rights, obligations, and choices of action of Enron and by potentially effecting the outcome of the administration of the Enron estate.
Tidelands questions that Lay has proffered sufficient evidence to the Court in the form of copies of private indemnity agreements between Lay and Enron or of insurance policies upon which he relies in order to assert that this cause is related to a bankruptcy proceeding, and Tidelands reminds the Court of Lay's burden in the matter. The Court finds that evidence was submitted indicating both the DO insurance policy that covered officers and directors of Enron and the Amended and Restated Articles of Incorporation of Enron Oregon Corp. and the Merger of Enron Oregon with Enron Delaware, both providing the articles relating to indemnification and contribution. The Court does not find, nor have the moving parties indicated with specificity, any provision within these documents undermining Lay's potential claim for indemnification, contribution or DO coverage against the Enron estate.
Tidelands' Motion to Remand, at 2-3.
Lay's Response to NNG's Motion to Remand, app. D.
Id. at app. C.
Additionally, NNG asks this Court to evaluate the potential validity of Lay's claims. ". . . Lay cannot show that the alleged potential indemnification and contribution claims could conceivably have any effect on the Enron banktruptcy estate. Even if such claims are viable, which is highly questionable, another lawsuit would certainly be required before such claims by Lay could affect the Enron Bankruptcy estate". This argument is inapposite. With respect to potential viability of claims, certainty or likelihood of a successful outcome on the action is not required; the key is whether an effect is conceivable. As previously discussed, the Fifth Circuit's interpretation of "related to jurisdiction" comprises a third party defendant's potential, but as yet unfiled or unasserted, claim for indemnity, contribution, or DO coverage, as actions with potential effect on the debtor's estate. The fact that Lay has not yet claimed for indemnity, contribution, or DO coverage does not prevent an analysis of the conceivable effect on the debtor's estate. Therefore, the second prong of NNG's argument falls.
NNG's Motion to Remand (Docket No, 19), at 8,
In re Canion, 196 F.3d at 587 n. 30; In re Wood, 825 F.2d, at 94; Copelin v. Spirco. Inc., 182 F.3d 174 (3d Cir. 1999); In re Titan Energy, 837 F.2d at 325, 330 (8th Cir. 1988).
III. Abstention and Equitable Remand
Finally, the moving parties urge the Court to abstain from exercising jurisdiction subject to § 1334(c)(1) and request remand to state court in the interest of justice. The moving parties only request the exercise of permissive abstention. Lay responds that permissive abstention is inappropriate in this instance, given the unusual nature of the consolidated proceedings before Judge Harmon and urges the Court to stay proceedings pending a decision from the multidistrict litigation panel or in the alternative to retain jurisdiction. The Court agrees with the moving parties and exercises its discretion to abstain from exerting federal jurisdiction for the reasons now set forth.
Compare 28 U.S.C. § 1334(c)(1) that provides for permissive abstention with § 1334(c)(2) that provides for mandatory abstention.
Applicable statutory law provides for the Court's abstention. "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 abstaining from hearing a particular proceeding arising under title 11, or arising in or related to cases under title 11". Moreover, a district court may remand a claim to state court on any equitable ground.
28 U.S.C. § 1452(b) ("The court to which such claim or cause of action is removed may remand such claim or cause of action on any equitable ground. An order entered under this subsection remanding a claim or cause of action, or a decision to not remand, is not reviewable by appeal or otherwise by the court of appeals under section 158(d), 1291, or 1292 of this title or by the Supreme Court of the United States under section 1254 of this title."). See also In re Southmark Corp., 163 F.3d 925, 929 (5th Cir. 1999).
The party seeking abstention bears the burden of establishing that abstention is proper. Abstention should be narrowly construed and exercised cautiously. With this burden in mind and after cautious consideration, the Court finds that abstention is appropriate in this case.
In re DeMert Dogherty, Inc., 271 B.R. 821, 842 (Bankr. N.D. Ill. 2001).
In re Hillsborough Holdings Corp., 123 B.R. 1004, 1010 (Bankr. M.D. Fla. 1990).
There are fourteen factors to be considered and balanced in determining whether to exercise discretionary abstention and equitable remand: (1) the effect on the efficient administration of the estate if abstention is exercised; (2) the extent to which state-law issues predominate over bankruptcy issues; (3) whether the law is difficult or unsettled; (4) whether a related proceeding has commenced in state court or other non-bankruptcy court; (5) whether there is another jurisdictional basis besides § 1334; (6) how closely related the suit is to the main bankruptcy case; (7) the substance, rather than form, of the case; (8) the possibility of severing state-law claims from the core bankruptcy matters to allow judgment in state court and enforcement in bankruptcy court; (9) the burden on the bankruptcy court; (10) the likelihood that removal involves forum shopping; (11) existence of aright to jury trial; (12) the presence of nondebtor parties; (13) comity; and (14) the possibility of prejudice to others in the action. No one factor is determinative, and the Court must balance with flexibility in light of the circumstances in a particular controversy.
See e.g., Broyles v. U.S. Gypsum Co., 266 B.R. 778, 785 (E.D. Tex. 2001) (combining the analysis for abstention with that of equitable remand due to the overlap in relevant factors); American National, at 20; J.R. Simplot Co. v. Farmland Indus. Inc. (In re Farmland), 2003 WL 1950004 (Bankr. W.D. Mo., Apr. 23, 2003).
Chicago, Milwaukee, St. Paul Pacific R. Co., 6 F.3d 1184, 1189 (7th Cir. 1993).
Applying these factors to the claims of the moving parties, the Court finds that discretionary abstention and equitable remand are favored. State law issues predominate over bankruptcy issues. As discussed above, any nexus between Enron's bankruptcy and the claims of NNG against Sheerin and Sheerin against Tidelands, Lay and ZG Gathering is at best gossamer. Lay asks the Court to hang federal subject matter jurisdiction upon the possibility that he will someday assert either claims based on contract or statute or common law claims that will potentially affect the estate of Enron. As a result of precedent, the Court technically finds that jurisdiction. But, a technicality does not produce judicial efficiency or proceedings in the interest of justice. NNG seeks debt collection on a promissory note; Sheerin claims against NNG, Tidelands, Lay and ZG Gathering for fraud and sale of unregistered securities. None of these are bankruptcy claims. The state law issues predominate, even if the estate of Enron is eventually, conceivably affected.
The substance versus form question connects with the above. Based upon the complaint and counterclaims of which each respect plaintiff is master, the substance of this litigation fits squarely within the realm of a state court's plenary jurisdiction. Because there is no basis for removal other than bankruptcy and the Court finds that the connection to bankruptcy is frayed, the controversy is best characterized as one suited to state court adjudication. In so finding, the Court is mindful of Judge Harmon's opinion in American National, declining to exercise permissive abstention. The substance of this action is grounded in state law claims and is only peripherally and potentially related at some future date to Enron's bankruptcy proceedings. Furthermore, the Court does not find that this controversy is intimately related to the MDL proceedings in the same degree as was the American National case.
See Caterpillar Inc. v. Williams, 482 U.S. 386, 398-99 (1987). See also Holmes Group, Inc. v. Vornado Air Circulation Sys., 535 U.S. 826, 831 (2002).
Next, and most simply, all parties to this action are non-debtors. Even if Lay were to eventually claim against the Enron estate, Sheerin and NNG would not be parties to that action. Not only are non-debtor parties present, but the debtor is absent. In addition, not all defendants joined in the request for removal. Tidelands, which in the same procedural if not factual posture as Lay, vigorously opposes the removal.
Also, Sheerin has alleged a right to jury trial, another factor favoring remand. This case involves both state statutory and common law claims, a request for a jury trial, federal jurisdiction limited to §§ 1334 and 1452. The Court finds that the "related to jurisdiction" is tenuous at best and will therefore favor remand. Moreover, the Court finds that equity and the nature of the factual dispute providing the basis for this claim both strongly favor remand to state court. The Court therefore exercises its discretion under 28 U.S.C. § 1452(b) to remand the matter to state court.
See Manguno, 276 F.3d at 723. (The Fifth Circuit's stated a rule of narrow construction of removal statutes and preference for remand in cases of ambiguity. The Supreme Court shadows this rule to some extent with Breuer v. Jim's Concrete of Brevard, Inc., 155 L.Ed.2d 923, 931 (2003), wherein the Court reevaluated the original basis for the string of cases upon which Manguno relies, including Shamrock Oil Gas Corp. v. Sheets, 313 U.S. 100, 108-09 (1941), and found that removal statutes have been amended to preclude the federalism concerns that initially mandated their strict construction.
IV. Representations of the Parties and Final Cautionary Findings
At the hearing on October 15, Lay raised his concern that remand will permit opposing counsel to make broad discovery requests relating to all alleged Enron fraud, thereby subjecting Lay to inconsistent rulings with respect to discovery and issues of alleged fraud in the context of the
Enron debacle. Counsel for Sheerin made representations to the Court that, upon remand, discovery in the instant matter will not substantially overlap with the discovery ongoing in the Enron related matters currently before Judge Harmon as part of the multidistrict litigation. The Court finds that the instant remand, based largely upon equitable concerns and matters of judicial economy and practicality, would be inadvisable in the absence of such representations.
Therefore, the Court cautions that discovery in the state court upon remand must be limited to the concrete dispute that serves as the basis for this claim, that is, the sale of the pipeline, alleged fraud of Ken Lay, and alleged mutual mistake of involved parties. With respect to paper discovery, there will be no need for broad or expansive discovery requests relating to all allegations of Lay's fraudulent conduct. Requested documents should be limited to this case alone and should not extend to include discovery related to Enron's alleged fraud. The deposition of Lay should be so limited as well. Any expansion of discovery beyond the discrete dispute related to the sale of pipeline and allegations of fraud in that context shall serve as a trigger for removal to federal court. Counsel has clearly represented to the Court that state court discovery will not expand to overlap with massive Enron-related document discovery but will instead be focused and limited to the issues disputed in the case related to payment owed on a promissory note.
CONCLUSION
The Court concludes that the evidence and the law in this case support a finding that federal subject matter jurisdiction exists and that the exercise of permissive abstention is appropriate. Accordingly, this Court can exercise subject matter jurisdiction over this case, and the procedures of removal by Defendant were proper. However, the Court, in its discretion and for the reasons clarified above, equitably remands the case to the State Court of Texas, Bexar County, pursuant to 28 U.S.C. § 1452(b).
It is therefore ORDERED that the pending Motions to Remand (Docket Nos. 7, 19, 20) are GRANTED. The clerk is DIRECTED to effect the remand.
In addition, the Court cautions that upon remand the parties abide by their representations made to this Court and focus discovery with respect to Lay's involvement in the pipeline sale as discussed above.