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Coupel v. Falterman

United States District Court, E.D. Louisiana

March 9, 2015

LARRY L. COUPEL, et al., Plaintiffs,
v.
ANTHONY G. FALTERMAN, SECTION

ORDER

SUSIE MORGAN, District Judge.

This matter is before the Court pursuant to a motion filed by Defendant Anthony Falterman ("Falterman") seeking dismissal of the adversary proceeding/complaint filed by Debtors/Plaintiffs Larry and Natalie Coupel ("the Coupels") for lack of subject-matter jurisdiction pursuant to Rule 12(b)(1).[1] In the alternative, Falterman requests the Court to abstain from exercising its jurisdiction over this adversary proceeding.[2] For the following reasons, Falterman's motion is DENIED.[3]

BACKGROUND

On September 18, 2010, the Coupels filed a voluntary petition for relief under Chapter 13 of the United States Bankruptcy Code, codified in Title 11 of the United States Code.[4] The Coupels then filed an adversary proceeding/complaint against Anthony Falterman on October 17, 2013 claiming adverse possession of real property known as "the Triangle."[5] The Coupels filed a motion to withdraw the reference of the adversary proceeding/complaint from the Bankruptcy Court to the District Court pursuant to 28 U.S.C. § 157(d), [6] which was not opposed by Falterman.[7] The Court granted the Coupels's motion, without deciding whether the Court should exercise jurisdiction over this matter.[8]

On July 15, 2014, Falterman filed this 12(b)(1) motion to dismiss for lack of subject-matter jurisdiction and to abstain.[9] He argues the Court does not have subjectmatter jurisdiction over this proceeding because it is not a "core" bankruptcy proceeding; rather, it a boundary claim concerning real property that the Coupels did not list as an asset in their Schedule A.[10] Falterman has not made a claim in the bankruptcy proceeding and is not a party other than by virtue of being a defendant in this proceeding.[11] To the extent the Court finds jurisdiction exists, Falterman argues the Court should abstain from exercising jurisdiction.[12] The Coupels filed an opposition to Falterman's motion to dismiss and to abstain arguing that this is a "core" proceeding because it concerns the administration of the Debtors' subject property and the exact property of the estate, and that even if it is considered to be a "non-core" proceeding, it should still be heard by this Court because it is "otherwise related to a case under title 11."[13]

LAW AND ANALYSIS

In this case, the Court must decide first whether bankruptcy jurisdiction exists. Once the Court establishes that it has jurisdiction, it can then determine whether it should abstain from hearing this matter.

A. Bankruptcy Jurisdiction

Title 28, United States Code, Section 1334 confers original jurisdiction over bankruptcy cases and proceeding on the district courts.[14] There are four types of bankruptcy matters over which the district courts have jurisdiction: (1) "cases under title 11", (2) "proceedings arising under title 11", (3) proceedings "arising in" cases under title 11, and (4) proceedings "related to" cases under title 11.[15] Bankruptcy courts obtain jurisdiction by referral at the discretion of the district courts.[16] In this district, Local Rule 83.4.1 provides that bankruptcy cases and proceedings are automatically referred and transferred to the bankruptcy judges of this district.[17]

The Court granted the Coupels's unopposed motion to withdraw the reference;[18] thus, the Coupels's adversary proceeding is properly before the Court. Falterman contends the Court does not have jurisdiction to hear this matter. Because this is not a case under Title 11, this adversary proceeding must be a proceeding arising under title 11, or arising in or related to a case under title 11 for the Court to have bankruptcy jurisdiction.[19] The Fifth Circuit has stated: "Legislative history indicates that the phrase arising under title 11, or arising in or related to cases under title 11' was meant, not to distinguish between different matters, but to identify collectively a broad range of matters subject to the bankruptcy jurisdiction of federal courts, " and "that this grant of jurisdiction... was broad."[20] Thus, the Court need not distinguish between these three categories at this stage because they "operate conjunctively to define the scope of jurisdiction. Therefore, it is necessary only to determine whether a matter is at least related to' the bankruptcy."[21]

A matter is at least related to the bankruptcy if "the outcome of that proceeding could conceivably have any effect on the estate being administered in bankruptcy."[22] Using this broad test, the Court finds the outcome of this matter could conceivably have an effect on the administration of the Coupels's estate in bankruptcy. The Coupels purchased their property before filing for bankruptcy and listed it as an asset of the bankrupt estate. They claim in this adversary proceeding that they are the owners of the Triangle, property that borders theirs. Consequently, the outcome of this adversary proceeding could conceivably impact the size and value of the Coupels's property forming part of the bankrupt estate, making this matter "related to" the title 11 case.[23] Thus, the Court has bankruptcy jurisdiction over this matter, [24] and Falterman's motion to dismiss for lack of subject-matter jurisdiction is denied.

B. Abstention

Falterman argues that, even if the Court has jurisdiction, the Court should abstain from exercising that jurisdiction over this action. There are two forms of abstention: mandatory and permissive.[25] Under 28 U.S.C. § 1334(c)(2), district courts must abstain from exercising jurisdiction over certain state law claims ("mandatory abstention"), and under § 1334(c)(1), they may abstain from certain proceedings "in the interest of justice, or in the interest of comity with State courts or respect for State law" ("permissive abstention").[26]

"Courts must abstain from hearing a state law claim if the following requirements are met: (1) The claim has no independent basis for federal jurisdiction, other than § 1334(b); (2) the claim is a non-core proceeding, i.e., it is related to a case under title 11 but does not arise under or in a case under title 11; (3) an action has been commenced in state court; and (4) the action could be adjudicated timely in state court."[27] Falterman concedes in his motion that mandatory abstention "may not apply as no state court proceeding presently exists between any of the heirs of Falterman's father and Coupel, and thus no state court action has been commenced.'"[28] Although the Coupels filed an action in state court before ...


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