Opinion
CIVIL ACTION NUMBER 1:98CV383-D-A.
Filed Date: February 26, 1999.
ORDER DENYING MOTION TO REMAND
Presently before the court is the motion for remand filed by the plaintiff. Finding that the motion is not well taken, the court shall deny the motion to remand and refer this cause to the Bankruptcy Court of the Northern District of Mississippi.
Procedural and Factual Background
Tupelo Public School District (TPSD) commenced the current action against defendants, United States Fidelity Guaranty (USF G) and Doug Walton on October 28, 1998, in the Chancery Court of Lee County, Mississippi. Plaintiff's complaint seeks a declaratory judgment pursuant to Rule 57 of the Mississippi Rules of Civil Procedure, concerning Mr. Walton's interest (or lack thereof) in certain remaining contract proceeds related to a construction project at Milam Intermediate School in Tupelo, Mississippi.
On August 28, 1998, some two months prior to TPSD filing suit, Mr. Walton filed for bankruptcy relief pursuant to Title 7 in the United States Bankruptcy Court for the Northern District of Mississippi, Case No. 98-13999. An automatic stay of any claims against Mr. Walton was invoked on August 28, 1998. The stay was in effect at the time of TPSD's filing of its complaint.
In its complaint, TPSD seeks declaration that:
Doug Walton is not entitled to any further payments from TPSD under any of the documents attached hereto;
TPSD is entitled to liquidated damages as provided in the construction contract, in conjunction with the take-over agreement and performance bond;
TPSD is entitled to its expenses for the structural repairs to the Milam Project as provided in the construction contract, take-over agreement and performance bond;
TPSD is entitled to its other actual damages and expenses resulting from breaches of the contract . . . and
TPSD is entitled to assess the retainage for the amounts owed to it by USF G and Walton.
Plaintiff's Complaint ¶ V.
On November 18, 1998, Defendant USF G removed the action to this court, alleging, among other things, jurisdiction pursuant to 28 U.S.C. § 1334. TPSD filed a motion to remand the case to the Lee County Chancery Court on December 11, 1998.
II. Legal Authority
This court's jurisdictional authority is conveyed by the bankruptcy proceedings statute, 28 U.S.C. § 1334. It provides the following:
(a) Except as provided in subsection (b) of this section, the district courts shall have original and exclusive jurisdiction of all cases under title 11.
(b) Notwithstanding any Act of Congress that confers exclusive jurisdiction on a court or courts other than the district courts, 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. § 1334.
Section 1334(b) provides that the district courts shall have original, but not exclusive jurisdiction, of the following types of "civil proceedings": (1) those arising under Title 11, (2) those arising in a case under Title 11, and (3) those related to a case under Title 11. The Fifth Circuit in In re Wood stated that distinguishing the separate provisions of section 1334(b) is not necessary when determining the scope of bankruptcy jurisdiction, but that "it is necessary only to determine whether a matter is a least `related to' the bankruptcy." In re Wood, 825 F.2d 90, 93 (5 th Cir. 1987).
Applying this test to the case at hand, this court finds that the complaint is sufficiently related to the pending bankruptcy to allow the district court to exercise jurisdiction under 28 U.S.C. § 1334. TPSD argues that because they seek no money damages from Walton, this cause is not related to the bankruptcy proceeding. Specifically, TPSD seeks in its declaration complaint that "Doug Walton is not entitled to any further payments from TPSD under any of the documents attached hereto." Plaintiff's Complaint ¶ V.
This court is of the opinion that such a seeking of a declaration would indicate the possibility that Mr. Walton could be entitled to some portion of the retainage. The determination of whether the debtor is entitled to any of the retainage would need to be made by a bankruptcy judge. The complaint against the bankruptcy debtor could have a conceivable effect on his bankruptcy estate. See Wood, 825 F.2d at 93 (holding that a proceeding is "related to" a Title 11 case if "the outcome of that proceeding could conceivably have any effect on the estate being administered in bankruptcy."). The Fifth Circuit has had recent occasion to clarify the definition of "related to" as follows:
[A]n 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 administration of the bankrupt estate.Feld v. Zell Corp. (Matter of Zell Corp.), 62 F.3d 746, 752 (5 th Cir. 1995) (citing In re Walker, 52 F.3d at 569).
Pursuant to the foregoing reasoning, the court has subject matter jurisdiction over this proceeding. Accordingly, TPSD's motion to remand is hereby DENIED. This cause is referred to the United States Bankruptcy Court for the Northern District of Mississippi.
SO ORDERED.