Denning v. Textron Aviation, Inc.

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This adversary proceeding originated in state court, was removed to federal district court based on allegations of bankruptcy court jurisdiction and federal question jurisdiction, and was then referred here by the District Court for a determination of bankruptcy court jurisdiction. Pending are a motion to dismiss filed by the defendant and a motion to remand filed by the plaintiffs.¹ As reflected in the case caption above, the bankruptcy case upon which this Court's jurisdiction is pinned is a Chapter 11 case filed in another district—the Bankruptcy Court for the Southern District of New York. It is also the bankruptcy of an entity that no longer exists because it exited bankruptcy as a new corporation. It then later underwent a change of ownership. Simply put, the bankruptcy case was closed more than ten years ago, in a different venue and for a different entity. The defendant in the recently filed state court litigation is, highly summarized, alleged to have contaminated real property with chemical pollutants. The defendant argues there is statutory, core jurisdiction over the plaintiffs' state law claims based on the need to enforce the discharge injunction from the closed bankruptcy case. The plaintiffs argue there is no core jurisdiction, and the case should be remanded to state court because the case satisfies the statutory elements of mandatory abstention and permissive abstention.

After considering the parties' briefs and hearing oral argument, the Court concludes it does not have core jurisdiction over this proceeding because it neither

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arises under title 11, nor arises in title 11. The Court has "related-to" jurisdiction, as the proceeding is related to a case under title 11. However, after analyzing the statutory bases for abstention, the Court believes permissive abstention by the bankruptcy court is appropriate under 28 U.S.C. § 1334(c)(1). And finally, because this is a non-core proceeding, these proposed findings of fact and conclusions of law are submitted to the district court for its consideration and for further proceedings.²Although this Court recommends abstention is warranted under 28 U.S.C. § 1334(c)(1), that still leaves for determination the defendant's removal under 28 U.S.C. § 1441, whether jurisdiction is proper under

28 U.S.C. § 1331, and the defendant's motion to dismiss.

I. Factual and Procedural Background

Plaintiffs are three named individuals, seeking relief individually and on behalf of all others similarly situated. Located in east-central Wichita, Kansas, the 650-acre real property at issue (the "Facility" or "Site") has been an aircraft manufacturing site for many years. Plaintiffs' state court petition is not clear about

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who allegedly did what, and when. For example, the petition acknowledges only one Defendant - Textron Aviation, Inc. But the petition occasionally uses the plural

"Defendants;" presumably because of the changing status of the entity at the Facility over the course of the last thirty years.

Raytheon Aircraft Company owned the Facility in the 1990s. In 2007, Raytheon Aircraft Company was sold to Hawker Beechcraft Corporation. In May 2012, Hawker Beechcraft Corporation filed a Chapter 11 bankruptcy petition in the U.S. Bankruptcy Court, Southern District of New York, "and emerged from bankruptcy in February 2013 as Beechcraft Corp."³In 2014, Textron, Inc. acquired Beechcraft Corp. Defendant Textron Aviation, Inc. is a subsidiary of Textron, Inc. The petition alleges both "contamination at the Site" from "spills that took place in 1993 or earlier"⁴and a continued contamination occurring at the Site. The following paragraph of the petition is illustrative:

Defendant has released, leaked, and leached and continue[s] to release, leak, and leach contaminants that have migrated and continue to migrate into, under, onto and around the Plaintiffs' and the Class Members' properties and residences. Defendant has contaminated and continue[s] to contaminate these properties with harmful chemicals— including toxic and carcinogenic chlorinated solvents such as TCE and 1,4-dioxane.⁵

Plaintiffs allege the "spills and leaks" at the Facility have resulted in contamination spreading throughout adjacent neighborhoods, extending a half mile

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west and south of the Facility. The petition alleges harm to physical health and wellbeing and a devaluation of residences and properties. It further alleges continued release and migration of contaminants, failure to implement effective remediation or mitigation measures, and that Defendant has known or should know that remediation measures have been ineffective and operations have been discharging contaminants that continue to migrate from the Site. Plaintiffs assert Defendant remained silent and did not notify the general public that property was either contaminated or threatened by contaminants and that "[f]or ten years Defendant has owned and/or operated the Site" and failed to control contaminants, remediate contamination, and notify the public about the threats.⁶ Plaintiffs filed their state court petition in Sedgwick County District Court. It states four causes of action: Count 1: negligence; Count 2: private continuing nuisance; Count 3: continuing trespass; and Count 4: violation of the Kansas Discharge Statute, Kan. Stat. Ann. § 65-6203. Plaintiffs demand a jury trial. They seek class action status, a judgment "for the loss of permanent and temporary or continuing property value, mitigation, remediation, stigma, unjust enrichment, the cost of prompt corrective action, and for all other relief, in an amount to be proven at trial, as to which they may be entitled, including interest, costs of notice to class members, fees and costs of this suit," pre- and post-judgment interest, punitive damages, and attorneys' fees and costs.⁷

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Defendant filed a Notice of Removal, removing the state court action to the U.S. District Court for the District of Kansas. The Notice of Removal, filed under 28 U.S.C. § 1452 and § 1441, alleges jurisdiction under both 28 U.S.C. § 1334(b) and §

1331.

In lieu of answering, Defendant filed a motion to dismiss, alleging that in June 1995, the Kansas Department of Health and Environment and Raytheon Aircraft Company entered into a Consent Order requiring environmental testing, monitoring, oversight, and clean up at the main facility and surrounding areas. In addition, the motion alleges the Environmental Protection Agency and Beechcraft Corp. entered into a CERCLA (Comprehensive Environmental Response, Compensation, and Liability Act) settlement in Debtor Hawker Beechcraft Corporation's Chapter 11 bankruptcy case.

In the motion to dismiss Defendant argues (1) the plan confirmed in the bankruptcy case of Hawker Beechcraft Inc. discharged and released all of Plaintiffs' claims; (2) CERCLA preempts Plaintiffs' state law claims; and (3) Plaintiffs' claims are time barred by the Kansas statutes of limitation and repose. Attached to the motion to dismiss are a "Stipulation and Order Resolving Claims of the United States of America and the Kansas Department of Health and Environment," dated November 20, 2017, and filed in the Hawker Beechcraft, Inc. bankruptcy case.⁸Also included is a Proof of Claim filed by the Kansas Department of Health and

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Environment in the bankruptcy case, and the "Findings of Fact, Conclusions of Law, and Order Confirming the Debtors' Amended Joint Plan of Reorganization Pursuant to Chapter 11 of the Bankruptcy Code," (Confirmation Order) dated February 1, 2023, and filed in the Hawker Beechcraft, Inc. bankruptcy case. The Confirmation Order discharges the debtor "from all existing debts and Claims."⁹ The plan to which the Confirmation Order refers to is not attached.¹⁰However, the Notice of Removal purports to quote a section of the discharge provision of the plan that states, unless as otherwise provided in the plan, the plan discharges "all debt .

. . that arose before the Confirmation Date, . . . whether or not . . . a Proof of Claim based on such debt . . . is filed" or "the Holder of such a Claim . . . has accepted the Plan."¹¹

Plaintiffs then filed a motion to remand the proceeding to state court, arguing

(1) Defendant's removal violates the well-pleaded complaint rule; (2) the proceeding must be remanded under the mandatory abstention doctrine under 28 U.S.C. § 1334(c)(1) and should be remanded based on permissive abstention; (3) Plaintiffs' claims, for a variety of factual and legal reasons, were not discharged in the Hawker Beechcraft Corporation bankruptcy; and (4) Defendant's CERCLA defense does not confer subject matter jurisdiction on the District Court. After both motions were

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fully briefed the District Court took them under advisement, and all pretrial proceedings and discovery were stayed pending resolution of the motions. The District Court then entered a Memorandum and Order, referring the proceeding to the bankruptcy court. The District Court noted D. Kan. Rule 83.8.5(a) refers to the bankruptcy court "all cases under Title 11 and any or all proceedings arising under Title 11 or arising in or related to a case under Title 11." Applying the close-nexus test to determine whether this proceeding relates to a Title 11 case, the District Court concluded it did "because, for plaintiffs to succeed on their claims over defendant's discharge defense, a court must interpret the scope and effect of the confirmation plan from Beechcraft's bankruptcy proceedings."¹²The Court concluded there was related-to jurisdiction at least for the purposes of referral under D. Kan. Rule 83.8.5(a) and noted the bankruptcy court's obligation to examine its own jurisdiction.¹³The District Court expressed no opinion on the merits of the motion to dismiss or the motion to remand.

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II. Jurisdiction

A. Subject Matter Jurisdiction, Generally As the District Court noted, this Court has an independent obligation to examine its own subject matter jurisdiction.¹⁴Bankruptcy courts are courts of limited jurisdiction; those limits are expressed by statute.¹⁵ Defendant's Notice of Removal is filed "pursuant to 28 U.S.C. §§ 1452 and 1441." Under 28 U.S.C. § 1452, "[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 section 1334 of this title." Under 28 U.S.C. § 1441, a state court civil action may be removed "to the district court of the United States for the district and division embracing the place where such action is pending." The Notice of Removal then asserts District Court jurisdiction based on 28 U.S.C. § 1334(b) (bankruptcy cases and proceedings) and § 1331 (federal question).

This Court's sole jurisdictional grant is found within 28 U.S.C. § 1334. Under

28 U.S.C. § 1334, upon referral from federal district courts, bankruptcy courts have

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"original and exclusive jurisdiction" over "all cases under title 11,"¹⁶and "original but not exclusive jurisdiction" over "all civil proceedings arising under title 11, or arising in or related to cases under title 11."¹⁷In this District, the referral of these matters is expressed in D. Kan. Rule 83.8.5(a), which mirrors referral under 28 U.S.C. § 1334.¹⁸

A case arising under or arising in title 11 is a core proceeding; it has "no existence outside of bankruptcy."¹⁹A related proceeding is a "civil proceeding[] that, in the absence of a bankruptcy petition, could have been brought in a district court or state court."²⁰A bankruptcy court may hear and determine core proceedings,²¹ but in non-core proceedings may only hear and make proposed findings of fact and conclusions of law unless all parties consent.²²

Finally, to determine its jurisdiction, the Court must also consider the well- pleaded complaint rule. Under this rule, a court assesses its jurisdiction based on a plaintiff's statement of its cause of action, not the defendant's assertion of a federal

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defense.²³However, "[i]f a court concludes that a plaintiff has 'artfully pleaded' claims [to purposefully omit a necessary federal question], it may uphold removal even though no federal question appears on the face of the plaintiff's complaint."²⁴ While bankruptcy courts have applied the well-pleaded complaint rule,²⁵ bankruptcy courts have also concluded the well-pleaded complaint rule is properly considered only applicable to "arising under" jurisdiction under title 11, and not considered when analyzing jurisdiction under 28 U.S.C. § 1334 based on proceedings "arising in" or "related to" a case under title 11.²⁶

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B. The Proceeding is Not a Core Proceeding Again, a core proceeding is one arising under or arising in title 11, the Bankruptcy Code. "A proceeding 'arises under' the Bankruptcy Code if it asserts a cause of action created by the Code, such as exemption claims under 11 U.S.C. § 522, avoidance actions under 11 U.S.C. §§ 544, 547, 548, or 549, or claims of discrimination under 11 U.S.C. § 525."²⁷A proceeding "arises in" title 11 if it "could not exist outside of a bankruptcy case" but is not a cause of action created by the Bankruptcy Code.²⁸"For example, orders respecting the obtaining of credit, confirmation of a plan, the assumption or rejection of a contract are all matters which could not exist absent the filing of a bankruptcy case, but are not causes of action created by the Bankruptcy Code."²⁹

Defendant's Notice of Removal states, without analysis, that the matter is a core proceeding because of 28 U.S.C. §157(b)(2)(I) ("Core proceedings include . . . determinations as to the dischargeability of particular debts"). In response to Plaintiffs' motion to remand, Defendant again cites 28 U.S.C. § 157(b)(2)(I) and argues Defendant's "dischargeability claims are core bankruptcy proceedings."³⁰But the state court petition is not an objection to the dischargeability of debt, as contemplated by 28 U.S.C. § 157(b)(2)(I). An objection to the dischargeability of debt

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is a cause of action stating a claim under 11 U.S.C. § 523(a),³¹which is an exception to discharge, and not presented here.³²

Defendant asserts that "whether the discharge injunction from the Bankruptcy Case bars the Plaintiffs' claims is a core proceeding arising under or in title 11,"³³citing In re Essar Steel Minnesota, LLC,³⁴a Third Circuit case from 2022. In that case, two related debtors filed a Chapter 11 bankruptcy in the District of Delaware in July 2016. Nearly a year later, the bankruptcy court confirmed a plan of reorganization, with a plan sponsor funding the debtors' exit from bankruptcy. The confirmed plan discharged all claims against the debtors arising before the plan's effective date and enjoined actions against the debtors and the plan sponsor

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by holders of those claims. The debtors emerged from bankruptcy as a new, reorganized entity.

During the bankruptcy case the plan sponsor sought to acquire the debtors and another affiliate and engaged a financial advisor. The financial advisor was to receive a restructuring transaction fee if the affiliate acquired the debtors. The parties' agreement was later amended to include additional financial advisor services for consummation of certain debt-financing transactions. One day before the plan's effective date, the financial advisor, the affiliate, and the plan sponsor entered a second amendment to their agreement, purportedly binding the affiliate, the plan sponsor, and the post-effective date reorganized entity. Six months after the plan's effective date, the financial advisor sought more than $16 million from the plan sponsor and the reorganized entity as a success fee under the parties' agreement. When the reorganized entity refused to pay, the financial advisor initiated two actions to collect: a lawsuit in the United States District Court for the District of Minnesota and an arbitration action filed with the Financial Industry Regulatory Authority. In response, the reorganized entity filed an adversary complaint in the bankruptcy court in the District of Delaware, arguing that the fee had been discharged by the plan and its confirmation order, and that the financial advisor's actions to collect violated the confirmation order. The financial advisor moved to dismiss the adversary proceeding, contending that its claim was not a pre-effective date claim enjoined by the plan and confirmation order.

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The bankruptcy court dismissed the adversary proceeding for lack of subject matter jurisdiction. On certification of a direct appeal to the Third Circuit, the Circuit reversed and remanded. The Third Circuit defined the underlying dispute as

"asking the Bankruptcy Court to interpret and implement the discharge injunction it issued in the plan and confirmation order."³⁵The Circuit then determined it need not assess related-to jurisdiction, because the matter was core. To justify this conclusion, the Circuit noted bankruptcy courts "routinely" recognize requests to interpret a confirmation order issued in the case as core.³⁶It then relied on a bankruptcy court's power to "redress a possible contempt of its plan and confirmation order," because a civil contempt proceeding arising out of a core matter would also be a core matter.³⁷The Third Circuit, without analysis, called the "plan and confirmation order . . . explicitly enumerated core proceedings under § 157(b)(2)" and therefore, because "the contempt proceeding" arose out of the

"previously entered plan and confirmation order," concluded it was also a core proceeding.³⁸

Notably, the Third Circuit characterized the adversary proceeding in the bankruptcy court as a "contempt proceeding" when it concluded it was a core proceeding. The Third Circuit then went on to conclude that, "in addition," the bankruptcy court had jurisdiction to interpret and enforce the discharge and

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injunction provisions of its plan and confirmation order.³⁹In this part of its decision, the Third Circuit did not differentiate core (whether arising under or arising in) versus related-to jurisdiction regarding the interpretation of the discharge injunction. In other words, the Third Circuit did not specify or analyze whether the bankruptcy court had either arising-under or arising-in—i.e., core—jurisdiction to interpret and enforce the discharge and injunction provisions or whether that jurisdiction was non-core. But it did note a bankruptcy court has wide latitude to abstain under 28 U.S.C. § 1334(c)(1) (permissive abstention),⁴⁰which applies to both core and non-core proceedings.

The Third Circuit's decision is best broken into its two parts. First, this Court agrees with the conclusion that an affirmative claim against an individual or entity for contempt for violation of a discharge injunction is a core proceeding. Other courts, including the Fifth Circuit, appear to agree with that conclusion.⁴¹But, as stated above, Defendant does not seek a contempt order for violation of the discharge injunction or confirmation order, which Defendant confirmed at oral argument in this Court. So, the Third Circuit's decision in In re Essar Steel Minnesota, LLC that a bankruptcy court has core jurisdiction over a contempt

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proceeding based on a discharge injunction violation stemming from a confirmation order recently issued by that court, is not applicable here.⁴² As noted, the Third Circuit additionally concluded the bankruptcy court had jurisdiction to interpret and enforce the plan and discharge provisions of that plan. But in this part of the decision, the Third Circuit again focused on a court's ability to interpret and enforce its own orders when a debtor seeks affirmative relief based on those orders. The Third Circuit relied on the Supreme Court's decision in Travelers Indemnity Co. v. Bailey,⁴³which held that a bankruptcy court "plainly had jurisdiction to interpret and enforce its own prior orders."⁴⁴The Third Circuit applied that same principle to conclude the bankruptcy court there had jurisdiction to interpret and enforce the discharge and injunction provisions of "its plan and

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confirmation order."⁴⁵But neither the Supreme Court in Travelers Indemnity Co., nor the Third Circuit in In re Essar Steel Minnesota, LLC addressed whether that jurisdiction was core or non-core. And neither the Supreme Court nor the Third Circuit addressed whether a bankruptcy court has core jurisdiction to determine whether a discharge injunction issued by another bankruptcy court grants bankruptcy court jurisdiction over a plaintiff's state law claims based solely on the discharge being raised as a defense.

There are courts in other jurisdictions that have concluded there is postconfirmation, core jurisdiction for a bankruptcy court to apply the discharge injunction to state law claims.⁴⁶In addition to the differences noted in the cases above, these courts often rely on a confirmation order retaining that jurisdiction for

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that bankruptcy court.⁴⁷More recent authority, however, rejects the conclusion that a party can manufacture its own jurisdiction solely with retention language.⁴⁸ In this Court's opinion there is no core bankruptcy court jurisdiction here. This is not a matter arising under the Bankruptcy Code because the state court petition does not assert a cause of action created by the Code. Neither does the petition invoke substantive rights provided under title 11. This is also not a matter arising in a case under title 11 since it is not a matter that has "no existence outside of bankruptcy," the definition of arising-in jurisdiction in this Circuit. The causes of action in Plaintiffs' petition are all based on state law. As the Tenth Circuit BAP has noted, if a proceeding "could be and was commenced independently" of the bankruptcy case, "is based entirely on state tort law," and is not dependent on the bankruptcy case for its existence, then it is not a proceeding arising in a bankruptcy case.⁴⁹While ultimately a court may need to enforce the terms of the confirmation

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order or the discharge injunction issued by the Bankruptcy Court in the Southern District of New York, that function alone does not make this a core matter.⁵⁰ C. Related-To Jurisdiction

Congress did not define or delineate the scope of related-to jurisdiction. And although the Supreme Court has noted the grant of such jurisdiction to bankruptcy courts was broad and comprehensive, it has also recognized "a bankruptcy court's 'related to' jurisdiction cannot be limitless."⁵¹

The Tenth Circuit has adopted the Third Circuit's test from Pacor, Inc. v. Higgins⁵²and concluded that whether a civil proceeding is related for determining bankruptcy court jurisdiction is '"whether the outcome of that proceeding could conceivably have any effect on the estate being administered in bankruptcy.'"⁵³To be related, "the proceeding need not be against the debtor or his property," rather,

"the proceeding is related to the bankruptcy if the outcome could alter the debtor's

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rights, liabilities, options, or freedom of action in any way, thereby impacting on the handling and administration of the bankruptcy estate."⁵⁴

Although it does not change after confirmation, "it is generally accepted that a bankruptcy court's jurisdiction narrows to some extent after plan confirmation with respect to non-core proceedings and 'related to' jurisdiction."⁵⁵The Pacor, Inc. test for related-to jurisdiction has been said to be "both too narrow and too broad"

when applied to postconfirmation proceedings:

It is too narrow because . . . in the vast majority of reorganization cases, confirmation of a debtor's plan vests the estate's property in the debtor and the estate ceases to exist. Applying the Pacor test literally would mean bankruptcy courts have no "related to" jurisdiction following confirmation. This test is also too broad because bankruptcy courts have always viewed confirmation as an event that severs the once close ties between the former debtor and the bankruptcy court.⁵⁶

Many Courts of Appeal have adopted the test the Third Circuit expressed in Resorts International for postconfirmation, related-to jurisdiction: "[a]t the post- confirmation stage, the claim must affect an integral aspect of the bankruptcy process—there must be a close nexus to the bankruptcy plan or proceeding."⁵⁷The Third Circuit also stated: "[m]atters that affect the interpretation, implementation, consummation, execution, or administration of the confirmed plan will typically have the requisite close nexus."⁵⁸This close nexus test has been adopted by the

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Fourth Circuit, Sixth Circuit BAP, and the Ninth Circuit.⁵⁹In the Fifth Circuit, a potentially narrower interpretation of postconfirmation related-to jurisdiction is used, and such jurisdiction exists only for "matters pertaining to the implementation or execution of the plan."⁶⁰

The Tenth Circuit has not adopted a specific postconfirmation related-to jurisdiction test, although it has decided several cases addressing postconfirmation related-to jurisdiction. First, in U.S. Trustee v. CF & I Fabricators of Utah, Inc. (In re CF & I Fabricators of Utah, Inc.),⁶¹the Tenth Circuit concluded the bankruptcy court had postconfirmation related-to jurisdiction to determine U.S. Trustee statutory fees. It approved a district court decision concluding the matter was within related-to jurisdiction because collection of quarterly fees would impact creditors' recovery.⁶²Second, in Plotner v. AT & T Corp.,⁶³the Tenth Circuit concluded without analysis in a postconfirmation Chapter 11 adversary proceeding filed by the debtor, that claims of fraud involving a plan-created trust were "at minimum, unmistakably 'related to'" the bankruptcy proceeding.⁶⁴And finally, in

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Peterson v. Fed. Trade Comm'n (In re Peterson),⁶⁵the Tenth Circuit concluded there was no related-to jurisdiction over claims for embezzlement and related violations of various federal statutes in a postconfirmation bankruptcy case, stating the court

"appropriately applied a strict test for § 1334(b) 'related to' jurisdiction, looking to the proceeding's practical effect on implementation of the confirmed reorganization plan, rather than to its conceivable effect on the bankruptcy estate. Any impact on the implementation of [the debtor's] plan is simply too remote a contingency to support bankruptcy jurisdiction under § 1334(b)."⁶⁶

Given this guidance, this Court concludes there is related-to jurisdiction over the enforcement of the confirmation order and discharge injunction from the bankruptcy case.⁶⁷Plaintiffs' state court petition contains only state law tort claims. But a court will necessarily have to determine if any part of those tort claims was discharged in the Chapter 11 bankruptcy case of Debtor Hawker Beechcraft Corporation. It is this application of the confirmed plan that brings the matter within the Court's related-to jurisdiction. Although the Tenth Circuit has not adopted a test, the Tenth Circuit BAP has implied the interpretation or enforcement of a confirmed plan may bring a matter within a bankruptcy court's

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related-to jurisdiction.⁶⁸And the Circuit Courts that have adopted tests for postconfirmation related-to jurisdiction would find that jurisdiction here, because this Court is being asked to weigh in on the "interpretation, implementation, consummation, execution, or administration of the confirmed plan."⁶⁹ There appears to be no consensus among bankruptcy courts on this question.⁷⁰But considering the Supreme Court's guidance in Travelers Indemnity Co. that a bankruptcy court "plainly had jurisdiction to interpret and enforce its own prior orders,"⁷¹the Court concludes it has related-to jurisdiction to interpret,

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administer and enforce a confirmation order of another bankruptcy court when the scope and application of that order is at issue as it relates to Plaintiffs' claims.⁷²

III. Abstention

Although the bankruptcy court has related-to jurisdiction, such jurisdiction is subject to abstention under 28 U.S.C. § 1334(c). Defendant argues the discharge question is central and dominates the state law claims. Defendant also argues the state court petition is entirely based on prepetition claims, citing cases for the proposition that claims arise prebankruptcy, and are thus dischargeable, when there is a pre-bankruptcy triggering event. But Defendant's cases address claims related to cleanup of prepetition events.⁷³

As noted in the factual recitation above, the claims as plead involve conduct both prior to the bankruptcy of Hawker Beechcraft, Inc. and after that bankruptcy

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case. The state court petition clearly alleges a continued contamination, the continued release and migration of contaminants, and that for the ten years Defendant has owned and operated the facility (all post-bankruptcy) Defendant has failed to control contaminants, remediate contamination, and notify the public about the threats.⁷⁴The Confirmation Order, attached to Defendant's motion to dismiss, itself states "existing debts and Claims" are discharged. And the purported discharge provision also states debts arising prior to the confirmation date are discharged. At this stage, the Court has nothing in the record from which it could conclude that claims arising post-bankruptcy would be discharged by the confirmation order or discharge injunction. The Court therefore finds the abstention question especially important because, on the current record, the discharge injunction from the bankruptcy case would bar, at most, only a portion of the claims.⁷⁵At this juncture, the pleadings control and the Court cannot resolve factual disputes.⁷⁶

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Abstention by the bankruptcy court is governed by 28 U.S.C. § 1334(c), which states in pertinent part:

(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.

(2) Upon timely motion of a party in a proceeding based upon a State law claim or State law cause of action, related to a case under title 11 but not arising under title 11 or arising in a case under title 11, with respect to which an action could not have been commenced in a court of the United States absent jurisdiction under this section, the district court shall abstain from hearing such proceeding if an action is commenced, and can be timely adjudicated, in a State forum of appropriate jurisdiction.

Abstention under 28 U.S.C. § 1334(c)(1) is referred to as permissive abstention, and abstention under (c)(2) is referred to as mandatory abstention. Taken in reverse order, abstention is mandatory under 28 U.S.C. § 1334(c)(2) when: "(1) the motion for abstention is timely; (2) the proceeding is based on state law claims; (3) the claims asserted in the proceeding are non-core 'related to' claims;

(4) there is no basis for federal jurisdiction other than 28 U.S.C. § 1334; (5) an action has been commenced in state court; and (6) the action can be timely adjudicated in state court."⁷⁷Here, there is no doubt the motion to abstain was timely filed, as it was filed within thirty days of the removal of the action from state court to federal court. As discussed above, the proceeding is based entirely on state law claims, and the Court has already concluded the claims are non-core, related-to

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claims. There is also no dispute that the state court action was commenced in state court and could be timely adjudicated there.

The sole issue raised by the parties is whether there is a basis for federal jurisdiction other than under 28 U.S.C. § 1334. Here, Defendant's Notice of Removal asserts removal is authorized under both 28 U.S.C. § 1334 and § 1331. Under 28 U.S.C. § 1331, a district court has "original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States." Defendant asserts CERCLA, 42 U.S.C. § 9601 et seq., as its basis for federal question jurisdiction, which Plaintiff denies under the well-pleaded complaint rule.⁷⁸ Defendant asserts jurisdiction under 28 U.S.C. § 1331, both independently and as a complement of bankruptcy court jurisdiction under 28 U.S.C. § 1334. In other words, Defendant asserts independent federal district court jurisdiction under

28 U.S.C. § 1331 and removal under 28 U.S.C. § 1441. It is for the District Court to assess removal and jurisdiction under those statutory subsections. For the purpose of assessing jurisdiction under 28 U.S.C. § 1334 and abstention under § 1334(c), the Court concludes it need not opine on 28 U.S.C. § 1331, because the basis for permissive abstention is clear under 28 U.S.C. § 1334(c)(1).⁷⁹

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"Permissive abstention is a matter within the sound discretion of the bankruptcy court."⁸⁰Although permissive abstention should be "the exception rather than the rule,"⁸¹it is appropriate here.

Permissive abstention applies regardless of whether the matter is core or non-core.⁸²Courts apply multiple factors to determine whether permissive abstention should be exercised:

1. The effect of abstention and remand on the administration of the bankruptcy estate, including whether claims could be timely adjudicated in state court to meet the needs of the bankruptcy case;

2. The extent to which state law issues predominate over bankruptcy issues;

3. The difficult or unsettled nature of the applicable law;

4. Whether abstention and remand serves principles of judicial economy;

5. The presence of a related proceeding commenced in state court or another non-bankruptcy court;

6. The feasibility of severing non-core state law claims from core bankruptcy claims;

7. The jurisdictional basis for the bankruptcy court to hear the claims in the removed proceeding, if any, other than 28 U.S.C. § 1334;

8. The whether the removed proceeding is a core proceeding;

9. The likelihood that commencement of the proceeding in bankruptcy court involves forum shopping by one of the parties;

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10. The existence of a right to jury trial;

11. The presence of non-debtor parties;

12. The burden the proceeding places on the bankruptcy court's docket;

13. Whether remand lessens the possibility of inconsistent results;

14. Whether the court where the action originated has greater expertise;

15. The status of the proceeding in the state court prior to removal and the status of the proceeding in bankruptcy court; and

16. Whether the nature of the proceeding [is] better suited for state court or bankruptcy court.⁸³

A bankruptcy court has "discretion to determine the relative weight to give each factor."⁸⁴Here, the factors that are applicable favor permissive abstention. First, as the Court noted above, the bankruptcy case here is far removed from the current matter. The debtor (Hawker Beechcraft Inc.) filed its Chapter 11 bankruptcy petition in May 2012. The plan was confirmed and the entity Beechcraft Corp. emerged from bankruptcy in February 2013. The bankruptcy case was (presumably) long ago fully administered and closed. As a result, the litigation of Plaintiffs' state law claims will involve resolution of the question of which claims preceded and were discharged by that bankruptcy case, but will have no impact on the administration of the bankruptcy case itself.⁸⁵Defendant characterizes this

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factor as neutral, acknowledging the plan in the bankruptcy case at issue was confirmed in 2012, but the Court disagrees with that assessment. Having zero impact on the bankruptcy estate and case is not a neutral factor when considering abstention under 28 U.S.C. § 1334(c)(1).

Second, Plaintiffs' claims are entirely based on state law, and state law predominates over bankruptcy issues. The only bankruptcy issue—the enforcement of the discharge—is a preliminary issue concerning the scope of the state law claims to be litigated. The state law claims are predominant. This Court could not enter a final judgment on Plaintiffs' state law claims absent the consent of both parties, which is lacking here, and a "two-tier review may favor a finding of timely adjudication in a state court."⁸⁶Defendant argues this factor does not favor remand because "the state law claims will be barred if the bankruptcy court finds that they are subject to the discharge injunction."⁸⁷But as noted above, based on the current record, at best only a portion of the state law claims might be barred. The claims as stated include alleged, post-bankruptcy claims.

Third, abstention and remand would serve judicial economy. This Court is one of limited jurisdiction. Plaintiffs' claims are, as noted here, predominantly state law matters outside this Court's jurisdiction. The state court has expertise in matters of state law. The state law claims were recently filed at the time of removal

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and are more efficiently addressed by a court that has the authority to administer the demanded jury trial⁸⁸and enter final judgment on the claims. The proceeding was commenced by non-debtor parties in state court and there are no core bankruptcy claims within. The state court can assess Defendant's affirmative defense related to the discharge in the bankruptcy case.⁸⁹Neither this Court nor the state court is the court that issued the discharge or the confirmation order. The additional factors are either neutral or nonapplicable. As noted above, Plaintiffs' state law claims include post-bankruptcy conduct. Even assuming the state law claims also involve pre-bankruptcy conduct and claims that were discharged, the post-bankruptcy discharge claims remain. So ultimately, at best, part of Plaintiffs' claims would be barred by the discharge injunction. The bankruptcy court is not the right venue for this action. At most the bankruptcy court would have related-to jurisdiction, state law issues predominate over the bankruptcy issues, and permissive abstention is appropriate. These "more substantial" factors weigh in favor of permissive abstention.⁹⁰

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IV. Application to Pending Motions

The Court believes it has related-to jurisdiction over the question of the impact of the 2012 discharge injunction and confirmation order on Plaintiffs' state law claims. But the Court also believes the factors for permissive abstention apply, and Plaintiffs' motion for permissive abstention should be granted. If those were the only matters, this would be more straightforward and the Court would recommend remand under 28 U.S.C. § 1452(b).⁹¹But here, Defendant additionally removed the state court action to District Court under 28 U.S.C. § 1441 based on jurisdiction under 28 U.S.C. § 1331.⁹²The District Court referred the matter to this Court for assessment of bankruptcy court jurisdiction under 28 U.SC. § 1334. This Court has no authority to assess the District Court's jurisdiction under

28 U.S.C. § 1331 or removal under 28 U.S.C. § 1441. Nothing herein should be construed as commentary on those issues or the ultimate resolution of the motion to dismiss.

V. Conclusion

The Court concludes there is no core jurisdiction under 28 U.S.C. § 1334(b), since this proceeding does not arise under or arise in the Bankruptcy Code. There is related-to jurisdiction over the question presented, because the proceeding is related to a case under title 11. Permissive abstention is appropriate under 28 U.S.C.

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§ 1334(c)(1). Because this is a non-core proceeding, the Court submits these proposed findings of fact and conclusions of law to the District Court for consideration and further proceedings pursuant to 28 U.S.C. § 157(c)(1). # # #