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GITP Properties I, Ltd. v. Mattress Pal Holdings, LLC

United States District Court, S.D. Texas, Houston Division

September 16, 2019

GITP Properties I, LTD, Plaintiff,
v.
Mattress Pal Holding, LLC, d/b/a Mattress 1 One and SOS Furniture Company, Inc., Defendant.

          MEMORANDUM AND RECOMMENDATION

          Christina A. Bryan United States Magistrate Judge.

         This breach of contract action is before the court on Plaintiffs Motion to Remand, (Dkt. 6), and Defendants' Motion to Transfer Venue (Dkt. 5).[1] Plaintiff does not oppose transfer of its case against Mattress Pal Holdings, LLC to the United States District Court for the Middle District of Florida, where Mattress Pal's bankruptcy case is pending (Dkt. 6 at 2). Having reviewed the parties' submissions and the law, the court recommends that Plaintiffs Motion to Remand be granted as to SOS Furniture Company, Inc., and Defendants' Motion to Transfer Venue be granted as to Mattress Pal Holdings, LLC.

         I. Background

         Plaintiff GITP filed this action in state court in May 2018 against Mattress Pal and SOS Furniture alleging breach of a lease agreement by Mattress Pal and liability for the breach under a guaranty of the lease by SOS Furniture. Approximately one year after GITP filed its state court lawsuit, Mattress Pal filed for bankruptcy protection in federal court in Florida. The state court denied GITP's subsequent motion to sever the claims against Mattress Pal from those against SOS. On May 29, 2019, Defendants Mattress Pal and SOS Furniture removed the case to federal court pursuant to 28 U.S.C. § 1334(b) and § 1452(a). Plaintiff now moves to remand its claims against SOS Furniture to state court.

         II. Analysis

         GITP concedes its case against SOS Furniture is "related to" Mattress Pal's bankruptcy proceeding under 28 U.S.C. § 1334(b) and subject to removal under 28 U.S.C. § 1452(a). Dkt. 6 at 5. GITP seeks severance of the claims against Mattress Pal from the claims against SOS, and remand of the claims against SOS to state court.[2] In support of remand, GITP argues: (1) this court must refrain from hearing the claims against SOS under the mandatory abstention provision of 28 U.S.C. § 1334(c)(2); this court should refrain from hearing the claims against SOS under the permissive abstention provision of 28 U.S.C. § 1334(c)(1); and this court should remand the claims against SOS on equitable grounds pursuant to 28 U.S.C. § 1452(b). As set forth below, the Court recommends permissive abstention and equitable remand of the claims against SOS Furniture and transfer to the Middle District of Florida of the claims against debtor, Mattress Pal.

         Mandatory Abstention.

         Section 1334(c)(2) provides:

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.

(emphasis added). GITP alleged in its state court petition that it is a Texas limited partnership with its principal place of business in Harris County, Texas; Mattress Pal is a Florida limited liability company doing business in Harris County that can be served through its registered agent in Florida; and SOS Furniture is a Florida corporation doing business in Harris County that can be served through its registered agent in Florida.[3] Dkt. 1 -1 at 1. GITP further alleged it had damages of approximately $330, 000.00. Id. at 4. Thus, according to facts alleged by GITP, it could have commenced its breach of contract action in federal court based on diversity jurisdiction pursuant to28U.S.C. § 1332.

         GITP admits the parties are diverse, see Dkts. 9, 13, but contends mandatory abstention applies because, due to SOS having waived its right to remove the case by failing to do so within thirty days of service of the state court action as required by 28 U.S.C. § 1446(b)(1), diversity jurisdiction no longer exists. However, the thirty-day provision of § 1446(b)(1) is a procedural rule that does not defeat subject matter jurisdiction. Barnes v. Westinghouse Elec. Corp., 962 F.2d 513, 516 (5th Cir. 1992) (untimely removal is a procedural defect that does not go to subject matter jurisdiction (citing Baris v. Sulpicio Lines, Inc., 932 F.2d 1540, 1544) (5th Cir. 1991)); Ragas v. Tenn. Gas Pipeline Co., 136 F.3d 455, 457 (5th Cir. 1998) (citing Williams v. AC Spark Plugs Div. of Gen. Motors Corp., 985 F.2d 783, 787 (5th Cir. 1993) for proposition that all objections to removal other than lack of subject matter jurisdiction are procedural). GITP could have commenced this action in federal court based on diversity jurisdiction. Therefore, § 1334(c)(2) does not apply in this case because in addition to "related to" bankruptcy jurisdiction under 28 U.S.C. § 1334(b), diversity jurisdiction would have allowed GITP to commence the case in federal court. Cf. Edge Petroleum Operating Co. v. GPR Holdings LLC (In re TXNB Internal Case), 483 F.3d 292, 299-300 (5th Cir. 2007) (motion to abstain denied where federal court supplemental jurisdiction existed).[4]

         Permissive Abstention and Equitable Remand.

         The permissive abstention doctrine is set forth in 28 U.S.C. § 1334(c)(1):

[N]othing 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 ...

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