Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

In re ABC Dentistry, P.A.

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

December 17, 2019

IN RE ABC DENTISTRY, P.A., et al., Debtor.
v.
BREWER & PRITCHARD, A PROFESSIONAL CORPORATION, J. MARK BREWER and A. BLAIRE HICKMAN, Appellees. DR. SAEED ROHI, Appellant,

          MEMORANDUM OPINION AND ORDER

          SIM LAKE, SENIOR UNITED STATES DISTRICT JUDGE

         This Memorandum Opinion and Order addresses an appeal brought by Dr. Saeed Rohi ("Rohi" or "Appellant") from the

1. Memorandum Opinion dated February 21, 2019 (Adv. Doc. No. 32); and
2. Dismissal Order dated February 21, 2019 (Doc, 420 and Adv. Doc. No. 33)[1]
entered in Adversary No. 18-3205 filed in Bankruptcy No. H-16- 34221-11 (the "Bankruptcy Case") .[2] For the reasons explained below, the Memorandum Opinion and Dismissal Order of the Bankruptcy Court will be affirmed.

         I. Factual and Procedural Backqround[3]

         Appellant, Dr. Saeed Rohi, hired Appellees Brewer & Pritchard, PC ("Brewer & Pritchard"), J. Mark Brewer (Brewer) and A. Blaire Hickman ("Hickman") (collectively "Appellees" or "Lawyers") to prosecute breach of contract and qui tam claims based on the Texas Medicaid Fraud Prevention Act, Texas Human Resources Code § 36.001, et seq., against ABC Dentistry, P.A., and others ("ABC Dentistry" or the "underlying defendants") in state court. Appellant and Brewer, acting on behalf of Brewer & Pritchard, entered into a contingency fee contract pursuant to which Brewer & Pritchard would "be paid a fee . . . contingent on the recovery of money or property. "[4] The agreed upon fee would be 40% or 45% "of the Gross Recovery" depending on whether the case went to trial.[5] The contract defined "Gross Recovery" as

the sum of any and all sums of money, notes or other property, real or personal, tangible or intangible, of any kind or nature, received from any party, and the forgiveness, reduction or elimination in whole or in part of any debt of any kind or nature which is owed or allegedly owed by Client.[6]

         ABC Dentistry filed a chapter 11 bankruptcy petition on August 26, 2016 (No. H-16-34221-11).[7] After ABC Dentistry's bankruptcy filing, Appellant's state court lawsuit against the underlying defendants was removed from state to federal court as an adversary proceeding within ABC Dentistry's bankruptcy case.[8] The Bankruptcy Court ordered the parties in the qui tam action to mediation on November 16, 2016.[9] The mediation resulted in an agreement memorialized in an "Amended Term Sheet" pursuant to which the underlying defendants agreed to be "jointly and severally liable to [Appellant] in the aggregate amount of $3.5 million, "[10]that amount would "be amortized monthly beginning on December 1, 2016 and continuing monthly until the effective date of a plan of reorganization incorporating the material terms of this Term Sheet (the 'Plan'), "[11] the amortized monthly payments would be "place[d] into the registry of the Court," and Appellant would "not be entitled to a disbursement of any such escrowed funds until the Effective Date of the Plan."[12]

         The State of Texas, which had to consent to settlement of the qui tam claims, refused to consent to the terms of the "Amended Term Sheet."[13] On July 26, 2017, the Bankruptcy Court ordered the parties to a second mediation and compelled the State of Texas to attend.[14] The second mediation resulted in agreement to a total settlement amount of $4 million but no agreement as to how that amount would be apportioned.[15] In briefing submitted to the Bankruptcy Court, Appellant proposed a division that treated the settlement as a common fund and allocated the proceeds first by deducting Appellant's and the State's individual claims in full, then deducting attorney's fees based on contingency agreements, and finally allocating 30% of the remaining proceeds to Appellant and 70% to the State.[16] The State argued that the common fund doctrine did not apply, and that Appellant was instead entitled to a pro rata share of the proceeds. The State also objected to payment of Appellant's attorney's fees, arguing that such payment would violate Texas law, which capped Appellant's recovery at 30% of the proceeds.[17] Despite lengthy negotiations, the parties failed to reach an agreement on how to allocate the settlement proceeds.[18]

         On November 7, 2017, the Bankruptcy Court held a hearing to determine the appropriate division of the settlement proceeds.[19]The hearing was attended by attorneys for the State of Texas, by Appellant, who was represented by attorneys from Brewer & Pritchard who had represented him in the state court qui tam action, and by Charles Long ("Long"), who was hired to represent Appellant in the adversary proceeding.[20] The Bankruptcy Court began the hearing with a proposal to divide the proceeds based on the 45% contingency fee in Appellant's contract with Brewer & Pritchard.[21] When the Bankruptcy Court asked the parties if they opposed the proposed allocation, Long requested a break to consult with the Appellant.[22]Counsel for the State of Texas objected arguing that the 45% fee applied only if the case was called to trial and that event never occurred.[23] The Bankruptcy Court agreed, readjusted the figures, and proposed to divide the proceeds based on the 40% contingency fee in the Brewer & Pritchard contract: "1, 599, 000 to the State, 720, 000 for Dr. Rohi, and 1, 681, 000 to the attorneys."[24] Following a ten minute break all parties consented to the Bankruptcy Court's proposed allocation of the settlement proceeds and waived their rights to an evidentiary hearing, written order, and appeal.[25] The Bankruptcy Court then issued an order by stating on the record: "The $4 million will be allocated $1, 599, 000 to the State of Texas, $720, 000 to Dr. Rohi, and $1, 681, 000 to the attorneys representing Dr. Rohi to be divided by the attorneys in accordance with their own agreements."[26] The Bankruptcy Court memorialized its oral order in a docket entry that states: "The court announced and ordered the division of the proceeds of $4, 000, 000.00 as follows: $1, 599, 000.00 to the State of Texas; $720, 000.00 to Dr. Rohi; $1, 681, 000.00 to the attorneys representing Dr. Rohi to be divided by the attorneys in accordance with their own agreements."[27]

         A short time thereafter Appellant voted for and signed ABC Dentistry's plan of reorganization, the plan was confirmed, [28] ABC Dentistry started to make quarterly payments into the registry of the court, [29] and disbursements to the parties began in accordance with the Bankruptcy Court's November 7, 2017, Order.[30] The disbursements led to a dispute between Appellant and Appellees. Appellant contended that the Bankruptcy Court's Order entitled him to a total recovery of $2, 401, 000.00 (consisting of his award of $720, 000.00 and the award of $1, 681, 000.00 to his attorneys), and that Appellees were only entitled to 40% of that amount pursuant to the Brewer & Pritchard contingency fee contract.[31] Appellees contended that Bankruptcy Court's November 7, 2017, Order made $720, 000.00 payable to Appellant, and the fee award of $1, 681, 000.00 payable to them.[32]

         On June 1, 2018, Appellant filed suit against Appellees in state court alleging breach of contract, breach of fiduciary duty, misapplication of fiduciary property, money had and received, and violations of the Texas Deceptive Trade Practices and Theft Liability Acts.[33]

         On July 25, 2018, Appellees filed a Notice of Removal pursuant to 28 U.S.C. § 1452(a), Federal Rule of Bankruptcy Procedure 9027, and Local Rule of Bankruptcy Procedure 9027-1, asserting that "[t]he Court has jurisdiction over one or more of the causes of action in the Removed Action pursuant to its 'arising under' or 'arising in' jurisdiction under 28 U.S.C. § 157(b) ."[34] On July 26, 2018, Appellees filed a motion to dismiss arguing that Appellant's state court action was barred by res judicata pursuant to the Bankruptcy Court's November 7, 2017, Order.[35]

         On August 3, 2018, Appellant filed a motion to remand and abstain.[36] After conducting hearings on August 13, 2018, [37] and September 20, 2018, [38] the Bankruptcy Court issued the February 21, 2019, Memorandum Opinion granting Appellees' motion to dismiss and denying Appellant's motion to remand and abstain, and the Dismissal Order from which Appellant appeals.[39]

         II. Apellate Jurisdiction and Standards of Review

         Final judgments, orders, and decrees of a bankruptcy court may be appealed to a federal district court. 28 U.S.C. § 158 (a). Because the district court functions as an appellate court, it applies the same standard of review that federal appellate courts use when reviewing district court decisions. See Webb v. Reserve Life Insurance Co. (In re Webb), 954 F.2d 1102, 1103-04 (5th Cir. 1992). This court reviews the Bankruptcy Court's findings of fact for clear error and its rulings on questions of law or mixed questions of law and fact de novo. Id. at 1104. See also Wooley v. Faulkner (In re SI Restructuring, Inc.), 542 F.3d 131, 134-35 (5th Cir. 2008). The Bankruptcy Court's denial of Appellant's motion to remand, and granting of Appellees' Rule 12(b) (6) motion to dismiss are subject to de novo review. See S.W.S. Erectors v. Infax, Inc., 72 F.3d 489, 492 (5th Cir. 1996) (motions to remand); Stokes v. Gann, 498 F.3d 483, 484 (5th Cir. 2007) (motions to dismiss). The court reviews discretionary decisions of the Bankrutpcy Court for abuse of discretion. Mendoza v. Temple-Inland Mortgage Corp. (In re Mendoza), 111 F.3d 1264, 1270 (5th Cir. 1997). A bankruptcy court abuses its discretion when "its ruling is based on an erroneous review of the law or on a clearly erroneous assessment of the evidence." Leonard v. Luedtke (In re Yorkshire, LLC), 540 F.3d 328, 331 (5th Cir. 2008) (per curiam) (citation omitted).

         III. Analysis

         Appellant "requests reversal of the Bankruptcy Court's order dated February 21, 2019 which denied Appellant's motions to remand and for mandatory and permissive abstention and granted Appellees Brewer & Pritchard, PC, J. Mark Brewer and A. Blaire Hickman's motion to dismiss. "[40] The issues on appeal are whether the Bankruptcy Court (1) erred by concluding that it had jurisdiction over Appellant's state law claims, (2) abused its discretion by declining to grant Appellees' requests for mandatory and/or permissive abstention, (3) erred by granting Appellees' motion to dismiss based on res judicata, and (4) abused its discretion by denying Appellant's request for leave to amend his complaint.

         A. The Bankruptcy Court Did Not Err by Denying Appellant's Motion to Remand upon Concluding It had Subject Matter Jurisdiction

         Citing Travelers Indemnity Co. v. Bailey, 12 9 S.Ct. 2195 (2009), for its holding that a bankruptcy court has post-confirmation jurisdiction to interpret and enforce its own orders, the Bankruptcy Court held that "the underlying dispute centers on the interpretation of the Court's November 7, 2017 Order, conferring it with 'arising in or under' jurisdiction under 28 U.S.C. § 1334(b) ."[41] The Bankruptcy Court explained that

Before finding that jurisdiction exists to the enforce or interpret its own prior orders, the Court must determine the source of its jurisdiction which existed when the original order was issued. . . . The Court's November 7, 2017 Order resolved the qui tam action against ABC and divided the $ 4, 000, 000.00 of settlement proceeds from ABC's bankruptcy estate. The Order addressed a question that was within its core jurisdiction under 28 U.S.C. § 157 (b) (2) (A), (L), and (0) as "matters concerning the administration of the estate" and "proceedings affecting the liquidation of the assets of the estate or the adjustment of the debtor-creditor or the equity security holder relationship." This brings the Court's original Order within "arising in or under" jurisdiction, conferring the Court with jurisdiction to interpret and enforce that Order.[42]

         Appellant argues the Bankrutpcy Court erred when it maintained jurisdiction over the purely state law claims asserted against his attorneys in state court.[43] Appellees argue that the Bankruptcy Court correctly held that it had jurisdiction over Appellant's claims because resolution of the underlying dispute requires interpretation of rights created by the Bankruptcy Court's November 7, 2017, Order dividing settlement proceeds which was incorporated by reference into the Confirmed Plan, and because this is a core proceeding.[44]

         1. Applicable Law

         Whether a court has bankruptcy jurisdiction is a legal determination subject to de novo review. See Newby v. Enron Corp. (In re Enron Corporation Securities), 535 F.3d 325, 333 (5th Cir. 2008) (citing United States of America, Internal Revenue Service v. Prescription Home Health Care, Inc. (In re Prescription Home Health Care, Inc.), 316 F.3d 542, 546-47 (5th Cir. 2002)). Bankruptcy courts find their source of jurisdiction in 28 U.S.C. §§ 157 and 1334. See Bass v. Denney (In re Bass), 171 F.3d 1016, 1021 (5th Cir. 1999) ("The holding of a bankruptcy court . . . that it has jurisdiction is a legal determination which we review de novo."). See also 28 U.S.C. § 157 (providing for referral of certain cases from district courts to bankruptcy courts), and 28 U.S.C. § 1334 (a)- (b) (providing district courts with "original and exclusive jurisdiction of all cases under title 11" and "original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11").

         However, "[a] fter a debtor's reorganization plan has been confirmed, the debtor's estate, and thus bankruptcy jurisdiction, ceases to exist, other than for matters pertaining to the implementation or execution of the plan." Craig's Stores of Texas, Inc. v. Bank of Louisiana (In re Craig's Stores of Texas, Inc.), 266 F.3d 388, 390 (5th Cir. 2001) (citing Daleske v. Fairfield Corunities, Inc. (In re Fairfield Corunities, Inc.), 142 F.3d 1093, 1095 (8th Cir. 1998), and Hospital & University Property Damage Claimants v. Johns-Manville Corp. (In re Johns-Manville Corp.), 7 F.3d 32, 34 (2d Cir. 1993)). "This jurisdiction extends to matters that 'impact compliance with or completion of the reorganization plan.'" Highland Capital Management LP v. Chesapeake Energy Corp. (In re Seven Seas Petroleum, Inc.), 522 F.3d 575, 589 (5th Cir. 2008) (quoting U.S. Brass Corp. v. Travelers Insurance Group, Inc. (In re U.S. Brass Corp.), 301 F.3d 296, 305 (5th Cir. 2002)). A bankruptcy court "plainly ha [ s] jurisdiction to interpret and enforce its own prior orders." Travelers, 129 S.Ct. at 2205 (citing Local Loan Co. v. Hunt, 54 S.Ct. 695, 697 (1934) ("That a federal court of equity has jurisdiction of a bill ancillary to an original case or proceeding in the same court, whether at law or in equity, to secure or preserve the fruits or advantages of a judgment or decree rendered therein, is well settled . . . These principles apply to proceedings in bankruptcy.")). See also Evercore Capital Partners II, L.L.C. v. Nancy Sue Davis Trust (In re Davis Offshore, L.P.), 644 F.3d 259, 262 n. 3 (5th Cir.), cert. denied, 132 S.Ct. 782 (2011) ("We are persuaded that [the Bankruptcy Court] had core jurisdiction to interpret the Plan and confirmation order pursuant to 28 U.S.C. § 157 (b).").

         2. Application of the Law to the Record

         Acknowledging that "a bankruptcy court has jurisdiction to interpret or enforce its own orders, "[45] Appellant argues that

here there is no order that needs interpretation or enforcement. [Appellant's] claims are not a collateral attack on the settlement allocation, and [Appellant] was not seeking to set aside the order. Rather, [Appellant] attacks conduct extrinsic to the ruling; that no matter the allocation of attorney's fees, h[e] and his lawyers agreed that the fees were part of the 'gross recovery' which they would share. A court can only retain jurisdiction if it had it in the first place and the bankruptcy court never had jurisdiction over this dispute because it was the conduct that took place after the allocation that "led to" the dispute.[46]

         Citing Travelers, 129 S.Ct. at 2195, Appellees respond that

[t]he bankruptcy court had "arising in" and "arising under" [jurisdiction] in this case because the underlying dispute centered on the interpretation of the court's November 7, 2017 order dividing the settlement proceeds, and the bankruptcy court has continuing jurisdiction to interpret and enforce its own orders.[47]

         Appellant replies that "Appellees' jurisdictional argument is based upon the false premise that the resolution of [Appellant's] claims against them required the bankruptcy court to interpret and enforce the order dividing the settlement."[48]

         Appellant's state court petition asserted causes of action for breach of fiduciary duty, breach of contract, misapplication of fiduciary property, money had and received, and violation of Texas' Deceptive Trade Practices and Theft Liability Acts based on the following allegations of fact:

[T] he lawyer defendants breached their agreement to their client and subordinated his interests by paying themselves 70% contingency fee when the agreement entitled the lawyers to only 40% . . .
Dr. Saeed Rohifard ("Dr. Rohi" of "Plaintiff") hired Brewer & Pritchard, P.C. ("BP"), J. Mark Brewer ("Brewer") and A. Blaire Hickman ("Hickman") (collectively, "Defendants") to prosecute a qui tam claim against ABC Dental, Dr. Iraj Jabbary, Dr. Kauser Bari and others who were culpable or responsible for Medicaid fraud under the Texas False Claims Act, in addition to breach of contract (the "underlying case"). Pursuant to the attorney/client agreement ("Agreement"), Dr. Rohi and Defendants agreed that Defendants would be compensated on a contingency basis. Specifically, the Agreement provided that following:
If Counsel is successful, he will receive as his fee a percentage of the Gross Recovery (as that term is defined below), according to the following schedule:
(a) 40% of all sums collected from and after 30 days before the first trial setting of Client's claims.
(b) 45% of all sums collected from and after the case is called to trial.
The underlying case was not called to trial. Therefore, Defendants were entitled to no more than 40% of all sums collected under the terms of the Agreement.
The qui tam case settled for an amount that, under the terms of the Agreement, would entitle Defendants to no more than $960, 400.00 in attorney's fees. However, Defendants breached the Agreement and placed their interests ahead of Dr. Rohi's and took for themselves approximately $1, 681, 000. 00 in attorney's fees. This amounted to more than 70% of the total settlement and was not only a breach of the Agreement, the fee was unconscionable and unethical as a matter of law.[49]

         Appellant's state court petition does not mention the Bankruptcy Court's November 7, 2017, Order dividing the proceeds from settlement of his qui tam action. But when Appellant's factual allegations are read in light of the court's record, they show that resolution of the claims asserted in the state court action are dependent upon the interpretation of rights created in bankruptcy, specifically those rights associated with the Bankruptcy Court's November 7, 2017, Order dividing the settlement proceeds.

         The court's record reflects that the second mediation in the qui tam action resulted in agreement to a total settlement amount of $4 million, but that despite lengthy negotiations, no agreement could be reached as to how that amount would be apportioned.[50] On November 7, 2017, the Bankruptcy Court conducted a hearing to apportion the settlement proceeds.[51] After initially proposing to divide the proceeds based on the 45% contingency fee in Appellant's contract with Brewer & Pritchard, [52] the Bankruptcy Court agreed with the argument made by the State of Texas that a 40% fee was appropriate because the case had not been called to trial.[53] The Bankruptcy Court adjusted the figures and proposed to allocate: "1, 599, 000 to the State, 720[, 000] for Dr. Rohi, and 1, 681, 000 to the attorneys.”[54] Following a short break requested by Appellant's counsel, [55] the parties consented to the proposed allocation and waived their rights to an evidentiary hearing, written order, and appeal.[56] The Bankruptcy Court then ruled orally by stating on the record:

Just to be sure then . . I'm going to repeat it. Hopefully, it's exactly what I said before.
The allocation of the settlement proceeds is now orally ordered for the reasons stated on the Record to be as follows: The $4 million will be allocated $1, 599, 000 to the State of Texas, $720, 000 to Dr. Rohi, and $1, 681, 000 to the attorneys representing Dr. Rohi to be divided by the attorneys in accordance with their own agreements. [57]

         The Bankruptcy Court memorialized its oral ruling in a docket entry stating: "The court announced and ordered the division of the proceeds of $4, 000, 000.00 as follows: $1, 599, 000.00 to the State of Texas; $720, 000.00 to Dr. Rohi; $1, 681, 000.00 to the attorneys representing Dr. Rohi to be divided by the attorneys in accordance with their own agreements.”[58]

         There is no dispute that the Bankruptcy Court had core jurisdiction over the Appellant's qui tam action.[59] Nor is there any dispute that the settlement proceeds from that action were paid by the estate in bankruptcy, that distribution of those settlement proceeds is material to consummation of the plan, and that the Bankruptcy Court's November 7, 2017, Order apportioning the settlement proceeds was incorporated into the plan confirmed on December 13, 2017, which the Bankruptcy Court retains jurisdiction to enforce. Despite his arguments to the contrary, Appellant's state court allegations that the qui tam action settled for an amount that entitled Appellees to no more than $960, 400.00 in attorney's fees, [60] show not only that the causes of action asserted in the removed action are based on rights created by the Bankruptcy Court's November 7, 2017, Order, but also that those causes of action require interpretation of that order because they challenge that order's allocation of $720, 000.00 to Appellant and $1, 681, 000.00 to his attorneys. Since, moreover, the November 7, 2017, Order was entered in a core proceeding, the Bankruptcy Court did not err in determining that it had "arising in or under jurisdiction" over the removed action.[61] Traveler's, 129 S.Ct. at 2205 (recognizing that a bankruptcy court "plainly has jurisdiction to interpret and enforce its own prior orders").

         B. The Bankruptcy Court Did Not Abuse its Discretion by Denying Appellant's Requests for Mandatory and Permissive Abstention

         Appellant argues that" [ e] ven if the bankruptcy court had jurisdiction, mandatory abstention was appropriate because all factors were satisfied. At a minimum the bankruptcy court should have permissibly abstained."[62]Asserting that "[t]he bankruptcy court considered only one permissive abstention factor which weighed in favor of retention, [63] Appellant argues that "[a] 11 thirteen of the other fourteen factors weighed in favor of abstention. Failing to properly apply these principles and abstain was an abuse of discretion.”[64] Appellees respond that "[t]he bankrutpcy court was not required to mandatorily abstain, "[65] and "correctly declined to permissively abstain.”[66]

         1. Applicable Law

         The conclusion that the Bankruptcy Court had subject matter jurisdiction to clarify or interpret its November 7, 2017, Order apportioning the settlement proceeds from the Appellant's qui tam action, does not necessarily require the Bankruptcy Court to exercise jurisdiction. As explained by the Supreme Court, "It is black letter law . . . that the mere grant of jurisdiction to a federal court does not operate to oust a state court from concurrent jurisdiction over the cause of action." Gulf Offshore Co. v. Mobil Oil Corp., 101 S.Ct. 2870, 2875-76 (1981). See also Malesovas v. Sanders, No. H-04-3122, 2005 WL 1155073, *3 n. 6 (S.D. Tex. May 16, 2005) ("Orders of bankruptcy courts, like those of other courts, can also be interpreted by other courts of competent jurisdiction. Thus, state courts are qualified to interpret the language of bankruptcy plans and orders and routinely engage in such interpretation.") (quoting Kmart Creditor Trust v. Conway (In re Kmart Corp.), 307 B.R. 586, 596 (Bankr. E.D. Mich. 2004)).

         A bankruptcy court's power to abstain derives from 28 U.S.C. § 1334(c), which states in pertinent part:

(1) Except with respect to a case under chapter 15 of title 11, 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.

28 U.S.C. § 1334(c) (1)-(2). Decisions by bankruptcy courts not to abstain under § 1334(c) are reviewed for abuse of discretion. See Edge Petroleum Operating Co., Inc. v. GPR Holdings, L.L.C. (In re TXNB Internal Case), 483 F.3d 292, 299 (5th Cir.), cert. denied, 128 S.Ct. 613 (2007) (citing Southmark Corp. v. Coopers & Lybrand (In re Southmark Corp.), 163 F.3d 925, 929 (5th Cir.), cert. denied, 119 S.Ct. 2339 (1999)).

         2. Application of the Law to the Record

         (a) Mandatory Abstention

         The Fifth Circuit interprets 28 U.S.C. § 1334(c)(2) "to mandate federal court abstention where:' (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. In re TXNB Internal Case, 483 F.3d at 300 (quoting Schuster v. Mims (In re Rupp & Bowman), 109 F.3d 237, 239 (5th Cir. 1997)).

         Appellant argues that "[b]ecause all elements of mandatory abstention were satisfied, the bankruptcy court had no discretion but to remand this case."[67] Asserting that the claims Appellant asserted in the state court act are core proceedings, Appellees respond that the Bankruptcy Court was not required to mandatorily abstain.[68] Appellant replies that he "does not dispute that the underlying proceeding was a core proceeding, but this dispute between non-debtor parties over proceeds which are not assets of the estate, and the resolution of which will have no conceivable effect on the estate, is not a core proceeding."[69] Appellant argues that "Appellees may not use an order from a core proceeding which has no bearing on the claims in this case to create jurisdiction which does not otherwise exist."[70]

         Whether the Bankruptcy Court abused its discretion by failing to mandatorily abstain turns on whether the claims that Appellant asserted in the state court action constitute core or non-core proceedings. Citing Traveler's, 129 S.Ct. at 2205, the Bankruptcy Court rejected Appellant's argument for mandatory abstention, holding in pertinent part that

when an order resolves a core proceeding, the interpretation and enforcement of that order is also a core proceeding . . . .
. . . The Court's November 7, 2017[, ] Order resolved the qui tam action against ABC and divided the $4, 000, 000.00 of settlement proceeds from ABC's bankruptcy estate. The Order addressed a question that was within its core jurisdiction under 28 U.S.C. § 157 (b) (2) (A), (L), and (O) as "matters concerning the administration of the estate" and "proceedings affecting the liquidation of the assets of the estate or the adjustment of the debtor-creditor or the equity security holder relationship.[71]

         Other courts have similarly held that a bankruptcy court's enforcement of its prior order is a "core" matter. See Angel v. K Realty Development, LLC (In re Chiron Equities, LLC), 552 B.R. 674, 684-85 (Bankr.S.D.Tex. 2016) (citing, inter alia, White v. Kubotek Corp., 487 B.R. 1, 7 (D. Mass. 2012) ("The Bankruptcy Court had statutory authority to rule because interpreting and enforcing an order resulting from a prior 'core proceeding' also constitutes a 'core proceeding.'"); Texaco Inc. v. Sanders (In re Texaco, Inc.), 182 B.R. 937, 943-44 (Bankr. S.D.N.Y. 1995) (a bankruptcy court's interpretation and enforcement of a previous order is a core proceeding)). For the reasons stated in§ III.A.2, above, the court has already concluded that resolution of the claims asserted in state court require interpretation of the Bankruptcy Court's November 7, 2017, Order. The Bankruptcy Court therefore did not abuse its discretion in holding that mandatory abstention was not required because this is a core proceeding. See Galaz v. Katona ("In re Galaz), No. 5:14-CV-967, 2015 WL 5565266, at *7 (W.D. Tex. Sept. 21, 2015), aff'd, 841 F.3d 316 (5th Cir. 2016) ("Because the Court has decided that . . . this [is a] core proceeding, mandatory abstention is inapplicable, and the bankruptcy court did not err in failing to exercise it.")).

         (b) Permissive Abstention

         The Fifth Circuit has said that a bankrutpcy court in its discretion may abstain from deciding either core or non-core proceedings under 28 U.S.C. § 1334(c) (1), "in the interest of justice, or the interest of comity with State courts or respect for state law." Wood v. Wood (In re Wood), 825 F.2d 90, 93 (5th Cir. 1987) (recognizing that 28 U.S.C. § 1334(c)(1) provides bankruptcy courts "broad power to abstain whenever appropriate"). Permissive abstention may be implemented in conjunction with the bankruptcy jurisdiction removal statute, which provides that "[t]he court to which such claim or cause of action is removed may remand such claim or cause of action on any equitable ground." 28 u.s.c. § 1452 (b). Factors courts consider when deciding motions for permissive abstention and equitable remand include: (1) the effect or lack thereof on the efficient administration of the estate if the court remands or abstains; (2) the extent to which state law issues predominate over bankruptcy issues; (3) the difficult or unsettled nature of applicable law; (4) the presence of a related proceeding commenced in state court or other nonbankruptcy proceeding; (5) the jurisdictional basis, if any, other than § 1334; (6) the degree of relatedness or remoteness of a proceeding to the main bankruptcy case; (7) the substance rather than the form of an asserted core proceeding; (8) the feasibility of severing state law claims from core bankruptcy matters to allow judgments to be entered in state court with enforcement left to the bankruptcy court; (9) the burden on the bankruptcy court's docket; (10) the likelihood that the commencement of the proceeding in bankruptcy court involves forum shopping by one of the parties; (11) the existence of a right to a jury trial; (12) the presence in the proceeding of nondebtor parties; (13) comity; and (14) the possibility of prejudice to other parties in the action. See McVey v. Johnson, DeLuca, Kurisky & Gould (In re SBMC Healthcare, LLC), 519 B.R. 172, 190 (Bankr.S.D.Tex. 2014), aff'd, Civil Action No. H-16-2947, 2017 WL 2062992 (S.D. Tex. May 11, 2017). See also Browning v. Navarro, 743 F.2d 1069, 1076-77 n. 21 (5th Cir. 1984) (setting forth factors considered for equitable remand).

         Appellant argues that the Bankrutpcy Court abused its discretion when it denied his motion for permissive abstention or equitable remand because "[t]he bankruptcy court did not balance the[] fourteen factors, it considered only one: whether it had core jurisdiction over these claims."[72] Appellant argues that the single factor considered by the Bankruptcy Court was decided incorrectly, and that the remaining thirteen factors weigh in favor of permissive abstention.[73] Appellant argues that the Bankruptcy Court incorrectly determined that this is a core proceeding because

the "heart of this dispute" is not whether the allocation was correct, but whether the Lawyers conduct extrinsic to the order was a breach of contract and/ or breach of fiduciary duty. . . Because the bankruptcy court erred by misconstruing these claims as core, it abused its discretion when it declined to permissively abstain.[74]

         Appellees argue that the Bankruptcy Court did not abuse its discretion by denying Appellant's motion for permissive abstention and/or equitable remand because the Bankruptcy Court

correctly determined that all of Rohi's arguments under the factors misleadingly frame the claim as a dispute over the fee agreement with his attorneys, when, instead, the heart of the dispute involved the interpretation of the court's November 7, 2017[, ] order that divided the settlement proceeds.[75]

         Appellees also argue that

a review of the permissive abstention considerations demonstrate that the trial court's decision was correct. Of the fourteen factors . . . that a court may consider in determining permissive abstention, the majority favor the denial of permissive abstention in this case. For example, factors 1, 2, 3, 5, 6, 7, 8, 9, 10 and 13 all support the bankruptcy court's decision.[76]

         Appellant replies by undertaking his own analysis of the factors and concluding that "of the 14 factors, 12 favor abstention and 2 are neutral. Because the scale tips so heavily in favor of abstention, the bankruptcy court abused its discretion by declining to abstain. "[77]

         The Bankruptcy Court held that Appellant's "argument that permissive abstention and equitable remand weigh in favor of remanding the dispute to state court are denied."[78] The Bankruptcy Court explained:

[Appellant] claims that because there is no effect on the administration of ABC s bankruptcy estate and that his causes of action are based on state law claims, the equities of his suit weigh in favor of permissive abstention. (ECF No. 14 at 21-24).
The majority of [Appellant's] arguments frame his claim as a dispute over the contingency fee agreement with Brewer & Pritchard. However, . . . the heart of this dispute involves the interpretation of the Court's November 7, 2017 Order which divided the settlement proceeds. The interpretation of the contingency fee contract between [Appellant] and Brewer & Pritchard is not in dispute. As set forth in detail below, the Court applied the contract's provisions when it issued the November 7, 2017 Order. Any interpretive disputes were resolved by the Order.[79]

         The Bankruptcy Court did not abuse its discretion by denying Appellant's motion for permissive abstention or equitable remand. Although the Bankruptcy Court's Memorandum Opinion did not address each of the 14 factors individually, it referenced and rejected Appellant's arguments that the 14 factors supported his motion for permissive abstention and/or equitable remand.

         This court's own review of those factors leads to the same conclusion as that reached by the Bankruptcy Court, i.e., that despite Appellant's strenuous efforts to establish that resolution of this dispute requires interpretation of the contingency fee contract that he entered with Brewer & Pritchard, this dispute actually requires interpretation of the Bankruptcy Court's November 7, 2017, Order dividing the settlement proceeds because the Bankruptcy Court applied the contingency fee contract's provisions and resolved any interpretive disputes when it issued the November 7, 2017, Order. The court concludes that Appellant's claim to a greater percentage of the settlement proceeds has a negative effect on the efficient administration of the bankruptcy estate (factor 1); bankrutpcy issues, not state law issues predominate because Appellant's claim to a greater percentage of the settlement proceeds is based on rights created by the Bankruptcy Court's November 7, 2017, Order (factor 2); the nature of the applicable law is bankruptcy law, not state law (factor 3); Appellant's claims constitute a challenge to the Bankruptcy Court's November 7, 2017, Order allocation of proceeds from settlement of the qui tam action (factor 6); resolution of Appellant's claims require interpretation of the Bankruptcy Court's November 7, 2017, Order, which constitutes a core proceeding (factor 7); there are no state law claims to sever because Appellant's claims involve a core bankruptcy matter (factor 8); there is no indication that this case burdens the Bankrutpcy Court (factor 9); this case involved forum shopping by Appellant, who brought his claims in state court (factor 10); and there is no issue of comity as there are no state law issues to resolve (factor 13). Because resolving the claims that Appellant asserted in state court required interpretation of the Bankruptcy Court's November 7, 2017, Order, the court concludes that the factors of convenience and comity weighed heavily in favor of keeping the case in the federal court, and that the Bankruptcy Court did not abuse its discretion by denying Appellant's motion for permissive abstention and/or equitable remand.

         C. The Bankruptcy Court Did Not Err by Granting Appellees' Motion to Dismiss Based on Res Judicata

         Appellant argues that "[e] ven if the bankruptcy court had jurisdiction over the state court lawsuit, it erred when it dismissed the claims based on res j udicata.[80] Asserting that "[t] he parties to the suits are not identical, "[81] "there is no prior judgment by a court of competent jurisdiction, "[82] and "there is no prior judgment on the merits, "[83] Appellant argues that he "had no actual or imputed knowledge of his claims against the Lawyers and the claims were not and could not have been part of the first judgment for the obvious reason that the claims arose afterwards. "[84] Appellees respond that the Bankruptcy Court did not err because Appellant's claims that he is entitled to a different amount of the settlement proceeds awarded to him by the November 7, 2017, Order are barred under the res judicata doctrine.[85]

         1. Applicable Law

         The doctrine of res judicata is comprised of two distinct but related doctrines: (1) true res judicata (or claim preclusion) and (2) collateral estoppel (or issue preclusion). Test Masters Educational Services, Inc. v. Singh,428 F.3d 559, 571 (5th Cir. 2005), cert. denied,126 S.Ct. 1662 (2006). The relevant doctrine here is true res judicata or claim preclusion. Claim preclusion bars the litigation of claims that have been or should have been raised in an earlier suit. Id. (citing Petro-Hunt L.L.C. v. United States, ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.