Benedor Corp. v. Conejo Enterprises, Inc.

Opinion by Judge T.G. NELSON; Dissent by Judge FLETCHER.

OVERVIEW

Ronald L. Durkin, the trustee in bankruptcy, and Western Waste Industries, a creditor in bankruptcy, (collectively “the appellants”) appeal the district court’s mandatory abstention, pursuant to 28 U.S.C. § 1334 (c)(2), from *1463 a pre-petition state action brought by Bene-dor Corporation (Benedor) against the debt- or in bankruptcy, Conejo Enterprises (Cone-jo), and granting Benedor relief from the automatic stay. We vacate the district court’s order and remand.

FACTS AND PROCEDURAL BACKGROUND

Conejo collects and disposes of waste. In May 1993, it allegedly entered into a contract with Benedor, obligating it to deliver its “green waste” to Benedor and to pay Bene-dor for disposal. When Conejo refused to deliver its “green waste” pursuant to the contract, Benedor filed suit against Conejo in a California state court alleging, inter alia, a state law breach of contract claim (referred to as the “state action”), seeking $26,000,000 in damages. One year later, in May 1994, Conejo filed for Chapter 11 bankruptcy and removed the Benedor state action to the bankruptcy court.

Prior to filing a proof of claim, Benedor…

Dissenting.

I respectfully dissent.

The majority holds that Benedor subjected itself to the core jurisdiction of the bankruptcy court by filing a proof of claim even though its claim is not within the traditional equitable jurisdiction of the bankruptcy court and Benedor was forced to file a proof of claim.

Had the bankruptcy court abstained as it was required to do, the appellee would not be in the Kafkaesque position the majority imposes on it today. Its contract claim is a state law claim. Absent bankruptcy, the claim could not be pursued in a federal forum. It was commenced in a state forum of appropriate jurisdiction prior to bankruptcy. It was capable of timely adjudication. It was a non-core 'proceeding. See Granfinanciera, S.A v. Nordberg, 492 U.S. 33, 55-56 , 109 S.Ct. 2782, 2797-2798 , 106 L.Ed.2d 26 (1989) (“The plurality [in Northern Pipeline Construction Co. v. Marathon Pipe Line Co., 458 U.S. 50, 71 , 102 S.Ct. 2858, 2871-72 , 73 L.Ed.2d 598 (1982) ] noted that the restructuring of debtor-creditor relations in bankruptcy ‘may well be a “public right”.’ But the plurality also emphasized that state-law causes of action for breach of contract or warranty are…