IN RE: MURRAY ENERGY HOLDINGS CO. (2024)

Chapter 11

MEMORANDUM OPINION AND ORDER ON PLAINTIFFS’ MOTION FOR REMAND (DOC. 33)

I. Introduction

This dispute arises in the Chapter 11 cases of Murray Energy Holdings Co. (“Murray Energy”) and its affiliated debtors and debtors in possession (“Debtors”). Before the Court is another adversary proceeding in which the plaintiffs first brought a lawsuit in state court against a law firm and certain of its partners for legal malpractice they allegedly committed while negotiating and seeking confirmation of the Debtors’ second amended Chapter 11 plan (“Chapter 11 Plan”) (Doc. 2135-1).¹ Once again, the defendants have removed the state court lawsuit to this Court. And once again, the plaintiffs are asking the Court to remand the lawsuit back to the state court for lack of subject-matter jurisdiction.

The Court's ruling in the prior adversary proceeding is reported at Murray v. Willkie Farr & Gallagher LLP (In re Murray Energy Holdings Co.), 654 B.R. 469 (Bankr. S.D. Ohio 2023) (“Willkie”). In Willkie, the Court held that remanding the plaintiffs’ malpractice claim was inappropriate because the Court had core, arising-in jurisdiction. The Court so held because (1) the malpractice claim was based on the defendants’ role in negotiating the Chapter 11 Plan, meaning that claim would not have existed but for the Debtors’ bankruptcy cases, and (2) the defenses asserted in the adversary proceeding required the Court to interpret and enforce the Chapter 11 Plan. Willkie, 654 B.R. at 487–97. The same is true here. For that reason, the result must be the same here as in Willkie. The Court will retain this adversary proceeding.

II. Jurisdiction & Constitutional Authority

As explained further below, the Court has arising-in jurisdiction to hear and determine this matter under 28 U.S.C. § 1334(b) and the general order of reference entered in this district under 28 U.S.C. § 157(a). Because the Court has arising-in jurisdiction, this is a core proceeding. See Brown v. Harrington (In re Brown), No. 21-11284-GAO, 2022 WL 1200783, at *2 (D. Mass. Apr. 22, 2022), aff'd, 55 F.4th 945 (1st Cir. 2022); S. Canaan Cellular Invs., LLC v. Lackawaxen Telecom, Inc. (In re S. Canaan Cellular Invs., LLC), 427 B.R. 85, 90 (Bankr. E.D. Pa. 2010). And because this dispute “stems from the bankruptcy itself,” the Court has the constitutional authority to enter a final order. Stern v. Marshall, 564 U.S. 462, 499 (2011).

III. Procedural History

The complaint in this adversary proceeding was initially filed in the Belmont County, Ohio Court of Common Pleas (“State Court”). As in Willkie, the plaintiffs here (“Plaintiffs”) include Brenda L. Murray (“Mrs. Murray”), the wife of the Debtors’ founder, Robert E. Murray (“Mr. Murray”), who died in October 2020. Mrs. Murray is a Plaintiff both in her capacity as executrix of Mr. Murray's estate and in her capacity as trustee of the Brenda L. Murray Trust. The other Plaintiff is Michael J. Shaheen, in his capacity as trustee of the Robert E. Murray Trust (“Robert Murray Trust”). The State Court complaint alleges that the defendants—Dinsmore & Shohl LLP (“Dinsmore”) and three of its present or former partners, Jerrad T. Howard, J. Michael Cooney and Kim Martin Lewis (collectively, “Defendants”)—committed legal malpractice in negotiating and seeking confirmation of the Chapter 11 Plan.

The Defendants removed the State Court complaint to this Court under 28 U.S.C. § 1452(a), which provides for the removal of actions over which there is jurisdiction under 28 U.S.C. § 1334 (jurisdiction over bankruptcy cases and proceedings), and Rule 9027 of the Federal Rules of Bankruptcy Procedure. Notice of Removal, Adv. Doc. 1. The parties then entered into an agreed order (Adv. Doc. 6) establishing deadlines for filing the Defendants’ motion to dismiss, the Plaintiffs’ opposition to that motion or amended complaint, and the Defendants’ reply in support of their motion to dismiss.

The Plaintiffs filed a motion to remand (“Remand Motion”) (Adv. Doc. 33), which the Defendants opposed (“Remand Opposition”) (Adv. Doc. 45). Later, the Plaintiffs’ replied (“Remand Reply”) (Adv. Doc. 46) and filed an amended complaint (“Amended Complaint”) (Adv. Doc. 47) in response to the Defendants’ motion to dismiss (Adv. Doc. 42) (“Dismissal Motion”). The briefing on the Dismissal Motion is in the process of wrapping up, and the Court will address that motion in a separate opinion.

IV. Background

The following facts are taken from the Amended Complaint and the Notice of Removal.

A. Competing Attorney-Client Relationships

For decades before the Debtors filed bankruptcy, the Defendants represented Mr. and Mrs. Murray and their trusts (collectively, “Murray Clients”) in personal matters. See Am. Compl. ¶ 18. In particular, the Defendants advised the Murray Clients on estate planning matters. See id. ¶¶ 19–23. The Defendants continued to represent the Murray Clients in personal matters after the Debtors filed bankruptcy. Id. ¶ 24. But at the same time, the Defendants represented the Debtors as their bankruptcy counsel. Id. ¶ 26. That is, the Defendants served as the Debtors’ counsel in their bankruptcy cases while continuing to represent the Murray Clients in personal matters. Id. ¶ 27.

B. ERISA Withdrawal Liability

The interests of the Murray Clients and the Debtors diverged as to what is known as “ERISA withdrawal liability.” Id. ¶ 28. Before they filed bankruptcy, some of the Debtors were signatories to a collective bargaining agreement (“CBA”) with the United Mine Workers of America. Id. ¶ 29. The CBA required the Debtors to contribute to the United Mine Workers of America 1974 Pension Plan and Pension Trust (“1974 Plan”), a multiemployer pension plan under the Employee Retirement Income Security Act of (“ERISA”). See id. ¶¶ 1, 12. While representing the Debtors during their bankruptcy, the Defendants sought and obtained Court approval for the Debtors to reject the CBA. Id. ¶ 29. Rejecting the CBA terminated the Debtors’ contribution obligations to the 1974 Plan, but left the Plaintiffs potentially liable for such obligations under ERISA. See id. ¶¶ 29–30. “If an employer withdraws from a multiemployer pension plan, ERISA imposes ‘withdrawal liability,’ meaning that the withdrawing employer is liable to the plan for its proportionate share of the plan's unfunded vested benefits.” Id. ¶ 13.

ERISA withdrawal liability is not limited to employers—it can also be imposed on members of a “controlled group,” including individuals who “carr[y] on an unincorporated ‘trade or business.’ ” Id. ¶¶ 15–16. The Plaintiffs are defending a lawsuit regarding the Murray Clients’ alleged withdrawal liability to the 1974 Plan. See Buckner, et al. v. Pers. Representative of the Est. of Robert E. Murray, et al., Case No. 1:24-cv-1268-TJK (D.D.C.). In that lawsuit, the 1974 Plan is seeking more than $6.5 billion from the Plaintiffs based on the Murray Clients’ alleged withdrawal liability. See Am. Compl. ¶ 1.

C. The Alleged Malpractice

The Plaintiffs contend that representing both the Debtors and the Murray Clients created a conflict of interest for the Defendants:

Unbeknownst to Plaintiffs, a conflict arose in which Defendants knew that the interests of Plaintiffs and the Murray Energy Debtors diverged on the critical issue of potential ERISA withdrawal liability. In the face of this conflict, Defendants willfully and deliberately breached their duties to Plaintiffs by exposing them to potential claims by the 1974 Plan for ERISA withdrawal liability and/or by failing to expose their conflict of interest, withdraw from the representation of the Murray Energy Debtors, and warn and advise Plaintiffs of the potential liability Defendants created by their actions on behalf of Defendants’ other clients.

Id. ¶ 18.

The Plaintiffs also allege that they were targeted for withdrawal liability “[d]ue to Defendants’ legal malpractice.” Id. ¶ 1. As stated above, the Defendants’ alleged legal malpractice arose from their actions in negotiating and seeking confirmation of the Chapter 11 Plan:

Defendants included provisions in the Chapter 11 plan that personally exposed Plaintiffs to potential claims by the 1974 Plan to recover from Plaintiffs the remaining billions of dollars in ERISA withdrawal liability left unpaid by the withdrawing Murray Energy Debtors. ․ Defendants deliberately harmed Plaintiffs by advocating for the Bankruptcy Court to confirm the Chapter 11 plan that placed Plaintiffs at risk of billions of dollars in potential claims by the 1974 Plan for ERISA withdrawal liability without ever warning Plaintiffs of that risk or advising them on steps they could take to protect themselves from it, despite Defendants’ longstanding representation of Plaintiffs.

Id. ¶¶ 32–33.

D. Defenses Based on the Chapter 11 Plan

In support of removal, the Defendants rely on a “Release” and an “Exculpation Clause” in the Chapter 11 Plan. As for the Release, the Defendants say:

For their part, and in partial consideration for the releases they themselves were receiving under the Chapter 11 Plan, the Murrays agreed to release Dinsmore (as a “Released Party”) from any claims “based on or related to, or in any manner arising from, in whole or in part, the Debtors’ in- or out-of-court restructuring efforts ․ the Chapter 11 Cases, the formulation, preparation, dissemination, negotiation, filing, or consummation of the [Restructuring Support Agreement] ․ the Plan ․ the pursuit of Confirmation ․ or upon any other related act or omission, transaction, agreement, event or other occurrence taking place on or before the Effective Date, other than claims or liabilities arising out of or relating to any act or omission of a Released Party that constitutes actual fraud, willful misconduct, or gross negligence, each solely to the extent as determined by a Final Order of a court of competent jurisdiction.” Id. at 53–54 (“Plan Release”).

Notice of Removal at 3.

As for the Exculpation Clause, the Defendants state:

The Chapter 11 Plan also includes an “Exculpation Clause.” That Clause “exculpate[s]” Debtors’ “attorneys” from “any Cause of Action for any claim related to any act or omission based on the negotiation, execution, and implementation” of the Chapter 11 Plan, “except for claims related to any act or omission that is determined by Final Order” of a “court of competent jurisdiction” to “have constituted actual fraud, willful misconduct, or gross negligence.” ․ In addition, the Plan enjoins pursuit of any exculpated claims and provides that the bankruptcy court retains “exclusive jurisdiction over all matters arising out of, or related to,” the bankruptcy case and the Chapter 11 Plan, including to “determine all disputes involving the existence, nature, scope, or enforcement of any exculpations.”

Id. at 4.

The Defendants argue that the Plaintiffs’ malpractice claim is “barred by both the [Release] and the Exculpation Clause” in the Debtors’ Chapter 11 Plan. Id. at 9.

V. Legal Analysis

The Plaintiffs contend that this adversary proceeding must be remanded to the State Court because the Court lacks subject-matter jurisdiction over their legal malpractice claim. For their part, the Defendants argue that this proceeding should not be remanded because the Court has core, arising-in jurisdiction over the Plaintiffs’ claim.

Remand would indeed be required if the Court lacked subject-matter jurisdiction. See 28 U.S.C. § 1447(c) (“If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded.”); Hart v. J. Anthony Logan and Brooks, Wilburn & Logan Co., L.P.A. (In re Hart), 326 B.R. 901 (B.A.P. 6th Cir. 2005) (holding that 28 U.S.C. § 1447(c) applies in bankruptcy). And “[t]he party that removed the case to federal court bears the burden of establishing federal subject matter jurisdiction.” Bray v. Bon Secours Mercy Health, Inc., 97 F.4th 403, 409 (6th Cir. 2024) (cleaned up). As explained below, the Defendants have carried their burden.²

Because this opinion covers a lot of ground, a brief roadmap is in order. The Court ultimately concludes that it has core, arising-in jurisdiction over this adversary proceeding. To get there, the Court finds that:

A. it has arising-in jurisdiction based on the face of the Amended Complaint because the allegation that attorneys committed malpractice in negotiating and obtaining approval of a Chapter 11 plan could, by its very nature, only arise in a bankruptcy case;

B. it may consider defenses in determining whether it has arising-in jurisdiction, and the defenses created by the Release and the Exculpation Clause afford the Court arising-in jurisdiction; and

C. a court may have arising-in jurisdiction even if it lacks related-to jurisdiction.

To aid the analysis that follows, the Court will reiterate what it said in Willkie regarding the three categories of bankruptcy court jurisdiction:

The first category is arising-under jurisdiction. “The phrase ‘arising under title 11’ describes those proceedings that involve a cause of action created or determined by a statutory provision of title 11.” Mich. Emp. Sec. Comm'n v. Wolverine Radio Co. (In re Wolverine Radio Co.), 930 F.2d 1132, 1144 (6th Cir. 1991).

The second category is arising-in jurisdiction. “[A]rising in proceedings are those that, by their very nature, could arise only in bankruptcy cases.” Wolverine Radio, 930 F.2d at 1144․ The Sixth Circuit has applied a “but for” test to determine whether there is arising-in jurisdiction. See Lowenbraun v. Canary (In re Lowenbraun), 453 F.3d 314, 321 (6th Cir. 2006).

The third category is related-to jurisdiction. The seminal case for determining whether a court has related-to jurisdiction is In re Pacor, Inc., 743 F.2d 984, 994 (3d Cir. 1984). Under Pacor, the test for related-to jurisdiction is whether the outcome of the proceeding could have any conceivable effect on the debtor's bankruptcy estate. Pacor, 743 F.2d at 994. The Sixth Circuit has adopted the Pacor test[.]

Willkie, 654 B.R. at 479–81.

A. The Court Has Arising-in Jurisdiction Based on the Face of the Amended Complaint.

Again, “[a]rising in proceedings are those that, by their very nature, could arise only in bankruptcy cases.” Wolverine Radio, 930 F.2d at 1144. The dispute between the parties fits the bill. Although the Defendants represented the Murray Clients before the Debtors’ bankruptcy, Am. Compl. ¶ 43, the Defendants’ alleged malpractice occurred entirely during the Debtors’ bankruptcy case, id. ¶ 44.

True, “the mere fact that conduct took place during a bankruptcy case is not enough to provide ‘arising in’ jurisdiction.” Waleski v. Montgomery, McCracken, Walker & Rhoads, LLP (In re Tronox), 603 B.R. 712, 724 (Bankr. S.D.N.Y. 2019), aff'd sub nom. In re Tronox Inc., No. 20-3949-BK, 2022 WL 16753119 (2d Cir. Nov. 8, 2022), cert. denied, 142 S. Ct. 2027 (2023). But the legal malpractice alleged in the Amended Complaint has everything to do with the Debtors’ bankruptcy case. The Plaintiffs allege that the Defendants committed legal malpractice by negotiating and obtaining approval of the Chapter 11 Plan in such a way that the Plaintiffs would be subject to ERISA withdrawal liability. According to the Plaintiffs, the Defendants should have taken steps that would have led to a different Chapter 11 plan being confirmed—one in which, despite the Debtors’ withdrawal from the 1974 Plan, the Murray Clients would have had no withdrawal liability.

By its very nature, the claim that an attorney committed malpractice in connection with the negotiation and approval of a Chapter 11 plan could only arise in a bankruptcy case. See Tronox, 603 B.R. at 719 (holding that court had arising-in jurisdiction over malpractice claims where the “theory of the malpractice claims is that ․ different plan terms would have been approved ․ if only the defendants had acted differently”); Kaiser Grp. Holdings, Inc. v. Squire Sanders & Dempsey, LLC (In re Kaiser Grp. Int'l, Inc.), 421 B.R. 1, 8 (Bankr. D.D.C. 2009) (holding that bankruptcy court had arising-in jurisdiction over malpractice claim based on the negotiation of a Chapter 11 plan).

The Plaintiffs suggest that the Court could only have arising-in jurisdiction over malpractice claims brought by the Debtors against the Defendants in their capacity as Court-appointed professionals. See Remand Reply at 2 (“Plaintiffs do not contend that Defendants’ liability stems from a violation of any duties they owed to the Murray Energy Debtors—to the contrary, Defendants breached their duties owed to Plaintiffs outside the bankruptcy.”); id. at 3 (“[T]his Court lacks subject-matter jurisdiction over Plaintiffs’ malpractice claim against Defendants in their capacity as Plaintiffs’ private counsel, and not as counsel for the ․ Debtors.”). But as one court put it, a “claim which arises in a bankruptcy case does so when the claim would have no practical existence but for the bankruptcy case, regardless of the identity of the party asserting the claim.” Kaiser Grp., 421 B.R. at 14 (cleaned up) (emphasis added); see also Stanley v. First Nat'l Bank of Sparta (In re Murphy), 213 B.R. 813, 817 (Bankr. S.D. Miss. 1997) (“[N]othing contained in [§ 1334(b)] indicates that ‘arising in’ jurisdiction is not as available to third-parties as it was held to be available to the trustee and the debtors.”).

Further, while the Plaintiffs attempt to hammer home the point that the alleged malpractice occurred “outside of the bankruptcy,” Remand Reply at 2–3, 7–9, nothing could be further from the truth. As the Amended Complaint makes clear, the alleged malpractice is based on actions that would have no practical existence but for the bankruptcy: This dispute would not have existed but for the Debtors’ bankruptcy because the Plaintiffs allege harm based on the Defendants’ role in negotiating and obtaining approval of the Chapter 11 Plan. See Am. Compl. ¶¶ 31–33.³

The primary case on which the Plaintiffs rely (other than Wolverine Radio, which is addressed in detail below) is Stewart v. Henry (In re Stewart), 62 F. App'x 610 (6th Cir. 2003). See Remand Mot. at 12–15. But Stewart does not counsel against finding arising-in jurisdiction here. Before they filed bankruptcy, the debtors in Stewart brought a lender liability counterclaim in a state court foreclosure action; that counterclaim became property of the estate after the debtors filed bankruptcy. During the bankruptcy, the Chapter 7 trustee settled the counterclaim on behalf of the debtors’ estate at a time when the debtors believed the trustee's law firm was representing them. The debtors brought a malpractice claim against the law firm, which removed the claim to the bankruptcy court. The debtors sought remand, but the bankruptcy court declined to remand because the malpractice claim “involved property of the estate” and was “explicitly bankruptcy and intimately intertwined with the bankruptcy estate.” Id. at 612. The district court affirmed. The Sixth Circuit reversed:

We are not persuaded by the bankruptcy court's “explicitly bankruptcy and intimately intertwined with the bankruptcy estate” argument, because that argument is explicitly premised on the bankruptcy court's conclusion that the claims in the complaint involve property of the estate. Neither are we persuaded by the district court's “core proceeding” analysis, which is explicitly premised on the conclusion that the Stewarts’ complaint necessarily implicates the administration of the estate. Both of these conclusions are, as we have explained, incorrect.

Id. at 614.

None of that applies here. The Plaintiffs’ malpractice claim neither involves property of the estate nor implicates the administration of the estate. Rather, the Plaintiffs’ legal malpractice claim would not exist but for the Debtors’ bankruptcy cases, meaning it arises in the Debtors’ bankruptcy cases. See Lowenbraun, 453 F.3d at 321 (applying a “but for” test for determining whether arising-in jurisdiction exists).

B. The Court May Consider Affirmative Defenses in Determining Whether It Has Subject-Matter Jurisdiction Over a Removed Action.

1. The Well-Pleaded Complaint Rule Does Not Apply to Removal Based on Arising-in Jurisdiction.

According to the Plaintiffs, the “well-pleaded complaint rule” prohibits the Defendants from relying on the Release and the Exculpation Clause to support the Court's jurisdiction over this adversary proceeding. Remand Mot. at 21; Remand Reply at 11. For the reasons explained below, however, the well-pleaded complaint rule does not apply to matters over which bankruptcy courts have arising-in jurisdiction.

Federal-question jurisdiction lies over “all civil actions arising under the Constitution, laws, or treaties of the United States.” 28 U.S.C. § 1331 (emphasis added). Because § 1331 refers to matters arising under federal law, federal question jurisdiction only exists where a federal question “appear[s] on the face of a well-pleaded complaint.” Am. Nat'l Red Cross v. S.G., 505 U.S. 247, 258 (1992). This classic formulation of the well-pleaded complaint rule “applies only to statutory ‘arising under’ cases[.]” Id. And to support removal from state to federal court, a federal question must “appear on the face of the complaint rather than as part of a defense, even if a federal-law defense is anticipated.” Hudak v. Elmcroft of Sagamore Hills, 58 F.4th 845, 852 (6th Cir. 2023) (cleaned up) (emphasis added).

There is an obvious issue with applying the well-pleaded complaint rule here: The Court's jurisdiction over this adversary proceeding is not predicated on § 1331. Rather, the Court has arising-in jurisdiction over this dispute under 28 U.S.C. § 1334(b). And it has been removed under 28 U.S.C. § 1452, the bankruptcy removal statute, which provides for removal of actions over which a court has jurisdiction under § 1334(b). The issue, then, is whether the well-pleaded complaint rule applies to bankruptcy removals of proceedings over which a court has arising-in jurisdiction based on a defense.

Many courts have held that the rule does not apply in the context of arising-in jurisdiction under § 1334(b).⁴ These courts rely on the Supreme Court's pronouncement in Red Cross that the “well-pleaded complaint rule applies only to ‘arising under’ jurisdiction pursuant to 28 U.S.C. § 1331,” and that it is “erroneous[ ] to invoke that rule outside the realm of statutory ‘arising under’ jurisdiction, i.e., jurisdiction based on 28 U.S.C. § 1331[.]” Red Cross, 505 U.S. at 257. Under this approach, the well-pleaded complaint rule does not apply outside the federal-question context, meaning that a defense may support arising-in jurisdiction.

Other courts have held that the well-pleaded complaint rule applies in the context of arising-in jurisdiction. See Conseco, Inc. v. Adams (In re Conseco, Inc.), 318 B.R. 425, 432 n.1 (Bankr. N.D. Ill. 2004); State v. Merrill Lynch & Co. (In re LJM2 Co-Inv., L.P.), 319 B.R. 495, 501 (Bankr. N.D. Tex. 2005). LJM2 relied heavily on another Supreme Court decision, Rivet v. Regions Bank of Louisiana, 522 U.S. 470 (1998). See LJM2, 319 B.R. at 500–01. In Rivet, the removing party invoked federal question jurisdiction under § 1331. “Although the removing party cited § 1331, and not § 1334, for federal jurisdiction, the case involved the consideration of prior bankruptcy court orders” that provided an “affirmative defense” that could not “be used to create a federal question.” Id. at 500. The LJM2 court acknowledged that the Supreme Court referenced removal based on federal question jurisdiction, but declined “to distinguish Rivet on that basis.” Id. at 500–01.

So which of those two camps is right? As the Court sees it, the courts that decline to apply the well-pleaded complaint rule in the context of arising-in jurisdiction are unequivocally correct. Rivet held only that courts must apply the well-pleaded complaint rule over removed causes of action when assessing whether federal question jurisdiction exists under § 1331. It did not address removal of claims under § 1334. See McIntyre Bldg., 2011 WL 1434691, at *13 (“[T]here was no discussion of 28 U.S.C. § 1334 in Rivet, as jurisdiction was predicated there solely on 28 U.S.C. § 1331. Therefore, Rivet provides no direct support for the proposition that the well-pleaded complaint rule somehow applies to bankruptcy jurisdiction.”).

Red Cross did not involve bankruptcy removals either, but it did admonish a party for “erroneously invoke[ing]” the well-pleaded complaint rule “outside the realm of statutory ‘arising under’ jurisdiction, i.e., jurisdiction based on 28 U.S.C. § 1331, to jurisdiction based on a separate and independent jurisdictional grant.” Red Cross, 505 U.S. at 258 (emphasis added). Important here, arising-under jurisdiction, arising-in jurisdiction and related-to jurisdiction are separate and independent bases for federal jurisdiction. As another bankruptcy court held, those three categories of jurisdiction “were intended to address separate, although perhaps overlapping jurisdictional issues.” Simmons v. Johnson, Curney & Fields, P.C. (In re Simmons), 205 B.R. 834, 838 (Bankr. W.D. Tex. 1997); see also BGC Partners Inc. v. Avison Young (Canada) Inc., No. 2:15-CV-02057-DCN, 2015 WL 7458593, at *6 n.10 (D.S.C. Nov. 24, 2015) (“arising in” jurisdiction provides a separate basis for bankruptcy jurisdiction beyond “arising under” and “related to”); Cano v. GMAC Mortg. Corp. (In re Cano), 410 B.R. 506, 546 (Bankr. S.D. Tex. 2009) (“The ‘arising in’ and ‘arising under’ prongs of § 1334 provide independent bases of jurisdiction.”). Arising-in jurisdiction is based on a separate and independent jurisdictional grant from arising-under jurisdiction. Thus, under Red Cross, it would be wrong to apply the well-pleaded complaint rule to arising-in jurisdiction.

Like arising-in jurisdiction, related-to jurisdiction is a separate and independent jurisdictional grant. So it is relevant that, as this Court has held, the well-pleaded complaint rule does not apply in the context of related-to jurisdiction. See Meritage, 474 B.R. at 563 n.37. The only circuit court to address the issue agrees. See Collins v. Sidharthan (In re KSRP, Ltd.), 809 F.3d 263, 268 n.3 (5th Cir. 2015).⁵ And as one bankruptcy court said, the “logic” under which the well-pleaded complaint rule does not apply to related-to jurisdiction “would equally apply to matters that ‘arise in’ a bankruptcy case,” because “ ‘arising in’ jurisdiction is also distinct from ‘arising under’ jurisdiction.” Senior Care Ctrs., 622 B.R. at 692 n.48. Arising-in jurisdiction lies over matters that, by their very nature, could arise only in bankruptcy cases. And “[t]o the extent that a proceeding can only arise in the context of bankruptcy, it is clearly Congress's intent that those proceedings be heard by the bankruptcy court even if not expressly enumerated in the Bankruptcy Code.” Briar Bldg., 649 B.R. at 726.

For these reasons, the Court finds that the well-pleaded complaint rule does not apply here. The Court may therefore consider the defenses of the Chapter 11 Plan's Release and the Exculpation Clause in determining whether it has arising-in jurisdiction.

2. The Defendants Rely on Defenses Afforded by the Release and Exculpation Clause, and the Court Has Arising-in Jurisdiction to Interpret and Enforce those Provisions of the Chapter 11 Plan.

Because the Defendants contend that the Release and the Exculpation Clause protect them from liability to the Plaintiffs for their alleged malpractice, adjudicating this adversary proceeding requires the Court to interpret and enforce the Chapter 11 Plan. As several circuit courts (including the Sixth Circuit) and other courts have held, interpreting and enforcing a Chapter 11 plan amounts to interpreting and enforcing an order of the court,⁶ bankruptcy courts have core, arising-in jurisdiction to interpret and enforce their own orders,⁷ and all this applies to Chapter 11 plans and the orders confirming them.⁸

The Plaintiffs argue that the Exculpation Clause and Release themselves show that the Court does not have arising-in jurisdiction. They point to the carve out for “actual fraud, willful misconduct, or gross negligence, each solely to the extent as determined by a Final Order of a court of competent jurisdiction.” Remand Mot. at 14 (quoting Chapter 11 Plan at 122–23). The Chapter 11 Plan defined “Final Order” as any final “order or judgment of the Bankruptcy Court or other court of competent jurisdiction with respect to the relevant subject matter.” Chapter 11 Plan at 77. According to the Plaintiffs, the fact that the State Court would be competent to decide this case means the Exculpation Clause and Release do not render this a core proceeding, as these defenses “could exist outside of the bankruptcy.” Remand Mot. at 15. But the fact that a state court has concurrent jurisdiction to decide a matter does not mean that the matter fails to arise under the Bankruptcy Code or arise in the bankruptcy. See McCarthy v. Prince (In re McCarthy), 230 B.R. 414, 418 (B.A.P. 9th Cir. 1999) (“The fact that a fraudulent transfer action might be a ‘core proceeding’ under 28 U.S.C. § 157(b)(2) does not equate to exclusive federal jurisdiction. Rather, there is concurrent federal and state jurisdiction over fraudulent transfer actions and many other core proceedings.”).

C. Arising-In Jurisdiction Is Not Predicated on Related-to Jurisdiction.

For the reasons explained above, the Court has arising-in jurisdiction over this adversary proceeding. The Plaintiffs, though, contend that because the Court lacks related-to jurisdiction over this adversary proceeding, the Court does not have jurisdiction over it at all. As in Willkie, the Plaintiffs’ argument is predicated on a fundamental misunderstanding of bankruptcy courts’ subject-matter jurisdiction. The Plaintiffs first rely on a footnote in a Supreme Court decision for the proposition that “Bankruptcy Courts lack jurisdiction over proceedings under 28 U.S.C. § 1334(b) that have no effect on the estate of the debtors.” Remand Mot. at 2 (citing Celotex Corp. v. Edwards, 514 U.S. 300, 308 n.6 (1995)). But the Celotex Court said that in the context of related-to jurisdiction—not arising-under or arising-in jurisdiction. See Celotex, 514 U.S. at 308 (“[A] bankruptcy court's ‘related to’ jurisdiction cannot be limitless.’ ”).

As for Celotex, a decision from the Southern District of New York is instructive. See Liberian Int'l Ship & Corp. Registry, LLC v. Allfirst Bank (Millenium Seacarriers, Inc.), No. 02 CV 7108 (RPP), 2004 WL 63501 (S.D.N.Y. Jan. 14, 2004), aff'd sub nom. In re Millenium Seacarriers, Inc., 419 F.3d 83 (2d Cir. 2005). In Millenium, the appellants argued that because an adversary proceeding would not affect Millenium's bankruptcy estate, it was not related to Millenium's bankruptcy, meaning the bankruptcy court lacked subject-matter jurisdiction over that proceeding. The appellants “base[d] their argument principally on footnote six of Celotex ․ , in which the Supreme Court stated, in determining the existence of ‘related to’ jurisdiction, that ‘whatever test is used, [the] cases make clear that bankruptcy courts have no jurisdiction over proceedings that have no effect on the estate of the debtor.” Id. at *7. The Millenium court never found that the adversary proceeding would have any effect on the estate, but still found that it had subject-matter jurisdiction because the proceeding “involved the interpretation of the Bankruptcy Court's Sale Order” and “a bankruptcy court retains jurisdiction to interpret and enforce its own orders.” Id.

To have jurisdiction over a matter, the Court must have arising-under, arising-in or related-to jurisdiction. See White-Lett v. NewRez, Inc., No. 4:22-CV-00082-WMR, 2024 WL 2826127, at *12 (N.D. Ga. Apr. 20, 2024) (“[F]or a federal court to have jurisdiction in a bankruptcy case or proceeding, there must be a “civil proceeding[ ] arising under title 11, or arising in or related to [a case] under title 11.”) (quoting 28 U.S.C. § 1334(b)). The Plaintiffs concede that the Court has jurisdiction to interpret and enforce its own orders, yet they would somehow leave this unmoored from § 1334(b). See Remand Mot. at 7, 11 (arguing that the Court lacks jurisdiction over this adversary proceeding while recognizing that courts have the inherent power to enforce their own orders). But if the Court has jurisdiction to enforce its own orders, it must be because the enforcement would constitute an exercise of jurisdiction under § 1334(b) in that it arises under the Bankruptcy Code or arises in or is related to the bankruptcy case.

Despite all this, the Plaintiffs contend that the Court cannot have arising-in jurisdiction over the dispute between the parties because it lacks related-to jurisdiction over it. As in Willkie, which the Plaintiffs appealed to the District Court, the Plaintiffs rely here on the Sixth Circuit's decision in Wolverine Radio. The Plaintiffs contend that this Court held in Willkie that Wolverine Radio “was wrongly decided or misconstrued by the Willkie plaintiffs.” Remand Reply at 5. And they also refer to the Court's “apparent disagreement with Wolverine Radio.” To be clear, the Court did not determine—and could not have determined—that Wolverine Radio was wrongly decided. Nor did the Court disagree with Wolverine Radio. Instead, the Court took issue with the gloss the Plaintiffs and others have put on that decision.

Relying on the Fifth Circuit's decision in Wood v. Wood (In re Wood), 825 F.2d 90 (5th Cir. 1987), the Sixth Circuit stated in Wolverine Radio:

For the purpose of determining whether a particular matter falls within bankruptcy jurisdiction, it is not necessary to distinguish between the [three categories under § 1334(b)] (proceedings “arising under,” “arising in,” and “related to” a case under title 11). These references operate conjunctively to define the scope of jurisdiction. Therefore, for purposes of determining section 1334(b) jurisdiction, it is necessary only to determine whether a matter is at least “related to” the bankruptcy.

Wolverine Radio, 930 F.2d at 1141 (emphasis added).

Based on the last sentence of that paragraph, emphasized above, the Plaintiffs argue that under Wolverine Radio, if a court lacks related-to jurisdiction over a claim, it cannot have any form of jurisdiction over that claim under § 1334(b). But they ignore the sentence that came immediately before, which says that the arising-under, arising-in, and related-to categories of jurisdiction “operate conjunctively to define the scope of jurisdiction.” Id. (emphasis added). Things that are conjunctive are “conjoining” (joined together) or “connecting” (joined, fastened or linked together), not subsumed within one another. See Webster's Third New International Dictionary at 469, 480.

In Willkie, the Court concluded that the Plaintiffs’ position—that arising-in jurisdiction must be predicated on related-to jurisdiction—was wrong for at least seven reasons. The Plaintiffs have taken on each of those reasons in their appeal to the District Court. And rather than address those seven reasons in their papers filed with this Court, the Plaintiffs have “append[ed] [as Exhibit 1 to their Remand Reply] and adopt[ed] the arguments on these issues that were addressed in detail by the Willkie plaintiffs in the pending District Court appeal.” Remand Reply at 5–6; see also Adv. Doc. 46–1 (“District Court Brief”).

So that all the relevant material is collected in one place, the opinion's next seven subsections will follow this pattern: First, the Court will directly quote the relevant portion of its reasoning in Willkie. Second, the Court will directly quote the arguments against Willkie made by the Plaintiffs in their District Court brief. Third, the Court will analyze the Plaintiffs’ arguments against Willkie and explain why those arguments are wrong. The Court will repeat this pattern as it addresses each of the seven reasons it previously put forth in concluding that arising-in jurisdiction does not hinge on related-to jurisdiction under § 1334(b).

1. Plain Meaning and Statutory Construction

a. The Willkie Opinion

First, ․ [i]f arising-under and arising-in jurisdiction were predicated on a court's having related-to jurisdiction, there would have been no reason for Congress to have included the arising-under or arising-in categories of jurisdiction in § 1334(b). In other words, a “facial reading of the statute [under which] the three categories were intended to address separate, although perhaps overlapping jurisdictional issues ․ comports with a basic tenet of statutory construction that every word in a statute be given effect.” Simmons v. Johnson, Curney & Fields, P.C. (In re Simmons), 205 B.R. 834, 838 (Bankr. W.D. Tex. 1997). As the Simmons court also said, this approach is consistent with § 1334(b)’s plain meaning:

What else, after all, could Congress have meant when it made specific provision for jurisdiction over matters that “arise in” bankruptcy? Recalling our obligation to give meaning and effect, if possible, to every word Congress uses in a given statute ․ There will be overlap with one or more of the other two “reservoirs” of jurisdiction, to be sure, but the use of three different concepts assures that cases that might otherwise fall beyond the margins of one or both of the other two provisions, but which ought otherwise to fall within the “broad grant of jurisdiction” contemplated by Congress, will in fact be included within the federal court's bankruptcy subject matter jurisdiction.

Id. at 840. See also id. at 842, 843 n.21 (explaining that if Wood actually meant that related-to jurisdiction subsumes the other two categories of arising-in and arising-under jurisdiction, they would be “read out of the statute altogether”).

Willkie, 654 B.R. at 482–83.

b. The Plaintiffs’ Response to Willkie

First: The Bankruptcy Court wrongly claimed that Wolverine Radio does not make the related-to test outcome determinative because otherwise “there would have been no reason for Congress to have included the arising-under or arising-in categories of jurisdiction in § 1334(b).” If a related-to matter did not include arising-under and arising-in matters, Wolverine Radio would require separate jurisdictional inquiries specifically addressed to each category—but it does not. Rather, because the related-to category inclusively covers the other two categories, “it is necessary only to determine whether a matter is at least ‘related to’ the bankruptcy” for § 1334(b) purposes. 930 F.2d at 1141 (emphasis added).

District Ct. Br. at 18 (cleaned up).

c. Analysis

The Plaintiffs posit a world in which arising-under and arising-in jurisdiction are mere subsets of related-to jurisdiction. If we lived in that world, then the conceivable-effect test—applicable to related-to jurisdiction—would necessarily apply to arising-under and arising-in jurisdiction. But we do not live in that world. Since Wolverine Radio, the Sixth Circuit has made clear that “the conceivable-effect test applies only to related-to jurisdiction[.]” Autumn Wind Lending, LLC v. Est. of Siegel, 92 F.4th 630, 637 (6th Cir. 2024). In Autumn Wind, the Sixth Circuit held that “the bankruptcy court lacks related-to jurisdiction to adjudicate a prepetition dispute between these two creditors that would have no conceivable effect on the bankruptcy estate.” Id. (emphasis added). If, as the Plaintiffs contend, arising-under and arising-in jurisdiction were mere subsets of related-to jurisdiction, then the conceivable-effect test would apply to them as well. How could it not? But the Sixth Circuit has held to the contrary.

2. Legislative History Quoted in Wolverine Radio

a. The Willkie Opinion

Second, the Wolverine Radio court cited with approval legislative history recognizing that there can be arising-in jurisdiction even in closed cases over which there would be no related-to jurisdiction:

Very often, issues will arise after the case is closed, such as over the validity of a purported reaffirmation agreement, proposed 11 U.S.C. § 524(b), the existence of prohibited post-bankruptcy discrimination, proposed 11 U.S.C. § 525 ․ and so on. The bankruptcy courts will be able to hear these proceedings because they arise under title 11.

Wolverine Radio, 930 F.2d at 1141 n.14 (quoting H.R. Rep. No. 595, 95th Cong., 2d Sess. 445). “Generally, when a bankruptcy case is closed, there is no longer an estate to be administered, and an action or proceeding cannot have a conceivable effect on an estate that no longer exists,” Al-Rayes v. Willingham, No. 3:15-CV-107-J-34JBT, 2016 WL 9527956, at *2 (M.D. Fla. Mar. 11, 2016), meaning that the bankruptcy court would lack related-to jurisdiction. The legislative history that the Sixth Circuit quoted (approvingly) in Wolverine Radio thus recognized that bankruptcy courts can have arising-under jurisdiction over matters even if they lack related-to jurisdiction.

Willkie, 654 B.R. at 483.

b. The Plaintiffs’ Response to Willkie

Second: The Bankruptcy Court asserted that Wolverine Radio recognized that even in closed cases there can be arising-under and arising-in jurisdiction without related-to jurisdiction by quoting ․ § 1334’s legislative history[.]

․

The Bankruptcy Court's reliance on this [legislative history] was misplaced. The House Report indicates that bankruptcy courts were meant to have residual power in closed cases to resolve arising-under disputes—i.e., claims based on a statute in title 11—but only where related-to jurisdiction existed when the case was filed. See Bavelis, 835 F. App'x at 805 (“The ordinary rule ․ is that jurisdiction is determined at the time of filing.”). Although omitted by the Bankruptcy Court, the House Report acknowledges this point: “[B]ecause title 11 ․ only applies once a bankruptcy case is commenced, any proceeding arising under title 11 will in some way be ‘related to’ a case under title 11.” H.R. Rep. 95-595 at 445 (emphasis added).

District Ct. Br. at 18–19 (cleaned up).

c. Analysis

The Court's reliance on the legislative history was not misplaced. There would be no related-to jurisdiction at any time, including as of the commencement of the bankruptcy case, over the examples given in the legislative history. The validity of a reaffirmation agreement and the existence of prohibited post-bankruptcy discrimination would affect the debtor, but would not—at any time—have any conceivable effect on the bankruptcy estate, which is the test for related-to jurisdiction. Cf. Csondor v. Weinstein, Treiger & Riley, P.S. (In re Csondor), 309 B.R. 124, 129 (Bankr. E.D. Pa. 2004) (holding that there was no related-to jurisdiction over Chapter 7 debtor's claim for alleged postpetition violation of the Fair Debt Collection Practices Act because “any recovery under these claims would belong to the Debtor and not her estate”). The legislative history was speaking colloquially when it said that “any proceeding arising under title 11 will in some way be ‘related to’ a case under title 11.” Cf. Scott v. Bank of Am. (In re Scott), No. 11-04314, 2015 WL 643334, at *1 (Bankr. W.D. Mich. Feb. 12, 2015) (“Although colloquially speaking, the lawsuit seems ‘related’ to the debtor and therefore to her bankruptcy case, the test requires a nexus to the estate and the administration of the case which, as both parties now concede, is lacking.”).

3. Later Supreme Court and Sixth Circuit Decisions Are Incompatible with the Plaintiffs’ Reading of § 1334(b).

a. The Willkie Opinion

Third, Supreme Court and Sixth Circuit cases would have been decided differently if a lack of related-to jurisdiction meant arising-under or arising-in jurisdiction could not exist. In Travelers Indem. Co. v. Bailey, 557 U.S. 137 (2009), the bankruptcy court had entered orders confirming a Chapter 11 plan and approving a related settlement agreement with the debtor's insurers (“1986 Orders”). More than a decade later, the court issued an order clarifying that the 1986 Orders barred actions that had been brought against the insurers. According to the Supreme Court, the only jurisdictional question was whether the bankruptcy court had subject-matter jurisdiction to enter the clarifying order. The Supreme Court held that answering that question was “easy,” because “as the Second Circuit recognized, and respondents do not dispute, the Bankruptcy Court plainly had jurisdiction to interpret and enforce its own prior orders.” Id. at 151. Although it did not expressly say so, the Supreme Court must have been relying on arising-in jurisdiction. For the bankruptcy court would not have had related-to jurisdiction to enter an order clarifying prior orders entered in connection with a Chapter 11 plan confirmed, and a settlement agreement approved, more than a decade earlier. See In re Cano, 410 B.R. 506, 546 (Bankr. S.D. Tex. 2009) (“In Travelers Indemnity, the Supreme Court held that, post-discharge, a bankruptcy court has jurisdiction to interpret and enforce its own orders even though the bankruptcy case was closed and the claims would not affect the bankruptcy estate.”).

Similarly, the Sixth Circuit would have decided Lowenbraun differently if the existence of arising-under or arising-in jurisdiction turned on whether the proceeding in question could have a conceivable effect on the bankruptcy estate. In Lowenbraun, the Sixth Circuit held that the bankruptcy court properly exercised core jurisdiction over a nondebtor's state law claims for libel, slander and abuse of process against a Chapter 7 trustee's counsel. Under the Plaintiffs’ conception of bankruptcy court jurisdiction, the bankruptcy court in Lowenbraun would have lacked arising-in jurisdiction and thus could not have adjudicated the nondebtor's claims. Why? Because no matter how they shook out, there would have been no conceivable effect on the estate. But the Sixth Circuit found that the claims, which had been removed from state court, were based on counsel's actions in the underlying bankruptcy case and thus “would not exist but for the bankruptcy.” Lowenbraun, 453 F.3d at 321. Because the claims would not exist but for the bankruptcy, the Sixth Circuit found that the bankruptcy court had arising-in-jurisdiction over those claims. That is, the Sixth Circuit held that the bankruptcy court had jurisdiction over state law claims between nondebtors that had been removed from state court, despite the fact that the claims could not have any conceivable effect on the bankruptcy estate and therefore could not have satisfied the test for related-to jurisdiction.

Willkie, 654 B.R. at 483–84.

b. The Plaintiffs’ Response to Willkie

Third: The Bankruptcy Court cited Travelers Indem. Co. v. Bailey, 557 U.S. 137 (2009), where decades after the Chapter 11 plan was confirmed, the bankruptcy court issued an order clarifying that its prior orders enjoined suits against the debtor's insurers. The U.S. Supreme Court observed that the bankruptcy court “plainly had jurisdiction to interpret and enforce its own prior orders.” Id. at 151. Seizing upon this language, the Bankruptcy Court presumed that the Supreme Court was referring to arising-in jurisdiction because the bankruptcy court in Travelers would not have had related-to jurisdiction to enter its clarifying order.

Travelers says no such thing, however, nor otherwise upends Wolverine Radio sub silentio. Travelers stands for the uncontroversial point that a bankruptcy court can interpret and enforce its prior orders in a closed case in which it originally had subject-matter jurisdiction, which the Supreme Court indicated by pointing out that the bankruptcy court in Travelers “retained jurisdiction to enforce its injunctions.” 557 U.S. at 151 (emphasis added). See, e.g., In re Sterling Optical Corp., 302 B.R. 792, 802-03 (Bankr. S.D.N.Y. 2003). But Travelers does not suggest that arising-in jurisdiction to interpret and enforce prior orders expands a bankruptcy court's § 1334(b) jurisdictional reach to non-bankruptcy matters where, as here, related-to subject-matter jurisdiction never existed. Notably, the Sixth Circuit cited Travelers in In re Conco, Inc., 855 F.3d 703, 711 (6th Cir. 2017), in recognizing that bankruptcy courts can “interpret orders that they have previously given” but without even hinting that Travelers altered its § 1334 jurisprudence.

The Bankruptcy Court also claimed that In re Lowenbraun, 453 F.3d 314 (6th Cir. 2006), would have been decided differently if arising-in jurisdiction depended on related-to jurisdiction. (AP 485-86.). This assertion is controverted by the facts of the case. In Lowenbraun, the plaintiff sought remand to state court based on mandatory abstention, which applies only in non-core (related-to) proceedings. See id. at 319–20. Thus, it was implicit in Lowenbraun that related-to jurisdiction existed (step one of Wolverine Radio's analysis) because the dispute was limited to whether the matter was core or non-core (Wolverine Radio's step two, undertaken only when related-to jurisdiction exists). See id. In fact, the Sixth Circuit noted that the state-court suit could affect (i.e., was related to) the bankruptcy because, unlike here, the plaintiff's claims were against the court-appointed trustee's counsel for his actions “to assist in the administration of the estate.” Id. at 321. Finally, any suggestion that Lowenbraun jettisoned the related-to test for § 1334(b) jurisdiction was put to rest in HNRC Dissolution Co., 761 F. App'x at 559–61, where the Sixth Circuit applied Lowenbraun's abstention analysis only after affirming that the bankruptcy court had subject-matter jurisdiction applying the related-to inquiry.

District Ct. Br. at 19–21 (cleaned up).

c. Analysis

As for Travelers, the Plaintiffs rely too heavily on the Supreme Court's statement that the bankruptcy court “retained” jurisdiction, as if that jurisdiction can somehow inherently exist without being tethered to § 1334(b)’s arising-under/arising-in/related-to framework. As many courts have held, interpreting and enforcing its own orders falls within a bankruptcy court's core, arising-in jurisdiction. See supra nn. 6 & 7.

As for Lowenbraun, the Plaintiffs assume the conclusion they seek to establish when they state that (1) the Lowenbraun plaintiffs sought remand to state court based on mandatory abstention, (2) mandatory abstention applies only in related-to proceedings, and (3) related-to jurisdiction therefore existed in Lowenbraun. And before the Sixth Circuit said that the lawsuit would have an “effect on the administration of the bankruptcy estate,” it first observed that “core proceedings include but are not limited to ‘matters concerning the administration of the estate.’ ” Lowenbraun, 453 F.3d at 320 (emphasis added); see also 28 U.S.C. § 157(b)(2)(A) (defining core proceedings to include “matters concerning the administration of the estate”). Nothing in Lowenbraun suggests that the Sixth Circuit thought there was related-to jurisdiction in that case. Further, while the Plaintiffs argue that in Willkie, this Court suggested that Lowenbraun “jettisoned the related-to test for § 1334(b) jurisdiction,” District Ct. Br. at 21, the Court did no such thing. Finally, there is nothing in HNRC Dissolution Co., 761 F. App'x at 559–61, supporting the idea that a court must have related-to jurisdiction before it may have arising-under or arising-in jurisdiction.

4. Under The Plaintiffs’ Interpretation of § 1334(b), Bankruptcy Courts Could Not Finally Adjudicate Proceedings Over Which They Have Undisputed Authority.

a. The Willkie Opinion

Fourth, if, as Plaintiffs argue, arising-under or arising-in jurisdiction depended on the existence of related-to jurisdiction, then bankruptcy courts would lack jurisdiction over proceedings that they have undisputed authority to finally adjudicate, including actions relating to the discharge in Chapter 7 debtors’ cases. “Over 90% of Chapter 7s are no-asset cases that provide no distribution to unsecured creditors.” ABI Commission on Consumer Bankruptcy, Final Report of the ABI Commission on Consumer Bankruptcy 2017–2019 at 93. As stated above, the test for related-to jurisdiction is whether the proceeding could have any conceivable effect on the debtor's bankruptcy estate. In no-asset Chapter 7 cases, there is no property of the estate to be distributed to creditors, and related-to jurisdiction therefore cannot exist in those cases. See Wu v. Rhee (In re Rhee), No. 11-35901, 2011 WL 5240152, at *2 (Bankr. S.D. Tex. Oct. 31, 2011) (“The argument that subject matter jurisdiction exists because this adversary proceeding is related to Rhee's bankruptcy case also fails. Rhee filed a ‘no-asset’ chapter 7 bankruptcy. Even if the court determines Rhee is liable to Wu, the outcome will have no effect on the estate being administered in bankruptcy. The Wus would collect nothing from the estate.”). So if related-to jurisdiction had to exist for there to be arising-under or arising-in jurisdiction, bankruptcy courts would lack jurisdiction to adjudicate proceedings—such as nondischargeability actions under § 523(a) of the Bankruptcy Code, contempt proceedings for the violation of the discharge injunction under § 524 and § 105(a), and objections to the debtor's discharge under § 727—over which, as discussed above, they plainly do have arising-under jurisdiction. The outcome of such matters would have no conceivable effect on the bankruptcy estate, meaning there would be no related-to jurisdiction. But bankruptcy courts indisputably still have arising-under jurisdiction to adjudicate these proceedings. As the Simmons court put it, the Plaintiffs’ approach “cannot deal with the obvious examples of matters which clearly are within the reach of bankruptcy jurisdiction, but which fall outside the boundaries of ‘related to’ jurisdiction, as that term has been defined by the courts.” Simmons, 205 B.R. at 844 n.22.

Willkie, 654 B.R. at 484–85.

b. The Response to Willkie

The Bankruptcy Court wrongly contended that its “undisputed authority” in Chapter 7 no-asset cases to hear dischargeability matters, even though they would not affect the bankruptcy estate, shows that related-to jurisdiction is unnecessary for arising-under and arising-in jurisdiction. ․ In fact, the related-to test does determine jurisdiction over dischargeability disputes in such cases. See In re Reed, 559 B.R. 194, 200 (Bankr. N.D. Ohio 2016) (“The Court's adjudication of [the dischargeability-related disputes] will affect the [Chapter 7] estate, empty though it may currently be.”).

District Ct. Br. at 21.

c. Analysis

This argument illustrates what the Court has long suspected: “Decisions can be cited to support almost any proposition.” New Orleans 2000 P'ship v. City of New Orleans, No. CIV.A. 91-3160, 1993 WL 302636, at *16 n.72 (E.D. La. Aug. 5, 1993). Or, as another court put it, “[i]t appears that a reasonably diligent legal researcher can find a line of cases that support about any proposition that the most fertile mind might care to advance.” State Farm Mut. Auto. Ins. Co. v. Burgin, 752 F. Supp. 877, 883 (W.D. Ark. 1990).

To the extent it held that dischargeability-related disputes affect the bankruptcy estate, Reed was wrongly decided. “Matters concerning discharge, by their nature, do not directly implicate the estate.” Kohl v. IRS (In re Kohl), 397 B.R. 840, 844 (Bankr. N.D. Ohio 2008); cf. Harrington v. Purdue Pharma L. P., 144 S. Ct. 2071, 2085 (2024) (“[A] discharge releases the debtor from its debts and enjoins future efforts to collect them ․ Generally, too, the bankruptcy code reserves this benefit to ‘the debtor’—the entity that files for bankruptcy.”) (cleaned up) (emphasis added). Because a discharge is a benefit reserved for a debtor, rather than a debtor's estate, there is simply no way that nondischargeability actions against a debtor could affect the bankruptcy estate—and thus no way bankruptcy courts could have related-to jurisdiction over such actions. Yet bankruptcy courts still have arising-under jurisdiction over nondischargeability actions, as many courts have held.⁹

In their District Court Brief, the Plaintiffs did not address the Court's statement in Willkie that bankruptcy courts have arising-under jurisdiction over contempt proceedings for the violation of the discharge injunction under § 524 and § 105(a), even though such actions would affect only the debtor and have no conceivable effect on the bankruptcy estate (i.e., fail the test for related-to jurisdiction). Bankruptcy courts clearly have arising-under jurisdiction over actions involving violations of the discharge injunction, even though they would only affect the debtor.¹⁰ What's more, actions seeking redress for violations of the automatic stay also arise under the Bankruptcy Code, and a bankruptcy court would have jurisdiction over them even if they could have no conceivable effect on the bankruptcy estate. See Protos v. Silver (In re Protos), No. 02-74770-MHM, 2005 WL 6491916, at *3–4 (Bankr. N.D. Ga. Jan. 28, 2005) (holding that court had arising-under jurisdiction over claim for violation of the automatic stay, even though “[a]ny recovery that Plaintiff may obtain against Defendant would have no conceivable effect on the estate being administered in bankruptcy because the proceeds of such a recovery would not flow into Plaintiff's bankruptcy estate”).

The point is not debatable: If arising-under or arising-in jurisdiction depended on the existence of related-to jurisdiction, then bankruptcy courts would lack jurisdiction over proceedings that they have undisputed authority to finally adjudicate.

5. Most Bankruptcy Courts Disagree with the Plaintiffs’ Interpretation of Wood and Wolverine Radio.

a. The Willkie Opinion

Fifth, recognizing the logical fallacy of interpreting Wolverine Radio and Wood the way the Plaintiffs do, most courts deciding the issue have held that bankruptcy courts may have arising-in or arising-under jurisdiction even if they lack related-to jurisdiction. See In re HNRC Dissolution Co., No. 02-14261, 2018 WL 2970722, at *3 (Bankr. E.D. Ky. June 11, 2018), aff'd, 3 F.4th 912 (6th Cir. 2021) (“Methane argues that the Court lacks ‘related to’ jurisdiction because resolution of the dispute will have no conceivable effect on the administration of the bankruptcy estate. ․ This argument misses the point. The Court has ‘arising in’ jurisdiction and that is sufficient to adjudicate the ․ issue before the Court.”); In re Motors Liquidation Co., 514 B.R. 377, 381 (Bankr. S.D.N.Y. 2014), aff'd, 829 F.3d 135 (2d Cir. 2016) (“ ‘Related to’ jurisdiction has nothing to do with the issues here. Bankruptcy courts (and when it matters, district courts) have subject matter jurisdiction to enforce their orders in bankruptcy cases and proceedings under those courts’ ‘arising in’ jurisdiction.”); In re Legal Xtranet, Inc., 453 B.R. 699, 705 n.1 (Bankr. W.D. Tex. 2011) (“[I]f ‘related to’ jurisdiction is not found, that does not mean that there can be no bankruptcy subject matter jurisdiction. ․ A matter might, for example, not be ‘related to’ the bankruptcy case (in the sense of having a conceivable effect on the administration of the estate, the formulation adopted by Wood for ‘related to’ jurisdiction), yet clearly fall within the bankruptcy subject matter jurisdiction of the federal courts, by virtue of either arising under a provision of title 11 (dischargeability actions are an example) or arising in the bankruptcy case (an action to interpret or enforce a sale order post-bankruptcy is an example).”); In re Kaiser Grp. Int'l, Inc., 421 B.R. 1, 14 (Bankr. D.D.C. 2009) (“Although ‘related to’ jurisdiction is considered the broadest of the jurisdictional inquiries under 28 U.S.C. § 1334(b), it does not encompass all the other categories. Whether ‘related to’ jurisdiction exists does not determine whether ‘arising in’ jurisdiction does.”); Cano, 410 B.R. at 546 (same); Simmons, 205 B.R. at 841–42 (same).

Simmons is particularly instructive. There, a former Chapter 11 debtor sued the attorneys who represented him during his bankruptcy case for malpractice. The court lacked related-to jurisdiction because Simmons commenced the proceeding nine months after confirmation of his Chapter 11 plan, and there “was thus no further ‘estate administration’ which could be ‘conceivably affected’ by the dispute.” Id. at 841 n.13. The court also lacked arising-under jurisdiction because the malpractice claim was not based on any provision of the Bankruptcy Code. See id. The court nonetheless held that it had arising-in jurisdiction over the malpractice claim, explaining its reasoning by reference to geometry, logic and theology:

A facial reading of [ 28 U.S.C. § 1334(b)] suggests that the three categories [of arising-under, arising-in and related-to jurisdiction] were intended to address separate, although perhaps overlapping jurisdictional issues. On the theory that a picture is worth a thousand words, one might think of the three interlocking circles that are normally used to represent the concept of the Trinity in Christian theology.

[T]he matter clearly belonged in the federal court, not in one or more state courts. And it just as clearly was a dispute which ‘arose in’ the bankruptcy case (i.e., that is where it had its genesis). The matter would have fallen outside federal bankruptcy jurisdiction were one to have employed a “concentric circle” model (i.e., a model under which it is assumed that ‘related to’ jurisdiction is the largest of three concentric circles, subsuming the other two fields.”).11

[I]f a plan creates a trust and shoehorns all claimants into an exclusive mechanism by which those claimants are to be satisfied for years into the future out of that trust, then future disputes over the interpretation or enforcement of the trust would fall into the bankruptcy court's “arising in” jurisdiction, because such disputes would not have occurred but for the bankruptcy process. [S]uch disputes represent an example of why our “three intersecting circles” operates as a better conceptual model than does the oft-assumed “concentric circle” model. [Such a] matter would have fallen outside federal bankruptcy jurisdiction were one to have employed a “concentric circle” model (i.e., a model under which it is assumed that “related to” jurisdiction is the largest of three concentric circles, subsuming the other two fields).

Or, to put it in logic terms, “[t]hat a finding of ‘related to’ jurisdiction is sufficient to make a finding of jurisdiction does not necessarily mean that it is necessary in order to make the finding of jurisdiction.”

Simmons, 205 B.R. at 838 & n.7, 841 & n.13, 843 n.19.

The Court finds Simmons persuasive. It is consistent with § 1334(b)’s plain meaning, and it gives effect to the statute's enumeration of three jurisdictional categories. It also ensures that disputes that arise under the Bankruptcy Code (because they are based on a provision of the Code) or arise in a bankruptcy case (because they would not exist but for the bankruptcy) fall within the jurisdiction of the bankruptcy courts even if the disputes could have no conceivable effect on the estate and therefore would not be related to the bankruptcy case.

Willkie, 654 B.R. at 485–86.

b. The Response to Willkie

Fifth: The Bankruptcy Court contended that “most courts” hold that arising-in jurisdiction can exist without related-to jurisdiction. Not so. In any event, all but one of the Bankruptcy Court's cited cases were from outside the Sixth Circuit. See Johnson Assocs. Corp. v. HL Operating Corp., No. 3:09-cv-01206, 2010 WL 4942788, at *2 (M.D. Tenn. Nov. 30, 2010) (“Although Defendant cites cases from other federal circuits and districts ․ this Court must follow the precedents of the Sixth Circuit.”). The only in-circuit case, In re HNRC Dissolution Co., Case No. 02-14261, 2018 WL 2970722, at *3 (Bankr. E.D. Ky. June 11, 2018), relied on inapposite, non-Sixth Circuit authorities to assert arising-in jurisdiction without related-to jurisdiction. The Bankruptcy Court also relied upon In re Simmons, 205 B.R. 834, 841-45 (Bankr. W.D. Tex. 1997), to support much of its jurisdictional analysis, but Simmons is contrary to Sixth (and Fifth) Circuit precedents, as other courts have highlighted. See In re Palmaz Scientific, Inc., Adv. No. 17-05027, 2018 WL 661409, at *5 (Bankr. W.D. Tex. Jan. 31, 2018); In re Shuman, 277 B.R. at 648.

District Ct. Br. at 22–23.

c. Analysis

By the Court's count, more courts than not have held that bankruptcy courts may have arising-in or arising-under jurisdiction even if they lack related-to jurisdiction. See HNRC Dissolution Co., 2018 WL 2970722, at *3; Motors Liquidation Co., 514 B.R. at 381; Legal Xtranet, 453 B.R. at 705 n.1; Kaiser Grp., 421 B.R. at 14; Cano, 410 B.R. at 546; Simmons, 205 B.R. at 841–42. The Court, of course, “must follow the precedents of the Sixth Circuit.” Johnson, 2010 WL 4942788, at *2. But Simmons is not contrary to any decision of the Sixth Circuit; it is contrary only to the Plaintiffs’ (incorrect) interpretation of Wolverine Radio. Again, a Sixth Circuit decision issued after Willkie makes clear that arising-in and arising-under jurisdiction are not subsets of related-to jurisdiction. See Autumn Wind, 92 F.4th at 637 (“[T]he conceivable-effect test applies only to related-to jurisdiction[.]”).

6. The Plaintiffs Relied on Inapposite or Wrongly-Decided Decisions.

a. The Willkie Opinion

Sixth, the decisions on which the Plaintiffs rely either do not stand for the proposition cited or were wrongly decided. As with Wolverine Radio, the Sixth Circuit's Stewart decision and the Sixth Circuit BAP's decision in Hart do not hold that arising-under or arising-in jurisdiction can exist only if the court has related-to jurisdiction. In Stewart, the Sixth Circuit held that the bankruptcy court lacked jurisdiction over a state law claim. Relying on the language from Wolverine Radio quoted above, the court focused on whether there was related-to jurisdiction. But the Sixth Circuit also said that it was not “persuaded by the district court's ‘core proceeding’ analysis, which is explicitly premised on the conclusion that the ․ complaint necessarily implicates the administration of the estate,” a conclusion the Sixth Circuit found to be “incorrect.” Stewart, 62 F. App'x at 614. Presumably, if there had been a correct conclusion regarding core jurisdiction (arising-under or arising-in jurisdiction) then the bankruptcy court would have had jurisdiction despite the lack of related-to jurisdiction. In Hart, the Sixth Circuit BAP also relied on Wolverine Radio to say that “it need not decide if there was arising-under or arising-in jurisdiction if there was no related-to jurisdiction.” Hart, 2005 WL 1529581, at *4. But it then stated that “[a] legal malpractice action does not ‘arise under’ the Bankruptcy Code,” id., which would have been unnecessary to say if arising-under jurisdiction had to be predicated on the existence of related-to jurisdiction.

The only case relied on by the Plaintiffs that clearly held that there cannot be arising-under or arising-in jurisdiction if there is no related-to jurisdiction is Spradlin v. Pikeville Energy Grp., LLC, No. CIV. 12-111-ART, 2012 WL 6706188, at *9 (E.D. Ky. Dec. 26, 2012)). There, the court said:

Section 1334(b) identifies four distinct matters that bankruptcy courts have jurisdiction over: (1) “cases under title 11”; (2) “proceedings arising under title 11”; (3) proceedings “arising in” a case under title 11; and (4) proceedings “related to” a case under title 11. 28 U.S.C. § 1334(a), (b); In re Wolverine Radio Co., 930 F.2d at 1141. These four categories define jurisdiction “conjunctively.” Id. (citing In re Wood, 825 F.2d 90, 93 (5th Cir. 1987)). “Related to” jurisdiction is the most expansive category, covering any proceeding that could have a conceivable effect on the administration of the estate. See id. Because “related to” jurisdiction covers any proceeding that would fall under the other forms, [c]ourts assessing § 1334(b) jurisdiction therefore need only determine whether the matter is “related to” the bankruptcy.

The plaintiffs also dedicate a substantial portion of their brief to arguing that the Bankruptcy Court had “arising in” jurisdiction over the complaint. R. 7 at 28–31 (Br.28–31). The Court need not address this issue. Because the Bankruptcy Court did not have “related to” jurisdiction it logically could not have “arising in” jurisdiction. See In re Wolverine Radio Co., 930 F.2d at 1141 (reasoning that, if a matter is not at least “related to” a bankruptcy proceeding, it cannot arise in or arise under that proceeding).

Spradlin, 2012 WL 6706188, at *6, 9 (emphasis added). For all the reasons explained above, Spradlin misconstrued Wolverine Radio and was wrongly decided.

Willkie, 654 B.R. at 486–87.

b. The Response to Willkie

Sixth: The Bankruptcy Court tried but failed to distinguish cases that correctly applied Wolverine Radio. The Bankruptcy Court first noted that in In re Stewart, 62 F. App'x at 614, the Sixth Circuit said that it was “[un]persuaded by the district court's ‘core proceeding’ analysis, which is explicitly premised on the [incorrect] conclusion that the [plaintiffs’] complaint necessarily implicates the administration of the estate.” The Bankruptcy Court wrongly presumed this meant “if there had been a correct conclusion regarding core jurisdiction,” § 1334(b) jurisdiction would have existed “despite the lack of related-to jurisdiction.”

In fact, in Stewart, the Sixth Circuit simply was reiterating that “the administration of the estate” was unaffected by the plaintiffs’ malpractice claim because it was not “property of the estate,” which precluded related-to jurisdiction. Id.; see also id. at 613 (“As we explained in In re Wolverine Radio Co., ․ to determine whether the matter at issue is within section 1334(b) jurisdiction, we need only determine whether the matter is at least ‘related to’ the bankruptcy ․ Under this analysis, the question is whether the Stewarts’ malpractice suit impacts their rights, liabilities, options, or freedom of action as debtors, or the handling of their estate. If it does not, then the malpractice case is not ‘related to’ the bankruptcy proceeding.” (emphasis in original)). Stewart's implicit point was that the district court erred in relying on a core-proceeding analysis to find § 1334(b) jurisdiction over the plaintiffs’ legal malpractice action brought against an attorney outside of his capacity as special counsel to the court-appointed bankruptcy trustee.

Next, the Bankruptcy Court surmised that the statement in In re Hart, 326 B.R. at *4—that “[a] legal malpractice action does not ‘arise under’ the Bankruptcy Code”—would have been unnecessary if arising-under jurisdiction had to be predicated on related-to jurisdiction. But the Court's reasoning is belied by Hart's ruling that because there was no related-to jurisdiction, “it [was] unnecessary to determine whether the litigation constitutes a ‘core’ [arising-under or arising-in] or ‘non-core’ [related-to] proceeding.” Id. at *5 (brackets added).

Lastly, the Bankruptcy Court opined without elaboration that [Spradlin's] determination that arising-in jurisdiction cannot exist without related-to jurisdiction “misconstrued Wolverine Radio and was wrongly decided.”

District Ct. Br. at 23–24.

c. Analysis

There was nothing about Stewart and Hart to distinguish. Neither decision stands for the proposition that arising-under or arising-in jurisdiction can exist only if the court has related-to jurisdiction. Spradlin did stand for that proposition, but the Plaintiffs’ argument that the Court “opined without elaboration” that Spradlin was incorrectly decided is flatly wrong. In fact, the Court spent several pages elaborating on the Plaintiffs’ interpretive errors—errors that were also made by the Spradlin court. Rather than repeat the same explanation of identical errors, the Court simply referred to its earlier discussion. See Willkie, 654 B.R. at 483–87.

7. Wolverine Radio’s Related-to Language Was Dicta.

a. The Willkie Opinion

Finally, the language in Wolverine Radio and Wood suggesting that bankruptcy courts must have related-to jurisdiction over a claim to have arising-in or arising-under jurisdiction is dicta, because no party argued that the jurisdictional question hinged on whether the matters arose under the Bankruptcy Code or arose in the bankruptcy case. See In re Alma Energy, LLC, 521 B.R. 1, 25–26 (Bankr. E.D. Ky. 2014) (“Wolverine Radio's statement was dictum. In Wolverine Radio, the Sixth Circuit held that the bankruptcy court below did have related-to jurisdiction over the matter in question. Thus, the proposition that ‘for purposes of determining section 1334(b) jurisdiction, it is necessary only’ to assess related-to jurisdiction was not tested by Wolverine Radio.”).

Willkie, 654 B.R. at 487.

b. The Response to Willkie

Seventh: The Bankruptcy Court miscited In re Alma Energy, 521 B.R. at 25–26, for the proposition that Wolverine Radio is “dictum.” Alma Energy considered a Rule 60(b)(4) motion to void a judgment for lack of subject-matter jurisdiction which required the bankruptcy court to evaluate whether it had any “arguable basis” for asserting arising-in jurisdiction, despite the absence of related-to jurisdiction, at the time it entered the judgment. The bankruptcy court found that it did only because the judgment pre-dated the Spradlin I-III rulings in that case, which reiterated that Wolverine Radio means “a bankruptcy court can never have core (arising-in or arising-under) jurisdiction over a matter if it lacks related-to jurisdiction over that matter.” Id. at 25. Thus, while the bankruptcy court treated Wolverine Radio's § 1334(b) discussion as “dictum” for Rule 60(b)(4) purposes, it recognized that Wolverine Radio's holding was indisputably binding after Spradlin I-III. See id. at 23–24.

District Ct. Br. at 24–25.

c. Analysis

The Alma Energy court clearly described Wolverine Radio's statement regarding jurisdiction as dicta. The Plaintiffs describe Wolverine Radio's statement about jurisdiction as a “holding,” but it was no such thing—and Alma Energy in no way said that it was a holding. Also, Alma Energy questioned whether the Sixth Circuit ruled in Wolverine Radio that there must be related-to jurisdiction for there to be arising-under or arising-in jurisdiction:

Note that Wolverine Radio could be read to mean only that in determining § 1334(b) jurisdiction, it is “necessary only” to find related-to jurisdiction, not that in determining § 1334(b) jurisdiction, it is “necessary only” to determine whether there is related-to jurisdiction, yes or no. That is, the Sixth Circuit may have inartfully been saying that related-to jurisdiction is a sufficient but not necessary condition for § 1334(b) jurisdiction.

Alma Energy, 521 B.R. at 26 n.3.

The Court could not have said it any better.

To be clear, the Court is not deciding whether it has related-to jurisdiction here. Under the conceivable-effect test, it would not, because the outcome of the adversary proceeding would have no conceivable effect on the Debtors’ bankruptcy estates. But another test for related-to jurisdiction—the postconfirmation close-nexus test—says that bankruptcy courts have jurisdiction if there is “a close nexus to the bankruptcy plan or proceeding.” Willkie, 654 B.R. at 481. The Court would have related-to jurisdiction under the close nexus test because “even the most restrictive views of post-confirmation jurisdiction acknowledge that the bankruptcy courts retain jurisdiction to interpret and enforce confirmed plans of reorganization.” Thickstun Bros. Equip. Co. v. Encompass Servs. Corp. (In re Thickstun Bros. Equip. Co.), 344 B.R. 515, 522 (B.A.P. 6th Cir. 2006). The Sixth Circuit, however, has not yet adopted the close-nexus test. See Willkie, 654 B.R. at 481 (cleaned up). Because the Court concludes that it may have arising-in jurisdiction even if it lacks related-to jurisdiction, the Court need not decide whether it would be appropriate to apply the close-nexus test if the Court had to determine whether it has related-to jurisdiction.

For all these reasons, the Plaintiffs’ arguments that Willkie was wrongly decided fall flat. The Court has core, arising-in jurisdiction over this proceeding—just as it did in Willkie.

D. Mandatory Abstention, Permissive Abstention & Equitable Remand

1. Mandatory Abstention

The Plaintiffs argue that “even if the Court had jurisdiction” over its legal malpractice claim, “the Court would be compelled to abstain from exercising jurisdiction pursuant to 28 U.S.C. § 1334(c)[.]” Remand Mot. at 15. Section 1334(c)(2) of the Judicial Code, which governs mandatory abstention, provides that:

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)(2) (emphasis added); see also Remand Mot. at 16–17.

Mandatory abstention does not apply to core proceedings. Lindsey v. Dow Chem. Co. (In re Dow Corning Corp.), 113 F.3d 565, 570 (6th Cir. 1997). Because this is a core proceeding, mandatory abstention does not apply here.

2. Permissive Abstention & Equitable Remand

The Plaintiffs finally ask the Court to permissively abstain from hearing this adversary proceeding under 28 U.S.C. § 1334(c)(1) or equitably remand it under 28 U.S.C. § 1452(b). Remand Mot. at 17–19. The analyses of each are “essentially identical.” Meritage, 474 B.R. at 572–73 (quoting Parrett v. Bank One, N.A. (In re Nat'l Century Fin. Enters., Inc., Inv. Litig.), 323 F. Supp. 2d 861, 885 (S.D. Ohio 2004)) (cleaned up). Both are within the Court's sound discretion. See Morris Black & Sons, Inc. v. 23S23 Constr., Inc. (In re Carriage House Condos. L.P.), 415 B.R. 133, 146 (Bankr. E.D. Pa. 2009).

“Because federal courts have an obligation to exercise the jurisdiction properly given to them, there is a presumption in favor of the exercise of federal jurisdiction and against abstention. And [t]he movant bears the burden of establishing that permissive abstention is warranted.” Molner v. Reed Smith, LLP (In re Aramid Ent. Fund, LLC), 628 B.R. 584, 594 (Bankr. S.D.N.Y. 2021) (cleaned up).

Section 1334(c)(1) of the Judicial Code governs permissive abstention. It provides in pertinent part:

[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 11 or arising in or related to a case under title 11.

28 U.S.C. § 1334(c)(1).

The factors courts consider when deciding whether to exercise permissive abstention include:

(1) the effect or lack of effect on the efficient administration of the estate if a court abstains, (2) the extent to which state law issues predominate over bankruptcy issues, (3) the difficulty or unsettled nature of the applicable state law, (4) the presence of a related proceeding commenced in state court or other non-bankruptcy court, (5) the jurisdictional basis, if any, other than 28 U.S.C. § 1334, (6) the degree of relatedness or remoteness of the proceeding to the main bankruptcy case, (7) the substance rather than 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 this 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 and (13) any unusual or other significant factors.

Meritage, 474 B.R. at 573.

And the factors courts consider when deciding whether to equitably remand a case are:

(1) Duplicative and uneconomical use of judicial resources in two forums, (2) prejudice to the involuntarily removed parties, (3) forum non conveniens, (4) the state court's ability to handle a suit involving questions of state law, (5) comity considerations, (6) lessened possibility of an inconsistent result and (7) the expertise of the court in which the matter was originally pending.

Id. (cleaned up).

“Courts assessing possible permissive abstention have considered one or more of these factors, and not necessarily all [of them]. A court thus need not ․ discuss[ ] ․ each factor in the laundry lists developed in prior decisions.” George Washington Bridge Bus Station & Infrastructure Dev. Fund, LLC v. Port Auth. (In re George Washington Bridge Bus Station Dev. Venture LLC), No. 21-1200 (DSJ), 2022 WL 1714176, at *6 (Bankr. S.D.N.Y. May 25, 2022) (cleaned up); see also Tronox, 603 B.R. at 726 (“The factors largely ask the Court to balance the federal interest in efficient bankruptcy administration against the interest of comity between state and federal courts,” and “[t]he analysis is not a mechanical or mathematical exercise and the court need not plod through a discussion of each factor in the laundry lists developed in prior decisions.”) (cleaned up).

“As shown by the language of the statute ․ permissive abstention is driven in large part by comity principles.” In re Tres Hermanos Dairy, LLC, No. 11-10-14240-TR, 2014 WL 176772, at *4 (Bankr. D.N.M. Jan. 16, 2014). As the bankruptcy court in Tres Hermanos Dairy concluded:

The Court [here] does not believe the state court would be offended in the slightest if the Court were to interpret the Confirmation Order. If the tables were turned and a state court elected to interpret one of its orders that was relevant in a bankruptcy case, this Court would welcome the assistance.

Id.

Here, “[p]rinciples of comity are not offended by declining to remand or abstain from this action[.]” KeyBank Nat'l Ass'n v. Franklin Advisers, Inc., 600 B.R. 214, 233 (S.D.N.Y. 2019). The core nature of this dispute favors retaining it. See IRS v. Luongo (In re Luongo), 259 F.3d 323, 331 (5th Cir. 2001) (“Another touchstone of the abstention inquiry is the substantive law governing the material issues. When bankruptcy issues are at the core of a dispute, it would be absurd for a bankruptcy court to abstain from deciding those matters over which it has particular expertise.”). “A core proceeding is ‘precisely the kind of issue that falls within the expertise of the bankruptcy court, and there is a strong preference for resolving core proceedings in the bankruptcy court.’ ” Tres Hermanos Dairy, 2014 WL 176772, at *3 (quoting Solis v. Wahl (In re Wahl), No. 12-01038-R, 2012 WL 5199630, at *3 (N.D. Okla. Oct. 22, 2012)).

The Plaintiffs believe the Court should abstain because they “demand[ ] a jury trial” and “will not consent to a jury trial in the bankruptcy court[.]” Remand Mot. at 19. But the fact that the Plaintiffs seek a jury trial does not weigh in favor of abstention. See Stoner v. Keirns (In re Keirns), 628 B.R. 911, 922 (Bankr. S.D. Ohio 2021) (“[W]hile the Defendant has a right to a jury trial, he is perfectly free to exercise that right in this Court.”); Official Comm. of Unsecured Creditors of Schlotzsky's, Inc. v. Grant Thornton LLP (In re Schlotzsky's, Inc.), 351 B.R. 430, 437 (Bankr. W.D. Tex. 2006) (“Nor ought we to institute a rule of decision that in effect rewards the party seeking abstention if that party insists on being as obstructionist as possible by refusing to consent either to the entry of final judgment by the bankruptcy judge or the conduct of a jury trial by that court.”); cf. Cipollone v. Virginia True Corp., No. 1:20-CV-972-FB, 2021 WL 2109205, at *3 (E.D.N.Y. May 25, 2021) (holding in the context of withdrawal of the reference that “[t]he Cipollones’ potential entitlement to a jury trial in several months’ time does not justify removing this case from the bankruptcy court today, especially where, as here, the bankruptcy court has already overseen a number of matters related to the bankrupt estate and acquired what one court describes as a ‘wealth of knowledge’ about its affairs”).

The degree of relatedness or remoteness of this adversary proceeding to the Debtors’ bankruptcy cases also favors retaining it. This is a core proceeding, which cuts against abstention or equitable remand. See Christensen v. Tucson Ests., Inc. (In re Tucson Ests., Inc.), 912 F.2d 1162, 1167 (9th Cir. 1990) (noting that “[t]he bankruptcy court in this case chose not to abstain because ․ the case is a core proceeding in which the bankruptcy court should enter the final order”); Tubbs v. Agspring Miss. Region, L.L.C., No. CV 3:21-03268, 2022 WL 1164803, at *10 (W.D. La. Apr. 4, 2022), report and recommendation adopted, No. CV 3:21-03268, 2022 WL 1164014 (W.D. La. Apr. 19, 2022) (“[T]he expertise of the Delaware Bankruptcy Court in handling disputes such as this supports maintenance of this suit in federal court and transfer to the Delaware Bankruptcy Court.”); Moelis & Co. v. Wilmington Tr. FSB (In re Gen. Growth Props., Inc.), 460 B.R. 592, 603 (Bankr. S.D.N.Y. 2011) (declining to exercise permissive abstention or equitable remand where the “crux of the dispute involves bankruptcy issues, and the Plan in particular.”).

Here, the crux of the parties’ dispute involves the Chapter 11 Plan and other bankruptcy issues. The Plaintiffs allege that the Defendants should have represented the Murray Clients in a way that would have led to a different Chapter 11 plan being confirmed—one in which, despite the Debtors’ withdrawal from the 1974 Plan, the Murray Clients would have had no withdrawal liability under ERISA. And although the briefing on the Dismissal Motion is still in the process of wrapping up, that motion also points out how interconnected the malpractice claim is with bankruptcy law. According to the Defendants, the Release and the Exculpation Clause bar Plaintiffs’ malpractice claim. Dismissal Mot. at 10. Another issue raised in the Dismissal Motion is whether there is any way the Defendants could have negotiated a version of the Chapter 11 Plan under which the Plaintiffs would have had no withdrawal liability. Id. at 2. In addition, the Defendants contend that the malpractice claim is “barred by res judicata” because the Plaintiffs “could have raised their malpractice claim in an objection to Dinsmore's fee application but failed to do so.” Id. As another bankruptcy court said in declining to abstain from hearing a malpractice claim, “[i]t defies logic that a court less acquainted with bankruptcy law will better address issues of alleged malpractice in a bankruptcy context than a bankruptcy court.” Woodard v. Sanders (In re SPI Commc'ns & Mktg., Inc.), 112 B.R. 507, 512 (Bankr. N.D.N.Y. 1990). For the foregoing reasons, the Court will neither abstain from hearing this adversary proceeding nor equitably remand it to the State Court.

VI. Conclusion

For all these reasons, the Remand Motion is DENIED.

IT IS SO ORDERED.

FOOTNOTES

1.   References to “Doc.__” are to docket entries in the main bankruptcy case, Case No. 19-56885, and references to “Adv. Doc.__” are to docket entries in this adversary proceeding. When citing documents in the record, the Court will cite the PDF page number.

2.   The Plaintiffs contend that the “Defendants improperly removed Plaintiffs’ Complaint directly to the Bankruptcy Court, rather than to the appropriate federal district court.” Remand Mot. at 11 n.2. But it is not appropriate to remand a state court action merely because the action was removed to the bankruptcy court instead of the district court. See Meritage Homes Corp. v. JPMorgan Chase Bank, N.A., 474 B.R. 526, 534–35 (Bankr. S.D. Ohio 2012).

3.   The Plaintiffs contend that “because Defendants Jerrad T. Howard and J. Michael Cooney did not appear as counsel in the bankruptcy, ․ the Court lacks subject-matter jurisdiction over Plaintiffs’ malpractice claim as [it] relates to them since neither was a ‘professional involved in the bankruptcy’ and thus—at most—Defendants’ jurisdictional arguments apply only to Defendants Dinsmore and Kim Martin Lewis[.]” Remand Reply at 3. But because the Amended Complaint alleges that the “Defendants” took the actions of which the Plaintiffs complain, and because the defined term “Defendants” includes Howard and Cooney, the Court does not lack jurisdiction over them on this basis.

4.   See Lee v. Choudhri (In re Briar Bldg. Houston LLC), 649 B.R. 719, 725 (Bankr. S.D. Tex. 2023) (holding that the well-pleaded complaint rule is inapplicable to bankruptcy courts’ arising-in jurisdiction); Rohi v. Brewer & Prichard, P.C. (In re ABC Dentistry, P.A.), No. 18-3205, 2021 WL 955932, at *3 (Bankr. S.D. Tex. March 12, 2021) (same); TXMS Real Estate Invs., Inc. v. Senior Care Centers, LLC (In re Senior Care Centers, LLC), 622 B.R. 680, 691 (Bankr. N.D. Tex. 2020) (same); Liberty Bank & Tr. Co. v. Danley (In re Danley), 552 B.R. 871, 886 (Bankr. M.D. Ala. 2016) (same); Giese v. Cmty. Tr. Bank (In re HRNC Dissolution Co.), No. 02-14261, 2015 WL 5299468, at *7 (Bankr. E.D. Ky. Sept. 9, 2015), aff'd sub nom. In re HNRC Dissolution Co., 585 B.R. 837 (B.A.P. 6th Cir. 2018), aff'd, 761 F. App'x 553 (6th Cir. 2019); McIntyre Land Co. v. McIntyre Bldg. Co. Inc. (In re McIntyre Bldg. Co.), No. 10–30558–WRS, 2011 WL 1434691, at *10–12 (Bankr. M.D. Ala. Apr. 14, 2011) (same).

5.   For other cases so holding, see Whitney Lane Holdings, LLC v. Don Realty, LLC, No. 1:08-CV-775 GLS/RFT, 2009 WL 6315323, at *11 (N.D.N.Y. Oct. 27, 2009), report and recommendation adopted in part, rejected in part, No. 08-CV-775 (GKS.RFT), 2010 WL 1257879 (N.D.N.Y. Mar. 26, 2010); Bank of Am. v. Brennan Title Co. (In re Donoho), 402 B.R. 687, 697 (Bankr. E.D. Va. 2009); Foster Poultry Farms, Inc. v. Int'l Bus. Machines Corp., No. CIV-F-06-0680 AWI SM, 2006 WL 2769944, at *9 (E.D. Cal. Aug. 1, 2006); Principal Life Ins. Co. v. JPMorgan Chase Bank, N.A. (In re Brook Mays Music Co.), 363 B.R. 801, 814–15 (Bankr. N.D. Tex. 2007); Newby v. Enron Corp. (In re Enron Corp. Sec., Derivative & “ERISA” Litig.), 511 F. Supp. 2d 742, 764 (S.D. Tex. 2005).Other courts have held that the well-pleaded complaint rule applies to matters over which bankruptcy courts have related-to jurisdiction. See Garza v. Earthstone Energy, Inc., 582 F. Supp. 3d 405, 411 (S.D. Tex. 2022); Malesovas v. Sanders, No. H-04-3122, 2005 WL 1155073, at *2 (S.D. Tex. May 16, 2005); Studebaker-Worthington Leasing Corp. v. Michael Rachlin & Co., 357 F. Supp. 2d 529, 535 (E.D.N.Y. 2004); Yangming Marine Transp. Corp. v. Electri-Flex Co., 682 F. Supp. 368, 370 (N.D. Ill. 1987). And still other courts have generally held that the well-pleaded complaint rule applies to removals based on § 1334(b) without distinguishing between arising-under, arising-in, and related-to jurisdiction. See Nat'l Union Fire Ins. Co. v. CM Liquidating Tr. (In re Cmty. Mem'l Hosp.), 532 B.R. 898, 905 (E.D. Mich. 2015); Kmart Creditor Tr. v. Conaway (In re Kmart Corp.), 307 B.R. 586, 595 (Bankr. E.D. Mich. 2004).

6.   See In re Cty. of San Mateo v. Peabody Energy Corp. (In re Peabody Energy Corp.), 958 F.3d 717, 721 (8th Cir. 2020) (“[A] confirmed Chapter 11 plan is an order of the bankruptcy court.”); Harper v. Oversight Comm. (In re Conco, Inc.), 855 F.3d 703, 711 (6th Cir. 2017) (“In this circuit, a confirmed plan is considered to be an order of the bankruptcy court; the bankruptcy court has the power to interpret such a plan.”); CHS, Inc. v. Plaquemines Holdings, L.L.C., 735 F.3d 231, 240 (5th Cir. 2013) (same); McCrary v. Barnett (In re Sea Island Co.), 486 B.R. 559, 566 (S.D. Ga. 2013) (same); In re SS Body Armor I, Inc., No. 10-11255(CSS), 2021 WL 2315177, at *5 (Bankr. D. Del. June 7, 2021) (“As a general rule, courts have the authority to interpret their own orders—which include confirmed plans.”).

7.   See Elliott v. Gen. Motors LLC (In re Motors Liquidation Co.), 829 F.3d 135, 153 (2d Cir. 2016) (holding that a bankruptcy court's decision to interpret and enforce its own order “falls under th[e] formulation of ‘arising in’ jurisdiction”); Tenet Healthsystem Philadelphia, Inc. v. Nat'l Union of Hosp. & Health Care Emps., AFSCME, AFL-CIO, Dist. 1199C (In re Allegheny Health, Educ. & Rsch. Found.), 383 F.3d 169, 176 (3d Cir. 2004) (same); Tronox, 603 B.R. at 719 (holding that arising-in jurisdiction “plainly covers matters that require the interpretation or enforcement of orders issued during a bankruptcy case”).

8.   See In re Chesapeake Energy Corp., 70 F.4th 273, 281 (5th Cir. 2023) (“Within its core jurisdiction, the [bankruptcy] court may also be called upon to interpret the terms of a confirmed reorganization plan.”); Mesabi Metallics Co. v. B. Riley FBR, Inc. (In re Essar Steel Minn. LLC), 47 F.4th 193, 199 (3d Cir. 2022) (holding that proceeding requiring the bankruptcy court to interpret and enforce injunctive provisions of Chapter 11 plan is a core proceeding); Milazzo v. Techakraisri (In re Old DDUS, Inc.), 659 B.R. 810, 826 (Bankr. S.D.N.Y. 2024) (holding in the context of a confirmation order that a “court's ‘arising in’ jurisdiction includes, among other things, claims that require the enforcement of orders issued during a bankruptcy case.”); In re City of Detroit, Mich., 614 B.R. 255, 262 (Bankr. E.D. Mich. 2020) (“[A] proceeding that seeks to enforce the confirmed [plan] ․ is a proceeding ‘arising in’ a case under title 11, because it is a proceeding that ‘by [its] very nature, could arise only in bankruptcy cases.’ ”); HRNC Dissolution Co., No. 02-14261, 2015 WL 5299468, at *7 (Bankr. E.D. Ky. Sept. 9, 2015) (“Courts have held that ․ disputes over plan interpretation ․ arise in bankruptcy.”).

9.   See Boudreau v. United States (In re Boudreau), 622 B.R. 817, 825 (B.A.P. 1st Cir. 2020) (holding that proceeding to determine the scope of the debtor's discharge arises under the Bankruptcy Code and that the bankruptcy court therefore has jurisdiction over them “regardless of ․ whether there is a potential impact on the bankruptcy estate or the distribution to creditors”) (cleaned up); Legal Xtranet, Inc. v. AT&T Mgmt. (In re Legal Xtranet, Inc.), 453 B.R. 699, 705 n.1 (Bankr. W.D. Tex. 2011) (explaining that nondischargeability actions are examples of matters that are not related to the bankruptcy estate but that arise under the Bankruptcy Code); Kohl, 397 B.R. at 844 (“[M]atters concerning a discharge in bankruptcy clearly invoke a substantive right created by federal bankruptcy law and exist only within the confines of a bankruptcy case.”); Hudak v. Penn. Lawyers Fund for Client Security (In re Hudak), No. ADV 05-3328-MBM, 2006 WL 6884425, at *3 (Bankr. W.D. Pa. June 14, 2006) (“[D]ischargeability determinations constitute core proceedings, which proceedings are nothing other than civil proceedings that either arise under title 11 or arise in a case under title 11,” and “a bankruptcy court thus possesses subject matter jurisdiction over a dischargeability determination even if such civil proceeding is not related to a bankruptcy case in the sense that it affects the administration of a debtors bankruptcy estate.”) (cleaned up).

10.   See Kvassay v. Kvassay (In re Kvassay), No. 2:11-BK-11698-BR, 2019 WL 545673, at *8 (B.A.P. 9th Cir. Feb. 11, 2019), aff'd, 803 F. App'x 154 (9th Cir. 2020) (“Proceedings ‘arising under’ title 11 involve causes of action created or determined by a statutory provision of title 11. Here, the discharge is provided for by § 524. So the bankruptcy court had arising under subject-matter jurisdiction because it was interpreting the discharge. As a result, [the] arguments about related to jurisdiction are misplaced.”); Cano, 410 B.R. at 546 (rejecting argument that the court lacked subject matter jurisdiction because claims for violation of the discharge injunction and other claims “could not affect a particular bankruptcy case” where the court had authority to adjudicate plaintiffs’ claims for violation of based on the ‘arising in’ and ‘arising under’ prongs of bankruptcy jurisdiction”); Moffitt v. America's Servicing Co. (In re Moffitt), 406 B.R. 825, 830–32 & n.7 (Bankr. E.D. Ark. 2009) (holding that court had arising-under jurisdiction over claim for violation of the discharge injunction even though the bankruptcy estate no longer existed, and the court therefore lacked related-to jurisdiction over the claim).

11.   Rather than saying that the three categories of jurisdiction are concentric, the Fifth Circuit in Wood and Sixth Circuit in Wolverine Radio said that they operate “conjunctively to define the scope of jurisdiction.” Conjunctive circles are “conjoining” (joined together) or “connecting” (joined, fastened or linked together), see Webster's Third New International Dictionary at 469, 480, as in the concept of the Trinity referred to by the Simmons court.

John E. Hoffman, Jr. United States Bankruptcy Judge