New Bern Riverfront Development filed suit in state court against nine defendants, but, after New Bern Riverfront Development filed Chapter 11, the state court action was remanded to the bankruptcy court. One of the nine defendants, Davis Architects, filed a third party complaint against McKim, who (after its motions to dismiss were denied) sought to have the bankruptcy court abstain or remand the proceeding to state court.
Pursuant to 28 U.S.C. § 1334(c)(2)l, abstention is mandatory when all of following the elements are present:
(1) a timely motion to abstain is filed,
(2) the removed proceeding is based on a state law claim or state law cause of action,
(3) the removed proceeding is “related to” a bankruptcy case, but does not “arise under” Title 11 or “arise in” a case under Title 11,
(4) the action could not have been commenced in a United States court absent jurisdiction under 28
U.S.C. § 1334,
(5) the action was pending when the bankruptcy was filed, and
(6) the action can be timely adjudicated in the state forum of appropriate jurisdiction.
Here the bankruptcy court found that as McKim participated in the case for more than a year, its motion failed the first element.
McKim alternatively sought permissive abstention, under which a court has discretionary authority to abstain from hearing a proceeding related to a case under title 11 “in the interest of justice, or in the interest of comity with State courts or respect for State law.” 28 U.S.C. § 1334(c)(1). Based on the procedural history of this case and the number of parties involved, the bankruptcy court found that it would not be in the interest of justice for the court to abstain.
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