Summary:
Prior to her bankruptcy, Ms. Mitchell and the defendant, Mr. Keesee, were involved in divorce litigation in the District Court for New Hanover County, North Carolina, wherein they agreed to an equitable distribution of their property which provided that Ms. Mitchell transfered her interest in specific property to Mr. Keesee, who agreed to pay Ms. Mitchell $750,000 from any future sale of that property. Following filing her Chapter 11 bankruptcy, Ms. Mitchell brought an adversary proceeding against Mr. Keesee alleging he failed to make payment to her following the sale of a portion of the property and also purchased the mortgage note securing the property, in an attempt to preclude her from obtaining any proceeds and unjustly enriching himself.
Mr. Keesee argued that the bankruptcy court lacked subject matter jurisdiction to enforce the equitable distribution order. Under Walters v. Walters, 298 S.E.2d 338 (N.C. 1983), consent orders resolving separation agreements are not treated as contracts, susceptible to enforcement, but “as judgments of the court, enforceable by the contempt power of the court.”
The bankruptcy court, however, distinguished this line of cases, finding that Mr. Keesee’s alleged postpetition conduct interfered with the administration of the bankruptcy estate and with bankruptcy estate property to such a degree that the claims were no longer “a simple breach of a state court consent order”, but instead were are core proceedings that did not preempt the bankruptcy court's jurisdiction.
And while the elements for mandatory abstention were similarly not met, the bankruptcy court held that, as domestic relations matters “are preeminently matters of state law” , the bankruptcy court would, “in the interest of comity with State courts and respect for State law”, permissively abstain from hearing the claims pursuant to 28 U.S.C. 1334(c)(1). The twelve factors for permissive abstention are:
1. the effect or lack thereof on the efficient administration of the estate if a Court recommends abstention;
2. the extent to which state law issue predominate over bankruptcy issues;
3. the difficulty or unsettled nature of the applicable law;
4. the presence of a related proceeding commenced in state court or other nonbankruptcy 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 of the bankruptcy court’s docket;
10. the likelihood that the commencement of the proceeding in bankruptcy court involves forum shopping by one of the parties;
11. the existence of a right to a jury trial; and
12. the presence in the proceeding of non-debtor parties.
Commentary:
Even bankruptcy judges do not want to hear domestic law matters.
For a copy of the opinion, please see:
Mitchell v. Keesee- Permissive Abstention
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