Opinion
No. M 47 (CSH)
March 2, 1993.
Opinion
This case arises out of the crash of Pan Am flight 103 at Lockerbie, Scotland on December 21, 1988. The debtor corporations moved this Court for an order transferring fifty-five wrongful death actions pending in the Florida state court to the Southern District of New York, pursuant to 28 U.S.C. § 157(b)(5). By memorandum opinion and order dated May 6, 1991, this Court abstained under 28 U.S.C. § 1334(c)(1) from exercising its transfer powers and declined to issue the order. Debtors appealed. The Second Circuit reversed this Court's opinion in part, and remanded the case for further proceedings. In Re Air Disaster at Lockerbie, Scotland, 950 F.2d 839 (2d Cir. 1991) ("Lockerbie II"). The parties have fully briefed the issues relevant to the remand.
The Second Circuit upheld this Court's abstention in the case of a deceased crew member, and reversed as to fifty-four actions on behalf of passengers.
This designation is intended to distinguish the Court of Appeals' decision reversing this Court from its earlier opinion,Lockerbie I, discussed infra.
BACKGROUND
Following the disaster, wrongful death actions on behalf of passengers and crew were filed in various federal and state courts. Pursuant to an order of the Judicial Panel on Multidistrict Litigation, all the federal cases were consolidated and transferred to Chief Judge Platt in the Eastern District of New York for pre-trial purposes (the "MDL Litigation"). In re Air Disaster at Lockerbie, Scotland, 709 F. Supp. 231 (J.P.M.L. 1989).
Fifty-four wrongful death actions based on Florida law were filed on behalf of passengers in the Circuit Court of the Eleventh Judicial Circuit, Dade County, Florida (the "Florida state court"). The Florida State court consolidated these actions under the caption of Thomas Coker, et al. v. Pan American World Airways, Inc., et al., No 89-14025 (the "Coker actions"). The defendants, collectively known as the "Pan Am defendants", are Pan American World Airways, Inc. ("Pan Am"), Pan Am World Services, Inc. ("PAWS"), and Alert Management Systems, Inc. ("Alert").
The Pan Am defendants attempted to remove the Coker actions to the United States District Court for the Southern District of Florida on the ground that the Warsaw Convention preempted plaintiffs' state law claims. The Florida district court remanded the cases to state court, holding that the Warsaw Convention, when raised only as a defense, does not give rise to federal question jurisdiction, and thus cannot serve as a basis for removal of a state court action to federal court.
Convention for the Unification of Certain Rules Relating to International Transportation by Air, October 12, 1929, 49 Stat. 3000, T.S. No. 876 (1934), reprinted in the note following 49 U.S.C.app. § 1502.
The Coker plaintiffs also filed complaints in the United States District Court for the Southern District of Florida, asserting identical causes of action as their state complaints, with the exception that the federal actions asserted claims under the Warsaw Convention. These federal claims were transferred under 28 U.S.C. § 1407 to the MDL Litigation in the Eastern District of New York. Thus, the Coker plaintiffs have similar causes of action pending in federal court in New York and state court in Florida.
On January 8, 1991, defendant Pan Am and its related entities filed a petition under Chapter 11 with the Bankruptcy Court for the Southern District of New York. The effect of that petition was to stay all actions against Pan Am, including the MDL Litigation and the Florida State court actions. See 11 U.S.C. § 362.
Pan Am sought to transfer the Coker actions to the Southern District of New York pursuant to 28 U.S.C. § 157 (b)(5), which provides for the transfer of personal injury tort cases to the district court where a related bankruptcy case is proceeding. Pan Am has acknowledged that if the transfer is granted, it intends to move to transfer to cases to the Eastern District to be consolidated with the MDL Litigation, pursuant to 28 U.S.C. § 1407.
Pan Am cannot accomplish this move directly. 28 U.S.C. § 1407 only provides for the consolidation and transfer of cases pending in federal court.
The Coker plaintiffs opposed the transfer. They first argued that the statutory scheme does not permit the two-step transfer envisioned by Pan Am; alternatively, they argued that this court has the power to abstain from transferring the Coker actions under 28 U.S.C. § 1334(c)(1), and that the court should exercise that power and decline the transfer.
While that motion was pending before this court, the Second Circuit issued a decision in In Re Air Disaster at Lockerbie, Scotland, 928 F.2d 1267 (2d Cir. 1991), cert. denied, 112 S.Ct. 331 (1991) ("Lockerbie I"). The Court of Appeals held that state law causes of action for international airline accidents are preempted by the Warsaw Convention; moreover, punitive damages are not available to plaintiffs under the Convention. Id., at 1270. This Court granted leave to all parties to rebrief the transfer issue in light of the Second Circuit's decision in Lockerbie I. Pan Am maintained it still intended to move to transfer the cases to the MDL Litigation if this Court granted its motion to transfer the cases here.
In a memorandum opinion and order dated May 6, 1991, this Court abstained from ordering the transfer, reasoning that (1) the statutory authority for Pan Am's two-step transfer was far from clear, (2) the differences in applicable law between the two forums raised questions of forum shopping (the Second Circuit had held that the Warsaw Convention preempted state law causes of action while the Eleventh Circuit was undecided), and (3) such a transfer was not "necessary" to the administration of the bankruptcy estate.
The Second Circuit reversed. It held that this Court premised its decision to abstain on improper considerations, and remanded the case for reconsideration "in accordance with the principles set forth in this opinion." 950 F.2d at 849.
DISCUSSION I. The Pertinent Statutes
Pan Am's initial motion to transfer was made pursuant to 28 U.S.C. § 157(b)(5). Section 157(b)(5) provides:
The district court shall order that personal injury tort and wrongful death claims be tried in the district court in which the bankruptcy case is pending, or in the district court in which the claim arose, as determined by the district court in which the bankruptcy case is pending.
Despite the mandatory command ("shall") contained in the provision, § 157(b)(5) has always been read as granting discretion to the district courts to leave personal injury cases where they are pending. District courts, under appropriate circumstances, may "abstain" from enforcing the provision. See Citibank, N.A. v. White Motor Corp. (In re White Motor Credit), 761 F.2d 270, 273 (6th Cir. 1985).
According to the Second Circuit, the manifest purpose of section 157(b)(5) was to centralize the administration of the bankruptcy estate, and eliminate the multiplicity of forums for adjudication of parts of a bankruptcy case. See Lockerbie II, 950 F.2d at 845. The Second Circuit stated flatly: "Transfer should be the rule, abstention the exception." Id.
Nonetheless, abstention remains a possibility in bankruptcy cases. 28 U.S.C. § 1334(c)(1) provides:
Nothing in this section prevents a district court in the interest of justice, or in the interest of comity with State courts or respect for State law, from abstaining from hearing a particular proceeding arising under title 11 or arising in or related to a case under title 11.
This provision was intended to codify already existing judicial abstention doctrines. Id., at 845. It recognized the need to "soften the tensions inherent in a system that contemplates parallel judicial processes." Id., at 846, citing Pennzoil Co. v. Texaco, Inc., 481 U.S. 1, 11 n. 9 (1987).
II. Application to the Facts at Bar
The determinative issue is how these two statutes interact under the circumstances presented by the case at bar. Lockerbie II suggests that the proper approach is to transfer a case pursuant to § 157(b)(5) unless there is some affirmative reason to abstain.
The Coker plaintiffs advocate a different approach. They suggest that a court should not transfer a case unless there is an affirmative reason to do so. In support of that proposition, they cite In re Titan Energy, Inc., 837 F.2d 325, 333 (8th Cir. 1988). Titan held that a bankruptcy court should abstain from adjudicating the rights of parties to an insurance policy where the debtor was liquidating, and the case was already proceeding in state court. I question the validity of Titan's conclusions in light of Lockerbie II. However, I need not try to reconcile the two cases since I believe that Titan is distinguishable on its facts.
Plaintiffs read Titan as distinguishing between bankruptcy proceedings under chapter 11 and those under chapter 7. The court there found significant that the debtor had moved into chapter 7 where there was no "reorganization" with which the state court action could interfere. Plaintiffs similarly argue that here, Pan Am has moved into chapter 7 liquidation proceedings, so the Florida state court proceeding could not possibly interfere with a non-existent reorganization proceeding.
I believe that the Eighth Circuit may have overstated the importance of the type of bankruptcy proceeding at issue. Nothing in § 157(b)(5) draws any distinction between the type of petition filed. Moreover, I question whether the need for centralized administration of a bankruptcy estate is that much less in a liquidation of this magnitude (Pan Am) than it would be in the reorganization of a smaller estate.
The underlying dispute in Titan involved a contract dispute, so § 157(b)(5) was not implicated.
Abstention was proper in Titan because the dispute turned on a pure question of state contract law. That case could not have been brought in a federal court absent the bankruptcy jurisdiction. But in the case at bar, Lockerbie I held that wrongful death actions stemming from an international air crash could only be brought in federal court. See Lockerbie I, 928 F.2d at 1273.
Furthermore, Titan involved a limited number of claimants, where there was no doubt that there would be ample funds to pay off all successful claims. Here, we have 54 wrongful death suits in Florida state court alone. My understanding is that the MDL Litigation involves a substantial number of claims against the defendants. It is not at all clear from the record that if there are awards made in favor of the plaintiffs that the defendant's insurance will be sufficient to cover all claims.
I am bound by the approach set down in Lockerbie II, which requires the transfer of a case unless there are factors militating in favor of abstention. I therefore turn to consideration of the three factors given in § 1334(c)(1) to weigh into the abstention analysis: respect for state law, comity with state courts, and the interests of justice.
The first factor, respect for state law, does not arise in light of Lockerbie I. There is no need to defer to state law on this matter, since it is of an exclusively federal province.Lockerbie I made clear that state actions were preempted. I am bound by Second Circuit precedent; I will not speculate on how the Eleventh Circuit might rule.
In Lockerbie II, the Second Circuit opined that the weight of authority in the Eleventh Circuit was against preemption. See Lockerbie II, 950 F.2d at 843, n. 6.
Since state law does not provide any basis for abstaining, I look next to whether comity with the state courts militates in its favor. Comity towards state courts is an appropriate consideration where an action can proceed in either jurisdiction; it is not an appropriate factor where the case falls within the exclusive jurisdiction of the federal courts, as this one does.See Chemerinsky, Federal Jurisdiction, § 14.3 ("A strong factor militating against federal court abstention should be the existence of an issue within exclusive federal court jurisdiction.").
Nor does it appear that abstention would serve the interests of justice. While plaintiffs argue that abstention would allow them to proceed in the forum of their choice, I cannot see how justice would be sacrificed by forcing them to proceed here; nothing in the record compels Florida as the obvious forum.
In contrast, there are a number of reasons why transfer would be the better course of action. The Second circuit expressed concern that scarce debtor resources would be wasted litigating a case in state court that may not belong there at all. Plaintiffs have tried to discount this argument by pointing out that Pan Am has since moved into liquidation proceedings, and there are no reorganization resources to waste. Plaintiffs miss the fact that litigating a potentially unnecessary lawsuit places strains even on a liquidation. The bankruptcy court's concern with amassing assets and fairly parceling them out does not end when a party moves from reorganization to liquidation.
See Lockerbie II, 950 F.2d at 847.
Secondly, I question the wisdom of allowing nearly identical actions to proceed in two separate courts, where the first one decided will likely be res judicata on the other. The plaintiffs have also filed federal complaints that are consolidated with the MDL Litigation in the Eastern District; those actions will not be stayed pending the outcome of any Florida litigation. Nonetheless, plaintiffs want the Florida litigation to proceed. The duplicative litigation wastes scarce debtor resources unnecessarily.
I cannot see any reason why defendants' motion for transfer should not be granted. According to § 157(b)(5), they may demand that all personal injury suits be heard in the district court where the bankruptcy proceeding is pending. Whether they wish to follow up this order with a motion to transfer the case to the MDL Litigation pursuant to 28 U.S.C. § 1407, or move for dismissal on the ground of pre-emption pursuant to Lockerbie I, is irrelevant to the present issue. Plaintiffs have not shown any reason why abstention would be a wiser course of action. Accordingly, defendants' motion to transfer the Coker actions from Florida state court to the Southern District of New York is granted.
Counsel for defendants are directed to settle an order consistent with this opinion on seven (7) days' notice.
It is SO ORDERED.