Parmalat Capital Finance Ltd. v. Bank of America Corp.

Summarized by Janice Grubin , Barclay Damon, LLP
14 years 1 week ago

Citation:

___ F.3d ___, 2012 LEXIS ______ (February 21, 2012, 2nd Cir.)

Tag(s):

Ruling:

Because two Illinois state court cases can be "timely adjudicated" in Illinois state court, abstention is mandatory under section 1334(c)(2) of Title 28. Thus, the federal district court's judgments of dismissal are vacated and the cases are remanded to that federal district court for transfer to the federal district court sitting in Illinois and subsequent remand to Illinois state court. Application of the four-factor test of "timely adjudication" results in favoring mandatory abstention : (i) the backlog of the state court's calendar relative to the federal court's calendar - since difference in timing is a matter of months and not years (in favor of federal forum), and question is one of timely, and not faster, adjudication, non-dispositive factor; (ii) the complexity of the issues presented and the respective expertise of each forum - basic questions of in pari delecto (one of key issues in case) under Illinois law are unsettled and since Illinois law does not allow this Court's certification of questions of Illinois state law to Illinois Supreme Court, remand will allow Illiniois state courts to speak directly on these issues plus complexity of factual issues ameliorated by developed summary judgment record; (iii) the status of the title 11 bankruptcy proceeding to which the state law claims are related - these actions will not affect the 304 proceedings and can be timely adjudicated in state court without affecting federal interest in "related-to" jurisdiction; and (iv) whether the state court proceeding would prolong the administration or liquidation of the estate - neither case will prolong New Parmalat's reorganization under its Concordat, Bondi's and PCFL's 304 proceedings or PCFL's liquidation in the Cayman Islands.

Procedural context:

Plaintiffs Parmalat Capital Finance Limited ("PCFL") and Dr. Enrico Bondi ("Bondi" and, collectively, "Apppellants") appeal from two judgments issued from the Southern District of New York dismissing their claims against Grant Thornton International, Inc., Grant Thornton International Ltd. and Grant Thornton LLP (collectively, "Grant Thornton" or "Appellees") based on the lower court's determination that mandatory abstention under 28 U.S.C. sec 1334(c)(2) was not required. This appeal arose out of the conclusion, for the second time, by the Southern District of New York that mandatory abstention did not apply, on remand from the Second Circuit (639 F.3d 572 (2d Cir. 2011))for a determination of whether two cases initially commenced in Illinois state court by Appellants (and removed and remanded to the Southern District of New York where Bondi's and PCFL's 304 proceedings were pending) could be timely adjudicated in Illinois state court in accordance with the factors set forth by the Second Circuit in its prior opinion.

Facts:

In 2003, Bondi and PCFL commenced separate proceedings under section 304 of the Bankruptcy Code in the Southern District of New York. In August 2004, Bondi commenced an action in Illinois state court against Appellants alleging claims arising under Illinois law including professional malpractice, fraud, negligent misrepresentation and unlawful civil conspiracy. In September 2004, Grant Thornton removed the Illinois case to the United States District Court for the Northern District of Illinois under 28 U.S.C. sec. 1334(b) and 1452. Bondi filed a motion to remand arguing mandatory abstention, and the Judicial Panel on Multidistrict Litigation transferred the case to the Southern District of New York, which then denied Bondi's remand motion. In December, 2005, PCFL filed suit against Grant Thornton in the same Illinois state court, alleging similar claims asserted by Bondi. Grant Thornton removed the case to the United States District Court for the Northern District of Illinois. PCFL's motion to remand, similar to Bondi's, was denied by the Northern District of Illinois, which then transferred the case to the Southern District of New York for consolidation with Bondi's case. In October, 2005, the Italian bankruptcy court approved the Concordato, Parmalat's plan of reorganization, and a newly formed entity, Parmalat, S.p.A. assumed all of the legal liabililites and assets of its predecessor companies. After discovery in the two consolidated "Illinois" cases, Judge Kaplan of the Southern District of New York, granted summary judgment to the defendants. On appeal, as noted above, the Second Circuit remanded the cases back to Judge Kaplan to determine "timely adjudication." Judge Kaplan again denied mandatory abstention, and this appeal, and opinion followed.

Judge(s):

Cabranes and Wesley, Circuit Judges, and Koeltl, District Judge

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