Bankruptcy

Getting “Timely” Bankruptcy-Related Removals Remanded

You’ve filed your case in state court. One of your defendants has removed the claims against it to federal court pursuant to 28 U.S.C. § 1452(a) and Bankruptcy Rule 9027, on the ground that it bears some sort of relation to a third party that has filed for bankruptcy.1 The defendant’s notice of removal claims that it is a timely removal, because Bankruptcy Rule 9027 prescribes a 90-day removal period when the underlying lawsuit was filed prior to the bankruptcy filing.Your defendant has filed sometime between 31 and 90 days after the bankruptcy filing. Is there any way to argue that the removal is nevertheless untimely?

Even if it complies with the timeliness requirement of the bankruptcy rule, your defendant’s removal of the action against it arguably violates the shorter 30-day removal deadline imposed at 28 U.S.C. § 1446(b). That statute gives a general removal filing deadline, and isn’t bankruptcy specific. But it’s a statute, whereas Rule 9027 is just a rule.

To the extent that the statute and the rule conflict, the 30-day deadline in 28 U.S.C. § 1446(b) (i.e., 30 days from discovery of the basis for federal jurisdiction) arguably governs rather than the 90-day deadline in Bankruptcy Rule 9027(a). The bankruptcy removal statute, Section 1452, itself contains no deadlines for seeking removal. As analogously explained by the United States Supreme Court in ruling that the procedural requirements of Section 1447(d) applied to bankruptcy removals under § 1452:

There is no express indication in § 1452 that Congress intended that statute to be the exclusive provision governing removals and remands in bankruptcy. Nor is there any reason to infer from § 1447(d) that Congress intended to exclude bankruptcy cases from its coverage. The fact that § 1452 contains its own provision governing certain types of remand in bankruptcy, see § 1452(b) (authorizing remand on “any equitable ground” and precluding appellate review of any decision to remand or not to remand on this basis), does not change our conclusion. There is no reason §§ 1447(d) and 1452 cannot comfortably coexist in the bankruptcy context. We must, therefore, give effect to both.

Things Remembered, Inc. v. Petrarca, 516 U.S. 124, 128-29, 116 S. Ct. 494 (1995).

More recently, the United States District Court for the District of Oregon found the Things Remembered analysis fully compelling, when it addressed the timeliness issue addressed in this article, involving a conflict as between Section 1446(b) and Rule 9027. In In Re Asbestos Litig., CV ? 01-1790-PA, 2002 U.S. Dist. LEXIS 3083 (D. Or. Feb. 1, 2002), the District Court concluded, with regard to Things Remembered, that “[t]he same logic applies here. Just as the procedural requirements of § 1447 apply to bankruptcy removals under § 1452, so also do the deadlines set in § 1446(b). There is no conflict between § 1446 and § 1452.” 2002 U.S. Dist. LEXIS 3083, at *9.

With specific respect to Rule 9027, the In re Asbestos Litig. Court concluded that, “[g]iven the reasoning of Things Remembered, the court is left with a conflict only between § 1446 and Bankruptcy Rule 9027. When a statute and a rule directly conflict, the statute wins.” Id; see Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-45, 104 S. Ct. 2778 (1984).

This makes sense in the context of the larger statutory scheme, too. A 1978 amendment to the Bankruptcy Act, 28 U.S.C. § 2075, deleted that portion of Section 2075 prescribing that all laws in conflict with bankruptcy rules would be of no further force or effect after such rules have taken effect. Section 2075 now reads in pertinent part:

The Supreme Court shall have the power to prescribe by general
rules, the forms of process, writs, pleadings, and motions, and the practice and procedure in cases under title 11. Such rules shall not abridge, enlarge, or modify any substantive right.

The language “such rules shall not abridge, enlarge, or modify any substantive right” has been a portion of Section 2075 since enactment of the Bankruptcy Code, 11 U.S.C. §§ 101et seq., in 1978. As amended, the specific rule-making authority of the Supreme Court for bankruptcy rules, Section 2075, is now different from that accorded the Supreme Court under 28 U.S.C. § 2072 for rules of procedure and evidence. The relevant portion of 28 U.S.C. § 2072 is as follows:

(a) The Supreme Court shall have the power to prescribe general rules of practice and procedure and rules of evidence for cases in the United States district courts (including proceedings before magistrates thereof) and courts of appeals.

(b) Such rules shall not abridge, enlarge or modify any substantive right. All laws in conflict with such rules shall be of no further force or effect after such rules have taken effect.3

28 U.S.C. § 2072.

Section 2072(b) retains what has been deleted from Section 2075, namely: “all laws in conflict with such rules shall be of no further force or effect after such rules have taken effect.” Therefore, the Supreme Court’s ability to supersede statutory authority by implementing a bankruptcy rule under Section 2075, which conflicts with a statutory provision, has been eliminated by the amendment to 28 U.S.C. § 2075. This lends compelling support to the argument that the shorter, statutory 30-day period governs defendant’s bankruptcy-related removal, rather than the longer, administrative 90-day period.

FOOTNOTES:

1 Note that a defendant is permitted to remove just the claims as to it – and not the entire case – when the removal is bankruptcy-related under Section 1452.

2 The Rule prescribes a 30-day removal period if the lawsuit was filed after the bankruptcy filing.

3 Pub. L. No. 95-598, 247, 92 Stat. 2672.

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