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United States District Court, S.D. New York

July 22, 2004.

ANDREA FARACE, Petitioner,
JOHN S. PEREIRA, as Trustee of Trace International Holdings, Inc. and Trace Foam Sub, Inc., Respondent.

The opinion of the court was delivered by: ROBERT SWEET, Senior District Judge


Petitioner Andrea Farace ("Farace") has moved for an order remanding this action to the Supreme Court of the State of New York, New York County pursuant to 28 U.S.C. § 1447(c) and alternately requests that this Court abstain from the proceedings pursuant to 28 U.S.C. § 1334(c) or grant an equitable remand pursuant to 28 U.S.C. § 1452(b). For the reasons set forth below, the motion is granted.

Prior Proceedings and Background

  On June 25, 2003, a money judgment was entered in favor of respondent John S. Pereira ("Pereira"), in his capacity as Trustee of Trace International Holdings, Inc. and Trace Foam Sub, Inc., and against Farace and other defendants in the action captioned Pereira v. Cogan, 00 Civ. 619. Approximately two weeks later, on July 11, 2003, the Federal Judgment was docketed by respondent in the New York County Clerk's Office as Judgment No. 1723113. The effect of such docketing was to give the Federal Judgment the force and effect of a state court judgment. See N.Y. CPLR § 5018(b).

  Following entry and docketing of the Federal Judgment, Pereira commenced various enforcement proceedings against Farace under Article 52 of the CPLR. Pereira's actions included attempting to serve restraining notices upon Farace and upon Citigroup, Independence Holdings Partners LLC ("Independence") and Smith Barney under CPLR § 5222, directing the United States Marshals Service ("USMS") to serve executions upon these garnishees under CPLR § 5232, and causing the Sheriff of the City of New York (the "Sheriff") to attempt to serve an income execution upon Farace at Smith Barney and at Citigroup in New York under CPLR § 5231.

  By order to show cause and verified petition, Farace commenced a special proceeding on March 1, 2004 in the Supreme Court, New York County to vacate the restraining notices, executions and income execution under CPLR §§ 5239 and 5240 on the grounds that Pereira, the USMS and the Sheriff failed to comply with the service requirements of Article 52 of the CPLR. The Honorable Rolando T. Acosta granted a temporary restraining order dated March 1, 2004, prohibiting Pereira and all of the garnishees from taking any steps to transfer or deliver any funds or other property under the executions or the income execution. The application was made returnable in the state court for March 10, 2004.

  By Notice of Removal, dated March 9, 2004, Pereira removed the Special Proceeding to this Court under 28 U.S.C. § 1446(d). Farace moved by order to show cause on March 16, 2004 to remand the action to the Supreme Court. The parties then agreed that the temporary restraining order previously issued by Justice Acosta shall remain in place through at least March 26, 2004, pending Farace's presentation of its application to remand On March 25, 2004, Pereira filed an Amended Notice of Removal. On March 31, 2004, argument was heard on the motion and it was marked fully submitted. On April 5, 2004, this Court issued an order extending the temporary restraining order issued by Justice Acosta pending the determination of Farace's motion.


  According to the initial Notice of Removal, Pereira asserts that removal is proper under 28 U.S.C. § 1441 because this Court has "federal question jurisdiction" because "this action arises from and is directly related to the action commenced approximately four years ago in this Court against Farace [which] resulted in the granting of a final judgment" and because "this action arises under Federal Rule of Civil Procedure 69 and federal case law which gives this court jurisdiction to supervise the enforcement of the Federal judgment . . ."

  In its Amended Notice of Removal and opposition brief, two additional grounds are provided for removal: (1) removal is proper under 28 U.S.C. § 1442(a)(3) because Pereira is an officer of the courts of the United States and the order to show cause challenges actions taken by him under color of his office or in the performance of his duties; and (2) removal is proper under 28 U.S.C. § 1452(a) because it relates to a case under Title 11 of the United States Code over which the United States District Court for the Southern District of New York has jurisdiction pursuant to 28 U.S.C. § 1334(b).

  "Removal jurisdiction must be strictly construed, both because the federal courts are courts of limited jurisdiction and because removal of a case implicates significant federalism concerns." In re NASDAQ Market Makers Antitrust Litigation, 929 F. Supp. 174, 178 (S.D.N.Y. 1996) (citing Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 109 (1941)) ("Due regard for the rightful independence of state governments, which should actuate federal courts, requires that they scrupulously confine their own jurisdiction to the precise limits which the statute has defined."); see also Deming v. Nationwide Mutual Ins. Co., No. Civ.A. 3:03CV1225, 2004 WL 332741, at *1 (D. Conn. Feb. 14, 2004) ("federal courts construe the removal statute narrowly, resolving any doubts against removability.") (quoting Somlyo v. J. Lu-Rob Enters., Inc., 932 F.2d 1043, 1045-46 (2d Cir. 1991)).

  "The burden is on the removing party to prove that it has met the requirements for removal." Codapro Corp. v. Wilson, 997 F. Supp. 322, 325 (E.D.N.Y. 1998) (quoting Avon Products, Inc. v. The A/J Partnership, 89 Civ. 3743/8032, 1990 WL 422416, at *1 (S.D.N.Y. March 1, 1990)); see also NASDAQ Market Makers, 929 F. Supp. at 178.

  Section 1441(b) Section 1441(b) provides that a defendant may remove any "civil action of which the district courts have original jurisdiction founded upon a claim or right arising under the Constitution, treaties or laws of the United States . . ." Removal pursuant to 28 U.S.C. § 1441(b) is "improper unless a federal question is an essential element of a plaintiff's cause of action, and is apparent on the face of the plaintiff's well-pleaded complaint without reference to the answer or the removal petition." Hodges v. Demchuk, 866 F. Supp. 730, 732-33 (S.D.N.Y. 1994); see also Rivet v. Regions Bank of Louisiana, 522 U.S. 470, 475 (1998).

  The petition filed by Farace in state court alleges several statutory causes of action under New York law. The order to show cause alleges that "judgment should be entered pursuant to CPLR §§ 5239 and 5240 vacating the Income Execution, the Executions and the Restraining Notices" on the grounds that such notices and executions were not served in accord with CPLR §§ 5222, 5231 and 5232. In addition, Farace alleges that service on him is invalid as a matter of law under the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters, 20 U.S.T. 36, T.I.A.S. 6638 (the "Hague Convention").

  Farace argues that because only state statutory claims are raised, the petition does not "arise under" federal law. Farace further argues that the reference to the Hague Convention at most anticipates a defense that may be raised by Pereira, namely that his service of the notice and executions was in compliance with the general service provision of Article 52, which contemplates service by mail. Farace's anticipatory response, as stated in the petition, is that "[e]ven though CPLR § 5222(d) . . . contemplates service by mail, such a state law provision is superseded by any contrary provision which, as a ratified treaty, controls under the Supremacy Clause of the United States Constitution." Petition at ¶ 20. Farace therefore argues that the reference to the Hague Convention may at most provide the basis for a federal defense, although it is more appropriately characterized as a response to an anticipated defense. However, "a case may not be removed to federal court on the basis of a federal defense, . . . even if the defense is anticipated in the plaintiff's complaint, and even if both parties admit that the defense is the only question truly at issue in the case." Rivet, 522 U.S. at 475 (quoting Franchise Tax Bd. of Cal. v. Construction Laborers Vacation Trust for Southern Cal., 463 U.S. 1, 14, 103 S.Ct. 2841, 2848, 77 L.Ed.2d 420 (1983)); see also Barbara v. New York Stock Exchange, Inc., 99 F.3d 49, 54 (2d Cir. 1996) ("the presence of a claimed violation of [a federal] statute as an element of a state cause of action is insufficiently `substantial' to confer federalquestion jurisdiction.") (quoting Merrell Dow Pharmaceuticals, Inc. v. Thompson, 478 U.S. 804, 814, 106 S.Ct. 3229, 92 L.Ed.2d 650 (1986)).

  Pereira responds that the proper focus under § 1441 in the instant case is not whether Farace's petition states a claim that arises under federal law, but rather whether this Court has jurisdiction to enforce its own judgments. The Supreme Court has held that a district court has the "inherent power to enforce its judgments," and has noted that it has

approved the exercise of ancillary jurisdiction over a broad range of supplementary proceedings involving third parties to assist in the protection and enforcement of federal judgments — including attachment, mandamus, garnishment, and the prejudgment avoidance of fraudulent conveyances.
Peacock v. Thomas, 516 U.S. 349, 356 (1996). Ancillary enforcement jurisdiction, however, is not the same as original jurisdiction. In a recent case, the Supreme Court held that ancillary enforcement jurisdiction is insufficient to fulfill the requirements of § 1441. See Syngenta Crop Protection, Inc. v. Henson, 537 U.S. 28 (2002). The Court explained that


Removal is governed by statute, and invocation of ancillary jurisdiction, like invocation of the All Writs Act, does not dispense with the need for compliance with statutory requirement.
. . .
Section 1441 requires that a federal court have original jurisdiction over an action in order for it to be removed from a state court. The All Writs Act, alone or in combination with the existence of ancillary jurisdiction in a federal court, is not a substitute for that requirement.
Id. at 34. Pereira's argument that "arising under" jurisdiction is conferred by Federal Rule of Civil Procedure 69 fails for the additional reason that "[t]he Rules do not provide an independent ground for subject matter jurisdiction over an action for which there is no other basis for jurisdiction." Cresswell v. Sullivan & Cromwell, 922 F.2d 60, 70 (2d Cir. 1990) (citing Fed.R. Civ. P. 82: "[t]hese rules shall not be construed to extend or limit the jurisdiction of the United States district courts . . .").

  Section 1442(a)(3)

  Pereira argues that jurisdiction exists over this action because as a bankruptcy Trustee, Pereira falls within the federal officer removal statute. The statute, 28 U.S.C. § 1442, provides in relevant part:

(a) A civil action or criminal prosecution commenced in a State court against any of the following persons may be removed by them to the district court of the United States for the district and division embracing the place wherein it is pending:
(1) Any officer of the United States or any agency thereof, or person acting under him, for any act under color of such office . . .
. . .
(3) Any officer of the courts of the United States, for any act under color of office or in the performance of his duties . . .
Pereira argues that pursuant to § 1442(a)(3), he has the right to remove because a bankruptcy trustee is deemed to be an officer of the court for removal purposes. See In re Serrato, 117 F.3d 427, 428 (9th Cir. 1997) (holding that a bankruptcy trustee is an "officer of the courts" under § 1442(a)(3) but not "an officer of the United States" under § 1442(a)(1)).

  Pereira fails to mention the further well-settled rule created by "an unbroken line" of Supreme Court decisions over more than a century that "have understood all the various incarnations of the federal officer removal statute to require the averment of a federal defense." Mesa v. California, 489 U.S. 121, 133-34 (1989). The Mesa Court further explained:

Section 1442(a) . . . cannot independently support Art. III "arising under" jurisdiction. Rather, it is the raising of a federal question in the officer's removal petition that constitutes the federal law under which the action against the federal officer arises for Art. III purposes.
Id. at 136.

  For the purposes of § 1442(a), Pereira's removal petition does not include a "colorable defense arising out of [his] duty to enforce federal law." Mesa, 489 U.S. at 133. The "federal law" which Pereira is arguably enforcing is Federal Rule of Civil Procedure 69, which pertains to the execution of judgments. However, as discussed above, the Federal Rules do not provide a basis for jurisdiction. As discussed above, the fact that the Hague Convention may be involved in this litigation is also insufficient to aver a federal defense, as it not properly federal and has been raised by Farace, not Pereira.

  Section 1452(a)

  Pereira states in the Amended Removal Petition that removal is proper under 28 U.S.C. § 1452(a) because it relates to a bankruptcy action in this Court. Section 1452(a) provides that "[a] party may remove any claim or cause of action in a civil action . . . if such district court has jurisdiction of such claim or cause of action under section 1334 of this title." 28 U.S.C. § 1452(a). Section 1334(b) provides for jurisdiction over cases that arise under the bankruptcy code or are "related to" such cases. 28 U.S.C. § 1334(b). Jurisdiction may be established under § 1334(b) if the outcome of the litigation "might have any `conceivable effect' on the bankrupt estate." In re Cuyahoga Equipment Corp., 980 F.2d 110, 114 (2d Cir. 1992) (citing In re Turner, 724 F.2d 338, 340-41 (2d Cir. 1983) (Friendly, J.)). Farace concedes that Pereira has met the test for jurisdiction under § 1334(b).

  Farace argues, however, that this court must abstain from this proceeding under § 1334(c)(2).*fn1 Section 1334(c)(2) "requires the district court to abstain from hearing a non-core matter which can be timely adjudicated in state court in a previously commenced action." In re Petrie Retail, Inc., 304 F.3d 223, 232 (2d Cir. 2002) (quoting In re S.G. Phillips Constrs., Inc., 45 F.3d 702, 708 (2d Cir. 1995)). However, "[t]here is a dispute among federal courts over whether the mandatory abstention provision applies in the context of removal and remand" Certain Underwriters at Lloyds v. ABB Lummus Global, Inc., 03 Civ. 7248, 2004 WL 224505, at *7 (S.D.N.Y. Feb. 5, 2004); see also Renaissance Cosmetics v. Development Specialists, Inc., 277 B.R. 5, 12-13 (S.D.N.Y. 2002) (collecting cases). "The Court of Appeals for the Second Circuit has not directly addressed the issue and is not likely to do so because the Court of Appeals recently held that a district court's decision not to abstain under § 1334(c)(2) is not reviewable." Id. (citing Beightol v. UBS Painewebber, Inc., 354 F.3d 187, 189 (2d Cir. 2004) (holding that the decision not to abstain is reviewable only if the district court certifies the decision for appeal or if a final decision has been issued). "Courts in this district, however, have `almost uniformly' found that abstention does not apply to removed actions." Id. (quoting Renaissance Cosmetics, 277 B.R. at 13). In Certain Underwriters, the Honorable John G. Koeltl reviewed the arguments for and against mandatory abstention, and adopted "the majority rule in this district . . . that § 1334(c)(2) does not apply to removed claims." 2004 WL 224505, at *8. Among the arguments against mandatory abstention are that "abstention does not apply to the claims against the removed defendants because there is no longer a parallel state court proceeding where those claims are being timely adjudicated," id. at *7, and that "[w]hen a claim or cause of action is removed pursuant to § 1452(a), remand is governed by § 1452(b), not § 1334(c), and section § 1452(b) provides that a court `may remand [a] claim or cause of action on any equitable ground.'" Id. at *8 (quoting 28 U.S.C. § 1452(b)) (emphasis added). Judge Koeltl's reasoning is persuasive, and the holding of Certain Underwriters that § 1334(c)(2) does not apply to removed claims is hereby adopted.

  Farace further argues that if mandatory abstention does not apply, this action should be equitably remanded to state court. A discretionary remand may be ordered pursuant to § 1334(c)(1), which provides that "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." Alternately, under § 1452(b), a district court may remand a claim or cause of action removed as related to a bankruptcy case "on any equitable ground." The Second Circuit has held "that § 1452(b)'s reference to an `equitable ground' means one that is fair and reasonable, rather than one that originated in the chancery courts or is discretionary." In re Cathedral of the Incarnation in the Diocese of Long Island, 99 F.3d 66, 69 (2d Cir. 1996).

  "Courts in this district have treated the analysis under these two statutory provisions as essentially identical." Kerusa Co. LLC v. W10Z/515 Real Estate Ltd. P'Ship, 04 Civ. 708, 04 Civ. 709, 04 Civ. 710, 2004 WL 1048239, at *3 (S.D.N.Y. May 7, 2004) (citing In re Worldcom Inc. Sec. Litig., 293 B.R. 308, 334 (S.D.N.Y. 2003)). However, because some courts have held that discretionary abstention pursuant to § 1334(c)(1) does not apply in the removal and remand context, see Nemsa Establishment, S.A. v. Viral Testing Systems Corp., 95 Civ. 0277, 1995 WL 489711, at *9 (S.D.N.Y. Aug. 15, 1995) (collecting cases), Farace's motion will be treated as a request to remand pursuant to § 1452(b). The factors to be considered in determining whether equitable remand is appropriate include:

(1) the effect on the efficient administration of the bankruptcy estate; (2) the extent to which issues of state law predominate; (3) the difficulty or unsettled nature of the applicable state law; (4) comity; (5) the degree of relatedness or remoteness of the proceeding to the main bankruptcy case; (6) the existence of the right to a jury trial; and (7) prejudice to the involuntarily removed defendants.
Drexel Burnham Lambert Group v. Figilant Ins. Co., 130 B.R. 405, 407 (S.D.N.Y. 1991). Farace argues that each one of these factors favors remand

  The independence of the various proceedings to enforce the judgment from the bankruptcy proceedings favors remand under the first and fifth factors. While they obviously bear some relation, there is no commonality of facts or of underlying law. In the context of an action involving state law claims for breach of fiduciary duty and fraud, one court held that "the state law claims do not require any `special expertise' of the Bankruptcy Court" and "the expertise of the State Court would certainly effect a more efficient estate administration since state court judges are very familiar with the New York law . . ." In re 9281 Shore Road Owners Corp., 214 B.R. 676, 696 (Bankr. E.D.N.Y. 1997). Here, state court expertise with respect to the service requirements for restraining notices and executions will similarly aid the effective administration of the estate.

  As to the second, third and fourth factors, issues of state law clearly predominate, and the parties are in dispute about what constitutes proper service of the restraining notices and executions. It is true that "[t]he fact that a complaint is based on state law causes of action does not mandate equitable abstention or remand, particularly where the state law claims are not novel or complex." Neuman v. Goldberg, 159 B.R. 681, 688 (S.D.N.Y. 1993). Farace has not claimed that the law at stake is particularly complicated. However, while "the predominance of state law issues in a case does not alone require remand, it does not mean that that consideration, in combination with others, could not usually tilt in favor of remand" Stahl v. Stahl, 03 Civ. 0405, 2003 WL 22595288, at *3 (S.D.N.Y. Nov. 7, 2003).

  The final two factors are irrelevant to the consideration whether to remand because the right to a jury trial is not an issue in this case and there are no other defendants besides Pereira, who initiated the removal proceedings.

  Because each of the Drexel factors favors remand, this action will be remanded to the Supreme Court of the State of New York, New York County pursuant to 28 U.S.C. § 1452(b).


  For the reasons stated above, this action is equitably remanded to state court for further proceedings pursuant to 28 U.S.C. § 1452(b).

  It is so ordered.

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