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,
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
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
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 . . .").
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.
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.