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Podkolzin v. Amboy Bus Co.

March 13, 2009

OLEG PODKOLZIN AND IRINA PODKOLZIN, PLAINTIFFS,
v.
AMBOY BUS CO., INC. AND VINCENT PALADINO, DEFENDANTS.



The opinion of the court was delivered by: Dora L. Irizarry, United States District Judge

MEMORANDUM & ORDER

This personal-injury matter is before the court by the June 19, 2008 order of the United States Bankruptcy Court for the Southern District of New York, permitting plaintiff Oleg Podkolzin to remove the case from the Supreme Court of the State of New York, County of Kings ("Kings County Supreme Court") to the United States District Court for the Eastern District of New York. This case is related to a bankruptcy pending in the Southern District of New York in so far that defendant Amboy Bus Co., Inc. ("Amboy"), together with its affiliated companies (collectively "Metro Affiliates"), filed for Chapter 11 protection there. Plaintiffs Oleg and Irina Podkolzin move to remand their case back to the Kings County Supreme Court. For the reasons set forth below, plaintiffs' motion is denied.

I. Background

On June 18, 2001, plaintiff Oleg Podkolzin was involved in an automobile collision with a school bus owned and operated by defendants. The collision occurred in Kings County, New York, and all parties are residents of New York. Plaintiffs commenced an action to recover damages for personal injuries and loss of services in the Kings County Supreme Court on or about January 16, 2002. On or about August 16, 2002, Amboy filed for Chapter 11 protection in the United States Bankruptcy Court for the Southern District of New York. By order of March 27, 2003, that court granted a motion by the debtors to modify the automatic bankruptcy stay so that personal-injury and property-damage suits against them could be handled through the Claims Process Program ("CPP"). This program provides alternative-dispute-resolution ("ADR") measures intended to expedite the resolution of claims against the debtors. In addition, by using the program, the plaintiffs could recover their damages in full despite the bankruptcy.

The bankruptcy court appointed Security Insurance Company of Hartford and Fire and Casualty Insurance Company of Connecticut ("Royal Sun Insurers") to administer the CPP.*fn1

Royal Sun Insurers are responsible for paying all recoveries. Under the program, if ADR does not resolve the dispute, the plaintiff has a right to "pursue such Disputed Claim in the Bankruptcy Court in accordance with 28 U.S.C. § 157(b)(5)*fn2 and the Federal Rules of Civil Procedure." (Pls.' Mot. to Remand ("Doc. 4"), Ex. C at 6 ¶ d.) Once the plaintiff exercises this right, the "Bankruptcy Court shall determine the Court in which the Disputed Claim shall be decided[, and] [t]he Disputed Claim shall be prosecuted in the court determined by the Bankruptcy Court." (Id.)

Plaintiffs submitted their claims to the CPP. After evaluating their submissions, Royal Sun Insurers denied their claims. Plaintiffs then submitted their claims for mediation pursuant to the program. When mediation failed, plaintiffs, in accordance with Paragraph d. of the CPP, requested the bankruptcy court to allow them to proceed with trial in the Kings County Supreme Court. On March 13, 2008, the bankruptcy court held a hearing on this question, but instead of deciding the issue, it transferred the case to the district court to decide. (Id., Ex. D. at 26:10-18.) On June 19, 2008, the bankruptcy court entered an order, pursuant to § 362(d) of the Bankruptcy Code, Section 157(b)(5), and Paragraph d. of the CPP, permitting either plaintiff Oleg Podkolzin or Royal Sun Insurers to remove the case to the United States District Court for the Eastern District of New York. (Id., Ex. E.) Pursuant to that order and the bankruptcy court's instructions at oral arguments, plaintiffs filed a notice to remove their suit to this court, and now seek to remand the case back to the Kings County Supreme Court. The parties have fully briefed the issue and the court held oral arguments on December 11, 2008.

II. Discussion

Plaintiffs argue that under 28 U.S.C. § 1334(c)(2), the court is required to remand the case under the doctrine of mandatory abstention.*fn3 Alternatively, plaintiffs urge the court to remand as a matter of discretionary abstention pursuant to 28 U.S.C. § 1334(c)(1). Defendants Amboy and Vincent Paladino oppose the motion on two grounds. First they argue that Section 157(b)(5) requires this court to try the case.*fn4 Second, defendants argue that plaintiffs have agreed to have the suit tried before this court because they participated in the CPP. The CPP has a forum-selection clause, which according to defendants, requires this court to try the case.

As a threshold matter, the motion for remand is not properly before the court. According to the CPP, the bankruptcy court must decide which court will try the case. The bankruptcy court approved the CPP, and it binds the debtors as well as all participants, which includes plaintiffs. Moreover, even if the bankruptcy court had decided that the case belongs in a federal court, which it explicitly did not, under Section 157(b)(5), only the United States District Court of the Southern District may assign the case to this venue. That did not occur here.

a. The Procedural Errors

Paragraph d. of the CPP and Section 157(b)(5) establish the two procedural requirements that must be followed before the case can reach this court. First, Paragraph d. provides that if the mediation fails and plaintiffs decide to take their claims to trial, "the Bankruptcy Court shall determine the court in which the Disputed Claim shall be decided." (Doc. 4, Ex. C at 6 ¶ d.) (emphasis added.) This means that the bankruptcy court must decide whether the case should be tried in a state or federal court. Second, if the bankruptcy court decides that the personal-injury suit should be tried in a federal court, then it is left up to "the district court in which the bankruptcy is pending" to determine venue, which "shall be . . . the district court in which the bankruptcy case is pending, or . . . the district court in the district in which the claim arose . . . ."

28 U.S.C. § 157(b)(5). Under Section 157(b)(5), a bankruptcy judge does not have the authority to set the venue for where the case will be tried; a district court judge must set the venue. See In re United States Lines, Inc., 216 F.3d 228, 234 (2d Cir. 2000) ("[T]he bankruptcy court lacked the power the set venue under Section 157(b)(5)."); In re New York Medical Group, P.C., 265 B.R. 408, 412 (Bankr. S.D.N.Y. 2001) (citation omitted) ("The bankruptcy court cannot exercise the authority granted to the district court under § 157(b)(5)."); Hopkins v. Plant Insulation Co., 342 B.R. 703, 708 (D.Del. 2006) (explaining that under Section 157(b)(5), the district court, and not the bankruptcy court, has the sole authority to determine the venue for the personal-injury action).

Here, the bankruptcy court did not follow either requirement. First, the bankruptcy judge did not make the initial determination as to whether the case should be left in the Kings ...


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