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Joseph and Kirschenbaum LLP v. Tenenbaum

United States District Court, S.D. New York

January 15, 2020

JOSEPH & KIRSCHENBAUM LLP, Plaintiff,
v.
JERALD TENENBAUM and JOSH ROSEN, Defendants.

          OPINION AND ORDER

          KATHERINE POLK FAILLA, UNITED STATES DISTRICT JUDGE

         Plaintiff Joseph & Kirschenbaum LLP moves to remand this petition to confirm an arbitration award back to the New York State Supreme Court from which it came. Plaintiff argues that Defendants Jerald Tenenbaum and Josh Rosen (collectively, “Defendants”) have improperly removed this action to federal court on the basis that their company, Manhattan River Group LLC (“MRG”), had earlier filed for Chapter 11 bankruptcy. According to Plaintiff, however, the petition is not a “core” bankruptcy proceeding under 28 U.S.C. § 1334(c)(2) for various reasons, and therefore both abstention and remand are required. Plaintiff argues in the alternative that even if the Court were to find that the action constituted a “core” bankruptcy proceeding, permissive abstention and equitable remand would nonetheless be appropriate under 28 U.S.C. §§ 1334(c)(1), 1452(b). Defendants retort that this action is a core proceeding, principally because recovery by Plaintiff will affect MRG's bankruptcy estate. As detailed in the remainder of this Opinion, the Court concludes that the matter is not a core bankruptcy proceeding; that this case was improperly removed; and thus that remand is required. In the alternative, the Court concludes that permissive abstention and equitable remand would be appropriate.

         BACKGROUND[1]

         A. Factual Background[2]

         1. The Underlying Arbitration

         On or about June 13, 2017, Connie Rodriguez hired Plaintiff to represent her in a dispute with her employer, La Marina Restaurant, which was owned and operated by MRG. (Petition ¶¶ 2, 6). The retainer agreement Plaintiff executed with Rodriguez specified that Plaintiff would receive the greater of one-third of the amount recovered by Rodriguez or the Court's award of attorneys' fees. (Id. at ¶ 4). On July 6, 2017, Plaintiff filed a suit on Rodriguez's behalf in this District, alleging violations of the Fair Labor Standards Act (the “FLSA”), the New York Labor Law (the “NYLL”), and the New York City Human Rights Law (the “NYCHRL”) against MRG; its owners Rosen and Tenenbaum; and Andrew Walters, Rodriguez's supervisor (collectively, the “Arbitration Defendants”). See Rodriguez v. Manhattan River Group, LLC, No. 17 Civ. 5070 (WHP) (S.D.N.Y. 2017). (Id. at ¶ 6). In response, MRG produced its arbitration agreement with Rodriguez, and on August 14, 2017, Rodriguez voluntarily dismissed the case to pursue an arbitration involving analogous claims before the alternative dispute resolution organization JAMS. (Id. at ¶¶ 7-8; 17 Civ. 5070 Dkt. #12)).

         Plaintiff represented Rodriguez in the Arbitration as well. (Petition ¶ 9). On April 26, 2018, JAMS issued an interim arbitral award in favor of Rodriguez on the NYLL claims and in favor of the Arbitration Defendants on the NYCHRL claims. (Id. at ¶ 10). The interim award provided for Rodriguez to receive $9, 069.20, plus prejudgment interest, and directed her to apply for attorneys' fees pursuant to the NYLL's fee-shifting provisions. (Id. at ¶ 11). On June 28, 2019, MRG paid Rodriguez the total amount owed to her of $9, 204.15. (Id. at ¶ 16).

         2. The Attorneys' Fees Dispute, MRG's Bankruptcy, and the Fee Action

         Because the final arbitral award (the “Final Award”) had not yet been released, the attorneys' fees owed to Plaintiff remained uncertain. (Petition ¶ 17). After the parties briefed the attorneys' fees issue before the arbitrator, JAMS informed Plaintiff that the Final Award had not been released due to the Arbitration Defendants' failure to pay the outstanding balance owed to JAMS. (Id. at ¶¶ 13-15). On November 16, 2018, Plaintiff filed suit in this Court to require the Arbitration Defendants to pay the outstanding balance. See Joseph & Kirschenbaum LLP v. Manhattan River Group, LLC, No. 18 Civ. 10283 (KPF) (S.D.N.Y. 2018) (the “Fee Action”).

         On December 20, 2018, MRG filed for bankruptcy, which stayed litigation against it. See In re Manhattan River Group, No. 18 Bankr. 14125 (SHL) (Bankr. S.D.N.Y. 2018) (the “Bankruptcy Action”); see also 11 U.S.C. § 362(a) (automatic stay provision). Given the filing of the Bankruptcy Action, Plaintiff agreed to (and this Court ordered) a stay of the Fee Action against MRG. (18 Civ. 10283 Dkt. #12). After initially failing to appear, Tenenbaum and Rosen appeared and requested that the stay be extended to them as well. (18 Civ. 10283 Dkt. #13-19). The Court denied this request. (18 Civ. 10283 Dkt. #20).

         On May 3, 2019, the Final Award was issued by JAMS. (Petition ¶ 18; see also Award 1). Accordingly, on May 3, 2019, Plaintiff filed a voluntary dismissal of the Fee Action, and the Court ordered the case dismissed on May 7, 2019. (18 Civ. 10283 Dkt. #26, 27).

         3. The Final Award and Plaintiff's Current Action

         The Final Award imposed attorneys' fees of $34, 844.25 and a court reporter appearance fee of $185 on the Arbitration Defendants. (Award 38-39). The attorneys' fees award was imposed jointly and severally against all Arbitration Defendants, and the $185 appearance fee was imposed jointly on MRG and Rosen. (Id.).

         On May 20, 2019, Plaintiff filed a petition to confirm the Final Award in New York State Supreme Court, New York County. (Dkt. #1-3 (Petition)). Because of the automatic stay in place as to MRG, Plaintiff sought confirmation solely with respect to Tenenbaum and Rosen. (Id. at ¶ 23). On August 9, 2019, after the filing of the instant case, the Bankruptcy Court issued an order confirming MRG's reorganization plan in the Bankruptcy Action. (18 Bankr. 14125 Dkt. #80).

         B. Procedural Background

         On June 17, 2019, Defendants filed a Notice of Removal pursuant to 28 U.S.C. §§ 1452, 1334, and 157. (Notice ¶ 4). Defendants argued that removal was proper under 28 U.S.C. § 1452(a), reasoning that this Court has original jurisdiction pursuant to 28 U.S.C. § 1334(b), because the case “is related to the Chapter 11 case of [MRG].” (Id.). Defendants further contended that the instant claims would have a direct impact on the bankruptcy estate, ...


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