The opinion of the court was delivered by: Amy J. St. Eve, District Court Judge
MEMORANDUM OPINION AND ORDER
Plaintiff Official Committee of Unsecured Creditors of Wickes, Inc. originally filed the present Complaint in the Circuit Court of Cook County, Illinois, County Department, Law Division. Pursuant to 28 U.S.C. § 1452(a), Defendants removed this action to federal court. Plaintiff now seeks to have this case remanded to state court pursuant to 28 U.S.C. §§ 1334(c)(1), (c)(2), or 1452(b). For the reasons discussed below, the Court remands the present action to the Circuit Court of Cook County, Illinois, County Department, Law Division pursuant to 28 U.S.C. § 1334(c)(2).
On January 20, 2004, Wickes, Inc. ("Wickes") filed a voluntary petition for bankruptcy relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Illinois, Eastern Division (the "Bankruptcy Court"). (R. 1-1, Removed Compl. ¶ 3.) Pursuant to 11 U.S.C. §1102(a), the Trustee thereafter appointed Plaintiff Official Committee of Unsecured Creditors of Wickes, Inc. to represent the interest of all unsecured creditors of Wickes in connection with the bankruptcy proceedings. (Id. ¶ 4.) On November 17, 2005, on Plaintiff's motion, the Bankruptcy Court granted Plaintiff the authority to pursue claims, which belong to Wickes itself, against Wickes' shareholders, officers, and directors and their affiliates. (Id. ¶ 5; 04-B-02221, R. 1962-1.) Plaintiff based its motion on the inability of the members of Wickes' present board of directors -- due to a conflict of interest -- to authorize the pursuit or settlement of claims on behalf of Wickes and its bankruptcy estate against their fellow and former directors and officers. (04-B-02221, R. 1923-1.)
On January 18, 2006, pursuant to the authority granted by the Bankruptcy Court, Plaintiff filed the present Complaint in the Circuit Court of Cook County. (R. 50-1, Mot. to Remand, ¶ 4.) The Complaint alleges the following claims: breach of fiduciary duty (Counts I and II), unjust enrichment (Count III), fraud (Counts IV and V), civil conspiracy (Count VI), illegal dividend (Count VII), aiding and abetting breach of fiduciary duty (Count VIII), and deepening insolvency (Count IX). During the relevant time period, Defendants were either officers, directors, or controlling shareholders of Wickes or other companies affiliated with Wickes. (R. 1-1, Removed Compl. ¶¶ 11-27, 214-295.) The claims alleged in Plaintiff's Complaint arise out of state law, chiefly, Delaware law. (Id. ¶¶ 214-295.)
Also on January 18, 2006, Plaintiff filed a lawsuit in the Bankruptcy Court against Stephen Wilson; Buildscape, Inc.; Buildscape, LLC; Cybermax, Inc.; Ennovative Commerce Solutions, Inc.; J &B Aviation, Inc.; and Riverside Group, Inc., commencing Adversary Proceeding No. 06-00098 (the "Adversary Proceeding"). (R. 59-1, Defs.' Opp. to Mot. to Remand, Ex. 2; 04-B-02221, R. 2041-1.) Plaintiff's claims in the Adversary Proceeding encompass avoidance actions arising under the Bankruptcy Code, namely, claims to avoid and recover fraudulent transfers under 11 U.S.C. §§ 544, 548, and 550, and claims to avoid and recover pre-bankruptcy preferential transfers under 11 U.S.C. §§ 544, 547, and 550. (Id.) The defendants in the Adversary Proceeding are also Defendants in the present lawsuit, but the present lawsuit includes other Defendants, such as officers and directors of Wickes who are not defendants in the Bankruptcy Adversary Proceeding. (R. 50-1, Mot. to Remand, ¶ 7.)
On February 15, 2006, Defendants in the present lawsuit filed a Notice of Removal because this case is "related to" the Wickes' bankruptcy case. The Court has jurisdiction under 28 U.S.C. § 1334(b).
In its motion to remand, Plaintiff argues that it has met the requirements for mandatory abstention under 28 U.S.C. § 1334(c)(2) or, in the alternative, that the Court should exercise its discretion to abstain under 28 U.S.C. § 1334(c)(1) or remand pursuant to 28 U.S.C. § 1452(b). The Court turns to the mandatory abstention provision under Section 1334(c)(2) because it is dispositive.
In federal courts, abstention is generally the exception rather than the rule, however, "in the realm of bankruptcy, abstention is looked upon more kindly," see Williams v. Stefan, 133 B.R. 119, 123 (N.D. Ill. 1991), because the "use of the Bankruptcy Code to obtain a favorable forum should not be encouraged." In re U.S. Brass Corp., 110 F.3d 1261, 1265 (7th Cir. 1997). "[S]section 1334(c)(2) makes abstention in favor of the state court mandatory in noncore proceedings not otherwise within federal jurisdiction." Id. at 1268. A proceeding is noncore if it "does not invoke a substantive right created by federal bankruptcy law and is one that could exist outside of bankruptcy." Barnett v. Stern, 909 F.2d 973, 981 (7th Cir. 1990). On the other hand, "[c]ore proceedings are actions by or against the debtor that arise under the Bankruptcy Code in the strong sense that the Code itself is the source of the claimant's right or remedy, rather than just the procedural vehicle for the assertion of a right conferred by some other body of law, normally state law." In re U.S. Brass Corp.,110 F.3d at 1268.
Under Section 1334(c)(2), abstention is mandatory when all of the following criteria are met: (1) the state law claim is a noncore proceeding; (2) there is no independent basis for federal jurisdiction other than the bankruptcy proceeding; (3) plaintiff has commenced the action in state court; and (4) the state court can timely adjudicate the matter. In re DeMert & Dogherty, Inc., 271 B.R. 821, 842 (Bankr. N.D. Ill. 2001) (citing In re Bill Cullen Elec. Contracting Co., 160 B.R. 581, 585 (Bankr. N.D. Ill. 1993)); see also Rheinstrom v. Action Am., Inc., 208 B.R. 36, 38 (N.D. Ill. 1997).
Defendants argue that Plaintiff cannot establish the first requirement under Section 1334(c)(2) because the present matter is a core proceeding. Core proceedings encompass two types of proceedings: (1) those "arising under" title 11 and (2) those "arising in" a case under title 11. See 28 U.S.C. § 157(b); Barnett v. Stern, 909 F.2d at 979. A lawsuit "arises under title 11" only when it involves a cause of action created or determined by a title 11 statutory provision. Kalamazoo Realty Venture L.P. v. Blockbuster Entm't Corp., 249 B.R. 879, 885 (N.D. Ill. 2000); see also Zerand-Bernal Group, Inc. v. Cox, 23 F.3d 159, 162 (7th Cir. 1994) ("the fact that a claim has a distant federal origin does not confer 'arising under' jurisdiction."). To "arise in a case under title 11," a claim must involve "questions that arise during the bankruptcy proceeding and concern the administration of the bankrupt estate, such as whether to discharge a debtor." Zerand-Bernal, 23 F.3d at 162; see also In re H. King & Assoc., 295 B.R. 246, 258 (Bankr. N.D. Ill. 2003) ("'Arising in' jurisdiction encompasses administrative matters that arise only in bankruptcy cases -- matters not based on any right expressly created by title 11, but without existence outside of bankruptcy.")
Section 157(b)(2) of the Bankruptcy Code contains a non-exhaustive list of core proceedings, including matters concerning the administration of the estate; allowance or disallowance of claims against the estate; counterclaims by the estate; orders in respect to obtaining credit; orders to turn over property of the estate; proceedings to determine, avoid, or recover preferences; motions to terminate, annul, or modify the automatic stay; proceedings to determine, avoid, or recover fraudulent conveyances; determinations as to the dischargeability of particular debts; objections to discharges; determinations of the validity, extent, or priority of liens; confirmations of plans; orders approving the ...