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Townsquare Media v. Alan R. Brill

July 21, 2011


Appeals from the United States District Court for the Southern District of Indiana, Evansville Division. Nos. 3:09-cv-00061-, -00062-RLY-WGH--Richard L. Young, Chief Judge.

The opinion of the court was delivered by: Posner, Circuit Judge.


Before POSNER, KANNE, and ROVNER, Circuit Judges.

This appeal requires us to plumb the mysteries of removal and remand in the context of bankruptcy.

Section 1446(a) of the Judicial Code (Title 28) specifies procedures for removing a case from a state court to a federal district court. Section 1447 specifies procedures after removal, and in subsection (c) provides that "a motion to remand [a case removed from a state court to a federal district court] on the basis of any defect other than lack of subject matter jurisdiction must be made within 30 days after the filing of the notice of removal under section 1446(a). If at any time before final judgment [in the removed case] it appears that the district court lacks subject matter jurisdiction, the case shall be remanded [to the state court]."

The next subsection, however, provides that "an order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise." 28 U.S.C. § 1447(d). As an original matter, this broad rule of nonappealability (with the exception, also in (d), inap- plicable to this case, of remands in civil rights cases governed by 28 U.S.C. § 1443) would, one would have thought, make subsection (c) irrelevant to the appealability of a remand. But in Thermtron Products, Inc. v. Hermansdorfer, 423 U.S. 336, 345-46 (1976), overruled on other grounds in Quackenbush v. Allstate Ins. Co., 517 U.S. 706 (1996), the Supreme Court held that (c) limits (d): only cases remanded under (c) are non-appealable. The only cases remanded under (c) are ones in which either it appears that the district court lacks subject-matter jurisdiction or there was some other "defect" in the re-moval, though in the latter case a motion to remand the case has to have been made within 30 days after the notice of removal was filed. Only the first ground for remand is relevant in this case because there was no timely motion to remand; so to simplify exposition we'll pretend that only if absence of subject-matter juris-diction is the ground for remand is the remand order unappealable.

The Supreme Court has adhered to the limiting inter- pretation of subsection (d), most recently in Carlsbad Technology, Inc. v. HIF Bio, Inc., 129 S. Ct. 1862 (2009), despite the evident misgivings of the Justices themselves, which we'll discuss later.

A further complication is the existence of a separate statute governing removal of bankruptcy cases, 28 U.S.C. § 1452(b), under which this case was removed. But we'll see that this court has held that the limitations in section 1452(b) on appeal are identical to the limitations in section 1447. So if but only if absence of subject-matter jurisdiction was the ground for the remand in this case, the remand is not appealable and we must therefore dismiss the appeal.

Enough, for the moment, about statutes; we need to tell the reader about the case. Alan Brill owned a number of media companies. In 2002 creditors forced several of them into a Chapter 11 bankruptcy. Neither Brill nor Brill's other companies were debtors in the bankruptcy proceeding.

The bankruptcy judge ordered that the radio stations owned by the debtors be auctioned off. See 11 U.S.C. § 363. Brill bid at the auction, but the successful bidder was Regent, as we will refer to the principal appellant despite its change of name (we can ignore the other appellants). The bankruptcy plan was confirmed in 2003. Essentially it was a liquidation, although the bankrupt companies were not dissolved.

Years later Brill (we can ignore his co-plaintiffs--other firms that he owns) sued Regent, along with pre-judgment creditors of the debtors and some of the debtors' lawyers and other professional advisors ("bankruptcy profession- als," they are called), in an Indiana state court. The 111- page complaint contained a multiplicity of tort and con- tract claims. The creditors were alleged to have violated the terms of the bond covenants and by these and other means to have forced the debtors to default on their bonds. The main allegations against the bankruptcy professionals were that they had misused confidential information and encouraged Regent to violate two con- fidentiality agreements that it had made with Brill. The complaint charged Regent mainly with those violations plus fraud. All claims were based on Indiana law.

The background of the claim against Regent (which is all that remains of Brill's case) was as follows. Before the bankruptcy, Brill had discussed with Regent the possibility of selling his companies' radio stations to it, and as part of the negotiations (never completed) the parties had made an agreement prohibiting Regent from using any information it obtained from Brill in those negotiations in a manner that would harm him or his companies. The sale never went through. But during the bankruptcy Brill discussed with Regent a plan to bid jointly for the debtors' radio stations, and they signed another confidentiality agreement. Brill claims that Regent used information subject to the agreements to outbid him at the auction ordered by the bankruptcy court.

In the order confirming the bankruptcy plan, the bank- ruptcy judge, consistent with a recommendation in the plan, had forbidden suits against the bankruptcy profes- sionals. (Third-party releases for the protection of bank- ruptcy professionals are common and, when consensual, unexceptionable. See, e.g., In re Specialty Equipment Cos., 3 F.3d 1043, 1046-47 (7th Cir. 1993).) Those bankruptcy professionals who had been debtors' counsel and whom Brill had sued asked the bankruptcy judge to compel him to comply with the judge's order confirming the plan; he had violated the order by suing them.

The order had also barred anyone but the debtors from pursuing certain litigation against pre-bankruptcy credi- tors of Brill's companies. Those creditors, upset that he'd included them as defendants in his suit, removed the suit to the bankruptcy court rather than just asking the bankruptcy judge to enforce compliance with his order as the bankruptcy professionals had done. The creditors based removal on 28 U.S.C. § 1452(a), which authorizes removal to a district court of any claim of which that court would have jurisdiction under 28 U.S.C. § 1334, which confers on the district courts original juris- diction "of all civil proceedings arising under title 11 [the Bankruptcy Code], or arising in or related to cases under title 11." §§ 1334(a), (b). Although section 1452(a) provides for removal to the district court rather than to the bankruptcy court, Bankruptcy Rule 9027, buttressed by standing orders in the district courts (including the district court for the Southern District of ...

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