TO: THE UNITED STATES DISTRICT COURT.

This report and recommendation is submitted for the district court's 5 ABR 71      review in accordance with AK LBR 5011-1, Fed. R. Bankr. P. 9033, and 28 U.S.C. § 157(c)(1). Pending before the bankruptcy court are a motion to withdraw the reference and a motion to abstain and remand. The bankruptcy court recommends that both the motion to withdraw the reference and the motion to abstain and remand be granted.

Background

The plaintiffs filed a wrongful death case against the defendant and debtor, Ronald Durheim, and Alaska Aquatics of Anchorage, Inc. on May 20, 1996, in State Superior Court at Nome. The complaint alleges that Durheim negligently recruited Michael Santos to work as a commercial diver for David Norton during the 1995 Norton Sound Herring fishery. According to the complaint, Durheim provided only one day of training to Santos and supplied him with the equipment for the job, knowing Santos was unqualified as a commercial diver. The complaint includes counts for negligence, negligent entrustment, strict liability, breach of implied warranty and punitive damages. It includes no federal claims. Durheim sued fisherman David Norton in a third party complaint seeking an apportionment of fault under state law.

Durheim is insured, and has a $1,000,000.00 liability policy. He is represented by counsel in this proceeding. Trial of the state court action was set for December 1, 1997. On August 25, 1997, four days before the close of discovery in the state court litigation, Durheim filed a Chapter 7 petition with this court. Two days later, the plaintiffs filed a motion for relief from stay. The motion was opposed by the debtors and went to hearing on September 18, 1997. Relief from stay was granted and the state court litigation was allowed to proceed. 5 ABR 72      On the same day, the defendants caused the state court action to be removed to bankruptcy court. In the notice of removal, the defendants prayed that the action be removed to district court. The defendants also filed a pleading entitled "Request for Order Transferring Case to U.S. District Court" on September 23, 1997. The plaintiffs filed a motion to abstain and remand and requested a hearing on shortened time. The motion to abstain was set for hearing on shortened time on September 26, 1997. Third party defendant David Norton joined in the plaintiffs' motion to abstain.

Analysis

The defendants' request for transfer is, in reality, a motion to withdraw the reference as to a specific proceeding under Alaska Local Bankruptcy Rule 5011-1(b)(2). Ordinarily, a party has twenty days to object to such a motion. In light of the time constraints posed by the pending litigation, counsel for the plaintiffs indicated his assent to withdrawal of the reference while vigorously maintaining that abstention and remand are appropriate.

Withdrawal of the reference is appropriate for a number of reasons. First of all, wrongful death claims are specifically excluded as core proceedings subject to bankruptcy court jurisdiction under the Code by 28 U.S.C. § 157(b)(2)(B) and (O). Second, under 28 U.S.C. § 157(b)(5), absent permissive abstention the district court must order that personal injury tort and wrongful death claims be tried either in the district court where the bankruptcy is pending or in the district court where the claim arose. Finally, under 28 U.S.C. § 157(e) a bankruptcy judge can only conduct a jury trial with the express consent of the parties. Here, 5 ABR 73      the parties do not consent to the bankruptcy court's conduct of a jury trial. Withdrawal of the reference as to this adversary proceeding is appropriate.

The key issue facing the district court is it's exercise of permissive abstention under 11 U.S.C. § 1334(c)(1). Mandatory abstention under 28 U.S.C. § 1334(c)(2) does not apply to wrongful death claims. 28 U.S.C. § 157(b)(4). 28 U.S.C. § 1334(c)(1) provides:

(c)(1) 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 arising under title 11 or arising in or related to a case under title 11.

The leading Ninth Circuit case interpreting § 1334(c)(1) is Christensen v. Tucson Estates, Inc. (In re Tucson Estates, Inc.), 912 F.2d 1162 (9th Cir 1990). There, the court endorsed the 12 factors set forth in In re Republic Readers's Serv., Inc., 81 B.R. 422, 429 (Bankr. S.D. Tex. 1987), which should be considered when determining whether to abstain. These factors are:

(1) the effect or lack thereof on the efficient administration of the estate if a Court recommends abstention, (2) the extent to which state law issues predominate over bankruptcy issues, (3) the difficulty or unsettled nature of the applicable law, (4) the presence of a related proceeding commenced in state court or other nonbankruptcy court, (5) the jurisdictional basis, if any, other than 28 U.S.C. § 1334, (6) the degree of relatedness or remoteness of the proceeding to the main bankruptcy case, (7) the substance rather than form of an asserted "core" proceeding, (8) the feasibility of severing state law claims from core bankruptcy matters to allow judgments to be entered in state court with enforcement left to the bankruptcy court, (9) the burden of [the . . . court's] docket, (10) the likelihood that the commencement of the proceeding in bankruptcy court involves forum shopping by one of the parties, (11) the existence of a right to a jury trial, and (12) the presence in the proceeding of nondebtor parties.

Tucson Estates, 912 F.2d at 1167 (the Ninth Circuit reversed the bankruptcy court's failure to abstain in a state court dispute between 5 ABR 74      the debtor and homeowners in a mobile home court which the debtor developed). Applying the 12 factors listed in Tucson Estates to this case, I feel abstention is warranted.

1. Abstention would not interfere with the efficient administration of the bankruptcy estate. The state court case is relatively close to trial and the state court has jurisdiction to conclude the matter. I am unfamiliar with the district court's docket, but I assume that given the current caseload, a three to four week trial in Nome would be difficult and there would be appreciable delays surrounding the district court's assumption of jurisdiction of the case.

2. State law issues predominate over bankruptcy issues. Additionally, to the extent applicable, maritime and admiralty law would dominate over any bankruptcy issues. There are really no significant bankruptcy issues involved in the litigation, other than the amount of the plaintiffs' possible claims against the Chapter 7 estate.

3. The difficulty or unsettled nature of the applicable law involves a number of factors. Inasmuch as this matter would be removed to the district court, the difficulty or unsettled nature of the law involving any admiralty and maritime issues in this proceeding would favor retention of the case by the district court.

4. There are no related proceedings commenced in state court or in another non-bankruptcy court.

5. There is no jurisdictional basis for the dispute other than 28 U.S.C. § 1334.

6. The adversary proceeding is not significant to the main bankruptcy case. Following liquidation of the debtors' assets, if any, the proceeds will be distributed to holders of claims allowable in 5 ABR 75      bankruptcy. The litigation will not affect the trustee's liquidation of the estate but, assuming the plaintiffs prevail, it will affect the distribution received by other creditors.

7. By definition, this proceeding is not a core proceeding.

8. Regarding the feasibility of severing claims, inasmuch as there are no core bankruptcy matters, this criteria really does not apply to the case. However, it does not appear feasible to "sever" the debtor's or the plaintiffs' state law claims from whatever admiralty claims may arise or supercede those claims. These issues of law should be dealt with in one proceeding, either in the state or federal forum.

9. I cannot speak to the burden on the district court's docket.

10. I feel that removal of this proceeding involved forum shopping by the defendants. The defendants would prefer to have their claims litigated before a federal district court judge because they feel a federal district court judge would be more familiar with the admiralty and maritime arguments that they are raising. It is also likely that the defendants would like to avoid a trial in Nome before a Nome jury.

11. While there has been a jury demand in this case, the existence of a right to a jury trial is irrelevant other than as to the forum shopping issue. Both the United States District Court and the Alaska Superior Court have jurisdiction to conduct jury trials.

12. There are non-debtor parties present in the proceeding. Alaska Aquatics of Anchorage, Inc. has not filed a Chapter 7 petition, although it is listed as a d/b/a of the debtor Ronald D. Durheim. David Norton is not a debtor in these proceedings.

After weighing all 12 factors, I conclude that abstention is appropriate. Continuation of this litigation in the state superior court 5 ABR 76      would be more efficient. There are no significant bankruptcy issues to be addressed in this litigation. There is no independent jurisdictional basis for retention of the case, despite the existence of possible admiralty and maritime issues. The removal of the case involved forum shopping.

The defendants contend that the Tucson Estates criteria are largely irrelevant due to the nature of this particular case. They argue the district court should accept jurisdiction because the case falls within its admiralty jurisdiction. The defendants failed to remove the case initially, because the "savings to suitors clause," 28 U.S.C. § 1331(1), prohibited such removal. Under the defendants' argument, the case is now where it rightfully belongs.

With the deepest humility and full acknowledgment of my limited understanding of admiralty jurisdiction, I disagree. First, Tucson Estates is binding on this court and the district court. It can't be ignored. Moreover, in my view, a Chapter 7 petition was never intended as a vehicle to establish federal admiralty or maritime jurisdiction in wrongful death actions. It is well established that under the savings to suitors clause, state courts must apply general admiralty and maritime law. Offshore Logistics, Inc., v. Tallentire, 477 U.S. 207, 222-223 (1986). It follows that a state court should not be deprived of jurisdiction mid-stream and the matter referred to federal district court simply because an insured defendant happens to file a Chapter 7 petition. Under the defendants' argument, the savings to suitors clause and the case law that has developed through the years would be rendered meaningless whenever an insured Chapter 7 debtor-defendant files for bankruptcy. In my view, Chapter 7 shouldn't be used as a loophole to 5 ABR 77      avoid the established procedures under 28 U.S.C. § 1333(1). I would abstain and remand.

Conclusion

For the forgoing reasons, I recommend that the reference be withdrawn solely as to this adversary proceeding. I further recommend that the district court abstain and remand this case to the state court for all further proceedings.

DATED: September 29, 1997.

BY THE COURT

Donald MacDonald IV

United States Bankruptcy Judge