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state court's calendar relative to the federal court's calendar," we explained that '[t]he inquiry does not turn exclusively on whether an action could be adjudicated most quickly in state court[, but] is, however, informed by the comparative speeds of adjudication in the federal and state forums.' Id. The District Court found that this factor ultimately weighs in favor of denying abstention. We agree that this factor weighs in favor of denying abstention [summary judgment had already been granted in the auditors' favor in the SDNY], but this factor is not dispositive." The court nonetheless noted that there was no evidence that the Illinois state court would not be able to decide the summary judgment motions within a matter of mere months. Regarding the second factor, the Court noted that because the defense of in pari delicto was a state law defense (and an unsettled one at that), the Illinois state courts had more expertise to decide the issue and/ or remanding the question to the Illinois Supreme Court. Thus, this factor favored abstention. Regarding the third factor, the Court, found that this factor also favored abstention/remand. Said the Court: "We specifically explained in our prior Opinion that '[b]ecause a [bankruptcy] court overseeing a § 304 case is not tasked with overseeing reorganization or liquidation of the estate, we see no reason why, as a result of the § 304 proceeding, the litigants in a state law proceeding would require swift resolution of the state law claims.' The District Court did not explain why such swift resolution of the § 304 proceeding was required here, or even whether a quicker resolution of the Illinois claims would have any effect on the § 304 proceeding. It is difficult to see how these actions will affect the § 304 proceeding, and the Appellees do not claim that they would. They argue that the factor is 'neutral,' but it is not, in our view, neutral. It supports the proposition that these cases can be timely adjudicated in state court without affecting the federal interest in 'related-to' jurisdiction." Finally, the Court found that the fourth factor also favored remand. The Court stated, "[i]t appears undisputed that the Italian reorganization of Parmalat will be completed when the current appeal in Italy is concluded, so that the pendency of the Illinois cases will not affect the reorganization of Parmalat. Nor is there any dispute that PCFL is in liquidation in the Cayman Islands [(in chapter 7 proceedings, there is no administrative urgency or plan of reorganization to facilitate)]." The Court rejected the relevance of the argument that remand would harm creditors by increasing the cost of litigation. The Court noted that the issue was plainly "not whether abstention increases the ultimate payout to creditors, but whether it 'unduly prolongs the administration of the estate' at issue." In sum, the court found that "the four factors weigh in favor of abstention. While some additional time will be expended by remanding these cases, that delay does not outweigh the substantial factors that militate in favor of abstention, namely the complexity of the state law issues, the deference owed to state courts in deciding state law issues where possible, and the minimal effect of the state cases on the federal bankruptcy action and on the administration of the underlying estates." The Court thus vacated the district court decision and transferred the cases to the Northern District of Illinois with instruction to remand to the state court.
©2014 William L. Norton III
