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UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NEW YORK
-----. __
...... . . ----........-X
In re:
Chapter 11
LUNDY'S MANAGEMENT CORP., Case No.: 14-42318-ess
Debtor.
..--..----------- --X
CHERRY HILL GOURMET, INC.,
Plaintiff, Adv. Pro. No.: 18-01046-ess
-against-
LUNDY'S MANAGEMENT CORP.,
Defendant.
---------- ------ -------X
LUNDY'S MANAGEMENT CORP.,
Third-Party Plaintiff,
-against-
SHEEPSHEAD RESTAURANT ASSOCIATES, INC.,
Third-Party Defendant.
---------- -------X
ORDER GRANTING MOTION TO REMAND AND FOR ABSTENTION
The Parties
WHEREAS, Lundy's Management Corp. isa New York domestic busiñêas
("Lundy's")
corporation, which leases the land and buildings located at 1901 Emmeñs Avenue, Brooklyn,
New York (the "Premises"), and subicases the Trqnijses to sublessees; and
WHEREAS, Sheepshead Restdurant Associates, Inc. ("Sheepshead") is a New York
domestic business corporation, which owns the Premises and leases the Premises to Lundy's
pursuuilt to a 49-year commercial net lease commeiicing on March 9, 1994; and
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Hill"
WHEREAS, Cherry Hill Gourmet, Inc. ("Cherry and with Lundy's and
Sheepshead, the "Parties") isa New York domestic busiñêss corpõratiõñ, which subleases a
portion of the Premises where itoperates a restaurst and catering business.
Background - The 2016 New York State Court Procéédhms
WHERBAS, on July 21, 2010, Lundy's and Shccpshcad entered into a lease modification
and amendment agreement which included, among other terms, a deadline of Septembcr 9, 2011,
for Lundy's to cure certain violations and obtain a Temparary Certificate of Occupancy ("TCO")
for the Premises; and
WHEREAS, in November 201 1, Lundy's and Sheepshead entered into a second lease
modification agreement extcñdiñg Lundy's deadlino to cure the violaneñs and toobtain a TCO
to December 9, 2012; and
WHEREAS, on April 15, 2013, Sheepshead served Lundy's with a Notice to Cure based
upon umumous alleged defaults under the lease, incinding Lundy's asserted failure to obtain a
TCO forthe Premises; and
WHEREAS, on April 30, 2013, Lundy's cesñcnced an action enEtled Lundy's
Management Corp. v. Sheepshead Restaurant Associates, Inc.,Index No. 502226/13, in New
York Supreme Court, Kings County (the "New York State Court") (the "2013 Action") seeking,
among other relief,(i)a judgmcat permanently enjoising Sheepshead from declaring Lundy's in
violation of the lease or in default thcrcüñder resulting from any ofthe violatiõüs or defaults
alleged in the Notice to Cure dated April 15, 2013; (ii)a declaratory judgment that Lundy's has
not defaulted under the tenns of the lease and lease amendments; (iii)damages; (iv) a judgment
permanently enjoining the Kings County Civil Court L&T Action, Index No. 61635/2013; (v) a
declamtory judgment directing that allinsurance proceeds, inchÆng the funds held by
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Sheepshead and the funds to be paid in the future, be paid to Lundy's; and (vi)a judgment
equitably estopping Sheepshead from seeking to declare Lundy's in violation of the lease and
seeking to evict Lundy's from the Premises; and
WHEREAS, on April 30, 2013, Lundy's moved for a Yellowstone injunction and
obtahmd a temporary restraining order extending itstime to cure the alleged violations and to
obtain a TCO; and
WHEREAS, on August 27, 20 13, Lundy's and Sheepshead entered into a stipulation and
agreed to extend the deadline for Lundy's to obtain a TCO to May 27, 2014, and ifLundy's
failed to do so, that the Yellowstone injectioñ would be dissolved without further court order,
motion, or notice; and
WHEREAS, on November 21, 2013, Sheepshead served Lundy's a second Notice to
Cure based on additional alleged defadts under the lease; and
WHEREAS, on January 2, 2014, Lundy's obtained a second Yellowstone injüñctiûn in
the 2013 Action, further extending itstime to cure the defaults under the lease; and
WHEREAS, on April 8, 2014, the New York State Court entered an order in the 2013
Action directing Lundy's to pay allreal estate taxes due through April 2014 and topost a bond in
the amount of $1,050,000 by April 11, 2014, and extending the Yê||owdone injü=Mion to April
29, 2014; and
WHEREAS, on April 9, 2014, Lundy's filed a motion seeking leave to appeal the April
8, 2014 order, and thereafter the Appellate Division of the New York Supreme Court, Second
Department (the "Appellate Division") issued a tempórary restraining order pcading a hearing
and determination on the motion forleave to appeal; and
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WHEREAS, on April 29, 2014, the Appellate Division heard Lundy's motion for leave to
appeal and deteriüiiledthat the Yellowstone injunction and Lundy's time to cure had expired; and
WHEREAS, on May 1, 2014, the Appellate Division vacätcd itsApril 29, 2014 order and
(i)held that the New York State Court order directing the posting of the bond was not
appealahle; (ii)exteiided Lundy's deadline to obtain the bond to May 9, 2014; and declined
(iii)
to extend the Yellowstone injunction; and
WHEREAS, on June 27, 2016, Cherry Hill comiñciiced an action in New York State
Court entitled Cheny Hill Gourmet, Inc, v. Lundy's Müñügsinent Corp., Index No. 510844/2016,
New York Supreme Court, Kings County (the "Primary Action") seeking, atnong other relief, to
stay the termination of its leases at the Premises; and
WHEREAS, on June 27, 2016, Cherry Hill obtained a Yellowstone injunction in the
Primary Action; and
WHEREAS, on Pcbruary 20, 2018, Lundy's commenced a third-party action against
Sheepshead in New York State Court entitledLundy's Ma; age;;;cnt Corp. v.Shespshead
Restaurant Associates, Inc., Index No. 510844/2016, New York Supreme Court, Kings County
Action"
(the "Third-Party and together with the Priiüãry Action, the "2016 Action"), and served
a sam-mw with notice, together with an applicstion for an order to show cause to stay any
"disputed"
iciiiiiiiâ‡ÎüüOfLundy's lease and to enjoin Sheapshead from collecting any rents; and
WHEREAS, on March 27, 2018, Sheepshcad siisw wed and asserted counterclaims in the
Third-Party Action and filed opposition in response to the New York State Court's order to show
cause; and
WHEREAS, on March 28, 2018, the New York State Court entered a Yellowstone
injunction in the Action in favor of Lundy's and sta yedSheepshead's termh n of
Third-Party
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the lease, and stayed collection of the penalties allegedly due under the lease for the duration of
the lease.
Lundy's Chapter 11 Case and This Adversmy Proceeding
WHEREAS, on May 8, 2014, Lundy's filed for protection under Chapter 1I of the
Bankruptcy Code (the "Lundy's Chapter 11 Case"); and
WHEREAS, on December 30, 2015, the Court so-ordered a stiputehen between
Sheepshead and Lundy's dismissing the Lundy's Chapter 11 Case with inejüdie, and retaining
jurisdiction over legal fees and to enforce a provision requiring Sheepshead and Lundy's to
execute a lease modification, This provision states:
In the event the Debtor and Landined are unable to execute a final lease
modWation in connection with the binding Confidential Settlement Outline
amlexed as Exhibit A between the parties referenced in paragraph [] 9 of this
atipnineñ on or before January 20, 2016, the partiesare hereby or lered and
directed to proceed to binding mediation regarding and tocomplete the language
of the lease modification agrcemêñt before mediator Simeon Baum within five (5)
days of written demand. The Plaintiffshall provide written comments to
Defendant's proposed lease modification on or before January []8, 2016. If
either party is forced to make a motion to enforce the terms of this provision, the
attorneys'
successfüI party in such motion will be entitled to reasonable costs and
fees. The court shall retain jurisdiction to enforce the terms of this paragraph.
(the"Stipulation"); and
WHEREAS, on January 26, 2016, this Court entered a stipulation and order resolving a
dispute over legalfees between Sheepshead and Lundy's; and
WHEREAS, on July 13, 2017, after several mediation sessions, Shcêpshcad and Lundy's
finalized and executed the lease modification agreement; and
WHEREAS, on January 30, 2018, Sheepshead and Lundy's agreed to an additional
modification of the lease to increase the base rentschedde; and
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WHEREAS, on April I1, 2018, Sheepshead removed the 2016 Action to this Court and
ininated this Adversary Proceeding, Case No. 18-01046; and
WHEREAS, Shêêpshead's Notice of Removal states that the 2016 Action amounts to an
settlement"
effortby Lundy's "to vacate certain terms of [the] [Syipü!secñ of in the Lundy's
Chapter 11 Case.
The Motion To Remand
WHEREAS, on April 25, 2018, Lundy's filedthis Motion for Remand or AbsteñHon (the
"Remand Motion") in thisAdversary Proceeding, seeking an order remsñding this action to New
York State Court pursuant to Judiciary Code Section 1452(b) or, inthe alternative,ebstshag
fmm hearing this action pursuant to Judiciary Code Sections 1334(c)(1) or (c)(2); and
WHEREAS, Lundy's argues in the Remand Motion thatremand or abstention is
necessary because, among other reasons, (i)Shecpsheâd's notice of removal isuntimely; (ii)
Sheepsiicad waived any removal right by filing counterclaims in the 2016 Action on March 27,
2018; (iii)there isno federal question or diversity jurisdiction; (iv) thisCourt retained
jurisdiction only over matters concerning legal fees and fimlizing the lease modification
agreement with the rucdiater, and those issues have been resolved; (y) in the interests of justice
and comity with state courts, pürsüâüi to Judiciary Code Section 1334(c)(1), this Court should
abstain; (vi)the law of the case doctrine requins remand or abstention; and (vii) thir1-party
defendants may not remove an action; and
WHEREAS, on May 18, 2018, Sheepshead filed app0sition to the Remand Motion (the
"Sheepshead Opposition"); and
WHEREAS, Sheepshead argues, among other things, that (i)this Court has subject
matter jurisdiction to deterreiñc the enforceability of the liquidated darnages ciãüses; (ii)the
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notice of removal was timely pumm# to Bankruptcy Rule 9027(a); (iii)Sheepshead did not
waive itsright to remove the Third-Party Action when itfiled itsceüñterclaims in New York
State Court because they were compulsory and were later withdrawn; (iv) the Third-Party Action
"core"
pertains to the enforceability of the Settlement and is,therefore, a proceeding in the
Lundy's Chapter 1I Case; (v) the order entered in the Third-Party Action which remended
numercus landlord-tenant proceedings between Cherry Hill and Lundy's is not the law of the
case; and (vi)Sheepshead correctly removed thisaction from New York State Court to this Court
and was not required first to remove to the District Court; and
WHEREAS, on June 4, 2018, Lundy's filed a reply to Sheepshead Opposition (the
"Lundy's Reply"); and
WHEREAS, on June 8, 2018, Cherry Hill filedan affirmation inpartial support of the
Remand Motion; and
WHEREAS, on June 11, 2018, Lundy's filed a reply to Cherry Hill's affirmation in
partial support of the Remand Motion; and
WHEREAS, on June 13, 2018, Lundy's filed a suppksantal statement with case law
arguing that third-party defendants do not have the right to remove a case; and
WHEREAS, on June 18, 2018, Sheepshcad filed a response to Lundy's supplemcatal
statement; and
WHEREAS, from time to time, and on June 20, 2018, the Court held hearings on the
Remand Motion and the Adversary Proceeding, and conducted se"lamant conferences, at which
the Parties appeared and were heard; and
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WHEREAS, on November 21, 2018, the Court heard argument on the Remand Motion,
at which the Parties appeared and were heard, and the Court considered whether to remand the
Primary Action on consent of the Parties; and
WHEREAS, on December 4, 2018, the Parties entered into a settlement to remand the
Primary Action; and
WHEREAS, on December 7, 20l8, the Court entered an order approviñg the December
4, 2018 settlement and remanding the Primary Action; and
WHEREAS, on December 7, 20I8, the Court held a coñtiñüzd hearing on the Remand
Motion, at which arenwat was cone!uded and the Court considered whether to remand the first,
third,fourth, and fifthcauses of action in thisAdversary Proceeding on consent of the Parties;
and
WHEREAS, on January 16, 2019, the Court entered an order rcñiañding the first,third,
fourth, and fifthcauses of action, leaving one ou¥=ñd45 claim, the second cause of action, in
this Adversary Proceeding; and
WHEREAS, from time to time, and on April 26, 2019, the Court held hearings on the
R emand Motion, the Proceeding, and conducted settlement conferences, at which the
Adversary
Parties appeared and were heard; and
WHEREAS, on May 13, 2019, the Court held a continued pre-trial conference and a
hearing on the Romand Motion, at which the Parties appeared and were heard, and the record
was closed.
T/re Standard for Commencing an Adversary Proceeding in a Closed Case
WHEREAS, Bankruptcy Rule 5005(a)(1) states thatcoiñplaints "shall be filed with the
clerk of the districtwhere the case under the Code is pending"; and
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WHEREAS, courts have found that "[w]here a bankruptcy case is closed and the estate
no longer exists . ., thecourt is without jurisdiction to entertain any proceedings, irrespective of
'core' 'non-core' proceedings."
whether those proceedings are defined as or related Walnut
Assocs. v. Sridel, 164 B.R. 487, 491 (E.D. Pa. 1994). See In re Smith, 2010 WL 1328918, at *2
(E.D,NY. Mar, 30, 2010), o ffd, 645 F.3d 186 (2d Cir. 201 1) (affirming bankruptcy court's
decision to strike the adymary complaint frorn the docket where the debtor's bankruptcy case
was closed and not pending at the time the debtor fileditscomplaint).
The Standard for Remand
WHEREAS, Judiciary Code Section 1452(b) governs the remand of claims and provides:
The court to which such claim or cause of action isrersovcd may remand such
claim or cause of action on any equitable ground. An order entered under this
subsection remanding a claim or cause of action, or a decision not to remand, is
not reviewable by appeal or otherwise by the court ofappeals under section
158(d), 1291, or 1292 of this titleor by the Supremo Court of the United States
under section 1254 of this title;
and
WHEREAS, pursuant to this standard, the question of remand iscewated to the sound
discretion of the court. Drexel Burnham Lambert Group, inc. v. Vigilant Ins. Co. (In re Drexel
Büñi|iciti Lambert Group, Inc.), 130 B,R. 405, 407 (S.D.NJ. 1991); and
WHEREAS, the factors to be cansidered in determining whether remand is appropilate
on equitable grounds include:
(1) the effect on the efficientadi..id:.ation of the bankruptcy estate;
(2) the extent to which issues of statelaw predominate;
(3) the difficulty or unsettled nature of the applicable statelaw;
(4) comity;
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(5) the degree of relatedness or remoteness of the preceeding to the main
bankruptcy case;
(6) the existence of the right to a jury trial;and
(7) prejudice to the invelüütarily removed defendants.
Id.(citations omitted); and
WHEREAS, "[t]ogether, [28 U.S.C. § 1452(b)] and [28 U.S.C. § 1334(c)] strongly
evince the congressional policy that, absent a countervailing circumstance, the trial of statelaw
created issues and rights should be anowed to proceed in statecourt, at least where there isno
basis forfederal jurisdiction independant of [28 U.S.C. § 1334(b)] and the litigation can be
court."
timely completed in state Rand v. Empire Funding Corp., 132 F. Supp. 2d 497, 503 (S.D.
Miss. 2000); and
ground"
WHEREAS, "[e]quitable isnot defined in the Judiciary Code, and "is not to be
understead as distinguishing equitable from legalgrounds in a traditional sense, but, instead,
'··qeitable' apprey.hte"
signals that which isrs.samble, fair,or Geruschat v.Ernst Young LLP
ground"
(In reSeven Fields Dev. Corp.), 505 F.3d 237, 245 (3d Cir. 2007). "Equitable may
iüclude the conclusion that a statecourt isbetter able to address a suit hïvólvi1g quesdens of
state law. Renaissance Cosmetics, Inc. v. Oleg Cassini, Inc., 2000 WL 890191, at *3 (S.D.N.Y.
July 5, 2000); and
WHEREAS, "on a motion to romand the party seeking to sustain the removal, not the
proper."
party seeking remand, bears the burden of demenstating thatremoval was In re AOG
Entm't, Inc.,569 B.R. 563, 572 (Bankr. S,D,N.Y. 2017) (internal quotation omitted).
Whether Remand Is Appropriate Under ,indicimy Code Sections 1447(c) and 1452tb)
WHEREAS, the Court considers the factors set forth in In re Drexel Burnham Lambert
Group, Inc. to determine whether remand isappropriate, in turn; and
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WHEREAS, the effect on the efficientadministration of the bankruptcy estate weighs in
favor of remand, because, among other n:asons, the Lundy's Chapter 1I Case was disrdssed
more than three years ago, on December 30, 2015, by Stipulation and order, so that there no
longer is a Chapter 11 bankruptcy case before this Court to be administered; and
WHEREAS, the extent to which issues of statelaw predominate over bankruptcy issues
weighs in favor of remand, because, among other reasons the quesF.ons presêñted in the second ..
cause of action in thisAdversary Praceedñg ariseprcd--2--My under state law, including New
York contract, real propertý, aikTadimnistrative law; and
WHEREAS, the difficulty or unsettled nature of the applicable state law weighs in favor
of remand, becâüse, among other reasons, the statelaw at issue is,to some extent, a novel
question of enforceability of a contraoi tenn arising under New York state cõñtract, real property,
and administrative law; and
WHEREAS, comity weighs in favor of remand, because, among other reasons, the claim
asserted here was initiated in New York State Court in a commercial landlord-tenant dispute it
concems New York state contract, real property, and admhastive law, and none of the Parties
iscurrently in bankruptcy; and
WHEREAS, the degree of relatedness or remoteness of the proceeding to the main
bankruptcy case weighs in favor of remand, beca=c, among other reasons,j the questions
presented in the second cause of action in thisAdversary Proceedüg, while arising from the
settlement and dismissal of the Lundy's Chapter 11 Case,tdo not appear to raise any issues
requiring the appliesucü of bankruptcy law and are no longer related to a pending case hecause
that case has been dismissed; and
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WHEREAS, the existence of the right to a jury trialweighs neither in favor of nor against
rentand, because, among other tenses, neither party has reqüested to have the second cause of
action in thisAdversary Proceeding tried by a jury; and
WHEREAS, prejudice to the involuntarily removêd defcñdants weighs neither in favor of
nor against remand because, among other reâsons, Lundy's may assert the same defenses and
arguments here and in New York State Court; and
WHEREAS, based on the entirerecord, the Court concludes that the balance of the
relevant factors weighs in favor of thisCourt exercising itsdiscretion to remand the second cause
of action in this Adversary Proceeding to the New York State Court pursuant to Judiciary Code
Section 1452(b).
The Standard for Permissive Abstention
WHEREA5 Judiciary Code Section 1334(c)(1) provides that a bankruptcy court may
abstain from heãriñg a core or non-core proceeding; and
WHEREAS, pursuant to Section 1334(c)(1), pennissive abstentioñ is applicable if
warranted "in the interest of justice, or in the interest of comity with state courts or respect for
State law"; and
WHEREAS, the factors for assessing whether permissive abstention is appropriate are:
(1) the effect or lack thereof on the efficient administration of the estate ifa
court recommends abstention;
(2) the extent to which state law issues predeñúnate over bankruptcy issues;
(3) the difficulty or unsettled nature of the applicable state law;
(4) the preseñce of a related proceeding cemmaced in state court or other
non-banicuptcy court;
(5) the jurisdictional basis, ifany, other than 28 U.S.C. § 1334;
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(6) the degree of relatedness or remoteness of the proceeding to the main
bankruptcy case;
'core'
(7) the substance rather than the form of an asserted proceeding;
(8) the feasibility of severing state law claims from core bankruptcy matters to
allow judgments to be êñtered in state cowt with enforcement left to the
bankruptcy court;
(9) the burden of the court's docket;
(10) the likelihood that the commeiicement of the proceeding in a bankruptcy
court involves forum slicpping by one of the parties;
(I I) the existence of a right to a jury trial;and
(12) the presence in the proceeding of non-debtor parties.
Cody, Inc. v. Cnty. of Orange (In re Cody, Inc.),281 B.R. 182, 190-91 (S.D.N.Y. 2002), aff'd in
part, appeal dismissed in pari, 338 F,3d 89 (2d Cir. 2003); and
as thisCourt has observed when whether permissive abstention is
WHEREAS, samesuling
factors,'"
appropriate, courts have "'considered one or more (not liêcessarily all)of twelve listed
above. Taub v. Taub (Inre Taub), 413 B.R. 81, 92 (Bankr. E,D.N.Y. 2009) (quoting In re Cody,
281 B.R. at 190).
Whether Permissive Abstention Is Appropriate Under Judiciary Code Section 1334(c)(1)
WHEREAS, the Court considers the factors set forth in In re Cody to assess whether
permissive abstention is appropriate, in turn;and
WHEREAS, the effect or lack thereof on the efficient administration of the estate ifa
court recommends absteiition weighs in favor of abstention, because, among other reasons, the
Lundy's Chapter 11 Case was dismissed more than three years ago, on December 30, 2015, by
Stipulation and order, so that there no longer is a Chapter 11 bankruptcy case before this Court to
be administered; and
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FILED: KINGS COUNTY CLERK 01/22/2020 11:30 AM
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FILED: KINGS COUNTY CLERK 01/22/2020 11:30 AM INDEX NO. 510844/2016 NYSCEF DOC. NO. 532 RECEIVED INDEX NYSCEF: NO. 01/22/2020 510844/2016 [FILED: KINGS COUNTY CLERK 09/0 6/2019 03 : 2 6 PMJ NYSCEF DOC. No. Qgge 1-18-01046-ess Doc 32 Filed 07/10/19 Entered 07/1041 gr7qg;4:@aSCEF: 09/06/2019 UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF NEW YORK -----. __ ...... . . ----........-X In re: Chapter 11 LUNDY'S MANAGEMENT CORP., Case No.: 14-42318-ess Debtor. ..--..----------- --X CHERRY HILL GOURMET, INC., Plaintiff, Adv. Pro. No.: 18-01046-ess -against- LUNDY'S MANAGEMENT CORP., Defendant. ---------- ------ -------X LUNDY'S MANAGEMENT CORP., Third-Party Plaintiff, -against- SHEEPSHEAD RESTAURANT ASSOCIATES, INC., Third-Party Defendant. ---------- -------X ORDER GRANTING MOTION TO REMAND AND FOR ABSTENTION The Parties WHEREAS, Lundy's Management Corp. isa New York domestic busiñêas ("Lundy's") corporation, which leases the land and buildings located at 1901 Emmeñs Avenue, Brooklyn, New York (the "Premises"), and subicases the Trqnijses to sublessees; and WHEREAS, Sheepshead Restdurant Associates, Inc. ("Sheepshead") is a New York domestic business corporation, which owns the Premises and leases the Premises to Lundy's pursuuilt to a 49-year commercial net lease commeiicing on March 9, 1994; and FILED: KINGS COUNTY CLERK 01/22/2020 11:30 AM INDEX NO. 510844/2016 NYSCEF DOC. NO. 532 RECEIVED INDEX NYSCEF: NO. 01/22/2020 510844/2016 FILED: KINGS COUNTY CLTRK 09/06/2019 03 : 2 6 PM| NYSCEF DOC. NO . CSSe 1-18-01046-ess Doc 32 Filed 07/10/19 Entered 07/10419dfhad:8 SCEF: 09/06/2019 Hill" WHEREAS, Cherry Hill Gourmet, Inc. ("Cherry and with Lundy's and Sheepshead, the "Parties") isa New York domestic busiñêss corpõratiõñ, which subleases a portion of the Premises where itoperates a restaurst and catering business. Background - The 2016 New York State Court Procéédhms WHERBAS, on July 21, 2010, Lundy's and Shccpshcad entered into a lease modification and amendment agreement which included, among other terms, a deadline of Septembcr 9, 2011, for Lundy's to cure certain violations and obtain a Temparary Certificate of Occupancy ("TCO") for the Premises; and WHEREAS, in November 201 1, Lundy's and Sheepshead entered into a second lease modification agreement extcñdiñg Lundy's deadlino to cure the violaneñs and toobtain a TCO to December 9, 2012; and WHEREAS, on April 15, 2013, Sheepshead served Lundy's with a Notice to Cure based upon umumous alleged defaults under the lease, incinding Lundy's asserted failure to obtain a TCO forthe Premises; and WHEREAS, on April 30, 2013, Lundy's cesñcnced an action enEtled Lundy's Management Corp. v. Sheepshead Restaurant Associates, Inc.,Index No. 502226/13, in New York Supreme Court, Kings County (the "New York State Court") (the "2013 Action") seeking, among other relief,(i)a judgmcat permanently enjoising Sheepshead from declaring Lundy's in violation of the lease or in default thcrcüñder resulting from any ofthe violatiõüs or defaults alleged in the Notice to Cure dated April 15, 2013; (ii)a declaratory judgment that Lundy's has not defaulted under the tenns of the lease and lease amendments; (iii)damages; (iv) a judgment permanently enjoining the Kings County Civil Court L&T Action, Index No. 61635/2013; (v) a declamtory judgment directing that allinsurance proceeds, inchÆng the funds held by 2 FILED: KINGS COUNTY CLERK 01/22/2020 11:30 AM INDEX NO. 510844/2016 NYSCEF DOC. NO. 532 RECEIVED NYSCEF: 01/22/2020 510844/2016 INDEX NO, FILED : KINGS COUNTY CLERK 09/06/2019 03 : 2 6 PM NYSCEF DOC. NO . QBBe 1-18-01046-ess Doc 32 Filed 07/10/19 Entered 07/10fies1r7tdd:Q9SCsF: 09/06/2019 Sheepshead and the funds to be paid in the future, be paid to Lundy's; and (vi)a judgment equitably estopping Sheepshead from seeking to declare Lundy's in violation of the lease and seeking to evict Lundy's from the Premises; and WHEREAS, on April 30, 2013, Lundy's moved for a Yellowstone injunction and obtahmd a temporary restraining order extending itstime to cure the alleged violations and to obtain a TCO; and WHEREAS, on August 27, 20 13, Lundy's and Sheepshead entered into a stipulation and agreed to extend the deadline for Lundy's to obtain a TCO to May 27, 2014, and ifLundy's failed to do so, that the Yellowstone injectioñ would be dissolved without further court order, motion, or notice; and WHEREAS, on November 21, 2013, Sheepshead served Lundy's a second Notice to Cure based on additional alleged defadts under the lease; and WHEREAS, on January 2, 2014, Lundy's obtained a second Yellowstone injüñctiûn in the 2013 Action, further extending itstime to cure the defaults under the lease; and WHEREAS, on April 8, 2014, the New York State Court entered an order in the 2013 Action directing Lundy's to pay allreal estate taxes due through April 2014 and topost a bond in the amount of $1,050,000 by April 11, 2014, and extending the Yê||owdone injü=Mion to April 29, 2014; and WHEREAS, on April 9, 2014, Lundy's filed a motion seeking leave to appeal the April 8, 2014 order, and thereafter the Appellate Division of the New York Supreme Court, Second Department (the "Appellate Division") issued a tempórary restraining order pcading a hearing and determination on the motion forleave to appeal; and 3 FILED: KINGS COUNTY CLERK 01/22/2020 11:30 AM INDEX NO. 510844/2016 NYSCEF DOC. NO. 532 RECEIVED INDEX NYSCEF: NO. 01/22/2020 510844/2016 [F ILED : KINGS COUNTY CLERK 0 9 /O 6 / 2 0 19 03 : 2 6 PM NYSCEF DOC. NO. 0880 1-18-01046-ess Doc 32 Filed 07/10/19 Entered07/10ftaFE/ SCEF: 09/06/2019 WHEREAS, on April 29, 2014, the Appellate Division heard Lundy's motion for leave to appeal and deteriüiiledthat the Yellowstone injunction and Lundy's time to cure had expired; and WHEREAS, on May 1, 2014, the Appellate Division vacätcd itsApril 29, 2014 order and (i)held that the New York State Court order directing the posting of the bond was not appealahle; (ii)exteiided Lundy's deadline to obtain the bond to May 9, 2014; and declined (iii) to extend the Yellowstone injunction; and WHEREAS, on June 27, 2016, Cherry Hill comiñciiced an action in New York State Court entitled Cheny Hill Gourmet, Inc, v. Lundy's Müñügsinent Corp., Index No. 510844/2016, New York Supreme Court, Kings County (the "Primary Action") seeking, atnong other relief, to stay the termination of its leases at the Premises; and WHEREAS, on June 27, 2016, Cherry Hill obtained a Yellowstone injunction in the Primary Action; and WHEREAS, on Pcbruary 20, 2018, Lundy's commenced a third-party action against Sheepshead in New York State Court entitledLundy's Ma; age;;;cnt Corp. v.Shespshead Restaurant Associates, Inc., Index No. 510844/2016, New York Supreme Court, Kings County Action" (the "Third-Party and together with the Priiüãry Action, the "2016 Action"), and served a sam-mw with notice, together with an applicstion for an order to show cause to stay any "disputed" iciiiiiiiâ‡ÎüüOfLundy's lease and to enjoin Sheapshead from collecting any rents; and WHEREAS, on March 27, 2018, Sheepshcad siisw wed and asserted counterclaims in the Third-Party Action and filed opposition in response to the New York State Court's order to show cause; and WHEREAS, on March 28, 2018, the New York State Court entered a Yellowstone injunction in the Action in favor of Lundy's and sta yedSheepshead's termh n of Third-Party 4 FILED: KINGS COUNTY CLERK 01/22/2020 11:30 AM INDEX NO. 510844/2016 NYSCEF DOC. NO. 532 RECEIVED INDEX NYSCEF: NO. 01/22/2020 510844/2016 {FILEI5 KINGS COUNTY CLERK O 9 / O6 /2 0 19 03 : 2 6 PM) NYSCEF DOC. NO. 60 1-18-01046-ess Doc 32 Filed 07/10/19 Entered 07/10£ices117tdA00SCEF: 09/06/2019 the lease, and stayed collection of the penalties allegedly due under the lease for the duration of the lease. Lundy's Chapter 11 Case and This Adversmy Proceeding WHEREAS, on May 8, 2014, Lundy's filed for protection under Chapter 1I of the Bankruptcy Code (the "Lundy's Chapter 11 Case"); and WHEREAS, on December 30, 2015, the Court so-ordered a stiputehen between Sheepshead and Lundy's dismissing the Lundy's Chapter 11 Case with inejüdie, and retaining jurisdiction over legal fees and to enforce a provision requiring Sheepshead and Lundy's to execute a lease modification, This provision states: In the event the Debtor and Landined are unable to execute a final lease modWation in connection with the binding Confidential Settlement Outline amlexed as Exhibit A between the parties referenced in paragraph [] 9 of this atipnineñ on or before January 20, 2016, the partiesare hereby or lered and directed to proceed to binding mediation regarding and tocomplete the language of the lease modification agrcemêñt before mediator Simeon Baum within five (5) days of written demand. The Plaintiffshall provide written comments to Defendant's proposed lease modification on or before January []8, 2016. If either party is forced to make a motion to enforce the terms of this provision, the attorneys' successfüI party in such motion will be entitled to reasonable costs and fees. The court shall retain jurisdiction to enforce the terms of this paragraph. (the"Stipulation"); and WHEREAS, on January 26, 2016, this Court entered a stipulation and order resolving a dispute over legalfees between Sheepshead and Lundy's; and WHEREAS, on July 13, 2017, after several mediation sessions, Shcêpshcad and Lundy's finalized and executed the lease modification agreement; and WHEREAS, on January 30, 2018, Sheepshead and Lundy's agreed to an additional modification of the lease to increase the base rentschedde; and 5 FILED: KINGS COUNTY CLERK 01/22/2020 11:30 AM INDEX NO. 510844/2016 NYSCEF DOC. NO. 532 RECEIVED INDEX NYSCEF: NO. 01/22/2020 510844/2016 FILED : KINGS COUNTY CLERK 0 9 / 0 6 /2 019 03 : 2 6 PM) NYSCEF DOC. NO. QaSe 1-18-01046-ess Doc 32 Filed 07/10/19 Entered 07/10ta8815/.did:00SCEF: 09/06/2019 WHEREAS, on April I1, 2018, Sheepshead removed the 2016 Action to this Court and ininated this Adversary Proceeding, Case No. 18-01046; and WHEREAS, Shêêpshead's Notice of Removal states that the 2016 Action amounts to an settlement" effortby Lundy's "to vacate certain terms of [the] [Syipü!secñ of in the Lundy's Chapter 11 Case. The Motion To Remand WHEREAS, on April 25, 2018, Lundy's filedthis Motion for Remand or AbsteñHon (the "Remand Motion") in thisAdversary Proceeding, seeking an order remsñding this action to New York State Court pursuant to Judiciary Code Section 1452(b) or, inthe alternative,ebstshag fmm hearing this action pursuant to Judiciary Code Sections 1334(c)(1) or (c)(2); and WHEREAS, Lundy's argues in the Remand Motion thatremand or abstention is necessary because, among other reasons, (i)Shecpsheâd's notice of removal isuntimely; (ii) Sheepsiicad waived any removal right by filing counterclaims in the 2016 Action on March 27, 2018; (iii)there isno federal question or diversity jurisdiction; (iv) thisCourt retained jurisdiction only over matters concerning legal fees and fimlizing the lease modification agreement with the rucdiater, and those issues have been resolved; (y) in the interests of justice and comity with state courts, pürsüâüi to Judiciary Code Section 1334(c)(1), this Court should abstain; (vi)the law of the case doctrine requins remand or abstention; and (vii) thir1-party defendants may not remove an action; and WHEREAS, on May 18, 2018, Sheepshead filed app0sition to the Remand Motion (the "Sheepshead Opposition"); and WHEREAS, Sheepshead argues, among other things, that (i)this Court has subject matter jurisdiction to deterreiñc the enforceability of the liquidated darnages ciãüses; (ii)the 6 FILED: KINGS COUNTY CLERK 01/22/2020 11:30 AM INDEX NO. 510844/2016 NYSCEF DOC. NO. 532 RECEIVED INDEX NYSCEF: NO. 01/22/2020 510844/2016 [F ILED : KÏNGS COUNTY CLERK O9 / O6 / 2 019 03 : 2 6 PM1 NYSCEF DOC. NO. 0A60 1-18-01046-ess Doc 32 FHed 07/10/19 Entered 07/1Qia9skT/dd:99SCEF: 09/06/2019 notice of removal was timely pumm# to Bankruptcy Rule 9027(a); (iii)Sheepshead did not waive itsright to remove the Third-Party Action when itfiled itsceüñterclaims in New York State Court because they were compulsory and were later withdrawn; (iv) the Third-Party Action "core" pertains to the enforceability of the Settlement and is,therefore, a proceeding in the Lundy's Chapter 1I Case; (v) the order entered in the Third-Party Action which remended numercus landlord-tenant proceedings between Cherry Hill and Lundy's is not the law of the case; and (vi)Sheepshead correctly removed thisaction from New York State Court to this Court and was not required first to remove to the District Court; and WHEREAS, on June 4, 2018, Lundy's filed a reply to Sheepshead Opposition (the "Lundy's Reply"); and WHEREAS, on June 8, 2018, Cherry Hill filedan affirmation inpartial support of the Remand Motion; and WHEREAS, on June 11, 2018, Lundy's filed a reply to Cherry Hill's affirmation in partial support of the Remand Motion; and WHEREAS, on June 13, 2018, Lundy's filed a suppksantal statement with case law arguing that third-party defendants do not have the right to remove a case; and WHEREAS, on June 18, 2018, Sheepshcad filed a response to Lundy's supplemcatal statement; and WHEREAS, from time to time, and on June 20, 2018, the Court held hearings on the Remand Motion and the Adversary Proceeding, and conducted se"lamant conferences, at which the Parties appeared and were heard; and 7 FILED: KINGS COUNTY CLERK 01/22/2020 11:30 AM INDEX NO. 510844/2016 NYSCEF DOC. NO. 532 RECEIVED INDEX NYSCEF: NO. 01/22/2020 510844/2016 (F ILED : KINGS COUNTY CLERK 0 9 /O 6 /2 019 03 : 2 6 PM| NYSCEF DOC. NO. Case 1-18-01046-ess Doc 32 Filed 07/10/19 Entered 07/10u8E1rTr id:00SCEF: 09/06/2019 WHEREAS, on November 21, 2018, the Court heard argument on the Remand Motion, at which the Parties appeared and were heard, and the Court considered whether to remand the Primary Action on consent of the Parties; and WHEREAS, on December 4, 2018, the Parties entered into a settlement to remand the Primary Action; and WHEREAS, on December 7, 20l8, the Court entered an order approviñg the December 4, 2018 settlement and remanding the Primary Action; and WHEREAS, on December 7, 20I8, the Court held a coñtiñüzd hearing on the Remand Motion, at which arenwat was cone!uded and the Court considered whether to remand the first, third,fourth, and fifthcauses of action in thisAdversary Proceeding on consent of the Parties; and WHEREAS, on January 16, 2019, the Court entered an order rcñiañding the first,third, fourth, and fifthcauses of action, leaving one ou¥=ñd45 claim, the second cause of action, in this Adversary Proceeding; and WHEREAS, from time to time, and on April 26, 2019, the Court held hearings on the R emand Motion, the Proceeding, and conducted settlement conferences, at which the Adversary Parties appeared and were heard; and WHEREAS, on May 13, 2019, the Court held a continued pre-trial conference and a hearing on the Romand Motion, at which the Parties appeared and were heard, and the record was closed. T/re Standard for Commencing an Adversary Proceeding in a Closed Case WHEREAS, Bankruptcy Rule 5005(a)(1) states thatcoiñplaints "shall be filed with the clerk of the districtwhere the case under the Code is pending"; and 8 FILED: KINGS COUNTY CLERK 01/22/2020 11:30 AM INDEX NO. 510844/2016 NYSCEF DOC. NO. 532 RECEIVED INDEX NYSCEF: NO. 01/22/2020 510844/2016 IF ILED : KINGS COUNTY CLERK 0 9 /d672 0 19 03 : 2 6 PM) NYSCEF DOC. NO. Case 1-18-01046-ess Doc 32 Filed 07/10/19 Entered 07/10tt8EWtild:00SCEF: 09/06/2019 WHEREAS, courts have found that "[w]here a bankruptcy case is closed and the estate no longer exists . ., thecourt is without jurisdiction to entertain any proceedings, irrespective of 'core' 'non-core' proceedings." whether those proceedings are defined as or related Walnut Assocs. v. Sridel, 164 B.R. 487, 491 (E.D. Pa. 1994). See In re Smith, 2010 WL 1328918, at *2 (E.D,NY. Mar, 30, 2010), o ffd, 645 F.3d 186 (2d Cir. 201 1) (affirming bankruptcy court's decision to strike the adymary complaint frorn the docket where the debtor's bankruptcy case was closed and not pending at the time the debtor fileditscomplaint). The Standard for Remand WHEREAS, Judiciary Code Section 1452(b) governs the remand of claims and provides: The court to which such claim or cause of action isrersovcd may remand such claim or cause of action on any equitable ground. An order entered under this subsection remanding a claim or cause of action, or a decision not to remand, is not reviewable by appeal or otherwise by the court ofappeals under section 158(d), 1291, or 1292 of this titleor by the Supremo Court of the United States under section 1254 of this title; and WHEREAS, pursuant to this standard, the question of remand iscewated to the sound discretion of the court. Drexel Burnham Lambert Group, inc. v. Vigilant Ins. Co. (In re Drexel Büñi|iciti Lambert Group, Inc.), 130 B,R. 405, 407 (S.D.NJ. 1991); and WHEREAS, the factors to be cansidered in determining whether remand is appropilate on equitable grounds include: (1) the effect on the efficientadi..id:.ation of the bankruptcy estate; (2) the extent to which issues of statelaw predominate; (3) the difficulty or unsettled nature of the applicable statelaw; (4) comity; 9 FILED: KINGS COUNTY CLERK 01/22/2020 11:30 AM INDEX NO. 510844/2016 NYSCEF DOC. NO. 532 RECEIVED INDEX NYSCEF: NO. 01/22/2020 510844/2016 [EILED : KINGS COUNTY CLERK 0 9/0 6 /2019 03 : 2 6 PM) NŸSCEF DOC. NO. CASe 1-18-01046-ess Doc 32 Filed 07/10/19 fEntered 07/108881i¾14:9 CEF: 09/06/2019 (5) the degree of relatedness or remoteness of the preceeding to the main bankruptcy case; (6) the existence of the right to a jury trial;and (7) prejudice to the invelüütarily removed defendants. Id.(citations omitted); and WHEREAS, "[t]ogether, [28 U.S.C. § 1452(b)] and [28 U.S.C. § 1334(c)] strongly evince the congressional policy that, absent a countervailing circumstance, the trial of statelaw created issues and rights should be anowed to proceed in statecourt, at least where there isno basis forfederal jurisdiction independant of [28 U.S.C. § 1334(b)] and the litigation can be court." timely completed in state Rand v. Empire Funding Corp., 132 F. Supp. 2d 497, 503 (S.D. Miss. 2000); and ground" WHEREAS, "[e]quitable isnot defined in the Judiciary Code, and "is not to be understead as distinguishing equitable from legalgrounds in a traditional sense, but, instead, '··qeitable' apprey.hte" signals that which isrs.samble, fair,or Geruschat v.Ernst Young LLP ground" (In reSeven Fields Dev. Corp.), 505 F.3d 237, 245 (3d Cir. 2007). "Equitable may iüclude the conclusion that a statecourt isbetter able to address a suit hïvólvi1g quesdens of state law. Renaissance Cosmetics, Inc. v. Oleg Cassini, Inc., 2000 WL 890191, at *3 (S.D.N.Y. July 5, 2000); and WHEREAS, "on a motion to romand the party seeking to sustain the removal, not the proper." party seeking remand, bears the burden of demenstating thatremoval was In re AOG Entm't, Inc.,569 B.R. 563, 572 (Bankr. S,D,N.Y. 2017) (internal quotation omitted). Whether Remand Is Appropriate Under ,indicimy Code Sections 1447(c) and 1452tb) WHEREAS, the Court considers the factors set forth in In re Drexel Burnham Lambert Group, Inc. to determine whether remand isappropriate, in turn; and 10 FILED: KINGS COUNTY CLERK 01/22/2020 11:30 AM INDEX NO. 510844/2016 NYSCEF DOC. NO. 532 RECEIVED INDEX NYSCEF: NO. 01/22/2020 510844/2016 [FILED : KINGS COUNTY CLERK 0 9 / 06 / 2 019 03 : 2 6 PM| NYSCEF DOC. NO. Çpse 1-18-01046-ess Doc 32 Filed 07/10/19 Eñtered 07/10 ap:99SCEF: 09/06/2D19 WHEREAS, the effect on the efficientadministration of the bankruptcy estate weighs in favor of remand, because, among other n:asons, the Lundy's Chapter 1I Case was disrdssed more than three years ago, on December 30, 2015, by Stipulation and order, so that there no longer is a Chapter 11 bankruptcy case before this Court to be administered; and WHEREAS, the extent to which issues of statelaw predominate over bankruptcy issues weighs in favor of remand, because, among other reasons the quesF.ons presêñted in the second .. cause of action in thisAdversary Praceedñg ariseprcd--2--My under state law, including New York contract, real propertý, aikTadimnistrative law; and WHEREAS, the difficulty or unsettled nature of the applicable state law weighs in favor of remand, becâüse, among other reasons, the statelaw at issue is,to some extent, a novel question of enforceability of a contraoi tenn arising under New York state cõñtract, real property, and administrative law; and WHEREAS, comity weighs in favor of remand, because, among other reasons, the claim asserted here was initiated in New York State Court in a commercial landlord-tenant dispute it concems New York state contract, real property, and admhastive law, and none of the Parties iscurrently in bankruptcy; and WHEREAS, the degree of relatedness or remoteness of the proceeding to the main bankruptcy case weighs in favor of remand, beca=c, among other reasons,j the questions presented in the second cause of action in thisAdversary Proceedüg, while arising from the settlement and dismissal of the Lundy's Chapter 11 Case,tdo not appear to raise any issues requiring the appliesucü of bankruptcy law and are no longer related to a pending case hecause that case has been dismissed; and 11 FILED: KINGS COUNTY CLERK 01/22/2020 11:30 AM INDEX NO. 510844/2016 NYSCEF DOC. NO. 532 RECEIVED INDEX NYSCEF: NO. 01/22/2020 510844/2016 FILED : KINGS COUNTY CLERK 0 9 /O 6 / 2 019 03 : 2 6 PM NYSCEF DOC. NO. Ç@pe 1-18-01046-ess Doc 32 Ried 07/10/19 Entered 07/10 W1fÇgd:QQSCEF: 09/06/2019 WHEREAS, the existence of the right to a jury trialweighs neither in favor of nor against rentand, because, among other tenses, neither party has reqüested to have the second cause of action in thisAdversary Proceeding tried by a jury; and WHEREAS, prejudice to the involuntarily removêd defcñdants weighs neither in favor of nor against remand because, among other reâsons, Lundy's may assert the same defenses and arguments here and in New York State Court; and WHEREAS, based on the entirerecord, the Court concludes that the balance of the relevant factors weighs in favor of thisCourt exercising itsdiscretion to remand the second cause of action in this Adversary Proceeding to the New York State Court pursuant to Judiciary Code Section 1452(b). The Standard for Permissive Abstention WHEREA5 Judiciary Code Section 1334(c)(1) provides that a bankruptcy court may abstain from heãriñg a core or non-core proceeding; and WHEREAS, pursuant to Section 1334(c)(1), pennissive abstentioñ is applicable if warranted "in the interest of justice, or in the interest of comity with state courts or respect for State law"; and WHEREAS, the factors for assessing whether permissive abstention is appropriate are: (1) the effect or lack thereof on the efficient administration of the estate ifa court recommends abstention; (2) the extent to which state law issues predeñúnate over bankruptcy issues; (3) the difficulty or unsettled nature of the applicable state law; (4) the preseñce of a related proceeding cemmaced in state court or other non-banicuptcy court; (5) the jurisdictional basis, ifany, other than 28 U.S.C. § 1334; 12 FILED: KINGS COUNTY CLERK 01/22/2020 11:30 AM INDEX NO. 510844/2016 NYSCEF DOC. NO. 532 RECEIVED NYSCEF: 01/22/2020 F ILED : KINGS COUNTY CLERK 0 9 0 6 /2 019 03 : INDEX NO. 510844/2016 / 2 6 PM| NYSCEF DOC. NO, g§0 1-18-01046-ess Doc 32 Med 07/10/19 I-ntered 07/10f 417946:@SCEF: 09/06/2019 (6) the degree of relatedness or remoteness of the proceeding to the main bankruptcy case; 'core' (7) the substance rather than the form of an asserted proceeding; (8) the feasibility of severing state law claims from core bankruptcy matters to allow judgments to be êñtered in state cowt with enforcement left to the bankruptcy court; (9) the burden of the court's docket; (10) the likelihood that the commeiicement of the proceeding in a bankruptcy court involves forum slicpping by one of the parties; (I I) the existence of a right to a jury trial;and (12) the presence in the proceeding of non-debtor parties. Cody, Inc. v. Cnty. of Orange (In re Cody, Inc.),281 B.R. 182, 190-91 (S.D.N.Y. 2002), aff'd in part, appeal dismissed in pari, 338 F,3d 89 (2d Cir. 2003); and as thisCourt has observed when whether permissive abstention is WHEREAS, samesuling factors,'" appropriate, courts have "'considered one or more (not liêcessarily all)of twelve listed above. Taub v. Taub (Inre Taub), 413 B.R. 81, 92 (Bankr. E,D.N.Y. 2009) (quoting In re Cody, 281 B.R. at 190). Whether Permissive Abstention Is Appropriate Under Judiciary Code Section 1334(c)(1) WHEREAS, the Court considers the factors set forth in In re Cody to assess whether permissive abstention is appropriate, in turn;and WHEREAS, the effect or lack thereof on the efficient administration of the estate ifa court recommends absteiition weighs in favor of abstention, because, among other reasons, the Lundy's Chapter 11 Case was dismissed more than three years ago, on December 30, 2015, by Stipulation and order, so that there no longer is a Chapter 11 bankruptcy case before this Court to be administered; and 13 FILED: KINGS COUNTY CLERK 01/22/2020 11:30 AM