County filed complaint in state court alleging that related entities directed the misappropriation of $21,000,000 of statutorily restricted public funds for expanding road to five lanes and instead utilized the funds on football franchise’s headquarters and practice facility, in connection with mixed-use development that included sports and entertainment venues.
Entities removed the case to federal district court, seeking ultimate reference to bankruptcy court, based on developer’s Chapter 11 filing in the United States Bankruptcy Court for the District of Delaware. County moved to remand.
The District Court held that:
- County’s removed action was “related to” developer’s Chapter 11 case, but
- Court lacked “arising in” jurisdiction over county’s action.
County’s removed action alleging that related entities directed the misappropriation of $21,000,000 of statutorily restricted public funds for expanding road to five lanes and instead utilized the funds on football franchise’s headquarters and practice facility, in connection with mixed-use development that included sports and entertainment venues, was “related to” developer’s Chapter 11 case, for purposes of bankruptcy jurisdiction, because recovery by county against related entities could affect the claim that county asserted in developer’s bankruptcy case for the same amount, existence of debtor’s indemnification clause could conceivably have an effect on the administration of the bankruptcy estate, and debtor’s adversary proceeding against county overlapped significantly with county’s claims.
District Court lacked “arising in” jurisdiction over county’s removed action alleging that related entities directed the misappropriation of $21,000,000 payment to Chapter 11 debtor-developer consisting of statutorily restricted public funds for expanding road to five lanes and instead utilized the funds on football franchise’s headquarters and practice facility, in connection with mixed-use development that included sports and entertainment venues, because all of county’s claims for civil conspiracy, negligence and negligence per se, interference with contractual relations, and negligent misrepresentation existed antecedent to debtor’s bankruptcy filing, and a claim that pre-dated Chapter 11 filing could not be said to have arisen within that case.