UNITED STATES BANKRUPTCY COURT

EASTERN DISTRICT OF KENTUCKY

COVINGTON DIVISION

IN RE:

MISSION INVESTORS/COVINGTON, L.P.

DEBTOR

MISSION INVESTORS/COVINGTON, L.P. PLAINTIFF

VS: ADV. NO. 99-2050

CSX TRANSPORTATION, INC., ET AL DEFENDANTS

MEMORANDUM OPINION

This matter is before the court upon the Motion of defendant, Duro Bag Manufacturing Company (ADuro@), pursuant to 28 U.S.C. '1334(c)(1) and (2) for permissive or mandatory abstention and to remand the within adversary proceeding to the Kenton Circuit Court, Kentucky, for further proceedings and the Motion of the plaintiff, debtor in a bankruptcy proceeding, for a change of venue for this adversary proceeding to the United States Bankruptcy Court for the Northern District of Texas at Dallas, where the Chapter 11 proceeding of the plaintiff/debtor is pending. For the reasons set forth below, this court will abstain from hearing this adversary proceeding and remand the matter to the Kenton Circuit Court for further proceedings.

The plaintiff is a limited partnership with principal offices in Texas. It owns interests in four tracts of real estate located in Kenton County, Kentucky, which tracts are subject to perpetual leases in favor of defendant Duro. Duro operates a manufacturing facility on a site which includes the tracts in which the plaintiff has an interest. The other defendants are other interest holders and parties related to the transaction wherein plaintiff acquired these interests in these tracts. Plaintiff acquired its interest in these tracts for the sum of $60,000 on July 30, 1996. Some approximately seven months later, it filed this action alleging that it was entitled to damages and other relief because Duro had environmentally contaminated the property and removed or lost certain personal property associated with the interest of plaintiff. The action, filed in the Kenton Circuit Court, has been pending slightly less than three years and apparently has been actively practiced. Because of contentious discovery the matter has progressed slowly.

On November 22, 1999, plaintiff filed a voluntary Chapter 11 proceeding in the United States Bankruptcy Court for the Northern District of Texas and it was assigned Case No. 99-38116. Plaintiff then removed the present action to this court. Apparently in conjunction with that filing, plaintiff has filed an adversary proceeding in the Texas bankruptcy court restating some or all of the causes of action it stated in this action.

This action, filed in the state court prior to bankruptcy, did not arise in or under Title 11 but is related to a proceeding under Title 11 since the outcome could have an effect on the bankruptcy proceeding. Robinson v. Michigan Consolidated Gas Co., 918 F.2d 579 (6^th Cir.1990); Pacor, Inc. v. Higgins (In re Pacor, Inc.), 743 F.2d 984 (3d Cir. 1984). The determination of whether to abstain is a core proceeding pursuant to 28 U.S.C. '157(b)(2)(A). Beneficial Nat=l Bank USA v. Best Reception Systems, Inc., (In re Best Reception Systems, Inc.), 220 B.R. 932 (Bankr.E.D.Tenn. 1998); In re Finkley, 203 B.R. 95 (Bankr.N.D.Ill. 1996). While the movant has brought its motion under both paragraphs (1) and (2) of 28 U.S.C. '1334(c), because the court concludes that permissive abstention is appropriate, it will not be necessary to address the question of mandatory abstention.

Permissive abstention is provided for by 11 U.S.C. '1334(c)(1) which provides:

Nothing in this section prevents a district court in the interest of justice, or in the interest of comity with the 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.

Movant cites several persuasive cases from bankruptcy courts in the Sixth Circuit. Beneficial Nat=l Bank USA v. Best Reception Systems, Inc., (In re Best Reception Systems, Inc.), supra; Nationwide Roofing and Sheet Metal, Inc. v. Cincinnati Insurance Company (In re Nationwide Roofing and Sheet Metal, Inc.), 130 B.R. 768 (Bankr.S.D.Ohio 1991); Brothers v. Tremaine (In re Tremaine), 188 B.R. 380 (Bankr.S.D.Ohio 1995). These cases distill a list of factors to consider when determining whether permissive abstention is appropriate. Those factors include (Best Reception, at page 953): 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 a state court or other nonbankruptcy court; 5) the jurisdictional basis, if any, other than 28 U.S.C.A. '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 courts; 9) the burden of the bankruptcy 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 non-debtor parties.

In applying these factors to the present circumstances, this court believes permissive abstention is appropriate for the following reasons. The court cannot say at this point that allowing the matter to be pursued in the state court will affect the administration of the bankruptcy estate. The suit involves solely state law issues and no bankruptcy issues. While the issues involved are issues involving real property under leases which apparently are older than 100 years, this court cannot address the difficulty or unsettled nature of the applicable law. This action began as a state court action. The state court has jurisdiction to render judgments regarding real property and injury thereto within its boundaries. The court cannot say that the outcome of this action is remote to the bankruptcy proceeding because it involves an adjudication concerning the sole assets of the bankruptcy proceeding. The court believes that it is likely that the commencement of the Chapter 11 proceeding in the Northern District of Texas involves some degree of forum shopping or delay on the part of the debtor/plaintiff. The plaintiff has demanded a jury trial in the proceeding and the state court can conduct such proceeding while this court can only do so pursuant to agreement of the parties and designation by the District Court to conduct the jury trial. Nothing indicates to this court that the state court cannot try and conclude this case as swiftly as this court could. Additionally, there are present in this case several non-debtor parties.

This proceeding was begun by the debtor and, in fairness, should be pursued and concluded in the original forum chosen by the debtor, the Kenton Circuit Court. A separate order will be entered herein.

Dated this day of January, 2000.

BY THE COURT

JUDGE WILLIAM S. HOWARD

COPIES TO:

W. Timothy Miller, Esq.

W. Gregory King, Esq.

Philip L. Hanrahan, Esq.

Robert B. Craig, Esq.

James F. Brockman, Esq.

Michelle E. Roberts, Esq.

Thomas R. Schuck, Esq.

Robert W. Carran, Esq.

James F. Ogden, Esq.

Mark A. Robinson, Esq.

Neil Sobol, Esq.

Michael J. Betz, Esq.

Jeanine A. Cadena, Esq.

U.S. Trustee

Mary Ann Woltenberg, Clerk