Moelis & Company LLC v. Wilmington Trust FSB

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
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:
In re: 	: 	Chapter 11
:
General Growth Properties, Inc., et al., 	: 	Case No. 09-11977 (ALG)
:
Reorganized Debtors. 	: 	(Jointly Administered)
:
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MOELIS & COMPANY LLC, 	:
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Plaintiff, 	: 	Adv. Proc. No. 10-04273 (ALG)
-against- 	:
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WILMINGTON TRUST FSB, 	:
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Defendant. 	:
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ORDER DENYING MOTION TO REMAND,
OR IN THE ALTERNATIVE, FOR ABSTENTION
A P P E A R A N C E S:
LATHAM & WATKINS LLP
Attorneys for Moelis & Company LLC
By: 	Blair G. Connelly
Michael J. Riela
John D. Castiglione
885 Third Avenue
New York, NY
FOLEY & LARDNER LLP
Attorneys for Wilmington Trust FSB
By: 	Douglas E. Spelfogel
Derek L. Wright
90 Park Avenue
New York, NY 10005
By: 	John A. Simon
Adam J. Wienner
500 Woodward Avenue, Suite 2700
Detroit, MI 48226
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ALLAN L. GROPPER
UNITED STATES BANKRUPTCY JUDGE
Before the Court is the motion of Plaintiff Moelis & Company LLC (“Moelis”) to remand
or 	abstain 	in 	the 	above-captioned 	adversary 	proceeding 	(the 	“Adversary 	Proceeding”).
Defendant Wilmington Trust FSB (the “Indenture Trustee”) opposes the Motion, asserting that
this Court has subject matter jurisdiction and that neither abstention nor equitable remand is
appropriate. 	For the reasons set forth below, this Court finds that it has jurisdiction and that
neither abstention nor remand is warranted.
FACTS
The relevant facts are largely undisputed. 	On April 16, 2009, the debtors in the above-
captioned chapter 11 cases (the “Chapter 11 Cases”) filed their voluntary petitions. 	Their debt
included $1,550 million in 3.98% Exchangeable Senior Notes due 2027 issued by GGP Limited
Partnership, one of the Debtors (the “Notes”). Defendant is the successor indenture trustee under
the indenture governing the Notes (the “Indenture”). At the direction of holders of a majority of
the outstanding principal amount of the Notes at the time (the “Consortium”), the Indenture
Trustee hired Moelis to serve as its financial advisor in connection with the Reorganized
Debtors’ chapter 11 proceedings. In an engagement letter (the “Engagement Letter”), dated as of
September 1, 2009, by and among the Indenture Trustee, Brown Rudnick LLP, as counsel, and
the Consortium, the Indenture Trustee agreed to pay Moelis a $9 million restructuring fee plus its
expenses on certain conditions, including completion of a “qualifying restructuring” of the
Notes.
The parties agree that a qualifying restructuring, as defined in the Engagement Letter,
occurred on October 21, 2010, when a plan of reorganization for the relevant Debtors was
confirmed (the “Plan”). The Plan became effective on November 9, 2010 (the “Effective Date”)
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(Dkt. No. 6232). Section 4.10 of the Plan provided that “Class 4.10 [consisting of claims based
on the Notes] is unimpaired by the Plan,” and that “[o]n the Effective Date, the Allowed
Exchangeable Note Claims shall (A)(i) be cured and reinstated in accordance with section 1124
of the Bankruptcy Code.” See Plan, § 4.10 (emphasis added). In accordance with its obligation
under the Plan to cure and reinstate the claims of the Noteholders, the Reorganized Debtors
distributed certain monies to the Indenture Trustee (the “Note Proceeds”), which is also the
disbursing agent for Class 4.10 under the Plan, so as cure all defaults under the Notes and pay
damages, as required by § 1124 of the Bankruptcy Code.
Moelis asserts that receipt of the Note Proceeds by the Indenture Trustee triggered
Moelis’ immediate right to payment by the Indenture Trustee of its entire restructuring fee, as
well as expenses. 	See Plaintiff’s Memorandum of Law at pg. 1 (Dkt. No. 5). 	The Indenture
Trustee has not paid Moelis’ fee or expenses and disputes its obligation to do so. 	Instead of
paying Moelis from the Note Proceeds, the Indenture Trustee has asserted that, “[c]onsistent with
the provisions of the Indenture and the Engagement Letter absolving Wilmington Trust for any
personal liability for Moelis’ claimed fees and expenses, and also with the plan provisions that
holders of the Exchangeable Notes are ‘unimpaired’ . . . the Indenture, Engagement Letter, and
plan process contemplate that Moelis’ fees and expenses will be sought in the Bankruptcy
Court.”1 Defendant’s Opposition at pg. 4 (Dkt. No. 8). Instead of paying Moelis from the Note
Proceeds, the Indenture Trustee has asserted the right, under § 7.08 of the Indenture and § 2.6 of
the Plan, to assert a “charging lien” over a portion of the Note Proceeds sufficient to cover
1 Section 4.10(b) of the Plan provides that, “on the Effective Date, subjection to Section 2.6 of the Plan, the Plan
Debtors shall pay in Cash any related outstanding reasonable Indenture Trustee Fee Claim.” Section 2.6 of the Plan
also provides that “all Indenture Trustee Fee Claims . . . shall be paid in Cash on the Effective Date by the Plan
Debtors as provided in Article 4.” The term “Indenture Trustee Fee Claim” is defined in § 1.111 of the Plan as “a
Claim of any Indenture Trustee for the reimbursement of its reasonable accrued and unpaid fees and expenses,
including reasonable attorneys’ fees, under the applicable Indenture . . . only to the extent allowable under the
applicable Indenture.”
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Moelis’ fee and expenses, as well as the fees and expenses of Brown, Rudnick.2 The Indenture
Trustee has apparently disbursed the remainder of the Note Proceeds to the Noteholders.
In an attempt to enforce its alleged right to a $9 million fee plus expenses arising under
the Engagement Letter, on November 17, 2010, Moelis commenced a civil action in the New
York State Supreme Court (the “State Court”) captioned, Moelis & Company LLC v. Wilmington
Trust FSB (the “State Court Action”). The following day, the Indenture Trustee filed its notice
of removal alleging that the State Court Action arises in and/or is related to the Chapter 11 Cases
pending before this Court. 	On December 6, 2010, Moelis filed its motion to remand and/or
abstain, contending that the State Court Action concerns only the relative rights of non-debtors
and is a simple, state-law claim for breach of contract that has no bearing on these cases because
the Plan has been consummated and the Reorganized Debtors have distributed the Note
Proceeds. Moelis also claims that there is no connection between the State Court Action and the
Chapter 11 Cases because the Indenture Trustee “has contractually bound itself to pay Moelis’
fee from the Note proceeds, independent of whether Wilmington Trust may ultimately recoup
those amounts” from the Debtors. Plaintiff’s Memorandum of Law at pg. 7. On the basis of the
foregoing, Moelis contends that the State Court Action should be remanded because it is not a
core matter “arising under” the Code, nor does it “arise in” or “relate to” these bankruptcy cases.
In contrast, the Indenture Trustee claims that the Motion “wholly ignores the close and
inextricable nexus between Moelis’ claim for fees and expenses” and the Chapter 11 Cases.
Defendant’s Opposition at ¶ 2. 	The Indenture Trustee argues that the Engagement Letter
explicitly provides, in numerous places, that the Indenture Trustee shall not “have any personal
2 Section 1.31 of the Plan defines a “Charging Lien” as “any right of any Indenture Trustee to a Lien upon, or other
priority with respect to, distributions to be made to holders of Note Claims for payment of any Indenture Trustee Fee
Claims.” Section 2.6 provides that “[a]n Indenture Trustee’s Charging Lien will be discharged solely upon payment
in full of the Indenture Trustee Fee Claims.”
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obligations or liability” for the payment of Moelis’ fees or expenses. 	See e.g., Engagement
Letter at ¶ 13. Given that Moelis agreed that the Indenture Trustee would not have any personal
liability for Moelis’ fees and expenses, it is contended that the Note Proceeds are the only
possible source of funds for payment.
DISCUSSION
1. 	Core Jurisdiction
Despite Moelis’ contentions, this is not a simple, State law contractual dispute involving
only non-debtor parties, where “[n]othing about the case will affect any bankruptcy proceedings
before this Court.” 	Plaintiff’s Memorandum of Law at pg. 1. 	On the contrary, this is a case in
which (i) Moelis entered into an agreement to provide services in connection with the Chapter 11
Cases and agreed to look for payment of its fee and expenses exclusively from the Note Proceeds
and not to impose personal liability on the Indenture Trustee; (ii) the distribution to Noteholders
under the Plan is being held up, in part, because of Moelis’ demand to be paid; (iii) the Plan
prohibits any party from interfering with its implementation; (iv) the Plan actually provides for
payment of the reasonable professional fees of the Indenture Trustee, including its advisors; and
(v) there are ongoing proceedings in this Court (in which Moelis is participating) for a
determination of the reasonableness of Moelis’ fee and expenses and to provide for payment out
of proceeds that the Debtors have escrowed for this purpose. This case thus raises the question
whether Moelis can nevertheless use State court proceedings to force the Indenture Trustee to
divert funds from the Noteholders to pay its presumptively unreasonable fees and expenses.
Under the facts and circumstances of this dispute, the question whether it can do so is one for
this Court to decide.
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The jurisdiction of the bankruptcy court derives from 28 U.S.C. § 1334, which provides
that, subject to certain specified limitations, “the district courts shall have . . . original but not
exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to
cases under title 11.” Section 157 of the Bankruptcy Code then distinguishes between core and
non-core proceedings and sets forth a non-exclusive list of matters that fall within a bankruptcy
court’s core jurisdiction, such as matters concerning the administration of the bankruptcy estate
and the confirmation of plans of reorganization. 	28 U.S.C. § 157(b)(2); see In re Chateaugay
Corp., 193 B.R. 669, 677 (S.D.N.Y. 1996); In re Galgano, 358 B.R. 90, 95 (Bankr. S.D.N.Y.
2009). Core matters include those that “arise under” or “arise in” bankruptcy cases. See Lothian
Cassidy LLC v. Ransom, 428 B.R. 555, 559 (E.D.N.Y. 2010), citing Winstar Holdings, LLC v.
Blackstone Group L.P., No. 07-4634, 2007 WL 4323003, at *2 (S.D.N.Y. Dec. 10, 2007);
Weaver v. Texas Capital Bank, 410 B.R. 453, 456 (N.D. Tex. 2009).
Moelis is correct that the State Court Action does not “arise under” the Bankruptcy
Code.3 However, its further argument—that administration of the estate and implementation of
the Plan are not impacted by the relief sought and that the dispute does not “arise in” the Chapter
11 Cases—is wholly specious. The State Court Action is a proceeding falling within this Court’s
core jurisdiction because it implicates the “enforcement or construction of a bankruptcy court
order,” in this case the confirmation order. 	A bankruptcy court always has jurisdiction to
interpret its own orders. See Travelers Indem. Co. v. Bailey, 129 S.Ct. 2195, 2205 (2009); In re
Portrait Corp., 406 B.R. 637, 641 (Bankr. S.D.N.Y. 2009). 	It does not matter that the State
Court Action is purportedly between two non-debtors, or that the Chapter 11 Cases have been
confirmed. See Luan Inv. S.E. v. Franklin 145 Corp. (In re Petrie Retail, Inc.), 304 F.3d 223,
3 A cause of action is one “arising under” title 11 when such action is one created by title 11, such as preference or
fraudulent transfer actions. See Celotex Corp. v. Edwards, 514 U.S. 300, 325 n.13 (1995); see In re Housecraft
Indus. USA, Inc., 310 F.3d 64, 68 (2d Cir. 2002).
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229-30 	(2d 	Cir. 	2002) 	(core 	jurisdiction 	exists 	in 	a 	dispute 	between 	non-debtors 	over
interpretation of the bankruptcy court’s sale order); In re Portrait Corp., 406 B.R. at 641; see
also Lothian Cassidy LLC, 428 B.R. at 560.
In the State Court Action, Moelis seeks to compel the Indenture Trustee to pay its fee and
expenses from the proceeds due to Noteholders under the Plan, even though the Plan on its face
requires that the Noteholders be unimpaired and provides for payment of only the Indenture
Trustee’s reasonable fees and expenses. 	Moelis seeks payment from the Note Proceeds despite
language in the confirmation order enjoining all parties in interest from obstructing distributions
under the Plan. See Confirmation Order at ¶ 20 (Dkt. No. 6240). 4 The relief that Moelis seeks in
the State Court Action has already had the effect of interfering with distributions under the Plan,
as the Indenture Trustee has withheld $15,842,953.44 in proceeds due the Noteholders to protect
itself from the possibility of liability to Moelis, Brown Rudnick and related liabilities under the
Engagement Letter (the “Withheld Funds”). Since Moelis seeks to compel the Indenture Trustee
to distribute the Note Proceeds in a manner not in accordance with the terms of the Plan, the
dispute requires the interpretation of the Plan, and this Court has jurisdiction to decide it.
This Court has already held two lengthy hearings, on January 26, 2011 and February 8,
2011, relating to the reasonableness of the fees charged by Moelis and Brown Rudnick, and there
is no dispute that the reasonable fees of Moelis and Brown Rudnick are payable under the Plan
by the Debtors. 	As noted above, the Plan expressly provided for the payment of reasonable
professional fees to the Indenture Trustee, and it preserved the Indenture Trustee’s so-called
“charging lien” for payment of such “Indenture Trustee Fee Claims.” Moelis’ lawsuit raises the
4 ¶ 20 of the confirmation order provides “Pursuant to Section 11.6 of the Plan, upon entry of this Confirmation
Order, all holders of Claims and Interests and other parties in interest, along with their respective present or former
employees, agents, officers, directors, or principals, shall be enjoined from taking any actions to interfere with the
implementation and Consummation of the Plan.”
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further question whether its unreasonable fees can be paid from the Note Proceeds. 	The Court
expresses no opinion on this issue at this stage of the dispute, but under these circumstances
there is no basis for the contention that Moelis’ lawsuit against the Indenture Trustee does not
affect the implementation of the Plan.
Moelis makes the further argument that the Indenture Trustee appropriately withheld part
of the Noteholders’ distribution for potential payment of its unreasonable fees and expenses
because the Consortium directed the Indenture Trustee to retain Moelis, as apparently permitted
under the Indenture, and consented to the terms of such retention, including a $9 million fee.
Although it appears that the Consortium directed the Indenture Trustee to hire Moelis, the
present record indicates that a minority of the Noteholders never gave their affirmative consent
to Moelis’ retention. 	Indeed, it appears that the minority Noteholders may have been wholly
unaware that Moelis had been retained by the Indenture Trustee, as the disclosure statement
distributed in connection with confirmation of the Plan did not disclose any purported obligation
to Moelis. 	The Noteholders were told they would be left “unimpaired,” and that the Indenture
Trustee’ reasonable fees would be paid by the Debtors. 	See Plan, § 4.10. There was no
disclosure that Moelis’ unreasonable fees and expenses might become payable from the Note
Proceeds.
Under the circumstances, it may be that claims can be “unimpaired,” as required by
§ 4.10 of the Plan, and yet Noteholders receive less than a 100% recovery because the
Consortium consented to such treatment or for some other reason.5 It may be that lack of
5 This Court expresses no opinion regarding Moelis’ ability to demand payment of its fees and expenses from the
Consortium, who appear to have consented to receive less than a full recovery on their Note claims when they
signed the Engagement Letter. Such signatories were at least on notice that Moelis might seek to appropriate part of
the Note Proceeds to pay its unreasonable fee and expenses. However, whether Moelis may force the Indenture
Trustee to redirect that portion of the Note Proceeds due to non-Consortium Noteholders when such Noteholders
may not have given their consent to such distribution and may not have had notice of the Engagement Letter, is a
different question.
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disclosure is irrelevant. 	However, the question whether “unimpaired” can be read to mean
“impaired” with the consent of a third party and whether payments under a Plan can be withheld
under the current circumstances requires interpretation of the Plan and the confirmation order in
light of the relevant provisions of the Bankruptcy Code. Because interpretation, construction and
enforcement of the Plan and confirmation order is implicated by the State Court Action, the State
Court Action is a core proceeding “arising in” this bankruptcy case. 	See e.g., In re Petrie, 304
F.3d at 229-30; see also, Mt. McKinley Ins. Co v. Corning Inc., 399 F.3d 436, 449 (2d Cir.
2005); In re Portrait Corp., 406 B.R. at 641.
2. 	“Related to” Jurisdiction
Even assuming arguendo that the State Court Action is not within this Court’s core
jurisdiction, this Court nonetheless would have subject matter jurisdiction over the instant
dispute as a case “related to” the Chapter 11 Cases. “Related to” jurisdiction exists if the action
“in any way impacts upon the handling and administration of the bankrupt estate.” 	Celotex
Corp. v. Edwards, 514 U.S. at 308 n.6; see also Parmalat Capital Finance Ltd. v. Bank of
America Corp., Case No. 09-4302, 2011 WL 135810, at *3 (2d Cir. January 18, 2011) (“for the
purposes of removal jurisdiction, a civil proceeding is ‘related to’ a title 11 case if the action’s
outcome might have any ‘conceivable effect’ on the bankrupt estate.”) (internal citations
omitted). 	Moelis asserts that this Court’s jurisdiction is limited because the instant dispute
involves only non-debtors, but the fact that the Reorganized Debtors are not parties to the State
Court Action is not dispositive as to whether the Court has “related to” jurisdiction. See Celotex
Corp. 514 U.S. at 308; In re Petrie, 304 F.3d at 229-30 (noting that core jurisdiction exists in a
dispute between non-debtors over interpretation of the bankruptcy court’s sale order). Moelis is
seeking to enjoin the disbursement of payments from the bankruptcy estate to the Noteholders,
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which clearly impacts upon the administration of the Reorganized Debtors’ estates and the
implementation of the Plan. 	Therefore, even if the Court does not have core “arising in”
jurisdiction, “related to” jurisdiction exists.
3. 	Post-Confirmation Jurisdiction
Moelis finally asserts that post-confirmation disputes are not typically core or even
“related to” bankruptcy proceedings because of the narrowed scope of a Bankruptcy Court’s
post-confirmation jurisdiction. 	See Plaintiff’s Reply at pg. 8 (Dkt. No. 9). 	While Moelis is
correct that a Bankruptcy Court’s jurisdiction is narrower after confirmation of a chapter 11 plan
than pre-confirmation, a Bankruptcy Court retains post-confirmation jurisdiction where: 	(i) the
matter has a close nexus to the bankruptcy plan or proceeding, such as “when a matter affects the
interpretation, implementation, consummation, execution or administration of the confirmed
plan;” and (ii) the plan “provides for the retention of jurisdiction over the dispute.” 	See In re
Kassover, 336 B.R. 74, 79 (Bankr. S.D.N.Y. 2006); Rahl v. Bande, 316 B.R. 127, 133 (S.D.N.Y.
2004), citing In re Petrie, 304 F.3d at 229; In re General Media, 335 B.R. 66, 73-74 (Bankr.
S.D.N.Y. 2005).
As discussed above, the State Court Action has a close nexus to the Chapter 11 Cases.
Moreover, despite Moelis’ contention that the Plan does not provide for the retention of
jurisdiction over the State Court Action, § 12 of the Plan specifically provides for the retention of
jurisdiction by this Court over the issues at bar. 	Section 12.1 of the Plan provides that the
“Bankruptcy Court shall have exclusive jurisdiction of all matters arising out of, or related to, the
Chapter 11 Cases, the Plan and implementation of the Plan.” Section 12.1(i) of the Plan further
provides jurisdiction for the Bankruptcy Court to “hear and determine disputes or issues arising
in 	connection 	with 	the 	interpretation, 	implementation 	or 	enforcement 	of 	the 	Plan, 	the
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Confirmation Order, [and] any transactions or payments contemplated thereby.” Similarly broad
retention of jurisdiction clauses have been found to fulfill the second prong of the test described
above. 	See In re Richard J.F. Navin, 382 B.R. 6, 15-16 (E.D.N.Y. 2007) (finding that it was
“beyond question” that the Bankruptcy Court exercised its jurisdiction appropriately where the
plan provided the bankruptcy court with jurisdiction to “hear and determine all controversies,
suits and disputes, if any, as may arise in connection with the interpretation or enforcement or
implementation of the plan.”); see also Rahl v. Bande, 316 B.R. at 134; Guccione v. Bell, Case
No. 06-492, 2006 WL 2032641, at *5 (S.D.N.Y. July 20, 2006).
Based on the foregoing, this Court has post-confirmation, subject matter jurisdiction over
the State Court Action.
4. 	Mandatory Abstention
Moelis contends that even if this Court finds, as it does, that it has subject matter
jurisdiction 	over 	the 	dispute, 	it 	should 	nonetheless 	abstain 	under 	mandatory 	abstention
principles. 28 U.S.C. § 1334(c)(2) provides that
Upon timely motion of a party in a proceeding based upon a State
law claim or State law cause of action, related to a case under title
11 but not arising under title 11 or arising in a case under title 11,
with respect to which an action could not have been commenced in
a court of the United States absent jurisdiction under this section,
the district court shall abstain from hearing such proceeding if an
action is commenced, and can be timely adjudicated, in a State
forum of appropriate jurisdiction. (emphasis added)
Since the State Court Action is one “arising in” a bankruptcy case and within this Court’s core
jurisdiction, mandatory abstention under 28 U.S.C. § 1334(c)(2) is inapplicable on its own terms.
See In re Adelphia Commc’ns Corp., 285 B.R. 285 B.R. 127, 141 (Bankr. S.D.N.Y. 2002);
Winstar Holdings, LLC, 2007 WL 4323003, at *5. Even if the matter were non-core, however,
abstention would not be mandatory because of two additional conditions on which the
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requirement of mandatory abstention is premised: (i) whether the action is one “based upon a
state law claim” and (ii) whether the action is capable of being “timely adjudicated” in state
court. 	28 U.S.C. § 1334(c)(2); In re Adelphia Commc’ns Corp., 285 B.R. at 141, citing
Renaissance Cosmetics, Inc. v. Development Specialists Inc., 277 B.R. 5, 12 (S.D.N.Y. 2002)
(internal citations omitted).
A. Action based on State Law Claims
As discussed above, Moelis alleges that resolution of the State Court Action does not
require reference to the Plan because the issues arise exclusively under State law and the
Consortium agreed, in the Engagement Letter, to the distribution of a portion of Note proceeds to
Moelis. 	These arguments are addressed above and for the reasons stated, interpretation of the
Plan and the Bankruptcy Code are required, the State Court Action is not based solely on State
law claims and mandatory abstention would not be appropriate.
B. Timely Adjudication
Moelis argues that its claims can be timely adjudicated in the State Court and that such
adjudication “would [not] have any unfavorable effect on the administration of these cases.” See
Plaintiff’s Reply at pg. 14. 	The crux of Moelis’ argument appears to be that because the Note
Proceeds have left the bankruptcy estate, the payment of Moelis from the Note Proceeds would
not have any effect on the bankruptcy estate. This argument is misplaced.
The meaning of “timely adjudication” was recently addressed by the Second Circuit in
Parmalat Capital Finance Ltd. v. Bank of America Corp., Case No. 09-4302, 2011 WL 135810
(2d Cir. January 18, 2011). That Court noted that whether an action can be timely adjudicated in
State court is a mixed question of fact and law. See id. at *4. 	The relevant inquiry focuses on
how quickly a case can be adjudicated in State court and whether that pace is sufficiently swift.
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Four factors are relevant to the consideration of timeliness, including: 	“(1) the backlog of the
state court's calendar relative to the federal court's calendar; (2) the complexity of the issues
presented and the respective expertise of each forum; (3) the status of the title 11 bankruptcy
proceeding to which the state law claims are related; and (4) whether the state court proceeding
would prolong the administration or liquidation of the estate.” Id. at *5. With regard to the first
two factors, the Second Circuit has instructed that, “timeliness . . . is a case- and situation-
specific inquiry” requiring inquiry into the “comparative speeds of adjudication in the federal
and state forums.” Id. at *5. This Court is required to “consider whether the litigants in a state
proceeding need the state law claims to be quickly resolved as a result of the status of the
ongoing bankruptcy proceeding.” Id at *5.
The Indenture Trustee is currently withholding part of the Note Proceeds to cover all of
Moelis’ fees and expenses. 	The expeditious resolution of this matter is required in order to
determine whether the Indenture Trustee must release the escrowed funds. 	The Indenture
Trustee’s action in withholding a substantial portion of the distribution due to Noteholders has
already resulted in a motion by one Noteholder for an order seeking the release of the Withheld
Funds. See Magnetar’s Cross Motion for the Release of Improperly Withheld Distributions (Dkt.
No. 6542). Expeditious resolution would inure to the benefit of all interested parties, whereas a
transfer or remand to the State Court would unduly prolong the administration of the estate.
Parmalat Capital Finance Ltd., 2011 WL 135810 at *5, citing In re Worldcom, Inc. Sec. Litig.,
293 B.R. 308, 331 (S.D.N.Y.2003). 	Finally, the expertise required to resolve the dispute
involves questions of bankruptcy law. 	This Court, rather than the State Court, has the most
expertise in bankruptcy law issues generally and in interpreting the Plan specifically. 	See Id.
(“Where the legal issues in a case are especially complex, the forum with the most expertise in
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the relevant areas of law may well be expected to adjudicate the matter in a more timely fashion
relative to the other forum.”)
Because the above factors do not weigh in favor of mandatory abstention, abstention
would not be mandated even if this Court had only non-core, “related to” jurisdiction.
5. 	Permissive Abstention & Equitable Remand
In addition to mandatory abstention, a bankruptcy court may abstain permissively from
hearing a State court action pursuant to 28 U.S.C. § 1334(c)(1), see In re Masterwear Corp., 241
B.R. 511 (Bankr. S.D.N.Y. 1999), or it may remand the matter to the State Court on “any
equitable ground.” 	See 28 U.S.C. § 1452(b); Drexel Burnham Lambert Group, Inc. v. Vigilant
Ins. Co., 130 B.R. 405, 407 (S.D.N.Y. 1991). 	The courts in this district commonly cite seven
“Drexel” factors6 to determine whether a Court should exercise its equitable powers to remand,
as well as twelve factors identified as being relevant to the issue of permissive abstention.7 The
parties have agreed that several factors, including the fourth, fifth, and eleventh permissive
abstention factors, are not at issue. They largely disagree on the appropriate interpretation of the
remaining factors.
It is clear on the present record that the crux of the dispute involves bankruptcy issues,
and the Plan in particular. 	As discussed above, the Plan is implicated by the relief sought by
6 The factors governing equitable remand include: “(1) the effect on the efficient administration of the bankruptcy
estate; (2) the extent to which issues of state law predominate; (3) the difficulty or unsettled nature of the applicable
state law; (4) comity; (5) the degree of relatedness or remoteness of the proceeding to the main bankruptcy case; (6)
the existence of the right to a jury trial; and (7) prejudice to the involuntarily removed defendants.” See Drexel
Burnham Lambert Group, Inc., 130 B.R. at 407.
7 The factors governing discretionary abstention include: (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 state 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 [on] the court's docket, (10) the likelihood that the commencement of the proceeding in a 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. In re Masterwear Corp., 241 B.R. 511.
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Moelis, rendering baseless Moelis’ assertion that “[n]o bankruptcy issues are involved in the
resolution” of its claims. See Plaintiff’s Memorandum of Law at pg. 14. Proceedings before this
Court are already pending to determine Moelis’ reasonable fees, and under the circumstances this
Court should also determine whether Moelis’ unreasonable fees can also be charged against the
Noteholders’ Plan distribution.
CONCLUSION
For the reasons stated above, Moelis’ Motion is denied.
IT IS SO ORDERED.
Dated: February 25, 2011
New York, New York
/s/ Allan L. Gropper 	_
UNITED STATES BANKRUPTCY JUDGE
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