Fifth Circuit Curtails Remand and Abstention Remedy for U.S. Litigation Broadly Related to Foreign Debtor Chapter 15 Bankruptcy Proceedings

June 15, 2015

On June 5, 2015, a three judge panel for the United States Court of Appeals for the Fifth Circuit (the “Court”) held that a district court may not discretionarily abstain from and equitably remand a properly removed state court action when the case relates to an ongoing chapter 15 bankruptcy proceeding. Firefighters’ Ret. Sys. v. Citco Grp. Ltd., No. 14-30857, 2015 WL 3540718 (5th Cir. June 5, 2015) (the “Opinion”). The Court gave a broad reading to the exception to a court’s discretionary abstention powers codified in 28 U.S.C. § 1334(c)(1) that applies “with respect to a case under chapter 15,” and concluded that both discretionary abstention and equitable remand are not proper either in a chapter 15 case itself or in other litigation and proceedings “arising in or related to” a chapter 15 case. The Opinion represents an issue of first impression by a federal appellate court, and if other courts of appeal follow suit, it would allow actions that relate to a pending chapter 15 case – whether or not the foreign debtor or its foreign representative are party to the litigation – to be removed to and maintained in federal district court without being subject to potential remand to the state court in which they were originally commenced.