Judge Lorna Schofield
After Fried v. Lehman Bros. Real Estate Associates III (Fried I) was dismissed, plaintiffs brought suit pleading federal and state law claims arising from failed investments with Lehman Brothers Real Estate Associates III. After Second Circuit upheld Fried I’s dismissal, plaintiffs renewed their motion to remand suit to state court, or have district court abstain. The only significant change was confirmation of Lehman Brothers Holdings Inc.’s (LHI) reorganization plan, effective March 6, 2012. To deny district court jurisdiction, plaintiffs’ amended complaint removed all federal law claims and references. The court denied remand, holding jurisdiction under 28 USC §1334(b) because the present case was "related to" LHI’s bankruptcy. However, the court granted abstention. Even if the six requirements for mandatory abstention under §1334(c)(2) had not been met, it would abstain under §1334(c)(1). Most factors relevant to permissive abstention weighed in favor of the state forum, with the sole basis of federal jurisdiction being "related to" jurisdiction under §1334(b). State adjudication would not impede efficient administration of the bankruptcy estate. Further, neither LHI nor any of the other former debtors was a party to the instant action.
