United States District Court, D. Utah, Central Division
Chapter 11 Case
MEMORANDUM DECISION AND ORDER ABSTAINING FROM FURTHER
PROCEEDINGS AND DISMISSING THE ACTION
Nuffer, United States District Judge.
VidAngel, Inc. (“VidAngel”) filed an adversary
proceeding (“Adversary Complaint”) related to
Bankruptcy No. 17-29073 and against Defendants Disney
Enterprises, Inc., Lucas Film Ltd. LLC, Twentieth Century Fox
Film Corporation, Warner Bros. Entertainment Inc., MVL Film
Finance LLC, New Line Productions, Inc., and Turner
Entertainment Co. (collectively, the
“Studios”). Based upon VidAngel's request,
reference to the Bankruptcy Court was
withdrawn. However, the order withdrawing reference
expressed concerns regarding the Adversary Complaint and
whether it should be dismissed for lack of jurisdiction or
other good cause. At that time, the parties were ordered to
provide briefing on this issue to determine whether VidAngel
should be allowed to proceed on the Adversary Complaint,
notwithstanding the withdrawal of reference. On November 19,
2018, VidAngel filed a memorandum in support of
jurisdiction and the Studios filed a memorandum
opposing jurisdiction over the Adversary
Complaint. Based upon the background of this case and
the parties' briefing, abstention from exercising
jurisdiction of the Adversary Complaint is appropriate.
court has jurisdiction over the Adversary Complaint under 28
U.S.C. § 1334(b). Section 1334(b) provides that
“the district courts shall have original but not
exclusive jurisdiction over all civil proceedings arising
under title 11, or arising in or related to cases under title
11.” “Proceedings ‘arising in'
a bankruptcy case are those that could not exist outside of a
bankruptcy case, but that are not causes of action created by
the Bankruptcy Code.” “A proceeding is
‘related to' a bankruptcy case if it could have
been commenced in federal or state court independently of the
bankruptcy case, but ‘the outcome of that proceeding
could conceivably have an effect on the estate being
administered in bankruptcy.'” Under this
standard, the court has jurisdiction over the Adversary
adversary case “arises in” and is “related
to” a Chapter 11 bankruptcy. The adversary case does
not raise causes of action created by the Bankruptcy Code,
but it would not be in this court, were it not for the
bankruptcy case filed by VidAngel because the case was filed
pursuant to VidAngel's Chapter 11 bankruptcy. The outcome
of the adversary case could alter VidAngel's rights,
liabilities, options, or freedoms of action, which could
conceivably impact the handling and administration of the
bankruptcy estate. Therefore, this court has jurisdiction
under Section 1334(b). However, the inquiry into whether to
exercise jurisdiction does not end there.
plain language of section 28 U.S.C. 1334(c)(1) provides for
abstention when it would serve ‘the interest of
justice, or . . . the interest of comity with State courts or
respect for State law.” The Tenth Circuit Court of
Appeals recently issued guidance on when to abstain when two
federal suits are pending.
As a starting point, courts should apply the first-to-file
rule. Under this rule, courts consider three factors:
“(1) the chronology of events, (2) the similarity of
the parties involved, and (3) the similarity of the issues or
claims at stake.”
all three factors under the first-to-file rule are satisfied.
Four of the defendants in this action (the “California
Plaintiffs”) sued VidAngel in the United States
District Court for the Central District of California on June
9, 2016-more than 20 months before VidAngel filed its
Adversary Complaint. As a result, the California court has
priority to consider the issues in the case. The parties
and issues at stake also substantially overlap between this
proceeding and the California proceeding.
argues that equitable factors support the exercise of
jurisdiction over this matter-primarily that (1) Utah is a
more convenient forum; and (2) the Utah community has an
interest in the litigation because the majority of
VidAngel's customers are located in Utah. While
equitable factors may bear on the inquiry of whether to
abstain,  the equitable considerations raised by
VidAngel do not overcome the first-to-file rule in this case.
Interested VidAngel customers, regardless of their location,
are capable of following the progress of the case. And,
convenience of the parties and witnesses is more appropriate
for the California court to consider in a motion to transfer
venue. Overall, abstention from exercising
jurisdiction over the Adversary Complaint is merited.
IT IS HEREBY ORDERED that this action is DISMISSED.
clerk of the court is ...