Bankruptcy — abstention

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U.S. Court of Appeals for the 7th Circuit

Civil

Bankruptcy — abstention

Where resolution depends on how state courts interpret state law, the federal court should have abstained pending resolution of the state law issues in state court. “If we knew that Judge Kaplan‘s opinion rejecting Parmalat’s claim against Grant Thornton would persuade the Illinois courts, then affirming Judge Darrah would bring this litigation to a close before it had a chance to exceed the length of the Trojan War (10 years). But we can’t be certain what the Illinois courts will do. And nowhere in its 85-page brief does Grant Thornton contend that the problem illustrated by this case—the intricacies of the in pari delicto defense in corporate suits against independent auditors—arises frequently enough to justify the radical surgery that it asks us to perform on the ‘no appeal’ clause of section 1334(d). Indeed, enforcing that clause strictly may minimize overall delay in the decision of state-law cases related to bankruptcy proceedings. Had Judge Darrah, as directed by the Second Circuit, remanded the case two years ago to the Circuit Court of Cook County, the litigation might well be at an end rather than on the brim of restarting. We conclude that Judge Darrah was authorized to do naught but remand the case (actually cases, but we’ve been pretending there’s just one, for the sake of simplicity) to the Cook County court. He must do so now.”

Reversed and Remanded.

13-2245 & 13-2253 Parmalat Capital Finance Limited v. Grant Thornton International

Appeals from the United States District Court for the Northern District of Illinois, Darrah, J., Posner, J.