Stanton v. Certain Underwriters at Lloyd's of London
ORDER AND OPINION denying 1 motion to withdraw reference. Signed on 01/03/2012 by District Judge Ortrie D. Smith. (Will-Fees, Eva)
IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF MISSOURI
JANICE E. STANTON,
CERTAIN UNDERWRITERS AT
LLOYD’S OF LONDON,
Case No. 11-1104-CV-W-ODS
ORDER AND OPINION DENYING MOTION TO WITHDRAW REFERENCE (DOC. 1)
Defendant moves the Court to withdraw a case referred to the United States
Bankruptcy Court for the Western District of Missouri. The motion is denied.
Plaintiff is the trustee appointed in a pending bankruptcy proceeding initiated by
Debtor Buckeye Development Company, Inc. (Case No. 09-45739-abf7). Plaintiff
brought an adversarial proceeding against Defendant alleging real property owned by
Buckeye had been damaged by fire and that Defendant was obligated by an insurance
policy to repair (Case No. 11-04184-abf). In addition to her claim of specific
performance, Plaintiff also requested damages and attorney fees under Missouri’s
statutes for vexatious refusal to pay, Mo. Ann. Stat. §§ 375.296 and 375.420.
Defendant filed an answer demanding a jury trial. Defendant also moved to
dismiss Plaintiff’s claim for vexatious refusal to pay, arguing Plaintiff failed to plead facts
showing that Defendant’s refusal to pay was vexatious and without reasonable cause.
In response, Plaintiff argued she had only asserted one count for relief – specific
performance – and that was only seeking a “penalty” for vexatious refusal to pay – not
asserting a “claim.” Nevertheless, she asserted she had been premature in alleging
vexatious refusal to pay and requested that portion of her prayer for relief be dismissed
without prejudice. Before the bankruptcy court ruled Plaintiff’s request, Defendant
moved to withdraw the case from the bankruptcy court.
The Court may withdraw a case or proceeding referred to the bankruptcy court
“for cause shown.” 28 U.S.C.A. § 157(d). The Court concludes cause has not been
shown to withdraw the reference at this time.
The fact that Defendant has requested a jury trial is one of the factors courts
consider in deciding whether to withdraw a case from the bankruptcy court. See In re H
& W Motor Express Co., 343 B.R. 208, 214 (N.D. Iowa 2006). Plaintiff argues
Defendant is not entitled to a jury trial, but Plaintiff is mistaken. Since she made a claim
for damages in her complaint, Defendant has a right to trial by jury. See Curtis v.
Loether, 415 U.S. 189, 195-96 (1974).1
Defendant’s demand for a jury trial does not in itself justify immediate withdrawal,
however. “[T]he district court will usually refrain from doing so until the matter is ripe for
trial.” Bankr. Prac. for Gen. Practitioner § 4:5 (footnote omitted). Defendant contends
that not withdrawing the reference is inefficient because this Court will be required to
review “any findings” made by the bankruptcy court. But “[t]he bankruptcy court has
authority, even when a jury trial has been demanded, to supervise discovery, conduct
pretrial conferences, and rule on motions.” In re Kirk E. Douglas, Inc., 170 B.R. 169,
170 (D. Colo. 1994). The Court concludes judicial efficiency would be better served by
keeping this case before the bankruptcy court, at least for pretrial proceedings, because
the bankruptcy court is more familiar with the trustee’s and the debtor’s situations, and
is cognizant of the impact this case will have on the bankruptcy proceedings.2
Plaintiff may have denominated that portion of her prayer a “penalty” for
vexatious refusal to pay, but in substance it is a claim for damages.
Indeed, one of the factors that weighs against withdrawal generally is when
withdrawal would impact “the uniformity of bankruptcy administration,” H & W Motor
Express Co., 343 B.R. at 214. Defendant contends Plaintiff’s suit should not impact the
Defendant also contends it is not forum shopping but “seek[ing] a forum where it
can effectively conduct the needed discovery.” Defendant asserts “the accelerated
discovery order issued in the bankruptcy Court cannot accommodate the amount of
discovery needed in this case.” But seeking withdrawal to avoid an applicable order of
the bankruptcy court seems remarkably similar to – if it is not actually – forum shopping,
and it is not an appropriate reason to withdraw the reference.3
Furthermore, by denying Defendant’s motion, the Court will avoid delving into the
parties’ contentions whether Plaintiff’s action constitutes a “core” or “non-core”
proceeding. As Plaintiff points out, § 157(b)(3) states the bankruptcy court should make
this determination: “The bankruptcy judge shall determine, on the judge's own motion or
on timely motion of a party, whether a proceeding is a core proceeding under this
subsection or is a proceeding that is otherwise related to a case under title 11.” The
Court acknowledges there is a conflict of authority whether § 157(b)(3) grants the
bankruptcy court exclusive authority to decide whether a proceeding is core or noncore. Compare In re Enron Corp., 318 B.R. 273, 275 (S.D.N.Y. 2004), with In re CIS
Corp., 172 B.R. 748, 755 (S.D.N.Y. 1994). Without controlling Eighth Circuit authority
requiring a different result, the Court concludes the bankruptcy court should decide
whether Plaintiff action is a core proceeding because that is the procedure most
consistent with § 157(b)(3). And the bankruptcy court has customary expertise in this
area, which is another reason it should make the core/non-core determination.
administration of the bankruptcy estate because Plaintiff’s suit is a non-core proceeding.
But even if it is non-core, that does not mean it will not impact the bankruptcy estate.
See In re Farmland Industries, Inc., 567 F.3d 1010, 1019-20 (8th Cir. 2009) (discussing
when action is related to bankruptcy).
Defendant offers reasons for being granted additional time for discovery, and
the Court expresses no opinion on the merit of those reasons. Rather, they should be
presented to the bankruptcy court for it to decide whether its discovery order should be
Defendant’s motion to withdraw the action referred to the bankruptcy court is
denied without prejudice.
IT IS SO ORDERED.
/s/ Ortrie D. Smith
ORTRIE D. SMITH, SENIOR JUDGE
UNITED STATES DISTRICT COURT
DATE: January 3, 2012