Alexander v. Aaron et al

Filing 336

MEMORANDUM OPINION and ORDER denying #318 MOTION to Withdraw Reference Pursuant to 28 U.S.C. 157(D) filed by J Lester Alexander, III; The court has for consideration J. Lester Alexander's Motion to Withdraw the Reference, #318 ; As stated further within, because the remaining matters involve core bankruptcy proceedings, the court declines to withdraw the reference, and the Trustee's Motion, #318 , is DENIED. Signed by Judge Abdul K Kallon on 2/16/2018. (KBB)

FILED
2018 Feb-16 AM 08:46
U.S. DISTRICT COURT
N.D. OF ALABAMA

UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
NORTHWESTERN DIVISION
J LESTER ALEXANDER, III

IN HIS CAPACITY AS
LIQUIDATING TRUSTEE OF
FRANKLIN PHARMACY, LLC,
Plaintiff,

vs.
TIMOTHY AARON, ET AL,

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Civil Action Number
3:15-cv-01314-AKK

Defendants.

MEMORANDUM OPINION AND ORDER
The court has for consideration J. Lester Alexander’s Motion to Withdraw
Reference, doc. 318, and the Post-Confirmation Creditors Committee’s objection
to the motion, docs. 320 & 329. The motion arises out of a long-running dispute.
Alexander, the Liquidating Trustee of Franklin Pharmacy, LLC (“the Trustee”),
filed suit against multiple defendants, alleging that they fraudulently conveyed
funds and assets from Franklin to another entity called Florida Pharmacy
Solutions, Inc. (FPS). See generally doc. 1. The Trustee has informed the court
that he has reached a settlement agreement with all remaining defendants, see docs.
321 & 328, and argues that withdrawal of the reference is necessary to preserve the
limited assets of the estate. After reading the briefs and considering the relevant
law, and with the benefit of oral argument, the court denies the motion.

District courts have original and exclusive jurisdiction of all cases under
Title 11 of the Bankruptcy Code, 28 U.S.C. § 1334(a), but may refer “any or all
proceedings arising under title 11 or arising in or related to a case under title 11” to
the Bankruptcy Court. 28 U.S.C. § 157(a). Relevant here, district courts may
withdraw the reference, however, in certain circumstances:
The district court may withdraw, in whole or in part, any case or
proceeding referred under this section, on its own motion or on timely
motion of any party, for cause shown. The district court shall, on
timely motion of a party, so withdraw a proceeding if the court
determines that resolution of the proceeding requires consideration of
both title 11 and other laws of the United States regulating
organizations or activities affecting interstate commerce.
28 U.S.C. § 157(d). The first sentence of this section, which allows for permissive
withdrawal “for cause shown,” id., is the one in contention here. See doc. 318-1 at
7. As such, the court must determine whether the Trustee has met his burden of
demonstrating adequate cause for withdrawal. 28 U.S.C. § 157.
Cause, which is not defined in the statute, “is not an empty requirement.” In
re Simmons, 200 F.3d 738, 741 (11th Cir. 2000). In addressing similar motions,
district courts in this circuit have cited to a footnote in In re Parklane/Atlanta Joint
Venture, 927 F.2d 532, 536 n.5 (11th Cir. 1991), as evidence that the circuit has
endorsed the use of the following factors outlined by the Fifth Circuit: 1)
advancing uniformity in bankruptcy administration; 2) decreasing forum shopping
and confusion; 3) promoting the economical use of the parties’ resources; 4) and

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facilitating the bankruptcy process. Id.; see McGregor v. Asset Acceptance, LLC,
No. 1:15-MC-00143-RDP, 2015 WL 3751986, at *3 (N.D. Ala. June 16, 2015);
Ogier v. Johnson, No. 1:13-CV-01490-WSD, 2013 WL 6843476, at *2 (N.D. Ga.
Dec. 27, 2013); In re Palm Beach Fin. Partners, L.P., No. 09-36379-PGH, 2013
WL 3490652, at *1 (S.D. Fla. July 8, 2013). Indeed, the Trustee cites to these
factors in his brief. Doc. 318-1 at 8. Similarly, the Committee cites to these
factors, but adds four additional ones for the court to consider: 1) whether the
claim is core or non-core; 2) efficient use of judicial resources; 3) a jury demand;
and 4) prevention of delay. Doc. 320 at 15-16 (citing In re Childs, 342 B.R. 823,
827 (M.D. Ala. 2006)). With the exception of the concern about forum shopping,
all the factors the parties cite effectively ask whether withdrawing the reference
promotes judicial efficiency.
With these factors as guidance, the court turns now to the specific
contentions here. Basically, the Trustee argues that efficiency and the fact that the
estate’s only asset is this litigation favors withdrawal of the reference. As the
Trustee puts it, (1) “administration of the estate is largely complete and the last
unliquidated asset of the estate” is this litigation; (2) the “withdrawal of the
reference will . . . . reduc[e] the number of Courts to which the Liquidating Trustee

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is required to report, and, thereby preserve the estate’s limited assets;”1 and (3)
streamlining the entire case into this court will “decrease confusion.” Doc. 318-1
at 1-2, 8-9.
Although the Trustee’s arguments are well taken, the existence of several
core bankruptcy matters leads the court to conclude that withdrawal of the
reference is inappropriate in this case. As the Committee notes, judicial efficiency
is better promoted by allowing “bankruptcy judges, [who] handle these matters on
a day-to-day basis” to continue to oversee this matter. Doc. 320 at 17-18. This
finding is consistent with the Trustee’s contentions that his “only remaining
responsibilities are to (i) conclude this litigation (the estate’s sole remaining
unliquidated asset); (ii) determine and pay administrative expenses; (iii) distribute
any remaining proceeds; and, (iv) provide a final accounting to close out the
estate.” Doc. 318-1 at 6. As this court sees it, these are precisely the types of
issues that bankruptcy courts were created to oversee. See 28 U.S.C. § 157(b)(2)
(defining “core proceedings” to include “matters concerning the administration of
the estate” and “other proceedings affecting the liquidation of the assets of the
estate or the adjustment of the debtor-creditor or the equity security holder
relationship”).
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Basically, the Trustee maintains that he can reduce the estate’s legal fees if the court
withdraws the reference: “Legal fees and other administrative expenses in the bankruptcy case
are significant,” and “the ultimate distribution to creditors will be materially increased if he is
only required to appear in a single court and that court which is most convenient for the
Liquidating Trustee.” Doc. 318-1.
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Ultimately, the Trustee has the burden to show that withdrawal would
primarily benefit the court, not merely some of the parties. See In re
Parklane/Atlanta Joint Venture, 927 F.2d at 536 n.5. The Trustee has failed to do
so here because, notwithstanding this court’s familiarity with the proceedings for
which the Trustee seeks compensation, the bankruptcy court is equally competent
to resolve the issue of administrative fees. Therefore, because the remaining
matters involve core bankruptcy proceedings, the court declines to withdraw the
reference, and the Trustee’s motion, doc. 318, is DENIED.
DONE the 16th day of February, 2018.

_________________________________
ABDUL K. KALLON
UNITED STATES DISTRICT JUDGE

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