Birgans v. Magnolia Auto Sales, Inc.
MEMORANDUM OPINION AND ORDER that the Motion to withdraw the reference is DENIED as more fully set out in order. Signed by Judge C Lynwood Smith, Jr on 11/30/2012. (AHI)
2012 Nov-30 AM 08:46
U.S. DISTRICT COURT
N.D. OF ALABAMA
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ALABAMA
CHARLES J. BIRGANS,
MAGNOLIA AUTO SALES, INC.,
Civil Action No. MC-12-S-03830-NE
MEMORANDUM OPINION AND ORDER
This action is before the court on a motion by plaintiff, Charles J. Birgans, to
withdraw the reference of this action to the Bankruptcy Court.1 After plaintiff filed
for Chapter 13 bankruptcy under 11 U.S.C. § 1301 et seq., defendant, Magnolia Auto
Sales, Inc., filed a claim in its capacity as a creditor.2 Plaintiff then filed an adversary
complaint alleging that defendant had violated the federal Truth in Lending Act, 15
U.S.C. §1601 et seq., and the Alabama Deceptive Trade Practices Act, Ala. Code §
8-19-1 et seq. (1975), and that defendant had committed state-law negligence and
wantonness.3 Plaintiff alleged the claims to be non-core, but related to the bankruptcy
case pursuant to 28 U.S.C. §157, and demanded a trial by jury.4
Doc. no. 1 (Motion to Withdraw Reference).
Id. at 1.
Doc. no. 1-7 (First Amended Complaint).
Id. ¶ 2.
Under 28 U.S.C. § 157, “[e]ach district court may provide that any or all cases
under title 11 and any or all proceedings arising under title 11 or arising in or related
to a case under title 11 shall be referred to the bankruptcy judges for the district.” 28
U.S.C. § 157(a) (alteration supplied). Section 157 also permits a district court to
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) (emphasis supplied).
Accordingly, § 157 creates two separate standards for withdrawal of reference:
i.e., mandatory withdrawal “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,” and permissive withdrawal
“for cause shown.” See, e.g., Abrahams v. Phill-Con Servs., LLC, Case No. 10-0326,
2010 U.S. Dist. LEXIS 124379 at *4 (S.D. Ala. Nov. 23, 2010) (discussing mandatory
withdrawal); id. at 11 (discussing permissive withdrawal). As plaintiff does not state
whether he seeks mandatory or permissive withdrawal of reference, this court will
consider the grounds for withdrawal under both standards in turn.
Mandatory Withdrawal of Reference
Even though § 157(d) may seem to set a somewhat lax standard for granting
“[o]verwhelmingly courts and commentators agree that the mandatory
withdrawal provision cannot be given its broadest literal reading, for
sending every proceeding that required passing ‘consideration’ of
non-bankruptcy law back to the district court would eviscerate much of
the work of the bankruptcy courts . . . . ” In re Vicars Insurance Agency,
Inc., 96 F.3d 949, 952 (7th Cir. 1996) (internal quotes omitted). Thus,
“courts have uniformly agreed that a narrow interpretation is indeed
Several narrowing readings have been offered, but only one “has
been accepted as an appropriate reading of the statute and effectuation
of Congress’ intent by most courts.” Vicars Insurance, 96 F.3d at 952.
Under this view, “withdrawal should be granted only if the current
proceeding could not be resolved without substantial and material
consideration of the non-Code federal law.” Id. (internal quotes
omitted). Of course, the term “substantial” is not self-defining, but
“[t]he majority of courts . . . generally require that the issues in question
require more than the mere application of well-settled or ‘hornbook’
non-bankruptcy law; significant interpretation of the non-Code statute
must be required.” Id. at 953 (internal quotes omitted). The Eleventh
Circuit appears not to have addressed the issue, but district courts within
this Circuit have regularly embraced the “substantial and material”
standard and its “significant interpretation” gloss,5 as have district courts
In support, the Abrahams opinion cites the following cases from courts within the Eleventh
Circuit: BankUnited Financial Corp. v. FDIC, 436 B.R. 216, 220 (S.D. Fla. 2010) (Huck, J.); In re
Security Bank Corp., Case No. 09-52409, 2010 WL 2464966 at *3 (M.D. Ga. 2010) (Royal, J.); In
re Tousa, Inc., Case No. 10-60206, 2010 WL 1644456 at *2-3 (S.D. Fla. 2010) (Cohn, J.); In re
Pearlman, Case No. 08-81-22, 2008 WL 786809 at *1 (M.D. Fla. 2008) (Conway, J.); Holmes v.
Grubman, 315 F. Supp. 2d 1376, 1379 (M.D. Ga. 2004) (Fitzpatrick, J.); In re Hvide Marine, Inc.,
248 B.R. 841, 844 (M.D. Fla. 2000) (Lazzara, J.); In re TPI International Airways, 222 B.R. 663,
667 (S.D. Ga. 1998). See Abrahams v. Phill-Con Servs., LLC, Case No. 10-0326, 2010 U.S. Dist.
LEXIS 124379 at *5-6 n.3 (S.D. Ala. Nov. 23, 2010).
In support, the Abrahams opinion cites the following cases from courts outside the Eleventh
Circuit: In re Boston Generating, LLC, Case No. 10-6528, 2010 WL 4288171 at *4 (S.D. N.Y.
2010); Rodriguez v. Countrywide Home Loans, Inc., 421 B.R. 341, 348 (S.D. Tex. 2009); In re
Creekside Vineyards, Inc., Case No. 09-2273, 2009 WL 3378989 at *5 (E.D. Cal. 2009); In re Van
Vleet, Case No. 08-00506, 2009 WL 3162212 at *17 (D. Colo. 2009); Murphy v. County of
Abrahams, 2010 U.S. Dist. LEXIS 124379 at *4-6 (alterations in original; emphasis
“Courts employing the ‘substantial and material’ test have expressed concern
that parties could undermine Congress’ intent to give district courts the discretion to
refer Title 11 cases to bankruptcy courts by alleging insubstantial claims involving
non-bankruptcy code federal law.”
Safety Guide of Ala., LLC v. McKnight
Construction Co., Case No. 08-03415, 2009 U.S. Dist. LEXIS 109957 at *5 (M.D.
Ala. Nov. 24, 2009) (citing In re American Body Armor & Equipment, Inc., 155 B.R.
588, 591 (M.D. Fla. 1993); United States v. ILCO, Inc., 48 B.R. 1016, 1021 (N.D. Ala.
Accordingly, “[t]he party seeking withdrawal bears the burden of
demonstrating that it is required.” Abrahams, 2010 U.S. Dist. LEXIS 124379 at *10
(citing In re Vicars Insurance Agency, Inc., 96 F.3d 949, 954 (7th Cir. 1996))
(alteration and emphasis supplied).
As in Abrahams, the plaintiff in this action has “failed to show that this action
requires significant interpretation of any non-bankruptcy law of the United States, and
[he has] thus failed to meet [his] burden.” See Abrahams, 2010 U.S. Dist. LEXIS
Chemung, 410 B.R. 145, 148 (W.D. N.Y. 2009); In re Snooks, Case No. 08-14180, 2009 WL 230598
at *2 (E.D. Mich. 2009); Snodgrass v. New Century Mortgage Corp., 358 B.R. 675, 679 (S.D. W.
Va. 2006); In re Rivera, Case No. 05-065, 2005 WL 4001273 at *2 (N.D. Ohio 2005); In re 3dfx
Interactive, Inc., Case No. 02-55795, 2005 WL 1074407 at *3 (N.D. Cal. 2005); In re
Apponline.com, Inc., 303 B.R. 723, 726 (E.D. N.Y. 2004); Southern Pacific Transportation Co. v.
Voluntary Purchasing Groups, Inc., 252 B.R. 373, 382 (E.D. Tex. 2000); In re Service Marine
Industries, Inc., Case No. 00-579, 2000 WL 777912 at *2 (E.D. La. 2000). See Abrahams, 2010
U.S. Dist. LEXIS 124379 at *6 n.4.
124379 at *10 (alterations and emphasis supplied). The mere fact that plaintiff filed
a claim under the federal Truth in Lending Act is not enough to show that “the issues
in question require more than the mere application of well-settled or ‘hornbook’
non-bankruptcy law.” See id. at 5 (emphasis supplied). That plaintiff only asserts a
single count against defendant under federal law, and that he asserts two other counts
against defendant under state law, also counsels against a finding that this action
requires significant interpretation of any non-bankruptcy law of the United States. See
McKnight, 2009 U.S. Dist. LEXIS 109957 at *5-6 (holding that, “[g]iven the unique
circumstances of this case where a few, but certainly not most of the claims in the
adversary proceeding arise under federal law, but the other claims arise under
Alabama common law or an Alabama statute, the Court cannot conclude that the
applicable of the ‘substantial and material’ test warrants mandatory withdrawal”)
(alteration supplied). Likewise, that defendant has not opposed plaintiff’s motion for
withdrawal of reference is not dispositive of whether this court should grant the
motion.7 See Abrahams, 2010 U.S. Dist. LEXIS 124379 at *10 -11 (holding that the
fact “[t]hat Phill-Con ‘concedes’ that mandatory withdrawal applies, (Doc. 15 at 2),
does not make it so or remedy the deficiency in the plaintiffs’ presentation”)
This court ordered any party wishing to respond to plaintiff’s motion for withdrawal of
reference to do so by November 27, 2012. See unnumbered Order Entered November 13, 2012.
As no response has been filed, it is assumed that the motion is not opposed.
Permissive Withdrawal of Reference
Section 157(d) also permits a district court to withdraw a reference “for cause
shown.” Abrahams, 2010 U.S. Dist. LEXIS 124379 at *10 -11. “The decision
whether to withdraw the reference is committed to the district court’s discretion.”
Abrahams, 2010 U.S. Dist. LEXIS 124379 at *11 (citing In re Tate, Case No.
09-0039, 2010 WL 320488 at *8 (S.D. Ala. Jan. 18, 2010)). In determining the
existence of cause for withdrawal of reference, the Eleventh Circuit directs the courts
to “consider such goals as advancing uniformity in bankruptcy administration,
decreasing forum shopping and confusion, promoting the economical use of the
parties’ resources, and facilitating the bankruptcy process.” Dionne v. Simmons (In
re Simmons), 200 F.3d 738, 742 (11th Cir. 2000) (quoting In re Parklane/Atlanta
Joint Venture, 927 F.2d 532, 536 n.5 (11th Cir.1991); Holland America Ins. Co. v.
Succession of Roy, 777 F.2d 992, 998 (5th Cir.1985)).
“Additional factors that may be considered include: (1) whether the claim is
core or non-core; (2) efficient use of judicial resources; (3) a jury demand; and (4)
prevention of delay.” In re Price, Case No. 06-3317, 2007 WL 2332536 at *2 (M.D.
Ala. 2007); BankUnited Financial Corp. v. FDIC, 436 B.R. 216, 220 (S.D. Fla. 2010).
Even so, “[t]he mere fact a bankruptcy proceeding is not a core proceeding is not a
sufficient reason to grant a motion for the withdrawal of the reference.” In re Tate,
2010 WL 320488 at *10 (quoting Eide v. Haas (In re H & W Motor Express Co.), 343
B.R. 208, 215 (N.D. Iowa 2006)) (alteration supplied). Likewise, “‘[f]ederal courts
have universally held that a Seventh Amendment jury trial right does not mean the
bankruptcy court must instantly give up jurisdiction.’” In re Tate, 2010 WL 320488
at *9 (quoting In re Healthcentral.com, 504 F.3d 775, 787 (9th Cir. 2007)) (alteration
Granting plaintiff’s motion for withdrawal of reference would undermine the
goals of promoting uniformity, economy, efficiency, and preventing forum shopping,
confusion, and delay. As of November 6, 2012, the record in the bankruptcy
proceeding contained fifty-four documents,8 and the record in the in the adversary
proceeding contained twenty documents,9 including an amended complaint,10 an
answer,11 and an order setting the trial of plaintiff’s claims against defendant for
February 4, 2013.12 Accordingly, the bankruptcy court is already familiar with the
facts and law regarding plaintiff’s various claims and has taken steps toward their
resolution, while this court would effectively have to start from scratch.
Doc. no. 1-4 (Bankruptcy Proceeding Docket Sheet).
Doc. no. 1-5 (Adversary Proceeding Docket Sheet).
Doc. no. 1-7 (Amended Complaint).
Doc. no. 1-8 (Answer).
Doc. no. 1-9 (Pretrial Order).
For the reasons explained above, the motion to withdraw the reference of this
action to the Bankruptcy Court is DENIED.
DONE and ORDERED this 29th day of November, 2012.
United States District Judge
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