Birdsell v. Schneider

Filing 5

ORDER denying 1 Motion to Withdraw the Reference (Bankruptcy). Signed by Judge Frederick J Martone on 4/21/11.(SAT)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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David A. Birdsell, Chapter 7 Trustee,

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Plaintiff,
vs.

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Joseph Schneider,
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Defendant.
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No. CV-11-0484-PHX-FJM
ORDER

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We have before us defendant Joseph Schneider’s motion for withdrawal of the
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reference to the United States Bankruptcy Court (doc. 1), trustee’s response (doc. 2), and
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defendant’s reply (doc. 3).
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Plaintiff is the Chapter 7 trustee of debtor Lori Kathleen Bryan’s bankruptcy case.
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See In Re: Lori Kathleen Bryant, No. BK-10-15923. Plaintiff alleges that before debtor’s
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filing for Chapter 7 relief, debtor paid $32,646.65 of the $36,500 purchase price of real
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property in Phoenix (“the property”). Defendant paid the balance, and defendant was then
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deeded the property. Trustee brought an adversary action against defendant, Birdsell v.
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Schneider, No. 10-AP-1954, seeking: (1) a declaratory judgment that debtor owns 89% of
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the property, as joint-tenant of the defendant; (2) authority to sell the property, pursuant to
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11 U.S.C. § 363(h); (3) in the alternative, an equitable lien against the property in the amount
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of $32,636.65, plus 89% of the net proceeds of the sale of the property; (4) avoidance of an
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allegedly preferential transfer of $24,506 from debtor to defendant, pursuant to 11 U.S.C. §
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547(b); and (5) avoidance of an allegedly fraudulent transfer of $43,000 from debtor to

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defendant, pursuant to 11 U.S.C. § 548. See Complaint, Birdsell v. Schneider, No.

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10-AP-1954 (doc. 1).

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The bankruptcy court has jurisdiction to “hear and determine all cases under title 11

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and all core proceedings arising under title 11, or arising in a case under title 11.” 28 U.S.C.

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§ 157(b)(1). In addition, bankruptcy judges may hear non-core proceedings that are “related”

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to a bankruptcy case, but may only submit proposed findings of fact and conclusions of law

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to the district court. 28 U.S.C. § 157(c)(1); see also Security Farms v. International Broth.

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of Teamsters, 124 F.3d 999, 1008 (9th Cir. 1997). Proceedings “arise under title 11 if they

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involve a cause of action created or determined by a statutory provision of title 11.” In re

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Marshall, 600 F.3d at 1054 (citations omitted). Title 11 provides a non-exhaustive list of

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“core proceedings.” See 11 U.S.C. § 157(b)(2). “A bankruptcy judge may only determine

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a claim that meets Congress’ definition of a core proceeding and arises under or arises in title

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11.” In re Marshall, 600 F.3d 1037, 1055 (9th Cir. 2010) (citing 28 U.S.C. § 157(c)).

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Trustee’s claims against defendant are all core proceedings, as they affect “the

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liquidation of the assets of the estate.” See 28 U.S.C. § 157(b)(2)(O). Moreover, some of

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trustee’s claims are specifically listed as core proceedings. See 28 U.S.C. § 157(b)(2)(F)

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(“proceedings to determine, avoid, or recover preferences”); § 157(b)(2)(H) (“proceedings

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to determine, avoid, or recover fraudulent conveyances”). Therefore, the bankruptcy court

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has jurisdiction to hear and determine trustee’s claims.

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However, where the bankruptcy court has jurisdiction, we may nonetheless withdraw

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any case or proceeding “on timely motion of any party, for cause shown.” 28 U.S.C. §

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157(d). In determining whether cause exists, we “consider the efficient use of judicial

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resources, delay and costs to the parties, uniformity of bankruptcy administration, the

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prevention of forum shopping, and other related factors.” Vacation Village, Inc. v. Clark

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County, Nev., 497 F.3d 902, 914 (9th Cir. 2007) (citing Security Farms, 124 F.3d at 1008).

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There is no good cause for granting defendant’s motion to withdraw. These core

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proceedings are normally handled in bankruptcy court. Because of that court’s unique
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expertise, it would be an inefficient allocation of judicial resources to withdraw the claims.

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Withdrawing the action would also be wasteful of the parties’ resources and jeopardize the

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uniformity of bankruptcy administration, because both the district court and bankruptcy court

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would have to become familiar with facts about the estate and make determinations regarding

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the parties’ rights and obligations. In addition, defendant explicitly concedes that he is

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attempting to forum shop. Defendant contends that trustee’s response to his motion

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demonstrates “a certain comfort from regularly appearing in bankruptcy court,” and

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withdrawal would place “this litigation in a forum not frequented by either party herein.”

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Reply at 2–3. The parties’ relative experience in different forums is not a factor in

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determining which court is best suited to handle these proceedings.

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Defendant’s request for a jury trial also does not constitute good cause to transfer the

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matter to the district court at this time. The bankruptcy court may conduct a jury trial only

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with the “express consent of all the parties.” 28 U.S.C. § 157(e). But even if a party does

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not consent, a “valid right to a Seventh Amendment jury trial in the district court does not

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mean the bankruptcy court must instantly give up jurisdiction and that the action must be

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transferred to the district court.” In re Healthcentral.com, 504 F.3d 775, 788 (9th Cir . 2007).

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Rather, the “bankruptcy court may retain jurisdiction over the action for pre-trial matters.”

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Id. Accordingly, even where withdrawal of the reference may ultimately be necessary, we

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may choose not to withdraw immediately so as to take advantage of the bankruptcy court’s

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familiarly with the facts and expertise in the law. See National Hockey League v. Moyes,

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2010 WL 3719289, *2 (D.Ariz. 2010) (“The majority of courts in this District addressing this

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issue have held that bankruptcy courts generally are best equipped to manage all pretrial

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issues and that the ultimate need for district court adjudication is speculative.”).

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Therefore, withdrawal at this time would be premature. Should a jury trial ultimately

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be necessary, the action may be withdrawn to the district court after all pre-trial matters have

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been resolved in the bankruptcy court. See In re Health.central.com, 504 F.3d at 788 (“Only

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by allowing the bankruptcy court to retain jurisdiction over the action until trial is actually

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ready do we ensure that our bankruptcy system is carried out”). Moreover, there is no right
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to a jury trial for many of trustee’s causes of action. The Seventh Amendment guarantees

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a right to jury trial for claims for damages, but not for equitable claims. See Granfinanciera,

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S.A. v. Nordberg, 492 U.S. 33, 41, 109 S.Ct. 2782, 2790 (1989); see e.g. Perera Co., Inc. v.

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Goldstone, 491 F.2d 386, 387 (9th Cir. 1974) (“enforcement of liens is a long established and

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well recognized function of the courts of equity.”).

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Because withdrawal of this matter from the bankruptcy court would waste judicial

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resources, increase delay and costs to the parties, jeopardize the uniformity of bankruptcy

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administration, and promote forum shopping, there is no good cause to withdraw the

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reference.

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Therefore, IT IS ORDERED DENYING defendant’s motion to withdraw the
reference to the bankruptcy court (doc. 1)
DATED this 21st day of April, 2011.

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