In Re Fred N Stanci, et al

Filing 7

ORDER denying 2 Motion to Withdraw Reference. Signed by Judge J. Leon Holmes on 2/19/2014. (jak)

IN THE UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF ARKANSAS
WESTERN DIVISION
IN RE: FRED N. STANCIL AND
LINDA STANCIL, DEBTORS

CASE NO. 4:14MC00002 JLH

OPINION AND ORDER
Linda Faye Stancil previously commenced an employment discrimination action, Linda Faye
Stancil v. Stephen L. LaFrance Pharmacy, Inc., d/b/a USA Drug; and David Rainbolt, No.
4:12CV00135 JLH. Before commencing that action, Stancil had filed a voluntary bankruptcy
petition. During the course of the bankruptcy proceedings, she failed to disclose the existence of this
claim. The defendants in the employment discrimination case eventually learned of the bankruptcy
proceedings and moved to dismiss this action, arguing that Stancil lacked standing to pursue this
action inasmuch as her claim was the property of the bankruptcy estate and could be pursued only
by the Trustee. The Trustee then filed a motion to be substituted as the plaintiff as the real party in
interest. While those motions were pending, the Trustee and the defendants settled the claim. When
the Court received notice that the claim had been settled, the Court ordered the Clerk to terminate
this action administratively pending approval of the settlement by the bankruptcy court.
Luther Sutter, who represented Stancil in the employment discrimination case, has filed a
motion to withdraw the reference and to consolidate the bankruptcy proceeding with the employment
discrimination case.
The statute provides:
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 Honorable Kristine G. Baker has recently explained that this subsection of
the statute includes both a discretionary provision and a mandatory provision:
The first sentence outlines the discretionary provision; withdrawal of the
reference may be accomplished “for cause shown” upon “timely motion of any party”
or upon the court’s own motion. The second sentence outlines the mandatory
provision; withdrawal of the reference is required “on timely motion of a party” if the
court determines that, in order to resolve the bankruptcy case, the court would also
have to consider “other laws of the United States regulating organizations or activities
affecting interstate commerce.”
Calderon v. Bank of America Corp., No. 4:13MC00005 KGB, 2013 U.S. Dist. LEXIS 62912, at *3
(E.D. Ark. May 2, 2013) (quoting 28 U.S.C. § 157(d)) (internal citations omitted). “Where . . . the
only federal law at issue is the Bankruptcy Code itself, withdrawal is generally discretionary.”
Vreugdenhil v. Hoekstra, 773 F.2d 213, 215 (8th Cir. 1985). Whether to approve the settlement
between the Trustee and the defendants presents issues that arise under the bankruptcy code, so
whether to withdraw the reference is discretionary.
“To grant a motion to withdraw the reference under the discretionary provision, the court
must determine whether the motion was ‘timely’ and the party has shown ‘cause’ for the withdrawal.”
Calderon, 2013 U.S. Dist. LEXIS 62912, at *4. The moving party, Sutter, bears the burden of proof
on both issues. Id.
Courts consider a number of factors in determining whether there is cause for
withdrawing the reference. They include whether the claims asserted are core or noncore, the delay and costs to the parties, the efficient use of judicial resources, the
uniformity of bankruptcy administration, the prevention of forum shopping, and the
presence of a jury demand.
Id. at *4-5. The determination of whether to approve the proposed settlement is a core proceeding
because it is a matter concerning the administration of the bankruptcy estate. In re Ontos, Inc., 478
F.3d 427, 433 (1st Cir. 2007). The efficient use of judicial resources as well as delay and costs to the

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parties weigh in favor of not withdrawing the reference, because the bankruptcy court has already
directed notice to creditors and interested parties, and that step would have to be repeated if the
reference were withdrawn. Furthermore, the bankruptcy court is in the best position to provide
uniform administration of the bankruptcy code and is best situated to determine whether the proposed
settlement is in the best interest of all of the creditors. In summary, the factors to be considered
weigh overwhelmingly in favor of not withdrawing the reference.
The motion to withdraw the reference is denied. Document #2.
IT IS SO ORDERED this 19th day of February, 2014.

J. LEON HOLMES
UNITED STATES DISTRICT JUDGE

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