In Re: International Manufacturing Group, Inc.

Filing 12

MEMORANDUM and ORDER signed by District Judge Morrison C. England, Jr on 10/23/2017 GRANTING 1 Motion to Withdrawal Reference. To the extent that motion requests bifurcation of the case, that request is DENIED. Joint Status Report/Joint Notice of Trial Readiness due by: 10/30/2017. Status Conference set for 11/2/2017 at 11:00 AM in Courtroom 7 (MCE) before District Judge Morrison C. England Jr. (Donati, J)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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In re INTERNATIONAL
MANUFACTURING GROUP, INC.,
Debtor.

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MEMORANDUM AND ORDER

BEVERLY N. McFARLAND, Chapter
11 Trustee for International
Manufacturing Group, Inc.,

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No. 2:17-cv-1695-MCE

Plaintiff,
v.
BYRON L. YOUNGER, JR.; JANE
YOUNGER; BYRON L. YOUNGER,
JR. FAMILY TRUST; WESTERN
BUILDING SPECIALTIES OF
SACRAMENTO; WESTERN
BUSINESS SOLUTIONS
INCORPORATED d/b/a WESTERN
BATH & SHOWER INC.; THE
ENTRUST GROUP, INC. FBO BYRON
& JANE YOUNGER; and RELIABLE
MEDICAL & DENTAL SALES, LLC,
Defendants.

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Presently before the Court is a motion to withdraw reference of this action to the

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U.S. Bankruptcy Court brought by Defendants Western Building Specialties of

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Sacramento and Western Business Solutions Incorporated doing business as Western
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Bath & Shower Inc. (the “Western Defendants”). Withdrawal of the reference of an

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adversary proceeding from bankruptcy court is governed by 28 U.S.C. § 157(d), which

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provides that:

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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). Section 157(d) “contains two distinct provisions: the first sentence

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allows permissive withdrawal, while the second sentence requires mandatory withdrawal

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in certain situations.” In re Coe-Truman Technologies, Inc., 214 B.R. 183, 185 (N.D.

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Ill.1997); see In re Nat'l Consumer Mortgage, LLC, SACV 09-792 CAS, 2009 WL

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2985243 (C.D. Cal. Sept. 14, 2009).

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With regard to permissive withdrawal, a court’s decision to withdraw the reference

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is generally discretionary, see, e.g., Vreugdenhil v. Hoekstra, 773 F.2d 213, 215 (8th

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Cir.1985) (cited by In re Cinematronics, Inc., 916 F.2d 1444, 1451 (9th Cir. 1990)), and

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“[p]ermissive withdrawal is permitted only in a limited number of circumstances,”

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Hawaiian Airlines, Inc., 355 B.R. at 223 (citing In re Ponce Marine Farm, Inc., 172 B.R.

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722 (D.P.R. 1994) for the proposition that “[i]n order to insure that the exception does not

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swallow the rule, courts remain cautious in applying § 157(d)”). Under controlling Ninth

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Circuit law, however, where a defendant has preserved its Seventh Amendment right to

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a jury trial in a noncore proceeding in which the Bankruptcy Court lacks authorization to

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conduct a jury trial, withdrawal of the reference is appropriate.

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Here, the parties do not dispute that the Western Defendants are entitled to a jury

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trial before this Court as they have timely demanded such a trial and have not consented

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to the jurisdiction of the Bankruptcy Court in this matter. The Court agrees and finds that

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withdrawal of the reference is appropriate with respect to the Western Defendants, who

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have properly preserved their Seventh Amendment right to a jury trial in the district court.
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The parties further agree that it is within this Court’s discretion to withdraw

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reference of the case in its entirety, or to bifurcate the Western Defendants from the

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remaining defendants and to withdraw the reference with respect to those claims

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asserted against the Western Defendants only. See 28 U.S.C. § 157(d); see also,

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Security Farms v. Int’l Brotherhood of Teamsters, 124 F.3d 999, 1008 (9th Cir. 1997) (“In

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determining whether cause exists, a district court should consider the efficient use of

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

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the prevention of forum shopping, and other related factors.”); Fed. R. Civ. Proc. 42(b)

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(providing similar factors for consideration in determining whether to bifurcate claims for

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trial). In considering the relevant factors, the Court finds the Defendants to be

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interconnected and the claims against the Western Defendants fundamentally tied to the

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claims against the other Defendants, such that bifurcation would frustrate judicial

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economy and waste the time and resources of both the parties and the Court.

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Moreover, bifurcation would result in the potential for inconsistent judgments between

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substantially identical cases. For these reasons, the Court declines to bifurcate this

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matter.

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For the foregoing reasons, the Court hereby GRANTS the Western Defendants’

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unopposed motion to withdraw reference of this action to the U.S. Bankruptcy Court

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(ECF No. 1). To the extent that motion requests bifurcation of the case, that request is

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DENIED. Reference of the action in its entirety is hereby WITHDRAWN.

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The parties are hereby ORDERED to file a Joint Status Report/Joint Notice of

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Trial Readiness not later than October 30, 2017. The parties are to set forth therein a

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brief background discussing the status of the case, the appropriateness of special

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procedures, whether this case is related to any other case(s) on file in the Eastern

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District of California, the prospect for settlement, their estimated trial length, any request

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for a jury, and their availability for trial. After review of the parties' Joint Status

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Report/Joint Notice of Trial Readiness, the Court will issue an order that sets forth a final

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pretrial conference and trial.
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A status conference is hereby scheduled and confirmed for November 2, 2017, at
11:00 a.m. in Courtroom 7.
IT IS SO ORDERED.
Dated: October 23, 2017

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