HARRISON et al v. GORDON et al
Filing
7
ORDER denying 1 Motion to Withdraw the Reference and dismissing matter from the District Court. Ordered by U.S. District Judge HUGH LAWSON on 9/25/2014. (nbp)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF GEORGIA
VALDOSTA DIVISION
IN RE:
ALPHA
INC.,
PROTECTIVE
SERVICES,
Debtor,
Case No. 7:14-MC-1 (HL)
________________________________
NEIL C. GORDON, as Trustee in
Bankruptcy
for
Alpha
Protective
Services, Inc.,
Plaintiff,
v.
JAMES LEE HARRISON, et al.,
Defendants.
ORDER
Before the Court is the Motion to Withdraw the Reference (Doc. 1) by
Defendants James Lee Harrison, Harrison Management and Consulting Group,
LLC, and Gary L. Harrison (collectively “Defendants”). Defendants ask this Court
to withdraw the reference for an adversary proceeding currently pending against
them in the United States Bankruptcy Court for the Middle District of Georgia
(“Bankruptcy Court”). If the reference were withdrawn pursuant to 28 U.S.C. §
157(d), as Defendants request, then the adversarial proceeding against them
would be carried out in this Court. Neil Gordon (“Trustee”), as the trustee in the
bankruptcy proceeding for Alpha Protective Services, Inc. (“Debtor”), opposes
withdrawing the reference. For the reasons stated herein, Defendants’ motion to
withdraw the reference is denied.
I.
Factual Summary
A brief review of the background for this case is necessary for analyzing
the merits of the motion to withdraw.1 In 2006, Defendant James Harrison (“J.
Harrison”) was a minority shareholder in the Debtor, which was in the business of
providing specialized security services. Jeffrey Brinson (“Brinson”) was the
majority shareholder. Defendant Harrison Management and Consulting Group,
LLC (“HMCG”), which was wholly owned and operated by Defendant Gary
Harrison (“G. Harrison”), had a management services agreement with the Debtor
under which HMCG was involved with Debtor’s operations. In addition to this
business arrangement, there was also a personal relationship between Brinson
and the Harrisons.
The relationship between Brinson and the Harrisons eventually fractured,
and in April 2006, the Debtor sought to terminate the services contract with
HMCG. These developments led to protracted litigation with the Harrisons and
HMCG making claims against Brinson and the Debtor, and vice versa. A
settlement was eventually reached, evidently in June 2007. Brinson and the
1
This factual history is obtained from the bankruptcy Complaint (Doc. 6-1) and
Trustee’s Response in Opposition to the Motion to Withdraw the Reference (Doc. 5), to
which Defendants have not replied.
2
Debtor agreed to pay several million dollars to J. Harrison and HMCG with the
money being conveyed in payments spread over eighty-four months. Brinson and
the Debtor executed notes and guarantees in evidence of their indebtedness.
On April 12, 2012, the Debtor filed a voluntary bankruptcy petition under
Chapter 11 of the bankruptcy code. At that time, some money was still owed to J.
Harrison and HMCG under the settlement agreement with Brinson and the
Debtor. In December 2012, Debtor’s bankruptcy proceeding was converted to
one under Chapter 7. In April 2014, Debtor’s Trustee sued Defendants for
recovery of payments made to them under the settlement agreement. Trustee’s
Complaint against Defendants alleged claims of insider preference avoidance,
preference avoidance, fraudulent transfer, fraudulent transfer avoidance,
recovery against immediate transferee, and recovery as transferee. (Complaint,
Doc. 6-1, ¶¶33-57). Defendants answered the Complaint and requested a jury
trial. They have not consented to having the jury trial in Bankruptcy Court. In
addition to the claims against Defendants, Debtor’s Trustee has also brought
similar claims against fifteen other entities.
II.
Legal Analysis
“Bankruptcy courts provide a special forum for debtors and creditors to
reach prompt resolution of bankruptcy issues, with district courts serving in a
supervisory and appellate capacity for bankruptcy courts.” In re Security Bank
3
Corp., 5:10-MC-3, 2010 WL 2464966, at *2 (M.D. Ga. June 14, 2010); see also
In re Parklane/Atlanta Joint Venture, 927 F.2d 532, 538 (11th Cir. 1991).
“Motions to withdraw reference from the bankruptcy court under § 157(d)
essentially only determine the forum in which final decisions will be reached.” In
re King Memorial Hosp., Inc., 767 F.2d 1508, 1510 (11th Cir. 1985). Thus,
Defendants’ motion seeks to have the issues in this case, including pre-trial
matters, decided by this Court rather than the Bankruptcy Court.
Although § 157(d) addresses circumstances in which the district court’s
withdrawal of the reference might be either mandatory or permissive, Defendants
only argue for the permissive withdrawal of the reference. The permissive
withdrawal
of
a
reference
to
bankruptcy
court
may
only
be
done
“for cause shown.” 28 U.S.C. § 157(d). Even though Congress did not provide a
definition for “cause,” the Eleventh Circuit has noted that this is not “an empty
requirement.” In re Simmons, 200 F.3d 738, 741 (11th Cir. 2000) (citing In re
Parklane, 927 F.2d at 536). District courts in this circuit have developed a
number of factors for determining whether cause has been shown: “(1) uniformity
and efficiency in the administration of bankruptcy law; (2) prevention of forum
shopping; (3) conservation of parties’ resources; … (4) facilitation of the
bankruptcy process; … (5) whether the claim is core or non-core; (6) efficient use
of judicial resources; (7) a jury demand; and (8) prevention of delay.” Holmes v.
4
Grubman, 315 F. Supp. 2d 1376, 1381 (M.D. Ga. 2004) (internal citations omitted
and numbering altered). Although the Eleventh Circuit “has not yet articulated
criteria for determining the existence of cause for withdrawal,” it has noted with
approval the Fifth Circuit’s instruction, in dicta, for district courts to utilize such
factors in determining cause. In re Simmons, 200 F.3d at 742 (quoting In re
Parklane, 972 F.2d at 536 n. 5).
In balancing these factors, the Court is convinced that the motion to
withdraw the reference should be denied. As the Trustee readily notes, there are
fifteen adversary proceedings in this bankruptcy case in addition to the one
brought against Defendants. These other proceedings involve similar factual
allegations and legal claims as those made against Defendants. Moreover, the
Bankruptcy Court has a familiarity with and expertise in these sorts of issues that
this Court lacks. Thus, allowing this matter to proceed in Bankruptcy Court would
encourage uniformity in the bankruptcy proceedings, efficiently utilize judicial
resources, and facilitate the bankruptcy process. Given the fact that Defendants
have already answered the Complaint brought in Bankruptcy Court, the Court is
also persuaded that there would be less delay and a greater conservation of the
parties’ resources if the adversary proceeding were not removed to this Court.
To the extent that the remaining factors are even relevant to this
proceeding, they are insufficient to tilt the balance in favor of withdrawing the
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reference. Both Trustee and Defendants recognize that the prevention of forum
shopping is not a factor at play here. While the claims brought against
Defendants appear to qualify this as a “core” proceeding under Title 11 of the
bankruptcy code, see § 157(b)(2), the Court agrees with the Trustee that the
Supreme Court’s opinion in Stern v. Marshall, 131 S.Ct. 2594, 180 L.Ed.2d 475
(2011), makes the factor of whether a proceeding is “core” or “non-core” much
less significant. In Marshall, the Supreme Court held that even if § 157 defined a
claim as a core proceeding, because bankruptcy judges are not appointed
pursuant to Article III of the Constitution, they may not enter final judgment on
such a claim if it arises from “the common law, or in equity, or admiralty.” 131
S.Ct. at 2608-09 (quoting Murray’s Lessee v. Hoboken Land & Improvement Co.,
59 U.S. 272, 18 How. 272, 284, 15 L.Ed. 372 (1856)). However, any final order
entered by the Bankruptcy Court is subject to de novo review by this Court, so
even if this Court determines that the Bankruptcy Court lacked constitutional
authority to enter final judgment on a claim, any such order would be treated as a
recommendation by the bankruptcy judge. See In re Williford, 222 F. App’x 843,
844 (11th Cir. March 13, 2007); Amended Standing Order of Reference for the
United States District Court for the Middle District of Georgia (Feb. 17, 2012).
Finally, the fact that Defendants have requested a jury trial does not
convince the Court to withdraw the reference at this time. Section 157(d) only
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permits bankruptcy judges to conduct jury trials “with the express consent of all
the parties” to an adversary proceeding, and Defendants refuse to provide such
consent. They contend that withdrawing the reference now would be more
expeditious given that their requested jury trial can only occur in district court.
The Court is not persuaded. Withdrawing the reference only after the Bankruptcy
Court has handled pretrial matters and entered “findings of fact and
recommendations of law on dispositive issues … is consistent with Congress’s
intent to let bankruptcy judges determine bankruptcy matters to the greatest
extent possible.” Ogier v. Johnson, No. 1:13-cv-01490, 2013 WL 6843476, at *6
(N.D. Ga. Dec. 27, 2013) (quoting In re Palm Beach Fin. Partners, L.P., No. 1380102-CIV, 2013 WL 203616, at *4 (S.D. Fla. May 14, 2013)). The proceeding
against Defendants will remain in Bankruptcy Court until their case is ready to go
to trial.
III.
Conclusion
Defendants’ Motion to Withdraw the Reference (Doc. 1) is denied, and this
matter is dismissed from the district court.
SO ORDERED, this the 25th day of September, 2014.
s/ Hugh Lawson_______________
HUGH LAWSON, SENIOR JUDGE
scr
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