Barnes v. Sea Hawaii Rafting, LLC et al

Filing 569

ORDER DENYING PLAINTIFF BARNES'S MOTION TO WITHDRAW THE REFERENCES OF CASES TO THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF HAWAI'I re: 531 "For the foregoing reasons, Plaintiff Barness Motion to reverse the references of the chapter 7 case and the chapter 13 case to the bankruptcy court is DENIED." Signed by JUDGE ALAN C. KAY on 5/31/2019 (jo)COURTS CERTIFICATE of Service - Non-Registered CM/ECF Participants have been served by First Class Mail to the addresses of record listed on the Notice of Electronic Filing (NEF)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAI`I
)
)
)
Plaintiff,
)
)
v.
)
)
SEA HAWAI`I RAFTING, LLC;
)
KRIS HENRY; ALOHA OCEAN
)
EXCURSIONS, LLC; JOHN
)
DOES 1-20; MARY DOES
)
1-20; DOE CORPORATIONS
)
1-20; DOE PARTNERSHIPS
)
1-20; DOE ASSOCIATES
)
1-20; DOE GOVERNMENTAL
)
AGENCIES 1-20; AND OTHER
)
ENTITIES 1-20, in personam;
)
AND M/V TEHANI, HA 1629-CP,
)
AND HER ENGINES, EQUIPMENT,
)
TACKLE, FARES, STORES,
)
PERMITS, FURNISHINGS, CARGO
)
AND FREIGHT; DOE VESSELS 1-20,)
in rem.
)
)
Defendants.
)
)
CHAD BARRY BARNES,

Civ. No. 13-00002 ACK-WRP

ORDER DENYING PLAINTIFF BARNES’S MOTION TO WITHDRAW THE
REFERENCES OF CASES TO THE UNITED STATES BANKRUPTCY COURT FOR
THE DISTRICT OF HAWAI`I
For the reasons that follow, Plaintiff Barnes’s motion
requesting the Court to withdraw the references of In re Sea
Hawai`i Rafting, LLC, Case No. 14-01520 (Bankr. D. Haw. 2014)
and In re Kristin Kimo Henry, Case No. 14-01475 (Bankr. D. Haw.
2014) to the United States Bankruptcy Court for the District of
Hawai`i is DENIED.

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BACKGROUND
For purposes of this Order, the Court will not recount
this case’s lengthy procedural history beginning in 2013.

The

Court only discusses those facts and events of specific
relevance to the issues that this Order addresses.
On November 3, 2014, Defendant Kris Henry (“Defendant
Henry”), the sole member of Defendant Sea Hawai`i Rafting, LLC
(“Defendant SHR”), filed a chapter 13 bankruptcy petition 1/ in
the United States Bankruptcy Court for the District of Hawai`i
(the “bankruptcy court”).

See In re Kristin Kimo Henry, Case

No. 14-01475 (Bankr. D. Haw. 2014) (the “chapter 13 case”).

On

November 12, 2014, Defendant SHR filed a chapter 7 bankruptcy
petition 2/ in the bankruptcy court.

See In re Sea Hawai`i

Rafting, LLC, Case No. 14-01520 (Bankr. D. Haw. 2014) (the
“chapter 7 case”).
Plaintiff Chad Barry Barnes’s (“Plaintiff Barnes”)
efforts to prosecute his maritime and non-maritime tort claims
1/

Chapter 13 of the Bankruptcy Code governs the adjustment of
debts of an individual with regular income. 6 Collier on
Bankruptcy ¶ 1300.01 (Richard Levin & Henry J. Sommer eds., 16th
ed. 2019). Chapter 13 involves reorganization of a debtor’s
unsecured and secured debts through a chapter 13 plan. Id. If
the debtor completes the chapter 13 plan, he receives a
discharge. Id.; 11 U.S.C. § 1328(a).
2/ Chapter 7 of the Bankruptcy Code governs liquidation of a
debtor. 6 Collier on Bankruptcy ¶ 700.01. Chapter 7 involves
the collection, liquidation, and distribution of a debtor’s
assets. Id. A Chapter 7 bankruptcy culminates in the discharge
of the debtor if the debtor is an individual, but not if the
debtor is an entity such as an LLC. Id.; 11 U.S.C. § 727(a).
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against Defendant SHR and Defendant Henry have been
significantly frustrated by the operation of the bankruptcy
stay, which comes into effect automatically when a debtor files
for bankruptcy and stays the commencement or continuation of
litigation against the debtor.

11 U.S.C. § 362(a).

Plaintiff Barnes has sought to prosecute his claims by
asking the bankruptcy court to lift the automatic stays against
Defendant SHR and Defendant Henry, their bankruptcy estates, and
the vessel M/V Tehani.

Chapter 7 case, Dkt. No. 285.

In a

Memorandum of Decision dated May 21, 2018, the bankruptcy court
lifted the automatic stays as to the vessel M/V Tehani and as to
Defendant SHR, allowing Plaintiff Barnes to litigate his in rem
claims against the vessel and his in personam claims against
Defendant SHR.

Chapter 7 case, Dkt. No. 300.

The bankruptcy

court declined to lift the automatic stays as to Defendant
Henry, Defendant Henry’s bankruptcy estate, or Defendant SHR’s
bankruptcy estate.

Id.

On March 11, 2019, Plaintiff Barnes filed a “Motion to
Reverse Referrals of Sea Hawaii Rafting, LLC and Kris Kimo Henry
to Bankruptcy Court Pursuant to Rule 28 U.S.C. § 157(d)”
“Motion”).

ECF No. 531.

(the

Plaintiff Barnes asks the Court to

withdraw the references of the chapter 13 and chapter 7 cases to
the bankruptcy court.

No party has filed a memorandum in

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opposition.

The Court held a hearing on Plaintiff Barnes’s

Motion on May 15, 2019.
STANDARD OF REVIEW
In general, district courts have original jurisdiction
over all bankruptcy matters.

28 U.S.C. § 1334.

However, 28

U.S.C. § 157(a) permits district courts to refer all bankruptcy
matters to a bankruptcy court.

Local Rule 1070.1(a) of the

Local Rules of Practice for the United States District Court for
the District of Hawai`i provides that, pursuant to 28 U.S.C. §
157(a), “all cases under Title 11 and civil proceedings arising
under Title 11 or arising in or related to a case under Title 11
are referred to the bankruptcy judges of this district.”
28 U.S.C. § 157 classifies matters as either “core
proceedings,” for which the bankruptcy court may enter
appropriate orders and judgments, or “non-core proceedings,”
which the bankruptcy court may hear but for which it may only
submit proposed findings of fact and conclusions of law to the
district court for de novo review.

Sec. Farms v. Int’l Bhd. of

Teamsters, Chauffers, Warehousemen & Helpers, 124 F.3d 999, 1008
(9th Cir. 1997) (citing 28 U.S.C. § 157).

“Actions that do not

depend on bankruptcy laws for their existence and that could
proceed in another court are considered “non-core.”

Sec. Farms,

124 F.3d at 1008 (citing In re Castlerock Props., 781 F.2d 159,
162 (9th Cir. 1986)).

Core proceedings include “motions to

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terminate, annul, or modify the automatic stay,” as well as
“objections to discharges.”

28 U.S.C. § 157(b)(2)(G), (J).

“A party who believes that a proceeding pending in the
Bankruptcy Court should instead be litigated before the district
court may move for mandatory or permissive withdrawal of that
reference pursuant to 28 U.S.C. § 157(d).”

Horowitz v. Sulla,

Civ. No. 16-00433 DKW-KSC, 2016 WL 5799011, at *1 (D. Haw. Sept.
30, 2016).

A district court may also sua sponte withdraw the

reference of a case or proceeding to the bankruptcy court.
Hawaiian Airlines, Inc., 355 B.R. 214, 218 (D. Haw. 2006); 28
U.S.C. § 157(d).

Motions to withdraw a reference are heard by

the district court.

Fed. R. Bankr. P. 5011(a).

Section 157(d)

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 party moving for withdrawal of the

reference has the burden of persuasion.

Hawaiian Airlines,

Inc., 355 B.R. at 218 (citing In re First Alliance Mortg. Co.,
282 B.R. 894, 902 (C.D. Cal. 2001)).

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DISCUSSION
Preliminarily, the Court notes that Plaintiff Barnes
has not specified whether he is seeking mandatory or permissive
withdrawal of the references.

Nor has he set forth sufficient

arguments supported by legal authorities as to why the Court
should withdraw the references under the present circumstances.
Plaintiff Barnes is evidently seeking withdrawal of the entirety
of both cases from the bankruptcy court.

To determine whether

it would be appropriate to withdraw the cases or any portion
thereof from the bankruptcy court, it is necessary to consider
the recent events in both bankruptcy cases.
On March 11, 2019, Plaintiff Barnes filed a “Motion to
Stay Discharge for Violation of Automatic Stay and to Lift
Protective Order” in the chapter 13 case. Chapter 13 case Dkt.
No. 246.

On that same date, he filed an identical motion in the

chapter 7 case.

Chapter 7 case, Dkt. No. 380.

On April 2,

2019, Plaintiff Barnes filed Motions for Reconsideration of
thirteen orders—eight in the chapter 13 case and five in the
chapter 7 case.
Dkt. No. 387.

Chapter 13 case, Dkt. No. 252; Chapter 7 case,
Additionally, on March 18, 2019, the Court issued

a Directive to the bankruptcy court requesting clarification on
whether the automatic stay still barred Plaintiff Barnes from
prosecuting claims against Defendant Henry in personam—Barnes
seeks to pierce the corporate veil and hold Defendant Henry

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personally liable for Defendant SHR’s maintenance and cure
obligations, as well as to pursue other tort claims against
Defendant Henry.

Chapter 13 case, Dkt. No. 259; Chapter 7 case,

Dkt. No. 383.
On April 23, 2019, the bankruptcy court issued seven
orders.

In the chapter 7 case, the bankruptcy court issued (1)

a Response to this Court’s Directive; (2) an Order Denying
Barnes’s Motion to Stay Discharge and Lift Protective Order; and
(3) an Order on Barnes’s Motion for Reconsideration.
case, Dkt. Nos. 390, 391, and 392.

Chapter 7

In the chapter 13 case, the

bankruptcy court issued (4) an Order Denying Barnes’s Motion to
Stay Discharge and Lift Protective Order; (5) an Order on
Barnes’s Motion for Reconsideration; (6) a Response to this
Court’s Directive; and (7) an Order of Discharge, which
discharged Defendant Henry from bankruptcy.
Dkt. Nos. 260, 261, 262, and 263.

Chapter 13 case,

In its Responses to this

Court’s Directive, the bankruptcy court ruled that the automatic
stay (and once Defendant Henry was discharged, the discharge
injunction) still barred Plaintiff Barnes from proceeding with
in personam claims against Defendant Henry.
Plaintiff Barnes has appealed each of these orders to
the district court. 3/

But for these and several other appeals

3/

The appeals are docketed as follows: Civ. No. 19-00210 DKW-RT;
Civ. No. 19-00211 DKW-RT; Civ. No. 19-00212 DKW-RT; Civ. No. 19– 7 –

awaiting resolution, 4/ it appears that there is nothing left for
the bankruptcy court to adjudicate.
Since the bankruptcy court has already ruled that the
stay (and now the discharge injunction) shall continue to bar
Plaintiff Barnes’s in personam claims against Defendant Henry,
and further made additional rulings adverse to Plaintiff Barnes,
and Plaintiff Barnes has appealed those rulings, all these
matters are now before an appellate court.
The Court will nevertheless analyze Plaintiff Barnes’s
request further.
concluded.

As noted, both bankruptcy cases appear to be

On April 23, 2019, the bankruptcy court issued an

Order of Discharge in the chapter 13 case.
No. 263.

Chapter 13 case, ECF

A debtor who has filed a chapter 13 bankruptcy

petition is entitled to a discharge as provided by 11 U.S.C. §
1328.

The bankruptcy code provides that “as soon as is

practicable after completion by the debtor of all payments under
the plan . . . the court shall grant the debtor a discharge of
all debts provided for by the plan or disallowed” by another
section of the bankruptcy code.

11 U.S.C. § 1328(a).

Defendant Henry completed all payments under his plan
and, therefore, received his discharge on April 23, 2019.

00213 DKW-RT; Civ. No. 19-00214 DKW-RT; Civ. No. 19-00215 DKWRT; Civ. No. 19-00216 DKW-RT.
4/ The other appeals are docketed as follows:
Civ. No. 16-00230
LEK-KSC; Civ. No. 16-00588 JAO-RLP; Civ. No. 19-00041 JMS-KJM.
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Chapter 13 case, Dkt. No. 263.

This means that the chapter 13

case is closed—although, as the Court noted supra, Plaintiff
Barnes has appealed the Order of Discharge and three other
orders issued in the chapter 13 case.

For these reasons, it is

not clear what, if anything, the Court could “withdraw” from the
bankruptcy court at this time, particularly where Plaintiff
Barnes has four appeals from the chapter 13 case pending before
another judge in this district.
Based upon the Court’s review of the docket in the
chapter 7 case, it appears that there is nothing left for the
bankruptcy court to do in that case either.

Indeed, Defendant

SHR’s estate appears to have been fully liquidated with the last
substantive order in the chapter 7 case being the Order
Approving Abandonment of Property dated December 6, 2018, in
which the bankruptcy court approved the Trustee’s abandonment of
the Tehani’s commercial use permit. 5/
355.

Chapter 7 case, Dkt. No.

Moreover, as the Court noted supra, Plaintiff Barnes

recently appealed three orders from the chapter 7 case.

But for

the resolution of Plaintiff Barnes’s appeals, it appears that
nothing remains for adjudication in the chapter 7 case.

5/

That order is currently on appeal before another judge in this
district. See Civ. No. 19-00041 JMS-KJM.
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For the foregoing reasons, the Court finds that
withdrawal of the references to the bankruptcy court is
inappropriate.
CONCLUSION
For the foregoing reasons, Plaintiff Barnes’s Motion
to reverse the references of the chapter 7 case and the chapter
13 case to the bankruptcy court is DENIED.

IT IS SO ORDERED.
DATED:

Honolulu, Hawai`i, May 31, 2019.

________________________________
Alan C. Kay
Sr. United States District Judge

Barnes v. Sea Hawai`i Rafting, LLC, Kris Henry, M/V Tehani, et al., Civ. No.
13-00002 ACK-WRP, Order Denying Plaintiff Barnes’s Motion to Withdraw the
References of Cases to the United States Bankruptcy Court for the District of
Hawai`i.

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