JH Kelly, LLC et al v. Hopkins
MEMORANDUM DECISION AND ORDER granting in part and denying in part 1 Motion to Withdraw Reference. The bankruptcy court will preside over all pretrial matters in this case, including discovery and pretrial conferences, and will resolve routine and dispositive motions. Until the bankruptcy court certifies that this case is ready for trial, the parties shall file all motions, pleadings, and other papers in the adversary proceeding in bankruptcy court. Signed by Judge B. Lynn Winmill. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by (cjs)(Emailed to JDP, dj, dh & lg at Bankruptcy Court.)
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO
Case No. 4:15-cv-433-BLW
INDUSTRIAL PIPING, INC. and JH
R. SAM HOPKINS, in his capacity as the
duly-appointed Chapter 7 Trustee of Hoku
R. SAM HOPKINS, in his capacity as the
duly-appointed Chapter 7 Trustee of Hoku
INDUSTRIAL PIPING, INC. and JH
KELLY, LLC, and John Does 1 through
10, unknown persons,
MEMORANDUM DECISION & ORDER - 1
MEMORANDUM DECISION AND
Pending before the Court is counter-defendant Industrial Piping, Inc.’s Motion to
Withdraw the Reference (Dkt. 1). The Court will grant the motion to the extent Industrial
Piping asks the Court to withdraw the reference when this case is ready for trial, but will
deny the motion to the extent an immediate withdrawal is sought.
This adversary proceeding traces its roots to the planned construction of a
polysilicon manufacturing plant in Pocatello, Idaho. In 2007, the debtor, Hoku
Corporation, began working with its wholly owned subsidiary, Hoku Materials, Inc., to
construct the plant.
For reasons not relevant here, the plant was not completed, and in July 2013, Hoku
Materials and Hoku Corporation filed separate bankruptcy cases. In the summer of 2015
– roughly two years after these bankruptcy cases were filed – Hoku Corporation’s
Chapter 7 Trustee initiated approximately 175 adversary proceedings against various
contractors and suppliers involved in the construction. These contractors and suppliers
had previously received full or partial payment for goods and services delivered. The
Trustee contends that these payments constitute fraudulent transfers. He therefore seeks
to have these monies returned to Hoku Corporation’s bankruptcy estate.
The Trustee’s theory is that the contractors and suppliers were allegedly paid by
Hoku Corporation, but they performed work for Hoku Materials. More precisely, the
Trustee says that Hoku Corporation never had any legal or equitable title in the
MEMORANDUM DECISION & ORDER - 2
polysilicon plant and thus has no liability for Hoku Materials’ polysilicon plant
construction costs or Hoku Materials’ debts.
With some exceptions, the Trustee’s complaints against the contractors and
suppliers follow the same formula. In his first claim for relief, the Trustee invokes the
federal Fair Debt Collection Practices Act (FDCPA) in his effort to recover the payments.
In his second claim, the Trustee invokes Idaho’s fraudulent transfer statutes. In a third
claim for relief, alleged against some (but not all) of the contractors and suppliers, the
Trustee invokes 11 U.S.C. § 548.
In bankruptcy court, three of these adversary defendants – including the moving
defendant here, Industrial Piping, Inc., – moved the bankruptcy court to substantively
consolidate Hoku Corporation’s and Hoku Materials’ bankruptcy estates. 1 See July 28,
2015 Motion for Substantive Consolidation & Request for Case Management
Conference, In re Hoku Materials, Case No. 13-40837-JDP (Bankr. D. Idaho), Bankr.
Dkt. 336. 2 These defendants say that if the bankruptcy court grants the motion, most of
the adversary proceedings against the contractors and suppliers would be eliminated.
Numerous defendants joined this motion.
After the substantive consolidation motion was filed, the bankruptcy court ordered
the contractor/supplier defendants in the adversary proceedings to either: (1) consent to
As discussed further below, Industrial Piping did not initially move for substantive
consolidation; rather it filed a single-count adversary complaint for substantive consolidation. The
bankruptcy court dismissed that complaint without prejudice, which prompted the motion for substantive
The substantive-consolidation motion was also filed in Hoku Corporation’s bankruptcy case.
See In re Hoku Corp., Case No. 13-40838-JDP (Bankr. D. Idaho), Bankr. Dkt. 412.
MEMORANDUM DECISION & ORDER - 3
entry of judgment by the bankruptcy court; or (2) move to withdraw the reference. As of
this date, roughly half of the adversary defendants, including Industrial Piping, responded
with a motion to withdraw the reference.
Federal district courts have original jurisdiction over cases arising under the
Bankruptcy Code. 28 U.S.C. § 1334(a). This Court has exercised its authority under 28
U.S.C. § 157(a) to refer all bankruptcy matters to the district’s bankruptcy judges. See
Apr. 24, 1995 Third Amended General Order. Nevertheless, under 28 U.S.C. § 157(d),
this reference is subject to mandatory or permissive withdrawal, depending on the
circumstances. See 28 U.S.C. § 157(d). Section 157(d) reads as follows:
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.
Industrial Piping contends that both mandatory and permissive withdrawal apply.
As the statute specifies, withdrawal is mandatory in cases requiring material
consideration “of both title 11 and other laws of the United States regulating
organizations or activities affecting interstate commerce.” Id.
Preliminarily, the Court is not convinced that withdrawal is mandatory if a
bankruptcy court must consider state law along with bankruptcy law to resolve a claim.
The plain language of the statute refers to federal laws – not state laws. See id. (referring
MEMORANDUM DECISION & ORDER - 4
to “other laws of the United States”) (emphasis added). So the key question is whether
the Trustee is asking the bankruptcy court to consider federal, non-bankruptcy law.
He is. In his second claim for relief against Industrial Piping, the Trustee invokes
the FDCPA. The FDCPA is indisputably a non-title 11, federal law that affects interstate
commerce. See 15 U.S.C. § 1692a(6). So if the statutory language were strictly
interpreted, this Court must withdraw the FDCPA claim without further analysis.
But the Court concludes that a more searching inquiry is necessary. The problem
with strictly interpreting the statute is that withdrawing disputes requiring even the most
basic consideration of non-bankruptcy law “would force district courts to withdraw
matters in which [Bankruptcy] Code questions overwhelmingly predominate and
consideration of non-Code statutes would be de minimus.” In re White Motor Corp., 42
B.R. 693, 703 (N.D. Ohio 1984). The alternative, more favored, interpretation requires
that the consideration of non-bankruptcy law be “substantial and material” before
withdrawal is mandatory. See, e.g., Holmes v. Grubman, 315 F. Supp. 2d 1376, 1379
(M.D. Ga. 2004). According to this view, “the ‘resolution of non-bankruptcy law must
be essential to the dispute.’” Id. (citation omitted). The Ninth Circuit has not indicated
which standard courts should apply, but has approved the “substantial and material”
standard in dicta. Sec. Farms v. Int’l Brotherhood of Teamsters, 124 F.3d 999, 1008 n.4
(9th Cir. 1997). This Court will therefore adopt that standard in examining the FDCPA
claim at issue here. Accord Hawaiian Airlines, Inc. v. Mesa Air Grp., Inc., 355 B.R. 214,
222 (D. Haw. 2006).
In his FDCPA claim, the Trustee seeks to avoid transfers made to Industrial Piping
MEMORANDUM DECISION & ORDER - 5
using his strong-arm powers, found in 11 U.S.C. § 544(b)(1), along with 28 U.S.C.
§ 3304 of the FDCPA. Under § 544(b)(1), a trustee may avoid “any transfer ... or any
obligation incurred by the debtor that is voidable under applicable law” by a creditor
holding an unsecured claim that is allowable under 11 U.S.C. § 502. See 11 U.S.C.
§ 544(b)(1) (emphasis added). The Trustee relies on the FDCPA as “applicable law” in
his effort to take advantage of the FDCPA’s six-year reach-back period to set aside
payments made to defendants. See 28 U.S.C. § 3306(b). (Idaho’s fraudulent transfer
laws have a four-year reach-back period. See Idaho Code § 55-918(1) and (2)).
Several adversary defendants dispute the use of the FDCPA as “applicable law”
within the meaning of Section 544(b). To resolve the Trustee’s claims, the reviewing
court must therefore determine whether the trustee can step into the shoes of a federal
creditor and use the FDCPA as “applicable law” under § 544(b)(1). The Ninth Circuit
has not confronted this issue, and there is a split of authority among the courts that have
decided the issue. See Gordon v. Harrison (In re Alpha Protective Servs., Inc.), 531 B.R.
889, 905 (Bankr. M.D. Ga. 2015) (discussing the split and citing cases).
Under these circumstances, the Court concludes that resolving the Trustee’s
FDCPA claim extends beyond applying well-settled, federal, non-bankruptcy law.
Therefore, the Court will withdraw the reference as to Count II of the Trustee’s
complaint. But the Court will not withdraw the reference at this stage for at least three
First, just because withdrawal is mandated does not mean the Court must
immediately withdraw the reference. Rather, the Court concludes that it may delay
MEMORANDUM DECISION & ORDER - 6
withdrawing the reference until the bankruptcy court certifies that the case is trial-ready.
Accord Beck v. Ally Fin., Inc., Case No. 13-mc-16, 2013 WL 5676232, at *1 (S.D. Ala.
Oct. 18, 2013) (district court granted motion for withdrawal after determining mandatory
withdrawal applied, but nevertheless “delay[ed] the withdrawal until the Bankruptcy
Court certifies that the case is ready for trial”); cf. 1 Collier on Bankruptcy ¶ 3.04
(16th ed. 2015) (observing that even when withdrawal is mandatory, district courts have
permitted bankruptcy courts to conduct pretrial proceedings, citing PBGC v. Pan Am
Corp. (In re Pan Am Corp.), 133 B.R. 700, 701 (S.D.N.Y. 1991) (although withdrawal
was mandatory, the district court remanded the case to the bankruptcy court to submit
proposed findings of fact and conclusions of law)).
Second, the vast majority of the adversary defendants who filed withdrawal
motions are not asking for an immediate withdrawal. For example, dozens of defendants
say this in their moving papers:
Defendant does not request that the withdrawal be immediate because a
certain Motion for Substantive Consolidation . . . is under consideration
by the Bankruptcy Court. Rather, this Motion to Withdraw Reference is
filed to meet the timeliness duty imposed by the Bankruptcy Court but it
could simply be stayed at this time.
See, e.g., Hopkins v. Chem. Design, Inc., Case No. 4:15-cv-395-BLW, Motion to
Withdraw, Dkt. 1, at 2. These same defendants also simply ask the Court to “withdraw
the reference of this Adversary Proceeding from the Bankruptcy Court at the appropriate
time prior to trial.” Id., Dkt. 1-1, at 6 (emphasis added).
Other defendants say they “understand that this Court may decide to have the
Bankruptcy Court handle the preliminary matters, [to] which the Defendant has no
MEMORANDUM DECISION & ORDER - 7
objection provided that there is no waiver of the Defendant’s right to a jury trial before
this Court and no consent to entry of final orders or judgments by the Bankruptcy Court.”
Reply Br. in Hopkins v. SetPoint Integrated Solutions, Inc., Case No. 4:15-cv-391-BLW,
Dkt. 3, at 8 n.3; see also Praxair Servs., Inc.’s Reply Br., Case No. 4:15-cv-412-BLW,
Dkt. 3 at 4 (“Withdrawal would not cause inefficient use of judicial resources because the
Bankruptcy Court can be assigned or referred the pre-trial procedure, and this Court can
then convene the jury for trial.”)
Third, as detailed below, this Court is not persuaded that an immediate
withdrawal would best serve the parties or the courts. See infra ¶ 2.
In sum, this Court concludes that although it must eventually withdraw the
reference of the Trustee’s second claim for relief against Industrial Piping, it will not do
The next question is whether the “cause” factors associated with permissive
withdrawal weigh in favor of an immediate withdrawal. Withdrawal is permissive in any
case or proceeding referred to a bankruptcy court upon the district court’s own motion, or
on a party’s timely motion for “cause shown.” 28 U.S.C. § 157(d). The statute does not
specify what is necessary to show “cause,” but courts have identified a variety of factors
that may be considered, including: (1) the efficient use of judicial resources; (2) delay
and costs to the parties; (3) uniformity of bankruptcy administration, (4) prevention of
forum shopping; and (5) other related factors. Sec. Farms, 124 F.3d at 1008. “Other
related factors” might include whether the issues are core or non-core proceedings, as
MEMORANDUM DECISION & ORDER - 8
well as the right to a jury trial. See Rosenberg v. Harvey A. Brookstein, 479 B.R. 584,
587 (D. Nev. 2012) (citation omitted).
A. Seventh Amendment Jury-Trial Right
The Court begins by observing that the fraudulent conveyance claims at issue in
this case are statutorily defined as “core” proceedings. See 28 U.S.C. § 157(b)(2)(H).
Congress has empowered bankruptcy courts to enter a final judgment on such claims.
See 28 U.S.C. § 157(b)(1). But in the wake of the Supreme Court’s landmark decision in
Stern v. Marshall, 131 S. Ct. 2594 (2011), the Ninth Circuit held that bankruptcy courts
lack the constitutional authority to enter final judgments on fraudulent conveyance
claims. See In re Bellingham Ins. Agency, Inc., 702 F.3d 553 (9th Cir. 2012), aff’d, 134
S. Ct. 2165 (2014) (“fraudulent conveyance claims . . . cannot be adjudicated by nonArticle III judges.”). The Trustee, for his part, has not meaningfully challenged Industrial
Piping’s assertions that it has a substantive right to a jury trial in district court on the
fraudulent conveyance claims.
The Trustee does, however, argue that Industrial Piping waived its right to a jury
trial. The Trustee’s waiver argument arises from Industrial Piping’s request that the
bankruptcy court substantively consolidate Hoku Corporation’s and Hoku Materials’
Industrial Piping first requested substantive consolidation in an adversary
complaint, which named as defendants the trustees of Hoku Corporation’s and Hoku
MEMORANDUM DECISION & ORDER - 9
Materials’ bankruptcy estates. 3 See Industrial Piping v. Rainsdon (In re Hoku Materials,
Inc.), No. 15-8011-JDP; Industrial Piping v. Hopkins (In re Hoku Corp.), No. 15-8012JDP.
The Trustees moved to dismiss the complaints and the Trustee of Hoku
Corporation’s bankruptcy estate also filed a counterclaim. The counterclaim alleges three
claims against Industrial Piping: fraudulent-conveyance claims under (1) 11 U.S.C. § 550
and the 3304 of the FDCPA, (2) 11 U.S.C. § 550 and Idaho’s fraudulent-transfer laws,
and (3) 11 U.S.C. § 548. See June 30, 2015 First Am. Counterclaim, Dkt. 43 in Bankr.
Case No. 15-8012 (Counts Two, Four, and Six).
In June 2015, the bankruptcy court dismissed the substantive-consolidation
complaints without prejudice, suggesting that the preferred practice would be to file a
motion. See June 23, 2015 Order, Dkt. 38 in Bankr. Case No. 15-8012-JDP; June 23,
2015 Hearing Tr., Dkt. 46 in Bankr. Case No. 15-8012, at 11 (“my canvass of the case
law and the rules suggest that the preferred approach for substantive consolidation is
motion practice not adversary proceedings”). Industrial Piping responded by moving for
substantive consolidation. (As of this writing, the bankruptcy court has not ruled on the
The Trustee says that when Industrial Piping requested substantive consolidation,
(first in the adversary proceeding and later via motion), it “affirmatively invoked the
jurisdiction of the bankruptcy court, waived any right to withdraw the reference, and
JH Kelly, LLC is a co-plaintiff in the adversary complaints. JH Kelly has not filed a motion to
withdraw the reference. As a result, this Order focuses solely on Industrial Piping.
MEMORANDUM DECISION & ORDER - 10
thereby also waived the right to a jury trial.” Response Br., Dkt. 2, at 3. The Trustee thus
contends that its fraudulent-transfer claims against Industrial Piping must be adjudicated
in bankruptcy court.
The Court is not persuaded. Preliminarily, as discussed above, Industrial Piping
has a Seventh Amendment right to a jury trial on the fraudulent-transfer claims. A party
may consent to having such claims adjudicated in bankruptcy court (either expressly or
impliedly), but any such consent must be “knowing and voluntary.” See Wellness Int’l
Network, Ltd. v. Sharif, 135 S. Ct. 1932, 1949 (2015).
Here, it would be difficult to conclude that Industrial Piping knowingly and
voluntarily consented to having the trustee’s fraudulent-transfer claims adjudicated in
bankruptcy court. In replying to the Trustee’s counterclaim, Industrial Piping expressly
requested a jury trial and further stated that it did not consent to a final judgment entered
by the bankruptcy court:
1. IPI hereby requests a jury trial on all issues in the Counterclaim.
2. IPI hereby requests the U.S. District Court to determine to what
extent it will withdraw the reference. Pursuant to F.R.B.P. 7008, IPI
does not consent to the U.S. Bankruptcy Court entering a final
judgment on the claims asserted in the Counterclaim.
June 9, 2015 Reply to Counterclaim, Dkt. 25 in 15-8012-JDP, ¶¶ 1-2; July 14, 2015
Reply to First Am. Counterclaim, Dkt. 45 in Bankr. Case No. 15-8012-JDP, ¶¶ 1-2.
Later, in response to the bankruptcy court’s request that the parties either (1) consent to a
judgment entered in bankruptcy court; or (2) move to withdraw the reference, Industrial
Piping promptly filed the pending motion to withdraw. See Aug. 5, 2015 Order re
MEMORANDUM DECISION & ORDER - 11
Consent to Entry of Final Judgment and Orders and Motions to Withdraw Reference,
Dkt. 48 in Bankr. Case No. 15-8012; Aug. 19, 2015 Motion for Withdrawal of Reference,
Dkt. 1. Under these facts, Industrial Piping did not knowingly and voluntarily consent to
having the Trustee’s fraudulent-transfer claims adjudicated in bankruptcy court.
The Trustee does not squarely address these points in advancing his waiver
argument. Instead, he generally refers to the fact that Industrial Piping sought substantive
consolidation, thus invoking the bankruptcy court’s general equitable powers. See
generally In re Bonham, 229 F.3d 750, 764 (9th Cir. 2000) (“[T]he power of substantive
consolidation derives from the bankruptcy court’s general equity powers as expressed in
§ 105 of the Bankruptcy Code. 4”). The Trustee’s briefing on this point is extremely
skeletal – just four sentences. See Response Br., Dkt. 2, at 2-3. But by referring to the
bankruptcy court’s equitable powers in the context of a waiver argument, the Trustee
might be trying to align himself with those situations where a creditor files a proof of
claim against the debtor’s bankruptcy estate and is then met with the trustee’s preference
or fraudulent-transfer claim. In that instance, the creditor has waived its right to a jury
trial, as the Supreme Court explained in Langenkamp v. Culp, 498 U.S. 42 (1990):
In Granfinanciera we recognized that by filing a claim against a
bankruptcy estate the creditor triggers the process of “allowance and
disallowance of claims,” thereby subjecting himself to the
bankruptcy court’s equitable power. If the creditor is met, in turn,
with a preference action from the trustee,[ 5] that action becomes part
Section 105(a) states: “The court may issue any order, process, or judgment that is necessary or
appropriate to carry out the provisions of this title.”
Although Langenkamp deal with a preference action, the same logic applies to fraudulent-conveyance
MEMORANDUM DECISION & ORDER - 12
of the claims-allowance process which is triable only in equity. In
other words, the creditor’s claim and the ensuing preference action
by the trustee become integral to the restructuring of the debtorcreditor relationship through the bankruptcy court's equity
jurisdiction. As such, there is no Seventh Amendment right to a jury
trial. If a party does not submit a claim against the bankruptcy estate,
however, the trustee can recover allegedly preferential transfers only
by filing what amounts to a legal action to recover a monetary
transfer. In those circumstances the preference defendant is entitled
to a jury trial.
Langenkamp v. Culp., 498 U.S. 42 (1990) (discussing Granfinanciera v. Nordberg, 492
U.S. 33 (1989) and other cases; all internal citations omitted here).
But the Trustee has not convinced the Court that moving for substantive
consolidation has the same effect as filing a proof of claim. When a creditor files a proof
of claim, the claims-allowance process is triggered. Filing a motion for substantive
consolidation does not trigger that process. Cf. Germain v. Conn. Nat’l Bank, 988 F.2d
1323, 1327 (2d Cir. 1993) (“the filing of a proof of claim is a necessary condition for the
claims allowance process to begin . . . .”). See generally Katchen v. Landy, 382 U.S. 323,
336 (1966) (“although petitioner might be entitled to a jury trial on the issue of
preference if he presented no claim in the bankruptcy proceeding . . . when the same issue
arises as part of the process of allowance and disallowance of claims, it is triable in
equity”) (internal citations omitted).
In sum, the Trustee’s brief waiver argument has not persuaded this Court that
Industrial Piping has waived its right to a jury trial on the fraudulent-transfer claims. As
a result, if the fraudulent conveyance claims against this defendant proceed to trial, an
MEMORANDUM DECISION & ORDER - 13
Article III judge will preside. See 28 U.S.C. § 157(e); 6 In re Dyer, 322 F.3d 1178, 1194
(9th Cir. 2003) (“[T]he bankruptcy court is unable to preside over a jury trial absent
explicit consent from the parties and the district court.”); In re Cinematronics, Inc., 916
F.2d 1444, 1451 (9th Cir. 1990) (agreeing with “several courts [that] have concluded that
where a jury trial is required and the parties refuse to consent to bankruptcy jurisdiction,
withdrawal of the case to the district court is appropriate”) (internal citations omitted)).
C. Need for Immediate Withdrawal
Despite Industrial Piping’s right to a jury trial, the Court is not required to – and
will not – immediately withdraw the reference. Rather, it is permissible for the
bankruptcy court to handle all preliminary matters up to the point of trial. See Sigma
Micro Corp. v. Healthcentral.com (In re Healthcentral.com), 504 F.3d 775, 787 (9th Cir.
2007) (“a Seventh Amendment jury trial right does not mean the bankruptcy court must
instantly give up jurisdiction” and transfer the case to district court). In fact, the Supreme
Court recently clarified that so-called “Stern claims” – which include the fraudulenttransfer claims at issue here – may comfortably proceed under the procedure set forth in
28 U.S.C. § 157(c)(1). See Executive Benefits Ins. Agency v. Arkison, 134 S. Ct. 2165,
2174 (2014). Section 157(c)(1) provides as follows:
A bankruptcy judge may hear a proceeding that is not a core
proceeding but that is otherwise related to a case under title 11. In such
In full, 28 U.S.C. § 157(e) provides:
If the right to a jury trial applies in a proceeding that may be heard under this section
by a bankruptcy judge, the bankruptcy judge may conduct the jury trial if specially
designated to exercise such jurisdiction by the district court and with the express
consent of all the parties.
MEMORANDUM DECISION & ORDER - 14
proceeding, the bankruptcy judge shall submit proposed findings of
fact and conclusions of law to the district court, and any final order or
judgment shall be entered by the district judge after considering the
bankruptcy judge’s proposed findings and conclusions and after
reviewing de novo those matters to which any party has timely and
Thus, in this case, the bankruptcy court may “hear” the Trustee’s fraudulenttransfer claims, and submit proposed findings of fact and conclusions of law to the
district court. Id. Further, if either party files a dispositive motion, the bankruptcy court
may entertain that motion and submit proposed findings of fact, conclusions of law, and a
recommended disposition of the claim to this Court. See Bellingham Ins. Agency, 702
F.3d at 565 (bankruptcy courts have the statutory power “to hear fraudulent conveyance
cases and to submit reports and recommendations to district courts”).
In light of this authority, the Court is not persuaded that defendants’ jury-trial right
requires a withdrawal at this stage. Rather, at this point in the proceedings, the Court’s
central concern is how it can best help the parties achieve a just, speedy, and inexpensive
resolution of their claims. Cf. Fed. R. Civ. P. 1. Many of the other “cause” factors
relevant to permissive withdrawal – including efficiency, cost, and delay – speak to this
(1) Efficiency; Cost; Delay; Uniformity
This case is in its beginning stages, so it would seem that the case would move
along at the same speed in either district court or bankruptcy court. But that is not true
here because the bankruptcy court has expended significant time and effort over the past
two years becoming familiar with the underlying bankruptcy proceeding. That
MEMORANDUM DECISION & ORDER - 15
knowledge will almost surely enable the bankruptcy court to move this case along more
quickly than this Court could. Further, although some defendants suggest that conducting
pretrial proceedings in one court, and then moving to another for trial, will cause
inefficiencies, there is a very real possibility that this case – like most cases – will resolve
Granted, if a case does proceed to trial, there will be judicial efficiency losses
because a second court will have to familiarize itself with the case. Further, this Court
may be required to conduct a de novo review of proposed findings and conclusions on
dispositive motions. Such a procedure could increase costs to the parties and cause some
delay. But these possible inefficiencies, delays, and costs do not overcome the weight
this Court has placed on the familiarity the bankruptcy court has with the debtor, the
bankruptcy estate, and the various other adversary proceedings pending in this
The Court also finds that the Hoku Corporation bankruptcy likely will be more
uniformly administered if all of the “contractor/supplier” adversary cases remain before
the same court for pretrial proceedings.
(2) Prevention of Forum Shopping
Lastly, regarding the forum-shopping factor, the Court is unpersuaded by the
Trustee’s assertion that the defendant has engaged in forum shopping. These motions
were made early in the proceedings, largely in response to the bankruptcy court’s order
that such motions be made within a fourteen-day period. This factor is therefore neutral.
MEMORANDUM DECISION & ORDER - 16
After having considered all of the above factors, the Court concludes that neither
permissive nor mandatory withdrawal is warranted at this time. The Court will instead
delay withdrawing the reference on the fraudulent-transfer claims asserted against
Industrial Piping until the bankruptcy court certifies that such claims are ready for trial.
For all the foregoing reasons, IT IS ORDERED that:
1) Defendant’s Motion to Withdraw the Reference (Dkt. 1) is granted in part, and
denied in part, as follows:
2) The Motion is GRANTED to the extent defendant seeks a withdrawal when
the bankruptcy court certifies that this case is ready for trial.
3) The Motion is DENIED to the extent defendant seeks an immediate
4) The bankruptcy court will preside over all pretrial matters in this case,
including discovery and pretrial conferences, and will resolve routine and
dispositive motions. If either party files a dispositive motion, the bankruptcy
court will entertain that motion and submit proposed findings of fact,
conclusions of law, and a recommendation for disposition to this Court.
5) If and when it becomes clear that a jury trial will be necessary, and the case is
prepared and ready for trial to begin, the bankruptcy court shall so certify to
this Court and the reference will be withdrawn at that time.
MEMORANDUM DECISION & ORDER - 17
6) Until the bankruptcy court certifies that this case is ready for trial, the parties
shall file all motions, pleadings, and other papers in the adversary proceeding
in bankruptcy court.
DATED: November 10, 2015
B. Lynn Winmill
United States District Court
MEMORANDUM DECISION & ORDER - 18
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