Riederer v. Brooke Holdings, Inc. et al

Filing 4

MEMORANDUM AND ORDER denying 1 Motion to Withdraw Reference; adopting 3 Report and Recommendations.. Signed by District Judge Eric F. Melgren on 10/26/2011. (cm)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS

Albert A. Riederer, Chapter 7 Trustee of
Brooke Corporation, Brooke Capital
Corporation and Brooke Investments, Inc.,
Plaintiff,

vs.

Case No. 11-2543-EFM

Brooke Holdings, Inc., Leland Orr, Anita
Lowry, Kimba K. Orr, Casey R. Orr,
Nicholas S. Rhodes, Wanda R. Schmidt,
Steven R. Schmidt, Michael Lowry, Brett A.
Biggs, Chad S. Maxwell, Alfred Marcotte and
Logan Wildlife Corporation,

Defendants.

MEMORANDUM AND ORDER
This matter comes before the Court on Defendants’ Motion to Withdraw Reference from
Bankruptcy Court (Doc. 1). The trustee filed a response in opposition (Doc. 2). Bankruptcy Judge
Dale Somers filed a Report and Recommendation pursuant to D. Kan. R. 83.8.6 (Doc. 3). The Court
has reviewed the motion, response, and Judge Somers’s recommendation. For the following
reasons, the Court denies the motion and adopts the Report and Recommendation.
This case is one of approximately 84 separate adversary proceedings filed by the Trustee
against approximately 460 defendants. The Trustee seeks to avoid certain transfers as preferences
and fraudulent transfers and to recover the transfers from Brooke Holdings, Orr family members,
and other individuals who were shareholders of Brooke Holdings.

Defendants1 move for mandatory withdrawal asserting that the case requires interpretation
and application of federal law other than the Bankruptcy Code, specifically the Securities Act of
1933 and the Securities Exchange Act of 1934. They also contend that good cause warrants
permissive withdrawal because there are procedural and practical reasons as to why the district court
should handle the action.
28 U.S.C. § 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.

In his recommendation, Judge Somers found that conditions for mandatory withdrawal were
not present. Judge Somers reviewed the complaint and determined that there were no causes of
action under the Securities Act of 1933, the Securities Exchange Act of 1934, or any other federal
law other than the Bankruptcy Code. Although SEC guidelines and GAAP guidelines might be
relevant in the Trustee’s evidence of insolvency, Judge Somers concluded that no “significant
interpretation” of federal securities law would be required to resolve the complaint.

As such,

because Defendants failed to establish that resolution of the complaint would require “substantial
and material consideration” of federal securities law, Judge Somers determined that mandatory
withdrawal was inappropriate. Furthermore, Judge Somers found that cause for discretionary
withdrawal was not present, and judicial efficiency and economy would be served by denying the
motion to withdraw reference.

1
All named Defendants in this adversary proceeding, except Anita Lowry, Michael Lowry, and Brett A. Biggs
joined in the motion.

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IT IS ACCORDINGLY ORDERED that Defendants’ Motion to Withdraw Reference from
Bankruptcy Court (Doc. 1) is DENIED.
IT IS FURTHER ORDERED that the Bankruptcy Judge’s Report and Recommendation
(Doc. 3) is ADOPTED.
IT IS SO ORDERED.
Dated this 26th day of October, 2011.

ERIC F. MELGREN
UNITED STATES DISTRICT JUDGE

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