Morris v. Consumer Law Associates, L.L.C.

Filing 7

MEMORANDUM AND ORDER. Defendant's motion to withdraw reference and transfer the adversary proceeding to the United States District Court pursuant to D. Kan. Rule 83.8.6(a)(6), Fed. R. Bankr. P. 5011, and 28 U.S.C. § 157(d) (Dk. 1) is grante d; the court adopts the bankruptcy court's recommendation on this motion (Dk. 6) and overrules the trustee's objection (Dk. 2); and the plaintiff's motion to extend (Dk. 4) is referred to the magistrate judge along with all further pretrial proceedings. See attached for more details. Signed by U.S. District Senior Judge Sam A. Crow on 8/22/2012. (bmw)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
IN RE:
KENNY A. PEDIGO and KARIN D. PEDIGO,

No. 11-12916
Chapter 7

Debtors.
_________________________________
No. 12-1268-SAC
J. MICHAEL MORRIS, Trustee,
Plaintiff,
vs.

Adv. No. 12-5055

CONSUMER LAW ASSOCIATES, L.L.C.,
Defendant.
MEMORANDUM AND ORDER
The case comes before the court on the defendant’s motion to
withdraw reference and transfer the adversary proceeding to the United
States District Court pursuant to D. Kan. Rule 83.8.6(a)(6), Fed. R. Bankr.
P. 5011, and 28 U.S.C. § 157(d). (Dk. 1). The trustee opposes the
immediate withdrawal of the adversary proceeding arguing that the
bankruptcy court should retain the case through the pretrial stages, should
address any dispositive motions, and should transfer only those matters
“truly ripe for jury trial.” (Dk. 2, ¶ 6). The report and recommendation
pursuant to D. Kan. Rule 83.8.6(f) entered by Chief Bankruptcy Judge
Robert Nugent suggests the immediate withdrawal of the reference and

transfer of the adversary proceeding to the district court. (Dk. 6). Chief
Judge Nugent offers:
Because these adversary proceedings do not implicate the need for
bankruptcy expertise and as they will ultimately be tried in the district
court, the pretrial process should be completed there. The district and
magistrate judges to whom these cases will ultimately be assigned are
likely to prefer early and active involvement in the discovery and
pretrial motion practice that will precede the trials in these cases. The
immediate transfer of these cases to the district court prevents the
possible duplication of effort on the part of the parties and their
counsel and best serves judicial economy.
(Dk. 6, pp. 8-9).
The adversary proceeding brought by the trustee in this
bankruptcy case is not unlike adversary proceedings filed in other
bankruptcy cases in this district against the defendant, Consumer Law
Associates, LLC. (“CLA”), or another named party, Persels & Associates, LLC
(“Persels”). See, e.g., Parks v. Consumer Law Associates, LLC, No. 121113-JTM; Parks v. Persels and Associates, LLC, No. 12-1140-KHV; Morris v.
Persels & Associates, LLC, No. 12-1262-JTM; Morris v. Persels & Associates,
LLC, No. 12-1270-KHV. The trustees have filed these adversary actions
alleging, inter alia, that the debtors received no debt management or
settlement benefits for the fees paid to the defendants so the fees are
recoverable as fraudulent transfers and that the defendants in these
transactions violated the terms of the Kansas Credit Service Organizations
Act, K.S.A. § 50-1116, and the Kansas Consumer Protection Act, K.S.A. §§
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50-626, 50-627. CLA and Persels have filed demands for jury trial and have
not consented to the bankruptcy court conducting the jury trials.
“The right to a jury trial is sufficient cause for withdrawal to the
district court where (1) the claims concern matters for which there is a right
to a jury trial; (2) a party timely demanded a jury trial; and (3) there is no
mutual consent to trial before the bankruptcy court.” Redmond v. Hassan,
2008 WL 795740 at *2 (D. Kan. 2008) (citing In re Hardesty, 190 B.R. 653,
655 (D. Kan. 1995)). That the trustee’s claims here are subject to the right
to a jury trial and that the defendant has timely demanded this right and
withheld its consent to proceed before the bankruptcy court provide cause
for withdrawal.
The question in dispute is when the reference should be
withdrawn. In the more recent cases, the district courts have taken
immediate reference of the adversary cases and then referred them to the
magistrate judge for pretrial proceedings. See, e.g., Morris v. Persels &
Associates, LLC, No. 12-1262-JTM; Morris v. Persels & Associates, LLC, No.
12-1270. To further uniform handling of these related cases and for the
reasons stated in the bankruptcy court’s recommendation, the court will
accept immediate transfer of this case and refers consideration of all pretrial
matters to the magistrate judge.

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IT IS THEREFORE ORDERED that the defendant’s motion to
withdraw reference and transfer the adversary proceeding to the United
States District Court pursuant to D. Kan. Rule 83.8.6(a)(6), Fed. R. Bankr.
P. 5011, and 28 U.S.C. § 157(d) (Dk. 1) is granted;
IT IS FURTHER ORDERED that the court adopts the bankruptcy
court’s recommendation on this motion (Dk. 6) and overrules the trustee’s
objection (Dk. 2);
IT IS FURTHER ORDERED that the plaintiff’s motion to extend
(Dk. 4) is referred to the magistrate judge along with all further pretrial
proceedings.
Dated this 22nd day of August, 2012, Topeka, Kansas.

s/ Sam A. Crow
Sam A. Crow, U.S. District Senior Judge

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