Philadelphia Indemnity Insurance Company v. 3D Resorts et al
Filing
47
OPINION & ORDER granting 42 Motion to Refer to Bankruptcy Court. Signed by Senior Judge Thomas B. Russell on 6/12/2012. cc:counsel (KJA)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
LOUISVILLE DIVISION
CASE NO. 3:10-CV-502
PHILADELPHIA INDEMNITY INSURANCE CO.
PLAINTIFF
V.
3D RESORTS-BLUEGRASS, LLC
3D RESORTS COMMUNITIES, LLC
DEFENDANTS
OPINION & ORDER
This matter is before the Court upon Defendant 3D Resorts-Bluegrass, LLC’s motion to
refer this matter to the Bankruptcy Court for the United States District Court, Western District of
Kentucky, Owensboro Division (DN 42). Plaintiff has responded (DN 43). Defendant 3D
Resorts-Bluegrass, LLC has replied (DN 46). This matter is now ripe for adjudication. For the
following reasons, Defendant’s motion (DN 42) is GRANTED.
On July 10, 2010, Plaintiff Philadelphia Indemnity Insurance Company (“Plaintiff”) filed
this insurance coverage action against Defendants 3D Resorts-Bluegrass, LLC (“3D Bluegrass”)
and 3D Resort Communities, LLC (“3D Communities”) stemming from a February 26, 2010 fire
loss. In the complaint, Plaintiff seeks a declaration that the insurance policy issued by Plaintiff
to Defendants does not cover the building damaged by the fire. Defendants asserted
counterclaims against Plaintiff for breach of contract, negligence, and reformation of an
insurance contract.
On October 31, 2011, Defendant 3D Communities filed a Chapter 7 bankruptcy petition
in the United States Bankruptcy Court for the Western District of Texas, case no. 11-53809. On
November 16, 2011, Defendant 3D Bluegrass filed a Chapter 7 bankruptcy petition in the
Western District of Texas, case no. 11-54001. On December 8, 2011, the Texas bankruptcy court
converted 3D Bluegrass’s case to a Chapter 11 bankruptcy case, ordered the appointment of a
trustee, and transferred venue of the case to the Western District of Kentucky.
Defendant 3D Bluegrass now seeks referral of this action to the Bankruptcy Court based
upon the provisions of 28 U.S.C. § 157, which sets forth procedures by which district courts may
refer cases to the bankruptcy judges for their districts. Pursuant to 28 U.S.C. § 157(a), “[e]ach
district court may provide that any or all cases under title 11 and any or all proceedings arising
under title 11 or arising in or related to a case under title 11 shall be referred to the bankruptcy
judges for the district.” Likewise, Local Rule 83.12(a)(3) implements this statutory provision by
providing for the referral to bankruptcy judges of “all matters arising under – or arising in or
related to cases arising under – Title 11 of the United States Code . . . except proceedings
involving tort claims for personal injury or wrongful death.” A bankruptcy judge “may hear and
determine all cases under title 11 and all core proceedings arising under title 11, or arising in a
case under title 11 . . . .” 28 U.S.C. § 157(b). A “core proceeding” includes “other proceedings
affecting liquidation of the assets of the estate or the adjustment of the debtor-creditor or the
equity security holder relationship . . . .” 28 U.S.C. § 157(b)(2).
Defendant 3D Bluegrass contends that, because this action is “related to a case under title
11,” the Court should refer this action to the Bankruptcy Court. Plaintiff opposes the referral of
this action, arguing that concerns of judicial efficiency weigh against referral and a bankruptcy
court lacks specialized knowledge outside of bankruptcy law. However, the issue of whether the
proceedings in this case are properly before a bankruptcy judge or this Court is not appropriately
determined by this Court as an initial matter. 28 U.S.C. § 157(b)(3) provides that
[t]he bankruptcy judge shall determine, on the judge's own motion or on timely
motion of a party, whether a proceeding is a core proceeding under this subsection
or is a proceeding that is otherwise related to a case under title 11. A
determination that a proceeding is not a core proceeding shall not be made solely
on the basis that its resolution may be affected by State law.
Therefore, the Court will refer the matter to the Bankruptcy Court for determination of whether
the case at bar constitutes a “core proceeding” within the meaning of 28 U.S.C. § 157(b).
Defendants’ Motion to Refer to Bankruptcy Court is GRANTED. The telephonic conference
scheduled for June 15, 2012 is CANCELLED.
IT IS SO ORDERED.
June 12, 2012
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