IN RE: Whistler Energy II, LLC
Filing
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ORDER AND REASONS - IT IS ORDERED that Baker Hughes Oilfield Operations, LLC's Motion to Withdraw the Reference for Adversary Number 18-01028 (Rec. Doc. 1 ) is DENIED, as set forth in document. Signed by Judge Jane Triche Milazzo on 10/11/20118. (sa)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
CIVIL ACTION
IN RE: WHISTLER ENERGY II, LLC
NO: 18-4202
SECTION: “H”
ORDER AND REASONS
Before the Court is Baker Hughes Oilfield Operations, LLC’s Motion to
Withdraw the Reference for Adversary Number 18-01028 (Doc. 1). For the
following reasons, the Motion is DENIED.
BACKGROUND
On March 24, 2016, an involuntary petition for Chapter 11 bankruptcy
was filed against Whistler Energy II, LLC (“Whistler Energy”). On January 25,
2017, a plan of reorganization was confirmed. As part of the plan, certain
causes of action were transferred and assigned to a litigation trust.
Subsequently, the Trustee of the Whistler Energy II, LLC Litigation Trust filed
a Complaint against Baker Hughes Oilfield Operations, LLC (“Baker Hughes”)
in bankruptcy court seeking to avoid and recover an allegedly preferential
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transfer made to Baker Hughes by Whistler Energy. Baker Hughes did not
submit a proof of claim against the bankruptcy estate. Baker Hughes now asks
this Court to withdraw the reference of that adversary proceeding, which the
Trustee opposes.
LEGAL STANDARD
This Court’s decision in this matter is governed by 28 U.S.C. § 157(d),
which provides for both permissive and mandatory withdrawal of the
reference. It states that:
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.
This case presents an issue of permissive withdrawal. Although “cause shown”
is not defined by statute, the Fifth Circuit has indicated that the district court
should consider the following factors in articulating the foundation for its
decision:
(1) whether the matter at issue is a core or a non-core proceeding,
(2) whether the proceedings involve a jury demand, and (3)
whether withdrawal would further the goals of (a) promoting
uniformity in bankruptcy administration, (b) reducing forum
shopping and confusion, (c) fostering the economical use of the
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debtor’s and creditors’ resources, and (d) expediting the
bankruptcy process. 1
This Court will consider these factors.
LAW AND ANALYSIS
“A proceeding is core under [28 U.S.C. §] 157 if it invokes a substantive
right provided by title 11 or if it is a proceeding that, by its nature, could arise
only in the context of a bankruptcy case.” 2 The parties do not dispute that this
action to avoid and recover a preferential transfer is a core proceeding, which
weighs against withdrawal of the reference.
Baker Hughes argues, however, that its jury demand entitles it to
immediate withdrawal of the reference, as the Bankruptcy Court cannot
conduct a jury trial. The Trustee rebuts that withdrawal of the reference on
the grounds of a jury demand is premature until the Bankruptcy Court has
determined all pretrial matters. Indeed, many courts, including this Court,
have found that a motion to withdraw is premature until such time as it is
determined that a jury trial must be conducted. 3 “Until that time, it may better
serve judicial economy . . . for the bankruptcy court to resolve pre-trial
matters.” 4 “Under the circumstances, the Court need not decide whether a jury
trial is proper, but may deny the motion to withdraw the reference until such
In re Gulf States Long Term Acute Care of Covington, L.L.C., 455 B.R. 869, 874 (E.D.
La. 2011) (citing Holland Am. Ins. Co. v. Succession of Roy, 777 F.2d 992, 998 (5th Cir. 1985)).
2 Matter of Wood, 825 F.2d 90, 97 (5th Cir. 1987).
3 In re Reed, No. 17-908, 2017 WL 1788295, at *2 (E.D. La. May 5, 2017); In re OCA,
Inc., 2006 WL 4029578 at *5 (E.D. La. Sept. 19, 2006); Post Confirmation Bd. of Wadleigh
Energy Grp., Inc. v. Wadleigh, 516 B.R. 850, 853 (E.D. La. 2014).
4 In re OCA, Inc., 2006 WL 4029578 at *5.
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time as it becomes clear that a jury trial, if available, is necessary.” 5 Here, the
Trustee has indicated an intention to file a dispositive motion in this
proceeding, and the deadline to do so is not for another month. It is possible
then that a jury trial may not ultimately become necessary and therefore
withdrawal at this stage would be premature.
Baker Hughes rebuts that the bankruptcy court should not handle pretrial motions and reference should be withdrawn immediately because the
bankruptcy court lacks the constitutional authority to enter final judgment in
this proceeding. In making this argument, Baker Hughes relies on Stern v.
Marshall, in which the Supreme Court held that even when a bankruptcy court
has statutory authority to enter judgment on a core claim, it may lack the
constitutional authority to do so when the claim would not necessarily be
resolved in the claims allowance process. 6 The Supreme Court later held that
these “Stern claims” should be treated as non-core claims within the meaning
of § 157(c),” that is that the bankruptcy court should “issue proposed findings
of fact and conclusions of law,” and “[t]he district court will then review the
claim de novo and enter judgment.” 7
Courts in this district have held that Stern does not constitute cause for
the withdrawal of the reference. 8 “[E]ven though the bankruptcy court cannot
Id. at *5.
Stern v. Marshall, 564 U.S. 462, 487 (2011).
7 Exec. Benefits Ins. Agency v. Arkison, 134 S. Ct. 2165, 2170–173 (2014).
8 S. Louisiana Ethanol, LLC v. Agrico Sales, Inc., No. 11-3059, 2012 WL 174646, at *3
(E.D. La. Jan. 20, 2012); Wadleigh, 516 B.R. at 856 (“Although defendants mention the
Holland factors, their motion focuses on their request for a jury trial and the inability of the
bankruptcy court to enter a final judgment on any Stern claims. As discussed above, these
considerations alone do not lead the Court to the conclusion that there is good cause to
withdraw the reference at this time.”).
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enter a final judgment, that fact alone is not cause because § 157(c)(1)
specifically contemplates referral of a non-core matter to a bankruptcy judge
who cannot enter a final order.” 9 Accordingly, Baker Hughes has not shown
cause for the withdrawal of the reference. This is a core proceeding, a jury trial
is not yet certain, and the bankruptcy court has the authority to at a minimum
issue a findings of fact and conclusions of law for this Court’s review.
Finally, the Court finds that it could benefit from the Bankruptcy Court’s
considerable expertise in resolving pre-trial motions in this matter. “Indeed,
allowing the bankruptcy court time ‘to function much like [a] magistrate[ ] to
the district court on matters that are merely related to a bankruptcy,’ or that
are otherwise unable to be finally adjudicated by that court, could considerably
expedite the litigation.” 10 The Court finds that, in the interests of judicial
efficiency, the reference should be maintained at this time. Once it becomes
clear that a jury trial must be conducted, Defendant may re-urge its Motion.
CONCLUSION
For the foregoing reasons, the Motion to Withdraw the Reference is
DENIED.
New Orleans, Louisiana this 11th day of October, 2018.
____________________________________
JANE TRICHE MILAZZO
UNITED STATES DISTRICT JUDGE
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S. Louisiana Ethanol, LLC, 2012 WL 174646, at *3.
Post Confirmation Bd. of Wadleigh Energy Grp., Inc, 516 B.R. at 856.
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