George T. Moran, Inc. v. The Mike Egan Insurance Agency, Inc.

Filing 7

MEMORANDUM. Signed by Judge William M Nickerson on 3/8/12. (bmhs, Deputy Clerk) Modified on 3/8/2012 (bmhs, Deputy Clerk). (c/m 3/8/12 bh)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND

IN RE: GEORGE T. MORAN, INC.
Debtor
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GEORGE T. MORAN, INC.
v.
THE MIKE EGAN INSURANCE
AGENCY, INC.
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Civil Action No. WMN-10-2101
(Bankruptcy No. 10-18337-RAG)
(Adversary No. 10-00296-RAG)

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MEMORANDUM
This is an adversary action between the Debtor, George T.
Moran, Inc. (Moran) and its major creditor, The Mike Egan
Insurance Agency, Inc. (Egan).

Egan has filed a motion to

withdraw the order of reference as to this adversary action on
the ground that, because it has requested a jury trial, the
trial of this matter must take place in the District Court.
No. 1 in Civ. No. WMN-10-2101.

ECF

Trustee George W. Liebmann

(Trustee), who has been substituted for Moran as Plaintiff,
responded by filing a “Motion for Order Providing that [Egan]
Has No Right to a Jury Trial.”

ECF No. 23 in Adv. No. 10-00296-

RAG.

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The procedural history leading to these motions is as

follows.
Moran filed a voluntary petition under Chapter 11 on or
about April 15, 2010.2

On May 5, 2010, Moran filed this

adversary action seeking to recover payments in the amount of
$75,000 which it made to Egan within the ninety-day period
before it filed for bankruptcy making those payments, in Moran’s
view, voidable preferential payments.

Egan filed an answer to

the complaint on June 14, 2010, and also filed a demand for jury
trial and indicated that it did not consent to a jury trial
before a bankruptcy judge.

With the answer and demand for jury

trial, Egan filed the motion for order to withdraw reference.
Moran’s previous counsel filed a response to the motion for
order to withdraw reference suggesting that the Court deny the
motion, without prejudice to Egan renewing the motion following
the completion of discovery and resolution of any dispositive
motions in the bankruptcy court.

After his appointment,

however, the Trustee filed the pending motion for an order
providing that Egan was not entitled to a jury trial on the
ground that Egan waived its right to a jury trial by filing a
claim in the underlying bankruptcy case.
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The parties have neglected to file the pleadings related to
this motion in this Court.
2

The bankruptcy case was converted to a Chapter 7 case on
October 1, 2010, and Leibmann was appointed Trustee.
2

Egan has filed a proof of claim in the bankruptcy case in
the amount of $579,416.84.

With the proof of claim, however,

Egan filed a “reservation of rights” in which it stated that its
claim was filed “under protest and without waiving any of its
rights, including its Seventh Amendment right to a trial by
jury.”

Adv. No. 10-00296, ECF No. 25, Ex. 1 at 1.

Egan

explained that, because its claim was based upon a state court
judgment, it should not have been required to file a proof of
claim.

It only had to do so, Egan argues, because Moran

asserted in bad faith that the claim was disputed in order to
force Egan to waive its constitutional right to a jury trial by
filing a proof of claim.

Relying on the reservation of rights,

Egan opposed the Trustee’s motion.

Egan also argued that,

should the Trustee’s motion not be denied outright, “[a]t a
minimum . . .

the resolution of the Trustee’s motion should

await an evaluation of whether [Moran] had any good faith basis
in law or fact to dispute the validity of [Egan’s] state court
judgment.”

Id. at 3.

On two occasions, this Court has requested a report from
the parties regarding the status of this action.
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ECF Nos. 3 and

In response to both requests, counsel for Egan has simply

reported the pendency of these two motions.

Counsel for Moran

or the Trustee did not respond to either request.

It is noted

that, because the parties neglected to file in this Court the
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papers related to the Trustee’s motion, this Court’s docket does
not list the Trustee as a party or counsel to be noticed.

As a

result, there is little in the record before this Court as to
the status of either the adversary action or the underlying
Chapter 7 case in the bankruptcy court.

It is not clear that

there is a live issue regarding either Egan’s claim on the state
court judgment or the Trustee’s claim to recover the alleged
preferential payment.
The Court will deny the motion to withdraw the reference,
without prejudice to Egan’s renewal of the motion should the
adversary action ever proceed to the point where a trial would
be required.

With some consistency, courts have concluded that

the bankruptcy court is in the best position to shepherd an
action in the preliminary stages until such time that is
determined that a trial is necessary.

See In re Stansbury

Poplar Place, Inc., 13 F.3d 122 (4th Cir. 1993) (suggesting that
it is often a preferable exercise of the district court's
discretion to leave the case with the bankruptcy court until the
trial itself); Furniture Rentors of America v. NYNex Information
Resources Co., 162 B.R. 728 (D. Md. 1994) (denying motion to
withdraw reference, without prejudice to movant’s right to renew
motion after pretrial conference).
This Court renders no opinion as to Egan’s right to a jury
trial.

While Egan makes a sound argument that it would be
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unjust to allow a debtor to deprive a creditor of a right to a
jury trial by means of a bad faith designation of an undisputed
debt as disputed, Egan acknowledges that, before reaching that
issue, there would need to be a threshold determination as to
whether Moran had a good faith basis to dispute the validity of
Egan’s state court judgment.

That determination, as well, is

best left to the bankruptcy court.
A separate order consistent with this memorandum will
issue.

____________/s/___________________
William M. Nickerson
Senior United States District Judge
DATED:

March 8, 2012

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