Canal Walk Construction, LLC, et al. v. Schlossberg
MEMORANDUM AND ORDER OF REFERENCE to the United States Bankruptcy Judge re: 1 Motion to Withdraw Reference filed by Canal Walk Construction, LLC, Scott Spencer. Signed by Judge Paul W. Grimm on 03/04/2014. (bas, Deputy Clerk).
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
United States District Court
Case No.: PWG-13-3932
SPENCER & ASSOCIATES
United States District Court
Case No.: PWG-13-3759
CANAL WALK CONSTRUCTION, LLC,
MEMORANDUM AND ORDER OF REFERENCE
TO UNITED STATES BANKRUPTCY JUDGE
Plaintiff Roger Scholossberg is the Chapter 7 Trustee of Debtor Bell Builders, Inc. (“Bell
Builders”) in its case before the Honorable Thomas J. Catliota, United States Bankruptcy Judge
for the District of Maryland, Chapter 7 Case No. 11-30672. Scholossberg brought two adversary
proceedings in the bankruptcy court pursuant to 11 U.S.C. §§ 547(b), 550(a)(1) to recover
allegedly preferential transfers to Spencer & Associates Architects, LLC, Adversary Proceeding
No. 13-634 (the “SAA Case”), Canal Walk Construction, LLC, and Scott Spencer, Adversary
Proceeding No. 13-604 (the “Canal Walk Case”). In December 2013, the Defendants in these
two adversary proceedings moved this Court to withdraw the reference of those matters to the
bankruptcy court, which the Court granted on January 28, 2014 for the Canal Walk case and on
February 20, 2014 for the SAA case.
In Langenkamp v. Culp, the Supreme Court noted that “[i]f a party does not submit a
claim against the bankruptcy estate, however, the trustee can recover allegedly preferential
transfers only by filing what amounts to a legal action to recover a monetary transfer. In those
circumstances the preference defendant is entitled to a jury trial.” 498 U.S. 42, 44 (1990) (citing
Granfinanciera v. Nordberg, 492 U.S. 33, 58–59 (1989)) (per curiam). However, that language
may be considered dictum because the preference defendant in Langenkamp had submitted a
bankruptcy claim. The Supreme Court quoted that language in Stern v. Marshall, ---- U.S. ----,
131 S. Ct. 2594 (2011), holding that a counterclaimant bringing a state law tort against the
bankruptcy estate was entitled to a jury trial. Again, however, the counterclaimant in Stern had
submitted a bankruptcy claim. Some courts have distinguished Stern on that basis and the Fourth
Circuit has not spoken on the issue. See, e.g., Badami v. Sears, 461 B.R. 541, 547–48 (B.A.P.
8th Cir. 2012) (“Unless and until the Supreme Court visits other provisions of Section 157(b)(2),
we take the Supreme Court at its word and hold that the balance of the authority granted to
bankruptcy judges by Congress in 28 U.S.C. § 157(b)(2) is constitutional.”).
Assuming, without deciding, that Defendants are correct as to the Article III question, “a
bankruptcy court can submit findings and conclusions where it otherwise cannot hear and decide
a case.” Dang v. Bank of Am., N.A., No. RDB-12-3343, 2013 WL 1683820, at *12–13 (D. Md.
Apr. 17, 2013) (citing cases). There is “‘significant value in having the bankruptcy court preside
over preliminary legal and discovery issues in a proceeding that is related to th[e] bankruptcy
action’ when the dispute is ‘but one’ of many actions having common issues with the bankruptcy
proceeding.’” In re Erickson Ret. Cmty., LLC, No. WDQ-11-3736, 2012 WL 1999493, at *3–4
(D. Md. June 1, 2012) (quoting In re El-Atari, No. 11-1090, 2011 WL 5828013, *6 (E.D. Va.
Nov. 18, 2011)).
Accordingly, pursuant to 28 U.S.C. § 157(c)(1), both cases captioned above ARE
REFERRED to the Honorable Thomas J. Catliota, United States Bankruptcy Judge, for said
District, to conduct all discovery and pretrial proceedings. For any dispositive matters, the
bankruptcy court will submit proposed findings of fact and conclusions of law in the form of a
report and recommendation for the district court’s de novo review. The Clerk shall docket this
Order in both district court cases and all three bankruptcy court cases referenced above.
So ORDERED this 4th day of March, 2014.
BY THE COURT:
Paul W. Grimm
United States District Judge
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