OPINION AND ORDER denying 1 Motion to Withdraw Reference. Signed by District Judge Paul D. Borman. (DTof)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
IN RE MOHAMAD HADLA,
FATME HADLA, ALI M. HADLA,
HOUDA HADLA, and FADI HADLA,
Case No. 17-11801
Paul D. Borman
United States District Judge
United States Bankruptcy Judge
MARK H. SHAPIRO,
OPINION AND ORDER DENYING MOTION TO WITHDRAW THE
REFERENCE, WITHOUT PREJUDICE
This case stems from a voluntary bankruptcy proceeding filed by Mohamad
Hadla (“Debtor”), in the course of which Debtor’s bankruptcy trustee, Mark H.
Shapiro (“Plaintiff”) initiated an adversary proceeding seeking to avoid transfers
of Debtor’s property that were made in 2013.
The matter is presently before the Court on a Motion to Withdraw the
Reference filed by Fatme Hadla, Ali M. Hadla, Houda Hadla, and Fadi Hadla
(collectively, “Defendants”). (ECF No. 1.) Upon review of the pleadings, the
Court finds that oral argument will not aid in the disposition of this matter.
Accordingly, the Court will decide the matter on the pleadings. See E.D. Mich. LR
7.1(f)(2). For the reasons articulated below, the Court will deny Defendants
Hadlas’ Motion without prejudice.
On March 15, 2010, Debtor Mohamad Hadla purchased a residence located
at 7920 Kentucky Street in Dearborn, Michigan. (ECF No. 3, Pl.’s Objs. Ex. A.)
On December 13, 2010, Debtor acquired title to real property at 6525 Orchard
Avenue in Dearborn, Michigan. (Pl.’s Objs. Ex. C.)
On January 15, 2013, Debtor executed a Quit Claim Deed transferring the
Kentucky Street property from “Mohamad Hadla, a married man” to “Mohamad
Hadla and Fatme Hadla[,] husband and wife[.]” (Pl.’s Objs. Ex. B.) On the same
day, Debtor executed another Quit Claim Deed transferring the Orchard Avenue
property from “Mohamad Hadla, a single man” to Ali M. Hadla. (Pl.’s Objs. Ex.
D.) Then on February 12, 2013, Houda Hadla and Fadi Hadla were added to the
title of the Orchard Avenue property. (Pl.’s Objs. Ex. E.) On June 2, 2015, the
Orchard Avenue property was sold for $105,128.24. (Pl.’s Objs. Ex. F.)
Debtor filed for Chapter 7 bankruptcy on August 26, 2016. (In re Hadla,
Case No. 16-51887-mar, ECF No. 1, Voluntary Petition (Chapter 7).) On May 9,
2017, Plaintiff filed an adversary proceeding seeking to avoid the transfers
described above as fraudulent, and to recover the properties or the value of the
properties for the benefit of the bankruptcy estate. (In re Hadla, Case No. 1704355-mar, ECF No. 1.) Defendants filed an answer on June 7, 2017. (In re Hadla,
Case No. 17-04355-mar, ECF No. 11.)
One day before filing their answer, Defendants filed the instant Motion to
Withdraw the Reference before this Court. (ECF No. 1, Defs.' Mot.) The asserted
basis for the instant Motion is that while Defendants have a Seventh Amendment
right to a jury trial in the adversary proceeding, they refuse to consent to a jury trial
in the Bankruptcy Court. (Defs.' Mot. at 11-12, Pg ID 11-12.) Plaintiff filed an
Objection to the Motion two days later, on June 8, 2017. (ECF No. 3, Pl.’s Objs.)
On July 6, 2017, Plaintiff filed a motion for summary judgment in the
adversary proceeding. (In re Hadla, Case No. 17-04355-mar, ECF No. 14.)
A federal district court has original, but not exclusive, jurisdiction over
bankruptcy cases and “all civil proceedings arising under title 11, or arising in or
related to cases under title 11.” 28 U.S.C. § 1334(b). However, “[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.” 28 U.S.C. § 157(a). The Eastern
District of Michigan’s Local Rules do exactly that, providing that:
[u]nless withdrawn by a district judge, all cases under Title 11 of the
United States Code and any or all proceedings arising under Title 11
or arising in or related to a case under Title 11 are referred to
bankruptcy judges. The court intends to give bankruptcy judges the
broadest possible authority to administer cases and proceedings
properly within their jurisdiction.
E.D. Mich. L.R. 83.50(a)(1).
Once a case is referred, 28 U.S.C. § 157(b)(1) “vests full judicial power in
bankruptcy courts over ‘core proceedings arising under title 11, or arising in a case
under title 11.’” In re Cmty. Mem'l Hosp., 532 B.R. 898, 901 (E.D. Mich. 2015)
(quoting Mich. Emp't Sec. Comm'n v. Wolverine Radio Co., Inc. (In re Wolverine
Radio Co.), 930 F.2d 1132, 1144 (6th Cir. 1991)). Withdrawal of such a
proceeding by the district court may be permissive or mandatory. 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.” 28
U.S.C. § 157(d). On the other hand, the district court must “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,” upon a timely motion of a party. Id.
District Courts have “broad discretion” in deciding whether permissive
withdrawal is warranted “for cause shown.” In re Romanzi, No. 16-CV-14265,
2017 WL 1148921, at *2 (E.D. Mich. Mar. 28, 2017) (quoting In re Millennium
Studios, Inc., 286 B.R. 300, 303 (D. Md. 2002)). “Section 157(d) does not define
‘for cause shown’ for the purpose of withdrawing a reference to a bankruptcy
court.” In re Cmty. Mem'l Hosp., 532 B.R. at 902 (citing Mathson Indus., Inc. v.
Negri Bossi USA, Inc. (In re Mathson Indus., Inc.), 408 B.R. 888, 891 (E.D. Mich.
2009)). District courts have considered the following factors when determining
whether there is sufficient “cause” to withdraw a reference: “(1) whether the claim
is core or non-core, (2) what is the most efficient use of judicial resources, (3) what
is the delay and what are the costs to the parties, (4) what will promote uniformity
of bankruptcy administration, (5) what will prevent forum shopping, and (6) other
related factors.” In re Cmty. Mem’l Hosp., 532 B.R. at 902 (quoting In re Mathson
Indus., Inc., 408 B.R. at 891).
In this case, Defendants have not indicated whether they seek mandatory or
permissive withdrawal via the instant Motion, but because the adversary
proceeding does not appear to “require consideration of both title 11 and other
laws of the United States regulating organizations or activities affecting interstate
commerce,” 28 U.S.C. § 157(d), the Court will construe Defendants’ Motion as
seeking permissive withdrawal only. On that reading of the instant Motion, the
Court determines that cause has not been shown at this time for permissive
withdrawal of the reference under 28 U.S.C. § 157(d).
The considerations identified in In re Cmty. Mem’l Hosp. that are relevant to
this case weigh in favor of that conclusion. Three of those considerations—the
delay and costs to the parties, the promotion of uniform bankruptcy law
administration, and the prevention of forum shopping—are not clearly implicated
here at all. Meanwhile, each of the other three factors favors a finding that there is
not cause at the present moment for permissive withdrawal. Whether the claim is a
core or non-core determination, for one, is readily answered by federal statutory
law, which expressly identifies “proceedings to determine, avoid, or recover
fraudulent conveyances” as core proceedings. See 28 U.S.C. § 157(b)(2)(H).
Moreover, the efficiency of the use of judicial resources would be better
served at this time by a decision by this Court not to withdraw the reference. As
Plaintiff points out, there are matters currently pending before the Bankruptcy
Court that are closely related to the issues raised in this adversary proceeding,
including objections to Debtor’s claimed exemption in the Kentucky Street
property. (In re Hadla, Case No. 16-51887-mar, ECF No. 59, Trustee’s Objection
to Debtor’s Exemptions and Motion to Compel Turn Over of Non-Exempt
Property.) Additionally, withdrawing the reference now could make for
unnecessary expenditure of judicial resources in a more general sense, as it would
very likely require efforts by this Court that would be duplicative of efforts that
can be or have already been made by the Bankruptcy Court. It has been recognized
that there is substantial benefit in delegating the administration of pretrial matters
in cases like this to the sound discretion of the Bankruptcy Court, subject to this
Court’s review. See Romanzi, 2017 WL 1148921, at *4 (“This Court frequently
benefits from the thorough review and recommendations made by Magistrate
Judges; a recommendation from the Bankruptcy Court, subject to review and
ruling by this Court, could provide just as much of a benefit.”).
The final consideration—“other related factors”—implicates the central
issue in the instant Motion, and indeed the only basis that Defendants have asserted
for withdrawal of the reference. Defendants contend that they are entitled to a trial
by jury under the Seventh Amendment. See Granfinanciera, S.A. v. Nordberg, 492
U.S. 33, 36 (1989) (holding that under the Seventh Amendment, “a person who has
not submitted a claim against a bankruptcy estate has a right to a jury trial when
sued by the trustee in bankruptcy to recover an allegedly fraudulent monetary
transfer . . . notwithstanding Congress' designation of fraudulent conveyance
actions as ‘core proceedings’ in 28 U.S.C. § 157(b)(2)(H)”). And because they
refuse to consent to a jury trial in the Bankruptcy Court, Defendants argue,
permissive withdrawal of the proceeding by this Court is warranted.
Assuming that Defendants do have a Seventh Amendment right to a jury
trial under Granfinanciera, the Court still concludes that withdrawal of the
reference would be premature at this stage. Because the other relevant permissive7
withdrawal factors favor the denial of Defendants’ Motion to Withdraw the
Reference, and because Defendants have identified no other reason for this Court
to do otherwise, the issue before this Court is simply whether Defendants’ refusal
to consent to a jury trial before the Bankruptcy Court is enough by itself to justify
permissive withdrawal. Another district court in the Eastern District of Michigan
recently addressed this issue, and found that in view of case law in this District,
that fact alone does not provide sufficient cause for permissive withdrawal:
At least one case in this District has found that being entitled to a jury
trial constitutes cause for withdrawing a reference. See In re Skyline
Concrete Floor Corp., 410 B.R. 564, 567 (E.D. Mich. 2008).
However, multiple more recent cases in this District have found that a
demand for a jury trial is an insufficient cause for discretionary
withdrawal if the motion is made at an early stage of the proceedings
and dispositive motions—pending before the bankruptcy court—may
resolve the matter prior to a trial. See, e.g., In re Cmty. Mem'l Hosp.,
532 B.R. [at 905–06]; In re Energy Conversion Devices, Inc., No. 1212653, 2012 WL 5383165, at *2 (E.D. Mich. Oct. 26, 2012) (“noting
“the standard practice of this Court, and of others in this District, is to
‘permit[ ] the Bankruptcy Judge to manage the pre-trial phase of the
litigation, with this Court revisiting the matter of withdrawal if and
when the case is ready for trial.’ ”); Official Comm. of Unsecured ex
rel. Estate of Greektown Holdings, LLC v. Papas, Nos. 10–cv–12628,
10–cv–12742, 10–cv–12774, 2010 WL 4807067, at *2 (E.D. Mich.
Nov. 18, 2010) (“Generally, the Courts of this District have denied
withdrawing the reference until the case is ready for trial.”) (collecting
Romanzi, 2017 WL 1148921, at *4.
This Court finds the analysis in Romanzi persuasive, and notes that the facts
central to that court’s decision are also present in this case: the instant Motion was
made at an early stage of the adversary proceeding, and Plaintiff has filed a
summary judgment motion in that proceeding. Thus, like the court in Romanzi, this
Court “concludes that withdrawal of reference is not ripe for consideration based
on the early stage of these proceedings and Appellee's pending motion for
summary judgment before the bankruptcy court. . . . Should the matter proceed
toward trial, the Court will entertain a renewed motion to withdraw at that
juncture.” Romanzi, 2017 WL 1148921, at *5.
For the reasons stated above, the Court hereby DENIES, WITHOUT
PREJUDICE, Defendants’ Motion to Withdraw the Reference.
IT IS SO ORDERED.
s/Paul D. Borman
Paul D. Borman
United States District Judge
Dated: August 3, 2017
CERTIFICATE OF SERVICE
The undersigned certifies that a copy of the foregoing order was served upon each
attorney or party of record herein by electronic means or first class U.S. mail on August 3, 2017.
Deborah Tofil, Case Manager
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