United States of America v. Gocha

Filing 8

OPINION ; signed by Judge Robert Holmes Bell (Judge Robert Holmes Bell, kcb)

U n i t e d States of America v. Gocha

Doc. 8

UNITED STATES DISTRICT COURT F O R THE WESTERN DISTRICT OF MICHIGAN S O U T H E R N DIVISION

In re: JAMES B. OONK, JR., Debtor. / U N IT E D STATES OF AMERICA, P l a in tif f , F ile No. 1:10-CV-616 v. H O N . ROBERT HOLMES BELL L IS A E. GOCHA, D e f e n d a n t. / OPINION T h is matter comes before the Court on Plaintiff United States' motion to withdraw re f ere n c e to the bankruptcy court and to consolidate the present adversary proceeding b e tw e e n the United States and Trustee Lisa E. Gocha with the United States' action in this c o u rt against James B. Oonk, Jr., United States v. Oonk, No. 1:10-CV-557 (Dkt. No. 1). The U n ite d States has also filed a motion to stay proceedings in the bankruptcy court pending d is p o s itio n of the motion to withdraw reference. (Dkt. No. 5.) For the reasons that follow, th e motion to withdraw reference will be denied and the motion for stay will be denied as m o o t. I. T h is dispute stems from a payment in the amount of $82,772.00 from Regency

Dockets.Justia.com

In te rn a tio n a l Flooring, LLC ("Regency") to the IRS to satisfy taxes reported by one of R e g e n cy's co-owners, James B. Oonk, Jr., the IRS's refunds of $22,476.00 and $51,995.60 to Oonk after he filed amended tax returns, and the subsequent Chapter 7 bankruptcies filed b y Regency and Oonk. See In re Regency Flooring, LLC, No. 06-05402 (Bankr. W.D. M ich .); In re Oonk, 06-05572 (Bankr. W.D. Mich.). Regency's Chapter 7 Trustee, Jeff A. M o ye r, filed an adversary action against the United States to avoid the transfer from Regency to the IRS on behalf of Oonk. The bankruptcy court entered judgment in favor of Trustee M o ye r and against the United States based on its conclusion that Regency's payment of O o n k 's tax liability was a fraudulent conveyance. The United States' appeal of that ruling is pending before this Court in United States v. Moyer, 1:09-CV-1146 (W.D. Mich.) (Bell, J.). In July of 2009 the United States filed an adversary action against Oonk, Trustee Moyer, a n d Trustee Gocha in Oonk's Chapter 7 bankruptcy. The bankruptcy court dismissed the U n ite d States' claims against Trustee Moyer and Oonk. Thereafter, the United States filed a n action against Oonk in this court. United States v. Oonk, 1:10-CV-557 (W.D. Mich.) (B e ll, J.). According to the United States, all that remains of its adversary action in the Oonk b a n k ru p tcy is the United States' objection to Trustee Gocha's proposed settlement with O o n k , by which Oonk would pay Trustee Gocha $40,000 in settlement of Trustee Gocha's c l a im to Oonk's post-petition receipt of the second refund from the IRS, and the United S ta te s' effort to impose a constructive trust on the $40,000 settlement deposit. The United S ta te s has now filed a motion to withdraw reference of its adversary action against Trustee

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G o c h a based on its contention that resolution of its claims against Oonk and Gocha in one j u d i c ia l proceeding before the same judge who is also presiding over the United States' c la im s against Trustee Moyer will result in judicial economy and will guard against in c o n s is te n t results. II. T h e bankruptcy code provides that the district court may withdraw any case referred to the bankruptcy court "for cause shown." 28 U.S.C. § 157(d). In determining whether a p a rty has shown sufficient "cause" to withdraw a reference, courts consider the following f a c to rs: (1) whether the claim is core or non-core, (2) what is the most efficient use of ju d ic ia l 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 p r e v e n t forum shopping, and (6) other related factors. In re Mathson Indus., Inc., 408 B.R. 888, 892 (E.D. Mich. 2009) (quoting S. St. Seaport Ltd. P ' sh i p v. Burger Boys (In re Burger Boys), 94 F.3d 755, 762 (2d Cir.1996). Of these factors, th e first, i.e., whether the claim is core or non-core, is the most important. In re Burger Boys, 9 4 F.3d at 762. Core proceedings are those that "involve a cause of action created or d e ter m in e d by a statutory provision of title 11" or "by their very nature, could arise only in b a n k ru p tc y cases." In re Wolverine Radio Co., 930 F.2d 1132, 1144 (6th Cir. 1991). III. T h e United States' appeal of the Moyer adversary proceeding, its federal district court a c tio n against Oonk, and its adversary proceeding against Gocha, all involve competing 3

c la im s to property arising out of the original payment of $82,772.00 made by Regency to the IR S . The United States contends that because these claims are interrelated, it would be more e f f ic ie n t for all of these claims to be adjudicated before one court. Trustee Gocha opposes withdrawal of reference because the United States' claim a g a in s t the Trustee is ripe for adjudication, the United States' claim against the Trustee is not d e p e n d en t upon the outcome of the fraudulent transfer claim on appeal or the outcome of the U n ite d States' district court case against Oonk, and consolidation of the adversary proceeding a g a in s t the Trustee with the claim against Oonk in the district court will prejudice the Trustee b y delaying resolution of the adversary proceeding and the bankruptcy case. A lth o u g h neither party has addressed the issue, it appears that the United States' claim a g a in s t the Trustee is a core proceeding inasmuch as its claim against the bankruptcy Trustee to impose a constructive trust on assets of the bankruptcy estate and to oppose a settlement b e tw e e n the bankruptcy trustee and the debtor involve claims that could only arise in b a n k ru p tc y cases. The Court is not convinced that withdrawal of reference would constitute the most e f f ic ie n t use of judicial resources. The United States' adversary proceeding against Trustee G o c h a has been pending in the bankruptcy court since July of 2009. (Dkt. No. 1, Attach. 2, B a n k r. Dkt. No. 1.) The time for taking discovery and filing dispositive motions has passed. ( I d . at Bankr. Dkt. No. 42, First Pretrial Order.) A pretrial conference is to be held on

S e p te m b e r 2, 2010, trial briefs are due by October 1, 2010, and the trial is to take place

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d u rin g the month of October 2010. (Id.) The case is now on the eve of trial. The bankruptcy c o u rt has already familiarized itself with this adversary proceeding. In addition, a withdrawal o f reference at this point in the proceedings would inevitably delay adjudication of the issues p re s e n te d in the adversary proceeding. Moreover, allowing the bankruptcy court to make a ruling in this adversary proceeding p ro m o te s uniformity of bankruptcy administration. The bankruptcy court presided over the R e g e n c y bankruptcy case, the Oonk bankruptcy case, is already intimately familiar with all o f the competing claims to property arising out of the original payment of $82,772.00 made b y Regency to the IRS. The bankruptcy court should be allowed to rule on this adversary p ro c e ed in g in the first instance, subject of course to the parties' right to appeal. Allowing th e bankruptcy court to proceed in its normal course prevents speculation about potential b a n k ru p tc y court rulings and forum shopping. The Court observes no good purpose for withdrawing the reference to the bankruptcy c o u rt. Accordingly, the United States' motion to withdraw reference will be denied and the m o tio n for stay will be denied as moot. A n order consistent with this opinion will be entered.

Dated: August 19, 2010

/s/ Robert Holmes Bell ROBERT HOLMES BELL UNITED STATES DISTRICT JUDGE

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